Canadian Maritime Law

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1 1 Canadian Maritime Law William Tetley * (published in LMCLQ International Maritime and Commercial Law Yearbook 2005 at pp ) CASES Asian Exports International Ltd. v. Zim Israel Navigation Co., Ltd. 1 Bills of lading delivery without bill of lading arrest of cargo bank guarantee motion for release of security hold harmless agreement comity Neither the manufacturer nor the broker of goods shipped by container from China to Canada would issue a bill of lading to the plaintiff buyer/consignee. The consignee, consequently, could not obtain the goods when the container arrived in Vancouver. It therefore arrested the container and posted a bank guarantee as security for release of the container to itself. The consignee then moved for release of the security. The defendant carrier appeared, not to oppose the release of security, but rather to seek a hold harmless agreement from the consignee to protect it as carrier from any potential claims for wrongful delivery resulting from its delivery of the container without presentation of a bill of lading. Decision: The motion for the return of security was allowed. The hold harmless agreement was not ordered. Instead the court issued an order barring other parties from making a claim against the carrier as to the container. Held: (1) A hold harmless agreement would provide the carrier with a measure of security in the event that other defendants, or others entities, filed a claim alleging wrongful delivery. (2) There was a concern in this case that other jurisdictions might not recognize a Federal Court decision and the rights acquired under it, in accordance with comity, that principle not being absolute. (3) All concerned had had the opportunity to intervene in this case. (4) The consignee had presented unchallenged evidence that it had paid for the cargo. (5) Delivery by the carrier was not voluntary, but by court order and so this case was distinguishable from Voss v. APL 2. (6) Accordingly, Prothonotary * QC, Professor of Law, McGill University; Distinguished Visiting Professor of Maritime and Commercial Law, Tulane University; counsel to Langlois Gaudreau O'Connor of Montreal ( The author is indebted to Robert C. Wilkins, BA, BCL; Victoria E.M. Netten, BCL, LLB; David Allardice, third year student at the Faculty of Law of McGill University; and Mark A.M. Gauthier, Senior Counsel, Transport Legal Services, Department of Justice of Canada, for their assistance in the preparation and correction of the text. In addition, the assistance of the Wainwright Fund is gratefully acknowledged AMC 609 (Can FC: Hargrave P). 2 [2002] 2 Lloyd s Rep. 707 (Singapore CA), where the carrier succumbed to the blandishments of the plaintiff and voluntarily delivered the cargo without a bill of lading being presented. The Singapore Court of Appeal held that the cargo ought not to be delivered without a bill of lading. Hargrave P distinguished the case at bar on the grounds that Zim Israel did not voluntarily deliver the container without a bill of lading. Delivery by Zim Israel was by court order in exchange for security.

2 2 Hargrave issued an order barring the manufacturer and broker from making any claims against the carrier for non-delivery, misdelivery or delivery without production of the non-negotiable bill of lading concerned. Atlantic Yacht & Ship Inc. v. Sovereign Yachts (Canada) Inc. 3 Jurisdiction - construction and sale of yacht - marketing/brokerage agreement - commission sales agreement action in rem - Federal Courts Act, ss. 22(2)(a), (n) and 43(2) The plaintiff broker (Atlantic), under an agreement with the defendant shipbuilder (Sovereign) undertook to provide marketing and brokerage services to Sovereign in return for a 5% commission on the sale prices of vessels built by Sovereign for which Atlantic found buyers. Atlantic found a U.S. buyer (Davis) who contracted with Sovereign for building a yacht. Atlantic and Sovereign then concluded a separate commission agreement requiring Sovereign to make periodic commission payments to Atlantic as progress payments were made by Davis to Sovereign for the building of the vessel. Davis paid Sovereign in full for the vessel, becoming its beneficial owner. When Sovereign failed to make all the commission payments due to Atlantic in respect of that sale, Atlantic sued Sovereign in an action in rem in the Federal Court of Canada and arrested Davis' yacht, claiming that it had an interest in the vessel based on the commission sales agreement. Davis moved to dismiss the plaintiff's claim in rem. Decision: The action in rem was dismissed and the yacht was released from arrest. Held: The Federal Court lacked in rem jurisdiction over the claim for the following reasons: (1) The Federal Courts Act s. 22(2)(a) 4 which gives the Federal Court in rem jurisdiction as to title, possession or ownership of a ship or an interest in a ship, as well as over the proceeds of sale of a ship, did not apply to a claim by a personal contractual creditor of Sovereign where no proceeds of sale of a ship were involved, but only a commission (much of which had been paid). (2) No proceeds were deposited with the Court, as required by s. 43(2) 5 to allow in rem proceedings. (3) Although the Supreme Court of Canada had made it clear that s. 22(2)(a) was not to be construed narrowly, 6 this case was distinguishable from the decision so holding. 7 (4) Atlantic had not provided any 3 (2003) 238 FTR 247 (Can FC: Hargrave P). 4 RSC 1985, c. F-7 as amended. The Federal Courts Act provides at s. 22(2) that: Without limiting the generality of subsection (1), for greater certainty, the Federal Court has jurisdiction with respect to all of the following: (a) any claim with respect to title, possession or ownership of a ship or any part interest therein or with respect to the proceeds of sale of a ship or any part interest therein; 5 The Federal Courts Act, RSC 1985, c. F-7, as amended, at s. 43(2) provides that Subject to subsection (3), the jurisdiction conferred on the Federal Court by section 22 may be exercised in rem against the ship, aircraft or other property that is the subject of the action, or against any proceeds from its sale that have been paid into court. 6 Antares Shipping v. The Capricorn [1980] 1 SCR 553, 566 (Can SC). 7 Hargrave P distinguished Antares Shipping from the present case, stating that The Capricorn dealt with a claim between parties to a contract for the sale and purchase of a ship and is thus not of any direct assistance in the present context See (2003) 238 FTR 247, par. 15.

3 3 tender for the yacht as alleged, and so had no claim in rem under s. 22(2)(n) 8 of the Federal Courts Act for providing equipment or necessaries to the vessel. (3) Davis had not been a party to either the marketing and brokerage services contract or to the commission sales contract between Atlantic and Sovereign. Brooks Aviation, Inc. v. Wrecked and Abandoned Boeing SB-17G Aircraft, Serial No Salvage claim sunken and derelict aircraft in provincial Crown lands Federal Court jurisdiction - rights of first finders of wrecks actual/constructive possession of wrecks - maritime lien for salvage salvage award - injunctions to aid recovery of wrecks rights and duties of receiver of wreck International Convention on Salvage Canada Shipping Act, s. 449(1) - Federal Courts Act, ss. 2, 22(1), 22(2)(j), 22(3)(b), 43(2) The plaintiff, Brooks Aviation, located the wreck of a US Air Force airplane at the bottom of a lake within Crown lands in Labrador. Prior to commencing salvage operations, the plaintiff began an in rem action against the aircraft, its apparel and cargo (the res) and against the owners, charterers and other interested in the res, and obtained a declaration by the Federal Court of Canada that the res had been arrested. The owner of the res at the time of the aircraft's loss was the United States, operating through the US Air Force. The Air Force, through correspondence with the plaintiff, advised that it did not maintain title to, and had no property interest in, the aircraft. The Province of Newfoundland and Labrador claimed ownership and title to the res, located on Crown land of the Province and, under provincial statutory law, 10 as an archaeological object. The plaintiff filed a motion for summary judgment seeking declarations that: (1) the Federal Court of Canada had exclusive jurisdiction over issues arising from the salvage; (2) plaintiff had a maritime lien for salvage services against the res; (3) it had possession and control of the wreck; (4) that other parties were enjoined from interfering with its exclusive salvage rights; (5) that it was entitled to a salvage award from the receiver of wrecks or from the true owner, or alternatively (6) that it be declared the sole owner of the aircraft. Decision: The motion was granted in part. Held: (1) The Federal Court of Canada had jurisdiction with respect to salvage of an aircraft under its maritime jurisdiction in relation to navigation and shipping, as defined in the Federal Courts Act. 11 (2) In addition to the traditional maritime law of salvage recognized by the common law and the Constitution, Parliament had enacted legislation on salvage in the Canada Shipping Act, 12 which included the International Convention on Salvage within Canadian maritime law, and which extended to wrecked aircraft. 8 The Federal Courts Act, RSC 1985, c. F-7, as amended, at s. 22(2)(n), provides that the Federal Court has jurisdiction with respect to any claim arising out a contract relating to the construction, repair or equipping of a ship 9 (2004) 240 DLR (4 th ) 533, (2004) 253 FTR 128 (Can FC: MacKay J). 10 The Historic Resources Act, RSNL 1990, c. H Federal Courts Act, RSC 1985, c. F-7, as amended, ss. 2, 22(1), 22(2)(j), 22(3)(b) and 43(2). 12 RSC 1985, c. S-9, as amended, Part VI. 13 Adopted in London, April 28, 1989 and in force July 14, The Convention is now part of Canadian maritime law, having been enacted by s (1) and Schedule V of the Canada Shipping Act, RSC 1985,

