Decision No. 227-C-A-2008
April 30, 2008
IN THE MATTER OF a complaint filed by Kelly McCabe against Air Canada.
File No. M4120-3/07-04482
INTRODUCTION AND ISSUES
 Air Canada refused to compensate Kelly McCabe for the loss of a piece of checked baggage while travelling on Flight No. AC8534 from Thunder Bay, Ontario to Toronto, Ontario, Canada, connecting to Flight No. AC714 from Toronto to New York, United States of America to attend the New York Hard Assets Conference (Conference), and for expenses relating to such loss.
 There are three issues:
- Did Air Canada properly apply the terms and conditions relating to the liability of baggage as set out in its Canadian General Rules Tariff No. CGR-1, CTA(A) No. 241 (Tariff)?
- Does the first sentence of Rule 230AC(B)(2) of the Tariff relieve Air Canada from liability in a way that is contrary to Article 26 of the Montreal Convention (Convention), thereby rendering this tariff provision null and void?
- If the first sentence of Rule 230AC(B)(2) of the Tariff is null and void, is that sentence just and reasonable as required by subsection 111(1) of the Air Transportation Regulations, SOR/88-58, as amended (the ATR)?
 If the carrier improperly applied the terms and conditions relating to the liability of baggage as set out in its Tariff, and if the first sentence of Rule 230AC(B)(2) of the Tariff relieves Air Canada from liability in a way which is contrary to Article 26 of the Convention and if such sentence is not just and reasonable, the question of compensation to Ms. McCabe becomes an issue.
 As indicated in the reasons which follow, the Agency finds that:
- Air Canada improperly applied the terms and conditions of carriage relating to the liability of baggage as set out in the carrier's Tariff;
- The first sentence of Rule 230AC(B)(2) of the Tariff is a contractual provision tending to relieve Air Canada from liability under the Convention or to fix a lower limit than that which is applicable according to the Convention. The first sentence of Rule 230AC(B)(2) is therefore null and void;
- The first sentence of Rule 230AC(B)(2) of the Tariff is not just and reasonable as required by subsection 111(1) of the ATR;
- Air Canada is liable for the loss of Ms. McCabes's baggage up to the limits provided for in the Convention; and
- Ms. McCabe is entitled to compensation in the amount of 1,000 Special Drawing Rights (SDR).
 On May 14, 2006, Ms. McCabe and Aubrey Eveleigh travelled with Air Canada from Thunder Bay to New York, via Toronto, to participate, on behalf of metalCORP Limited (metalCORP), a mineral exploration corporation, in a trade exhibit at the Conference. One piece of baggage checked by Ms. McCabe, namely, a "Pelican" hard plastic case belonging to metalCORP, was lost during travel. The lost piece of baggage contained two mining drill cores, and other items. Ms. McCabe indicates that metalCORP estimates the replacement cost to obtain new drill cores to be approximately $40,000. Ms. McCabe submits that the replacement cost for the Pelican case is $655.50. She filed a claim totalling $52,699.32, which includes expenses of $10,715.82 associated with attendance at the Conference. Ms. McCabe also requests the reimbursement of the legal costs incurred to obtain a satisfactory settlement from Air Canada.
 Air Canada has denied Ms. McCabe's claim for compensation.
RELEVANT TARIFF, CONVENTION AND STATUTORY EXTRACTS
 The extracts relevant to this Decision are set out in Appendix A.
EVIDENCE AND SUBMISSIONS
 Ms. McCabe submits that the missing piece of baggage contained business and promotional materials, including displays, pamphlets and two mining drill cores. She adds that the trade show was unsuccessful due to the fact that metalCORP had virtually nothing of substance to exhibit because of the missing baggage. Ms. McCabe provided a list of the missing items, the receipts for some of these items, and the expenses she and Mr. Eveleigh incurred in New York, and a sworn affidavit attesting that the value of the missing items is accurate.
 Air Canada submits that metalCORP is not a party to the contract of carriage, and, in addition, argues that Ms. McCabe is not entitled to any compensation for several reasons.
 Air Canada submits that it is not liable for the missing piece of baggage and its contents because these were not Ms. McCabe's personal property. Air Canada states that Rule 190AC (A) of its Tariff clearly specifies that Air Canada only accepts personal property for transportation as baggage. Air Canada points out that Ms. McCabe declared that the missing piece of baggage belonged to her employer, metalCORP, and that it contained material and documents specifically relating to her participation in the Conference.
