J.D. Irving, Limited v. Siemens Canada Limited

J.D. Irving, Limited v. Siemens Canada Limited
Court (s) Database
Federal Court Decisions
Date
2016-01-22
Neutral citation
2016 FC 69
File numbers
T-520-10
Decision Content
Date: 20160122
Docket: T-520-10
Citation: 2016 FC 69
Ottawa, Ontario, January 22, 2016
PRESENT: The Honourable Madam Justice Strickland
BETWEEN:
J.D. IRVING, LIMITED
Plaintiff
and
SIEMENS CANADA LIMITED, MARITIME MARINE CONSULTANTS (2003) INC., SUPERPORT MARINE SERVICES LTD., NEW BRUNSWICK POWER NUCLEAR CORPORATION, BMT MARINE AND OFFSHORE SURVEYS LTD., AND DANIEL MACPHERSON carrying on business as MACPHERSON MARINE GROUP
Defendants
I. Overview and Procedural Background. 2
II. Legislative Provisions. 6
III. Matters in Dispute and Summary of the Parties’ Submissions. 13
IV. Purpose of the Limitation Convention. 16
V. Preliminary Issue: Admissibility of Harquail Notes. 24
VI. Facts and Evidence. 30
A. Evidence of witnesses. 34
(1) Selection and suitability of the “SPM 125”. 35
(2) Events leading up to the day of the loss. 40
(a) MMC’s ballast plan error 42
(b) MMC’s misunderstanding of the transporter operating features. 44
(3) The loadout and the loss. 47
(a) Change in ballast plan. 47
(b) Marking the centreline and deviations of the load. 51
(c) Barge list and cargo tilt 60
B. Expert evidence. 67
(1) Summary of expert opinions. 68
(2) Findings on barge stability. 76
(a) Change in ballast plan / Free surface effect 84
(b) Swept path. 87
(c) Barge list and transporter stability. 89
VII. Cause of Loss. 92
VIII...................................................................................................... Application of Facts to Law.. 105
A. Recklessness and knowledge. 109
B. Inferences. 110
(1) Inference of knowledge that barge was too small 111
(2) Inference of recklessness and knowledge based on evidentiary gap. 117
IX. Conclusion. 130
JUDGMENT AND REASONS
[1] This is an action commenced by J.D. Irving Limited (“JDI”) seeking a declaration that it is entitled to limit its liability in relation to cargo that fell into the sea while being loaded on the deck of a barge on October 15, 2008, in Saint John, New Brunswick, including with respect to any person for whose act, neglect or default JDI is responsible, to the amount of CDN$500,000.00 plus interest to the date of the constitution of a limitation fund, pursuant to the Marine Liability Act, SC 2001, c 6 (“MLA”).
I. Overview and Procedural Background [2] On September 1, 2006 Siemens Canada Limited (“Siemens”) entered into a contract with Atomic Energy of Canada Limited concerning the refurbishing and upgrading of the Point Lepreau Nuclear Generating Station located at Point Lepreau, New Brunswick (“Point Lepreau”). The contract was subsequently assigned to the New Brunswick Power Nuclear Corporation (“NB PNC”).
[3] Pursuant to that contract, Siemens was to provide NB PNC with three new low pressure modules (“LP Modules”) and to refurbish and upgrade a generator rotor. Each LP Module is comprised of an outer low pressure cylinder casing (“LP Casing”) and an internal low pressure turbine rotor (“LP Rotor” or “rotor”). Each LP Rotor weighs approximately 115 tons, is approximately 4.1 metres in diameter and 7.8 metres in length.
[4] On January 11, 2007 Siemens issued a purchase order to Irving Equipment, a division of JDI, pertaining to the transport of the LP Modules and generator rotor (“Siemens PO”). For the purposes of these reasons, any reference to JDI includes Irving Equipment. The Siemens PO described three main services to be provided by JDI: to transport the generator rotor from Point Lepreau to alongside a ship located at the Port of Saint John for further transport by sea for refurbishment; to transport the refurbished generator rotor from alongside a ship at the Port of Saint John back to Point Lepreau; and, to transport the new LP Rotors from alongside a ship at the Port of Saint John to Point Lepreau, by sea, and to transport the LP Casings by road. The Siemens PO also set out other services connected with the transport, including the provision by JDI of all necessary equipment, personnel, tugs and barges, and attached Siemens’ standard terms and conditions.
[5] To effect the transport of the LP Rotors, JDI entered into a BIMCO Standard Barge Bareboat Charter Party on October 15, 2008 with Superport Marine Services Ltd (“Superport”), the owner of the barge “SPM 125” (“SPM 125” or the “barge”). JDI also chartered the tug “Mary Steele” from Superport to assist with the move.
