ABB Inc. v. Canadian National Railway Company

ABB Inc. v. Canadian National Railway Company
Court (s) Database
Federal Court Decisions
Date
2020-08-06
Neutral citation
2020 FC 817
File numbers
T-1766-16
Notes
Reported Decision
Decision Content
Date: 20200806
Docket: T-1766-16
Citation: 2020 FC 817
Ottawa, Ontario, August 6, 2020
PRESENT: Mr. Justice Sébastien Grammond
BETWEEN:
ABB INC.
Plaintiff
and
CANADIAN NATIONAL RAILWAY COMPANY
and
CSX TRANSPORTATION, INC.
Defendants
JUDGMENT AND REASONS
Table of Contents
I. Background 4
II. Analysis 7
A. Legal Framework 7
(1) The Diversity of the Legal Sources 8
(2) Rates and Tariffs 12
(3) Liability of the Carrier 14
B. The Claim Against CN 16
(1) Which Law Governs? 16
(2) Which Limitation of Liability Applies? 20
(3) Is CN Liable for CSXT’s Negligence? 31
(4) Was CSXT Negligent? 37
C. The Claim Against CSXT 39
(1) Which Law Governs? 40
(2) Contractual Basis of the Claim 41
(3) The 2015 Settlement Agreement 45
D. Pre-Judgment and Post-Judgment Interest 47
III. Disposition and Costs 48
[1]
The plaintiff, ABB, a manufacturer of electrical equipment, contracted with the defendant CN for the transportation of an electrical transformer from its plant in Varennes, Quebec, to its customer’s facilities in the United States. CN, in turn, retained the services of the defendant CSXT for the American leg of the journey. While carried by CSXT, the transformer was damaged.
[2] ABB sues both CN and CSXT for damages. Both defendants, however, argue that ABB agreed to a limitation of liability. Limitations of liability are commonplace in the transportation industry. Despite their potential harshness for shippers, they may be viewed as simply shifting the burden to obtain insurance coverage. What is at stake in this case, however, is not the existence of a limitation of liability, but its scope. ABB argues that the relevant limitation of liability is found in an agreement it signed with CN in 2011, which makes an exception where the negligence of the carrier is proven. For their part, CN and CSXT argue that the relevant limitation is found in other documents and is not subject to such an exception.
[3] I agree with ABB. The 2011 agreement governs the relationship between ABB and CN. The parties intended the limitation of liability found in that agreement, which made an exception for cases of negligence, to become a standard term of their subsequent dealings. Thus, even though the contract concluded in 2015 for the carriage of the transformer was a “separate agreement,” the limitation of liability it contained must be interpreted as excluding cases of negligence. Moreover, under the relevant regulatory scheme, CN is liable for CSXT’s negligence.
[4] The issue of CSXT’s direct liability towards ABB is not dealt with explicitly in federal legislation and regulations. It falls to be decided under the private law of the relevant province, in this case, Quebec. Under Quebec law, the connecting carrier, CSXT, becomes a party to the contract with the originating carrier, CN, on the same terms and conditions. Thus, CSXT is directly liable to ABB and is bound by CN’s limitation of liability and its exceptions.
[5] CSXT was negligent in failing to ensure that the transformer, due to its dimensions, would not collide with obstacles found along the way—in this case, a bridge. The situation comes within the exception to the limitation of liability. Thus, I am condemning CN and CSXT to pay $1.5 million to ABB, an amount agreed to by all parties.
I. Background
[6] The plaintiff, ABB Inc. [ABB], is a Canadian corporation and has its headquarters in Varennes, Quebec, where it manufactures electrical equipment. The defendant, Canadian National Railway Company [CN], is a Canadian corporation and has its headquarters in Montreal, Quebec. It operates a railway network situated mainly in Canada. The defendant, CSX Transportation, Inc. [CSXT], is incorporated under the laws of Virginia and has its headquarters in Jacksonville, Florida. It operates a railway network situated mainly in the United States.
[7] Some of the equipment manufactured by ABB is large and heavy. In the railway industry, such equipment is referred to as a “dimensional load.” Special arrangements must be made for their transportation and delivery to ABB’s clients. For that purpose, ABB frequently retains the services of CN.
