Nova Steel Ltd. v. Kapitonas Gudin (The)

Nova Steel Ltd. v. Kapitonas Gudin (The)
Court (s) Database
Federal Court Decisions
Date
2002-01-29
Neutral citation
2002 FCT 100
File numbers
T-958-95
Notes
Digest
Decision Content
Date: 20020129
Docket: T-958-95
Neutral Citation: 2002 FCT 100
ACTION IN REM AND IN PERSONAM AGAINST THE VESSEL
"KAPITONAS GUDIN" AND ALL THOSE PERSONS INTERESTED IN HER
BETWEEN:
NOVA STEEL LTD. AND
J.B. MULTI-NATIONAL TRADE INC.
Plaintiffs
- and -
LITHUNIAN SHIPPING COMPANY
AND M.V. "KAPITONAS GUDIN" AND HER
OWNERS AND CHARTERERS
Defendants
REASONS FOR JUDGMENT
LEMIEUX J.:
A. BACKGROUND
[1] The central issue in the trial of this action is whether sea water caused the damage to a shipment of 240 hot rolled steel coils weighing 4,510 metric tons (the "cargo") purchased by Nova Steel Ltd. ("Nova Steel"), a Canadian steel processor, through J. B. Multi-National Trade Inc., a Canadian steel broker, from Unibros Steel Co., an international steel broker based in Limassol, Cyprus ("Unibros") at US $370 per metric ton for a total purchase price of US $1,668,700.00, cost and freight discharged at the Port of Montreal.
[2] The cargo was manufactured in Russia, railed to Riga, Latvia, where it was off-loaded on a dock in the port. On January 27, 1995, it was then loaded onboard the M.V. Kapitonas Gudin (the "Captain Gudin"), a bulk carrier, which discharged it at the Port of Montreal on February 20/21, 1995. The bill of lading issued by her Master in Riga contained the following remarks: "1. Partly rust stained". 2. Wet before shipment" which was acceptable as such coils are shipped unprotected.
[3] This action was tried together with action T-1597-95. Samuel, Son & Co. Ltd., is the plaintiff there with a shipment of 279 cold rolled galvanized coils weighing 2,990.11 metric tons carried onboard the Captain Gudin at the same time as Nova Steel's cargo of hot rolled steel coils. Separate reasons will be issued concurrently in Action T-1597-95. Both sets of reasons are to be read together.
[4] Samuel, Son & Co. Ltd. was also the owner of another shipment of cold rolled steel carried by the Captain Gudin on her voyage. The problems with that shipment were not the subject of any action in this Court. The Court was, however, informed it was processed as an insurance claim related to metallurgical production defects.
[5] Both parties agree the applicable law is found in the Hague-Visby Rules which is Schedule I of the Carriage of Goods by Water Act. Technically, the Hague-Visby Rules only apply to a shipment from a signatory country but not to a signatory country which would exclude its application in this case. The parties agreed to go forward because Lithuania is also a signatory to the International Convention giving rise to the Hague-Visby Rules.
[6] Articles III and IV setting out the rights and obligations of the carrier provide:
Article III
1. The carrier shall be bound, before and at the beginning of the voyage, to exercise due diligence to
(a) make the ship seaworthy;
(b) properly man, equip and supply the ship;
(c) make the holds, refrigerating and cool chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage and preservation.
2. Subject to the provisions of Article IV, the carrier shall properly and carefully load, handle, stow, carry, keep, care for and discharge the goods carried.
3. After receiving the goods into his charge, the carrier, or the master or agent of the carrier, shall, on demand of the shipper, issue to the shipper a bill of lading showing among other things
(a) the leading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage;
(b) either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper;
(c) the apparent order and condition of the goods:
Provided that no carrier, master or agent of the carrier shall be bound to state or show in the bill of lading any marks, number, quantity, or weight which he has reasonable ground for suspecting not accurately to represent the goods actually received or which he has had no reasonable means of checking.
4. Such a bill of lading shall be prima facie evidence of the receipt by the carrier of the goods as therein described in accordance with paragraphs 3(a), (b) and (c).
However, proof to the contrary shall not be admissible when the bill of lading has been transferred to a third party acting in good faith.
