Admiralty Jurisdiction

   

Last Updated: 2016-05-12 00:00:00

Admiralty Jurisdiction

The cases under this title consider the Admiralty jurisdiction of the courts and which court has jurisdiction to hear a particular matter. More specifically, because the provincial superior courts have inherent jurisdiction, the cases usually concern the whether the Federal Court's admiralty jurisdiction is invoked. It is important to note that the Admiralty jurisdiction of the Federal Court is closely related to the definition, nature and scope of the body of law known as Canadian Maritime Law which is, in turn, partly dependant upon the constitutional division of powers between the federal and provincial governments. Therefore, the cases digested under the topic Constitutional Issues may also be relevant and should be consulted when addressing a jurisdiction issue.

The Admiralty Jurisdiction of Provincial Courts

The provincial superior court's have inherent jurisdiction which means that they have jurisdiction to hear all cases unless a statute specifically provides otherwise (see below for some examples of statutes that specifically provide otherwise). It is clear that they have admiralty jurisdiction, something which the Supreme Court of Canada confirmed in Ontario v Pembina Exploration., [1989] 1 SCR 206, at para. 15. Ontario v Pembina also stands for the proposition that a provincial inferior court, such as a small claims court, also has jurisdiction to hear admiralty cases. However, with the exception of British Columbia, the provincial courts do not have in rem actions or admiralty rules. Thus, as a practical matter, it is often prudent to commence admiralty cases in the Federal Court.

The Federal Court's Concurrent Admiralty Jurisdiction

The Federal Court is a statutory court and, as such, has only the jurisdiction specifically given to it. Section 22 of the Federal Courts Act is the primary source of the Federal Court's admiralty jurisdiction. Subsection 22(1) is a general grant of concurrent jurisdiction to hear and determine any case "in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law".

22. (1) The Federal Court has concurrent original jurisdiction, between subject and subject as well as otherwise, in all cases in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, except to the extent that jurisdiction has been otherwise specially assigned.

Subsection 22(2) of the Federal Courts Act also enumerates 19 specific categories of claims over which the Federal Court has jurisdiction. The categories are:

(a) any claim with respect to title, possession or ownership of a ship or any part interest therein or with respect to the proceeds of sale of a ship or any part interest therein;
(b) any question arising between co-owners of a ship with respect to possession, employment or earnings of a ship;
(c) any claim in respect of a mortgage or hypothecation of, or charge on, a ship or any part interest therein or any charge in the nature of bottomry or respondentia for which a ship or part interest therein or cargo was made security;
(d) any claim for damage or for loss of life or personal injury caused by a ship either in collision or otherwise;
(e) any claim for damage sustained by, or for loss of, a ship including, without restricting the generality of the foregoing, damage to or loss of the cargo or equipment of, or any property in or on or being loaded on or off, a ship;
(f) any claim arising out of an agreement relating to the carriage of goods on a ship under a through bill of lading, or in respect of which a through bill of lading is intended to be issued, for loss or damage to goods occurring at any time or place during transit;
(g) any claim for loss of life or personal injury occurring in connection with the operation of a ship including, without restricting the generality of the foregoing, any claim for loss of life or personal injury sustained in consequence of any defect in a ship or in her apparel or equipment, or of the wrongful act, neglect or default of the owners, charterers or persons in possession or control of a ship or of the master or crew thereof or of any other person for whose wrongful acts, neglects or defaults the owners, charterers or persons in possession or control of the ship are responsible, being an act, neglect or default in the management of the ship, in the loading, carriage or discharge of goods on, in or from the ship or in the embarkation, carriage or disembarkation of persons on, in or from the ship;
(h) any claim for loss of or damage to goods carried in or on a ship including, without restricting the generality of the foregoing, loss of or damage to passengers’ baggage or personal effects;
(i) any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise;
(j) any claim for salvage including, without restricting the generality of the foregoing, claims for salvage of life, cargo, equipment or other property of, from or by an aircraft to the same extent and in the same manner as if the aircraft were a ship;
(k) any claim for towage in respect of a ship or of an aircraft while the aircraft is water-borne;
(l) any claim for pilotage in respect of a ship or of an aircraft while the aircraft is water-borne;
(m) any claim in respect of goods, materials or services wherever supplied to a ship for the operation or maintenance of the ship, including, without restricting the generality of the foregoing, claims in respect of stevedoring and lighterage;
(n) any claim arising out of a contract relating to the construction, repair or equipping of a ship;
(o) any claim by a master, officer or member of the crew of a ship for wages, money, property or other remuneration or benefits arising out of his or her employment;
(p) any claim by a master, charterer or agent of a ship or shipowner in respect of disbursements, or by a shipper in respect of advances, made on account of a ship;
(q) any claim in respect of general average contribution;
(r) any claim arising out of or in connection with a contract of marine insurance; and
(s) any claim for dock charges, harbour dues or canal tolls including, without restricting the generality of the foregoing, charges for the use of facilities supplied in connection therewith.

Because the Federal Court has jurisdiction to hear and determine any case "in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law", it is often necessary to determine the scope and content of "Canadian maritime law" in order to assess the full extent of the Federal Court's admiralty jurisdiction. Canadian maritime law is a separate and distinct body of law defined in section 2 of the Federal Courts Act and enacted by s. 42 of the Federal Courts Act.

“Canadian maritime law” means the law that was administered by the Exchequer Court of Canada on its Admiralty side by virtue of the Admiralty Act, chapter A-1 of the Revised Statutes of Canada, 1970, or any other statute, or that would have been so administered if that Court had had, on its Admiralty side, unlimited jurisdiction in relation to maritime and admiralty matters, as that law has been altered by this Act or any other Act of Parliament;

42. Canadian maritime law as it was immediately before June 1, 1971 continues subject to such changes therein as may be made by this Act or any other Act of Parliament.

Since at least ITO Terminal Operators Ltd. v Miida Electronics Inc., [1986] 1 SCR 752, the test for a finding of jurisdiction in the Federal Court has required that three essential elements be established:

(1) that there is a statutory grant of jurisdiction to the Federal Court;

(2) that there is an existing body of federal law, essential to the disposition of the case, which nourishes the statutory grant of jurisdiction; and

(3) that the law on which the case is based must be "a law of Canada" as the phrase is used in s. 101 of the Constitution Act.

The first element of the above test, that there be a statutory grant of jurisdiction to the Federal Court, is necessary but not sufficient, by itself, to give the Federal Court jurisdiction. This part of the test is usually satisfied, in relation to maritime matters, by referring to s. 22 of the Federal Courts Act.

The second element of the above test is that there be existing federal law to nourish the statutory grant of jurisdiction. In maritime matters the federal law nourishing the statutory grant is usually Canadian maritime law as enacted by s. 42 of the Federal Courts Act. There is a very large body of case law that explores the nature, scope and content of Canadian maritime law in relation to Federal Court jurisdiction. The more recent cases are digested on this site and, as well, there are papers listed below that address this issue in detail. In general, Canadian maritime law is the law that governs matters relating to navigation and shipping. It is federal law that is uniform throughout the country and is applied regardless of the court in which proceedings are commenced. It includes, but is not limited by, the rules and principles of English admiralty law as it was exercised in 1934. More specifically, it includes the laws relating to: carriage of goods by sea (Tropwood A.G. v Sivaco Wire & Nail Co); contracts relating to the sale of a ship (Antares Shipping Corp. v The “Capricorn); contracts for the repair of a ship or her equipment (Wire Rope Industries v B.C. Marine Shipbuilders Ltd); marine insurance (Triglav v Terrasses Jewellers Ltd); and stevedores (I.T.O. v Miida Electronics Ltd.). Canadian maritime law includes the common law principles of contract, tort, bailment and agency (Q.N.S. Paper Co. v Chartwell Shipping Ltd.) and tort liability (Whitbread v. Walley).

Finally, the third element in the above test, that the law must be a "law of Canada" within the meaning of s. 101 of the Constitution Act, requires that the nourishing law must be within federal legislative competence under s. 91(10) of the Constitution Act. This element of the test requires a constitutional analysis involving the division of powers under the Constitution Act between the federal and provincial governments. Again, the more recent cases considering these issues are summarized on this site but some are digested under the topic Constitutional Issues.

The three part test in ITO Terminal Operators Ltd. v Miida Electronics Inc. is somewhat easier to apply when one is addressing a matter that falls within one of the enumerated categories in ss. 22(2) of the Federal Courts Act. It has been held that claims within ss. 22(2) are necessarily nourished by Canadian maritime law and within the jurisdiction of the Federal Court. (Harry Sargeant III v. Al-Saleh, 2014 FCA 302, paras. 89-93; Siemens Canada Ltd. v. J. D. Irving Ltd., 2012 FCA 225 (CanLII),  para. 35; Skaarup Shipping Corporation v. Hawker Industries Limited [1980] 2 F.C. 746)

The Federal Court's Exclusive Admiralty Jurisdiction

It is to be noted that the Federal Court's admiralty jurisdiction under section 22 is not exclusive but is concurrent. This means that, unless a specific statute provides otherwise, the provincial superior courts also have jurisdiction to hear and determine admiralty cases. Two statutes that provide otherwise are the Marine Liability Act and the Canada Shipping Act 2001. These statutes give the Federal Court exclusive jurisdiction in relation to the following matters, among others:

Statute	Section	Claim/Matter
Marine Liability Act	32	The constitution and distribution of a limitation fund established under the LLMC Convention.
Marine Liability Act	52	The constitution and distribution of a limitation fund established under the CLC Convention.
Marine Liability Act	74.25	The constitution and distribution of a limitation fund established under the HNS Convention 2010, once it enters into force.
Marine Liability Act	106	Appeals from decisions by the Administrator of the Ship Source Oil Pollution Fund.
Canada Shipping Act, 2001	86(3)	Claims for lien in respect of seamen's wages. (Note that such claims can be made in any court with an in rem procedure but only the Federal Court and the British Columbia Supreme Court have such procedures.)

Additional Information

For further background and a historical review of the important cases in this area please see the below papers but take note that the papers are not current and this area continues to develop.

