Opinion: False promises of security could open a legal challenge

A recent article published by Today’s Trucking reported that last year there were more cargo thefts in Canada than the entire United States. Ontario’s Peel Region was the second-busiest jurisdiction for thieves, only behind California.

That’s a dubious honor, to be sure.

With so much theft going on in the Greater Toronto Area, shippers are obviously going to continue to be very interested in the kinds of security measures that carriers implement at their yards, or the yards where they conduct business. Carriers should not be surprised when shippers or freight brokers inquire about such measures.

However, carriers should also be very careful with their answers. If a shipper can show that it entered a deal with a carrier on the strength of information that later turned out to be false, there’s a chance that the shipper could successfully sue the carrier. The damages might even surpass the familiar $2/lb. limitation of liability that motor carriers enjoy in most Canadian jurisdictions.

Consider the following scenario. A shipper calls and asks whether a carrier is able to move a shipment of goods from Toronto to Ottawa on a given day. The carrier replies that it is, and that it will arrive on the preceding day to pick up the goods and take them to a yard where the freight will remain overnight before departing the following morning.

The shipper then advises the carrier that the goods are very valuable and asks whether the load will be stored overnight in a secure facility. The carrier replies that the load will be stored in a yard with a fence, a security gate with 24-hour guards, and other such measures.

On the basis of this advice, the shipper proceeds to engage the carrier. But what if the carrier takes the goods to an unsecured yard and leaves the cargo there overnight? The goods might be stolen and never seen again.

In this example, there is definitely an argument that the shipper only agreed to enter into the contract with the carrier on the basis of the representation that the cargo would be kept in a secure facility. This turned out to be false.

Thus, it may be argued that the shipper and carrier were in a relationship other than the contract alone. In other words, because of the carrier’s representations to the shipper, the carrier might also find itself liable in tort to the shipper — whether on the basis or negligence, fraudulent or negligent misrepresentation, or similar grounds.

In cases like this, the tort — or carrier’s “wrongdoing” — must be independent of the contractual relationship between the parties, so that any legal obligations or duties owed by one party to the other must not arise out of the contractual obligations.

In our example above, the shipper can argue that it never would have entered into the contract with the carrier in the first place if the carrier had been forthcoming and advised that its facilities were not secure. Since the representations at issue took place before the contract was formed, this could arguably result in a finding of liability against the carrier.

The kicker? If the court agrees that the carrier is liable to the shipper on the basis of an independent tort as opposed to just the contract of carriage, then the $2/lb limitation of liability would not apply. The carrier could potentially be on the hook for the full measure of the shipper’s damages.

The bottom line is that both carriers and shippers need to be careful about the things they say to each other at the outset of a contractual relationship. Carriers should be sure they are answering the shipper’s questions honestly and openly. Shippers should be sure they get required information from a carrier before committing. In every case, putting things in writing is a good idea.

If in doubt, always ask a friendly transportation lawyer.

• James Manson of Fernandes Hearn LLP can be reached 416-203-9820, or jmanson@fernandeshearn.com. This column is intended for information purposes only and does not constitute legal advice.