Asia Ocean Services, Inc. (UPS Asia Group Pte Ltd) v. Belair Fabrication Ltd

Asia Ocean Services, Inc. (UPS Asia Group Pte Ltd) v. Belair Fabrication Ltd
Court (s) Database
Federal Court Decisions
Date
2015-10-06
Neutral citation
2015 FC 1141
File numbers
T-1297-13
Decision Content
Date: 20151006
Docket: T-1297-13
Citation: 2015 FC 1141
Ottawa, Ontario, October 6, 2015
PRESENT: The Honourable Mr. Justice Russell
ADMIRALTY ACTION IN PERSONAM AGAINST
BELAIR FABRICATION LTD
BETWEEN:
UPS ASIA GROUP PTE LTD d.b.a UPS ASIA OCEAN SERVICES, INC
Plaintiff
(Defendant by Counterclaim)
And
BELAIR FABRICATION LTD
Defendant
(Plaintiff by Counterclaim)
JUDGMENT AND REASONS
I. INTRODUCTION [1] This is a motion for summary trial brought by UPS Asia Ocean Services, Inc [UPS] pursuant to Rule 216 of the Federal Courts Rules, SOR/98-106 [Rules]. UPS seeks judgment against Belair Fabrication Ltd [Belair] for CAD$210,105.02. In a counterclaim, Belair seeks judgment against UPS for CAD$173,629.12.
II. BACKGROUND [2] UPS is a logistics company which provides ocean freight services to clients shipping goods from China to North America.
[3] Belair is a company which manufactures steel components for industrial, commercial and institutional projects.
[4] In late 2012, UPS and Belair discussed arranging a series of shipments from China to Vancouver. The shipment at issue is described as a “break bulk” or non-containerized shipment. It consisted of a number of extremely large crane parts which were manufactured in China.
[5] On May 13, 2013, the parties executed a booking note for the break bulk shipment [Belair-UPS Booking Note]. A booking note is a contract used for large ocean charter contracts. The Belair-UPS Booking Note: provided for an estimated shipping date of May 23, 2013; provided a port of loading as Qinghuangdao, China; and, contained a “dead freight” clause. A “dead freight” clause is a standard clause in booking notes and provides that a charterer will pay the full freight charge if the charterer cancels a booking or reduces the cargo to be shipped after a booking is confirmed. Belair says it executed the Belair-UPS Booking Note on the condition that UPS would confirm with the Chinese manufacturer that the shipment would be ready in time.
[6] On May 14, 2013, the manufacturer advised Belair that the goods would not be ready to ship until June 10, 2013. Belair advised UPS of this date.
[7] On May 15, 2013, UPS advised Belair that it needed to confirm that the cargo was ready to ship, or the space on the ship would be released and Belair would be responsible for any penalties.
[8] On May 16, 2013, UPS again advised Belair that the ship was already booked and that Belair should try to ship as much as they could because they would be responsible for the dead freight charge regardless of whether the space was used. On the same day, UPS entered into a booking note with Eastern Car Liner Ltd [ECL] to ship Belair’s break bulk shipment on May 23, 2013 [UPS-ECL Booking Note]. This booking note also contained a dead freight clause.
[9] UPS says that when it became aware that the goods would not be ready to ship, it immediately began working with ECL to see if another vessel could be booked to mitigate Belair’s responsibility for the dead freight charge.
[10] On May 26, 2013, the original vessel was released without Belair’s goods.
[11] UPS and Belair exchanged a number of offers with different shipping dates and different ports as they worked to find an alternative vessel to ship Belair’s goods and mitigate the dead freight charges.
[12] UPS says it offered Belair a vessel on May 24, 2013 which would have been available between June 10-15, 2013 and that ECL would build a reduced dead freight charge into the fee.
[13] Belair says that it confirmed this offer on May 27, 2013.
[14] UPS says that Belair attempted to change the terms of the offer over the following days.
[15] Belair says that it confirmed with the manufacturer on June 6, 2013 that the shipment would be ready for June 8, 2013.
[16] UPS says that on June 6, 2013, Belair advised that the shipment would not be ready until June 10, 2013. UPS advised ECL that it would not be executing a booking note for the June shipping.
[17] Belair ultimately shipped its goods to Vancouver with another carrier. As a result, Belair says that it incurred storage, transportation, labour and other costs.