• Confused Seas: The Application of Provincial Laws to Maritime Matters - 2011
• A Reformulation of the Inter jurisdictional Immunity Doctrine - 2007
• Constitutional Implications of Ordon v Grail and Expanding Definition of Canadian Maritime Law -2000

Statutes and Regs

• Sections of the Federal Courts Act Relating to Maritime Law
• The Admiralty Rules of the Federal Court.

Admiralty Practice

   NEW/UPDATED

Last Updated: 2016-11-23 00:00:00

Admiralty Practice & Procedure

For an overview of the law of Admiralty practice and procedure review the paper entitled  Admiralty Practice and Procedure: An Overview - 2005.

For sister ship arrest, see the paper Sister Ship Arrest in the Federal Court of Canada: A Wreck in Need of Salvage, which considers the cases involving sister ship arrest and exposes a problem with s. 43(8) and Rule 481(2)(e).

Statutes and Regs

• Sections of the Federal Courts Act Relating to Maritime Law
• The Admiralty Rules of the Federal Court.

Carriage of Goods by Air

   NEW/UPDATED

Last Updated: 2016-08-31 00:00:00

Carriage by Air

Domestic Air Carriage

The domestic carriage of goods by air is not extensively governed by legislation. The Carriage by Air Act does not apply to domestic carriage. The only legislation governing the form and content of domestic air carriage contracts is the Air Transportation Regulations passed pursuant to the provisions of the Canada Transportation Act. These regulations merely require air carriers to file tariffs with the Canadian Transportation Agency and to specify in those tariffs the terms and conditions of their contracts of carriage. The regulations do not attempt to impose upon carriers any particular terms and conditions. Therefore, the domestic carriage of goods by air is governed by the general common law. This has two important implications.

First, the common law imposes strict liability on the carrier subject to certain limited exceptions. It is sometimes said that the carrier is an insurer of the goods. To establish a prima facie case against the air carrier all that the plaintiff needs to do is to prove receipt by the carrier of the cargo in good condition and failure to deliver or delivery by the carrier in a damaged condition. The carrier is then liable for damages unless it establishes one of the common law defences available to it. The common law defences are that the loss or damage was caused by:

• Act of God;
• Inherent Vice;
• Act of Queens Enemies; or
• Fault or fraud on the part of the shipper or owner of the goods

The parties to a domestic contract of carriage are free to negotiate and to include whatever terms they wish in the contract of carriage. Contracts for the carriage of goods by air generally include many defences in addition to the common law defenses and also, most importantly, include provisions excluding and limiting the liability of the carrier. In some cases (particularly in the case of courier companies) these contractual provisions can comprise many pages.

The general law of contract does impose some constraints and limits on the ability of carriers to completely avoid the consequences of their breach of contract or negligence. For example, the general law of contract requires that onerous terms or conditions be properly and sufficiently brought to the attention of the other party to the contract before or at the time the contract is entered into. There have been many decided cases in which exclusion or limitation clauses were held not to form part of the contract of carriage because they were not properly brought to the attention of the shipper prior to shipment. Additionally, when interpreting exclusion or limitation clauses the courts will usually require that any such term be expressed in clear and unambiguous language and will strictly construe such terms against the interest of the carrier and in favour of the shipper. Again, there have been many decided cases in which exclusion or limitation clauses have been held not to be applicable because of imprecise or inadequate wording. Finally, any terms or conditions that are considered to be “unconscionable” by the courts will not be enforced.

International Air Carriage

What Convention/Protocol Applies?

Canada is a party to the major international conventions governing the international carriage of goods by air. The Carriage by Air Act implements four separate regimes governing the international carriage of goods by air:

• Warsaw Convention - Section 2(1) of the Act implements the Convention for the Unification of Certain Rules Relating to International Carriage by Air (commonly referred to as the Warsaw Convention) which is contained in Schedule I to the Carriage by Air Act;
• Hague Protocol - Section 2(2) enacts the Hague Protocol to the Warsaw Convention which is contained in Schedule III to the Carriage by Air Act. The Hague Protocol was originally signed in 1955 and came into force in 1963. There are currently 136 state parties to the Hague Protocol. (Given the amount of air traffic between Canada and the United States, it is noteworthy that the United States did not sign the Hague Protocol.);
• Montreal Protocol -Section 2(2) also enacts the Montreal Protocol No. 4 to the Warsaw Convention which is contained in Schedule IV to the Carriage by Air Act. The Montreal Protocol was signed in 1975 and entered into force in 1998. There are currently 53 state parties to the Montreal Protocol
• Montreal Convention - Section 2.1 of the Carriage by Air Act enacts the Convention for the Unification of Certain Rules Relating to International Carriage by Air Done At Montreal on 28 May 1999. This is commonly referred to as the Montreal Convention and is contained in Schedule VI to the Carriage by Air Act. The Montreal Convention came into force internationally on 4 November 2003 and was proclaimed into force in Canada on the same day 14 .

Determining which of the conventions/protocols applies to a particular contract for the carriage of goods by air is not easy. The convention/protocol that will applies will depend on the countries of departure and destination. (This follows from the prescribed definitions of "international carriage" in the different protocols/conventions.) The convention/protocol that will apply will be the one that the country of departure and the country of destination are both parties to. Therefore it is necessary to ascertain which instruments the country of departure and country of destination have ratified in order to determine which Convention/Protocol will govern. This information can be obtained from the International Civil Aviation Organization. It is also important to note that domestic carriage could be international carriage where there is an “agreed stopping place” in the territory of another state. Thus, for example, carriage from Vancouver to Montreal with a stop at Chicago that is disclosed in the air waybill would be international air carriage. However, if the stop was unscheduled or not disclosed in the air waybill the carriage would probably be considered domestic carriage.

Liability

Under the various conventions, the air carrier is prima facie liable for loss of or damage to cargo during the carriage by air and for delay in delivery of cargo. There are, however, some subtle differences between the various conventions/protocols. The air carrier is prohibited from contracting out of the the convention provisions but does have prescribed defences, which differ depending on the convention/protocol. (See the overviews below for details.)

Limitation of Liability - Cargo Damage

The air carrier is entitled to limit liability unless the consignor has made a special declaration of value. Under the Warsaw convention and the Hague Protocol the limitation amount is 250 francs (16.58 SDRs) per kilogram. Under the Montreal Protocol the limitation amount is 17 SDRs per kilogram. Under the Montreal Convention the limitation amount was originally 17 SDRS per kilogram but was increased to 19 SDRs per kilogram in 2009 under the periodic review provisions in art. 24.

There is a profound difference between the Warsaw Convention and the Hague Protocol, on the one hand, and the Montreal Protocol and Montreal Convention, on the other hand, in relation to the loss of the right to limit. Under the Warsaw Convention the carrier can lose the right to limit if the damage is caused by wilful misconduct of the carrier or of his agents acting within the scope of their employment. Under the Hague Protocol the carrier loses the right to limit if it is proved that the damage resulted from an act or omission of the carrier, or his servants or agents acting within the course of their employment, done with intent to cause damage or recklessly and with knowledge that damage would probably result. In contrast, under the Montreal Protocol and Montreal Convention the right to limit liability in respect of claims for damge to cargo is absolute and cannot be lost.

Limitation Period

The prescription period for bringing proceedings against the carrier is the same in all Conventions/Protocols and is two years.

Additional Information

For a more detailed overview of the law of Carriage of Goods by Air, see the following papers.

• Canadian Law of Carriage of Goods by Air: An Overview and Analysis of Burden of Proof - 2004
• Canadian Law of Carriage of Goods by Air: An Overview and Summary - 2003

Statutes and Regs

• Carriage by Air Act
• Schedule 1 - The Warsaw Convention
• Schedule III - Hague Protocol to the Warsaw Convention
• Schedule IV - Montreal Protocol No. 4 to the Warsaw Convention
• Schedule VI - The Montreal Convention

Carriage of Goods by Road/Rail

   

Last Updated: 2015-12-24 00:00:00

Carriage of Goods by Road

The law applicable to carriage of goods by road depends on whether the carriage is intra-provincial (within a single province) or extra-provincial (between provinces or between a province and a foreign state).

Where the carriage is intra-provincial, the law of the province in which the carriage occurs applies and most provinces have legislation addressing the rights and obligations of the parties to a contract of carriage. Luckily, there is general, although not complete, uniformity between the various provincial statutes and regulations. For carriage within British Columbia, the governing regulation is Division 37 of the Motor Vehicle Act Regulations, BC Reg 26/58. (The section of the Motor Vehicle Act, RSBC 1996, c. 318, authorizing the making of these regulations is s.212.2(2)(g).)

In general, the provincial statutes require that the motor carrier issue a bill of lading in a more or less prescribed form that includes or incorporates by reference a number of required terms and conditions. These conditions generally: make the carrier liable for any loss or damage to the cargo;provide a limited number of defences to the carrier (Act of God, the Queen's or public enemies, riots, strikes or a defect or inherent vice in the goods); and, entitle the carrier to limit liability to $4.41 per kilogram ($2.00 per pound) unless the shipper declares a value for the cargo on the bill of lading. Notice of loss or damage must be given to the carrier within within 60 days after the delivery of the goods, or, in the case of failure to make delivery, within 9 months after the date of shipment of the goods. A final statement of the claim must be filed within 9 months after the date of shipment, together with a copy of the paid freight bill.

A frequent issue that arises, especially in the context of multi-modal carriage, is the carrier fails to issue a bill of lading. The result of such failure can disentitle the carrier to limit liability, if the applicable act requires the carrier to issue a bill of lading. (See for example, Valmet Paper Machinery Inc. v. Hapag-Lloyd AG, 2004 BCCA 518)

Where the carriage is extra-provincial, the Conditions of Carriage Regulations, SOR/2005-404 under the Federal Motor Vehicle Transport Act, RSC 1985, c 29 (3rd Supp) apply. Pursuant to these regulations "the conditions of carriage and limitations of liability that apply to transport by an extra-provincial truck undertaking are those set out in the laws of the province in which the transport originates, as amended from time to time, that are applicable to transport by a motor carrier undertaking within that province". In essence, for extra-provincial carriage, it is the law of the province of origin that applies. If there is no provincial law that applies, then the conditions of carriage and limitations of liability that apply are those agreed to by the parties.