4 4 (3) Maritime salvage law as extended to wrecked aircraft was not limited by sect. 449(1) of the Canada Shipping Act, to aircraft on or over the sea or tidal waters and on and over the Great Lakes, because that provision related to the duty to render assistance to aircraft in distress and not to sunken aircraft. (4) The correspondence from the US Air Force showed satisfied the Court that the airplane had been abandoned by its original owner and was therefore derelict and subject to salvage claims. (5) Until it had recovered the wreck (in whole or part), however, the plaintiff could not be considered a salvor, nor have a valid maritime lien or statutory lien for salvage enforceable in rem. (6) The plaintiff was not in actual or constructive possession of the res and had no greater claim to possession than the Province or any third party, particularly because its preliminary efforts to locate, identify and examine the aircraft did not constitute a continuing effort of recovery at the site of the wreck. 14 (7) Nevertheless, the Court could protect the rights of the plaintiff, as first finder of the wreck, for a reasonable time, to seek to recover and take possession of the res, by granting an injunction or damages against any third party seeking to interfere with plaintiff's efforts, or to initiate a second effort, to salvage the wreck; and such an order was therefore made; (8) The plaintiff's other claims for declaratory relief (seeking recognition that it was a salvor with a maritime lien and possession of the wreck; enjoining all others from interfering with its exclusive salvage rights; and recognizing its right to a salvage award from the receiver of wrecks or from the owner) were dismissed as premature. 15 (9) As for the Province s claim of ownership, it was unnecessary to resolve the ownership issue at this stage, because the owner cannot ordinarily preclude salvage of the res if it is considered derelict, as in this case. 16 Budisukma Puncak Sendirian Berhad v. Canada 17 Crown - liability of Crown for torts of servants negligent detention of ship - conditions of liability - damages Canada Shipping Act, s. 310 SOLAS Convention 1974, Regulation 19(f) c. S-9, as amended by the Act to amend the Canada Shipping Act and to amend another Act in consequence thereof, SC 1993, c. 36, s MacKay J distinguished both The Tubantia (1924), 18 Lloyd s Rep. 158 (UK Adm. Div) and Morris v. Lyonesse Salvage Co., [1970] 2 Lloyd s Rep. 59 (UK HC) based upon the lack of continuing activity at the site of the wreck. 15 MacKay J noted that the receiver of wrecks was not liable to reward the plantiff, a potential salvor. The receiver, to whom the plaintiff would be expected to transfer possession of the wreck after recovering it, would only be liable then to pay a reasonable salvage claim, out of funds received from the owner of the salvaged res, or from its sale, if it remained unclaimed. The receiver might then transfer possession and title of the res to the plaintiff as salvor, in satisfaction of the latter's claim in rem. See (2004) 240 D.L.R.(4 th ) 533, The Court cited Ontario v. Mar-Dive Corp. (1996), 141 DLR (4 th ) 577, 20 OTC 81 (Ont Ct Gen Div) as an illustration of a situation where the province, and not the salvors, were granted title to an abandoned vessel lost at the bottom of Lake Erie. While in that case the Ontario Court granted title to the Province of Ontario, finding that the defendants did not establish that they qualified as salvors, the decision turned primarily on the Court's refusal to recognize a California judgment holding that the defendants were salvors. 17 (2003) 249 FTR 161 (Can. FC: Campbell J). See the previous proceedings summarized in [2004] IMCLY 24.

5 5 This was an action by ship owners for damages arising out of the negligent detention of a vessel by Port State Control. Upon its arrival in Vancouver, Port State Control inspectors boarded the ore/bulk carrier M/S Lantau Peak and detained the vessel under s.310 of the Canada Shipping Act 18, on the basis that the hull had corroded beyond the allowable limit. The inspectors set the acceptable wastage at 17% of original thickness and ordered all ship side vertical frames that failed to meet this standard to be repaired before the ship would be released. The ship s owners protested the decision and the ship s flag state, Malaysia, requested the ship s release. The ship s classification society, Class NK, confirmed the actual Class corrosion standard to be 25%. Class NK supplied certificates attesting to the vessel's seaworthiness to make a trans-pacific ballast voyage to China, where the cost of any required repairs would be significantly cheaper. The owners appealed to the Chairman of the Board of Steamship Inspection for the vessel s release. The Chairman s decision, made after a delay of approximately three months, raised the allowable wastage limit. The new terms demanded that all frames corroded beyond 33% be repaired before the detention would be lifted, with an added condition that the vessel sail to China for repairs on all frames corroded beyond 25%. The owners agreed to the conditions of release under protest and sued for damages as a result of the vessel s detention. Decision: Action allowed. Held: (1) A foreign flag vessel trading internationally may not be detained in Canada for safety reasons under s. 310 of the Canada Shipping Act. The authority for detention comes rather from the Tokyo Memorandum of Understanding (MOU) on Port State Control in the Asia-Pacific (the Paris MOU controls Atlantic shipping) with reliance on the International Convention for the Safety of Life at Sea (SOLAS). 19 (2) International treaties and conventions, including SOLAS, are not part of Canadian law unless they have been implemented by statute, but Canadian legislatures are presumed to comply with international law, to avoid interpretations that would put Canada in breach of its international obligations and to respect the values and principles enshrined in international law, both customary and conventional, these constituting a part of the legal context in which legislation is enacted and read. 20 (3) The Canada Shipping Act and the Non-Canadian Ships Safety Order 21 should be read with an understanding of the reality of international marine trading so as to find harmony, not conflict. As such, a unique Canadian safety standard could not be applied to foreign flag vessels. (4) There was an explicit understanding between the Authorities of the MOU that if a flag state is negligent in its conduct, it should expect to be held accountable. 22 A duty of care was established in accordance with the three part test outlined in Anns v. Merton London 18 Canada Shipping Act, R.S.C. 1985, c. S-9, s. 310 provides, in pertinent part: "(1) A steamship inspector, in the performance of his duties, may go on board any ship at all reasonable times and inspect the ship, and if he considers the ship unsafe, he shall detain that ship. (2) A steamship inspector may detain any ship in respect of which any of the provisions of this Act have not been complied with, if, in his opinion, detention is warranted in the circumstances." 19 International Convention for the Safety of Life at Sea, 1974, CTS 1980/45 (commonly known as the "SOLAS Convention"). 20 Baker v. Canada [1999] 2 SCR CRC 1978, c. 1452, enacted under Part V of the Canada Shipping Act. 22 Supra, note 17 at para. 114.

