Rhône (The) v. Peter A.B. Widener (The)

Rhône (The) v. Peter A.B. Widener (The)
Collection
Supreme Court Judgments
Date
1993-02-25
Report
[1993] 1 SCR 497
Case number
21885, 21886
Judges
La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Gonthier, Charles Doherty; Cory, Peter deCarteret; McLachlin, Beverley; Iacobucci, Frank
On appeal from
Federal Court of Appeal
Subjects
Maritime law
Notes
SCC Case Information: 21886, 21885
Decision Content
Rhône (The) v. Peter A.B. Widener (The), [1993] 1 S.C.R. 497
Great Lakes Towing Company Appellant
v.
The Owners and Operators of the MV Rhône,
Vinalmar S.A. of Basle, Switzerland,
the MV Rhône Respondents
and
The MV Peter A.B. Widener, the owners and
operators of the MV Peter A.B. Widener,
Seaway Towing Inc. and North Central Maritime
Corporation Respondents
and between
Great Lakes Towing Company Appellant
v.
The MV Peter A.B. Widener, the owners
and operators of the MV Peter A.B. Widener,
Seaway Towing Inc. and North Central Maritime
Corporation Respondents
Indexed as: Rhône (The) v. Peter A.B. Widener (The)
File Nos.: 21886, 21885.
1992: May 26; 1993: February 25.
Present: La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, Cory, McLachlin and Iacobucci JJ.
on appeal from the federal court of appeal
Maritime law ‑‑ Collision ‑‑ Limitation of liability ‑‑ Actual fault or privity ‑‑ Corporate identification ‑‑ Navigational error by lead tug captain, acting as master of flotilla, causing collision between tow barge and moored ship ‑‑ Whether corporate tug owners entitled to limit liability ‑‑ Whether fault of tug master fault of corporation ‑‑ Canada Shipping Act, R.S.C. 1970, c. S‑9, s. 647(2).
Maritime law ‑‑ Collision ‑‑ Limitation of liability ‑‑ Appropriate unit of limitation ‑‑ Navigational error by lead tug captain, acting as master of flotilla, causing collision between tow barge and moored ship ‑‑ Vessels in flotilla belonging to different shipowners ‑‑ Whether limitation of liability provisions in Canada Shipping Act applicable to limit lead tug owner's liability ‑‑ If so, whether all vessels of lead tug owner in flotilla should be taken into account in determining extent of liability ‑‑ Canada Shipping Act, R.S.C. 1970, c. S‑9, s. 647(2).
The moored ship Rhône was struck by the barge Widener in the Port of Montréal. They both sustained damage. At the time of the collision, the Widener was being towed by four tugs. The Ohio was in front of the Widener, the South Carolina and the Ste. Marie II were on either side, and the Rival was at the rear. Of the four tugs, only two, the South Carolina and the Ohio, were owned by Great Lakes. Captain Kelch, on the tug Ohio, acted as de facto master of the flotilla. His navigational errors, compounded by a malfunction of the Ohio's towing apparatus, caused the collision.
The owners of the Rhône sued the barge and the tug owners for damaging their ship and North Central, the owner of the barge, sued Great Lakes for breach of its towage contract. Great Lakes denied liability in both actions and counterclaimed for limitation of liability pursuant to s. 647(2) of the Canada Shipping Act . In the Federal Court, Trial Division, in the action commenced by the owners of the Rhône, the trial judge apportioned 80 percent of the liability to Great Lakes, based on the negligence of the South Carolina and the Ohio, and 20 percent to North Central, based on the negligence of the captain of the Widener for failing to drop the Widener's own anchor to stop its slide into the Rhône. In the action instituted by North Central, the trial judge ordered Great Lakes to pay all of the damages incurred by the Widener. Great Lakes' counterclaims for limitation of liability in both actions were dismissed. Great Lakes appealed both decisions. North Central also cross‑appealed the trial judge's finding of fault against the Widener. The Federal Court of Appeal confirmed the finding of negligence against Captain Kelch on the Ohio and against the Widener but rejected the assessment of fault against the South Carolina, noting that any errors it had made had been pursuant to orders from Captain Kelch on the Ohio and not any negligence on the part of those responsible for her navigation. The court nevertheless maintained the trial judge's overall finding with respect to both the negligence and the apportionment of liability as between Great Lakes and North Central. The court also agreed with the trial judge that Captain Kelch was a directing mind of Great Lakes, at least for the purpose of carrying out Great Lakes' obligations in relation to the tow of the Widener. As such, it found Great Lakes was not entitled to limit its liability since the damage did not occur "without its actual fault or privity".
