Timberwest Forest Ltd (the plaintiff) consigned a cargo of green heat-treated Douglas fir lumber for carriage by sea. The cargo was loaded on the Rhone, which was bareboat chartered by Gearbulk Pool Ltd (the defendant). The Rhone also carried a cargo of soda ash. The plaintiff's lumber became dusted with soda ash. The plaintiff brought an action against the defendant for damages for breach of contract, breach of duty as bailee and common carrier for hire, and negligence. The bill of lading provided that:

CLAUSE PARAMOUNT This Bill of lading shall have effect subject to the provisions of any legislation relating to the carriage of goods by sea which incorporates the rules relating to Bills of Lading contained in the International Convention, dated Brussels 25th August 1924, or subsequent convention which is compulsorily applicable to the contract of carriage herein contained. When no such enactment is in force in the country of shipment the corresponding legislation of the country of destination shall apply, but in respect of shipments to which no such enactments are compulsorily applicable, the terms of the British Carriage of Goods by Sea Act, 1971, shall apply. Under no circumstances will any enactments or legislation apply to live animals or cargo carried on deck.

In addition, the bill of lading contained a notation that 'stowage: 86% on deck, 14% under deck'.

The issues, among others, before the Court, were:

1. Was there ambiguity/uncertainty in the description of the storage of the cargo such that it attracted the status of 'goods' within the meaning of the Carriage of Goods by Water Act RSC 1993 c 21 (the Act) and hence was subject to the Hague-Visby Rules incorporated by that statute, and not susceptible to the reach of an exclusion clause?

2. Even if the cargo were not 'goods' and not subject to protection from exclusion clauses by the Hague-Visby Rules and even if the applicable exclusion clause or clauses was/were effective did it/they cover the alleged act of negligence in this case or was that act something that fell outside the scope of the contract among the parties?

Held: Judgment in favour of the plaintiff.

The choice of law clause in the bill of lading was effective and the Court would apply English law to determine the effectiveness and scope of the exemption clause unless it found the cargo fell within the definition of 'goods' provided in the Hague-Visby Rules.

Under the Hague-Visby Rules, 'goods' were defined as including 'goods, wares, merchandise and articles of every kind whatsoever except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried'.

In addition, art 3.8 of the Hague-Visby Rules provided that:

Any clause, covenant or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with goods arising from negligence, fault or failure in the duties and obligations provided in this article or lessening such liability otherwise than as provided in these rules shall be null and void and of no effect.

There was no evidence of the potential or real impact of the failure to properly identify or quantify the risk to be borne by the plaintiff, on the plaintiff. One could easily conceive of a situation, however, where even a relatively small variation between the risk understood and the risk undertaken could have significant consequences to a shipper or consignee. It was no answer, on a principled analysis, to point to the degree of uncertainty created by the documents to attempt to sustain the applicability of the exclusion clause or preclude the operation of the Hague-Visby Rules. There was no need to demonstrate an absolute uncertainty with regard to the conditions of stowage; it was sufficient if its description created uncertainty such that the degree of the potential risk to the owner and the legal implications to all the parties were not readily ascertainable through a review of the contract of carriage. The exclusion clause in the bill of lading was not valid or enforceable by virtue of the Act.

[For the unsuccessful appeal to the British Columbia Court of Appeal, see Timberwest Forest Ltd v Gearbulk Pool Ltd (CMI1020).]