[6] JDI retained Maritime Marine Consultants (2003) Inc. (“MMC”) to provide naval architectural and consulting services by way of a Purchase Order dated August 13, 2008 (“Irving Equipment PO”). Mr. Don Bremner (“Bremner”) is the principal and owner of MMC.
[7] BMT Marine and Offshore Surveys Limited (“BMT”) was retained by Siemens and/or its insurer, AXA Corporate Solutions (“AXA”), to provide marine surveying services for the move of the LP Rotors. The attending surveyor was Mr. Douglas Hamilton (“Hamilton”).
[8] On October 15, 2008 each of the LP Rotors were placed on a self-propelled multi-wheeled transporter (“transporter”) owned by Irving Equipment. This allowed them to be driven, or “rolled”, on and off the “SPM 125”. While in the process of loading, the second transporter (“T2”) to be driven on to the “SPM 125”, tipped to starboard, fell over and off the barge into Saint John harbour. The LP Rotor which had been placed on the first transporter (“T1”) immediately followed, T1 itself remained on its side on the port side of the “SPM 125” (“incident” or “loss”).
[9] Unsurprisingly, this prompted a flurry of litigation. The history of that litigation was set out by Justice Heneghan in JD Irving, Limited v Siemens Canada Limited, 2011 FC 791 [JDI FC]. In essence, Siemens commenced an action in the Ontario Superior Court of Justice against JDI, BMT, MMC and Superport claiming breach of contract, negligent misrepresentation, negligence and/or gross negligence, failure to warn and damages in the amount of $45,000,000.00. Siemens also claimed joint and several indemnification from JDI, MMC, BMT and Superport in respect of all claims made against Siemens by NB PNC. Siemens subsequently filed a second action in the Ontario Superior Court of Justice pertaining to the incident claiming $45,000,000.00 against twelve individuals, including Bremner, and against Atlantic Towing Limited, a division of JDI.
[10] On April 7, 2010 JDI filed this limitation action pursuant to ss 29(6), 29.1 and 32(5) of the MLA seeking to limit its liability to $500,000.00 as against all claims related to the incident. MMC filed a Statement of Claim in this Court on April 30, 2010 also seeking to limit its liability pursuant to the MLA in relation to the loss, naming Siemens, Superport, NB PNC and BMT as defendants (T-666-10). And, by Notice of Third Party Claim filed on July 28, 2010, BMT claimed contribution and indemnity in relation to the incident against AXA, Siemens’ cargo insurer.
[11] On June 29, 2011, Justice Heneghan heard several motions in the two limitation actions and, pursuant to s 33(1) of the MLA, granted the motions of JDI, MMC and BMT to enjoin any other proceeding before any court or tribunal with respect to the incident. Justice Heneghan also dismissed Siemens’ motion to stay this action and T-666-10, and, ordered that a limitation fund be constituted, pursuant to s 32 of the MLA. The Federal Court of Appeal upheld Justice Heneghan’s decision (Siemens Canada Limited v JD Irving Limited, 2012 FCA 225 [JDI FCA]).
[12] Subsequently, on July 5, 2013, Justice Heneghan ordered that the limitation action proceed before the liability action. A limitation fund of $500,000.00, plus interest accrued to the date of its constitution, being $546,007.31, as prescribed by Justice Heneghan’s Order of July 18, 2013, was constituted by guarantee bond on behalf of JDI on July 29, 2013. In the result, the sole issue to be decided at this limitation trial was whether JDI, MMC and BMT may benefit from the limitation of liability pursuant to the MLA.
[13] However, on the day prior to trial, BMT advised that the principal and all indemnity proceedings both by and against BMT had been settled. BMT therefore did not participate as a party in the limitation hearing, although Hamilton was called as a witness by JDI. BMT filed a Notice of Settlement on October 6, 2015. At trial, counsel for MMC also advised that Bremner, MMC and Siemens had reached an agreement whereby Siemens would limit its enforcement of any judgment obtained against them. The specifics of the agreement were not disclosed, however, MMC still sought a declaration that it was entitled to limit its liability pursuant to the MLA.
II. Legislative Provisions [14] The relevant legislative provisions of the MLA, which incorporates into Canadian law Articles 1 to 15 of the Convention on Limitation of Liability for Maritime Claims, 1976, as amended by the Protocol of 1996 to amend the Convention on Limitation of Liability for Maritime Claims, 1976 (collectively, the “Limitation Convention”) are as follows:
PART 3 LIMITATION OF LIABILITY FOR MARITIME CLAIMS
PARTIE 3 LIMITATION DE RESPONSABILITÉ EN MATIÈRE DE CRÉANCES MARITIMES
Interpretation
Définitions et dispositions interprétatives
24. The definitions in this section apply in this Part.
24. Les définitions qui suivent s’appliquent à la présente partie.
“Convention”
« Convention »
“Convention” means the Convention on Limitation of Liability for Maritime Claims, 1976, concluded at London on November 19, 1976, as amended by the Protocol, Articles 1 to 15 of which Convention are set out in Part 1 of Schedule 1 and Article 18 of which is set out in Part 2 of that Schedule.