In this Court, Great Lakes challenges the denial of its counterclaims to limit its liability under s. 647(2) of the Canada Shipping Act . These appeals raise three issues: (1) Is the captain of Great Lakes' tug Ohio a directing mind of Great Lakes by virtue of the fact that he exercised some discretion and performed some non‑navigational functions as an incident of his employment? (2) Does s. 647(2) apply to limit Great Lakes' liability with respect to errors committed in the navigation of other vessels within the flotilla not owned by Great Lakes? (3) In the event that Great Lakes is entitled to limit its liability under the Canada Shipping Act , what vessels must be taken into account in determining the extent of its liability?
Held (L'Heureux‑Dubé and McLachlin JJ. dissenting in part): The appeals should be allowed. The judgment of the Federal Court of Appeal, in so far as it relates to Great Lakes' inability to limit its liability under s. 647(2) of the Canada Shipping Act , is set aside. The unit of limitation for purposes of s. 647(2) should be the tug Ohio.
Per La Forest, Sopinka, Gonthier, Cory and Iacobucci JJ.: The collision between the Rhône and the Widener did not occur with the actual fault or privity of Great Lakes. While Captain Kelch was the master of the Ohio at the time of the collision, navigational errors committed by a ship's master, in the course of his duties, do not in themselves give rise to actual fault or privity on the part of the shipowner in the absence of a breach of its duty to supervise the management and navigation of its vessel which is causally linked to the resulting damage. Further, there was no actual fault or privity on the part of Great Lakes on the basis that Captain Kelch was a directing mind of the corporation. The key factor which distinguishes directing minds from normal employees is the capacity to exercise decision-making authority on matters of corporate policy, rather than merely to give effect to such policy on an operational basis, whether at head office or across the sea. While Captain Kelch no doubt had certain decision-making authority on navigational matters as an incident of his role as master of the tug Ohio and was given important operational duties, he did not have governing authority over the management and operation of Great Lakes' tugs. The totality of the evidence clearly showed that Captain Kelch was essentially a port captain subject to supervision and direction. Given Captain Kelch's considerable expertise, he was given additional responsibilities, including some non‑navigational functions, but they do not denote delegation to him of the governing executive authority over the management and supervision of Great Lakes' fleet. This authority remained with his superior. The fact that his superior may have been lax in his supervision of Captain Kelch does not alter the fact that Kelch was essentially a servant of Great Lakes. Finally, it was not out of the ordinary practice for the captain of the lead tug to act as master of a flotilla. Arranging for additional tugs was also a component of the exercise of navigational responsibilities. In fact, Captain Kelch's extensive authority in navigational matters was not unusual in the trade. The discretion of a master in the performance of his assigned role is a wide one that generally extends to all acts that are usual and necessary for the use and employment of a ship. A master's discretion in navigational matters does not derive from delegation of central authority but from tradition and necessity.
Section 647(2) of the Canada Shipping Act is applicable to limit Great Lakes' liability. Under s. 647(2)(d)(ii), the owner of a ship may limit its liability for damage caused to another vessel through "any other act or omission of any person on board that ship". Great Lakes, as owner of the Ohio, may thus limit its liability since the cause of the collision consisted of acts or omissions of Captain Kelch on board the Ohio. Interpreting s. 647(2) in this manner to limit Great Lakes' liability accords not only with the clear words of the statute but also with the purpose underlying this section -- namely, removing the threat of unlimited liability to a shipowner.
All the vessels within a flotilla belonging to an impugned shipowner need not be taken into account in determining the extent of that shipowner's liability. The intent of s. 647(2) of the Canada Shipping Act is to limit liability for navigational errors according only to the tonnage of those vessels causing the alleged damage. Apart from the vessel responsible for the overall navigation of a flotilla, only those vessels of the same shipowner which physically caused or contributed to the resulting damage form the unit for which liability is limited. Here, the appropriate unit of limitation under s. 647(2) is the tonnage of the tug Ohio alone. The South Carolina was absolved of any fault. Only the Ohio and the Widener were found to have been negligent. It does not appear from the findings of the courts below that the South Carolina physically contributed to the collision in any manner. The resulting damage to the Widener and the Rhône would have arisen notwithstanding the South Carolina's role. In light of these facts, the South Carolina cannot be held to be a "guilty" vessel or part of the "wrongdoing mass". It would be stretching the principles of causation beyond their proper limits to hold a vessel not physically causing the impugned damage nor responsible for the navigation of the vessel which in fact physically caused the damage to be part of the "wrongdoing mass".