6 6 Borough Council 23 : (a) The MOU, with reference to Regulation 19(f) of SOLAS, 24 established proximity between Canadian port inspectors and ship owners; (b) The loss of income caused by detainment, coupled with the cost differential between repairs in Canada and China, made damages for the breach of the duty of care reasonably foreseeable; (c) It would be contrary to Canada s international legal obligations to have a policy that bars recovery by a shipowner of damages for wrongful detention. 25 (5) the vessel was detained after only a cursory inspection of certain portions of the hull and without any prior expert analysis; (6) The imposition by Port State Control authorities of terms of release based on an arbitrary wastage standard, without reference to the standards of a particular ship s classification society, amounted to a breach of the duty of care owed to a shipowner and constituted negligence. 26 (7) Under the MOU and SOLAS Regulation 19(f), Port State Control authorities owe a duty of care to shipowners for expeditious decision making, which was not observed in this case. Any delay outside what would be considered reasonable and prudent of officials in charge of the administration of the MOU 27 breaches this duty of care and constitutes negligence; and the three-month delay by the Chairman of the Board of Steamship Inspection in deciding the appeal in this case was negligent. (8) Where the appeal is reasonable, the owner of a detained ship does not fail to mitigate its damages if it makes use of a Port State Control authority s appeals process, rather than conducting repairs immediately. 28 (9) Accordingly, the defendants were condemned to pay damages in an amount totalling Can. $4,344, DSL Corp. v. Bulk Atlantic Inc. 29 Conflict of laws cargo claim service ex juris Federal Court jurisdiction in personam Defendants applied to either set aside ex juris service or to stay proceedings arising out of a claim for damage to steel pipe during a voyage from Turkey to Texas, on the ground that the case had no real and substantial connection to Canada and therefore the Federal Court lacked in personam jurisdiction. The plaintiff, DSL, was an American company. The defendant shipowners and the defendant ship (which had not been arrested) were Maltese. The ship was managed by a Greek corporation. The defendant time charterer, Bulk Atlantic, was a Marshall Island company. Neither the shipowners, managers nor the time charterers had a place of business, branch or agency in Canada. The intended loading or discharge ports were not in Canada. Nevertheless, the ship s agents, American 23 [1978] AC 728 (HL). 24 Regulation 19(f) of SOLAS (supra, note 19) provides: When exercising control under this regulation all possible efforts shall be made to avoid a ship being unduly detained or delayed. If a ship is thereby unduly detained or delayed it shall be entitled to compensation for any loss or damage suffered. 25 Supra note 17 at par Note: The decision to detain made by port inspectors was characterized as an operational, rather than a policy, decision and so the standard of negligence applied by the courts in determining the breach of a duty of care could be applied. 26 Ibid., at par Ibid,. at par Ibid., at par (2003) 241 FTR 153 (Can FC: Hargrave P).

7 7 Shipping and Chartering of Houston, Texas, had advised the cargo underwriters of DSL, the plaintiff, to deal with their principals, Atlantic Maritime Inc. of Montreal, Quebec, thus holding out that company as both brokers and claims agents for Bulk Atlantic. Decision: Application dismissed. Held: (1) A claims agent, unlike a broker, is empowered to deal with any claim arising out of a contract. Inviting the plaintiff's cargo underwriter to deal with the charterer s Canadian-based claims agent was therefore an act or contact sufficient to tie the matter to Canada and give in personam jurisdiction to the Federal Court. (2) In any event, there was no express or implied qualification on the Federal Court s in personam jurisdiction based on the place where the cause of action arose, 30 as long as the claim (such as this cargo claim) fell within one of the heads of the Court's jurisdiction specified in s. 22 of the Federal Courts Act. 31 Foresight Shipping Co. v. Union of India 32 Business associations - foreign arbitral award arrest of foreign ship in Canada in execution of award distinct existence of corporations from related corporations alter ego - lifting the corporate veil This was a motion by a non-party corporation, Shipping Corporation of India (SCI), for leave to intervene and for relief from seizure of its ship by Foresight Shipping Co. (Foresight). In 1993 Foresight obtained an arbitral award in India against two Indian corporations, Union of India and the Food Corporation of India (FCI), in a charterparty dispute. Although the award was subsequently registered in the High Court of Delhi (2000), in England (2001) and in the Federal Court of Canada (2002), Union of India and FCI refused to pay. The assets of Union of India were immune from execution under Indian law. Having waited ten years without receiving payment of the award, Foresight obtained a writ of seizure and sale in the Federal Court of Canada against the ship Lok Rajeshwara, owned by SCI, to satisfy the award. Foresight argued that as an alter ego of the government of India, SCI s assets should be made available to satisfy the debts of Union of India and that the Court should pierce the corporate veil and treat SCI s assets as though they were Union of India s for the purpose of execution. Decision: Motion to intervene granted; seizure of ship set aside. Held: (1) Under Indian law, the assets and liabilities of SCI and of Union of India were distinct and separate, the two companies having distinct juridical personalities. 33 (2) SCI was not an alter ego of the Indian government under Indian law, although the government was its controlling shareholder. (3) There was no evidence that Foresight had relied on the credit or assets of SCI or been misled as to the identity of the entity with which it had 30 United Nations v. Atlantic Seaways Corporation [1979] 2 FC 541 (Can FCA: LeDain J). 31 RSC 1985, c. F-7, s. 22(2)(e). 32 (2004) 248 FTR 161 (Can FC: Tabib P), aff d (2004) 260 FTR 161 (Can FC: Tremblay-Lamer J). 33 SCI is a juridical personality distinct from its shareholders under the Indian Companies Act, It is a publicly traded company over which the Union of India, although the majority shareholder, has no more control than any majority shareholder of a private company has. As such it was not held to be the government of India s alter ego. This case was distinguished from Med Coast Shipping Ltd. v. Cuba, 1993 AMC 2538 (Que. SC) where, under Cuban law, the defendant corporation did not have a distinct juridical personality from the state and so its assets and obligations were held to also be those of Cuba.

8 8 contracted. (4) In order to lift the corporate veil it must be shown that (a) the corporate entity is completely dominated and controlled by the owner of the corporation so that the corporation does not function independently, and (b) that by this domination the corporation is being used as a shield for fraudulent or improper conduct. 34 (5) Foresight had not shown that Union of India was using SCI for its allegedly nefarious purposes, nor was SCI involved in Union of India s refusal to pay or was being used to shield its assets outside India. Friesen v. Norwegian Cruise Lines Inc. 35 Conflict of laws - passenger ticket -choice of law choice of jurisdiction forum non conveniens The plaintiff, a ship s passenger, brought an action in British Columbia for damages from a slip and fall in Alaskan waters aboard the defendant cruise line s Bahamian-registered vessel. The passenger ticket called for Florida law and jurisdiction. The defendant cruise line, a Bermuda corporation based in Florida, applied to the BC Supreme Court to decline jurisdiction on grounds of forum non conveniens. The plaintiff and most witnesses associated with her lived in British Columbia. Most witnesses associated with the defendant lived in foreign countries. Decision: Application dismissed. Held: (1) The plaintiff established that the cost and inconvenience of presenting her case in Florida would be prohibitive, thus functionally equivalent to denying her access to a court at all, even given the availability of video-conferencing (assuming it would be acceptable in a Florida court). (2) Conversely, the cost of the trial for the defendant would be similar wherever in the world it took place. In consequence, holding the trial in Florida as opposed to British Columbia would be of little advantage to the defendant cruise line. (3) It would be easier for the defendant to prove Florida law in a British Columbia court than for the plaintiff to present evidence in a Florida court. Goodman Yachts LLC v. Penguin Boat International Ltd. 36 Maritime law - practice and procedure - security for costs In an action for the loss of a large yacht carried on deck from Singapore to Vancouver, the American owner s claim for US$1,750,000 was subrogated to a Singapore underwriting firm. Because the plaintiff resided outside Canada and had no Canadian assets, the defendant (also a Singapore corporation) obtained an interim order for security for costs in the amount of $50,000, with the right to apply for further security as 34 Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 OR (3d) 423. (Ont. Gen. Div.). In this case the plaintiff sought to hold a company s assets available to satisfy its principal s (India) debts and liabilities rather than vice-versa. The prothonotary declined to decide if this was an appropriate use of the doctrine. On the facts it was held that, as the corporation had been created in 1950 and had acquired the Lok Rajeshwara in 1980, SCI had not been created and was not being used for the purpose of shielding India from its liabilities. 35 (2003) 12 BCLR (4th) 394 (Can BCSC: Fraser J.) 36 (2004) 245 FTR 179 (Can FC: Hargrave P).