5. The shipper shall be deemed to have guaranteed to the carrier the accuracy at the time of shipment of the marks, number, quantity and weight, as furnished by him, and the shipper shall indemnify the carrier against all loss, damages and expenses arising or resulting from inaccuracies in such particulars. The right of the carrier to such indemnity shall in no way limit his responsibility and liability under the contract of carriage to any person other than the shipper.
6. Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, or, if the loss or damage be not apparent, within three days, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading.
The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection.
Article IV
Rights and Immunities
1. Neither the carrier nor the ship shall be liable for loss or damage arising or resulting from unseaworthiness unless caused by want of due diligence on the part of the carrier to make the ship seaworthy, and to secure that the ship is properly manned, equipped and supplied, and to make the holds, refrigerating and cool chambers and all other parts of the ship in which goods are carried fit and safe for their reception, carriage and preservation in accordance with the provisions of paragraph 1 of Article III.
Whenever loss or damage has resulted from unseaworthiness, the burden of proving the exercise of due diligence shall be on the carrier or other person claiming exemption under this article.
2. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from
. . .
(c) perils, dangers and accidents of the sea or other navigable waters;
. . .
i) act or omission of the shipper or owner of the goods, his agent or representative;
. . .
(m) wastage in bulk or weight or any other loss or damage arising from inherent defect, quality or vice of the goods;
(n) insufficiency of packing;
. . .
Article III
Responsabilités et obligations
1. Le transporteur sera tenu avant et au début du voyage d'exercer une diligence raisonnable pour_:
a) mettre le navire en état de navigabilité;
b) convenablement armer, équiper et approvisionner le navire;
c) approprier et mettre en bon état les cales, chambres froides et frigorifiques, et toutes autres parties du navire où des marchandises sont chargées, pour leur réception, transport et conservation.
2. Le transporteur, sous réserve des dispositions de l'article IV, procédera de façon appropriée et soigneuse au chargement, à la manutention, à l'arrimage, au transport, à la garde, aux soins et au déchargement des marchandises transportées.
3. Après avoir reçu et pris en charge les marchandises, le transporteur ou le capitaine ou agent du transporteur devra, sur demande du chargeur, délivrer au chargeur un connaissement portant, entre autres choses_:
a) les marques principales nécessaires à l'identification des marchandises telles qu'elles sont fournies par écrit par le chargeur avant que le chargement de ces marchandises ne commence, pourvu que ces marques soient imprimées ou apposées clairement de toute autre façon sur les marchandises non emballées ou sur les caisses ou emballages dans lesquels les marchandises sont contenues, de telle sorte qu'elles devraient normalement rester visibles jusqu'à la fin du voyage;
b) ou le nombre de colis, ou de pièces, ou la quantité ou le poids, suivant les cas, tels qu'ils sont fournis par écrit par le chargeur;
c) l'état et le conditionnement apparents des marchandises. Cependant, aucun transporteur, capitaine ou agent du transporteur ne sera tenu de déclarer ou de mentionner, dans le connaissement, des marques, un nombre, une quantité ou un poids dont il a une raison sérieuse de soupçonner qu'ils ne représentent pas exactement les marchandises actuellement reçues par lui, ou qu'il n'a pas eu des moyens raisonnables de vérifier.
4. Un tel connaissement vaudra présomption, sauf preuve contraire, de la réception par le transporteur des marchandises telles qu'elles y sont décrites, conformément aux alinéas 3a), b) et c).
Toutefois, la preuve contraire n'est pas admise lorsque le connaissement a été transféré à un tiers porteur de bonne foi.
5. Le chargeur sera considéré avoir garanti au transporteur, au moment du chargement, l'exactitude des marques, du nombre, de la quantité et du poids tels qu'ils sont fournis par lui, et le chargeur indemnisera le transporteur de toutes pertes, dommages et dépenses provenant ou résultant d'inexactitudes sur ce point. Le droit du transporteur à pareille indemnité ne limitera d'aucune façon sa responsabilité et ses engagements sous l'empire du contrat de transport vis-à-vis de toute personne autre que le chargeur.
6. À moins qu'un avis des pertes ou dommages et de la nature générale de ces pertes ou dommages ne soit donné par écrit au transporteur ou à son agent au port de déchargement, avant l'enlèvement des marchandises et leur remise sous la garde de la personne ayant droit à la délivrance sous l'empire du contrat de transport, ou lors de cet enlèvement et de cette remise, ou, si les pertes ou dommages ne sont pas apparents, dans un délai de trois jours, cet enlèvement constituera jusqu'à preuve contraire, une présomption que les marchandises ont été délivrées par le transporteur telles qu'elles sont décrites au connaissement.
