Federal Court Decisions

     T-1706-94

BETWEEN:

     AMERICAN PRESIDENT LINES, LTD.,

     a body politic and corporate having

     its head office and principal place

     of business at 8150 Keal Street, Unit 2,

     Concorde, Ontario;

     Plaintiff

     - and -

     PANNILL VENEER CO. LTD.,

     a body politic and corporate

     having a place of business at

     340 Louisa Street,

     Kitchener, Ontario;

     Defendant

     REASONS FOR JUDGMENT

JEROME, A.C.J.:

     In this action the plaintiff claims from the defendant the sum of U.S. $6,655.68, equivalent to CAN. $9,067.03 on account of ocean freight for the carriage of plaintiff's goods.

     The facts are not in dispute and are set out by the parties in a Joint Admissions of Facts as follows:

1. Pannill Veneer Co. Limited ("Pannill") of Kitchener, Ontario sold to Thunb Mart Enterprises Co. Ltd. ("Thunb Mart") of Taiwan three shipments of red oak veneer (the "Cargo") having each an approximate value of US $25,000.00;

2. Canapack International Inc. ("Canapack") was the freight forwarder which organized the transportation of the Cargo from Kitchener to Kaohsiung, Taiwan;

3. American President Lines, Ltd. ("APL") was the ocean carrier responsible for the carriage of the Cargo from Toronto to Kaohsiung;

4. The sale of the oak veneer to Thunb Mart was made pursuant to three separate purchase orders respectively dated December 2, December 22, 1993 and January 12, 1994;

5. The Cargo was loaded into three containers bearing number APLU802127, ICSU1340287 and APL884831 which were picked up at Pannill's plant in Kitchener by Highland Transport and remitted to APL in Toronto on December 13, 1993, January 5, and January 24, 1994 for carriage to Kaohsiung;

6. In due course, the Cargo was delivered in good order and condition by APL to Thunb Mart which paid in full the Pannill invoices;

7. In due course, APL sent three bills of lading to Canapack each in the amount of US $2,218.56 for a total of US $6,655.68;

8. In due course, Canapack issued several invoices for the entire movement of the Cargo from Kitchener to Kaohsiung which included the inland freight, the ocean freight, the letter of credit and courier charges, as well as the insurance charges for a total amount of US $8,347.37;

9. In due course, Pannill paid the Canapack invoices in full by way of three cheques respectively dated January 7, 1994 in the amount of US $2,700.00, January 28, 1994 in the amount of US $2,822.20 and February 4, 1994 in the amount of US $2,218.56;

10. Canapack issued two cheques to APL respectively dated February 28, 1994 in the amount of US $2,2218.56 and March 4, 1994 in the amount of US $2,218.56;

11. Those two cheques were returned to APL's bank in light of the fact that the body and figure thereof differed;

12. The three Pannill cheques were cashed by Canapack which became insolvent on or about February 28, 1994;

13. APL was never paid the ocean freight for the carriage of the three containers to Kaohsiung.

     The issue before the Court is whether the defendant Pannill Veneer, who paid the freight forwarder Canapack, did so at its peril and must now pay the carrier, the plaintiff APL, the costs of the shipment involved.

     The law in cases of this nature has been clearly set out by the Federal Court Trial Division in C.P. Ships v. Industries Lyon Corduroys Ltee, [1983] 1 F.C. 736 and followed in Algocen Transport Inc. v. Hinspergers Poly Industries Ltd. (1988), 64 O.R. (2d) 444 (Dist. Ct.); (appeal to Ontario Divisional Court dismissed 70 O.R. (2d) 799.

     In both of those cases, the shippers had goods delivered by a carrier through a broker. The shipper, as in the case at bar, paid the broker who in turn failed to forward payment to the carrier. The Courts acknowledged that the shippers had an obligation to pay the transportation costs but then went on to consider the effect of the payment made by them to the broker. In the C.P. Ships case Addy, J. made the following comments at pp. 738-39:

Where a debtor, instead of paying his creditor, chooses to pay a third party, he does so at his peril. Where the money is not turned over to the creditor, the onus is then on the debtor to establish either:

(1) that the creditor actually authorized the third party to receive the money on his behalf, or

(2) that the creditor held the third party out as being so authorized, or

(3) that the creditor by his conduct or otherwise induced the debtor to come to that conclusion, or

(4) that a custom of the trade exists to the effect that in that particular trade and in those particular circumstances, both the creditor and the debtor normally would expect the payment to be made to the third party.

     Here, the defendant maintains that the fact situation falls within the third and fourth exceptions set out above, namely, that APL, by its conduct or otherwise, induced Pannill Veneer to conclude that Canapack was authorized to receive funds on its behalf and, that in accordance with the custom of the trade the carrier and the shipper would normally expect payment to be made to the freight broker.

     Based on the evidence, I am satisfied that the plaintiff did not send any invoice to Pannill Veneer at the time the services in question were provided. Indeed, APL sent the bills of lading to Canapack on December 13, 1993, and when no payment was forthcoming, contacted Canapack on February 18, 1994, asking for payment of the ocean freight. There is simply no evidence that APL ever expected payment directly from the defendant. The plaintiff's witness Ms. Lee confirmed that the plaintiff was looking to Canapack, as the freight forwarding agent, for payment of the charges as that was the normal practice in this type of situation. It was not until much later, after the three cheques issued by Canapack to the plaintiff were returned by the bank, that APL attempted to collect the shipping charges from the defendant.

     On the totality of the evidence, I am persuaded that the reasonable expectation of all the parties in the circumstances of this case was that Canapack would bill the defendant for the shipping charges and that the defendant would pay Canapack who in turn would pay the plaintiff. The plaintiff's own conduct leaves little doubt that it expected payment from Canapack.

     For these reasons, I conclude that the payments made by the defendant to Canapack constitute payment to the plaintiffs. Accordingly, the action is dismissed with costs.

O T T A W A

September 17, 1997                      "James A. Jerome"     

                             A.C.J.