« Convention » La Convention de 1976 sur la limitation de la responsabilité en matière de créances maritimes conclue à Londres le 19 novembre 1976 — dans sa version modifiée par le Protocole — dont les articles 1 à 15 figurent à la partie 1 de l’annexe 1 et l’article 18 figure à la partie 2 de cette annexe.
“maritime claim”
« créance maritime »
“maritime claim” means a claim described in Article 2 of the Convention for which a person referred to in Article 1 of the Convention is entitled to limitation of liability.
« créance maritime » Créance maritime visée à l’article 2 de la Convention contre toute personne visée à l’article 1 de la Convention.
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“Protocol”
« Protocole »
“Protocol” means the Protocol of 1996 to amend the Convention on Limitation of Liability for Maritime Claims, 1976, concluded at London on May 2, 1996, Articles 8 and 9 of which are set out in Part 2 of Schedule 1.
« Protocole » Le Protocole de 1996 modifiant la Convention de 1976 sur la limitation de la responsabilité en matière de créances maritimes conclu à Londres le 2 mai 1996, dont les articles 8 et 9 figurent à la partie 2 de l’annexe 1.
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25. (1) For the purposes of this Part and Articles 1 to 15 of the Convention,
25. (1) Pour l’application de la présente partie et des articles 1 à 15 de la Convention :
(a) “ship” means any vessel or craft designed, used or capable of being used solely or partly for navigation, without regard to method or lack of propulsion, and includes
a) « navire » s’entend d’un bâtiment ou d’une embarcation conçus, utilisés ou utilisables, exclusivement ou non, pour la navigation, indépendamment de leur mode de propulsion ou de l’absence de propulsion, à l’exclusion des aéroglisseurs et des plates-formes flottantes destinées à l’exploration ou à l’exploitation des ressources naturelles du fond ou du sous-sol marin; y sont assimilés les navires en construction à partir du moment où ils peuvent flotter, les navires échoués ou coulés ainsi que les épaves et toute partie d’un navire qui s’est brisé;
(b) the definition “shipowner” in paragraph 2 of Article 1 of the Convention shall be read without reference to the word “seagoing” and as including any person who has an interest in or possession of a ship from and including its launching; and
b) la définition de « propriétaire de navire », au paragraphe 2 de l’article premier de la Convention, vise notamment la personne ayant un intérêt dans un navire ou la possession d’un navire, à compter de son lancement, et s’interprète sans égard au terme « de mer »;
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(2) In the event of any inconsistency between sections 28 to 34 of this Act and Articles 1 to 15 of the Convention, those sections prevail to the extent of the inconsistency.
(2) Les articles 28 à 34 de la présente loi l’emportent sur les dispositions incompatibles des articles 1 à 15 de la Convention.
APPLICATION
CHAMP D’APPLICATION
26. (1) Subject to the other provisions of this Part, Articles 1 to 15 and 18 of the Convention and Articles 8 and 9 of the Protocol have the force of law in Canada.
26. (1) Sous réserve des autres dispositions de la présente partie, les articles 1 à 15 et 18 de la Convention et les articles 8 et 9 du Protocole ont force de loi au Canada.
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27. For purposes of the application of the Convention, Canada is a State Party to the Convention.
27. Pour l’application de la Convention, le Canada est un État partie à la Convention.
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29. The maximum liability for maritime claims that arise on any distinct occasion involving a ship of less than 300 gross tonnage, other than claims referred to in section 28, is
29. La limite de responsabilité pour les créances maritimes — autres que celles mentionnées à l’article 28 — nées d’un même événement impliquant un navire d’une jauge brute inférieure à 300 est fixée à :
(a) $1,000,000 in respect of claims for loss of life or personal injury; and
a) 1 000 000 $ pour les créances pour décès ou blessures corporelles;
(b) $500,000 in respect of any other claims.
b) 500 000 $ pour les autres créances.
