Decision No. 181-C-A-2007

April 13, 2007

File No. M4120-3/06-06262

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COMPLAINT

[1] On September 21, 2006, Stephen Pinksen filed with the Canadian Transportation Agency (hereinafter the Agency) the complaint set out in the title.

[2] On November 20, 2006, the Agency requested that Air Canada address the complaint within the context of sections 67, 67.1 and 67.2 of the Canada Transportation Act, S.C., 1996, c. 10 (hereinafter the CTA). On November 30, 2006, the Agency requested that Air Canada address certain issues in its answer.

[3] On December 21, 2006, Air Canada requested a 30 day extension to file its answer. In Decision No. LET-C-A-2-2007 dated January 5, 2007, the Agency granted this extension.

[4] On January 19, 2007, Air Canada filed its answer and on January 29, 2007, Mr. Pinksen filed his reply.

[5] Pursuant to subsection 29(1) of the CTA, the Agency is required to make its decision no later than 120 days after the application is received unless the parties agree to an extension. In this case, the parties have agreed to an extension of the deadline until April 13, 2007.

ISSUES

[6] The issues to be addressed are:

• whether Air Canada properly applied the terms and conditions with respect to liability for the carriage of perishable items in checked baggage as set out in its Canadian Domestic General Rules Tariff No. CDGR-1 (hereinafter the Tariff) as required by subsection 67(3) of the CTA, and whether such terms and conditions are clearly set out in Air Canada's Tariff in this matter, as required by paragraph 107(1)(n) of the Air Transportation Regulations, SOR/88-58, as amended (hereinafter the ATR); and
• whether it is reasonable, in the context of subsection 67.2(1) of the CTA, for a carrier to exempt itself from liability for loss of a perishable item.

FACTS

[7] On June 7, 2006, Mr. Pinksen travelled from Charlottetown, Prince Edward Island to Iqaluit, Nunavut via Halifax, Nova Scotia, Montréal, Quebec, and Ottawa, Ontario. Mr. Pinksen purchased 25 pounds of fresh live lobsters in Charlottetown, which he checked in as baggage with Air Canada. At check-in, Air Canada did not advise Mr. Pinksen that the carrier would not assume liability should the lobsters be lost. Upon arrival in Ottawa, Mr. Pinksen discovered that the lobsters were missing. Mr. Pinksen completed the appropriate forms to declare the loss. In response, Air Canada advised Mr. Pinksen that the carrier's liability for loss, damage or delay of checked baggage is limited, and that Tariff regulations preclude any liability for, among other things, jewellery, fragile or perishable items. Air Canada subsequently advised Mr. Pinksen that while the carrier was not responsible for the loss of perishable items, in this instance, as its agent accepted the box of lobsters and did not advise of Air Canada's liability, it was reimbursing Mr. Pinksen, as a good will measure, in the amount of CAD$200, which represents the price that he had originally paid for the lobsters.

POSITIONS OF THE PARTIES

[8] Mr. Pinksen submits that he understands that perishable goods taken as baggage should be governed by special rules, as they are subject to spoilage. He adds that he would also understand if the carrier's Tariff stated that if a perishable item is delayed and spoils, the owner bears full responsibility. However, Mr. Pinksen states that when the carrier loses a piece of baggage, he is perplexed as to how the carrier can expect to be able to avoid any liability. He is of the opinion that, since he put the baggage into the carrier's care and the carrier lost it, which has nothing to do with the fact that the item is perishable, it is the carrier that should be responsible.

[9] Mr. Pinksen is of the opinion that it is wrong and unfair for Air Canada to deny a claim for a lost item on the basis of it being perishable, and the Tariff should be changed.

[10] Air Canada submits that it has the provisions necessary in the Tariff to address the issue of liability for any damage resulting from the loss of perishable goods placed in its custody for carriage, with or without its knowledge. Air Canada refers to Rule 195AC(L) of the Tariff and states that this rule "clearly excludes the carrier's liability arising from the carriage of perishable goods, even when the nature of the goods has not contributed to the loss being claimed".

[11] Air Canada maintains that Tariff Rule 195AC(L) allows a carrier to accept perishable items only upon execution of a Limited Release Tag at the time of check-in. The carrier adds that the content of the Limited Release Tag is set out in subparagraph (H) of Tariff Rule 195AC, and that, based on this provision, the carrier is released from liability arising from the damage and/or spoilage resulting from delay. Air Canada also submits that a loss must be considered as a "long delay" and that in the case of perishable items, the spoilage occurs while the baggage is delayed.