 Air Canada maintains that the vast majority of the missing items are clearly business documents for which the carrier is exempt from liability under Rules 190AC and 195AC of its Tariff.
 Air Canada submits that the drill core samples qualify as other valuables and/or samples for which the carrier is exempt from liability under Rule 195AC of its Tariff.
 Air Canada submits that it is not liable for the expenses Ms. McCabe and Mr. Eveleigh incurred in New York because such expenses relate to an alleged foregone business opportunity resulting from the loss of the Pelican case. Air Canada explains that Rule 95AC of its Tariff exempts the carrier from liability for consequential damages arising from or connected with any act or omission by the carrier, its employee or agents.
 Air Canada submits that, in any event, Article 22 of the Convention provides that the carrier's liability is limited to 1,000 SDR for each passenger in the case of lost baggage.
 Ms. McCabe asserts that pursuant to paragraph 17(3) of the Convention, the phrase "the passenger is entitled to enforce against the carrier the rights which flow from the contract of carriage" does not require that metalCORP be a party to the contract of carriage to allow her to claim compensation for the lost baggage under paragraph 17(2) of the Convention.
 Ms. McCabe refutes Air Canada's argument that the term "personal property", as used in the Tariff, is restricted to property whose title is exclusively held by the passenger, personally. She argues that the Convention does not require that the property carried by the passenger be free of all third party liens, encumbrances and interests in title. She submits that the Convention provides that the carrier is liable for compensation for lost baggage as long as the passenger makes a claim in accordance with the provisions of the Convention. She suggests that disallowing compensation for lost baggage to business travellers carrying items owned by their employers is an unfair, discriminatory application of the Tariff and the Convention.
 Ms. McCabe asserts that a reasonable interpretation of the term "business document" precludes considering the missing items as fitting within this definition.
 Ms. McCabe submits that the drill core samples are not of significant value in themselves, and advises that it is the time, effort and expense associated with obtaining them that makes them valuable.
 With respect to the claim for $10,715.82, Ms. McCabe advises that such claim represents the direct costs incurred due to the loss of the Pelican case. She points out that, in this case, consequential damages would be the lost business opportunities claimed as the result of the loss of the materials for the conference, and advises that these costs would be significantly more than the direct costs claimed.
ANALYSIS AND FINDINGS
Did Air Canada properly apply the terms and conditions relating to the liability of baggage as set out in its Tariff?
 Air Canada argues that it is exempt from any liability in that many of the items carried by Ms. McCabe were owned by her employer, metalCORP, and metalCORP is not a party to the contract of carriage. The Agency finds that it is the passenger who is entitled to enforce rights which flow from the contract of carriage, notwithstanding the ownership of items which may be carried by the passenger.
 Further, Rule 190AC of the Tariff provides, in part, that Air Canada will accept for transportation as baggage, such personal property as is necessary or appropriate for the wear, use, comfort or convenience of the passenger for the purpose of the trip. The Agency finds that the baggage at issue qualifies as personal property because the baggage that was checked by Ms. McCabe and for which she received a baggage tag, was necessary or appropriate for her use for the purpose of the trip, namely, to participate in the Conference and undertake business activities.
 The Agency therefore finds that Air Canada did not properly apply the terms and conditions of its Tariff in asserting an exemption from liability on the basis of items in Ms. McCabe's baggage not being owned by her or not being personal property.
 In addition, Air Canada argues that the declaration in Rule 190AC of items it does not agree to carry absolves Air Canada from all liability if those items are lost or damaged. The Agency acknowledges that a carrier has the right to refuse to carry certain items as checked baggage. However, paragraph 17(2) of the Convention provides that a carrier is liable for loss or damage if the event which caused the loss or damage took place on board an aircraft or during any period within which the checked baggage was in the charge of the carrier. The carrier can avoid liability only if the damage resulted from an inherent quality or defect of the baggage.
 The Agency therefore is of the opinion that if a carrier accepts checked baggage for transportation and the checked baggage is under the care and control of the carrier, the carrier assumes liability for the baggage in the event of loss and damage, notwithstanding the carrier has not agreed to carry items and the items are contained in checked baggage with or without the carrier's knowledge.