[8] In December 2011, ABB and CN signed a “Confidential Transportation Agreement” [the 2011 agreement], which limits CN’s liability in respect of the carriage of dimensional loads. This agreement was made for a period of one year and was automatically renewable for subsequent one-year periods unless notice to the contrary was given. There is no dispute that this agreement was still in force when the facts of this case took place. The relevant part of this agreement reads as follows:
For each and every haulage of Dimensional Loads requested by Shipper from CN during the term hereof, CN’s liability for any loss or damage to the said Dimensional Loads, or any part thereof, shall be limited to USD $25,000, unless negligence is proven.
[9] In July 2014, ABB contacted CN to obtain a quote for the transportation of an electrical transformer that it had sold to the Tennessee Valley Authority [TVA] and that it needed to deliver to TVA’s facilities in Drakesboro, Kentucky. CN then issued a “Dimensional Services Proposal.” That proposal contained a mention reading “For Limited Liability of $USD 25,000.00.” In March 2015, ABB issued a purchase order to CN, referencing the price quoted by CN in the July 2014 proposal. There is no serious dispute that ABB thus accepted CN’s offer to contract and thereby formed a contract, which I will call the 2015 agreement. On October 7, 2015, five days after taking possession of the cargo, CN issued a tariff reflecting the terms of the agreement. That tariff was effective from October 2, 2015 to November 1, 2015. It contains the mention, “Rate includes limited liability coverage of $25,000 USD while handled by Carriers shown in route.”
[10] CN’s network, however, does not extend to Kentucky. Thus, it was necessary to retain CSXT’s services for the American leg of the journey. ABB, however, dealt only with CN; it did not have direct communications with CSXT with respect to this movement. As we shall see, the precise nature of the legal relationships between ABB, CN and CSXT is very much in dispute.
[11] Before the journey began, ABB provided the dimensions of the transformer to CN, which, in turn, provided them to CSXT. Each carrier performed a “clearance check,” to ensure that the dimensions of the load would not exceed the available clearance of various obstructions found along the proposed route, most importantly the height of bridges.
[12] The transformer was delivered to CN in Varennes on October 2, 2015. CN carried it to Buffalo, New York, where it was handed over to CSXT. CSXT then carried it to its final destination in Drakesboro, Kentucky, on October 21, 2015.
[13] However, shortly before reaching destination, the transformer hit a bridge and was severely damaged. It appears that CSXT’s software failed to identify the insufficient height of that bridge. I will return to this issue later in these reasons.
[14] ABB sues both CN and CSXT for the damage resulting from the accident. CN denies owing anything, as it delivered the transformer in good condition to CSXT. It also invokes the limitation of liability clauses contained in the July 2014 proposal and in the October 2015 tariff or, in the alternative, in the 2011 agreement. CSXT also denies owing anything, arguing that it has no direct contractual relationship with ABB. It also invokes limitation of liability clauses contained in its tariff or in an agreement with ABB settling litigation regarding a different shipment. CN did not bring a cross-claim against CSXT. CN and CSXT say that any claim between them will be dealt with in another forum, and have accordingly brought little evidence in this regard.
[15] The trial proceeded entirely on the basis of admissions of facts and documents and read-ins of discovery transcripts. No witnesses were heard. The parties agreed that, should either CN or CSXT be held liable, the damages suffered by ABB are to be assessed at $1.5 million.
II. Analysis
[16] This dispute stems mainly from a disagreement as to the basic legal framework for carriage by rail. ABB asserted a wide variety of arguments against both defendants, stating in essence that someone must pay for what happened. The defendants, on their part, advanced various reasons why they should not be held liable. To put it shortly, CN says that it did not do anything wrong and CSXT, that it did not have a contract with ABB. The outcome depends on a web of rules stemming from statute, regulation and contract. The parties disagree as to the proper ordering of these rules.
[17] Thus, it is necessary to clarify the legal framework before analyzing ABB’s claims against CN and CSXT.
A. Legal Framework
[18] There is a tendency to consider that federal legislation governing carriage by rail is exhaustive. As will become clear shortly, this is simply not true. In some circumstances, this legislation must be read against the backdrop of private law and, in particular, contract law. In other words, private law provides the “suppletive” law, that is, the law that supplements gaps in federal railway legislation. Private law typically falls under provincial jurisdiction. Thus, it is necessary to ascertain in which province the facts took place. Where the facts took place in Quebec, private law rules are found in the Civil Code.