SCHEDULE 1 (Section 24 and subsections 26(2) and 31(1))
ANNEXE 1 (article 24 et paragraphes 26(2) et 31(1))
PART 1
PARTIE 1
Text of Articles 1 to 15 of the Convention on Limitation of Liability for Maritime Claims, 1976, as amended by the Protocol of 1996 to amend the Convention on Limitation of Liability for Maritime Claims, 1976
Texte des articles 1 à 15 de la Convention de 1976 sur la limitation de la responsabilité en matière de créances maritimes telle que modifiée par le Protocole de 1996 modifiant la Convention de 1976 sur la limitation de la responsabilité en matière de créances maritimes
CHAPTER I. THE RIGHT OF LIMITATION
CHAPITRE PREMIER — LE DROIT À LIMITATION
ARTICLE 1
ARTICLE 1
PERSONS ENTITLED TO LIMIT LIABILITY
PERSONNES EN DROIT DE LIMITER LEUR RESPONSABILITÉ
1. Shipowners and salvors, as hereinafter defined, may limit their liability in accordance with the rules of this Convention for claims set out in Article 2.
1. Les propriétaires de navires et les assistants, tels que définis ci-après, peuvent limiter leur responsabilité conformément aux règles de la présente Convention à l’égard des créances visées à l’article 2.
2. The term “shipowner” shall mean the owner, charterer, manager and operator of a seagoing ship.
2. L’expression « propriétaire de navire », désigne le propriétaire, l’affréteur, l’armateur et l’armateur-gérant d’un navire de mer.
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4. If any claims set out in Article 2 are made against any person for whose act, neglect or default the shipowner or salvor is responsible, such person shall be entitled to avail himself of the limitation of liability provided for in this Convention.
4. Si l’une quelconque des créances prévues à l’article 2 est formée contre toute personne dont les faits, négligences et fautes entraînent la responsabilité du propriétaire ou de l’assistant, cette personne est en droit de se prévaloir de la limitation de la responsabilité prévue dans la présente Convention.
5. In this Convention the liability of a shipowner shall include liability in an action brought against the vessel herself.
5. Dans la présente Convention, l’expression « responsabilité du propriétaire de navire » comprend la responsabilité résultant d’une action formée contre le navire lui-même.
6. An insurer of liability for claims subject to limitation in accordance with the rules of this Convention shall be entitled to the benefits of this Convention to the same extent as the assured himself.
6. L’assureur qui couvre la responsabilité à l’égard des créances soumises à limitation conformément aux règles de la présente Convention est en droit de se prévaloir de celle-ci dans la même mesure que l’assuré lui-même.
7. The act of invoking limitation of liability shall not constitute an admission of liability.
7. Le fait d’invoquer la limitation de la responsabilité n’emporte pas la reconnaissance de cette responsabilité.
ARTICLE 2
ARTICLE 2
CLAIMS SUBJECT TO LIMITATION
CRÉANCES SOUMISES À LA LIMITATION
1. Subject to Articles 3 and 4 the following claims, whatever the basis of liability may be, shall be subject to limitation of liability:
1. Sous réserves des articles 3 et 4, les créances suivantes, quel que soit le fondement de la responsabilité, sont soumises à la limitation de la responsabilité :
(a) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation), occurring on board or in direct connexion with the operation of the ship or with salvage operations, and consequential loss resulting therefrom;
a) créances pour mort, pour lésions corporelles, pour pertes et pour dommages à tous biens (y compris les dommages causés aux ouvrages d’art des ports, bassins, voies navigables et aides à la navigation) survenus à bord du navire ou en relation directe avec l’exploitation de celui-ci ou avec des opérations d’assistance ou de sauvetage, ainsi que pour tout autre préjudice en résultant;
(b) claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;
b) créances pour tout préjudice résultant d’un retard dans le transport par mer de la cargaison, des passagers ou de leurs bagages;
(c) claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connexion with the operation of the ship or salvage operations;
c) créances pour d’autres préjudices résultant de l’atteinte à tous droits de source extracontractuelle, et survenus en relation directe avec l’exploitation du navire ou avec des opérations d’assistance ou de sauvetage;
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2. Claims set out in paragraph 1 shall be subject to limitation of liability even if brought by way of recourse or for indemnity under a contract or otherwise. However, claims set out under paragraph 1(d), (e) and (f) shall not be subject to limitation of liability to the extent that they relate to remuneration under a contract with the person liable.
2. Les créances visées au paragraphe 1 sont soumises à la limitation de la responsabilité même si elles font l’objet d’une action, contractuelle ou non, récursoire ou en garantie. Toutefois, les créances produites aux termes des alinéas d), e) et f) du paragraphe 1 ne sont pas soumises à la limitation de responsabilité dans la mesure où elles sont relatives à la rémunération en application d’un contrat conclu avec la personne responsable.
ARTICLE 4
ARTICLE 4
CONDUCT BARRING LIMITATION
CONDUITE SUPPRIMANT LA LIMITATION
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A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.