Carriage of Goods by Rail

Rail carriage is governed by the Canada Transportation Act and the Railway Traffic Liability Regulations, SOR/91-488. Pursuant to s. 137 of the Canada Transportation Act a railway cannot not limit or restrict its liability except by means of a written agreement signed by the shipper or by an association or other body representing shippers. If there is no agreement, the railway's liability is limited or restricted to the extent provided in any terms and conditions that the Canadian Transportation Agency may have specified for the traffic; or as prescribe by regulation. (See Canadian Pacific Railway Company v. Canexus Chemicals Canada LP, 2015 FCA 283 for an in depth consideration of the effect of s. 137).

The Railway Traffic Liability Regulations specify that the railway is liable for any loss, damage or delay unless caused by: act of God; war or an insurrection; riot, strike or lock-out; any defect in the goods; any act, negligence or omission of the shipper or owner of the goods; an authority of law; or a quarantine. A notice of claim must be filed within the railway within 4 months. Although the regulations do not provide a limitation amount, most railways will limit their liability by contract.

Statutes and Regs

• Division 37 of the Motor Vehicle Act Regulations, BC Reg 26/58
• Conditions of Carriage Regulations, SOR/2005-404
• Canada Transportation Act
• Railway Traffic Liability Regulations, SOR/91-488

Carriage of Goods by Sea

   

Last Updated: 2015-03-14 14:09:19

Carriage of Goods by Sea

Part 5 of the Marine Liability Act (formerly the Carriage of Goods by Water Act) governs the carriage of goods by sea to or from Canada and within Canada. The Act implements the Hague-Visby Rules and provides for the possible future implementation of the Hamburg Rules. Pursuant to the Hague-Visby Rules the carrier of the cargo is liable for any loss of or damage to the cargo unless the loss or damage is caused by an excepted peril. The carrier is, however, entitled to limit liability to the greater of 666.67 SDRs per package (approximately C$1,200) or 2 SDRs per kilogram (approximately C$3.60). The time limit for bringing a suit against the carrier is one year from the date of discharge of the goods.

For an overview of Canadian Law of Carriage of Goods by Sea see the paper Canadian Law of Carriage of Goods by Sea: An Overview

For a list of the cargo regimes in force in various countries see A SURVEY OF THE CARGO BY SEA CONVENTIONS, prepared by George F. Chandler III of Hill, Rivkins & Hayden, Houston, Texas.

Statutes and Conventions

• Marine Liability Act (external link)
• Hague-Visby Rules
• Hamburg Rules
• Bills of Lading Act

 

Carriage of Passengers by Sea

   

Last Updated: 2015-03-14 14:08:02

Carriage of Passengers

The carriage of passengers is regulated by Part 4 of the Marine Liability Act which implements the 1974 Athens Convention relating to the Carriage of Passengers and their Luggage by Sea and the 1990 Protocol and introduces special Canadian amendments. The operative section is Section 37 which gives the Convention and Protocol the force of law in Canada.

Application

Article 2 of the Athens Convention provides that the provisions of the conventions apply to: (a) any international carriage if the carrying “ship” is flagged or registered in a State party to the convention, (b) the “contract of carriage” is made in a State party to the convention, or (c) the place of departure or destination is, according to the contract of carriage, in a State party to the convention. The terms “ship” and “contract of carriage” are defined terms under the Athens Convention. “Ship” is defined as a seagoing vessel. “Contract of carriage” is defined as a contract for the carriage by sea of a “passenger”. “Passenger” is in turn defined as any person carried in a “ship”. The net effect of these definitions and Article 2 is that the Athens Convention applies of its own force only to international contracts for the carriage of passengers in seagoing ships. This application was considered too narrow for Canada and was therefore expanded by sections 36 and 37 of the MLA .

Section 36 expands on the definition of ship to include ships of all types, whether seagoing or not. The effect of this change in definition is to make the Convention applicable to the carriage of passengers on inland lakes and rivers.

Section 37(2)(a) expressly makes the Convention applicable to contracts for the domestic carriage of passengers as well as international carriage.

Section 37 (2)(b) further extends the application of the convention by dispensing with the requirement that there be a contract of carriage in the case of persons (excluding the Master, crew or employees) carried on ships operated for a commercial or public purpose. This is achieved through the following strangely worded provision:

"37(2) Articles 1 to 22 of the Convention also apply in respect of...

(b) the carriage by water, otherwise than under a contract of carriage, of persons or of persons and their luggage, excluding

(i) the master of a ship, a member of a ship’s crew or any other person employed or engaged in any capacity on board a ship on the business of the ship, and

(ii) a person carried on board a ship other than a ship operated for a commercial or public purpose."

The first clause of section 37(2)(b) extends the application of the Convention to the carriage of all persons regardless of whether there is a contract of carriage. The use of the term “persons” and the discarding of the requirement that there be a contract of carriage make the Convention applicable to virtually every person on board a ship for whatever reason. It is for this reason that the qualifiers in 37(2)(b)(i) and (ii) are introduced. Section 37(2)(b)(i) states that the Convention does not apply to the master or crew of the ship or other persons employed on board the ship. Section 37(2)(b)(ii) is intended to ensure that the Convention does not apply to persons carried on board pleasure craft.

In summary, the combination of Article 2 of the conventions and sections 36 and 37 of the MLA make the Convention applicable to both domestic and international carriage of passengers (except 'adventure tourism") in ships of all sorts on inland lakes and rivers as well as the high seas. In addition, persons (not being master, crew or employees) on board ships used for commercial or public purposes are governed by the Convention regardless of the existence of a contract of carriage.

Adventure Tourism

Section 37.1 of the MLA has an important exclusion for "Adventure Tourism". Specifically, s. 37.1 exempts "adventure tourism activities" from the provisions of Part 4. Adventure tourism is an activity that: 1. exposes participants to an aquatic environment; 2. normally requires safety equipment and procedures beyond the norm; 3. exposes participants to greater risks than normal; 4. its risks have been presented to the participant and they have accepted in writing to be exposed to them; and 5. any other prescribed condition (of which there are none as of January 2011). Where these conditions are met, Part 4 of the MLA does not apply. The exclusion of adventure tourism from Part 4 means that the liability of adventure tourism operators is governed by the general common law and that exclusion clauses can be used by such operators for such activities. It further means that the ship owner/operator cannot benefit from the limitation amounts established by Part 4 but is rather subject to the limits in Part 3 of the MLA. In turn, this means that the owner/operator could be subject to a higher limit of liability than would otherwise be the case if the activity was governed by Part 4.

Liability and Burden of Proof

Pursuant to Article 3, the carrier under the Athens Convention is liable for damages suffered due to the death or personal injury of the passenger or for the loss of or damage to the passenger’s luggage where (1) the incident which caused the damage occurred during the course of carriage and (2) the damage was due to the fault or neglect of the carrier or his servants or agents acting within the scope of their employment. The burden of proving the incident which caused the damage occurred during the course of carriage is on the claimant. In cases of shipwreck, collision, stranding, explosion, fire or defect in the ship, the fault or neglect of the carrier is presumed. Similarly, for claims in respect of loss of or damage to luggage the fault of the carrier is presumed. In all other cases, the burden of proving the fault or neglect of the carrier is on the claimant.

Who is Liable

The Athens Convention recognizes that there are often two types of carriers, contracting carriers and performing carriers, and makes both liable. The term “carrier” is defined in Article 1(a) as the person by or on behalf of whom a contract of carriage has been concluded regardless of whether the carriage is performed by him or a performing carrier. The term “performing carrier” is defined as the person who actually performs all or part of the contract of carriage.

Pursuant to Article 4, where there is both a contracting and performing carrier, the “carrier” (i.e. the contracting carrier) remains liable for the entire carriage. Further, pursuant to Article 4(2) the contracting carrier is made liable for the acts and omissions of the performing carrier. The liability of the “performing carrier” is invoked by Article 4(1) which makes the “performing carrier” subject to and entitled to the provisions of the Convention for that part of the carriage performed by him.

Article 4(4) provides that where both the contracting and performing carriers are liable their liability is joint and several.

Limitation of Liability

The carrier under the Athens Convention is given the right to limit his liability. Article 7 provides that the maximum liability of the carrier for the death of or personal injury to a passenger is 175,000 SDR (approximately C$350,000). Article 8 provides that the maximum liability of the carrier for loss of or damage to cabin luggage is limited to 1,800 SDR (C$3,150) and to 10,000 SDR (C$17,500) for loss of or damage to a vehicle including all luggage carried in the vehicle. Other types of luggage are subject to a limitation of 2,700 SDR (C$4,725) per passenger per carriage. (Note: All SDR amounts are converted to Canadian dollars at a rate of 1 SDR= C$1.75. This rate does however fluctuate. The current rate of exchange can be found at various internet sites including here.)

The above limits are individual limits applicable to claims by individual passengers. In the case of claims by multiple passengers, the carrier may seek the right to limit liability to a global figure pursuant to Part 3 of the MLA and the 1976 Convention on Limitation of Liability. Article 19 of the Athens Convention would appear to preserve this right in the carrier.

Loss of Right to Limit

Article 13 provides that the carrier will lose his right to limit liability where it is proved that the damage resulted from an act or omission done with intent to cause damage or recklessly and with the knowledge that such damage would probably result.

Notice Provisions

Article 15 prescribes a notice provision for claims for the loss of or damage to luggage. For “apparent” damage, the passenger is required to give written notice of such damage at the time of disembarkation for cabin luggage or the time of re-delivery for other luggage. In the case of loss of luggage or damage that is not “apparent”, the passenger must give written notice within 15 days from the date of disembarkation or re-delivery. In the absence of written notice, the luggage is presumed to have been received in good condition.

