Connaught Laboratories Ltd. v. British Airways

[Indexed as: Connaught Laboratories Ltd. v. British Airways]

77 O.R. (3d) 34

[2005] O.J. No. 2019

Docket: C42022

Court of Appeal for Ontario

Catzman, Labrosse and Moldaver JJ.A.

May 19, 2005

Carriage of goods -- Carrier's liability -- Limitation of liability -- Warsaw Convention -- Perishable vaccine shipped by air carrier -- Vaccine spoiled because of carrier's failure to refrigerate -- Warsaw Convention applying -- Carrier liable for damages to goods caused by delay -- Carrier not entitled to limitation of liability because damage resulted from act or omission done "recklessly and with knowledge that damage would probably result" -- Subjective test to determine whether carrier had acted recklessly and with knowledge -- Adverse inference that carrier had acted recklessly and with knowledge -- Adverse inference because of carrier's failure to investigate and preserve evidence despite notice of possible claim for damages -- Carriage by Air Act, R.S.C. 1985, c. C-26, Arts. 18, 19, 20, 22, 25. [page35]

Limitations -- Aviation -- Carriage of goods -- Carrier's liability -- Limitation of liability -- Warsaw Convention -- Perishable vaccine shipped by air carrier -- Vaccine spoiled because of carrier's failure to refrigerate -- Warsaw Convention applying -- Carrier liable for damages to goods caused by delay -- Carrier not entitled to limitation of liability because damage resulted from act or omission done "recklessly and with knowledge that damage would probably result" -- Subjective test to determine whether carrier had acted recklessly and with knowledge -- Adverse inference that carrier had acted recklessly and with knowledge -- Adverse inference because of carrier's failure to investigate and preserve evidence despite notice of possible claim for damages -- Carriage by Air Act, R.S.C. 1985, c. C-26, Arts. 18, 19, 20, 22, 25. NOTE: The catchlines above relate to a decision of the Superior Court of Justice dated September 4, 2002 4642 (ON SC), 2002, 61 O.R. (3d) 204. An appeal of this judgment to the Court of Appeal for Ontario (Catzman, Labrosse and Moldaver JJ.A.) was dismissed on May 19, 2005. The endorsement of the court was as follows:

Gerard A. Chouest for appellant. Ramon V. Andal for respondent.

[1] BY THE COURT: -- The appellant British Airways appeals the judgment of Molloy J., whereby she awarded to the respondent Connaught Laboratories Limited ("Connaught") damages in the amount of $28,500, inclusive of prejudgment interest, and costs.

[2] Connaught shipped four cartons of perishable vaccine from Toronto through London, England, to a customer in Melbourne, Australia, via British Airways. The contract required British Airways to keep the cargo refrigerated. Despite direction to do so, British Airways did not store the cargo at the required temperatures. The cargo was delayed during the transportation and, due to the extended length of time that it was exposed to temperatures above the allowable range, the vaccine was not accepted and had to be destroyed. Connaught had to replace the vaccine and sued the appellant for damages.

[3] The trial judge found that Connaught's action was subject to the Carriage by Air Act, R.S.C. 1985, c. C-26, Sched. I ("Warsaw Convention"). The precise issue was whether British Airways was entitled under Article 22 to limit its liability to approximately $2,500, or whether, pursuant to Article 25, the limitation of liability was not available because the damage resulted from an act or omission done "recklessly and with knowledge that damage would probably result". Articles 22 and 25 are attached to these reasons as Appendix "A".

[4] The trial judge held that the onus was on Connaught to prove that the failure of British Airways to refrigerate the cartons went beyond carelessness or negligence, and amounted to recklessness. She also held that Connaught had to prove that British Airways had actual knowledge that the failure to refrigerate the cartons would probably result in damage. Finally, she [page36 ]held that the test for determining whether the action or omission of British Airways rose to the required level of known, reckless infliction of damage is a subjective test.

[5] This case was essentially a fact-driven one. The evidence was uncontradicted that, once exposed to elevated temperatures, the vaccine was not safe for human use and had to be destroyed. Moreover, the trial judge found that the instructions to refrigerate were clearly stated on the cargo. Those findings were clearly open to her.

[6] The cargo was not kept in refrigeration during the delay in London. The trial judge found that the inability to explain why the cargo was not refrigerated was due to British Airways' inaction and failure to make a timely investigation following prompt notice of the damage. She concluded that British Airways was liable for the damages which resulted from its failure to store the cartons at the temperature specified on the carton labels and on the waybills. She also concluded that British Airways acted recklessly and with knowledge that damage would probably result, and thus could not limit its liability under the Convention.