[19] In this section, I will thus attempt to outline the main features of the legal framework governing carriage by rail in Canada. I will focus on what is not in dispute between the parties; more controversial points will be addressed later in the analysis.
(1) The Diversity of the Legal Sources
[20] One particular challenge of this case is that the legal rules governing carriage by rail are derived from several sources. A proper understanding of the interactions between the bodies of law derived from those sources is key to resolving the dispute. To reach that understanding, one must begin with the constitutional division of powers.
[21] Interprovincial and international carriage by rail is a matter that comes under Parliament’s jurisdiction, according to sections 91(29) and 92(10)(a) of the Constitution Act, 1867. In the exercise of that jurisdiction, Parliament has enacted the Canada Transportation Act, SC 1996, c 10 [the Act], which regulates air and railway transportation. The enactment of federal legislation under that head of jurisdiction does not, however, exclude the application of provincial legislation.
[22] Under the modern view of Canadian constitutional law, “the same fact situations can be regulated from different perspectives, one of which may relate to a provincial power and the other to a federal power:” Desgagnés Transport Inc v Wärtsilä Canada Inc, 2019 SCC 58 at paragraph 84 [Desgagnés Transport]. The application of provincial legislation is ousted in two kinds of circumstances: interjurisdictional immunity and paramountcy: Canadian Western Bank v Alberta, 2007 SCC 22, [2007] 2 SCR 3 [Canadian Western Bank]. Interjurisdictional immunity occurs where the application of provincial legislation would impair the core of federal jurisdiction. The parties have not argued that this would happen in this case. Indeed, there are many situations in which provincial legislation applies to railways: Ontario v Canadian Pacific Ltd, [1995] 2 SCR 1028. Paramountcy describes the situation in which provincial and federal legislation conflict, in which case federal legislation is paramount.
[23] Two kinds of conflict may lead to a situation of paramountcy: Saskatchewan (Attorney General) v Lemare Lake Logging Ltd, 2015 SCC 53 at paragraphs 17-22, [2015] 3 SCR 419 [Lemare Lake Logging]. The first one is the operational conflict, that is, a situation where it is impossible to comply simultaneously with federal and provincial legislation. The second one is where the application of provincial legislation would frustrate the purpose of federal legislation. However, the Supreme Court of Canada has warned against giving too wide a scope to the “frustration of purpose” branch of paramountcy: Canadian Western Bank, at paragraph 74; Lemare Lake Logging, at paragraph 21. The Court has been loath to find that Parliament’s purpose is to exclude the application of provincial legislation or, in other words, to “cover the field” or to set forth a “complete code:” Bank of Montreal v Marcotte, 2014 SCC 55 at paragraph 72, [2014] 2 SCR 725.
[24] Where provincial legislation relates to “property and civil rights” or, in more modern terms, to private law, section 8.1 of the Interpretation Act, RSC 1985, c I-21, must also be taken into consideration. It reads as follows:
8.1 Both the common law and the civil law are equally authoritative and recognized sources of the law of property and civil rights in Canada and, unless otherwise provided by law, if in interpreting an enactment it is necessary to refer to a province’s rules, principles or concepts forming part of the law of property and civil rights, reference must be made to the rules, principles and concepts in force in the province at the time the enactment is being applied.
8.1 Le droit civil et la common law font pareillement autorité et sont tous deux sources de droit en matière de propriété et de droits civils au Canada et, s’il est nécessaire de recourir à des règles, principes ou notions appartenant au domaine de la propriété et des droits civils en vue d’assurer l’application d’un texte dans une province, il faut, sauf règle de droit s’y opposant, avoir recours aux règles, principes et notions en vigueur dans cette province au moment de l’application du texte.
[25] Section 8.1 was adopted in 2001, but enshrines a long-standing principle: Canada (Attorney General) v St-Hilaire, 2001 FCA 63, [2001] 4 FC 289 [St-Hilaire]; Jean-Maurice Brisson and André Morel, “Droit fédéral et droit civil: complémentarité, dissociation” (1996) 75 Can Bar Rev 297 [Brisson and Morel, “Droit fédéral”]. It accomplishes two things, which I will describe by highlighting their application to railway legislation.