Prescription/ Time Limitation

Article 16 prescribes the applicable limitation periods. In the case of personal injury or loss of or damage to luggage the limitation period is two years from the date of disembarkation. In the case of death of the passenger during the carriage the limitation period is two years from the date the passenger should have disembarked. In the case of a death resulting after disembarkation due to a personal injury received during the carriage, the limitation period is two years from the date of the death but shall not exceed three years from the date of disembarkation.

Jurisdiction

Article 17 prescribes the jurisdictions in which a claim under the Convention must be brought. Those jurisdictions are: the place where the defendant has his permanent residence or principal place of business; the place of departure or of destination under the contract; the place where the claimant is domiciled or has permanent residence provided the defendant also has a place of business in that State; or the place where the contract of carriage was made if the defendant has a place of business in that State.

Exclusion Clauses

Pursuant to Article 18 of the Convention any contractual provision that tends to relieve the carrier of his liability or to fix a lower limit of liability than that prescribed shall be null and void. Similarly, any provision tending to shift the burden of proof which rests upon the carrier or to restrict the claimants right to commence proceedings in the specified jurisdictions is null and void.

For additional information, also see the paper The Marine Liability Act, Parts 2, 3 and 4: Apportionment of Liability, Limitation of Liability and Carriage of Passengers - 2002.

Collisions and Ships

   

Last Updated: 2015-03-14 18:12:11

Collisions

See the Collision Regulations.

Constitutional Issues in Maritime Law

   

Last Updated: 2015-04-20 15:14:17

Constitutional Issues/Canadian Maritime Law

The cases under this topic consider the division of powers between the federal and provincial governments under the Constitution Act in relation to maritime matters. Such issues normally arise where a provincial law of general application purports to apply to a fact situation with a marine component or where a provincial law provides a different remedy than Canadian maritime law. (It should be noted that constitutional issues can arise in cases concerning the Admiralty jurisdiction of the Federal Court and, for this reason, cases digested under the topic Admiralty Jurisdiction may also be relevant and should be consulted.)

The analytical framework to be used in a division of powers analysis has changed significantly over the years and, in particular, since 2007. Prior to 2007, in division of powers disputes, the constitutional doctrine of interjurisdictional immunity was frequently applied to render provincial statutes inapplicable to matters within federal legislative jurisdiction. In Canadian Western Bank v. Alberta, 2007 SCC 22 (a non-marine case) and British Columbia (Attorney General) v. Lafarge Canada Inc., 2007 SCC 23, the Supreme Court of Canada was extremely critical of the interjurisdictional immunity doctrine finding that it unfairly favoured parliament over the provincial legislatures, created uncertainty and was not compatible with "flexible federalism". To rectify these perceived inequities, the Supreme Court modified the analytical framework to be used in division of powers disputes. The currently applicable analytical framework is as follows:

1. Pith and Substance: The first step is to analyze the pith and substance of the impugned legislation. This involves an inquiry into the true nature of the law in question to identify the "matter" to which it essentially relates. Two aspects of the law must be considered; the purpose of the enacting legislature in adopting it and the legal effect of the law. If the pith and substance analysis leads to the conclusion that the law is in relation to a matter coming within the legislative jurisdiction of the enacting body under the Constitution Act, then it is valid and the potential application of the interjurisdictional immunity and paramountcy doctrines must be considered. If the pith and substance analysis leads to the conclusion that the law is invalid, that is the end of the matter.

2. After the pith and substance analysis, the court should generally proceed to a consideration of the doctrine of paramountcy before interjurisdictional immunity. The potential application of the interjurisdictional immunity doctrine should generally be considered only where there is prior case law favouring its application to the subject matter at hand. The doctrine is of limited application and should generally be reserved for situations already covered by precedent.

3.Paramountcy: Paramountcy involves an inconsistency between the provincial enactment and the federal enactment. Where a provincial statute is inconsistent with a federal statute, the provincial law is inoperative to the extent of the inconsistency. The inconsistency can be actual conflict in operation such as where one statute says "yes" and the other "no". Inconsistency can also arise when the provincial statute has the effect of frustrating the purpose of the federal statute. The standard for frustration of purpose is high. A provincial statute will not be found to frustrate the purpose of a federal statute merely because it restricts a permissive federal statute.

4. Interjurisdictional Immunity: Prior to 2007, the interjurisdictional immunity doctrine was invoked whenever a provincial law "affects" a vital or essential part of a federal power or undertaking. The so-called "affects" test was modified in Canadian Western Bank v. Alberta and British Columbia (Attorney General) v. Lafarge Canada Inc. such that the doctrine now only applies when the provincial law "impairs", without necessarily sterilizing or paralyzing, the “basic, minimum and unassailable content” or “core” of the federal legislative power in question. "Impairs" implies that there must be adverse consequences. The "core" of a federal legislative power means “the minimum content necessary to make the federal power effective for the purpose for which it was conferred”.

The new analytical framework developed for division of powers disputes would appear to make it more likely that provincial laws of general application will apply to matters that are otherwise governed by Canadian maritime law. Recent examples include: R. v. Mersey Seafoods Ltd.,2008 NSCA 67 (occupational health and safety legislation); Jim Pattison Ent. v. Workers' Compensation Board, 2011 BCCA 3 (occupational health and safety legislation); and, Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44 (workers' compensation legislation). However, there are also many recent cases where provincial laws were held not to be applicable, including, British Columbia (Attorney General) v. Lafarge Canada Inc., Chalets St-Adolphe inc. v. St-Adolphe d'Howard (Municipalit de), 2011 QCCA 1491 and West Kelowna (District) v. Newcombe, 2015 BCCA 5, all of which concerned municipal by-laws.

Additional Information

For further background and a historical review of the important cases in this area please see the below papers but take note that the papers are not current and this area continues to develop.

• Confused Seas: The Application of Provincial Laws to Maritime Matters - 2011
• A Reformulation of the Inter jurisdictional Immunity Doctrine - 2007
• Constitutional Implications of Ordon v Grail and Expanding Definition of Canadian Maritime Law -2000

Statutes and Regs

• Constitution Act

Limitation of Liability in Maritime Law

   

Last Updated: 2016-02-12 00:00:00

Limitation of Liability

Note: Where a limitation amount is expressed in SDRs we have used an exchange rate of 1 SDR=Cdn$1.75. This rate does however fluctuate. The current rate of exchange can be found at various internet sites including here.

Introduction

Limitation of liability is dealt with in Part 3 of the Marine Liability Act. Part 3 of the MLA implements the 1976 Convention on Limitation of Liability for Maritime Claims and the 1996 Protocol but with Canadian amendments and limits. These provisions originally became part of Canadian law on August 10, 1998 when they were enacted as amendments to Part IX of the Canada Shipping Act. Prior to 10 August 1998, Canada adhered to the 1957 limitation Convention which had lower limits but it was also much easier to break limitation. Immediately below is a brief summary of the limitation provisions of the Marine Liability Act.

Persons Entitled to Limit

As is well known, the 1976 Convention as amended by the 1996 Protocol regulates the limitation of liability of shipowners. Article 1 sets out the persons entitled to limit liability. They are: the owner, charterer, manager and operator of seagoing ships and salvors. Article 1(4) extends the right to limit to employees and agents of such persons. Article 1(6) extends the benefits to liability insurers of persons entitled to limit.

The MLA further extends the list of persons entitled to limit their liability beyond that allowed in the Convention. Section 25(1)(b) of the MLA extends the right to limit to owners, charterers, managers and operators of all ships and not just “seagoing” ships and further to any person with an interest in or possession of a ship. With these amendments the right to limit applies to pleasure craft on lakes and rivers as well as “seagoing” ships.

Claims Subject to Limitation

Article 2 of the Convention sets out the claims that are subject to limitation of liability. These are:

(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;
(b) claims in respect of loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;
(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;
(d) ...;
(e) claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship;
(f) claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with this Convention, and further loss caused by such measures.

Article 2(d), which is omitted from the above list, is "claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship". We have omitted it because Article 18 Convention allows states to make certain reservations as to the claims for which limiation of liability is available. In Part 3 of Schedule 1 to the MLA Canada has made such a reservation in respect of art. 2(d). Therefore, in Canada, there is no limitation of liability for wreck removal claims.

Article 3 sets out the claims excepted from limitation. The excepted claims are limited. They are: claims for salvage, claims for oil pollution damage governed by the 1969 Convention on Civil Liability for Oil Pollution, claims for nuclear damage, and claims by employees if the applicable law does not permit limitation.

Conduct Barring Limitation

Article 4 sets out the circumstances under which a person will lose their right to limit. In order to prevent a defendant from limiting his liability the plaintiff must prove that the loss resulted from the personal act or omission of the defendant “committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”. This is a very strict test and the author is not aware of any case where the test has been met. In fact, the Supreme Court of Canada described it as "a virtually unbreakable limit" in Peracomo Inc. v. Telus Communications Co., 2014 SCC 29.

The Limits

The general limits of liability are established by Article 6 of the Convention and by section 29 of the MLA. Section 29 of the MLA sets out special Canadian limits for vessels of less than 300 gross tons. For vessels of more than 300 gross tons the limitation amount is governed by the Convention. The table below summarizes the limits applicable to all claims with the exception of claims by passengers. The limits of liability for passenger claims is dealt with in Article 7 of the Convention and section 28 of the MLA. These limitations are dealt with in the next section.

Limitation Amounts - Non-Passenger Carriage

Table Notes:
(1) The amounts apply to the aggregate of all claims arising on any distinct occasion.
(2) The amounts for ships over 300 tons derive from art. 6 of Schedule 1 to the MLA. For ships less than 300 tons, the amount is stipulated in s. 29 of the MLA.
(3) As as of 8 June 2015 the limitation amounts were increased pursuant to SOR/2015-98. These new amounts are indicated in the appropriate column.
(4) SDRs are converted to CDN$ at a rate of 1 SDR=CDN$1.75. This rate does however fluctuate. The current rate of exchange can be found here.