Per L'Heureux‑Dubé and McLachlin JJ. (dissenting in part): Both the Ohio and the South Carolina should be considered in determining the amount of the limitation of liability under s. 647(2) of the Canada Shipping Act . In cases of navigational error affecting the conduct of a flotilla, all the vessels owned by the party responsible for the error which are affected by the error, whether involved directly in the accident or contributing causally to the accident, should be considered for purposes of determining the maximum liability of that party.
This conclusion accords with the traditional Canadian "aggregate tonnage" approach, an approach compatible with the wording and purpose of s. 647(2) . There is no requirement in s. 647(2) (d)(i) that the ship itself have been "negligent", nor that the negligent navigator have been on board the ship which is used for purposes of the limitation. All that is required is that there have been an act or omission in relation to the navigation or management of a ship. This language is broad enough to encompass the misdirection of a tow, and thus supports the Canadian approach that, in the context of this case, the tonnage of both tugs owned by Great Lakes should be considered for purposes of determining the limitation on liability. The fault of misnavigation of a flotilla cannot realistically be confined to a single vessel since it affects all the vessels which are involved in directing the barge. The fact that the navigator happens to be standing on one vessel or the other is incidental; what is essential is the direction which caused the various vessels to act as they did. Here, the navigation mistakes caused all the tugs, including the South Carolina, to move the barge too quickly. That movement, exacerbated by the mechanical malfunction on the Ohio, caused the collision. The South Carolina thus physically contributed to the collision and the loss. Finally, the policy basis of the enactment of statutory liability limitations for shipowners, including the limitation in the Canada Shipping Act , is the promotion of shipping by limiting the potentially ruinous risk that would otherwise be faced by shipowners. A shipowner's potential liability is limited to a value based on the assets which have been devoted by the shipowner to the operation in question. The owner's assets employed in the operation being higher, the amount of the limitation should proportionately be higher, if the purpose of the section is to be respected.
Section 647(2) is an extraordinary provision, operating in derogation of the usual rights of recovery for negligence causing damage to others. Unless it is clear that the limitation should be reduced to a portion of the owner's assets involved in the collision, all the assets should be considered; the courts should derogate from the usual rights of recovery only to the extent that the language and the purpose of the provision clearly so require.
Cases Cited
By Iacobucci J.
Considered: London Dredging Co. v. Greater London Council (The Sir Joseph Rawlinson), [1972] 2 Lloyd's Rep. 437; The Bramley Moore, [1963] 2 Lloyd's Rep. 429; Stein v. The Ship "Kathy K", [1976] 2 S.C.R. 802; The Ran; The Graygarth, [1922] P. 80; The Harlow, [1922] P. 175; The Freden (1950), 83 Ll. L. Rep. 427; Owners of the M.S. Pacific Express v. The Tug Salvage Princess, [1949] Ex. C.R. 230; Monarch Towing & Trading Co. v. British Columbia Cement Co., [1957] S.C.R. 816; distinguished: The Alvah H. Boushell, 38 F.2d 980 (1930); referred to: The Lady Gwendolen, [1965] 1 Lloyd's Rep. 335; Grand Champion Tankers Ltd. v. Norpipe A/S (The Marion), [1984] 2 All E.R. 343; Northern Fishing Co. (Hull) Ltd. v. Eddom (The Norman), [1960] 1 Lloyd's Rep. 1; Wishing Star Fishing Co. v. The B.C. Baron, [1988] 2 F.C. 325; Tesco Supermarkets Ltd. v. Nattrass, [1972] A.C. 153; Lennard's Carrying Co. v. Asiatic Petroleum Co., [1915] A.C. 705 (H.L.), aff'g [1914] 1 K.B. 419 (C.A.); Paterson Steamships, Ltd. v. Robin Hood Mills, Ltd. (The Thordoc) (1937), 58 Ll. L. Rep. 33; British Columbia Telephone Co. v. Marpole Towing Ltd., [1971] S.C.R. 321; H. L. Bolton (Engineering) Co. v. T. J. Graham & Sons Ltd., [1957] 1 Q.B. 159; Canadian Dredge & Dock Co. v. The Queen [1985] 1 S.C.R. 662; Continental Bank of Canada v. Riedel International Inc. (1991), 78 D.L.R. (4th) 232; The Garden City, [1982] 2 Lloyd's Rep. 382; Société anonyme des minerais v. Grant Trading Inc. (The Ert Stefanie), [1989] 1 Lloyd's Rep. 349; Grant v. Norway (1851), 20 L.J.C.P. 93; Robertson v. Owners of the Ship Maple Prince, [1955] Ex. C.R. 225.