[26] First, section 8.1 creates a strong presumption that Parliament does not intend to “cover the field” and to exclude the application of provincial legislation regarding property and civil rights. The same idea flows from the manner in which the doctrine of paramountcy of federal legislation is applied, which I described above. With respect to railways, this is consistent with the fact that the Act and its predecessors have never been considered as an exhaustive codification of the law governing railways: Canadian National Railway Company v Neptune Bulk Terminals (Canada) Ltd., 2006 BCSC 1073 at paragraph 91 [Neptune]. Rather, section 8.1 requires the application of provincial private law to supplement provisions of federal legislation that resort to private law concepts. In this regard, the basic premise of the Act is that transportation of goods takes place pursuant to contracts made between shippers and railway companies: G.E.X.R. v Shantz Station and Parrish & Heimbecker, 2019 ONSC 1914 at paragraph 84; Neptune, at paragraph 93. Because the Act relies on the juridical concept of contract, it may be necessary to draw upon provincial private law rules that define and govern contracts in order to provide a complete solution to a legal problem involving carriage by rail. Indeed, there is no such thing as a federal law of contract that could play that role: Desgagnés Transport, at paragraph 47; Quebec North Shore Paper Co v Canadian Pacific Ltd, [1977] 2 SCR 1054; Brisson and Morel, “Droit fédéral,” at 310; H. Patrick Glenn, “The Common Law in Canada” (1995) 74 Can Bar Rev 261, at 279-280; Philippe Denault, La recherche d’unité dans l’interprétation du droit privé fédéral – Cadre juridique et fragments du discours judiciaire, Montreal, Thémis, 2008 at 38-50.
[27] Second, section 8.1 enshrines the equality of the civil law and the common law. It dispels any notion that gaps in federal legislation must be filled by having recourse to the common law, whether it be because of a belief that federal legislation was drafted with the common law in mind or simply for reasons of convenience or uniformity: D.I.M.S. Construction inc (Trustee of) v Quebec (Attorney General), 2005 SCC 52 at paragraph 64, [2005] 2 SCR 564. In this regard, I note that “concerns for uniformity cannot drive the division of powers analysis:” Desgagnés Transport, at paragraph 152; see also Canada v Raposo, 2019 FCA 208.
[28] One consequence of that principle, which was not fully appreciated by the parties at the outset of the trial, is that recourse must be had to the civil law, and not the common law, when it is necessary to supplement the provisions of the Act with respect to a dispute taking place in Quebec. In those cases, “the suppletive law is the civil law:” St-Hilaire, at paragraph 36. This is not a novel principle: see, in particular, Canadian National Railway Company v Sumitomo Marine & Fire Insurance Company Ltd, 2007 QCCA 985, [2007] RJQ 1508 [Sumitomo]; Compagnie des chemins de fer nationaux du Canada v Compagnie d’arrimage de Québec ltée, 2010 QCCQ 942 at paragraph 49.
[29] In some instances, as in Sumitomo, it may be possible to resolve a legal issue only by interpreting the provisions of the Act. This, however, is not always the case and one should not be led to think that the Act is a “complete code” that never needs to be supplemented by private law principles. In practice, asserting that the Act is a “complete code” may lead to the conscious or unconscious use of common law concepts in a dispute originating in Quebec. For instance, in this case, the parties initially stated that it was not necessary to go beyond the Act to solve the dispute, but nevertheless deployed common law concepts, such as non-delegable duty or vicarious liability, without any apparent thought that the dispute might be governed by the civil law.
[30] Thus, when the Act needs to be supplemented by private law concepts, the first step of the analysis should be to ascertain which provincial law is applicable as suppletive law.
(2) Rates and Tariffs
[31] While the Act relies on the private law concept of contract to structure the legal framework for the relationship between shippers and railway companies, it restricts the railway companies’ freedom of contract in important respects. In particular, the Act requires railway companies to conclude a contract of carriage with any shipper who wishes to use their services. The Act also provides mechanisms for imposing important terms of contracts of carriage. In doing so, the Act departs from the rules habitually governing contracts, which protect the freedom to choose one’s contracting partners and the freedom to negotiate the terms of the agreement. Those restrictions on freedom of contract are necessary because “an efficient economic system cannot depend upon the vagaries of the good will of those who control the means of transporting goods to market:” Canadian Pacific Railway Company v Canexus Chemicals Canada LP, 2015 FCA 283 at paragraph 97, [2016] 3 FCR 427 [Canexus].