Les réserves écrites sont inutiles si l'état de la marchandise a été contradictoirement constaté au moment de la réception.
Article IV
Droits et exonérations
1. Ni le transporteur ni le navire ne seront responsables des pertes ou dommages provenant ou résultant de l'état d'innavigabilité, à moins qu'il ne soit imputable à un manque de diligence raisonnable de la part du transporteur à mettre le navire en état de navigabilité ou à assurer au navire un armement, équipement ou approvisionnement convenables, ou à approprier et mettre en bon état les cales, chambres froides et frigorifiques et toutes autres parties du navire où des marchandises sont chargées, de façon qu'elles soient aptes à la réception, au transport et à la préservation des marchandises, le tout conformément aux prescriptions de l'article III, paragraphe 1.
Toutes les fois qu'une perte ou un dommage aura résulté de l'innavigabilité, le fardeau de la preuve, en ce qui concerne l'exercice de la diligence raisonnable, tombera sur le transporteur ou sur toute autre personne se prévalant de l'exonération prévue au présent article.
2. Ni le transporteur ni le navire ne seront responsables pour perte ou dommage résultant ou provenant_:
. . .
c) des périls, dangers ou accidents de la mer ou d'autres eaux navigables;
. . .
i) d'un acte ou d'une omission du chargeur ou propriétaire des marchandises, de son agent ou représentant;
. . .
m) de la freinte en volume ou en poids ou de toute autre perte ou dommage résultant de vice caché, nature spéciale ou vice propre de la marchandise;
n) d'une insuffisance d'emballage;
. . .
[7] At trial, the defendants abandoned the following excepted perils which had been pleaded in the statement of defence:
· act, neglect or fault of the Master and crew;
· perils of the sea except to the extent condensation damage is involved;
· act of God;
· latent defects; and
· any other cause arising without the actual fault or privity of the carrier.
[8] Nova Steel claims the hot rolled steel coils (the "coils") were damaged by contact with sea water while in the care and custody of the defendants. The coils were "pitted" when sea water ate into them rendering them unfit for their intended use -- making of shoe brakes for automobiles. Nova Steel claims a loss of $585,654.40 after accounting the coils' salvage value to which is to be added $67,062.67 for additional charges (mainly on account of freight, pickling and oiling, rewinding and storage) and the amount of $70,201.42 for expert costs in the investigation. Pre-judgment interest at 6.58%, post-judgment and costs are also asked for.
[9] The defendants deny liability. No damage to the goods was caused by them. They say no sea water entered the Captain Gudin during its voyage from Riga to Montreal. They allege the wet condition of the cargo and the water evidenced on arrival was because they were loaded wet and arose from condensation occasioned during the voyage by either a combination of cargo or ship sweat or sweating of the holds of the ship.
[10] In addition, the defendants allege the damage to the coils either occurred prior to their being loaded onboard the Captain Gudin (either during transit from the mill in Russia to the port of loading or while on the dock at Riga awaiting loading) or was caused while the cargo was sitting in open air on the dock in Montreal or was being transported to Cambridge, Ontario, when, in either case, it was exposed to road salt. Damage could also have arisen by exposure to chemicals such as potash or urea at some point in time either prior to or after discharge.
[11] Defendants add if the goods were rejected, it was not because of pitting but because of mill defects in the steel coils.
[12] On damages, the defendants say Nova Steel did not appropriately mitigate its damages by quickly removing the coils after discharge and arresting, by pickling or otherwise, the spreading salt corrosion. They did not get the best salvage value. They say Nova Steel double accounted some expenses which would have been incurred in any event and certain items in salvage are not allowable because they are a compromise with its insurers.
[13] It is useful, I think, at this stage to identify the burdens of proof in cargo claims. These were summarized by Justice Pinard in Kruger Inc. v. Baltic Shipping Co., [1988] 1 F.C. 262 (F.C.T.D.), affirmed by the Federal Court of Appeal in [1989] F.C.J. No. 229, March 31, 1989. Justice Pinard wrote:
It is also essential, at this stage, to look at the question of burden of proof. In cases like the present one, where the contract of carriage is one to which the Carriage of Goods by Water Act is applicable, I consider the following test to be appropriate:
1) Initially, the cargo owners need only establish their interest in the cargo, the fact that it was not delivered in the same apparent good order and condition as received on board and the value of cargo lost or damaged. If the carrier offers no defence, the plaintiffs will obtain judgment.