By McLachlin J. (dissenting in part)
The Ran; The Graygarth, [1922] P. 80; Owners of the M.S. Pacific Express v. The Tug Salvage Princess, [1949] Ex. C.R. 230; Monarch Towing & Trading Co. v. British Columbia Cement Co., [1957] S.C.R. 816; The Bramley Moore, [1963] 2 Lloyd's Rep. 429; London Dredging Co. v. Greater London Council (The Sir Joseph Rawlinson), [1972] 2 Lloyd's Rep. 437; The Alvah H. Boushell, 38 F.2d 980 (1930); The Bordentown, 40 F. 682 (1889); The Anthracite, 168 F. 693 (1909), certiorari denied, 214 U.S. 522 (1909).
Statutes and Regulations Cited
Canada Shipping Act, R.S.C. 1970, c. S‑9, ss. 647(2), 649.
Canada Shipping Act, R.S.C., 1985, c. S‑9, ss. 575(1) , 577 .
Authors Cited
Donovan, James J. "The Origins and Development of Limitation of Shipowners' Liability" (1979), 53 Tul. L. Rev. 999.
Ewaschuk, E. G. "Corporate Criminal Liability and Related Matters" (1975), 29 C.R.N.S. 44.
Gilmore, Grant, and Charles L. Black, Jr. The Law of Admiralty, 2nd ed. Mineola, N.Y.: Foundation Press, 1975.
Hill, Christopher Julius Starforth. Maritime Law, 3rd ed. London: Lloyd's of London Press, 1989.
Jones, Walter W. "Flotilla or Several Vessels of Same Owner as Liable Under Federal Statute Providing for Limitation of Shipowner's Liability (46 USC § 183(a))" (1971), 9 A.L.R. Fed. 768.
Kovats, L. J. The Law of Tugs and Towage. Chichester: Rose, 1980.
Marsden, Reginald G. The Law of Collisions at Sea, 11th ed. By Kenneth C. McGuffie. London: Stevens & Sons, 1961.
Muir, I. A. "Tesco Supermarkets, Corporate Liability and Fault" (1973), 5 N.Z.U. L. Rev. 357.
Williams, Glanville. Textbook of Criminal Law, 2nd ed. London: Stevens & Sons, 1983.
APPEALS from a judgment of the Federal Court of Appeal, [1990] 3 F.C. 185, 106 N.R. 113, 67 D.L.R. (4th) 646, affirming in part a judgment of Denault J. (1988), 18 F.T.R. 81. Appeals allowed, L'Heureux-Dubé and McLachlin JJ. dissenting in part.
Marc Nadon and George J. Pollack, for the appellant.
Edouard Baudry, for the respondents.
//Iacobucci J.//
The judgment of La Forest, Sopinka, Gonthier, Cory and Iacobucci JJ. was delivered by
Iacobucci J. -- These appeals require this Court to consider the limitation of liability provisions within the Canada Shipping Act, R.S.C. 1970, c. S‑9, allowing a shipowner to limit its liability for damages caused to other vessels occurring without the shipowner's actual fault or privity. More specifically, this Court must determine whether the appellant is entitled to limit its liability for the negligence of its employee in directing the navigation of a flotilla and, if so, the appropriate unit of limitation.
I. Facts
On November 7, 1980, the moored ship, Rhône, owned by the respondent Vinalmar S.A. ("Vinalmar"), was struck by the barge, Peter A.B. Widener ("Widener"), at the Port of Montréal. The Rhône sustained damages in the agreed amount of $88,357.89, while the damages to the Widener were set at $49,200.
The Widener, owned by the respondent North Central Maritime Corporation ("North Central"), is a "dumb" barge, so called because it relies on tug boats for its movements. At the time of the casualty, the Widener was commanded by Captain Lyons and was being towed by four tugs. Two of these, the South Carolina and the Ohio, were owned by the appellant, Great Lakes Towing Company ("Great Lakes"). Two others, the Ste. Marie II and the Rival were owned by the respondent North Central, and McAllister Towing & Salvage Ltd., respectively.