[12] Air Canada adds that its exclusion from liability is reasonable within the context of subsection 67.2(1) of the CTA, as the carrier is entitled to exclude itself from liability for certain goods, and that if a passenger does not wish to be subject to such limitation, he or she must declare the nature of the good and purchase insurance.

APPLICABLE LEGISLATIVE AND REGULATORY PROVISIONS

[13] The Agency's jurisdiction over complaints concerning domestic tariffs is set out in sections 67, 67.1 and 67.2 of the CTA, and paragraph 107(1)(n) of the ATR.

[14] Section 67 of the CTA provides, in part:

...

(3) The holder of a domestic licence shall not apply any fare, rate, charge or term or condition of carriage applicable to the domestic service it offers unless the fare, rate, charge, term or condition is set out in a tariff that has been published or displayed under subsection (1) and is in effect.

[15] Section 67.1 of the CTA provides:

If, on complaint in writing to the Agency by any person or on its own motion, the Agency finds that, contrary to subsection 67(3), the holder of a domestic licence has applied a fare, rate, charge or term or condition of carriage applicable to the domestic service it offers that is not set out in its tariffs, the Agency may order the licensee to

(a) apply a fare, rate, charge or term or condition of carriage that is set out in its tariffs;

(b) compensate any person adversely affected for any expenses they incurred as a result of the licensee's failure to apply a fare, rate or term or condition of carriage that was set out in its tariffs; and

(c) take any appropriate corrective measures.

[16] Pursuant to subsection 67.2(1) of the CTA, the Agency may take certain remedial action following receipt of a complaint where the Agency finds that the holder of a domestic licence has applied terms or conditions of carriage applicable to the domestic service it offers that are unreasonable or unduly discriminatory. More particularly, subsection 67.2(1) of the CTA states that:

If, on complaint in writing to the Agency by any person, the Agency finds that the holder of a domestic licence has applied terms or conditions of carriage applicable to the domestic service it offers that are unreasonable or unduly discriminatory, the Agency may suspend or disallow those terms or conditions and substitute other terms or conditions in their place.

[17] Paragraph 107(1)(n) of the ATR provides, in part:

107.(1) Every tariff shall contain

...

(n) the terms and conditions of carriage clearly stating the air carrier's policy in respect of at least the following matters, namely,

...

(x) limits of liability respecting passengers and goods,

(xi) exclusions from liability respecting passengers and goods, and

...

ANALYSIS AND FINDINGS

[18] In making its findings, the Agency has carefully considered all of the evidence submitted by the parties during the pleadings. The Agency has also examined the terms and conditions respecting the carriage of perishable items in checked baggage relevant to the present case, as set out in the carrier's Tariff.

[19] RULE 195AC Conditions and charges for acceptance of special items of the Tariff, reads, in part, as follows:

(L) PERISHABLES

Carrier does not agree to carry perishable items unless they are appropriately packed for carriage and checked as a separate piece of baggage. Carrier agrees to carry perishable items which are unsuitably or inadequately packed but only upon the execution of a baggage Limited Release tag at time of check-in and shall also require the completion of the tag for perishable items at time of check-in which are appropriately packed and checked as a separate piece of baggage.

NOTE: Perishable items are classified as follows: Fresh or frozen foodstuffs such as fruits, vegetables, meats, fish and seafood, poultry, bakery products, dairy products, animal hides. Floral and nursery stock such as flowers, fruit and vegetables plants, cut flowers, foliage and floral displays.

[20] Rule 195AC (H)(3) Release Forms, of the Tariff, reads as follows:

The following are copies of release forms that will be provided by carriers. Execution of the release forms relieves carrier of liability for damage to fragile items (of the type identified in paragraph (1) above) in checked baggage, which damage results solely from the unsuitability of such item as checked baggage and/or the inadequacy of their packaging, and not from the carrier's failure to exercise the ordinary standard of care. Execution of the release form also relieves the carrier of liability for spoilage or substantial loss of value or potency which results from carrier's delay in delivery of checked baggage when such spoilage results from the unsuitability of such items as checked baggage and not from the carrier's failure to exercise the ordinary standard of care.

RELEASE

( ) FRAGILE ITEMS - Release applies to damage.

( ) PERISHABLE ITEMS - Release applies to damage and spoilage resulting from delay.

( ) UNSUITABLY OR INADEQUATELY PACKED ITEMS - Release applies to damage and loss.

Article consists of:__________________________

In consideration of carrier transporting the property described above, which is deemed by applicable tariff to be unsuitable for transportation as checked baggage, I hereby release carrier from liability resulting solely from such unsuitability as designated above by an "X".

