Case information

Transportation law — Railways — Contracts — Clause limiting or excluding carrier’s liability — Whether Canada Transportation Act must be interpreted so as to prohibit rail carriers from entering into confidential contracts to exclude, in whole or in part, their liability for damage to traffic, notwithstanding Parliament’s intention to promote freedom of contract in railway transportation sector — Whether it is appropriate to endorse doctrine of breach of essential obligation in Quebec civil law even though effectiveness of exculpatory clauses and limitation of liability clauses would thereby become largely unforeseeable well beyond railway transportation sector — Under s. 8.1 of Interpretation Act, which circumstances make it necessary, in interpreting federal statute, to refer to “rules, principles or concepts forming part of the law of property and civil rights” in force in province — Canada Transportation Act, S.C. 1996, c. 10, ss. 126 and 137 — Interpretation Act, R.S.C. 1985, c. I 21, s. 8.1.

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In 2009, two subway cars being carried under an agreement between Bombardier and the applicant, CN, were damaged during a derailment while they were under CN’s responsibility. Following the derailment, the respondent insurance company, Ace, compensated Bombardier and brought an action in subrogation against CN. In response, CN relied on a clause in the contract that limited its liability to $0.

The Superior Court found that the clause was contrary to s. 137 of the Canada Transportation Act and therefore could not be set up against Ace. It ordered CN to pay Ace $611,414. The Court of Appeal dismissed the appeal, finding that s. 126(1)(e) of the Transportation Act had to be interpreted as not allowing a carrier to completely exclude its liability.