The towage of the Widener had been arranged through an oral contract between North Central and Great Lakes and involved its towage from Duluth, Minnesota to the Port of Montréal. Captain Kelch, master of the Great Lakes' tug Ohio, acted as de facto master of the flotilla.
On the day of the collision in question, the Ohio was in front of the Widener, the South Carolina and the Ste. Marie II were on either side, and the Rival was at the rear. Owing to navigational errors made by Captain Kelch relating to the speed at which the flotilla was travelling and the point at which they turned around St. Helen's Island and proceeded up river against the St. Mary's current, the Widener began to move off course as the flotilla entered the Port of Montréal. The tugs attempted to compensate for this but the Ohio's towing apparatus malfunctioned and the Widener began to drift towards the Rhône. Despite attempts to correct the Widener's angle of drift, the Widener collided with the Rhône.
As a result of this mishap, two actions were commenced. In the first, the owners of the Rhône, the respondent Vinalmar, sued everyone involved ‑‑ the barge owner and tug owners ‑‑ for damaging their ship. In the second, the owners of the Widener, the respondent North Central, sued the appellant Great Lakes for breach of its contract of towage. Great Lakes denied liability in both actions and counterclaimed for limitation of liability pursuant to s. 647(2) of the Canada Shipping Act .
The two actions were joined for trial. In the action commenced by the owners of the Rhône, Denault J. apportioned 80 percent of the liability to Great Lakes, based on the negligence of the South Carolina and the Ohio, and 20 percent to the respondent, North Central, based on the negligence of Captain Lyons, captain of the Widener, for failing to drop the Widener's own anchor to stop its slide into the Rhône. In the action instituted by North Central, Denault J. ordered Great Lakes to pay all of the damages incurred by the Widener. Great Lakes' counterclaims for limitation of liability in both actions were dismissed.
Great Lakes appealed both decisions. North Central, the owners of the Widener, also cross‑appealed the trial judge's finding of fault against the Widener. Although the Federal Court of Appeal disagreed with certain findings made by Denault J., it nevertheless maintained his overall finding with respect to both the negligence and the apportionment of liability as between Great Lakes and North Central. It agreed with Denault J. that Captain Kelch was a directing mind of Great Lakes, at least for the purpose of carrying out Great Lakes' obligations in relation to the tow of the Widener. As such, it found Great Lakes was not entitled to limit its liability since the damage did not occur "without [its] actual fault or privity".
As both appeals to this Court involve the same parties, facts, issues, and reasons in the courts below, I propose to deal with both through a single set of reasons. In both actions, the appellant, Great Lakes, challenges the denial of its counterclaims to limit its liability under s. 647(2) of the Canada Shipping Act submitting that Captain Kelch was not a directing mind of the company. It therefore contends that it should be entitled to limit its liability on the basis of the tonnage of the tug Ohio. However, if this Court finds the courts below erred in holding the resulting damage to the Widener and Rhône did not occur "without [the] actual fault or privity" of Great Lakes, the respondents submit that s. 647(2) is of no avail to Great Lakes in any event or, alternatively, that liability should be limited according to the combined tonnage of its tugs, the Ohio and South Carolina.
II. Relevant Statutory Authority
Canada Shipping Act, R.S.C. 1970, c. S‑9
647. . . .
(2) The owner of a ship, whether registered in Canada or not, is not, where any of the following events occur without his actual fault or privity, namely,
. . .
(d) where any loss or damage is caused to any property, other than property described in paragraph (b), or any rights are infringed through
(i) the act or omission of any person, whether on board that ship or not, in the navigation or management of the ship, in the loading, carriage or discharge of its cargo or in the embarkation, carriage or disembarkation of its passengers, or
(ii) any other act or omission of any person on board that ship;
liable for damages beyond the following amounts, namely,
. . .
(f) in respect of any loss or damage to property or any infringement of any rights mentioned in paragraph (d), an aggregate amount equivalent to 1,000 gold francs for each ton of that ship's tonnage.
649. (1) Sections 647 and 648 extend and apply to
. . .
any person acting in the capacity of master or member of the crew of a ship and to any servant of the owner or of any person described in paragraphs (a) to (c) where any of the events mentioned in paragraphs 647(2) (a) to (d) occur, whether with or without his actual fault or privity.
(2) The limits set by section 647 to the liabilities of all persons whose liability is limited by section 647 and subsection (1) of this section arising out of a distinct occasion on which any of the events mentioned in paragraphs 647(2) (a) to (d) occurred apply to the aggregate of such liabilities incurred on that occasion.