[32] The tariff is the main tool by which those goals are pursued. Without entering into the details, sections 117, 118 and 119 of the Act provide that railway companies must publish their tariffs and that they cannot charge rates other than those set out in these tariffs. According to section 87, a tariff may include not only rates, but also terms and conditions of carriage. In turn, section 113 requires railway companies, among other things, to accept to transport “all traffic offered for carriage on the railway.” Thus, in exchange for a requirement to contract with anyone willing to ship goods on their railways, railway companies obtain the power to determine unilaterally the terms of those contracts. In contractual terms, the Act requires railway companies to make a standing offer to contract to the public, on the terms and conditions that they set in their tariffs. A contract is formed when a shipper manifests its will to ship goods according to the tariff.
[33] Nevertheless, the Act also contemplates the direct negotiation of the terms and conditions of a contract for carriage by rail. Section 126 allows shippers and railway companies to conclude “confidential contracts” governing the terms of carriage of goods between them. According to section 117, these confidential contracts supersede the provisions of any tariff.
[34] Moreover, nothing prevents a shipper from agreeing with a railway company as to the rates and terms for the carriage of certain goods, through a contract that is not confidential within the meaning of section 126. In this case, for the agreement to be effective, the contents of the agreement must be embodied in a published tariff. In theory, other shippers could avail themselves of the same tariff while it is in force. As we saw earlier, this is what ABB and CN did in this case.
(3) Liability of the Carrier
[35] As in all contractual situations, a party’s failure to perform its obligations gives rise to contractual liability. The key provision, in this regard, is section 137 of the Act, which accomplishes two main things. First, it empowers the Canada Transportation Agency [the Agency] to make regulations that will govern, absent an agreement, liability issues between a shipper and a railway company. Second, it allows a shipper and a railway company to agree to a different liability regime. At this juncture, it is enough to provide only a basic outline of each of these two components.
[36] Pursuant to the power granted by section 137, the Agency made the Railway Traffic Liability Regulations, SOR/91-488 [the Liability Regulations]. Section 4 of these Regulations sets out the general principle to the effect that a railway carrier is liable for “any loss or damage to the goods” in its possession. Section 5 sets forth certain causes of exoneration broadly related to the concept of superior force or force majeure, such as an “act of God,” a war, a quarantine, and so forth. The Federal Court of Appeal described these provisions as “largely reproduc[ing] a common carrier’s obligations (and the exceptions to those obligations) at common law where a common carrier is treated as the insurer of the shipper’s goods:” Canexus, at paragraph 11. This comparison could be extended to the civil law: art 2049 of the Civil Code. Section 8 of the Regulations, to which I will return later in these reasons, deals with the issue of liability when goods are transported by successive carriers.
[37] That is the default regime. A shipper and a railway company may substitute a different regime, provided that they do so in compliance with subsection 137(1) of the Act. The wording of this provision was amended in 2015, after the 2011 agreement between ABB and CN, but before the carriage of the transformer took place. The differences between the two versions are not material to the issues in dispute in this case. The provision currently reads as follows:
137. (1) Any issue related to liability, including liability to a third party, in respect of the movement of a shipper’s traffic shall be dealt with between the railway company and the shipper only by means of a written agreement that is signed by the shipper or by an association or other entity representing shippers.
137. (1) Les questions portant sur la responsabilité relativement au transport des marchandises d’un expéditeur, notamment envers les tiers, ne peuvent être traitées entre la compagnie de chemin de fer et l’expéditeur que par accord écrit signé soit par l’expéditeur, soit par une association ou une autre entité représentant les expéditeurs.
[38] Thus, a railway company may limit its liability. It may not, however, do so unilaterally, by inserting a term to that effect in its tariff: Canexus, at paragraphs 98-99. It needs to obtain a “written agreement that is signed by the shipper.”