[18] On June 15, 2013, UPS-SCS Inc paid USD$57,500 to ECL.
[19] On June 27, 2013, UPS sent Belair an invoice for the dead freight charge totalling CAD$210,105.02.
[20] UPS filed its Statement of Claim on July 29, 2013. Belair filed its Statement of Defence and Statement of Counterclaim on August 27, 2013. UPS filed its Statement of Defence to the Counterclaim on September 24, 2013.
III. ISSUES [21] UPS raises the following issues in this motion:
1. Whether this matter is suitable for determination by way of summary trial;
2. Whether Belair is liable to UPS for the full dead freight amount pursuant to the Belair-UPS Booking Note; and
3. Whether Belair’s counterclaim should be dismissed.
IV. STATUTORY PROVISIONS [22] The following provisions of the Rules are applicable in this proceeding:
Summary Trial
Procès sommaire
Dismissal of motion
Rejet de la requête
216. (5) The Court shall dismiss the motion if
216. (5) La Cour rejete la requête si, selon le cas :
(a) the issues raised are not suitable for summary trial; or
a) les questions soulevées ne se prêtent pas à la tenue d’un procès sommaire;
(b) a summary trial would not assist in the efficient resolution of the action.
b) un procès sommaire n’est pas susceptible de contribuer efficacement au règlement de l’action.
Judgment generally or on issue
Jugement sur l’ensemble des questions ou sur une question en particulier
(6) If the Court is satisfied that there is sufficient evidence for adjudication, regardless of the amounts involved, the complexities of the issues and the existence of conflicting evidence, the Court may grant judgment either generally or on an issue, unless the Court is of the opinion that it would be unjust to decide the issues on the motion.
(6) Si la Cour est convaincue de la suffisance de la preuve pour trancher l’affaire, indépendamment des sommes en cause, de la complexité des questions en litige et de l’existence d’une preuve contradictoire, elle peut rendre un jugement sur l’ensemble des questions ou sur une question en particulier à moins qu’elle ne soit d’avis qu’il serait injuste de trancher les questions en litige dans le cadre de la requête.
V. ARGUMENT A. UPS – Plaintiff/Defendant by Counterclaim (1) Suitability for summary trial [23] Under Rule 216, a judge should give judgment if he or she can find the facts as he or she would upon a trial, regardless of complexity or conflicting evidence, unless to do so would be unjust. The Court should consider the following factors (Inspiration Management Ltd v McDermind St Lawrence Ltd (1989), 36 BCLR (2d) 202, [1989] BCJ no 1003 at paras 48, 53-57 [Inspiration Management]): the amount involved; the complexity of the matter; its urgency; any prejudice likely to arise by reason of delay; the cost of taking the case forward to a conventional trial in relation to the amount involved; the course of the proceedings; and any other matters that arise for consideration.
[24] UPS submits that this matter is suitable for disposition by way of a summary trial because (Plaintiff’s Memorandum of Fact and Law at para 55):
a. The contractual dispute is not overly complex and turns on a factual dispute which is sufficiently evidenced in the written record;
b. A determination at a summary trial would be dispositive of both the Plaintiff’s claim and the Defendant’s counterclaim, and there would be no litigating in slices;
c. A summary trial would allow for the just, most expeditious and least expensive determination of this proceeding on its merits as contemplated by Rule 3 of the Federal Courts Rules.
(2) Belair is liable to UPS for the dead freight charge [25] UPS submits that the general rules of contract apply to the Belair-UPS Booking Note. Under a booking note, the party entitled to use the ship, or the space on a ship, is called the charterer. Belair executed the Belair-UPS Booking Note on May 13, 2013 as merchant and charterer and agreed to be bound by all terms of the Belair-UPS Booking Note.
[26] UPS says that Belair cancelled the Belair-UPS Booking Note when it advised UPS that the cargo would not be available until June 10, 2013. By failing to provide the cargo, Belair breached the Belair-UPS Booking Note and became liable for the dead freight charge.
[27] As a result of Belair’s cancellation, UPS released the space booked with ECL and became liable to ECL for the dead freight charge under the UPS-ECL Booking Note.
[28] UPS says that the Court must uphold the contract because it was a bargain struck between two commercial parties with equal bargaining power: Ship MF Whalen v Pointe Anne Quarries Ltd (1921), 63 SCR 109 at 125-126; Atlas Construction Co Ltd v Montreal (City of), [1954] 4 DLR 124 at 130 (QCSC).