(Now R.S.C., 1985, c. S-9, ss. 575(1) (d), (f), and 577 .)
III. Judgments in the Courts Below
Federal Court, Trial Division (1988), 18 F.T.R. 81
Denault J. had no trouble in concluding that Captain Kelch, as captain of the Ohio, conducted the flotilla in a negligent manner. Kelch had personal knowledge that the turn around St. Helen's Island at the entrance to the Port of Montréal would be a difficult one because he had run into trouble there the year before while towing another vessel. He was aware that the current at that point was fast and had actually agreed the night before with Captain Lyons of the Widener that they would make the turn at a less precarious place. In fact, he had notified Captain Lloyd, vice‑president of operations of Great Lakes, that he was calling in a fourth tug (the Rival) to assist in the turn precisely because he was concerned about the difficulties involved. While Denault J. did not fault Kelch for his arrangement of the tugs, he found Kelch negligent in having them enter the turn at full speed so that they had little power to respond to deviations in the course of the tow. He further found Kelch negligent in failing to communicate adequately with the other tugs. In this regard, Denault J. made the following finding of fault (at pp. 103-4):
However, the greatest part of the liability must of necessity rest with the lead tug, the "Ohio", its master and owners. The lack of preparation which was apparent in the organization and conduct of this voyage, the haste shown by Capt. Kelch to get into the Port of Montréal, the flagrant lack of communication between the masters both before the turn at the Ile Ste‑Hélène buoy and while they were proceeding back up the river, the decision to turn at that location, their return speed, are all factors which helped to make the accident inevitable. Furthermore, the mechanical breakdown on the tug, which had been the subject of extreme tension, cannot serve to exonerate the owners of the "Ohio" in respect of the "Rhone".
Denault J. also found the South Carolina failed to discharge its burden in establishing that it had not been at fault. Moreover, he held the captain of the Widener was negligent for failing to communicate with the Ohio as the accident developed and in not dropping the barge's anchor on his own initiative. He apportioned 80 percent of the liability to Great Lakes and 20 percent to North Central.
Denault J. proceeded to consider the question of limitation of liability under s. 647(2) . He analyzed the organization of Great Lakes and essentially found that the directing minds of Great Lakes were represented by Captains Lloyd and Kelch, as well as Joseph White, who was responsible for the maintenance and repairs for its fleet. He noted that, while Captain Lloyd had plenary responsibility for operational matters, he had delegated significant responsibility over the tug Ohio to Kelch. In particular, he observed that Kelch was responsible for anything relating to the navigation of the Ohio, including the provision of maritime maps and ensuring that all necessary items were on board the tug. He also highlighted that, by Lloyd's own admission, Kelch was part of the company's management and that Kelch himself viewed his many duties as making him a representative of Great Lakes. In terms of this particular voyage, Denault J. noted that, apart from preliminary measures taken care of by Lloyd, all navigational decisions were Kelch's responsibility. Therefore, while Kelch referred to Lloyd for authority to retain a fourth tug, Denault J. viewed this merely as a formality to cover the financial aspects of the matter. The decision whether to retain an additional tug rested with Kelch.
Denault J. also found that the breakdown of the towing equipment had to be attributed to the negligence of Great Lakes in maintaining its equipment. Moreover, he was particularly concerned by the fact that Lloyd had not been aware that Kelch had elected to act as master of the flotilla and, as a matter of practice, did not check whether Great Lakes' servants would assume responsibility as lead tug in a flotilla. Therefore, he concluded (at p. 110):
In short, even assuming that the defendant G.L.T. was able to prove the identity of persons whose acts identified them with acts of the company, it is far from establishing that those persons were not guilty of fault or privity in the sense that must be given to these words, as explained in the "Kathy K". On the contrary, the evidence established that Capt. Lloyd was the person whose acts identified him most with the acts of the company so far as administration and general supervision are concerned, and it was abundantly clear from his testimony that he knew practically nothing of what was happening on board his tugs during this voyage, cared very little about it and gave his masters all possible latitude. The person responsible for maintenance, Jos White, gave no plausible explanation of the mechanical breakdown on board the "Ohio". Finally, Capt. Kelch, who was responsible on the company's behalf not only for providing the tugs with the documentation necessary for such a voyage, but inter alia for hiring a fourth tug to bring the barge to its destination, failed lamentably in his duties by exercising his functions as a company manager negligently in respect of the "Rival".