Une personne responsable n’est pas en droit de limiter sa responsabilité s’il est prouvé que le dommage résulte de son fait ou de son omission personnels, commis avec l’intention de provoquer un tel dommage, ou commis témérairement et avec conscience qu’un tel dommage en résulterait probablement.
III. Matters in Dispute and Summary of the Parties’ Submissions [15] It is not disputed that JDI is a shipowner as defined by s 25(1)(a) of the MLA and is thereby entitled to limit its liability under the Limitation Convention. Similarly, there is no dispute that the gross tonnage of the “SPM 125” is less than 300 tons and, therefore, that the amount of limitation, if applicable, is CDN$500,000.00 pursuant to s 29 of the MLA.
[16] What is at issue is whether JDI is barred by its conduct from limiting its liability, pursuant to Article 4 of the Limitation Convention. With respect to MMC and Bremner, the question is whether they are entitled to limit their liability pursuant to Article 1(4), as persons for whose acts, neglect or default JDI is responsible, and, if so, whether that entitlement is barred by their conduct pursuant to Article 4.
[17] The determination of these issues requires the interpretation of Article 1(4) and Article 4 and the application of the facts and evidence of this case to those provisions.
[18] Siemens does not assert that any party intended to cause the loss. It does, however, assert that the evidence establishes, or that the Court should infer, that JDI and MMC acted recklessly and with knowledge that loss of the cargo would probably result, within the meaning of Article 4 of the Limitation Convention.
[19] Siemens acknowledges that, to forfeit the right of limitation, the loss must have resulted from the personal acts or omissions of the shipowner. In the case of JDI, the impugned acts or omissions of particular individuals must be attributed to the corporation. In this regard, Siemens argues that two of JDI’s employees, Mr. Roderick Malcolm (“Malcolm”), project manager of the cargo move, and Mr. David McLaughlin (“McLaughlin”), senior rigging engineer, had the authority to and did act on behalf of JDI in fulfilling the contract with Siemens. In that regard, Malcolm and McLaughlin’s functions in the company were the same as to be expected by JDI itself and their actions and knowledge can be attributed to JDI.
[20] Siemens further submits that JDI is responsible for the conduct of MMC and Bremner as JDI engaged, instructed and paid MMC. JDI identified MMC, for the purposes of the cargo move, as its naval architect.
[21] JDI submits that, pursuant to Article 4, Siemens was required to prove that JDI was reckless and that JDI actually knew that the loss sustained by Siemens would probably result from its recklessness. According to JDI, Siemens has failed to prove the actual cause of the incident or that a proven cause was recklessness. Further, neither Malcolm’s nor McLaughlin’s actions were attributable to JDI for this purpose. And, in any event, Siemens has failed to prove that anyone involved in planning or implementing the move was reckless.
[22] In this regard, it is of note that in its Statement of Claim JDI asserted that none of the individual JDI employees or affiliates, named by Siemens as defendants in the Ontario or other actions commenced by Siemens, were directing minds of JDI for the purposes of Article 4. Subject to that, however, for the purpose of its limitation action only, JDI accepted that the acts of its employees in relation to the incident were its acts, and JDI accepted responsibility for those acts as limited by the provisions of the MLA. Further, and on the same basis, JDI accepted that the acts of its affiliates were its acts and accepted responsibility for them.
[23] In their respective Defence, Counterclaim and Crossclaims filed in response to JDI’s limitation action, MMC and Bremner each admitted that JDI was entitled to limit its liability pursuant to the MLA and also claimed that their own liability was so limited. In its responding Reply and Defence to Counterclaim(s), JDI admitted that MMC is entitled to limit its liability pursuant to the MLA, provided that JDI has the same entitlement and accepted that all claims against MMC and JDI were, collectively, limited to $500,000.00. In this action, MMC and Bremner submitted that their right to limit arises from Article 1(4) of the Limitation Convention. They interpret Article 1(4) to extend the limitation of liability to independent contractors, provided that the shipowner is responsible for their actions as a matter of law. MMC submitted that JDI’s legal responsibility for MMC and Bremner arises pursuant to s 43(2) of the MLA which incorporates the Hague-Visby Rules and states that a shipowner has a non-delegable obligation to make its ship seaworthy. Therefore, an independent contractor who by its act, neglect or default, renders a ship unseaworthy, may limit its liability if sued by the owners of the damaged cargo. MMC and Bremner also assert, for the same reasons as JDI, that the evidence does not engage the Article 4 bar to limitation.
IV. Purpose of the Limitation Convention [24] In my view, as a starting point, it is important to understand the history and purpose of the Limitation Convention.