(3) Counterclaim [29] UPS asks that the counterclaim be dismissed. UPS says that it did not agree to amend the Belair-UPS Booking Note, nor did it repudiate the Belair-UPS Booking Note. UPS also says that Belair and UPS did not enter into any other booking note. UPS was simply working with ECL to try to secure another vessel to mitigate Belair’s liability for payment of the dead freight charge. UPS was unable to offer Belair a new shipping option to meet Belair’s needs, and so no new booking note was ever executed.
B. Belair – Defendant/Plaintiff by Counterclaim (1) Suitability for summary trial [30] Belair submits that this motion should be dismissed because the matter is not suitable for summary trial. Belair agrees with UPS’ general statement of the law governing summary trials. However, Belair says that this matter is inappropriate for summary trial because there are significant inconsistencies in the evidence on crucial elements of the proceeding. The inconsistencies relate to whether or not the Belair-UPS Booking Note was modified by UPS’ agreement that UPS would confirm with the manufacturer that the cargo would be ready to ship.
(2) Belair is not liable to UPS for the dead freight charge [31] Belair says that it is not liable to UPS for the dead freight charge for three reasons.
[32] First, Belair says that it is not a charterer as provided for in s 43 of the Belair-UPS Booking Note. A charterer is someone who hires an entire ship from a ship owner for a period of time or who reserves the entire cargo space of a ship: see BBC Chartering, “Chartering Terms,” online: <https://bbc-chartering.com/toolbar/tools/chartering-terms.html>. In contrast, Belair only booked space on a ship that was already carrying cargo for multiple shippers. The Belair-UPS Booking Note itself identifies Belair as a merchant, not a charterer. As a result, Belair should not be liable.
[33] Second, Belair says that it only signed the Belair-UPS Booking Note on the condition that UPS would confirm with the manufacturer that the cargo would reach the port on time. It says that it expressed concern about signing the booking note without a fixed shipping date, and UPS agreed to confirm with the manufacturer to obviate the risk of the dead freight charge being imposed. Belair should not be responsible for the dead freight charge because UPS never confirmed with the manufacturer as agreed. UPS’ breach of this condition should absolve Belair from any liability under the Belair-UPS Booking Note. Belair says that neither of its witnesses has been cross-examined on their affidavits. As a result, their evidence on this issue should be accepted: Society of Composers, Authors and Music Publishers of Canada v Maple Leaf Sports & Entertainment, 2010 FC 731.
[34] Third, Belair says that UPS has suffered no loss. The dead freight charge was not paid by UPS but by UPS-SCS Inc, and UPS has not reimbursed this payment. UPS is seeking a windfall payment. It is unfair for UPS to claim the full CAD$210,105.02 because it has never suffered that loss. A clause which is not reflective of a true estimate of potential damages, or is wholly out of proportion to the potential loss, is unenforceable as it is a penalty rather than a stipulated damages clause: Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd, [1915] AC 79 (HL) [Dunlop Pneumatic Tyre Co Ltd]. UPS is not a carrier or a ship owner. If cargo is not delivered, UPS is not necessarily out of pocket for the loss of the freight charge. Here, UPS is only out of pocket because of the dead freight charge in a separate contract with ECL – not for the full dead freight amount in the Belair-UPS Booking Note. If any damages are awarded, they should be limited to the actual loss which shows that UPS-SCS Inc paid a dead freight charge of USD$57,500 to ECL.
(3) Counterclaim [35] Belair asks that the Court grant its counterclaim. Belair says that it confirmed that the cargo would be delivered to the shipping port by June 8, 2013. UPS failed to confirm this with ECL. As a result, the delay in finding a new ship caused Belair to incur storage, transportation, labour and other costs that would not have been required had the cargo shipped as agreed. Belair says that it has incurred a loss of CAD$173,629.12 because of the cancellation.
VI. ANALYSIS A. Suitability for Summary Trial [36] There are two issues that need to be decided in this dispute:
a) Whether Belair is liable to pay UPS the sum of CAD$210,105.02 for the amount owing for the dead freight charge under the Belair-UPS Booking Note; and
b) Whether UPS is liable to Belair for damages suffered by Belair as a result of UPS’ breach of contract, as set out in Belair’s counterclaim.