2) The carrier can then shift the burden of proof back to the plaintiffs by establishing that the loss or damage is attributable to one of the excepted perils set out in Article IV of the Hague Rules.
3) Thereafter the cargo owners must establish the carrier's negligence or both that the ship was unseaworthy and that the loss was caused by that unseaworthiness.
4) If these points, in the context of unseaworthiness, are established, the carrier can only escape liability by establishing that due diligence was exercised to make the ship seaworthy.
[14] In this case the defendants rely upon the following excepted perils:
· perils of the sea to the extent condensation damage occurred;
· act or omission of the shipper or owner of the goods alleging defective packaging;
· inherent defect, quality of the goods alleging mill defects in the coils.
[15] I also refer to Justice Blais' recent decision in Voest-Alpine Stahl Linz GmbH et al. v. Federal Pacific Ltd. et al. (1999), 174 F.T.R. 69 (F.C.T.D.) where he set out the burden of proof and adopted the approach suggested by Professor William Tetley in his Marine Cargo Claims quoting the learned author as follows on the order of proof demanded by the courts:
(i) The claimant must first prove his loss;
(ii) The carrier must then prove
(a) the cause of the loss,
(b) that due diligence to make the vessel seaworthy in respect of the loss was taken and
(c) that he is not responsible by virtue of at least one of the exculpatory exceptions of the Rules;
(iii) Then, various arguments are available to the claimant;
(iv) Finally, there is a middle ground where both parties may make various additional proofs.
B. FURTHER BACKGROUND
[16] There are a number of facts not in dispute or controverted.
[17] First, hot rolled steel coils do not require any packaging protection as do cold rolled galvanized coils. A claused bill of lading in this case stating the goods are "atmospherically rusty, rust stained, partly rust stained, wet before shipment or similar" is acceptable for the cargo and for payment on the letter of credit. It is expected hot rolled coils will evidence wetness or atmospheric rust through oxidization and exposure to the elements. Rust spots do not affect the integrity of the coils since these will be eliminated after undergoing a normal cleaning process through pickling to remove the mill scale which is always present on such coils.
[18] Second, the Captain Gudin's voyage took it across the Baltic Sea, down through the English Channel, across the North Atlantic south of Cape Race, Newfoundland and then into the Cabot Straight, the St-Lawrence and Montreal. The weather during the voyage was not unusual for that time of the year but the vessel did encounter, at times, during the period of February 10 through 14, 1995, very heavy winds and heavy seas.
[19] Third, when the stevedores began discharging the cargo in Montreal on February 20, 1995, they observed it was wet. Federal Marine Terminals, mandated to unload the cargo, on behalf of Unibros, delivered, that day, a letter to the Master of the Captain Gudin which read:
This is to advise you that coils in all holds are partially wet. The hatch tank tops have some quantity of water of as yet unknown origin. It has not been determined if same is due sea water ingress. Surveyor appointed on behalf of the vessel and/or Charterer is aware of the situation.
[20] On February 21, 1995, Captain Pozela, the Captain Gudin's Master replied:
In reply to your letter of February 20, 1995, I wish to declare that the water found in the hatches is not sea water.
During loading of the cargo of Cold rolled steel coils at Ventspils January 18-23, 1995 and Hot rolled steel coils at Riga January 25-27, 1995, coils were loaded from open storage and notations made in the Mate's Receips[sic] to that effect.
During the Trans-Atlantic voyage, we experienced large temperature differences from +16C on Feb. 08/95 to -10C on February 15/95 -- at the same time, the water temperature varied from +10C to + 01C.
The hatches are in good, sound condition and no sea water entered the holds during the sea voyage and the small quantity of water found in the holds is from loading wet coils in the loadport and condensation during the voyage due to the large temperature difference noted above.