[25] This has been described in many prior cases, including the reasoning for the extremely high threshold required to break limitation under Article 4 in Canada. In Canadian Pacific Railway v “Sheena M” (The), [2000] 4 FC 159 [The Sheena M], this Court stated that:
[8] A part of the reasoning behind the 1976 Convention is neatly set out in Griggs and Williams, Limitation of Liability for Maritime Claims, Lloyd’s of London Press, 1998, at page 3, which begins by the authors referring to the 1957 Limitation Convention:
It was recognized that the previous system of limitation had given rise to too much litigation and there was a desire that this should be avoided in future. There was agreement that a balance needed to be struck between the desire to ensure on the one hand that a successful claimant should be suitably compensated for any loss or injury which he had suffered and the need on the other hand to allow shipowners, for public policy reasons, to limit their liability to an amount which was readily insurable at a reasonable premium.
The solution which was finally adopted to resolve the competing requirements of claimant and defendant was (a) the establishment of a limitation fund which was as high as a shipowner could cover by insurance at a reasonable cost, and (b) the creation of a virtually unbreakable right to limit liability.
The text of the 1976 Convention finally adopted by the Conference therefore represents a compromise. In exchange for the establishment of a much higher limitation fund claimants would have to accept the extremely limited opportunities to break the right to limit liability. Under the 1976 Convention the right to limit liability is lost only when the claimant can prove wilful intent or recklessness on the part of the person seeking to limit (Article 4).
[emphasis added]
[26] More recently, the purpose and history of the Limitation Convention was addressed in Daina Shipping Company v Te Runanga O Ngati Awa, [2013] 2 NZLR 799 [Daina Shipping]:
[26] The 1976 Convention brought about a “dramatic change”. Under the 1957 Convention the owner claiming an entitlement to limit liability had to establish that the occasion giving rise to the claim occurred without the owner’s actual fault or privity. Article 4 of the 1976 Convention shifted the burden. The owner was no longer required to establish an absence of fault and an absence of privity. Article 4 requires a claimant opposing limitation to establish that the owner intended to cause the loss suffered by the claimant, or was reckless in that regard and acted with knowledge that the loss would probably result.
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[28] In The Bowbelle, Sheen J described art 4 as imposing “a very heavy burden” on the claimant. In The Leerort Lord Phillips of Worth Matravers MR, immediately after citing the observation of Sheen J, commented: “It is worth pausing to consider just how heavy that burden is.” His Lordship then considered the extent of the burden and concluded: “[W]hen a claim is made for damages resulting from a collision, it is virtually axiomatic that the defendant ship owner will be entitled to limit his liability.”
[29] The extent of the difficulty faced by a claimant seeking to break the limitation is reflected in numerous expressions similar to those just cited. Sheen J expressed it differently, but to the same effect, when he said that the owner has an “almost indisputable right to limit”. In The Saint Jacques II and Gudermes Gross J said that “it is likely that only truly exceptional cases will give rise to any real prospect of defeating an owner’s right to limit”.
[30] In The Tasman Pioneer Williams J cited with approval an observation of Dr Jackson that “it seems accepted that the limits will normally be unbreakable - a trade off for the higher limits established in the 1976 Convention”. The Travaux Préparatoires of the 1976 Convention, and 1996 Protocols, makes it clear that this was the express intention. That this was the intention can also readily be inferred by comparing art 4 with the provisions of the 1957 Convention. Under the 1957 Convention it was more difficult for the owner to secure a limitation of the amount of liability but, if secured, the cap was low. It was a “derisory” limit as one commentator has noted.
[footnotes omitted, emphasis added]
[27] Similarly, the history and purpose of the Limitation Convention has been addressed in the context of English law in Margolle and another v Delta Maritime Company Limited and others (The Saint Jacques II), [2002] EWHC 2452 (Admlty) [Saint Jacques II] which also addressed the nature of recklessness and knowledge as elements of Article 4:
[16] For present purposes, the legal framework may be summarised as follows:
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(1) for reasons of policy, the right of shipowners and certain others to limit their liability is long-established in English law and is now (as already remarked) contained in the 1976 convention. Three features stand out when the 1976 convention is compared with its predecessor convention, the International Convention relating to the Limitation of the Liability of Owners of Sea-going Ships 1957 (TS 52 (1960); Cmnd 3678); the 1976 convention provides: (i) for a higher limit of liability; (ii) that the burden of proof now rests on the party seeking to ‘break’ the limit; (iii) that that burden is (intentionally) a very heavy burden. Sheen J’s observations in The Bowbelle [1990] 3 All ER 476, [1990] 1WLR 1330 that the 1976 convention conferred on the shipowner an ‘almost indisputable right to limit’, were cited with approval in MSC Mediterranean Shipping Co SA v Delumar BVBA [2000] 2 All ER (Comm) 458 at 460, [2000] 2Lloyd’s Rep 399 at 401 (esp at paras 11 and following) and in Schiffahrtgesellschaft MS ‘Merkur Sky’ mbH & Co KG v MS Leerort NTH Schiffahrts GmbH & Co KG ‘The Leerort’ [2001] EWCA Civ 1055 at [9] and following, [2001] 2Lloyd’s Rep 291 at [9] and following.