[37] As Mr. Walek tells the Court in his affidavit for Belair (Affidavit of Mark Walek, sworn December 17, 2014 [Walek Affidavit]):
3. I have read the Affidavits of Larry Palmer dated June 25, 2014 (“Palmer #1”) and Normal Heath dated July 16, 2014 (“Heath #1”) and September 30, 2014 (“Heath #2”). While those Affidavits set out generally the dealings between Belair and the Plaintiff/Defendant by Counterclaim (“UPS”), there are significant discrepancies in how Mr. Palmer and Mr. Heath describe the genesis of the booking note eventually signed by Belair on or about May 13, 2013 and the cancellation of the charter in June, 2013. I have also read the transcript of the Examination for Discovery of Mr. Heath and the responses provided by UPS counsel to requests for further information made at Mr. Heath’s Examination for Discovery.
[38] Those “essential differences,” although extremely important, are focused upon two fairly narrow assertions that Belair makes:
1. That UPS agreed that Belair would only sign the Belair-UPS Booking Note on the condition that UPS would confirm with the manufacturer in China that the cargo would be delivered to the port in time for the May 23-25 loading; and
2. That UPS agreed to amend the Belair-UPS Booking Note, or contracted with Belair to ship the goods from the port in China to Vancouver with a cargo delivery date of June 10, 2013, and UPS breached this contract.
[39] As regards the agreement that UPS was responsible to confirm delivery times with the manufacturer, Mr. Walek has the following to say in his affidavit:
12. On or about Tuesday, May 7, 2013, Mr. Heath telephoned me and told me that he needed the booking note signed. I told Mr. Heath that I would sign the booking note the following day as long as the factory confirmed that the product would be ready. This conversation took place around noon in Canada, meaning it was in the middle of the night in China and that is why I needed to wait until the following day. Nevertheless, Mr. Heath told me that the booking note had to be signed that very day. I told Mr. Heath that I was not even at the office and was physically unable to sign the booking note. Mr. Heath then asked if Belair’s office administrator, Carolyn Albin, could sign on Belair’s behalf. I told him that Ms. Albin did not have signing authority but Mr. Heath said that it didn’t matter because the booking note was only going to be used to get us a firm shipping schedule.
13. I did not take Mr. Heath's advice at face value. I was still concerned about the dead freight clause. I told Mr. Heath that Belair would sign the booking note only if UPS confirmed with the factory that the cargo would be ready to be delivered to the port on time to meet the ship. Mr. Heath agreed to do so. By way of an email on the morning of Wednesday, May 8, 2013, I gave Mr. Heath contact information for the factory in China. The contact person there was Lisa Liu.
14. On Thursday evening on May 9, 2013, Mr. Heath sent an email to Lisa Liu at the factory in China to advise her of the proposed loading schedule on May 23-24, 2013. Due to the time difference between Canada and China, that email would have been delivered in China early Friday morning, May 10, 2013. The same day, Ms. Liu emailed Mr. Heath and asked how long the vessel would be in port. Mr. Heath did not respond to this request until Monday, May 13, 2013 (Tuesday, May 14, 2013 in China).
15. Also on Friday, May 10, 2013, Mr. Heath sent Ms. Ablin a booking note to sign on behalf of Belair. I am informed by Ms. Albin that she spoke to Mr. Heath on the telephone and expressed concern about a number of things including the dead freight charge. Mr. Heath again assured Ms. Albin that the dead freight charge need not be of a concern as the booking note was only being signed to confirm the dates.
16. I am informed by Ms. Albin that on May 13, 2013, Mr. Heath phoned her and asked her if the booking note had been signed. She told him that it had not been signed because I was not in the office and that it would have to wait until I returned because she did not know all the details. About noon on the same day, Mr. Heath phoned me on my cell phone and told me that the booking note needed to be signed immediately otherwise we would lose the potential sailing at the end of May. I told him again that Belair would sign the booking note only on the condition that UPS would confirm with the factory that the cargo would be delivered to the port on time. He agreed. As a result, I called Ms. Albin and asked her to sign and return the booking note to Mr. Heath.