[21] On February 21, 1995, the Captain Gudin's Master issued a Note of Protest, part of which reads:
During the voyage, the vessel encountered heavy weather on Feb. 10, 11, 12, 13 and 14 with winds from SW-NW to Beaufort Force 11. The vessel was labouring, pitching and rolling very severely up to 30o each side, in full storm sea and swell conditions. Vessel also snipping very heavy seas continuously overall decks and hatch lids. The vessel also altered her courses and speeds to Master's orders as required for conditions. These particulars from ship's deck log extract filed.
[22] Fourth, the shipment was discharged at the Port of Montreal during light flurry activity and was stored on Federal Marine Terminals' docks in open air.
[23] Fifth, there was a strike in the Port of Montreal during February/March of 1995 which the plaintiffs say prevented the cargo leaving the port and being delivered in a timely fashion to Nova Steel in Cambridge, Ontario or at Metco in Montreal. Metco is a wholly owned subsidiary of Nova Steel.
[24] Sixth, there is no disagreement between the parties that a positive silver nitrate test on the coils is only prima facie evidence of the presence of sea water. In order to confirm that presence, chemical analysis must be performed.
C. NOVA STEEL'S CASE
1. On liability
[25] Nova Steel's case rests primarily on survey reports and testing which it says conclusively establish the pitting damage to the coils, leading to rejection by Nova Steel's or Metco's customers, was caused by sea water ingress during the voyage. It also relies on a translation of certain entries in the Captain Gudin's deck log book.
[26] The first survey relied on is that of Captain William Morrison who examined both types of steel coils on February 20/21, 1995, when the ship's hatches to the holds, of which there are six, were opened. He observed rust streaks on the hatch coamings which he testified is a sign of sea water ingress. This observation of hatch leakage was corroborated by Mr. Woodfine, Commercial Manager at Unibros Canada who also attended the ship for its discharge.
[27] Captain Morrison found, for hatches No. 2 and 3, evidence of water entry after or forward end under the hatch coamings. He also observed water had collected on the tank tops which are undulations in the floor of the ship's holds for hatches 3, 4, and 6. He took silver nitrate tests in holds No. 2, 3, 4 and 6 which he wrote indicated the presence of sea water. Hatch No. 1 was not opened and sighted because it had no cargo. In hatch No. 5 all coils in the hatch square were rusted, a rust typical to that found by heavy condensation.
[28] Captain Morrison re-attended the Captain Gudin the next day where he reported linking up with Mr. Tony Steggerda, a surveyor he believed was acting on behalf of the vessel owners but who was actually representing the charterers of the vessel. His survey report notes a lengthy conversation with Mr. Steggerda on the cause of damage. He said it was agreed the cause of the damage was a combination of salt and fresh water contact. Captain Morrison testified at trial as did Messrs. Woodfine and Steggerda.
[29] Roger Daigneault, Vice-President Purchasing for Nova Steel, testified that on March 6, 1995, four coils were trucked from the Port of Montreal to Metco's processing facilities in Montreal where some coils were cut and sent to several customers who rejected the product because of surface damage. He testified Metco was lucky to clear four coils out of the port because of the strike.
[30] Mr. Daigneault testified it was only on March 29, 1995, Nova Steel was able to start clearing, in earnest, the cargo from the Port of Montreal. That day some coils began to be trucked to Cambridge, Ontario and another two were sent to Metco's facility in Montreal. Some coils were shipped directly to Kleen Steel, the only batch pickler in Quebec and to Sidbec-Dosco, a steel producer.
[31] Mr. Daigneault testified, when Kleen Steel unwrapped the coils, they immediately discovered the pitting problem and so reported to Metco. Other coils were shipped to Nelson Steel, a pickler in Stoney Creek, Ontario, with facilities permitting pickling as the coils were unwound which enabled a better assessment of the inside condition of the coils.
[32] Mr. Jose Amiot, the General Manager at Metco, also testified. He confirmed the four coils received on March 6, 1995, two of which were unwound and processed into steel plates, were for its customers, namely, Atelier Beauroc, and Acier Roger.
[33] He testified Beauroc rejected the steel plates because of salt water damage and returned them to Metco. Acier Roger also rejected the coils because of salt water damage but also because its thickness and flatness exceeded specification tolerance.
[34] The reports from the picklers and the rejection from customers caused a series of surveys to be conducted both at the facilities of Nova Steel in Cambridge, Ontario, where 133 coils had been delivered and were in storage as well as various locations in Montreal where 107 coils were still on the docks, a small quantity (47 perhaps) were in the Montreal warehouse of Metco, Nova Steel's subsidiary, and others were in Nova Steel's facilities at Dorval. This initiative, which began in the last week in April 1995, was coordinated by William Park, a marine surveyor with Toplis and Harding, acting on behalf of cargo underwriters.
