Federal Court of Appeal affirms finding that, based on German law, the loss of three containers stolen from a port terminal in Belgium had occurred during the road leg of a multimodal transport journey between Montreal and the Netherlands




In Hapag-Lloyd AG v. Iamgold Corporation, 2021 FCA 110, the appellant, Hapag-Lloyd, as a carrier and the respondent, Iamgold Corporation, as the shipper, entered into a contract of multimodal carriage to transport four containers containing ferroniobium from Montreal to Antwerp, Belgium, by ship and then by truck from Antwerp to Moerdijk, Netherlands, where the other respondent, Niobec, had its warehouse.

The containers were discharged from the ship in Antwerp and placed at the port terminal pending pickup and carriage to Moerdijk. However, an unauthorized trucker picked up three of the containers from the port, using the necessary PINs. These containers never made it to Niobec.It was unclear how this illegal removal was accomplished. Hapag-Lloyd admitted fault, so the question before Southcott J. was the amount of liability. This depended on whether the loss occurred during the ocean leg (where liability would be limited by the terms incorporated in the sea waybill to 2 Special Drawing Rights (“SDRs”) per kg) or on the road leg (where liability would be limited by the applicable convention to 8.33 SDRs per kg). It was agreed by the parties that German law was applicable for this determination.

The Federal Court Decision

Southcott J. heard evidence from two experts on German law put forward by both sides. The experts, relying on various German court decisions, agreed on the basic principles of German law, but disagreed on the ultimate issue, whether the loss occurred during the road or ocean leg of the journey.The experts relied on several German court decisions. Southcott J. indicated that his role was to decide the state of German law as a matter of fact and that it was open to him to consider the expert’s opinions and whether those opinions were supported by the German decisions that they had relied on.

Southcott J. determined that based on his understanding of German law, whether a loss occurred during a particular leg of a multimodal transport depended on whether the events were “characteristic or attributable or closely tied to a particular leg” (para 30). Southcott concluded that as the present loss arose from activity characteristic of road transport, German law would consider that the loss occurred during the road leg (para 32).Therefore, the limitation of liability of 8.33 SDR per kg was applied. This meant that Hapag-Lloyd’s liability amounted to approximately CAD $872,909 instead of CAD $209,582.

No Doubt that German Law Applied

The appellant’s first argument that it had not been established that either German law had been proven to be the same as Canadian law or that it had not been proven to differ, in which case Canadian law should apply, was quickly rejected by Nadon J.A. since (1) the parties had agreed that German law applied and (2) Southcott J. had clearly found that the evidence of the experts was sufficient to allow him to identify the relevant principles of German law (para 44-45).

Palpable and Overriding Error Standard Applied for Judge’s Finding based on German Law

Hapag-Lloyd argued that the applicable standard on questions of foreign law was correctness, relying on the Ontario Court of Appeal’s decision in General Motors Acceptance Corporation of Canada, Limited v. Town and Country Chrysler Limited, 2007 ONCA 904 (“General Motors”) and cases that had followed it. However, Nadon J.A. disagreed with General Motors, stating that it was “unpersuasive” (para 52).

Nadon J.A. suggested that the Ontario Court of Appeal in General Motors had effectively second-guessed the Supreme Court’s decision in Housen v. Nikolaisen, [2002] 2 SCR 235 (“Housen”) which stated clearly that questions of fact are subject to the palpable and overriding error standard. Nadon J.A. felt that it was not up to a Court of Appeal “to determine, on a case-by-case basis, whether the policy reasons were given by the Supreme Court in Housen for deferring to the factual findings of a trial judge apply”.Nadon J.A. emphasized that determinations of foreign law were a question of fact and therefore the standard applicable was that of a palpable and overriding error (para 59).

The Judge did not Make Any Reviewable Error with Respect to his Findings on German Law

Nadon J.A. concluded that Southcott J. had not made a palpable and overriding error. He pointed out that, despite their disagreement on the ultimate issue, the two experts had agreed on the relevant principles of German law. In these circumstances, it was up to Southcott J. to decide the issue based on his assessment of the evidence presented by the experts. He did so and determined that the loss occurred during the road leg (para 74).

There was no reason to interfere with the judge’s findings. Faced with conflicting evidence from the experts concerning the application of German law, Southcott J. had to resolve the issue in the same manner as other conflicting evidence. To do so, he assessed the opinions of the experts and then came to a decision based on his understanding of German law (para 76-77).

Nadon J.A. rejected the appellant’s suggestion that Southcott J. had misunderstood the German decisions cited by the experts. It was clear that the judge was alive to the fact that none of the German cases were directly on point since none dealt with theft by third parties. Nadon J.A. stated that Southcott J. was correct to not let this stand as a bar to concluding that the loss occurred during the road leg (para 78).Nadon J.A. ruled that the judge’s finding was open to him on the evidence and, despite the appellant’s disagreement with his assessment, there was no basis to conclude that Southcott J. had made a palpable and overriding error in finding that the loss occurred during the road leg of the journey (para 80).

April 14, 2022
Hapag-Lloyd AG v. Iamgold Corporation, 2021 FCA 110