“Unprecedented in a century of international commercial aviation” - NSW Court of Appeal holds Air Canada’s Tariff Does Not Waive Right to Liability Limit under the Montreal Convention
Air Canada v Evans [2024] NSWCA 153
On 21 June 2024, the New South Wales Court of Appeal delivered a judgment in which it held that rule 105C(1)(a) of Air Canada’s International Tariff General Rules (Tariff) did not have the effect of waiving Air Canada’s right to invoke a defence under Article 21(1) of the Montreal Convention in order to limit its liability by proving that the damage is not due to negligence or other wrongful act or omission of Air Canda or its servants or agents.
The case arose out of claims by two passengers, Renae and Stephanie Evans, who alleged they were injured during clear air turbulence on a flight between Vancouver and Sydney on 11 July 2019.
Air Canada pleaded that the effect of Article 21 of the Montreal Convention was that it was not liable for damages in excess of 113,100 SDRs on the basis that any injuries sustained were the result of clear-air turbulence and therefore, any damage suffered by the Plaintiffs was not due to the negligence or other wrongful act or omission of Air Canda or its servants or agents.
The Plaintiffs contended that Air Canada had waived its right to rely on the limit of 113,100 SDRs by rule 105C(1)(a) of Air Canada’s Tariff which provided (1) Where the Montreal Convention applies, the limits of liability are as follows: (a) There are no financial limits in respect of death or bodily injury” and sought that the Court determine whether this was the case as a preliminary issue.
At first instance, Justice Rothman[1] held that the rule had the effect of waiving the limit of Air Canada’s right to rely on the limit of liability in Article 21, even if Air Canada could prove the damage was not caused by the negligence or other wrongful act of Air Canada or its servants or agents. Having "objective regard to the actual words used, while taking into account the context and commercial purpose of the contract", Justice Rothman held that the words of rule 105C(1)(a) were “unambiguous” and that giving those words “their ordinary and natural meaning,” “those words can only mean that r 105(C)(1)(a) removes the limit on Air Canada's liability imposed by Art 21 of the Montreal Convention in the manner allowed by Art 25".
The Court of Appeal unanimously allowed Air Canada’s appeal, with Leeming JA (with whom Payne JA and Griffiths AJA agreed) holding that 105(C)(1)(a) of Air Canada's Tariff does not stipulate that there is to be no limit of liability under Art 21 of the Montreal Convention.
At the heart of the Court of Appeal’s reasoning were the “history, background and context and the market in which the parties were operating”, including the relevant history of Conventions governing liability arising out of international civil aviation. The Court of Appeal held at [85]:
“Rule 1 05(C)(1)(a) should not be construed as undoing a central element of the shift represented by the Montreal Convention from the Warsaw regime which preceded it. Nor should it be construed so as to detract from the unequivocal incorporation of the Montreal Convention effected by r 105(B)(5).”
In reaching its conclusion, the Court of Appeal read Air Canada’s Tarriff “as a whole” and had regard to the following further textual matters:
The Court of Appeal accepted that the language of r 105C(1) was inserted into the Tariff in compliance with the obligation in reg 122(c)(xviii) of the Canadian Air Transportation Regulations that the tariff contain a clear statement of the "limits of liability" to which the carriage was subject.
No reference was made in r 105C(1) to any exercise of the power under Art 25 to stipulate that there was to be no limits of liability.
Rule 105C(1)(a) did not appear in the same sub-rule as the other provisions of the Tariff which enhance the entitlements of passengers to whose carriage the Montreal Convention applied.
There was no language similar to that used elsewhere in the Tariff which involved departures from the Warsaw regime such as "shall not invoke" (r 105(B)(1)(a)), "shall not avail itself" (r 105(B)(1)(b)) and "liability will be waived" (r 105(B)(4)(a)).
The explicit text of r 105(C)(1)(a) refers to "financial limits", not "liability limits" and to read r 105(C)(1)(a) as a waiver of carrier’s ability to invoke absence of negligence defence is not a natural reading.
There was no clarity as to whether if the Plaintiffs’ construction is accepted, r 105(C)(1)(a) disentitles the Defendant to rely on Art 20 defence of contributory negligence in addition to that of Art 21(2) and if not (which is what ultimately was contended for by the Plaintiffs), how one defence is preserved while the other is not.
Air Canada's construction also avoids internal inconsistency between r 105(C)(1)(a) and immediately preceding sub-paragraph of the tariff preserves the entirety of the Montreal Convention.
Part of the primary Judge’s reasoning was that on the Defendant’s construction, r 105(C)(1)(a) would have served no purpose and that was held to be incorrect. The purpose of r 105(C)(1)(a) was held to be to notify in general terms the conditions of carriage, while the provisions of sub-rule (B) were held to confirm or depart from the rights and obligations stated in the relevant international conventions.
If r 105C(1)(a) was construed to mean that Air Canada voluntarily waived its limits of liability, it would have been “unprecedented in a century of international commercial aviation”.
Accordingly, appeal was allowed in favour of Air Canada.
The decision rectifies the very unusual result of the first instance decision which was to the effect that air carriers who had conformed to the IATA requirements in Resolution 724 had, in using the words, ‘there are no financial limits in respect of death or bodily injury’ agreed to waive their entitlement to rely on the limits of liability under Article 21 of the Montreal Convention. The decision is significant given the number of international airlines which use similar wording in their Tariff and the increasing frequency of claims under the Montreal Convention which arise out of clear air turbulence events.
[1] Evans v Air Canada [2023] NSWSC 1535
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