[35] Mike Talwar, a surveyor who testified at trial and who had been retained by Unibros to determine whether the cause of the damage was mill related, examined three coils on April 27, 1995 at Nova Steel's Cambridge facility: one coil had been pickled and had been rejected; the other two had not been through the pickling process and showed positive results to the silver nitrate test.
[36] On the coil which had been pickled he reported seeing pitting scratches on the surface and edges indicating to him salt water damage. He measured the coil and determined gauge was no problem. He could see no mill related problem.
[37] He reported much the same results on the unprocessed unpickled coils which were unwound and exhibited pitting. On one coil the gauge of the steel was in excess of the thickness tolerance but Mr. Talwar was of the view this was not a problem because the customer was getting more steel than ordered.
[38] Mr. Talwar concluded it was apparent the majority of the damage was due to contamination by sea water. He reported it had been agreed between all parties because of the sea water contamination, pitting had occurred on the surface of the material. The coils had been rejected on account of rust/pitting and for no other reason.
[39] Mr. Park undertook to examine the balance of the coils on the dock in Montreal as well as in other locations in the Montreal area.
[40] Mr. Park, retained by Nova Steel's insurers, completed a survey report dated September 18, 1995, where he reported on various surveys he conducted as did his associate in Montreal, Don Angel. Both testified at trial. By May 8, 1995, he and Mr. Angel had checked every unprocessed coil, i.e. 180 out of 240 coils, and designated each with either an X or a checkmark according to whether they reacted positively to the silver nitrate test. Out of the 180 coils, 120 reacted positive.
[41] Mr. Park noted on May 4, 1995, he, together with Mr. R. Cuthbert, a steel expert, attended at Nelson's Steel in Stoney Creek to witness the pickling of four coils which had no traces of salt water, the intention being for the steel expert to examine for possible mill, surface and gauge problems. He writes in his report Mr. Cuthbert, who did not testify at trial, concluded the steel appeared to be in line with industry standards.
[42] After having segregated all unprocessed coils reacting positively to the silver nitrate test and, after a meeting with Nova Steel on May 29, 1995, it was decided to further inspect the suspect X coils by unwinding them completely and visually examining and photographing the steel as it moved by. Forty (40) of the X coils were examined this way to establish a correlation between the outward appearance of a coil and the condition inside the coil in order to determine whether the coil could be classified as workable or unworkable. The unworkable coils, which were pitted, were put up for salvage sale.
[43] As part of the verification process, Mr. Angel arranged to have a chemical analysis performed on three samples out of forty-seven (47) coils located at Metco. Nancy Mercereau, a chemist with Technitrol.Eco provided Captain Angel with a June 13, 1995 report concluding the steel coils had been contaminated by salt water. She testified at trial.
[44] Mr. Park also took three scrapings of corrosion from coils he had inspected and submitted them for analysis by David Gordon of Technitrol Expertise Inc. in Toronto who provided him with a May 9, 1995 report confirming all samples had been in contact with salt water. Mr. Gordon testified at trial.
[45] Nova Steel then commissioned a study from Technitrol.Eco who provided a report on December 6, 1996. The study was headed by Ludwig Cambal, an expert metallurgist, who was called as a witness, to testify on steel production, the features of hot rolled steel and on the sea water corrosion test simulating the conditions in the holds of the ship he had performed.
[46] As for the simulation test, a certain number of clean and undamaged plates of hot rolled steel from the cargo were exposed for twenty (20) days to a wetting cycle by having synthetic sea water dripping on the stacked plates for five minutes every four hours. He examined the plates after twenty (20) days and compared these to parts of the original coil which had exhibited pitting corrosion. The pitting patterns of the test plates and the plates from the damaged coil were identical. He then performed the same drip test for periods of three, six, nine and fifteen days. He found once the plates were exposed to dripping for nine days, the material was rejectionable. He concluded the pitting corrosion initiated by sea water during transportation was in itself sufficient to render the coils unacceptable. In Mr. Cambal's opinion, as an expert metallurgist, the storage at the Port of Montreal and exposure to atmospheric conditions was not a factor in the rejectionability of the coil.