B. The Claim Against CN
[39] ABB’s claim against CN is based on two main propositions: first, that the applicable limitation of liability is the one found in the 2011 agreement and makes an exception for cases of negligence and, second, that CN is liable for damage sustained by the transformer while it was carried by CSXT. CN disputes both propositions. Before addressing those two main issues, I need to determine which suppletive law is applicable to the ABB-CN contracts. Furthermore, as CSXT’s negligence constitutes the basis of the claim against CN, I will also address CSXT’s argument that it was not negligent in this section.
(1) Which Law Governs?
[40] As will become clear later, the Act and the Liability Regulations do not provide the answer to all questions in issue. Thus, according to section 8.1 of the Interpretation Act, the first step of the analysis is to determine which provincial law is applicable as a background to the Act.
[41] In this regard, ABB argued that its contract with CN is governed by the law of Quebec, because it was entered into by two businesses headquartered in that province and because it governed the carriage of the transformer from Quebec to Kentucky. CN did not take a firm position on the issue, arguing instead that the application of the Civil Code would “not impact the analysis.” CSXT denies that Quebec law applies. It asserts that the 2011 agreement between CN and ABB is not governed by civil law because the parties used a common law concept—negligence—in the agreement’s main clause. CSXT also invokes a variety of reasons to oppose the application of the Civil Code, including the fact that the Act and Regulations do not need to be supplemented, that there is no provincial jurisdiction over international transportation and that CSXT is based in the United States and carried the transformer in the United States only. Beyond acknowledging that it is subject to Canadian law, in particular the Act and the Liability Regulations, CSXT did not suggest that the law of any province other than Quebec was applicable.
[42] In such a situation, one cannot simply conclude that no law is applicable. Neither is there a presumption in favour of the common law, as this would be contrary to the equality of the civil law and common law traditions enshrined in section 8.1 of the Interpretation Act. The solution must be based on principle and not mere convenience.
[43] The identification of the applicable law in an action brought before this Court may give rise to a number of conceptual and practical difficulties. Where a legal situation is connected with more than one jurisdiction, there does not appear to be an accepted method to determine the province whose law should be applied, for the purposes of section 8.1 of the Interpretation Act. Where the dispute is brought before a provincial superior court, the solution would typically be derived from that province’s rules of private international law. In the Federal Court, however, because the common law and civil law have equal status, there is no single set of private international law rules that can be applied to resolve the issue.
[44] A practical manner of sidestepping this conceptual hurdle while safeguarding the equality of the legal traditions is to look at the private international law rules of the Civil Code and those of the common law. If they converge towards the same result, this settles the issue.
[45] Articles 3111-3113 of the Civil Code set out the rules to determine the law applicable to a contract. Article 3111 provides that a contract is governed by the law designated in it. The ABB-CN contracts, however, contain no choice of law clause. Failing an explicit designation, article 3112 states that the applicable law is that of the jurisdiction “with which the act is most closely connected.” In turn, article 3113 sets out a presumption with respect to that connection:
3113. A juridical act is presumed to be most closely connected with the law of the State where the party who is to perform the prestation which is characteristic of the act has his residence or, if the act is concluded in the ordinary course of business of an enterprise, has his establishment.
3113. Les liens les plus étroits sont présumés exister avec la loi de l’État dans lequel la partie qui doit fournir la prestation caractéristique de l’acte a sa résidence ou, si celui-ci est conclu dans le cours des activités d’une entreprise, son établissement.
[46] In the case of a contract for carriage, the carrier is the party performing the characteristic prestation: Jean Pineau and Guy Lefebvre, Le contrat de transport de marchandises: terrestre, maritime et aérien, rev. ed., Montreal, Thémis, 2016, at paragraph 77 [Pineau and Lefebvre, Le contrat de transport]. Thus, the applicable law is that of CN’s residence or establishment, namely, Quebec law.
[47] Canadian common law adopts an approach similar to that of article 3112 of the Civil Code, without, however, the presumption established in article 3113. In Imperial Life Assurance Co of Canada v Colmenares, [1967] SCR 443 at 448, the Supreme Court of Canada stated that
[…] the problem of determining the proper law of a contract is to be solved by considering the contract as a whole in light of all the circumstances which surround it and applying the law with which it appears to have the closest and most substantial connection.