PASSENGER'S SIGNATURE:__________________DATE________________

CARRIER AGENT:___________________________

Whether Air Canada properly applied the terms and conditions of the Tariff with respect to the carriage of perishable items in checked baggage, i.e., the lost lobsters, and whether such terms and conditions are clearly set out in Air Canada's Tariff in this matter.

[21] The Agency has carefully reviewed Rule 195AC of the Tariff, and notes that there is no explicit exemption from liability for the loss of perishable items.

[22] Air Canada argued that a loss must be considered as a "long delay". The Agency is of the opinion that there is a clear distinction between the loss of an item and the delay of an item. With respect to loss, it is understood that the item will not be retrieved, whereas with regard to delay, it is anticipated that, at some point, the item will be recovered. The Agency notes that elsewhere in the Tariff, for example, in Rule 230AC Liability - Baggage, (B) Exclusions from Liability, Air Canada draws a distinction between loss or delay of an item by employing both words in setting out certain conditions under which the carrier excludes itself from liability.

[23] Further and while not applicable for domestic transportation, the Montreal Convention for the Unification of Certain Rules for International Carriage by Air (hereinafter the Montreal Convention), does provide some guidance. The Agency notes that Chapter III, Article 17, paragraph 3 of the Convention establishes that unless a carrier admits to the loss, a passenger can enforce the provisions for recovery of damage after the expiration of twenty-one days after the date on which the baggage ought to have arrived.

[24] The Agency also notes from the evidence on file that Mr. Pinksen was not requested to sign the Release Form set out in Tariff Rule 195AC(H)(3). The Agency further notes that the Release Form does not speak to the loss of perishable items that are suitably packed, nor does it exclude liability when there is a failure to exercise the ordinary standard of care.

[25] The Agency finds that in denying liability for the lost lobsters, Air Canada is seeking to apply a term and condition of carriage that is not set out in the Tariff. Such an action contravenes subsection 67(3) of the CTA.

[26] Pursuant to section 67.1 of the CTA, the Agency finds Air Canada liable for any out-of-pocket expenses incurred by Mr. Pinksen as a result of the carrier's failure to apply the Tariff. In this case, Mr. Pinksen's direct out-of-pocket expenses would be limited to the original purchase price of the lost lobsters.

[27] Given that Air Canada has reimbursed Mr. Pinksen an amount equal to the purchase price of the lobsters, i.e., CAD$200, the Agency finds that no further compensation is due.

[28] With respect to whether Air Canada has clearly set out its policy in this matter, the Agency looks to the Tariff as it contains the conditions of carriage between a passenger and carrier. Paragraph 107(1)(n) of the ATR requires that the Tariff clearly set out the carrier's policy. Therefore, if loss, damage or delay of checked baggage occurs during transportation, the carrier and passenger should have recourse to a clear and unambiguous tariff in order to facilitate a determination of matters. The Agency notes that while the Tariff contains in Rule 230AC(B) a provision concerning various limits of liability under different circumstances, it does not contain an explicit exemption from liability for the loss of perishable goods that the carrier has accepted as checked baggage. Further, the general provision related to liability for perishable goods is not clear. In this regard, the Agency notes that Tariff Rule 190AC(A)(3)(b) provides that Air Canada does not agree to carry perishable items, among other items, in checked baggage or when otherwise placed in the care of the carrier. Tariff Rule 195AC(L) then creates an inconsistency in effectively providing, in part, that Air Canada agrees to carry perishable items that are appropriately packed for carriage and checked as a separate piece of baggage, provided that a "Release tag" is completed. Tariff Rule 195AC(H), entitled "Fragile Items", sets out a Release Form that purports to relieve Air Canada from liability in the carriage of certain items, including when damage and spoilage to perishables occur as a result of delay. As noted above, the Release Form does not speak to liability for the loss of a perishable item. The Agency is of the opinion that, given the inconsistencies in Air Canada's Tariff provisions relating to the acceptance of perishable items, and the liability associated therewith, the passenger may be given inaccurate information respecting this matter. Tariff Rule 230AC(B)(2) appears to contradict all of the above by a blanket denial of liability for items it "has not agreed to carry" which by reference to Tariff Rule 190AC includes perishables.

[29] In view of the foregoing, the Agency finds that Air Canada has contravened paragraph 107(1)(n) of the ATR in not clearly stating its policy in respect of its limits of liability respecting goods.

Whether it is reasonable for a carrier to exempt itself from liability for loss of a perishable item.

