Our firm represented St. Paul Travelers (“Travelers”), the subrogated insurer of Boutique Jacob Inc. (“Jacob”), a well known clothing retailer. Some of Jacob’s merchandise was destroyed by fire whilst being trucked westward from Montreal. Our mandate was to recover as much as possible for our client.

Jacob had a contract with Purolator Courier Ltd. (“Purolator”) to transport its goods from Montreal to its many retail locations throughout Canada. On March 28, 2005, Jacob remitted 3191 boxes of its goods having a weight of 60 525 lbs. (the “Shipment”) to Purolator to be carried to Boutique Jacob’s retail locations in Quebec, Ontario, Alberta and British Columbia. Purolator brought the Shipment to its sorting warehouse and subdivided the boxes for transport based on destination. 117 cartons of the Shipment were sub-contracted for carriage to Arnold Bros. Transport Ltd. (“Arnold Bros.”) for delivery to Calgary. During transit, the Arnold Bros. trailer carrying these 117 cartons caught fire and this merchandise was destroyed. Travelers instituted an action against both Purolator and Arnold Bros. seeking the full invoice value of the lost goods. Before trial, Purolator settled with the express understanding that the settlement funds received would be for costs only and would not impact the continued litigation against Arnold Bros. As such, Travelers proceeded to trial against Arnold Bros. only.

At the trial, the following issues were to be determined:

1. Could Arnold Bros. avail itself of a limitation of liability contained in the contract in place between Jacob and Purolator and, if so, did the limitation apply to the Shipment comprising 3191 boxes (the contract quantity) or only to the 117 boxes (being the amount received by Arnold Bros.) which were destroyed?

2. What was the quantum of St. Paul’s damages?

Quebec law differs from most common law jurisdictions in that successive carriers to a contract of transportation are deemed parties to the initial contract of carriage even though there is no actual contractual privity between the shipper and the sub-carriers. This constitutes a statutory exception to the rule of contractual privity. The purpose behind the enactment of this article was to allow a shipper to sue successive carriers in contract. However, this article can have the additional effect of allowing a sub-carrier to benefit from a limitation of liability which is contained in the initial contract of carriage. In this instance, the contract between Jacob and Purolator stated that a limitation of Liability of $2.00/lb. would be applied to the “poids total de l’expédition” which loosely translated means “total weight of the shipment”. Arnold Bros. made the argument that the total weight of the shipment was not the entirety of the goods remitted to Purolator on the day in question but rather the weight of the goods Arnold Bros. had received and which were damaged on route to Calgary. The Court rejected this argument stating it could lead to the artificial subdivision of shipments which would result in further limits of liability beyond what the parties had agreed to.

Moreover, even though Arnold Bros. had received only 117 cartons of merchandise having a total weight of approximately 2 250 lbs. and therefore a potential limit of liability of approximately $4,500), it was held that the limit of liability would be calculated on the total weight of the Shipment consigned to Purolator (the contract quantity), not on the weight of the goods actually received by Arnold Bros. Because the limitation fund calculated on the total weight of the Shipment exceeded the amount of Travelers action, limitation was not a factor in the amount awarded. Thus, recovery in the capital amount of $91,372.27 plus interest and costs was achieved.

With respect to quantum, the Jacob witness testified that Jacob could track the historical sales prices of the styles of the garments that were lost. Since the lost goods could not be replaced owing to Jacob’s ordering and sales cycles, the court awarded Travelers all of Jacob’s actual lost profit in addition to the landed cost of the Shipment.

Lastly, with respect to the settlement entered into between Travelers and Purolator, it is important to know that because the settlement agreement specifically provided that the settlement was for costs only, the Court refused to offset the Purolator settlement amount against the recovery from Arnold Bros. This very important point should guide parties regarding settlements against multiple
defendants which may allow claimants to maximize their recoveries and apply settlement funds specifically to costs and legal fees as opposed to diminishing the capital amount of a claim against another defendant.

Please note that the delay for appeal has not yet expired.

This article is provided for information purposes only and does not constitute a legal opinion. Sproule Faguy is a Limited Liability Partnership specializing in insurance, transportation, civil and commercial litigation.

November 21, 2008