(2) A glance at art 4 of the 1976 convention suffices to indicate just how heavy is the burden resting on the party challenging the shipowner’s right to limit. As David Steel J expressed it in the MSC Mediterranean Shipping case ([2000] 2 All ER (Comm) 458 at 461, [2000] 2Lloyd’s Rep 399 at 401 (para 14)):
... absent, as in the present case, any allegation of intent, the person challenging the right to limit must establish both reckless conduct and knowledge that the relevant loss would probably result. (My emphasis.)
(3) The nature of these two requirements (recklessness and knowledge) and the relationship between them appear from two authorities on the Warsaw Convention for the Unification of Certain Rules Relating to International Carriage by Air1929, as amended at The Hague in 1955 and set out in Sch 1 to the Carriage by Air Act 1961, governing the carriage of goods and persons by air (the Warsaw Convention). As to conduct being reckless, Eveleigh LJ said in Goldman v Thai Airways International Ltd [1983] 3 All ER 693 at 699, [1983] 1 WLR 1186 at 1194:
When conduct is stigmatised as reckless, it is because it engenders the risk of undesirable consequences. When a person acts recklessly he acts in a manner which indicates a decision to run the risk or a mental attitude of indifference to its existence. This is the ordinary meaning of the word ... One cannot therefore decide whether or not an act or omission is done recklessly without considering the nature of the risk involved.
In Nugent v Michael Goss Aviation Ltd [2000] 2 Lloyd’s Rep 222 at 227 Auld LJ spoke of recklessness as involving ‘an obvious risk of damage and failure to give any thought to the possibility of it or recognition of the risk and going on to take it’. It is plain that ‘knowledge’ here means actual not constructive knowledge. Again, in Nugent’s case, Auld LJ said (at 229):
... the additional ingredient is actual knowledge, in the sense of appreciation or awareness at the time of the conduct in question, that it will probably result in the type of damage caused. Nothing less will do.
Plainly, the two requirements of recklessness and knowledge are separate and cumulative; a challenge to the right to limit will fail if (for instance) only recklessness but not knowledge is established. However, and still further in Nugent’s case, Auld LJ said (at 227):
Adding a further ingredient ... of knowledge of the probability of damage may or may not, depending on the obviousness of the risk, add much to the task of inferring that a carrier recognized the risk and went on to take it. The greater the obviousness of the risk the more likely the tribunal is to infer recklessness and that the defendant, in so doing, knew that he would probably cause damage. As a matter of proof the two will often stand or fall together ... As so often, practical considerations of what a tribunal is prepared to infer as to a defendant’s state of mind may be more determinative than fine matters of principle of what one legal concept adds to another ...
(4) Valuable as are these authorities on the Warsaw Convention as to the meaning of ‘recklessly’ and ‘knowledge’ in the present context, matters do not end with them. The test under the 1976 convention for defeating the right to limit is still higher than that found in the Warsaw Convention, in respect of both the act or omission in question and the relevant knowledge, so: (i) under the 1976 convention, the act or omission in question must be the ‘personal’ act or omission of the party seeking to limit; by contrast, the exception to the right to limit contained in the Warsaw Convention applies to the act or omission of ‘the carrier, his servants or agents’ (see art 25 of the Warsaw Convention); (ii) under the Warsaw Convention, the relevant knowledge is that ‘damage would probably result’ (see art 25); under the convention, the relevant knowledge under art 4 is that ‘such loss’ would probably result.
(5) These considerations were addressed by Lord Phillips MR in Schiffahrtgesellschaft MS ‘Merkur Sky’ mbH & Co KGv MS Leerort NTH Schiffahrts GmbH & Co KG ‘The Leerort’ [2001] EWCA Civ 1055 at [13]-[19], [2001] 2 Lloyd’s Rep 291 at [13]-[19], as follows:
13. The limitation provisions in relation to merchant shipping provide even greater protection than those in relation to carriage by air. It is only the personal act or omission of a shipowner which defeats the right to limit. A shipowner is defined in art. 1 as the owner, charterer, manager or operator of a seagoing ship. Thus, to defeat the right to limit, it is necessary to identify the causative act or omission on the part of such a person that caused the loss. Furthermore, it is only conduct committed with intent to cause such loss, or recklessly with knowledge that such loss would probably result, that defeats the right to limit. It seems to me that this requires foresight of the very loss that actually occurs, not merely of the type of loss that occurs. That certainly appears to have been the conclusion of Mr. Justice Steel in [MSC Mediterranean Shipping Co SA v Delumar BVBA [2000] 2 All ER (Comm) 458, [2000] 2 Lloyd’s Rep 399] ...