9 9 warranted by the circumstances. Presenting a draft bill of costs in the amount of $161,101.95, the defendant filed a motion for an additional $ as security for costs. Decision: Motion accepted in part. Security for costs set at $ Held: (1) Where a party does not reside in Canada, the certainty of recovery is reduced and in these situations, the strict Faulding 37 approach for the calculation of security for costs does not apply. (2) As the Federal Court had a broad geographic scope of operations and was in a sense also an international court, 38 litigants should not be forced to retain local counsel. Security for the reasonable travel costs of outside counsel was therefore proper. (3) The defendant's draft bill of costs included some items deemed unreasonably soft, thus justifying setting additional security at only Cdn. $95,000. Isen v. Simms et al. 39 Admiralty - jurisdiction Canadian maritime law - tort occurring on land - personal injuries -limitation of shipowners' liability Federal Court Act, ss. 22(2)(d) and (g) - Canada Shipping Act, ss. 577, 581 The plaintiff shipowner was fastening an engine cover to his pleasure boat with a bungee cord when the cord slipped and struck the defendant in the eye. The defendant sued for his injury. At the time of the incident, the vessel had been removed from one lake and was resting on a ramp, before being transported by its owner to another lake. The plaintiff shipowner brought this motion to determine whether he was entitled to limit his liability to $1,000,000 under s. 577 of the Canada Shipping Act. 40 Decision: Motion allowed. Held: (1) The Federal Court had jurisdiction over any claim... in connection with the operation of the ship. 41 (2) Canadian maritime law may be applied to torts in nontidal waters and even to those occurring on land, if sufficiently connected to navigation and shipping. 42 Furthermore, limitation of shipowners' liability was part of Canadian maritime law, as was the tortious liability of pleasure craft owners. 43 (3) The owner was a "shipowner" and his pleasure craft was a "ship" under the Canada Shipping Act. (4) The word "involve" in s. 577 of the Canada Shipping Act must be given a broader meaning than the word "cause", 44 so that the ship need not have been the cause of the injury in this case. It was sufficient that the incident related to the ship and that the ship was more than 37 Faulding (Canada) Inc. v. Pharmacia S.p.A. (1997), 138 FTR 73 (Can FC: McKeown J), where it was held that all but the most firm items should be disallowed in calculating security for costs. In this case for security under section 60 of the Patent Act, however, the plaintiff was a Canadian company, and there was every possibility that the company would be available at the end of the day to cover any additional award of costs. 38 Supra note 36 at par (2004) 236 DLR (4 th ) 376, 247 FTR 233 (FC: Snider J), aff d 2005 FCA 161 (Can FCA: Nadon and Sexton JJA concurring; Décary J A dissenting). 40 RSC 1985, c. S-9, s. 577 which, at the time of the incident concerned, provided that a shipowner could limit his liability to $1,000,000 in respect personal injury and death claims arising on any distinct occasion and involving a ship of less than 300 tons. 41 Federal Courts Act, RSC 1985, c. F-7, s. 22(2)(g) and (d). 42 ITO-International Terminal Operators Ltd. v. Miida Electronics Inc. [1986] 1 SCR Whitbread v. Walley. [1990] 3 SCR Supra note 39, 236 D.L.R.(4 th ) at 382.

10 10 just a background feature. 45 (5) The act of hooking the bungee cord onto the engine cover to prevent its flapping in the wind during transport of the boat from one lake to another was an act of securing the ship and its apparel and was very analogous to the mooring of a ship, 46 and so qualified the owner for limitation of $1,000,000 for a ship of less than 300 tons, under s. 577 of the Act. Island Tug & Barge Ltd. v. Communication, Energy and Paperworkers Union, Local Constitutional law - distribution of legislative authority interprovincial vs. intraprovincial undertaking - -labour dispute Constitution Act, 1867, ss. 91(29), 92(10((a) BC Labour Relations Code, ss. 136, 137(1) Canada Labour Relations Code, s. 2 The employees of an oil company began picketing the dock at the company s marine terminal. Two other companies, one of which who purchased and distributed oil from the striking company and the other of which (the appellant) was a shipping company operating tugs and barges in transporting it, applied to the British Columbia Supreme Court (the provincial superior court) for an injunction to restrain the striking workers from preventing the tugs and barges from approaching the dock. The provincial superior court refused, holding that the dispute was governed by the BC Labour Relations Code, 48 which granted exclusive jurisdiction over such applications to a provincial board. The companies appealed from the superior court s refusal to grant an injunction to restrain the activities of the striking workers. The appeal decision focused on the appeal of the shipping company, which claimed the status of a federal work, undertaking or business, making it subject to the Canada Labour Code, rather than that of BC. Decision: Appeal dismissed. Held: The appeal must fail for lack of jurisdiction. (1) The appellant shipping company was engaged in purely intraprovincial trade and as such did not qualify as a "federal work, undertaking or business" under s. 2 of the Canada Labour Code 49. Section 2(c) of that Code applied the term expressly to a line of ships connecting a province with any other province, or extending beyond the limits of a province, thus implicitly excluding those lines that operated exclusively within a province. 50 (2) Read together, sections 91(29) and 92(10)(a) and (b) of the Constitution Act, excluded intraprovincial shipping companies from federal jurisdiction. 52 The specific mention of interprovincial shipping companies in ss. 92(10)(a) and (b) placed them under federal jurisdiction and implicitly excluded intraprovincial shipping companies from the same jurisdiction. 45 Ibid. at Ibid. at (2003) 226 DLR (4 th ) 701, 12 BCLR (4 th ) 279 (BC CA: Southin JA). 48 Labour Relations Code, RSBC 1996, c Canada Labour Code. RSC 1985, c. L-2 50 Agence Maritime Inc. v. Canada (Labour Relations Board) [1969] SCR RSC 1985, Appendix II, No Supra note 47, 226 DLR (4 th ) at 711.