[48] This approach was adopted by the Federal Court of Appeal, most recently in JPMorgan Chase Bank v Lanner (The), 2008 FCA 399, [2009] 4 FCR 109.
[49] In this case, the following factors show that the ABB-CN contracts have the closest and most substantial connection with Quebec, as opposed to any other Canadian province: CN and ABB both have their headquarters in Quebec; ABB’s employees involved in concluding the contracts worked mainly in Quebec. In addition, with respect to the 2015 agreement, the movement originated in Quebec and, while the transformer was carried through Ontario, nothing of significance to this case happened in that province.
[50] It has also been suggested that the applicable law is that of the jurisdiction where the bill of lading is issued, which is, in most cases, the point of origin of the shipment: John S. McNeil, Motor Carrier Cargo Claims, 5th ed, Toronto, Thomson Carswell, 2007 at 257-258 [McNeil, Motor Carrier Cargo Claims]. That would also make Quebec law applicable.
[51] I also reject CSXT’s argument that ABB and CN implicitly chose to subject the 2011 agreement to the common law and not the law of Quebec. First, while article 3111 of the Civil Code contemplates the possibility of an implied choice of law clause, the parties’ choice must be “inferred with certainty.” Second, a choice of law clause typically designates the law of a particular jurisdiction, not a legal tradition such as the common law or the civil law. Thus, the use of a common law term in a contract does not indicate an intention to choose the law of any specific common law jurisdiction. CSXT has not identified any precedent where the use of a common law term was held to amount to a choice of law. Third, negligence is not a term that belongs exclusively to the common law. It has been used for a long time in the civil law. McGill University’s Dictionnnaires de droit privé en ligne define “negligence” as “[n]on-intentional fault consisting in the failure to act with the care required of a reasonable person in order to avoid the occurrence of a foreseeable damage in given circumstances:” "https://nimbus.mcgill.ca/pld-ddp/dictionary/show/16322". The parties’ use of “negligence” in the 2011 agreement is compatible with an implied choice of Quebec law.
[52] Nor can I give effect to CN’s contention that the application of the Civil Code does not lead to a different result. This may or may not be true in any particular situation. One does not know before applying civil law to the problem at hand. Dismissing the application of the civil law on that basis would amount to applying the common law by default, contrary to the principle of equality of the common law and civil law enshrined in section 8.1 of the Interpretation Act.
(2) Which Limitation of Liability Applies?
[53] A significant difficulty in this case results from the apparent discrepancy between the limitation of liability clauses found in the 2011 agreement and in the proposal and tariff issued by CN in 2014 and 2015. While the former qualifies the limitation of liability by the phrase, “unless negligence is proven,” the latter do not explicitly contain such a mention. On that basis, CN argues that, when entering into a contract in 2015, ABB and CN intended to displace the 2011 agreement and to limit CN’s liability even where negligence was proven. In other words, CN says that the 2015 agreement was a “separate agreement” entirely distinct from the 2011 agreement.
[54] I disagree with CN’s interpretation. While it is true that the 2011 and 2015 agreements are conceptually separate, they remain related and must be analysed together. By entering into the 2011 agreement, the parties set certain terms of their future contractual relationships and defined the parameters of the limitation of liability. CN’s argument assumes that the parties intended to depart from the rule they had set for themselves, without any basis in the evidence. In doing so, it deprives the 2011 agreement of any meaningful purpose. Moreover, if CN’s argument were to be accepted, ABB would be deprived of the protection afforded by section 137 of the Act.
(a) The Contractual Matrix
[55] It is not seriously in dispute that a contract must be interpreted in light of other contracts between the same parties or, if I may use that expression, in light of its “contractual matrix:” Pierre-Gabriel Jobin, “Comment résoudre le casse-tête d’un groupe de contrats” (2012) 46 RJT 9; Billards Dooly’s inc v Entreprises Prébour ltée, 2014 QCCA 842 at paragraphs 58-63. Nevertheless, CN argues that the 2011 agreement was superseded by the 2015 agreement. It invokes the well-known principles of interpretation to the effect that a subsequent provision takes precedence over a former provision and that a specific provision takes precedence over a more general one. In my view, however, it is not appropriate to resolve the matter by opposing the 2011 and 2015 agreements and giving priority to one or the other. Instead, one must examine the contractual matrix in its totality and ascertain the purpose that each piece of the matrix is intended to achieve. Only then can the provisions of the two agreements be reconciled.
