''Canada Steamship Lines Ltd v R'' , also referred to as Canada Steamship Lines Ltd v The King,Wyatt, D.
Applying Canada Steamship principles on interpretation of exclusion clauses
''Lexology'', published 27 November 2012, accessed 27 February 2023 is a

Canadian contract law Canadian contract law is composed of two parallel systems: a common law framework outside Québec and a civil law framework within Québec. Outside Québec, Canadian contract law is derived from English contract law, though it has developed dist ...

case, also relevant for

English contract law English contract law is the body of law that regulates legally binding agreements in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries ...

, concerning the interpretation of unfair terms ''

contra proferentem ''Contra proferentem'' (Latin: "against heofferor"), also known as "interpretation against the draftsman", is a doctrine of contractual interpretation providing that, where a promise, agreement or term is ambiguous, the preferred meaning sho ...

''. The case was decided by the

Judicial Committee of the Privy Council The Judicial Committee of the Privy Council (JCPC) is the highest court of appeal for the Crown Dependencies, the British Overseas Territories, some Commonwealth countries and a few institutions in the United Kingdom. Established on 14 Augus ...

on appeal from the

Supreme Court of Canada The Supreme Court of Canada (SCC; french: Cour suprême du Canada, CSC) is the Supreme court, highest court in the Court system of Canada, judicial system of Canada. It comprises List of Justices of the Supreme Court of Canada, nine justices, wh ...

, as the cause for appeal arose before the abolition of such appeals in 1949. Although arising in civil law under the

Civil Code of Lower Canada The ''Civil Code of Lower Canada'' (french: Code civil du Bas-Canada) was a set of laws that were in effect in Lower Canada on 1 August 1866 and remained in effect in Quebec until repealed and replaced by the Civil Code of Quebec on 1 January 19 ...

, it has been influential in similar cases under English law, but is now recognised as providing "guidelines" rather than an "automatic solution".

Facts

In November 1940, Canada Steamship Lines Ltd (CSL) entered into a Crown lease for a twelve-year term, in which it became a tenant of certain dock property on which was situated a freight shed, on St Gabriel Basin on the

Lachine Canal The Lachine Canal ( in French (language), French) is a canal passing through the southwestern part of the Island of Montreal, Quebec, Canada, running 14.5 kilometres (9 miles) from the Old Port of Montreal to Lake Saint-Louis, through the boroug ...

, part of the

Port of Montreal The Port of Montreal (french: Port de Montréal) ( ACI Canadian Port Code: 0395, UN/LOCODE: CA MTR) is a cruise and transshipment point located on the St. Lawrence River in Montreal, Québec, Canada. The port operates as an international contain ...

. The lease contained the following clauses: :* Clause 7 said "the lessee (ie, CSL) shall not have any claim… for… damage… to… goods… being… in the said shed." :* Clause 8 said the lessor (ie, the Crown) would maintain the said shed at its own cost and expense. :* Clause 17 said "the lessee shall at all times indemnify ... the lessor from and against all claims ... by whomsoever made ... in any manner based upon, occasioned by or attributable to the execution of these presents, or any action taken or things done ... by virtue hereof, or the exercise in any manner of rights arising hereunder." In May 1944, while trying to keep the shed in repair with an

oxy-acetylene Principle of burn cutting Oxy-fuel welding (commonly called oxyacetylene welding, oxy welding, or gas welding in the United States) and oxy-fuel cutting are processes that use fuel gases (or liquid fuels such as gasoline or petrol, diesel, ...

torch, an employee started a

fire Fire is the rapid oxidation of a material (the fuel) in the exothermic chemical process of combustion, releasing heat, light, and various reaction Product (chemistry), products. At a certain point in the combustion reaction, called the ignition ...

and burned down the shed. According to proper practice he was negligent and should have used a hand drill because sparks flew and lit some cotton bales. $533,584 of goods were destroyed, of which $40,714 belonging to Canada Steamship Lines. The Crown argued that CSL could not sue because clause 7 excluded liability.

Court rulings

Exchequer Court of Canada

At the

Exchequer Court of Canada In the civil service of the United Kingdom, His Majesty’s Exchequer, or just the Exchequer, is the accounting process of central government and the government's '' current account'' (i.e., money held from taxation and other government reve ...

, Angers J held that the Crown's employees had been negligent and that clause 7 could not be invoked as their negligence amounted to '' faute lourde'' (roughly equivalent to

gross negligence Gross negligence is the "lack of slight diligence or care" or "a conscious, voluntary act or omission in reckless disregard of a legal duty and of the consequences to another party." In some jurisdictions a person injured as a result of gross negl ...

common law In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omnipresen ...

). For the same reason, he dismissed the third party proceedings instituted by the Crown under clause 17.

Supreme Court of Canada

On appeal to the

, the Court declared that the finding of negligence by the trial judge could not be disturbed. The Court ruled: :* The intention of the parties to be gathered from the whole of the document was that, as between the lessor and the lessee, the lessor should be exempt under both clauses 7 and 17 from liability founded on negligence ( Locke J dissenting as to clause 7). :* The conduct of the Crown's employees did not amount to ''faute lourde''. CSL appealed the ruling to the Privy Council.

Privy Council

Appeal was allowed against the SCC judgment. Lord Morton of Henryton said that clause 7 did not exclude negligence liability in clear enough terms and clause 17 was ambiguous and would be construed against the Crown. The Crown could realistically be said to have been strictly liable for damage to the goods (e.g. by breach of obligation to keep the shed in repair) and therefore negligence should not be covered. In that regard, he set out the following principles for courts to use in considering such clauses: #if a clause expressly excludes liability for negligence (or an appropriate synonym ) then effect is given to that. If not, #one should ask whether the words are wide enough to exclude negligence and if there is doubt, that is resolved against the one relying on the clause. If that is satisfied, then #one should ask whether the clause could cover some alternative liability other than for negligence, and if it can, it covers that.''Alderslade v Hendon Laundry Limited'',

945 Year 945 ( CMXLV) was a common year starting on Wednesday (link will display the full calendar) of the Julian calendar. Events By place Byzantine Empire * January 27 – The co-emperors Stephen and Constantine are overthrown barel ...

1 KB 189 In this case, another form of liability for damage was

strict liability In criminal and civil law, strict liability is a standard of liability under which a person is legally responsible for the consequences flowing from an activity even in the absence of fault or criminal intent on the part of the defendant. ...

, and so the exclusion clause did not work to cover negligence.

References