Ship’s Gross Tonnage	Claims For Loss of Life or Personal Injury (except passengers or persons carried on a ship)		Other Claims (except passengers or persons carried on a ship)
	Pre 8 June 2015	Post 8 June 2015	Pre 8 June 2015	Post 8 June 2015
Less than 300	C$1,000,000	C$1,000,000	C$500,000	C$500,000
300 - 2,000	2,000,000 SDR (C$3,500,000)	3.02 million SDR (C$5.285 million)	1,000,000 SDR (C$1,750,000)	1,510,000 SDR (C$2,642,500)
2001 - 30,000	2,000,000 SDR (C$3,500,000) plus 800 SDR (C$1,400) for each ton over 2000	3.02 million SDR (C$5.285 million) plus 1,208 SDR (C$2,114) for each ton over 2000	1,000,000 SDR (C$1,750,000) plus 400 SDR (C$700) for each ton over 2000	1,510,000 SDR (C$2,642,500) plus 604 SDR (C$1,057) for each ton over 2000
30,001 - 70,000	24,400,000 SDR (C$42,700,000) plus 600 SDR (C$1,050) for each ton over 30,000	36,844,000 SDR (C$64,477,000) plus 906 SDR (C$1,585) for each ton over 30,000	12,200,000 SDR (C$21,350,000) plus 300 SDR (C$525) for each ton over 30,000	18,422,000 SDR (C$32,238,500) plus 453 SDR (C$793) for each ton over 30,000
over 70,000	48,400,000 SDR (C$85,400,000) plus 400 SDR (C$700) for each ton over 70,000	73,084,000 SDR (C$127,897,000) plus 604 SDR (C$1,057) for each ton over 70,000	24,200,000 SDR (C$42,350,000) plus 200 SDR (C$350) for each ton over 70,000	36,542,000 SDR (C$63,948,500) plus 302 SDR (C$529) for each ton over 70,000

It should be noted that pursuant to Article 6(2) where the limitation amount applicable to a personal injury claim is insufficient to satisfy all such claims the amount applicable to property damage claims shall be made available to satisfy the personal injury claims. (This does not apply to vessels under 300 tons which are governed by s. 29 of the MLA, not the convention.)

Pursuant to Article 6(4) the limits of liability applicable to a salvor not operating from a ship are to be calculated according to a tonnage of 1,500 tons.

Limits of Liability for Fatalities and Personal Injuries to Passengers

The limits of liability for claims by passengers (including participants in adventure tourism activities as defined in s. 37.1(1) of the MLA) and persons carried on board a ship are set by Article 7 and by section 28 of the MLA. Article 7 establishes the maximum liability at 175,000 SDR (C$306,250) multiplied by the number of passengers the ship is authorized to carry by her certificate. This provision, of course, requires that a ship have a certificate. It is unworkable where the ship carries passengers but is not required to have, and does not have, a certificate. In such cases, section 28(1) of the MLA provides that the limitation amount is the greater of 2,000,000 SDR (C$3,500,000) and 175,000 SDR (C$306,250) multiplied by the number of passengers on board the ship. Sections 28(2) applies a similar limit to claims for loss of life or personal injury to persons carried on a ship “otherwise than under a contract of passenger carriage”. By virtue of the exceptions in section 28(3) these limits do not apply to the master, crew, stowaways and shipwrecked persons carried out of necessity. The passenger limitation amounts also do not apply to persons carried on ships used for pleasure purposes.

Owners of Docks Canals and Ports

Section 30 of the MLA includes special limitation provisions applicable to owners of a dock, canal or port including any person having the control or management of the dock, canal or port and any ship repairer using the dock, canal or port. Such persons are entitled to limit their liability for loss caused to a ship or to any cargo or property on board the ship. The limitation amount is calculated by multiplying $1,000 by the tonnage of the largest ship to have used the dock in the last five years but is subject to a minimum of $2 million. As with claims under the Convention, the right to limit liability is lost if it is proved that the loss resulted from the personal act or omission of the person seeking to limit and “committed with intent to cause the loss or recklessly and with knowledge that the loss would probably result”.

Limitation Periods in Maritime Law

   

Last Updated: 2016-02-12 00:00:00

Limitation Periods

The limitation periods that apply to claims governed by maritime law are not always easy to identify or locate. The federally prescribed limitation periods for many of the more common claims subject to maritime law are addressed below. For those claims for which there is not a specific limitation period, s. 140 of the Marine Liability Act now provides for a general limitation period of three years.

Summary Table

Claim	Statute	Period
Personal Injury from Collision between ships	MLA s. 23(1)	2 Years
Personal Injury to a “passenger”	Athens Convention, art. 16 r. 1	2 years
Other Personal Injury	MLA s. 140	3 years
Dependant’s Claims	MLA, s. 14	2 years
Property Damage from Collision between ships	MLA s. 23(1)	2 years
Damage to Cargo Governed by Hague Visby	Hague-Visby Rules, art. 3. r.6	1 year
Other Property/Cargo Damage	MLA s. 140	3 years
Pollution Claim Against Owner of a Ship	MLA, Sched. 5,	3 years (but can be as much as 6 years)
Pollution Claim Against Administrator of SSOPF	MLA, s. 103	2 years (but can be as much as 5 years)
All Other Claims under Canadian Maritime Law	MLA, s. 140	3 years

Application of Provincial Limitation Statutes

It is now reasonably clear that the limitation periods under provincial limitation statutes will not apply to matters governed by Canadian maritime law as there is now a general limitation period in s. 140 of the Marine Liability Act applying a three year limitation period to all matters governed by Canadian maritime law for which there is not a specific federally prescribed period. This three year general limitation period was contained in Bill C-7 and enacted on 23 June 2009. Cases decided prior to the enactment of Bill C-7 and which applied provincial limitation statutes should be treated with care. Cases which have refused to apply provincial limitation statutes include: Nicholson  v. Canada, [2000] 3 FC 225; Russell et al. v. MacKay, 2007 NBCA 55; Frugoli v. Services Aériens des cantons de L'Est inc., 2009 QCCA 1246 ; G.B. v. L. Bo, 2014 QCCS 18; and Malcolm v. Shubenacadie Tidal Bore Rafting Park Limited, 2014 NSSC 217. These cases also stand for the proposition that those parts of provinicial limitation statutes that operate to extend limitation periods will not apply where the matter is governed by Canadian maritime law. A case to the contrary is Gaudet v. Navigation Madelaine Inc., 2014 QCCS 4106 but it is not very convincing as it is against the weight of authority.

Federally Prescribed Limitation Periods

Personal Injury - Death

If personal injury results from a collision between two ships the limitation period is two years as set out in s. 23(1) of the Marine Liability Act.

If personal injury is caused to a passenger the limitation period is two years as set out in Art.16, r.1 of the Athens Convention.

If the claim is for personal injury not caused in a collision between two ships and not to a passenger, the limitation period is three years as set out in s. 140 of the Marine Liability Act.

Property/Cargo Damage

If property damage results from a collision between two ships, the limitation period is two years as set out s.23(1) of the MLA.

If the property damage is to cargo that is carried under a contract of carriage subject to the Hague-Visby Rules, the limitation period is one year as set out in Art. III, r. 6 of the Hague-Visby Rules.

If the claim is for property damage not caused in a collision between two ships and not to cargo covered by the Hague-Visby Rules, the limitation period is three years as set out in s. 140 of the MLA.

Claims by Dependants

Claims by dependants of an injured or deceased person must be commenced within two years pursuant to s.14(1)and (2) of the Marine Liability Act.

Pollution

Pursuant to Art. VIII of Sched. 5 of the Marine Liability Act, a claim against the owner of a ship for damages caused by pollution must be commenced before the earlier of (i) three years after the day on which the pollution damage occurred, and (ii) six years after the occurrence that caused the pollution damage. If the pollution damage was caused by more than one occurrence having the same origin, the claim must be commenced within six years after the first of the occurrences.

Pursuant to s. 103 of the Marine Liability Act, a claim against the Administrator of the Ship Source Oil Pollution Fund must be commenced a) within two years after the day on which oil pollution damage occurred and five years after the occurrence that caused that damage, or (b) if no oil pollution damage occurred, within five years after the occurrence in respect of which oil pollution damage was anticipated.

Contribution - Indemnity

Pursuant to s. 20 of the Marine Liability Act, actions against third parties for contribution or indemnity must be commenced within one year of the date of the judgement or settlement giving rise to the claim.

All other matters governed by Canadian maritime law

Pursuant to s. 140 of the Marine Liability Act, all other claims governed by Canadian maritime law must be commenced within three years after the date the cause of action arose.

Marine Insurance

   

Last Updated: 2015-03-14 14:29:57

Marine Insurance

Marine insurance in Canada is governed by the Marine Insurance Act which is modeled on the English Act of 1906.

Over the years we have prepared various papers relating to marine insurance. Links to these papers are provided below. Readers are cautioned that the papers, though current as of the date prepared, are not updated.

• Outline of the Law of Marine Insurance - 2008
• Miscellaneous Marine Insurance Issues - 2007
• Provincial Regulation of Marine Insurance - 2007
• Frequently Asked Questions Relating to Marine Insurance - 2000
• Additional Assureds and Co-Assureds - 2000
• Warranties in Marine Insurance - 1999

Statutes

Marine Insurance Act

Maritime Liens, Mortgages & Priorities

   

Last Updated: 2015-03-14 18:21:01

Maritime Liens, Mortgages and Priorities

The substantive law applicable to maritime liens, ship's mortgages and priorities differs significantly from the law that is applied to land based property as does the procedural law.