(Walek Affidavit, sworn December 17, 2014, emphasis in original)
[40] When it became clear that the May 23-25, 2013 delivery date could not be met by the manufacturer in China, UPS and Belair began to look for alternative arrangements that would allow the cargo to reach Canada in a timely manner. Belair says this resulted in a contract to ship the cargo on June 8, 2013. Mr. Walek’s version of events is as follows:
21. UPS immediately began to search for an alternative. W. Heath telephoned me and advised that UPS had found a vessel in port between June 12 to 15, 2013 and that the dead freight obligation from the first booking note would be covered by the payment of an additional $40,000 on this second attempt. While I did not agree Belair should be responsible for the dead freight charge, time was running short, so I made a business decision to pay the extra money to ensure the cargo was delivered to Canada on time.
22. After a few days of negotiating delivery dates, Mr. Heath told me that the cargo had to be at the port no later than June 11, 2013 and I so advised Ms. Liu at the factory. There were also ongoing discussions about which of two different ports would be used and how the cargo would be delivered from the factory to the port. I asked Mr. Heath if UPS could assist with the delivery from the factory to the port. While it remained Belair's responsibility to pay for the goods to be moved to the port, UPS agreed to assist with the logistics. UPS China was used.
23. On about June 5, 2013, the June 11, 2013 delivery date was changed to June 9, 2013 and I confirmed to UPS that the cargo would be at the port and ready on June 9, 2013.
24. The next day, UPS changed the date again to June 8, 2013 as China Customs would be closed June 10 to 12, 2013.
25. On Thursday, June 6, 2013 in the evening, (morning, Friday, June 7, 2013 in China), I contacted the factory to confirm that the cargo would be ready for June 8, 2013. I was informed by Ms. Liu that the cargo would be ready but that I should make sure that UPS will be able to clear the cargo through customs prior to a Chinese Dragon Boat Festival holiday to be held June 10 to 12, 2013.
26. On Friday, June 7, 2013, sometime between 6 and 7 in the morning as I was driving to my office, I called Mr. Heath on my cell phone to confirm that the cargo would be ready to be delivered at the port on June 8, 2013. I mentioned to him that we needed to have the cargo clear customs prior to the Chinese holiday. Mr. Heath seemed to be unaware about the Chinese holiday but said he would confirm later as it was nighttime in China and the UPS office there would be closed.
27. Later on Friday, June 7, 2013, I was at the Belair assembly shop overseeing production when I received a call from Mr. Heath. Mr. Heath informed me that the vessel had been cancelled because the factory was not ready to deliver the cargo. I asked him why he was saying that when I had confirmed directly with the factory that it was in fact ready. I also asked him who gave him permission to cancel the vessel. Mr. Heath said that his office had made the decision. I was very angry. I asked how it was possible that the vessel that was booked for the May shipment could not be cancelled two weeks prior to the proposed loading date but this vessel from the same shipping line could be cancelled only a few days prior to sailing. Mr. Heath could not answer the question.
28. Immediately after this conversation, I went to my office and started looking for a new shipping company and what other options might be available. I obtained contact information for the original shipping company, Eastern Cu Liner, Ltd. ("ECL") and spoke to Bill Christ who, it turned out, had been the individual at ECL that was dealing with UPS on both the shipments. I asked Mr. Christ if it was an option to have the original vessel return to port. Mr. Christ said he would look into it and would advise me the next day. In the end, it turned out that we were a few hours too late to turn the vessel back to pick up the cargo.
29. About the middle of the following week, Mr. Heath contacted me again and said that he would look for another vessel. I told him that he was welcome to do so but I would be looking at new options as well. He eventually offered another vessel sailing in late June or the beginning of July but the price was even higher than the original price we had negotiated in February plus the additional $40,000 dead freight charge.
(Walek Affidavit, sworn December 17, 2014)
[41] This evidence is categorically disputed by UPS. As a result of this dispute concerning, admittedly crucial evidence, Belair says this is not a suitable case for summary trial. My review of the record convinces me that this is a suitable case for summary trial and that the Court is in a position to assess the relevant evidence on key points and make a decision on the facts that underlie the claim and the counterclaim. I will come to that evidence in detail later but, at this point, I think it should be pointed out that every other aspect of the dispute supports the case for summary trial.
[42] Rule 216(6) of the Rules provides as follows:
If the Court is satisfied that there is sufficient evidence for adjudication, regardless of the amounts involved, the complexities of the issues and the existence of conflicting evidence, the Court may grant judgment either generally or on an issue, unless the Court is of the opinion that it would be unjust to decide the issues on the motion.