11 11 Lloyd s of London, Simon Philip Cooper Syndicat 500 c. Pêcheries Nicol Desbois Inc. 53 Marine insurance insurable interest - sale of a vessel presumption of ownership Quebec Civil Coe, arts. 1708, 1710 Canada Shipping Act, s. 5 Pêcheries Nicol Desbois (Desbois) insured a fishing boat with Lloyd s of London (Lloyd s). Desbois sold and delivered the boat to a third party (Cotton) without informing Lloyd s. Cotton took possession of the boat and the boat sank while under Cotton s command. Desbois claimed indemnification under the insurance contract for the full insured value of the vessel. Desbois argued that he had remained the owner of the boat, because the sale had not been recorded as required by the Canada Shipping Act, s. 5(1) 54 (as it then read) prior to the sinking and so the sale was incomplete. Lloyd s refused to indemnify him, arguing that the ownership of the vessel had changed prior to the sinking, because there had been an agreement of sale between the parties, or alternatively, because the agreement constituted a promise of sale accompanied by possession by the buyer, which was tantamount to a sale under Quebec civil law. Lloyd s was ordered to indemnify the insured in first instance. 55 This was an appeal from that decision. Decision: Appeal allowed. Held: (1) The respondent had lost his insurable interest in the vessel upon its sale to the third party. (2) Under the Québec Civil Code, 56 the agreement between Desbois and Cotton in this case constituted a sale of the vessel, 57 which was perfected by the sole consent of the parties, 58 or was at least a promise of sale accompanied by possession, and therefore equivalent to sale. 59 (3)The fact that the bill of sale for the vessel had not been recorded in accordance with the requirements of the Canada Shipping Act, s. 5(1) did not make the sale incomplete under Quebec law. 4) Notwithstanding the validity of the sale under Quebec law, the court examined whether Desbois could still be considered the owner of the boat under the Canada Shipping Act, which provided that the ownership of the vessel would be "deemed unchanged" until the bill of sale was duly recorded. Taking into account the context in which the word "deemed" was used in s. 5(1) of the statute, as 53 [2004] RRA 23 (Can Que CA: Rousseau-Houle J, Forget J and Rochette J). Leave to appeal refused by the Supreme Court of Canada on October 7, 2004, [2004] SCCA No Canada Shipping Act, RSC 1985, c. S-9, s. 5(1): The bill of sale for a recorded vessel that is sold shall be filed with the registrar at the port at which the vessel is recorded and the ownership of that vessel shall be deemed unchanged until the bill of sale is recorded. 55 Pêcheries Nicol Desbois Inc. v. Québec (Procureur général), [2002] RRA 163 (Can. Que. C.S.: ). 56 SQ 1991, c. 64, in force 1 January 1994 (hereafter abbreviated as "c.c.q."). 57 Art c.c.q. provides: "Sale is a contract by which a person, the seller, transfers ownership of property to another person, the buyer, for a price in money which the latter obligates himself to pay. A dismemberment of the right of ownership, or any other right held by the person, may also be transferred by sale." 58 Art of the Québec Civil Code (c.c.q.) provides: "A contract is formed by the sole exchange of consents between persons having capacity to contract, unless, in addition, the law requires a particular form to be respected as a necessary condition of its formation, or unless the parties require the contract to take the form of a solemn agreement." The Court held (ibid. at p. 32) that the commitments made by the buyer to register and insure the vessel in this case did not affect the transfer of ownership, although they might have allowed for the annulment of the contract. 59 Art c.c.q. provides: "The promise of sale with delivery and actual possession is equivalent to sale."

12 12 well as the purpose of the statute as a whole in order to determine if the term meant deemed conclusively or deemed until the contrary is proven, 60 the Court held that the term created merely a rebuttable legal presumption, because: a) previous jurisprudence and doctrine had held that recording of vessel ownership in the ship registry was only prima facie evidence of ownership; 61 and b) the purpose of the statute was twofold: (i) to permit administrative authorities to exercise control over shipping and (ii) to make it easier for third parties to exercise a recourse against the owner of vessels. (5) Lloyd s was held to have successfully rebutted the legal presumption of ownership created by s. 5(1), by proving that in this case ownership of the boat had passed to the third party by a valid contract of sale before the vessel was lost, so that it was not liable to the respondent under the policy, not having been informed of the sale. Magic Sportswear Corp. v. OT Africa Line Ltd. 62 Bill of lading choice of foreign law and jurisdiction clause - stay of proceedings forum non conveniens - anti-suit injunction- Marine Liability Act, s. 46(1) Federal Courts Act, s. 50 The plaintiff shipper, incorporated in the United States, shipped 170 cartons in a container from the US to the plaintiff consignee in Liberia on a ship of the defendant carrier, under a bill of lading with an exclusive English choice of law and jurisdiction clause. 63 Upon arrival in Liberia, 99 of the cartons were allegedly missing. The bill of lading was issued at Toronto and freight was payable there. The defendant carrier, although incorporated in England, had offices, a call center and an agent in Toronto. Relying on Marine Liability Act, s. 46(1) 64, the subrogated Toronto-based insurer of the plaintiff, commenced action for damages in the amount of $30,000 (Cdn) in the Federal Court of Canada on August 1, 2003 and served the defendant at their Toronto office. On September 3, 2003, the defendant commenced proceedings in the High Court of Justice in England for declaration that it was not liable for the loss. Notice of these proceedings were served on the plaintiffs who, on October 28, 2003 filed an Acknowledgement of 60 Gray v. Kerslake, (1957), [1958] SCR 3 at 9 (Can. SCC: Cartright J) where the SCC said that [t]he question of the meaning to be given to the word deemed when used in a statute has been considered in many decisions the word may mean deemed conclusively or deemed until the contrary is proven. 61 Osborn Refrigeration Sales and Services Inc. v. The Atlantean I, (1984) 7 DLR (4 th ) 395, 52 NR 10 (Can. FCA: Pratte J). Re Lady Ship Marquis, (1985) 73 NSR (2d) 38 (Can NS SC: Burchell J) 62 [2003] FC 1513 (Can. FC: Milczynski P) affirmed by Magic Sportswear Corp. v OT Africa Line Ltd., 2005 AMC 275 (Can. FC: O Keefe J). A further appeal has been lodged with the Federal Court of Appeal, but the appeal has not yet been scheduled for a hearing. 63 Clause 25(1) of the bill of lading stated that Any claim or dispute whatsoever arising in connection with the carriage under the Bill of Lading shall exclusively be governed by English law and determined by the High Court of London." 64 Marine Liability Act, SC 2001, c. 6, s. 46(1) provides: "If a contract for the carriage of goods by water to which the Hamburg Rules do not apply provides for the adjudication or arbitration of claims arising under the contract in a place other than Canada, a claimant may institute judicial or arbitral proceedings in a court or arbitral tribunal in Canada that would be competent to determine the claim if the contract had referred the claim to Canada, where (a) the actual port of loading or discharge, or the intended port of loading or discharge under the contract, is in Canada; (b) the person against whom the claim is made resides or has a place of business, branch or agency in Canada; or (c) the contract was made in Canada."