Mortgages

Registered Vessels

The law applicable to mortgages on ships is dependant on whether the particular ship is a "registered" vessel under the Canada Shipping Act, 2001. If the ship is a registered vessel, sections 65 through 72 of the Canada Shipping Act, 2001 apply. These provisions require that mortgages and transfers of mortgages be in the from prescribed and be registered in the Canadian Register of Vessels (s.65(2) & .71). (Failure to register the mortgage can result in a loss of priority as in British Columbia v. PT Car and Yacht Rental Inc., 2003 BCSC 1073.) The Act further provides that priorities as between mortgages is by order of registration unless all mortgagees consent otherwise in writing (s.67). The first mortgagee of a registered vessel is empowered with the right to sell the vessel (s.69(1)). A subsequent mortgagee may not sell the vessel without an order of the Federal Court or the consent of the prior mortgagees (s.69(2)). Finally, the Act provides that a registered mortgage is not affected by the bankruptcy of the owner and the mortgagee has priority over creditors or the trustee in bankruptcy.

The form prescribed for a mortgage of a registered vessel is very brief containing little more than the names of the parties and a space to enter the nature of the consideration and whether there is a collateral agreement. Due to the fact that sections 65 through 72 of the Canada Shipping Act, 2001 provide relatively little regulation over ship's mortgages, it is customary, if not universal, for there to be a collateral agreement containing the full terms of the mortgage agreement. Such a collateral agreement will normally contain extensive terms including: charging provisions (what is being mortgaged); representations and warranties of the mortgagor; repayment terms; insurance requirements; and remedies on default (including a right of private sale and appointment of a receiver).

It is to be noted that the Personal Property Security Acts of British Columbia (s.4(b)), Nova Scotia (s.5(j)), Prince Edward Island (s.4(j)), Newfoundland (s.5(j)) and New Brunswick (s.4(j)) specifically exempt mortgages registered under the Canada Shipping Act from the application of those acts. The Quebec Civil Code (s. 2714) similarly exempts ships registered under the Canada Shipping Act. The laws of the other provinces are silent on the issue which can present difficulties as in  Royal Bank  v. 1132959 Ontario Ltd., 2008 CanLii 40231.

Unregistered Vessels

With respect to unregistered vessels, there are no federal statutory provisions similar to sections 65 through 72 of the Canada Shipping Act, 2001. Such vessels are subject to the provisions of the provincial Personal Property Security Acts which do not exempt unregistered vessels. However, there may be a constitutional issue as to whether the provincial Personal Property Security Acts can validly regulate mortgages on unregistered vessels. (This is particularly so when addressing priorities between mortgages and maritime liens where the provincial act and maritime common law can have different results.) Nevertheless, many practitioners register such mortgages under the provincial acts, which seems prudent.

Types of Liens

There are various liens recognized in maritime law. The categories are traditional maritime liens, possessory liens and statutory liens. All can be, and should be, enforced by way of an action in rem which means that proceedings should generally be commenced in the Federal Court as opposed the provincial superior courts (with the possible exception of the Supreme Court of British Columbia which is the only superior court with rules providing for in rem proceedings.)

Traditional Maritime Liens

A traditional maritime lien is a lien unique to maritime law. It is a privileged claim, upon maritime property that accrues from the moment the claim arises. It travels with the ship unconditionally, even into the hands of bona fide purchasers for value whether with or without notice (This is its defining characteristic.). It is enforced, as with other claims, by means of an action in rem. The traditional maritime liens are claims for seaman's wages, salvage, collision damage, Master's disbursements and bottomry (virtually non-existent today).

Traditional maritime liens have a priority ranking above mortgages.

Possessory Liens

The common law possessory lien is recognized under Canadian maritime law. Such a lien requires continued uninterrupted possession or it lost. Possessory liens usually arise in the context of ship repairs and claims for freight. Such a lien has priority over mortgages and also over any subsequently accruing maritime liens. However, maritime liens that attached prior to the possession of the possessory lien claimant have priority.

Provincial statutes that provide for registration of liens and the continuation of the lien after possession is given up, such as the Repairers Lien Act and Warehouseman's Lien Act of British Columbia, have been held to apply to liens on ships. (see for example,  False Creek Harbour Authority v. The “Shoda”, 2002 FCT 275) However, there is a constitutional issue as to whether such statutes can validly apply.

Statutory Liens

Statutory liens are liens created by a validly enacted statute. They have the priority given to them by the statute that created them. There are many such liens including:

• claims by the Master and crew for wages which rank in priority to all but marshall's costs and salvage claims (Canada Shipping Act, 2001, s. 86(1), (2) and (4));
• claims by the Master for disbursements which rank in priority to all but wage claims, marshall's costs and salvage claims (Canada Shipping Act, 2001, s. 86(2.1));
• claims in respect of fines or debts due the Minister have a super priority ranking above Marshall's expenses (Canada Shipping Act, 2001, s.226(2));
• claims by a carrier for any amounts due which must be perfected by notice and gives a right of sale (Canada Shipping Act, 2001, s. 248-9));
• claims by a Port Authority for amounts owing which rank in priority to all but claims for wages (Canada Marine Act, s.122); and
• claims in respect of goods, materials or services supplied to the foreign vessel and claims arising out of a contract for the repair or equipping of a foreign vessel by a person carrying on business in Canada which are given the status and priority of a "maritime lien". (Marine Liability Act, s. 139).

Foreign Maritime Liens

Liens that arise outside of Canada and have a status equivalent to a "maritime lien" under the foreign law applicable to the claim are recognized by Canadian courts as traditional maritime liens and have the priority of a traditional maritime lien. In other words, the law that determines the nature of the lien is the foreign law but the law applied in the ranking of the lien is Canadian law. This is different from the law that is applied elsewhere, such as the UK, where both the nature of the lien and its priority are determined by the local law.

Ranking of Claims

The priority of claims against a ship are ranked generally as follows:

1. Marshall' Costs and expenses, being the costs and expenses of the sale of the ship;
2. Possessory liens that attach prior to a traditional maritime lien;
3. Maritime liens (traditional maritime liens and Marine Liability Act, s. 139 claims);
4. Possessory liens that attach subsequent to a maritime lien;
5. Registered mortgages; and
6. Unregistered mortgages;

Statutory liens will have the priority dictated in the statute that created the lien.

In rem creditors/claimants have no special priority. Their claims will rank equally after mortgages.

Variations to the Usual Ranking

The court has an inherent discretion to depart from the usual ranking of priorities in appropriate cases. In order to depart from the usual order of priorities the Court must be satisfied that the usual ranking would produce "an obvious injustice" or " a plainly unjust result". It has been noted in many authorities that there is a heavy onus on the person seeking to depart from the usual ranking and that very strong and reliable evidence is required. Not surprisingly, there are few cases in which the usual ranking is upset by equitable considerations. Most of the authorities acknowledge the discretion but then refuse to exercise it. One of the few cases in which the discretion was exercised is  Fraser Shipyard & Industrial Centre Ltd. v. The Atlantis Two, 1999 CanLII 8369,  1999 CanLII 8498.

Procedure

The procedure for determining priorities is always for one claimant to commence an in rem action and to arrest the ship. Sometimes, more than one action is commenced and more than one arrest warrant is served. After the arrest, an application is made to the court for the sale of the vessel. All parties who have filed Caveats against Release are served with the application. Usually the Order authorizing the sale of the vessel will require that an advertisement be placed in local papers as well as one or two international shipping publications. The advertisement invites tenders and notifies all creditors of the pending sale. The Order and advertisement usually require that any creditors with a claim against the ship must file their claims by affidavit in the court by a specified date. Sometimes the Order will provide for cross-examination, otherwise, special orders to cross-examine must be obtained. Once all claims are filed and cross-examinations are completed a hearing is held to determine the priorities. Evidence at the hearing is by affidavit and cross-examination transcript. At the hearing, each claimant presents their claims and the other claimants may, if they deem it expedient, oppose the claim.

Additional Information

For additional information, see the following papers:

• Priorities and Bankruptcy in Admiralty - 2002
• Update on Canadian Law of Priorities - 2000
• Summary of Canadian Law of Priorities -1999

Personal Injury and Maritime Law

   

Last Updated: 2015-03-14 14:31:20

Personal Injury

Is the Injured Person's Claim Governed by Part 4 of the MLA?

For cases involving personal injury or fatalities to persons on board a ship or caused by a ship, the first step is to determine whether the injured person is a "passenger" within the meaning of Part 4 of the Marine Liability Act. If the injured person is carried under a contract of carriage (either domestic or international) they are a "passenger" within the meaning of Part 4. If the injured person is carried on a ship that is being operated for a commercial or public purpose, they are also a "passenger" within the meaning of Part 4. On the other hand, if the injured person is carried on a ship used for pleasure purposes and not under a contract of carriage, they are not a "passenger" within the meaning of Part 4.

If the injured person is a "passenger" within the meaning of Part 4 of the Marine Liability Act, then the liability regime in Part 4 (and the commentary under the section "Carriage of Passengers") applies.

If the injured person is not a "passenger" within the meaning of Part 4 of the Marine Liability Act, then the general common law of negligence applies.

Limitation Period - non Passengers

If personal injury results from a collision between two ships the limitation period is two years as set out in s. 23(1) of the Marine Liability Act.

If the claim is for personal injury not caused in a collision between two ships and not to a passenger (and not a claim by a dependant), the limitation period is three years as set out in s. 140 of the Marine Liability Act.

Limitation of Liability - Non Passengers

Claims for personal injury or fatalities are subject to the limitations of liability set out in Part 3 of the Marine Liability Act. These limits are addressed in the section entitled "Limitation of Liability" and the actual limits depend on the size of the ship. For ships less than 300 tons (which will be most pleasure craft), the limit is C$1,000,000. The limitation can only be broken if the plaintiff proves that the loss resulted from the personal act or omission of the defendant “committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”. This is a very strict test and the author is not aware of any case where the test has been met. In fact, the Supreme Court of Canada described it as "a virtually unbreakable limit" in Peracomo Inc. v. Telus Communications Co., 2014 SCC 29.

Dependants Claims/Derivative Actions

Claims by dependants of an injured or deceased person are governed by Part 1 of the Marine Liability Act which gives dependants the right to bring a claim against the wrongdoer in circumstances where the injured or deceased person could have brought a claim. "Dependant" is defined in section 4 and includes spouse, common law spouse, children, grandchildren, grandparents and brothers and sisters.