[7] The trial judge stated in her reasons that the clear labeling of the refrigeration requirements and the availability of refrigeration in London led to the inference that British Airways personnel deliberately took the risk of the damage and that, at the very least, this inference called for British Airways to provide an explanation for failure to follow the clear instructions of refrigeration. She relied on the reasoning expressed in S.S. Pharmaceutical Co. Ltd. v. Qantas (1988), 22 NSWLR 734 (Comm. Div.), (1989) 1 Lloyd's Rep. 319, affd [1991] 1 Lloyd's Rep. 288 (Aust. C.A.), a decision which, although decided on different facts, bears some similarity to the present case. The trial judge quoted from the New South Wales Supreme Court decision:

As the evidence stands, the plaintiffs did all they could to draw attention by the stencilled umbrellas to the special care required by the cargo. The evidence suggests that they might as well have not bothered. Qantas paid no particular attention, took no particular care. To have cargo, which is particularly vulnerable to damage by rain, and leave it exposed to the elements without particular precautions, is reckless. Here, the defendant, who had such goods in its care, declined to give evidence of what, if anything, it did to protect the goods. In these circumstances, the telex and the letter which might not carry much weight become significant. The cartons got wet. If properly waterproofed, they would not have got wet. Why they were not protected the defendant did not condescend to explain. Mr. Sheller [solicitor for Qantas] submitted that to approach the question thus is to guess. There are explanations consistent with precautions having been taken but which have turned out, for one reason or another, to be ineffective. He suggested that the tarpaulin may not have been adequately tied down or it may have been defective. These are matters exclusively within the defendant's knowledge. In his letter, the Director of Cargo acknowledged "deplorably bad handling". There was no suggestion in that letter of any of the [page37 ]matters conjured up by the forensic mind. I am entitled on the evidence, as I do, to hold the defendant's conduct to have been reckless. In my view, there was clear knowledge of the likelihood of damage to particularly vulnerable cargo in the weather conditions then obtaining. In my opinion, the plaintiff has satisfied the test propounded by art. 25 ...

(Trial judge's emphasis)

[8] In the present case, having regard to the evidence of the clear instructions to refrigerate, the evidence of a considerable delay in transportation, the availability of refrigeration, the evidence that a British Airways employee made a decision not to put the cargo in a cooler for unknown reasons, and the exclusive opportunity to investigate, it was open to the trial judge to find a prima facie case of recklessness and knowledge that damage would probably result. The evidence to rebut that prima facie case was solely within the knowledge of British Airways. It called no such evidence.

[9] It is on this basis that it was open to the trial judge to conclude that Connaught had met the burden of proof to show that British Airways was reckless, with knowledge that damage would probably result.

[10] We agree with the trial judge's conclusion that British Airways is liable for the damages suffered by Connaught.

[11] Accordingly, the appeal is dismissed with costs, fixed at $8,000, inclusive of disbursements and GST.

APPENDIX A

The Convention for the Unification of Certain Rules Relating to International Carriage by Air, codified in the Carriage By Air Act, R.S.C. 1985, c. C-26, Schedule I, Arts. 22 and 25 (as amended by relevant provisions of Schedule III)

Article 22

(1) In the carriage of persons the liability of the carrier for each passenger is limited to the sum of two hundred and fifty thousand francs. Where, in accordance with the law of the court seised of the case, damages may be awarded in the form of periodical payments, the equivalent capital value of the said payments shall not exceed two hundred and fifty thousand francs. Nevertheless, by special contract, the carrier and the passenger may agree to a higher limit of liability.

(2) (a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of two hundred and fifty francs per kilogramme, unless the passenger or consignor has made, at the time when the package was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so [page38 ]requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that that sum is greater than the passenger's or consignor's actual interest in delivery at destination.

(b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any object contained therein, the weight to be taken into consideration in determining the amount to which the carrier's liability is limited shall be only the total weight of the package or packages concerned. Nevertheless, when the loss, damage or delay of a part of the registered baggage or cargo, or of an object contained therein, affects the value of other packages covered by the same baggage check or the same air waybill, the total weight of such package or packages shall also be taken into consideration in determining the limit of liability.

(3) As regards objects of which the passenger takes charge himself the liability of the carrier is limited to five thousand francs per passenger.

(4) The limits prescribed in this article shall not prevent the court from awarding, in accordance with its own law, in addition, the whole or part of the court costs and of the other expenses of the litigation incurred by the plaintiff. The foregoing provision shall not apply if the amount of the damages awarded, excluding court costs and other expenses of the litigation, does not exceed the sum which the carrier has offered in writing to the plaintiff within a period of six months from the date of the occurrence causing the damage, or before the commencement of the action, if that is later.

(5) The sums mentioned in francs in this Article shall be deemed to refer to a currency unit consisting of sixty-five and a half milligrammes of gold of millesimal fineness nine hundred. These sums may be converted into national currencies in round figures. Conversion of the sums into national currencies other than gold shall, in case of judicial proceedings, be made according to the gold value of such currencies at the date of the judgment.

Article 25

The limits of liability specified in Article 22 shall not apply if it is proved that the damage resulted from an act or omission of the carrier, his servants or agents, done with intent to cause damage or recklessly and with knowledge that damage would probably result; provided that, in the case of such act or omission of a servant or agent, it is also proved that he was acting within the scope of his employment.