Si la Cour est convaincue de la suffisance de la preuve pour trancher l’affaire, indépendamment des sommes en cause, de la complexité des questions en litige et de l’existence d’une preuve contradictoire, elle peut rendre un jugement sur l’ensemble des questions ou sur une question en particulier à moins qu’elle ne soit d’avis qu’il serait injuste de trancher les questions en litige dans le cadre de la requête.
[43] It is well-established in the jurisprudence that, in determining whether a summary trial is appropriate, the Court should consider factors such as the amount involved, the complexity of the matter, its urgency, any prejudice likely to arise by reason of delay, the cost of taking the case forward to a conventional trial in relation to the amount involved, the course of the proceedings, and any other matter that arises for consideration. See Inspiration Management, above, at para 48.
[44] Federal Court jurisprudence tells us that British Columbia jurisprudence is instructive and persuasive in this context because the Federal Court summary trial rules are modelled on the former Rule 18A of the British Columbia Supreme Court Civil Rules, BC Reg 168/2009 (now Rule 9-7). See Wenzel Downhole Tools Ltd v National-Oilwell Canada Ltd, 2010 FC 966 at para 34.
[45] In the recent case of Hryniak v Mauldin, 2014 SCC 7, the Supreme Court of Canada emphasized the need for proportionality in the judicial process and Karakatsanis J pointed out that summary procedure can be just as fair and is no less legitimate in the judicial process. See para 27.
[46] The only factor in the present case that could render summary trial inappropriate is a conflict in the evidence. Belair acknowledged that conflicts in evidence can be overcome, but objects to summary trial in this case because the conflicting evidence is at the heart of the case. In other words, Belair says that credibility of the witnesses on both sides is a crucial factor and the Belair witnesses have not been cross-examined on their affidavits. However, the British Columbia Supreme Court concluded that although it is generally inappropriate to decide an application in the face of contradictory affidavit evidence on the main issues, it nevertheless remains within the powers of the Court to decide disputed questions of facts where there is an ability to review the totality of the evidence and give it appropriate weight if the evidence is adequate. See Canada Wide Magazines Ltd v Columbian Publishers Ltd (1994), 55 CPR (3d) 142 (BCSC).
[47] I have come to the conclusion that it is possible to deal with this matter summarily. Even though there are conflicting affidavits, there is other admissible evidence before the Court that makes it possible to find the necessary facts. See Inspiration Management, above, at para 55. As the British Columbia Supreme Court recently pointed out in Morin v 0865580 BC Ltd, 2014 BCSC 2110 at para 22:
The onus lies with the summary trial application respondent to demonstrate that the matter is not suitable for summary trial. In my view, the issues raised by the applicant defendants in respect of the purported deficiencies in the plaintiffs' claims are discrete and well-suited to disposition in the manner proposed. The actual conflicts in the evidence of Chester on the one hand, and the plaintiffs and Gaukel on the other, are relatively minor and, as will be seen, the differences between the parties amount chiefly to differences in how the evidence is characterized and as to the legal consequences, as opposed to substantive differences as to what was done and said. Furthermore, the Rules do of course permit findings of fact to be made even in the face of conflicting evidence: see Placer Development Ltd. v. Skyline Explorations Ltd. (1985), 67 B.C.L.R. 366 (B.C. C.A.), at 385 — 86. To the extent there are substantive conflicts in the affidavit evidence of the parties and Gaukel, I have concluded the conflicts can be fairly resolved through weighing that evidence against the affidavit evidence given by non-parties and against the documentary evidence, and by testing the affiants' contentions against common sense.
[48] Proportionality and all of the other factors point to the need for summary disposition in this case. We have a plethora of documentary evidence created at the material time, the UPS evidence has been tested on cross-examination, the evidence of Mr. Walek and Ms. Albin for Belair can be tested against the extensive and detailed documentary evidence dealing with the particulars in this case, common practice and common sense. In my view, this dispute can be fairly adjudicated in a timely, affordable and proportionate manner without the need to resort to a full trial.
B. Terminology of the Booking Notes [49] Focusing upon the terminology of the Belair-UPS Booking Note, Belair asserts that it was not a “charterer” within the legal meaning of that word and so, for this reason, was not subject to the dead freight charge.