The damages recoverable by a dependant include loss of care, guidance and companionship (s.6(3)(a)) as well as the actual value of the loss of past and future financial support.

A claim by a dependant is subject to a two year limitation period pursuant to s. 14 of the Marine Liability Act and is also subject to limitation of liability.

Pollution (Ship Source)

   

Last Updated: 2015-04-09 09:36:48

Pollution

Marine pollution is predominantly now governed by statute law but the common law can still have some application. The torts of nuisance, trespass and negligence and the Rylands v Fletcher doctrine still can have some application.

The main federal statutes that address pollution from ships are:

• Canada Shipping Act 2001, Parts 8 and 9
• Marine Liability Act, Parts 6 and 7
• Canadian Environmental Protection Act, 1999
• Fisheries Act
• Migratory Birds Convention Act, 1994

In addition, provincial pollution statutes may apply, although this is not clear.

Canada Shipping Act 2001, Parts 8 and 9

Parts 8 and 9 of the Canada Shipping Act do a number of things. Specifically:

• Prescribed vessels (oil tankers of 150 or more gross tons, other vessels of 400 gross tons or more that carry oil as cargo, groups of vessels (barges) with combined tonnage of 150 or more tons that carry oil) are required to have an arrangement with a pollution response organization and to carry pollution insurance.
• Prescribed oil handling facilities must have oil pollution prevention and emergency plans and an arrangement with a pollution response organization.
• Vessels are prohibited from discharging a pollutant (including oil and oily mixture, noxious liquid, sewage and sludge and garbage.
• Vessels are required to report the discharge of a pollutant.
• Pollution Prevention and Response Officers are authorized to board, inspect and detain vessels and may require security be posted before a vessel is allowed to leave.
• If a vessel or oil handling facility has discharged, is discharging or is likely to discharge a pollutant, the Minister may take measures to remedy, minimize or prevent pollution damage including the removal, sale, or destruction of vessel or the Minister may direct any person or vessel to take measures to remedy, minimize or prevent pollution (in which event compensation shall be paid to such person or vessel [except the polluter] by the Crown).
• If a vessel or person contravenes a provision of the Act, they are guilty of an offence and liable to a maximum penalty of $1 million and/or 18 months imprisonment (some provisions carry a lesser penalty). In some cases, more frequently of late, Administrative Monetary Penalties are applied instead of the offence procedure.

Marine Liability Act, Parts 6 and 7 (Oil and HNS)

Oil

The Marine Liability Act does the following:

• Enacts the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 and the International Convention on Civil Liability for Oil Pollution Damage, 1992 ( and the Supplementary Fund and Supplementary Fund Protocol), which provide for civil liability and certificates of financial responsibility and establish limitation amounts.
• Continues the Ship Source Oil Pollution Fund which is required to pay prescribed claims for oil pollution damage from a ship and authorizes the Administrator to commence subrogation proceedings against the wrongdoer.
• Provides for civil liability against the owner of the ship for oil pollution damage caused by a discharge of oil from the ship. The owner is liable for clean-up costs and costs of measures to reinstate the environment. The liability is not dependent on proof of fault or negligence. The owner has very limited defences. The limitation period applicable to oil pollution damage claims from a ship is from three to six years depending on whether there was more than one occurrence.

HNS

The Marine Liability Act will, at a future date, also enact and include the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea, 2010, concluded at London on April 30, 2010 (the "HNS convention"). The HNS Convention will be addressed in Part 6 of the MLA and included as Schedule 9 to the MLA. The HNS Convention establishes a civil liablity and compensation regime similar to the International Convention on Civil Liability for Oil Pollution Damage but in respect of hazardous and noxious substances. The shipowner's liability under the HNS Convnention is limited to 100 million Special Drawing Rights (SDR) for bulk HNS and 115 SDRs for packaged HNS. The HNS Convention is not yet in force internationally and is therfore not yet part of Canadian maritime law.

Canadian Environmental Protection Act, 1999

The Canadian Environmental Protection Act, 1999 is a comprehensive anti-pollution statute that is based upon the "polluter pays" principle. It creates an offence for, among other things, the disposal of pollutants at sea. The directors and officers, Master, Chief Engineer and ship owner are all required to take reasonable care to ensure compliance with the Act and are deemed to be party to and guilty of any offence. The maximum penalty is $300,000 and/or imprisonment of 6 months if the Crown proceeds summarily or $1 million and/or imprisonment of 3 years if the Crown proceeds by indictment. In the event of a spill, any person who owns or has charge, management or control over the substance or causes or contributes to the spill is jointly and severally liable to pay clean-up costs and costs of restoring the environment. The defences under the Act are limited but a due diligence defence is available for some offences.

Fisheries Act

The Fisheries Act prohibits the deposit of a "deleterious substance" in waters frequented by fish and creates both civil and criminal liability for such a deposit. The offence is subject to a maximum penalty of $300,000 and/or imprisonment of 6 months if the Crown proceeds summarily or $1 million and/or imprisonment of 3 years if the Crown proceeds by indictment. Civil liability is absolute and does not depend on negligence. There are again very limited defences.

Migratory Birds Convention Act, 1994

The Migratory Birds Convention Act, 1994 prohibits the deposit of a substance that is harmful to migratory birds in waters frequented by migratory birds by any person or vessel and creates criminal liability for such a deposit. The offence is subject to a maximum penalty of $300,000 and/or imprisonment of 6 months if the Crown proceeds summarily or $1 million and/or imprisonment of 3 years if the Crown proceeds by indictment. Minimum fines of $500,000 and $100,000 are also created for vessels over 5000 tonnes. There is a due diligence defence available.

Salvage and Wrecks

   

Last Updated: 2015-07-13 18:51:38

Salvage and Wreck

We are frequently asked questions about the law of salvage and wrecks. These questions are usually something like "If I find a vessel adrift or in trouble and put a line on it or otherwise save it, is it mine?" or "If something washes up on the beach, can I keep it?" or "If I find lost treasure (or a shipwreck or an airplane hull), is it mine?". The answer in all cases is no. Generally, one does not become the owner of maritime property merely because the person saves it or finds it. If a person renders assistance to a vessel in distress and saves it, they are entitled to a salvage award, not an ownership interest. If a person finds lost or abandoned maritime property, they are required to report it to the Receiver of Wrecks and they are entitled to a salvage award. Both the law of salvage and the law of wrecks are governed extensively by statute and regulations. The most relevant statutes are the Canada Shipping Act, 2001 ("CSA, 2001") and the Navigation Protection Act ("NPA"). The Marine Liability Act ("MLA") is also relevant, but less so.

Salvage

Salvage is one of the ancient maritime laws. It is concerned with the saving of life or property at sea. Generally,when maritime property is in danger and a volunteer successfully saves the property, the volunteer is entitled to a salvage award that is determined by the courts. The three necessary elements to a salvage award are: danger; voluntary assistance; and success. If the property is not in danger, no salvage award is payable. If the person is not a volunteer (i.e. is under some legal obligation to render assistance), salvage is not payable. (But note that pursuant to s. 147 of the CSA, 2001, assisting a person at sea, responding to distress signals or following the directions of a rescue coordinator does not disentitle a person to a salvage award.) If the salvage attempt is not successful, no salvage award is payable ("no cure no pay").

The amount of the salvage award is dependent on a number of factors including: the value of the saved property; the extent of the danger; the time required and the expenses and losses of the salvor; the skill of the salvor; and the risks and liabilities avoided by reason of the salvage (i.e. pollution).

Although there is no necessity or requirement that there be a contract between the salvor and the owner of the property in danger, most large scale commercial salvage operations today are done under a salvage contract. The most well known, if not the most common, of these is the Lloyd's Open Form Salvage Agreement, which includes a "no cure no pay" provision as well as arbitration to determine the salvage award. Such contracts are valid but, pursuant to art. 7 of the Salvage Convention (see below) are subject to annulment if entered into under undue influence or the influence of danger or if the payment is excessive for the services rendered.

Priority of Salvage Awards

Salvage has traditionally been considered to be a "maritime lien", which means that a claim for salvage is not defeated by a change in the ownership of the salved property and that the claim has a fairly high priority in the event of a priorities dispute. Pursuant to s. 86(4) of the CSA 2001, a lien arising from a claim for salvage has priority over all claims except costs relating to the arrest and sale of the vessel.

Limitation Period

The limitation period for a salvage claim is two years from the date the salvage services were rendered but this period may be extended to the extent and on such conditions as the court deems fit. (CSA 2001, s.145, and Art. 23 of the Salvage Convention)

Limitation of Liability

Salvors are entitled to limit their liability pursuant to article 2 of the Convention on Limitation of Liability for Maritime Claims, 1976, as amended by the Protocol of 1996.(the "LLMC"; Schedule 1 to the MLA) Claims for salvage are, however, exempted from limitation pursuant to art. 3 of the convention.(Schedule 1 to the MLA) The limits of liability for any salvor not operating from any ship or for any salvor operating solely on the ship to or in respect of which he is rendering salvage services, shall be calculated according to a tonnage of 1,500 tons. (Art. 6 r. 4 of the LLMC)

International Convention on Salvage, 1989

Salvage law is predominantly governed by the CSA 2001 which, pursuant to s. 142 implements the International Convention on Salvage, 1989 (Schedule 3 to the CSA 2001). The Salvage Convention applies to both salvage operations at sea and in inland waters. (Canada could have declared the convention did not apply to inland waters under article 30 but did not do so in its reservations, which are recorded in Part 2 of Schedule 3 to the CSA 2001.)