Denault J. dismissed the argument that, because the mistakes made by Captain Kelch were navigational in nature, the limitation provisions within the Act should nevertheless apply. He found the fact that Kelch performed non‑navigational functions, such as providing maps and arranging additional tugs, made him part of Great Lakes' management and, as such, any errors committed while in his capacity as tug master were those of the company. He concluded (at pp. 109-10):
It does not much matter whether he acted wrongfully in his capacity as a manager of the company, as port master, or whether his faults are attributable to navigational errors as tug master: that cannot be a means of excluding his liability to the plaintiff. If the same person who commits a navigational mistake is also one whose acts identify him with the acts of the company, and in that capacity is also at fault, his employers cannot benefit from the limitation of liability contained in s. 647.
Denault J. next turned to North Central's action against Great Lakes. He found Great Lakes breached its contractual obligation to North Central and could not limit its corresponding liability for the same reasons stated above. He also found that the limitation of liability contained in Great Lakes' published tariff did not form part of the contract between the parties and, therefore, he refused to give effect to it. Accordingly, Denault J. held North Central was entitled to recover the entire amount of the damages sustained by the Widener from Great Lakes.
Federal Court of Appeal, [1990] 3 F.C. 185
Hugessen J.A. wrote for the court. He addressed the findings of negligence against the three vessels in turn. He confirmed the finding of negligence against Kelch on the Ohio, noting that it was well supported by the evidence and that any other conclusion would have been perverse. He also confirmed the finding against the Widener. However, he rejected the assessment of fault against the South Carolina, noting that any errors it had made had been pursuant to orders from Kelch on the Ohio and not any negligence on the part of those responsible for her navigation. He stated, however, this reversal had no implications for the distribution of liability between Great Lakes and North Central.
On the issue of limitation of liability, Hugessen J.A. disagreed with the trial judge's finding of actual fault or privity in Captain Lloyd because of his inadequate supervision of Captain Kelch. While he agreed with the trial judge that an owner may be in actual fault or privity through sins of omission, he noted that the jurisprudence requires that such omission breach the standard of a reasonably prudent shipowner and be causally related to the casualty. Relying on The Lady Gwendolen, [1965] 1 Lloyd's Rep. 335 (C.A.), Grand Champion Tankers Ltd. v. Norpipe A/S (The Marion), [1984] 2 All E.R. 343 (H.L.), and Northern Fishing Co. (Hull), Ltd. v. Eddom (The Norman), [1960] 1 Lloyd's Rep. 1 (H.L.), he commented (at pp. 212-13):
The comparison between these cases and the facts as found by the learned Trial Judge in the case at bar is striking. There is no suggestion that a lack of supervision by the owners contributed in some way, however remote, to the casualty. The specific acts of negligence found against Captain Kelch are without exception ordinary questions of navigation lying within the normal authority and scope of activity of the master. There is no shred of evidence to suggest that a prudent shipowner would have so concerned himself with the details of navigation as to specifically instruct Kelch where to turn the flotilla or at what speed to tackle the St. Mary's current or in what manner to communicate with the other captains. . . . [T]here was no reasonable likelihood that any closer degree of supervision and reporting imposed by the owners at the company's Head Office in Cleveland would have materially affected the actions or decision of Captain Kelch when he was navigating his flotilla in the Port of Montréal.
He further found Denault J. to have erred in finding Great Lakes was in actual fault or privity by reason of White's supervision of the repair and maintenance of the Ohio's towing machinery. While there was clearly a causal link between the breaking of the towing machine and the resulting damage, Hugessen J.A. concluded the trial judge erred in imposing such a high standard on the owner of a ship in relation to the proper functioning of its equipment. He highlighted that Great Lakes' inspection and maintenance system was "numerous and sophisticated" and that there was no finding of any inadequacy or defect in that system. As such, Hugessen J.A. observed that the trial judge's assessment of fault had the effect of incorrectly turning a shipowner into an insurer every time a casualty results from an equipment failure.