[50] In effect, Belair says that a “charterer” is someone who hires an entire ship from the ship owner for a period of time or who reserves the entire cargo space of a ship, and Belair only booked space on a ship that was already carrying cargo.
[51] In my view, this position is a semantic red-herring. UPS has produced authorities to establish that a “charterer” is a signatory to a charter party, which is a contract for the transportation of cargo, whether or not the charterer contracts for the use of the entire space or just a portion of it. I do not have to decide this rather technical issue. The evidence is clear that, however Belair is referred to under the Belair-UPS Booking Note, Belair fully understood that, in signing the Belair-UPS Booking Note, it became liable to pay the dead freight charge. This is why, in these proceedings, Belair alleges a collateral verbal agreement that UPS would assume the responsibility of dealing with the manufacturer to ensure that the cargo would be delivered to the port in time for loading on May 23, 2013. The Belair-UPS Booking Note, and the contemporaneous documentation that speaks to how the Belair-UPS Booking Note came to be signed, makes perfectly clear what the parties understood as their respective obligations under the Belair-UPS Booking Note. There was a meeting of minds that, as far as the documentation is concerned, Belair would be liable under the dead freight clause if the booking was cancelled or the volume of the cargo was reduced.
[52] Belair is asserting a collateral verbal agreement in order to avoid the consequences of signing the Belair-UPS Booking Note. This is because Belair is fully aware that, whatever terminology is used to identify the parties in the Belair-UPS Booking Note, it signed knowing full well the consequences of cancellation or reduced volume under the dead freight clause.
C. Parties to the Contract [53] Belair also seeks to avoid liability under the dead freight clause of the Belair-UPS Booking Note by questioning the identity of UPS as a contracting party as well as the identity of the corporate entity that paid the liability under the UPS-ECL Booking Note.
[54] The evidence is that UPS Asia Ocean Services, Inc signed the Belair-UPS Booking Note with Belair, while UPS Asia Group PTE Ltd is identified as the merchant on the UPS-ECL Booking Note. The evidence is that UPS Asia Ocean Services, Inc was entered as the operating name for UPS Asia Group PTE Ltd on the Belair-UPS Booking Note in clerical error so it is clear that the contracting party was UPS Asia Group PTE Ltd for both booking notes, which is an entity organized and existing under the laws of Singapore.
[55] The evidence as to who settled the dead freight obligation under the UPS-ECL Booking Note is that UPS-SCS Toronto provided a wire transfer to ECL in the amount of USD $57,500.00 on June 25, 2013. UPS-SCS Toronto is, apparently, UPS SCS, Inc, an Ontario corporation that carries on business as UPS Global Freight Forwarding in Canada.
[56] Belair is attempting to avoid payment of the dead freight charge in the Belair-UPS Booking Note by questioning whether UPS Asia Group PTE Ltd even reimbursed UPS-SCS Toronto for the dead freight payment under the UPS-ECL Booking Note. The Court has no evidence as to how and why UPS has accounted for the payment within its group of companies. However, it is clear that payment has been made.
[57] The issue before me is whether Belair is obliged to pay the dead freight charge calculated under the Belair-UPS Booking Note. Part of the reason for that dead freight charge was the liability that UPS incurred to ECL under the UPS-ECL Booking Note. But there is nothing in the Belair-UPS Booking Note that makes payment by UPS Asia Group PTE Ltd, a condition precedent to Belair’s obligation to pay the dead freight charge under the Belair-UPS Booking Note. That payment is triggered by cancellation of the booking and/or decrease in the cargo volume. Belair’s liability to pay the dead freight charge is not dependent upon which entity of the UPS corporate structure forwards the payment to ECL. Once again, I regard this point as irrelevant.
D. Amount of Belair’s Liability [58] Belair argues that the amount it is obliged to pay under the Belair-UPS Booking Note – assuming the alleged collateral arrangements with UPS do not relieve it of liability altogether – should be either nothing at all because the dead freight charge is a penalty clause, or no more than UPS has paid to ECL in accordance with the dead freight clause in the UPS-ECL Booking Note, which amounted to USD $57,500.00.