…
[emphasis added]
[28] Finally, I note that the Supreme Court of Canada recently addressed the purpose of the Limitation Convention, and the interpretation and application of Article 4, in Peracomo Inc v Telus Communications Co, 2014 SCC 29 [Peracomo SCC]. That case dealt with intent to cause loss under Article 4 of the Limitation Convention, rather than recklessness as in the present case. However, the Court addressed the purpose of the Limitation Convention and recklessness in the context of exclusion from insurance coverage due to wilful misconduct, as differentiated from recklessness under Article 4.
[29] There, Mr. Vallée was the sole shareholder and officer of Peracomo Inc, and it was conceded that he was the alter ego of that company. While fishing, Mr. Vallée snagged a cable which he cut, believing it to be abandoned. The cable was, in fact, a working communication cable owned by Telus. The trial judge found that, because Mr. Vallée cut the cable on purpose, the Article 4 bar to limitation applied. The Federal Court of Appeal upheld the trial judge’s decision (Peracomo Inc v Société Telus Communications, 2012 FCA 199 [Peracomo FCA]). However, the Supreme Court of Canada disagreed. It found that the limit of liability applied but that the loss was excluded from Mr. Vallée’s insurance coverage on the basis of wilful misconduct. He was found to be personally liable for damages as limited by the MLA.
[30] The Supreme Court found that Article 4 establishes a very high level of fault based on the Limitation Convention’s purpose to establish “a virtually unbreakable limit on liability”:
[24] I turn first to the Convention’s purpose. The contracting states to the Convention intended the fault requirement to be a high one - the limitation on liability was designed to be difficult to break: Margolle v. Delta Maritime Co. (The “Saint Jacques II” and Gudermes”), [2002] EWHC 2452, [2003] 1 Lloyd’s Rep. 203, at para. 16; Schiffahrtsgesellschaft MS “Merkur Sky” m.b.H. & Co. K.G. v. MS Leerort Nth Schiffahrts G.m.b.H. & Co. K.G. (The “Leerort”), [2001] EWCA Civ 1055, [2001] 2 Lloyd’s Rep. 291, at para. 18. The Convention has been described as a “trade-off”: “As a quid pro quo for the increase of the [limitation] fund, the article providing for the breaking of limitation became tighter, so that it is almost impossible for the claimants to break the right to limit”: A. Mandaraka-Sheppard, Modern Maritime Law and Risk Management (2nd ed. 2007), at p. 865. Meeting the threshold fault requirement requires a high degree of subjective blameworthiness: Nugent, at p. 229 (interpreting the similarly worded Warsaw Convention, 137 L.N.T.S. 11, as amended by the Hague Protocol, 478 U.N.T.S. 371). The fault standard set by art. 4 has been described as “a virtually unbreakable right to limit liability” (P. Griggs, R. Williams and J. Farr, Limitation of Liability for Maritime Claims (4th ed. 2005), at p. 3) and as “an almost indisputable right to limit . . . liability”: The “Bowbelle”, [1990] 1 Lloyd’s Rep. 532 (Q.B.D.), at p. 535; see also D. Damar, Wilful Misconduct in International Transport Law (2011), at p. 168; R. P. Grime, “Implementation of the 1976 Limitation Convention” (1988), 12 Marine Pol’y 306, at p. 313; P. Heerey, “Limitation of Maritime Claims” (1994), 10 MLAANZ Journal 1, at p. 3; T. Ogg, “IMO’s International Safety Management Code (The ISM Code)” (1996), 1 I.J.O.S.L. 143, at p. 149; J. F. Wilson, Carriage of Goods by Sea (7th ed. 2010), at p. 288; E. Gold, A. Chircop and H. Kindred, Maritime Law (2003), at p. 728. It is worth noting that the contracting states considered, but expressly rejected, the inclusion of “gross negligence” as a sufficient level of fault to break the liability limit: Comité Maritime International, The Travaux Préparatoires of the LLMC Convention, 1976 and of the Protocol of 1996 (2000), Article 4. Conduct barring limitation, at pp. 123-32.
[25] In my respectful view, the Federal Court of Appeal’s approach to breaking the limit on liability lowered the intended fault element and thereby undermine