Canada Steamship Lines Ltd v R
Canada Steamship Lines Ltd v The King [1] is a Canadian contract law case concerning the interpretation of unfair terms contra proferentum. The case was decided by the Judicial Committee of the Privy Council, at that time the court of last resort for Canada, as part of the British Empire and Commonwealth. Although decided under the Civil Code of Lower Canada (Quebec), it has been influential in similar cases under English law.
Facts
Clause 8 in a contract said the Crown would keep a freight shed in repair, where Canada Steamship Lines Ltd’s goods were being stored. This was at St Gabriel Basin, on a wharf of the inner harbour of Montreal. Unfortunately, while trying to keep the shed in repair with an oxy-acetylene torch, an employee started a fire and burned down the shed. According to proper practice he was negligent and should have used a hand drill because sparks flew and lit some cotton bales. $533,584 of goods were destroyed, $40,714 belonging to Canada Steamship Lines. Clause 7 said ‘the lessee shall not have any claim… for… damage… to… goods… being… in the said shed.’ Clause 17 said “the lessee shall at all times indemnify ... the lessor from and against all claims ... by whomsoever made ... in any manner based upon, occasioned by or attributable to the execution of these presents, or any action taken or things done ... by virtue hereof, or the exercise in any manner of rights arising hereunder.” The Crown argued that Canada Steamship could not sue because clause 7 excluded liability.
Advice
Giving the advice of the Judicial Committee of the Privy Council, Lord Morton of Henryton said that clause 7 did not exclude negligence liability in clear enough terms and clause 17 was ambiguous and would be construed against the Crown. The Crown could realistically be said to have been strictly liable for damage to the goods (e.g. by breach of obligation to keep the shed in repair) and therefore negligence should not be covered. He set out these principles, that (1) if a clause expressly excludes liability for negligence (or an appropriate synonym ) then effect is given to that. If not, (2) one should ask whether the words are wide enough to exclude negligence and if there is doubt that is resolved against the one relying on the clause. If that is satisfied then (3) one should ask whether the clause could cover some alternative liability other than for negligence, and if it can it covers that. In this cause another form of liability for damage was strict liability, and so the exclusion clause did not work to cover negligence.
See also
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Construing contract terms
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Canada Steamship Lines v R [1952] AC 192
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Notes