13 13 Service, indicating that they would be contesting jurisdiction of the English court. On an ex parte motion to the English Court, the defendants obtained an anti-suit injunction on September 8, 2003 retraining the plaintiffs from proceeding with their action in the Federal Court of Canada. 65 On September 9, the defendants filed this motion for a stay of the Canadian proceedings. Decision: Motion dismissed. Held: (1) The requirements of the Marine Liability Act, s. 46(1)(b) and (c) were satisfied in this case, because the defendants had a place of business, branch or agency in Canada and there was no dispute that the contract of carriage was made in Canada. (2) While the Marine Liability Act, s. 46 clearly removed the binding effect of a forum selection clause in a bill of lading, 66 the Federal Court still retained jurisdiction under the Federal Courts Act, s to order a stay of proceeding in appropriate circumstances, including considering the doctrine of forum non conveniens. (3) A number of factors must be taken into account to determine whether the Court should exercise its discretion and issue a stay of proceedings under the doctrine of forum non conveniens, including: (a) the jurisdiction in which the evidence is situated; (b) the application of foreign law; (c) with what country each party has a connection; (d) whether the defendant is seeking a procedural advantage by relying on the forum selection clause; and (e) whether the plaintiff would suffer any prejudice by having to pursue its claim in another jurisdiction. (5) In this case, considering the value of the goods, the fact that the true plaintiffs were in Canada, that the defendants had business interests in Canada and that most of the material witnesses would come from Liberia or the US (which favoured neither jurisdiction), the most convenient and appropriate forum for determination of the plantiff's claim, including the interpretation and application of English law, was held to be the Federal Court of Canada. Mediterranean Shipping Co. S.A. v. BPB Westroc Inc. 68 Carriage of goods - contract of carriage - agency 65 For the most recent decision of the English High Court, see O.T. Africa Line Ltd. v. Magic Sportswear Corporation [2005] 1 Lloyd s L. Rep. 252 (QB Comm: Langley J), where the anti-suit injunction was extended to the insurers of Magic Sportswear and the Court denied a stay of proceedings to the Torontobased insurance company, on the grounds that there was no exceptional reason to do so when the parties had chosen England as the exclusive jurisdiction in the contract and there was nothing to justify a departure from the exclusive jurisdiction clause. As to the Marine Liability Act, s. 46, Langley J held there was insufficient logic in treating it as giving rise to some exceptional circumstance. According to the highest level of English law, anti-suit injunctions were to be granted essentially to ensure that parties abided by their agreements. This decision was affirmed. See [2005] EWCA 710 (C.A.). 66 Z.I. Pompey Industrie v. ECU-Line N.V., [2003] 1 SCR 450, 224 DLR (4 th ) 577, 2003 AMC 1280 (Can. SC) at paragraph 37, where the Supreme Court held that section 46(1) of the Marine Liability Act, which entered into force on August 8, 2001, has the effect of removing from the Federal Court its discretion under s. 50 of the Federal Court Act to stay proceedings because of a forum selection clause where the requirements of s. 46(1)(a), (b) or (c) are met." 67 The Federal Courts Act, RSC 1985, c. F-7, s. 50, as amended, provides: "The Federal Court of Appeal or the Federal Court may, in its discretion, stay proceedings in any cause or matter (a) on the ground that the claim is being proceeded with in another court or jurisdiction; or (b) where for any other reason it is in the interest of justice that the proceedings be stayed." 68 (2003) 238 FTR 135 (Can FC: Larenière P).

14 14 BPB Westroc (Westroc) employed J.T. Knight (Knight), a freight-forwarding company, and shipped merchandise on a vessel of the Mediterranean Shipping Co. (MSC) through Knight. MSC s bills of lading were addressed to Westroc as shipper, but they were forwarded to Knight. Westroc remitted payment to Knight, which was supposed to pay Westroc s invoices with MSC. MSC invoiced Westroc for a total of $65, for three voyages. Westroc remitted the sum to Knight, but Knight failed to make payment to MSC. MSC sent a demand letter to Knight. Knight requested that MSC not contact Westroc directly so as not to alienate them. MSC then took suit against Westroc for shipping charges. Westroc claimed it was no longer liable as it had already paid the freight charges to Knight. Decision: Action allowed. Held: (1) Knight was acting as a typical freight forwarding agent for Westroc towards MSC. There was, however, no trade custom whereby Westroc and MSC expected that payment would be valid and effective if made to Knight, nor had MSC authorized Knight to receive payment on its behalf or held out Knight as being so authorized. (2) Under the general principles of agency, non-payment by an agent was deemed non-payment by the principal, so that a shipper remained liable to the carrier unless it could prove the carrier had released it from liability. 69 (3) Westroc had appointed Knight as its agent and so it ought to have been aware or should have informed itself as to Knight s reputation and solvency. Having failed to take the proper precautions to protect itself, Westroc assumed the risk of paying freight twice. Navigation Madeleine Inc. v. Canada (Attorney General) 70 Compulsory pilotage Laurentian Pilotage Regulations Interpretation Act, s. 12 meaning of ferry Navigation Madeleine owned and operated the Canadian registered vessel Vacancier, which ran a regularly scheduled passenger and vehicle service between Montreal and the Magdalen Islands. The Laurentian Pilotage Authority (LPA) Regulations 71 required ships above a certain tonnage and length to have two LPA licensed pilots or equivalently certified officers aboard when navigating the St. Lawrence River between the St. Lambert Lock in Montreal and Les Escoumins on the North Shore of the Rivr. Passenger ferries, however, were exempted from such compulsory pilotage under the Regulations. 72 Navigation Madeleine sought a declaratory judgement that the Vacancier was a ferry and therefore not subject to compulsory pilotage under the LPA Regulations. LPA contested the motion. Decision: Motion dismissed. Held: (1) In accordance with the Interpretation Act, the LPA Regulations should be given such fair, large and liberal construction and interpretation" as would best ensure 69 C.P. Ships v. Les Industries Lyon Corduroys Ltee, [1983] 1 FC 736 (Can FC: Addy J). 70 [2004] FC 54, 245 FTR 88 (Can FC: Blais J), aff d [2005] FCA 10 (Can FCA: Desjardins, Nadon, Pelletier JJ A); motion for leave to appeal to Supreme Court of Canada filed 15 March See [2005] SCCA No Laurentian Pilotage Authority Regulations, C.R.C. 1978, c. 1268, Schedule I, s.4(1)(a), adopted under the Pilotage Act, RSC 1985, c. P Ibid. s.4(3)(b).

15 15 the attainment of their objects. 73 (2) The purpose of the Regulations was to ensure the safety of ships and passengers in areas in which navigation was difficult. (3) Irrespective of the meaning of the word ferry, a vessel of the tonnage, dimensions and number of passengers of the boat in question must comply with the LPA Regulations when using the same navigation channel as other large vessels subject to compulsory pilotage (as the Vacancier did). 74 (4) The applicant did not persuade the Court that it was impossible for the employees of the vessel s owner to obtain a pilot s licences or certificates of pilotage under the LPA s certification program due to the absence of a navigation simulator in Quebec. North Coast Sea Products Ltd. v. ING Insurance Co. of Canada. 75 Marine insurance hull and machinery policy on oyster trays - loss of trays claims for recovery expenses sue and labour clause This was an appeal from a decision ordering the insurer to reimburse the insured for sue and labour costs under a hull and machinery policy of marine insurance. The insured, a shell fish farm operator, grew oysters on trays. The trays were insured for their full market value, but the oysters were uninsured. The trays were stacked and suspended from ropes. Vandals cut a number of ropes, sending trays of oysters to the bottom, at a depth of one hundred feet. The contract of insurance contained a sue and labour clause requiring the insured to take reasonable measures to minimize any losses that might be recoverable under the policy. The insured hired a diving company and, under the supervision of a marine surveyor appointed by the insurer, managed to recover all of the trays, including the oysters, thereby incurring $56, in expenses. When the insured claimed that amount under the policy, the insurer claimed that it was only liable for that proportion of the sue and labour expenses that the value of the insured trays ($116,000) bore to the total value of all the property recovered (226,000) (i.e. an amount of some $28,000). Decision: Appeal dismissed Held: (1) Ambiguities in insurance contracts were to be resolved in favour of the insured and against the insurer. 76 (2) Subsection 79(2) of the Canadian Marine Insurance Act 77 did not apply where the recovery of uninsured property (the oysters) was a mere effect of sue and labour expenses incurred for the purpose of minimizing loss by a peril 73 Interpretation Act, RSC 1985, c. I-21, s The Vacancier was distinguished from the Queen of the North, a ferry that operated without pilots on a route of several hundred miles in British Columbia. The Pacific Pilotage Regulations (CRC 1978, c.1270, s. 9(3)(b)) also provided ferries with an exemption from compulsory pilotage, but the Queen of the North did not operate in a compulsory pilotage area and so the exemption did not apply, regardless of whether or not that vessel was considered a ferry under the Regulations. 75 (2004) 7 CCLI (4 th ) 3 (BC CA: Lambert JA). 76 The sue and labour clause concerned contained a rateability provision but the judge ruled it to be restricted to a specific number of circumstances set out in subsequent paragraphs of the clause that it did not apply in the circumstances of the case at bar. 77 SC 1993, c.22, s. 79(2). The subsection provides in pertinent part that expenses incurred for the purpose of averting or diminishing a loss by a peril not insured against are not recoverable under a sue and labour clause.