[47] Violeta Davoliute testified at trial. She was recognized as an expert translator from Lithuanian to English. She reviewed the deck log of the Captain Gudin, written in Lithuanian, between February 10 to 15, 1995. She provided two reports: the first is dated August 27, 2001 and the second is dated September 14, 2001.
[48] The following are the translated extracts from the deck log of the Captain Gudin as set out in Ms. Davoliute's August 27, 2001 report:
(1) February 10, 1995, Chief K.P. at 03:00 hrs:
The vessel is swaying strongly from side to side, rocking back and forth, and is experiencing vibration. Sea water is periodically flooding the main deck and the hatches to the holds. Chief K.P.
(2) At 08:00 hrs. the same day Chief K.P. wrote the following:
During this shift, the vessel was swaying strongly from side to side rocking back and forth. Sea water was repeatedly flooding the main deck and the hatches to the holds.
(3) On February 11, 1995, the deck log at 08:00 hrs. from Chief K.P.'s handwritten entries reads:
For the duration of this shift the vessel was swaying strongly from side to side, and rocking back and forth. The angle of the vessel's heeling to the sides was 25% of the flanks. The main deck and the hatches to the holds were repeatedly flooded by seawater.
(4) For February 12, 1995, the following entry is recorded at 15:00 hrs:
... The vessel has been prepared to sail under fog conditions.
(5) For February 13, 1995, the deck log entries were:
(1) At 05:35:
We have started pumping the bilges of all the holds.
(2) At 07:35:
We have finished pumping the bilges of all the holds.
(3) At 08:00:
For the duration of the present shift the ship was rocking strongly back and forth. Huge quantities of water were repeatedly flooding the main deck and the hatches to the holds. For the duration of this shift, the base of the (cranes, winches) used for climbing-down into the sluices (the phrase might be erroneous because research should be done on the meaning of gerviu) broke off, the ventilation pipe between holds no. 2 and 3 have been bent. Chief K.P.
(4) At 12:00:
We are sailing against the storm. Because the wind, which is w-25-30 metres/second and the waves, which reach approximately 10/12 meters in height, we are keeping the vessel directed against the waves, against the wind. The speed of the ship is 2-3 miles per hour. The waves are flooding the deck and the hatches to the holds.
(5) At 17:00:
The vessel is swaying strongly from side to side, and rocking back and forth and vibrating. Seawater is repeatedly flooding the main deck and the hatches to the holds. During the time of this shift we pumped out the water from the bilges of the holds several times.
(6) At 22:00:
During the time of this shift the vessel was rocking back and forth and water was repeatedly flooding the main deck and the hatches to the holds. Chief K.P.
(6) For February 14, 1995, the deck log entries were as follows:
(1) At 00:10:
We started pumping the bilges of holds No. 3 and 4.
(2) At 00:45:
We finished the pumping.
(3) At 05:35:
We started pumping all of the bilges of all the holds.
(4) At 07:40:
We finished pumping the bilges of all the holds.
(5) At 14:00:
Water has been found inside the hold No. 3. We have started to fill the afterpeak with ballast. We have started pumping the water out of hold No. 3.
(6) At 15:03:
We have finished filling the afterpeak with ballast.
(7) For February 15, 1995, the deck log records the Captain Gudin entering an ice field and sailing through it for the better part of the day.
[49] In her supplementary report dated September 14, 2001, Violeta Davoliute addressed her translation of the deck log entry for the time 14:00, on February 14, 1995, which was:
Water has been found inside the hold No. 3. We have started to fill the afterpeak with ballast. We have started pumping the water out of hold No. 3.
[50] She notes her first report did not translate the Lithuanian word "uzbortinis", a compound adjective which, when read in combination with the Lithuanian word "vanduo" can be translated as "overboard water" or, if read literally, "the water from outside the vessel". She writes:
Bearing in mind the given context, it also would be accurate to translate the combination of words "uzbortinis vanduo" as "sea water". Therefore the translation of the first sentence of the entry for 14:00 on February 14, 1995, should read: "Sea water has been found inside the hold No. 3". This is an accurate translation to the best of my knowledge and ability.