[59] I have no cases before me from either side which characterize the kind of dead freight charge at issue here as either a penalty or a liquidated damages clause. The legal distinction is well known in that a liquidated damages clause is enforceable because it is a genuine attempt at a pre-estimate of damages that will occur, while a penalty clause is not enforceable because it is not a pre-estimate of damages and is an “in terrorem” clause, the purpose of which is to compel the performance of contractual obligations. The following principles set out by Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd, above, have been widely accepted by Canadian Courts (at 86):
i) Though the parties to a contract who use the words “penalty” or “liquidated damages” may prima facie be supposed to mean what they say, yet the expression used is not conclusive. The Court must find out whether the payment stipulated is in truth a penalty or liquidated damages. This doctrine may be said to be found passim in nearly every case.
ii) The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage…
iii) The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as the time of the making of the contract, not as at the time of the breach…
iv) To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive. Such are:
(a) It will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach…
(b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid…
(c) There is a presumption (but no more) that it is a penalty when “a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage”…
On the other hand:
(d) It is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the consequences of the breach are such as to make precise pre-estimation almost an impossibility. On the contrary, that is just the situation when it is probable that pre-estimated damage was the true bargain between the parties…
[Footnotes omitted]
See Canadian General Electric Co v Canadian Rubber Co (1915), 52 SCR 349; Lozcal Holdings Ltd v Brassos Development Ltd (1980), 111 DLR (3d) 598; 22 AR 131 (ABCA); Place Concord East Ltd Partnership v Shelter Corp of Canada Ltd (2006), 270 DLR (4th) 181 (ONCA).
[60] In the present case, it seems to me that, when the Belair-UPS Booking Note was entered into, the dead freight clause was a reasonable attempt to estimate the damages UPS would suffer in the event that the booking had to be cancelled because Belair could not deliver the cargo to the vessel by the stipulated loading time. We can see this from the explanations given in the written exchanges between the parties. UPS itself had to sign a booking note with ECL that contained the same clause, and it seems obvious that it is intended to cover the loss that occurs when a vessel is booked to come to a particular port to pick up a particular cargo and space is reserved for that cargo which is then not used.
[61] UPS made it clear to Belair that it would have to assume contractual responsibility for this loss (assumed by UPS through the UPS-ECL Booking Note). It is also clear that UPS put a significant amount of work into finding a vessel and booking it for Belair under conditions where timing was extremely important to Belair. No charge was made for this intense and extensive work and any damages would be difficult to calculate with precision. Hence, a dead freight charge makes sense in the circumstances and it seems clear from the record that the parties did not intend this as a penalty but as an attempt to reasonably account for the loss that would occur if the booking had to be cancelled for Belair’s failure to deliver.
[62] Cancellation of the May 2013 break bulk shipment meant that UPS became liable to ECL under the s 43 dead freight clause in the UPS-ECL Booking Note. UPS’ total liability was USD $163,864.10 which was made up of base ocean freight of USD $143,395.20, plus BAF of USD $20,413.90 (USD $20.50 w/m), and B/L fee of USD $55.00. In June 2013, ECL demanded payment for this amount. However, UPS was able to negotiate a discount with ECL so that, in the end, UPS paid USD $57,500.00 to ECL. UPS has not passed this discount on to Belair.
[63] Belair does not take issue with the calculations set out above but says that if it is obliged to pay anything under the dead freight clause in the Belair-UPS Booking Note it can only be the USD $57,500.00 that UPS has paid to ECL, otherwise this will result in a windfall to UPS.
[64] While there is some discrepancy in the authorities and among academic commentators, the prevailing view appears to be that an enforceable liquidated damages clause is assessed at the time the contract containing it was entered into (May 13, 2013, in this case) and not at the time when the damages occur. See Mortgage Makers Inc v McKeen, 2009 NBCA 61 at para 20 [Mortgage Makers]. The fact that actual damages may later turn out to be either more or less than the estimate is not an indication that the original estimate was unreasonable. The dead freight clause in this case does not say that the charge will be reduced to reflect the amount that UPS eventually pays to ECL. If Belair’s liability is only for actual damages calculated at the time of breach, then the purpose of the dead freight clause - an agreed estimate of damages and the certainty that comes from knowing in advance what the liability will be in the event of cancellation - would be meaningless. The amount remains a genuine attempt to estimate damages and liabilities in advance so that both sides know what they are facing even if actual damages turn out to be more or less. See Mortgage Makers, above, at para 19. As Angela Swan points out in Canadian Contract Law, 3rd ed (LexisNexis Canada, 2012) at 951
The fact that a stipulated damages clause may provide f