16 16 insured against (vandalism). 78 (3) Subsection 79(2) of the Marine Insurance Act would not curtail the insured party s full recovery of any sue and labour expenses incurred, where the loss of uninsured property arose from a peril insured against, such as vandalism in this case. 79 North King Lodge Ltd. v. Gowlland Towing Ltd. 80 Agreement for hire of vessel to provide accommodations - charterparty bailment shifting and loss of vessel - implied terms of agreement - duty and standard of care of owner and hirer contributory negligence - apportionment of liability marine insurance - waiver of subrogation rights This action was a subrogated claim for damages by the insurer of the vessel owner against the vessel's hirer and a towing company following the sinking of the vessel. T&D Carter was a logging contractor which hired the Sea Lion VI from North King as overflow accommodation for is workers. The vessel was moored with an anchor off its bow, two stern lines to the shore and three lines to a booming ground off its port side. Neither party asked Ashlaur Trading, the owner of the booming ground, for permission to secure the vessel to it. When the logging was complete, Gowlland Towing, on Ashlaur Trading s instructions, removed the booming ground and in the process it untied the Sea Lion VI s port lines. On December 9, 2000, North King was advised to pick up its vessel as logging was completed. Two days later, T&D Carter was informed in the morning that the vessel had shifted position, but did not inform North King until that afternoon. Around 10 pm that evening, the vessel was found to have grounded and flooded. The plaintiff claimed that T&D Carter breached its responsibilities being in possession, care and control of the vessel, and also alleged negligence against Gowlland Towing for causing the vessel s loss by altering its moorings. T&D Carter claimed it was entitled to rely on the waiver of subrogation benefit contained in the vessel owner's insurance policy. Decision: Action allowed in part against the hirer but dismissed against the tower; apportionment of damages: 80% to vessel owner and 20% to hirer. Held: (1) The agreement concerned in this case did not fit into any of the traditional forms of charterparty contract, but regardless of whether this contract could be characterized as a charterparty, it was a form of bailment because the vessel was in the possession of T&D Carter, which had the right to occupy the vessel and to moor it where it wished. (2) It was an implied term of the agreement that North King, as owner of the vessel, had the primary responsibility to ensure that it remained moored safely, even while in the hirer's possession. (3) The hirer had an implied obligation under the agreement to use reasonable care not to damage the vessel in its use. (4) The owner was not adequately mindful of the risks of mooring the vessel in shallow water close to shore and knew of the flow of currents in the area; it failed to ask permission of Ashlaur to secure it to the booming ground and ought to have been aware that there was a 78 Supra note 75 at par Ibid. at par. 12. Nota bene: The Canadian Act differs from the English Marine Insurance Act, 1906 (U.K.), 6 Edw. 7, c. 41, s. 78(3), which does not permit recovery of sue and labour expenses incurred to minimize any loss not covered by the policy. 80 (2004) 27 B.C.L.R. (4 th ) 284 (BC SC: Sigurdson J).

17 17 probability that the booming ground would be removed with little, if any, notice when the logging was completed. (5) Moreover, North King undertook to have a watchman on the vessel, but failed to ensure that he remained in place, although that obligation had never been waived or varied. (6) Once North King learned that the moorage had changed, it did not take the appropriate steps to assure the vessel s safety and was therefore contributorily negligent in the loss of the vessel, to the extent of 80%. (7) There was an implied term that T&D Carter, as hirer of the vessel, would take reasonable steps to notify the owner if the vessel was in any possible danger. This obligation was breached by its failure to promptly notify North King that the vessel's position had shifted and that the vessel might be at risk, making it 20% liable for the vessel's loss. (8) As there was no express or implied consent by Ashlaur to tie the Sea Lion IV to the log boom, the vessel s lines were a trespassing chattel on the booming ground when Gowlland arrived to remove the boom. Given that North King was trespassing, Gowlland did not breach the duty of care owed to a known trespasser. It clearly did not intentionally harm the plaintiff; act recklessly, or without common humanity, and thus, there was no contributory negligence on its part. 81 (9) An exclusion clause that derogates from the rule established in London Drugs 82 should be read narrowly. Nevertheless, some meaning must be given to the wording of the contract and so the exclusion clause must prevail. 83 There was no evidence that North King had consented to T&D Carter having the benefit of the insurance insofar as the waiver of subrogation clause was concerned. Rough Bay Enterprises Ltd. v. Budden 84 Towage of barge capsizing claims of breach of contract of sale and negligence causation seaworthiness marine insurance - covenant to insure barge misrepresentation as to insurance by barge owner's agent - effect on subrogated claim of barge owner's insurer against tug and its owner The plaintiff purchaser of a wooden barge sued the defendant barge vendor, as well as a tower and its tug, for negligence and breach of contract, following the loss of the barge's bow and stern sections during towage in bad weather. After purchasing the barge, the plaintiff made a second contract with the defendant vendor for the delivery of the barge by tug. The defendant barge vendor agreed with the tower that towage should commence, 81 Supra note 80 at The Court noted that Gowlland did take steps to see that the moorage appeared safe after the lines were disconnected and also took some steps to notify the persons apparently in charge. 82 London Drugs Ltd. v. Kuehne & Nagel International Ltd. [1992] 3 S.C.R That decision established that a waiver of subrogation clause of an insurance contract could be extended to benefit a third party if the contracting parties intended to extend the benefit to the third party seeking to rely on it and if the activities performed by the third party were the very ones contemplated by the provision concerned. 83 The insurance policy in this case contained a clause providing that the assured and insurer did not intend the policy to automatically cover any party named in it other than the specifically named assured(s) and further stating that the coverage and benefits of certain clauses (including the waiver of subrogation clause) could only be extended to parties other than the specifically named assured(s) at their option, and that no one other than the specifically named assured(s) could claim any rights in respect of the policy without the written consent of the specifically named assured(s). 84 (2003) 22 BCLR (4 th ) 326 (BC SC: Davies J).

18 18 despite the possibility of dangerous weather at sea. The barge capsized in transit during a storm, resulting in the loss of its bow and stern sections. Held: Action dismissed. Decision: (1) The defendants had not been negligent in commencing the towage, notwithstanding the published gale force wind warnings for the area concerned when the towage began. (2) The plaintiff had failed to prove that the barge capsized because of either the defendants' negligence or the wind and sea conditions encountered during the towage. (3) The evidence established that the barge was unseaworthy owing to considerable rot in its bow and stern planking. Royal Bank of Scotland plc. v. Golden Trinity (The) et al. 85 Maritime law Maritime liens General principles - Priorities Lien for necessaries Ship mortgagees and suppliers of necessaries applied for a determination of priorities (vis-à-vis two ship mortgagees) regarding the proceeds of the court-approved sales of four ships. The vessels at issue were each owned by separate companies but were all managed by Pronoia Ship Agents & Brokers Inc. (Pronoia). The vessels were arrested by the mortgagees, the plaintiffs, The Royal Bank of Scotland (RBS) and Nedship Bank N.V., and sold following the owners default on the mortgages. Certain suppliers of necessaries were unpaid at the time of the arrest. Tramp Oil & Marine Limited ( Tramp ) had provided bunkers to the four arrested vessels and to other ships it contended were sister ships. Tramp claimed a maritime lien against the one arrested vessel, a contractual lien against another defendant vessel and maritime liens, under the sister ship arrest procedure, for bunkers provided to other Pronoia ships. Calogeras Marine Inc. (Calogeras) supplied necessaries to sister ships it alleged had the same beneficial owner as the arrested vessels, and its claims were statutory rights in rem. Aduanera Colombia S.I.A. Ltd. Inc. (Aduanera) supplied goods to the one of the arrested vessel in Colombia and claimed maritime liens. United Maritime Supplies Inc. (United) supplied necessaries to one vessel at Vancouver and sought a re-ordering of priorities. Decision: The conventional ordering of priorities was upheld, with the holder of mortgage security taking priority over suppliers of necessaries. 86 Held: (1) Despite an English choice of law clause in the bunker supply invoice, it was held that American law was the most closely connected law 87 and governed Tramp s maritime lien claim against one of the ships concerned where the bunkers were supplied to the vessel in the US by an American sub-supplier of Tramp. (2) There was a presumption under American law that the supplier of necessaries to a vessel acquires a maritime lien and to attack this presumption it must be established that the supplier intended to forego the lien. 88 Tramp was subrogated to the US maritime lien of the third 85 (2004) 254 FTR 1 (Can FC: Hargrave P). 86 A summary of priorities is set out in Governor & Co. of the Bank of Scotland v. The Nel [2001] 1 F.C. 408 (Can FC). 87 Imperial Oil Ltd. v. Petromar Inc. (2001) 283 N.R. 182 (Fed CA). 88 First National Bank of Jefferson Parish v. M/V Lightning Power 851 F.2d 1543, 1989 AMC 170 (U.S. C.A. 5 th Cir., 1988)