 Consequently, the Agency finds that Air Canada is liable for the loss of Ms. McCabe's checked baggage and that Air Canada did not properly apply the terms and conditions of its Tariff in denying the liability.
Does the first sentence of Rule 230AC(B)(2) of the Tariff relieve Air Canada from liability in a way that is contrary to Article 26 of the Convention, thereby rendering this tariff provision null and void?
 The Convention has the force of law in Canada by virtue of the Carriage by Air Act, R.S.C., 1985, c. C-26. and governs the liability limitations for loss, damage, or delay of baggage applicable to international carriage by air.
 The Agency finds that the first sentence of Rule 230 AC(B)(2) of Air Canada's Tariff fixes a limit of liability that is lower than that which is provided for in Article 22 of the Convention.
 Therefore, the Agency finds that, pursuant to Article 26 of the Convention, the first sentence of Rule 230AC(B)(2) of Air Canada's Tariff is null and void as it is contrary to the Convention.
If the first sentence of Rule 230AC(B)(2) of the Tariff is null and void, is the first sentence of the same Rule just and reasonable as required by subsection 111(1) of the ATR?
 Because the first sentence of Rule 230AC(B)(2) of the Tariff is null and void, the Agency finds it not just and reasonable as required by subsection 111(1) of the ATR.
 Ms. McCabe requests compensation to reflect the replacement cost of approximately $40,000 to obtain new drill cores, and the value of the "Pelican" case and the items contained therein, amounting to $1,983.50. However, at check-in, Ms. McCabe did not declare the higher value of her checked baggage and did not pay a supplementary sum to insure her checked baggage in case of loss.
 The Agency has reviewed the list of the lost items provided by Ms. McCabe in support of her application. The Agency notes that Air Canada does not contest the list of items submitted by Ms. McCabe. The Agency is satisfied that the list reasonably reflects the items, the quantities as well as the value of the items missing.
 The Agency finds that, pursuant to Article 22 of the Convention, Air Canada's liability for the loss of Ms. McCabe's checked baggage is limited to 1,000 SDR.
 As of April 29, 2008, the most recent information available indicates that the International Monetary Fund converted SDR to Canadian dollars ($) using a rate of [SDR=CAD$1.646830]. Utilizing that rate, 1,000 SDR equal $1,646.83.
Awarding of legal costs
 It has been well documented by the Agency and its predecessors that costs are not awarded as a matter of course even in situations where a party has been substantially successful in its recourse. Rather, the Agency's practice has been to review each application for costs on its own merit and to award costs only in special or exceptional circumstances. The Agency finds that the present case does not meet those special or exceptional circumstances. Accordingly, the Agency dismisses Ms. McCabe's request that she be awarded costs of this application on a solicitor and client basis.
 Based on the above findings, the Agency:
- pursuant to section 113.1 of the ATR, orders Air Canada to compensate Ms. McCabe, within thirty (30) days of this Decision, an amount of $1,646.83, and to advise the Agency once compensation has been tendered;
- does not award costs of this application to Ms. McCabe;
- pursuant to paragraph 113(a) of the ATR, disallows the first sentence of Rule 230AC(B)(2) of Air Canada's Tariff. The Agency orders Air Canada to, within thirty (30) days from the date of this Decision, file an amendment to its tariff provisions setting out Air Canada's limitation of liability with respect to checked baggage as required by the ATR, and in accordance with the provisions of the Convention; and
- directs Air Canada to revise all its public communications, including its Web site, to correspond with the amended Tariff.
- Raymon J. Kaduck
- Geoffrey C. Hare
- John Scott
Air Canada's Canadian General Rules Tariff No. CGR-1, CTA(A) No. 241
Rule 190AC - ACCEPTANCE OF BAGGAGE - GENERAL
(A) GENERAL CONDITIONS OF ACCEPTANCE
AC will accept for transportation as baggage, such personal property as is necessary or appropriate for the wear, use, comfort or convenience of the passenger for the purpose of the trip, subject to the following conditions:
(1) All baggage is subject to inspection by AC; however, AC shall not be obligated to perform inspection. AC will refuse to transport or will remove at any point baggage that the passenger refuses to submit for inspection.
(2) AC has the right to refuse to transport baggage on any flight other than the one carrying the passenger.
(b) AC does not agree to carry in checked baggage or when otherwise placed in the care of the carrier, money, jewelry, silverware, negotiable papers, securities or other valuables, computers, cameras, cellular phones, business documents, samples, liquids, perishables or prescription drugs.