[56] CN and ABB are in a long-term, repetitive contractual relationship. While such relationships are fertile ground for the emergence of tacit or informal contractual practices, the parties may also wish to give more structure to their relationship by entering into a more formal “framework agreement” intended to govern certain aspects of their ongoing contractual practices. This is what happened in this case when ABB and CN concluded the 2011 agreement.
[57] An example of the interplay between a framework agreement and subsequent contracts is provided by STMicroelectronics Inc v Matrox Graphics Inc, 2007 QCCA 1784, [2008] RJQ 73 [Matrox]. At paragraph 24, the Court rejected the idea that the subsequent contracts of sale should be viewed in isolation:
The appellant claims that there were as many sales contracts between the parties as there were accepted orders. In a sense, this is true but it seems to me, on the basis of the evidence, that there was first a master or general contract between the parties, the performance of which subsequently occurred through successive sales/purchases. The terms of that contract were clarified by the exchange of documents in conjunction with the performance of the contract.
[58] The Court accepted that the parties who entered into a framework agreement could, at a later stage, tacitly agree on additional conditions by way of less formal exchanges of documents, but “without running counter to the terms and conditions of the master contract:” Matrox, at paragraph 37.
[59] The 2011 agreement is a formal, written agreement, bearing the signature of the parties. Its preamble explains the context and purpose of the agreement: the desire of the parties to limit CN’s liability for the transportation of ABB’s dimensional loads, in conformity with section 137 of the Act. Its operative part is very simple and was quoted above. It deals with a single issue, limitation of liability. It does not constitute, in and of itself, a contract for the carriage of a particular dimensional load. The obvious intention of the parties was to stipulate a standard term for all future contracts for the carriage of dimensional loads that would be made while this agreement remained in force. In other words, the parties established a strong presumption that their subsequent dealings would include a limitation of liability subject to the exception regarding negligence.
[60] In legal terms, this intention could be implemented in two different ways, depending on the circumstances. First, where a subsequent contract for carriage is silent regarding the limitation of liability, the 2011 agreement evinces the parties’ intention to imply such a limitation in that contract for carriage (art 1434 of the Civil Code). Second, the 2011 agreement defines the parameters of the limitation of liability to which the parties intended to subject themselves. Where a subsequent contract for carriage provides for a limitation of liability without defining its parameters, one then reverts to the 2011 agreement. Thus, the 2011 agreement established a definition applicable to subsequent agreements. The latter must be interpreted according to that definition.
[61] The instant case fits in the second of these categories. In the electronic exchanges of documents that gave rise to the 2015 agreement, in particular CN’s quote to ABB, one finds the mention “For Limited Liability of $USD 25,000.00.” Apart from the amount, this mention does not set forth the parameters of the intended limitation. One must presume that CN intended to apply the term agreed to in 2011, which was subject to an exception where “negligence is proven.”
[62] It is in this context that CN’s argument that the 2015 agreement displaced the 2011 agreement must be assessed. CN’s argument disregards the purpose of the 2011 agreement. Indeed, it renders that agreement meaningless. Why would the parties make a formal contract providing for a limitation of liability “unless negligence is proven,” if a telegraphic mention of “limited liability” in a subsequent email exchange is sufficient to substitute a different rule? CN’s interpretation would give the 2011 agreement “no effect,” contrary to article 1428 of the Civil Code. The better interpretation is that, when it offered to carry the transformer subject to its “limited liability,” CN was referring to the standard limitation of liability clause that the parties had agreed to in 2011. Moreover, there is every reason to believe that ABB understood it in that way.
[63] Of course, it is always open to parties to a contract to change or terminate it by a subsequent agreement, expressly or tacitly. The 2015 agreement does not evince any express intention to displace the 2011 agreement. As I mentioned above, the mention of “limited liability” in the 2015 agreement can be interpreted in a manner compatible with the 2011 agreement.
[64] Moreover, when parties entered into a formal framework agreement intended to govern the making of future contracts, courts should be loath to find that they tacitly agreed to different terms, as the Quebec Court of Appeal noted in Matrox. In this re