Hugessen J.A. then turned to the question of whether Kelch was a directing mind of Great Lakes. Citing Wishing Star Fishing Co. v. The B.C. Baron, [1988] 2 F.C. 325 (C.A.), he noted that, if Kelch was a directing mind, the fact that he was also acting as master and that his negligent acts had been committed within the scope of that capacity was irrelevant. Hugessen J.A. emphasized that Kelch was more than an ordinary master and had extended duties and responsibilities for the conduct of the flotilla. In this regard, he relied on the following facts in coming to the conclusion that Kelch was a directing mind of Great Lakes: (1) he was the towmaster of the flotilla and was vested with authority to give commands to all the other vessels in the flotilla; (2) his appointment to command the flotilla was not made by or with the knowledge of anyone senior to him at Great Lakes; (3) he was described, in parts of the evidence, as being part of management, a salaried employee, a "trouble shooter" and the person responsible for breaking in new captains; and (4) he took care of the documents for all of the Great Lakes' fleet. Hugessen J.A. admitted that this finding was at "the outer margins of the application of the doctrine of corporate identification" (p. 222) but declined to characterize the trial judge's finding as so palpable and overriding an error that it warranted appellate intervention, particularly bearing in mind the heavy burden on Great Lakes to establish its right to invoke the statutory limitation.
With respect to Great Lakes' liability for the damage caused to the Widener, Hugessen J.A. rejected Great Lakes' attempt to raise the issue of contributory negligence. Moreover, he further dismissed its assertion that the limitation of liability clause contained in its tariff rates formed part of the contract between the parties. As such, apart from striking from the trial judgment the attribution of fault against the South Carolina, Hugessen J.A. dismissed both the appeal and the cross‑appeal.
IV. Issues
These appeals raise three issues. First, is the master of the appellant's tug Ohio a directing mind of the appellant by virtue of the fact that he exercised some discretion and performed some non‑navigational functions as an incident of his employment? Second, do the limitation of liability provisions in the Canada Shipping Act apply to limit a shipowner's liability for the acts or omissions of its servant in directing a flotilla comprising vessels belonging to other shipowners? Third, in the event that the appellant is entitled to limit its liability under the Canada Shipping Act , what vessels must be taken into account in determining the extent of its liability?
V. Analysis
1. Is the Master of the Appellant's Tug a Directing Mind of the Corporation?
The appellant, Great Lakes, contends that Hugessen J.A. erred in concluding that there was actual fault or privity on its part on the basis that Captain Kelch was a directing mind of the corporation and that therefore Great Lakes could not limit its liability under the Canada Shipping Act . Assessing the merits of this contention requires that I examine briefly both the general principles pertaining to the limitation of liability under the Canada Shipping Act and the development of the doctrine of corporate identification before applying the relevant principles to the facts of this case. As a preliminary matter, I believe it important to point out that the identification of particular individuals within a corporate structure as directing minds of that company is a question of mixed fact and law. As Lord Reid observed in Tesco Supermarkets Ltd. v. Nattrass, [1972] A.C. 153 (H.L.), at p. 170, "It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company's servant or agent." The legal issue is concerned with identifying which functions or offices ground corporate identification; the factual issue determines who carries out these functions or fills these offices.
(a)The General Principles of Limitation of Liability and Corporate Identification
It is well settled that in an action to limit liability under s. 647(2) of the Canada Shipping Act , the onus is on the shipowner claiming the limitation to establish a complete absence of "actual fault or privity" on its part. The onus is a heavy one which is not discharged by showing merely that the owner was not the sole or principal cause of the mishap: Stein v. The Ship "Kathy K", [1976] 2 S.C.R. 802, at p. 819.
The leading Anglo‑Canadian case setting out the meaning of the words "actual fault or privity" and its application to a corporate shipowner is Lennard's Carrying Co. v. Asiatic Petroleum Co., [1915] A.C. 705 (H.L.), aff'g [1914] 1 K.B. 419 (C.A.). The words "actual fault or privity" were found to denote something personal and blameworthy to a shipowner as opposed to a constructive fault arising under the doctrine of respondeat superior. In the oft-quoted words of Viscount Haldane L.C. at pp. 713‑14:
It must be upon the true construction of that section in such a case as the present one that the fault or privity is the fault or privity of somebody who is not merely a servant or agent for whom the company is liable upon the footing respondeat superior, but somebody for whom the company is liable because his action is the very action of the company itself. It is not enough that the fault should be the fault of a servant in order to exonerate the owner, the fault must also be one which is not the fault of the owner, or a fault to which the owner is privy; and I take the view that when anybody sets up that section to excuse himself from the normal consequences of the maxim respondeat superior the burden lies upon him to do so.
In Paterson Steamships, Ltd. v. Robin Hood Mills, Ltd. (The Thordoc) (1937), 58 Ll. L. Rep. 33 (P.C.), Lord Roche adopted the meaning attributed to the words "fault and privity" by both the Court of Appe