Rule 195AC - CONDITIONS AND CHARGES FOR ACCEPTANCE OF SPECIAL ITEMS
The following are special items or types of items that will be accepted as baggage by specified carriers subject to the conditions shown. The exclusion of carriers from a paragraph does not imply that those carriers will not accept the item; unless otherwise indicated, the excluded carriers will accept the item subject to the general terms of acceptance in Rule 190. Charges prescribed in this rule are applicable from the point at which the item is accepted to the point to which the item is transported.
(K) FRAGILE ITEMS
(a) Articles not acceptable in checked baggage or when otherwise placed in the care of the carrier: Carrier does not agree to carry in checked baggage, or when otherwise placed in the care of the carrier; money, jewelry, silverware, negotiable papers, securities, or other valuables, computers, cameras, cellular phones, business documents, samples, liquids, perishables or prescription drugs.
(b) AC does not agree to carry fragile items as checked baggage, or when otherwise placed in the care of the carrier, unless they are appropriately packaged in the original factory-sealed carton, a cardboard mailing tube, or a container or case specifically designed for shipping such items. Carrier agrees to carry such items without the appropriate packaging upon execution by the passenger of a Limited Release tag at time of check-in (see below for form of Limited Release tag applicable). Unsuitably or inadequately packed items will be carried but only upon completion of a Limited Release tag at time of check-in (see paragraph (4) below).
(2) Classes and Examples of Fragile and/or Perishables Items
The classes of items listed below are deemed by carrier to be fragile or perishable or otherwise unsuitable as checked baggage and are subject to the conditions of acceptance set forth in paragraph (1) above.
Business documents, mechanical drawings, blueprints, maps, charts, historical documents, and photographs. Photographs include negatives, prints, portraits and slides.
Rule 230AC - LIABILITY - BAGGAGE
(B) EXCLUSIONS FROM LIABILITY
(2) Carrier shall not be liable for loss, damage, or delay in the delivery of items the carrier has not agreed to carry pursuant to Rule 190(A)(3)(b) when such items are contained in checked baggage with or without the knowledge of the carrier. Carrier shall not be liable for damage to fragile or unsuitably packed items or for damage or delay to perishable items or for loss of unsuitably or inadequately packed items when such damage, delay or loss occurs after completion of a Limited Release Tag as set forth in Rule 196(L)(4).
THE MONTREAL CONVENTION
Articles 17, 22 and 26 of the Montreal Convention
Article 17 - Death and Injury of Passengers - Damage to Baggage
(2) The carrier is liable for damage sustained in case of destruction or loss of, or of damage to, checked baggage upon condition only that the event which caused the destruction, loss or damage took place on board the aircraft or during any period within which the checked baggage was in the charge of the carrier. However, the carrier is not liable if and to the extent that the damage resulted from the inherent defect, quality or vice of the baggage. In the case of unchecked baggage, including personal items, the carrier is liable if the damage resulted from its fault or that of its servants or agents.
(3) If the carrier admits the loss of the checked baggage, or if the checked baggage has not arrived at the expiration of twenty-one days after the date on which it ought to have arrived, the passenger is entitled to enforce against the carrier the rights which flow from the contract of carriage.
Article 22 - Limits of Liability in Relation to Delay, Baggage and Cargo
(2) In the carriage of baggage, the liability of the carrier in the case of destruction, loss, damage or delay is limited to 1 000 Special Drawing Rights for each passenger unless the passenger has made, at the time when the checked baggage was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the declared sum, unless it proves that the sum is greater than the passenger's actual interest in delivery at destination.
Article 26 - Invalidity of Contractual Provisions
(1) Any provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down in this Convention shall be null and void, but the nullity of any such provision does not involve the nullity of the whole contract, which shall remain subject to the provisions of this Convention.
Air Transportation Regulations, SOR/88-58, as amended
Division II - International
All tolls and terms and conditions of carriage, including free and reduced rate transportation, that are established by an air carrier shall be just and reasonable and shall, under substantially similar circumstances and conditions and with respect to all traffic of the same description, be applied equally to all that traffic.
The Agency may
(a) suspend any tariff or portion of a tariff that appears not to conform with... section 111... or disallow any tariff or portion of a tariff that does not conform with any of those provisions;...