[51] Nova Steel's case on liability was rounded out by the testimony of Robert Hunter, formerly its Director of Materials and Captain Melvyn Fernandez. Mr. Hunter identified that up to 50% of the hot rolled steel coils destined to Nova Steel, Cambridge, had been purchased for resale to Fenwick Friction ("Fenwick") to be made into brake shoes in which case the customer is somewhat more lenient on surface finishing, gauge and thickness tolerances but not where pitting was exhibited. He confirmed Fenwick rejected the coils because of pitting.
[52] Mr. Hunter confirmed the results he had received from the pickling plants of Kleen Steel and Nelson Steel which evidenced severe pitting to the coils likely caused by salt water.
[53] He described the oiling efforts taken by Nova Steel to arrest or prevent the seepage of water into the coils. He described the steel market in 1995 as hot because of the shortage of Canadian supply which forced Nova to import. In this context, he testified the reason Nova could not take delivery sooner was because of the strike. He stated Fenwick did not reject the coils because of any mill problems.
[54] Captain Melvyn Fernandez provided an expert report on the probable cause of the damage to both cargoes, hot rolled and cold rolled galvanized steel coils and whether the wind or sea conditions experienced were unusual for that time of the year.
[55] The second aspect of his report need not be developed because the defendants are not claiming perils of the sea on that account but he did say the Captain Gudin experienced rough weather with storm-like conditions for the most part of her voyage.
[56] Captain Fernandez' opinion was taken from survey reports and log extracts made available to him. In particular, he relied on Miss Davoliute's translation.
[57] He concluded, after examining Captain Morrison's survey, Anthony Steggerda's survey and lab tests, the M.V. Captain Gudin was not water tight.
[58] On cross-examination he expressed the view looking at the inside of hatch coaming does not indicate anything about the water tightness of the ship: he would examine the hatch covers, the gaskets, the cleats and the wedges.
[59] He said it would be difficult to examine the hatch covers if they were open but acknowledged you could examine the compressor bar on the hatch coaming.
[60] He described three tests used in determining water tightness: ultrasonic tests, a hose test (which is the most prevalent) and a chalk test.
[61] He admitted a change from +16C to -8C was a very big difference in temperature. He also said if loaded wet, the cargo would have dried off with ventilation.
(2) Nova Steel's case on damages
[62] Nova Steel's case on loss or damage incurred was put in through the testimony of William Park of Toplis & Harding and that of Robert Hunter.
[63] Two recovery mechanisms were used to quantify the loss in value of the hot rolled steel coils which Nova Steel had purchased: either sale at auction or retention by Nova Steel at various discounted prices. Which mechanism was used depended whether the coils had been identified as X-coils or had been checkmarked. The X-coils had tested positive to silver nitrate; the checkmarked ones had not.
[64] After rewinding and inspecting over forty of the X-coils, it was determined that sufficient correlation existed between the outward appearance of the coil and the condition of its insides and that the X-coil assessment process could be completed without unwinding every X-coil. All remaining X-coils were inspected and designated either workable or unworkable. The workable coils were sent for pickling and processing in the usual manner and the unworkable coils were set aside for salvage sale.
[65] Toplis & Harding arranged the salvage sale of 1,724.83 metric tons of rejected, damaged steel on behalf of Nova Steel. They invited sealed bids with a ten percent (10%) deposit from interested potential buyers throughout North America. They also advertised the sale by tender through the "Metal Bulletin", an international weekly journal for the steel industry. A total of five offers were received by the closing date of September 5, 1995, the highest value of which was Lombard Metals Corporation who offered $482,475.66 ($431,395.66 after deducting applicable taxes).
[66] The loss on the remaining X-coils was assessed by way of percentage allowances. Two coils which were found pitted throughout after the salvage sale were retained at a fifty percent (50%) allowance and a thirty percent (30%) allowance was approved for 400.5 metric tons of the remaining workable X-coils. The fifty percent (50%) allowed for the two pitted coils roughly equated to the salvage value expected and the thirty percent (30%) allowance on the workable X-coils was derived from Nova's experience during unwinding and processing of similar coils up to the time of the salvage sale.
[67] With respect to the coils which had a checkmark, representing 1.431.13 metric tons, Toplis & Harding agreed with Nova Steel's position some allowance had to be made for the likelihood of hidden damage to those. Ultimately, a seven percent (7%) allowance was agreed. This figure reflected Nova Cambridge's experience with the checkered coils which they had processed by the time of the closure of the salvage sale on September 5, 1995