[30] Air Canada maintains that it is entitled to exclude itself from liability with respect to the carriage of certain items, such as fragile and perishable goods, "even when the nature of the goods has not contributed to the loss of such items". Further, the Agency notes that in letters to Mr. Pinksen by a customer service representative of Air Canada, dated July 11 and October 17, 2006, respectively, the carrier maintained that it is not responsible for perishable items, and that in a letter to the Agency by Air Canada legal counsel dated January 19, 2007, the carrier stated that "Domestic Tariff Rule 195(O) clearly excludes the carrier's liability arising from the carriage of perishable goods even if the nature of such goods did not contribute to the loss ".

[31] The Agency does not find Air Canada's argument to be persuasive. In this regard, the Agency is of the opinion that while carriers can limit their liability in the case of certain articles, any tariff provision that tends to relieve a carrier from all liability for loss of a perishable item, where the carrier has failed to fulfil its contractual obligation of placing the item in possession of the passenger, is unreasonable and thus, contrary to subsection 67.2(1) of the CTA.

[32] The Agency notes that Tariff Rule 230AC, which sets out Air Canada's liability for baggage, provides that liability for loss of, damage to, or the delay in delivery of baggage shall not be more than CAD$1,500 unless a higher value is declared in advance and the applicable charges are paid. The Agency further notes that, with respect to international travel, Article 22 of the Convention, provides that, in the carriage of baggage, the liability of the carrier extends to the destruction, loss, damage or delay in delivery of baggage. The Agency finds that it would be appropriate for Air Canada to apply to the domestic carriage of perishable items, that it knowingly accepts for transportation, similar conditions under which the carrier assumes liability for regular baggage that is carried domestically or internationally.

Member Bennett's additional reasons

[33] While I agree with all of the above, I would add further analysis on the issue of a reasonable tariff.

[34] Despite the apparent agreement to carry perishables under Tariff Rule 195AC (L), if the overall effect of the current provisions regarding the carriage of perishable items is to be read as excluding Air Canada from liability for loss, damage or delay, then it is a question of whether this type of contractual provision is reasonable.

[35] I am of the opinion that a blanket limit of liability reduces the contract between the carrier and the passenger to, in the words of Lord Wilberforce in the Suisse Atlantique case [1967]1A.C. 361 at 432 "a mere declaration of intent". In Firestone Tyre Co. versus Vokins [1951] 1 Lloyd's Rep 32, Devlin J. considered a London Lighterage Clause regarding carriage by a barge on the River Thames which sought to relieve the lightermen from liability for every class of loss and damage except pilferage. Devlin J. framed this type of blanket exclusion at pp. 3839 thus:

If the construction which counsel for the lightermen pressed upon me is the right one, it seems to me that it is not a contract of bailment or carriage at all. One may test the point by considering the construction of the contract if the phrase about pilferage of the goods were not there. The position then would be that the lightermen have said: ‘We will deliver your goods; we promise to deliver your goods at such and such a place, and in the condition in which we receive them; but we are not liable if they are lost or damaged whatsoever.' That is not in law a contract at all. It is illusory to say: ‘We promise to do a thing but we are not liable if we do not do it.'..."

[36] The examination of the terms of international instruments as persuasive authority in interpreting domestic rules has been deemed a valid tool by the majority of the Supreme Court of Canada and thus, in my opinion, the Agency can look to the Montreal Convention governing international travel for guidance. Articles 17, 18 and 19 of the Montreal Convention provide that the liability of the carrier extends to the destruction, loss, damage or delay in the delivery of baggage or cargo. A similar provision in the Warsaw Convention for the Unification of Certain Rules Relating to International Carriages by Air was interpreted by the Civil Aeronautics Board of the United States of America as meaning that "an air carrier is clearly precluded from both accepting baggage and then denying resultant liability; rather, it must either refuse to accept such property for transportation, as permitted by Article 33 of the Convention or accept liability subject to the limits spelled out in Article 22." (Trans International Airlines Inc., Docket 28807)

[37] The monetary limits upon proof in both the Montreal Convention and under Tariff Rule 230AC set a clear and unequivocal standard to which the Agency looks for guidance.

CONCLUSION

[38] Based on the concurring reasons set out above, the Agency hereby directs Air Canada to revise the Tariff within 30 days of the present Decision in order to clarify its policy respecting liability for the loss of perishable goods accepted for transportation and to file such revision with the Agency within the said 30 days. This revision should include a provision that requires Air Canada to assume liability for the loss of perishable items.

[39] With respect to the contravention of subsection 67(3) of the CTA and given that Air Canada has reimbursed Mr. Pinksen, no further action is contemplated.

Members

• Mary-Jane Bennett
• Guy Delisle