19 19 party US sub-supplier of bunkers whose invoice Tramp paid. (3) With respect to Tramp's claim for bunkers supplied to a second ship, in Korea, under a contract providing for a lien, the Court held that a contractual lien clause may recognize or endorse a maritime lien, but cannot be its legal source, because maritime liens arise by law alone; 89 thus, Tramp had no claim to a maritime lien purely under the contract. (4) With respect to Tramp's lien claims against "sisters ships", the Court held that to establish sister ship status in Canada, a known and fixed entity must be shown to be the common owner of the ships concerned. Common management, identical boards and common insurance policies are in themselves inconclusive in establishing the beneficial ownership of sister ships under the Federal Courts Act. 90 The onus was on the plaintiff to demonstrate the beneficial ownership link, which included establishing that there was not merely a common beneficial owner, but that the beneficial owner was the same throughout. This burden had not been satisfied. Here the defendants established only the likelihood that they had the same beneficial owner, but not that he was the beneficial owner. Thus, Tramp s maritime lien claims for supplying bunkers to alleged sister ships and Calogeras claims were dismissed for a failure to establish that the vessels were sister ships. (5) The established order of priorities could only be departed from in very special circumstances to prevent an obvious injustice. 91 The re-ordering of priorities was not warranted in this case, because: (a) the defendants were sophisticated international suppliers well able to protect themselves, (b) RBS acted in a commercially reasonable manner, pursuing what it saw to be the best course of action for the mutual benefit of itself and Pronoia during an economic downturn in the industry, and had no reason to suspect Pronoia would not weather the downturn, (c) RBS did not wrongfully delay in arresting the vessels. 92 (6) Colombian law governed Aduanera s claim for maritime liens. Under the Colombian Commercial Code, maritime liens are granted for contracts signed by the master as representative of the owner. After considering Colombian law, as proved, only two of the maritime lien claims were allowable: (a) for pilotage and tug services, signed for by the master; and (b) the provision of lights and buoys, being acts of the shipping agent on behalf of the master. (7) The claim of United, a Canadian necessariesman, was dismissed, because it was purely a statutory right in rem and no valid grounds for altering its normal ranking had been shown. Sea-Link Marine Services Ltd. V. Doman Forest Products Ltd. 93 Carriage of goods by barge - seaworthiness - loading - defective stowage - duty of carrier - ;liability of cargo owners contributory negligence apportionment of damages Sea-Link sued for damages to its barge while shipping lumber for Doman in British Columbia. The barge had been converted from a log barge into a general cargo barge by 89 Supra, note 87 at 193; Textainer Equipment Management B.V. v. Baltic Shipping Co. (1994) 84 FTR 108, 133 (Can FC). 90 Federal Courts Act, R.S.C. 1985, c. F-7. s. 43(8); Ssangyong Australia Pty Ltd. v. The Looiersgracht [1994] 2 Lloyd s Rep. 411 (Can FC). 91 Scott Steel Ltd. v. The Alarissa (1997), 125 FTR 284 (Fed. C.A.) at 288.; Fraser Shipyard & Industrial Centre Ltd. v. Expedient Maritime Co. (The Atlantis Two) (1999), 170 FTR 1 (Can FC). 92 The Atlantis Two at (2003) 235 FTR 173 (Can FTD: Heneghan J).

20 20 the addition of asphalt and sidewalls. No stability testing had been done after the conversion. Under the contract of carriage, Doman was responsible for loading the lumber. Prior to the voyage in question Doman had loaded the lumber, incorporating certain modifications requested by the Sea-Link s captain, who overlooked the loading and lashing, giving occasional instructions to that company's employees. The barge left port when the possibility of gale force winds was forecast. During the voyage the load shifted, and some lumber was washed off the deck, damaging the barge. Sea-Link argued that the load had been improperly stowed by Doman and that the captain s intervention did not relieve it of its responsibility for loading. Doman contended that Sea-Link had failed to provide a seaworthy vessel and that the damage was due to Sea-Link s negligence in failing to seek shelter during the storm. Decision: Action allowed in part. Apportionment of liability: 60% to Doman; 40% to Sea-Link Held: (1) The general responsibility of the carrier to stow goods properly, in the interests of seaworthiness and to avoid damage to the goods, may be transferred to the shipper by express provision in the contract or implied in light of the surrounding circumstances. 94 (2) The cargo was improperly stowed, and the stowing was Doman s responsibility. The barge captain's oversight of loading and occasional instructions did not shift this legal responsibility. (3) The improper stowage was the primary cause of the damage and so Doman was liable for 60% of the damages. (4) With respect to seaworthiness (which includes cargoworthiness 95 ), carriers are liable for unseaworthiness only if it is proven to have been real, effective or actual cause of the loss. 96 A ship may be rendered unseaworthy by the incompetence and insufficiency of the crew if the evidence demonstrates their "disabling want of knowledge or skill" in relation to the voyage. 97 The master s lack of knowledge as to the quantity of cargo that could be loaded before rendering the ship unstable may only be taken as proof of unseaworthiness if it was an actual cause of the damage, which it was not. 98 (5) Sea-Link nevertheless failed to do other things to avoid the loss and was therefore liable for 40% of the damage, but not on the basis that it breached its "overriding obligation" 99 to provide a unseaworthy vessel. (6) The apportionment of liability between the shipper and carrier was possible because the old contributory negligence bar of the common law had been replaced in Canadian maritime law by proportionate fault, in the interest of fairness and justice. 100 TJ Inspection Services v. Halifax Shipyards Court Line Limited v. Canadian Transport Company Ltd. (1940), 67 Lloyd s L.R. 161 (H.L.) 95 Canadian Pacific Forest Products Ltd. Tahsis Pacific Region v. The Beltimber [1999] 4 FC 320, (Fed CA), leave to appeal to Supreme Court of Canada refused, May 25, 2000, [1999] SCCA No Supra note 93 at par citing Maxine Footwear Co. Ltd. v. Canadian Government Merchant Marine Ltd., [1959] 2 Lloyd s L.R (P.C.) 97 Standard Oil Company of New York v. Clan Line Steamers Ltd. (1923), 17 Lloyd s L.R. 120, 125 (H.L.) 98 Supra note 93 at par Maxine Footwear Co. Ltd. [1959] 2 Lloyd's Rep. 105, 113 (PC); The Eurasian Dream [2002] 1 Lloyd's 719, Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd. [1997] 2 SCR (2004) 245 D.L.R. (4 th ) 171; 226 N.S.R. (2d) 286 (NS SC: MacDonald ACJ).



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