In summary, the main provisions of the Salvage Convention are:

• Art. 4 - State owned vessels are exempted from the Salvage Convention;
• Art 6 - The convention applies to all salvage operations unless a contract specifically provides otherwise but the contract is subject to annulment if entered into under undue influence or the influence of danger or if the payment is excessive for the services rendered (Art. 7).
• Art. 8 - The salvor has the duty to carry out the operations with due care and to prevent or minimize damage to the environment. The owner has the duty to cooperate with the salvor and to similarly prevent or minimize damage to the environment;
• Art. 10 - Ship's Masters are obliged to render assistance to any person in danger of being lost so far as can be done without serious danger to his vessel;
• Art. 12 - Salvage operations which have a "useful result" give a right to an award;
• Art 13 - The award shall not exceed the salved value but is to be fixed with a view to encouraging salvage operations and shall take into account: the salved value; the skill and effort to minimize damage to the environment; the measure of success; the danger involved; the skill and efforts of the salvor; the time, expenses and losses of the salvor; the risks run by the salvors; the promptness of the salvage; the vessels and equipment used; and the state of readiness and efficiency of the salvor;
• Art. 14 - Where the vessel threatened damage to the environment and the salvor prevented or minimized damage to the environment, he is entitled to special compensation if the award under art. 13 is not sufficient;
• Art. 18 - A salvor may be deprived of all or part of his award if guilty of fault, neglect, fraud or dishonest conduct;
• Art. 19 - A salvor is not entitled to an award where the owner expressly and reasonably prohibited the salvage operation;
• Art. 21 - Upon the request of the salvor the persons liable to pay an award shall provide security including for interest and costs and the salved property shall not be removed from the port or place to which is first taken until the security is posted;
• Art. 23 - An action for payment of a salvage claim shall be brought within two years from the day on which the salvage operations terminated.

Historical and Cultural Property

Maritime property that is considered of historical or cultural significance may not be subject to salvage. In Part 2 of Schedule 3 to the CSA 2001, the Government of Canada specifically reserved the right not to apply the Salvage Convention "when the property involved is maritime cultural property of prehistoric, archaeological or historic interest and is situated on the seabed". To date, we are not aware of any case in which such a designation has been specifically made, however, we are aware that the Government of Canada is actively looking at this topic. Moreover, there are a number of provincial statutes that purport to apply to maritime ship wrecks that prohibit disturbing the wreck in any way. (See for example the Heritage Conservation Act of British Columbia which declares any ship (or airplane) wreck a heritage object after only two years.) Whether and/or to what extent these provincial acts are constitutionally applicable to ship wrecks is a matter of debate but, as most of them make it an offence to breach their provisions, it would be wise to seek professional advice before disturbing any property found on the sea bed.

Wreck

The law of "wrecks" is related to but different from salvage. It concerns derelict (i.e. abandoned) vessels, wrecked vessels, stranded vessels, vessels in distress and any other property that is found floating (flotsam) or washed ashore (jetsam) or on the bed of the sea (lagan). "Wreck" is defined in s. 153 of the CSA 2011 as including:

(a) jetsam, flotsam, lagan and derelict and any other thing that was part of or was on a vessel wrecked, stranded or in distress; and
(b) aircraft wrecked in waters and anything that was part of or was on an aircraft wrecked, stranded or in distress in waters.

The finder of a wreck is not entitled to retain the wreck or any part thereof or any lost cargo. To the contrary, the finder is required to report the find to the Receiver of Wrecks, an office created under the provisions of the CSA 2001, and must deal with the wreck as directed by the Receiver.The finder is, however, entitled to a salvage award which is determined by the Receiver but which cannot exceed the value of the wreck. The law relating to wrecks is addressed in Part 7 of the CSA 2001 which provides:

• Any person who finds, takes possession of or brings a wreck into Canada, the owner of which is not known, shall report it to the Receiver of Wrecks (an office designated under the act) and take whatever measures the Receiver directs including deliver it to the Receiver (s.155);
• The person who finds the wreck etc. is entitled to a salvage award determined by the Receiver which may be the wreck, part of the wreck or all or part of the proceeds upon the disposition of the wreck (s.156) but the award cannot exceed the value of the wreck (s. 159);
• Every person is prohibited from possessing, concealing or disposing of a wreck that has not been reported (s. 157);
• The Receiver must release the wreck or the proceeds of its disposition to the owner provided the owner: (1) submits a claim within 90 days of when the wreck was reported; (2) establishes their claim to ownership; and (3) pays the salvage award and the Receiver's fees and expenses.(s.158);
• The Receiver's decisions respecting the right of ownership or the salvage award can be appealed to a court but the salvage award of the court shall not exceed the value of the wreck (s. 159);
• The Receiver may sell or destroy the wreck: (a) after 90 days if the value of the property is over $5,000; or (b) at any time if, (i) the value is less than $5,000, (ii) the storage costs would likely exceed the value, or (iii) the wreck is perishable or poses a threat to health or safety (s. 160). If the wreck is sold and the owner does not make a claim within 90 days, the proceeds less the salvage award and the Receiver's expenses are paid into the Consolidated Revenue Fund (i.e. they go to the Crown) . (s.160); and
• If the owner has established ownership but not paid the salvage award within 30 days, the Receiver may dispose of the wreck and pay the owner the balance after deducting the unpaid salvage award and fees and expenses. (s.161)

It should be noted that the above provisions apply only where the owner of the wreck is not known by the finder. If the owner is known, the finder is only entitled to claim a salvage award unless the finder can prove the owner has abandoned the property. This requires that the finder commence court proceedings for a declaration the owner has abandoned the property and that the finder has title. (See, for example, the unreported decision in All Tow Boat Moving Ltd. v Lovdahl et al. (FCTD) T-2085-14 (2015-03-02), a copy of which can be found here). One would think that this would be a rare occurrence since, if the wreck has value, the owner will not abandon it. Additionally, a declaration of title would make the finder liable for any pollution emanating from the wreck and possibly for wreck removal expenses.

Navigation Protection Act

A vessel, or part of one, that is wrecked, sunk, partially sunk lying ashore or grounded is an obstruction within the meaning of the Navigation Protection Act (the "NPA") and is subject to the provisions of that act. In summary, such vessels must be removed by the owner or person in charge, and if they fail to do so, the Crown will do so at the owner's expense. More specifically, the provisions provide:

• the person in charge of the obstruction (i.e. the owner) shall notify the Minister of the obstruction, maintain a sufficient signal and light to indicate the position and shall immediately remove the obstruction. If the owner fails to remove it the Minister may do so. (s.15);
• If the Minister is required to remove the wreck the costs incurred are a debt owing to the Crown recoverable from the person in charge of the wreck or any person through whose act or fault the obstruction was occasioned or continued (s.18);
• If any vessel is wrecked, sunk, partially sunk, lying ashore, grounded or abandoned in any navigable water, the Minister may authorize any person to take possession of and remove the vessel, part of the vessel or thing for that person’s own benefit, on that person’s giving to the registered owner or other owner of the vessel or to the owner of the thing, if known, one month’s notice or, if the registered owner or other owner of the vessel or owner of the thing is not known, public notice for the same period in a publication specified by the Minister (s.20).

Limitation of Liability

Under Canadian law there is no right to limit liability in respect of claims for wreck removal. Pursuant to Article 18 of the Convention on Limitation of Liability for Maritime Claims, 1976, as amended by the Protocol of 1996 and Part 3 of Schedule 1 to the MLA, Canada has exempted from limitation of liability "Claims in respect of the raising, removal, destruction or rendering harmless of a ship that is sunk, wrecked, stranded or abandoned, including anything that is or has been on board that ship".

Nairobi International Convention on the Removal of Wrecks

The Nairobi International Convention on the Removal of Wrecks, 2007 is a brand new convention that comes into force on 14 April 2015. The convention applies to "wrecks" in the territorial waters of signatory states but can be extended to include internal waters. Canada is not a party to the convention but Transport Canada has recommended that Canada accede to the convention and apply it to Canada's internal waters and territorial sea in two separate discussion papers. The 2010 Transport Canada discussion paper on this can be found here. In July 2015 Transport Canada issued a second discussion paper with specifics of what is proposed to be implemented in Canada. The 2015 discussion paper can be found here.

In summary, the convention requires that a "wreck" be reported and, if it is determined the "wreck" is a hazard to navigation or the environment, the wreck must be removed. The convention requires owners to have compulsory insurance to cover the costs of wreck removal and provides for direct action against the insurers. The owner of the "wreck" is responsible for the costs of removal unless the owner proves the wreck:

• resulted from an act of war or similar hostilities; or
• resulted from a natural phenomenon of an exceptional, inevitable and irresistible character; or
• was wholly caused by acts or omissions by third parties done with intent to cause damage; or
• was wholly caused by the negligence or other wrongful act of any Government or authority responsible for the maintenance of navigational aids.

The convention permits the owner to limit liability under any applicable national law or convention but, as indicated above, Canada and many other countries have exempted wreck removal claims from limitation of liability.

The limitation period established by the convention is three years from the date the "wreck" is determined to be a hazard but subject to a maximum of six years from the date of the casualty.

Statutes and Regs

• Canada Shipping Act, 2001, SC 2001, c 26
• Navigation Protection Act, RSC 1985, c N-22
• Marine Liability Act, SC 2001, c.6

Tug and Tow

   

Last Updated: 2015-04-24 15:36:14

Tug and Tow

Towage vs Carriage

It is always important to distinguish a contract of towage from one of carriage as different legal regimes apply. A contract of towage is one where the tug owner supplies a tug to tow (or push or assist) a ship, barge or other object belonging to someone else. Examples of towage are where a tug owner assists a ship in docking or undocking or when a tug owner is hired to tow a barge (loaded or unloaded) provided by the customer from point A to Point B. In contrast, a contract of carriage is one where the tug owner agrees to supply both the tug and the barge for the transportation of the customer's goods from point A to point C. Where the contract is one of carriage, the duties and liabilities of the tug owner are those of a carrier and the legal regime applicable is that governing contracts for the carriage of goods by sea.

Responsibilities and Liabilities of Tug Owner

The responsibilities and liabilities of a tug owner at common law are: (1) to provide a seaworthy tug, properly manned and equipped to carry out the work in the weather and circumstances reasonably to be expected; and (2) to carry out the work with due care and skill. (Wire Rope British Columbia v BC Marine Shipbuilders, [1981] SCR 363 at p. 392) This duty would appear to include an obligation to inspect the tow. (Fraser River Pile & Dredge Ltd. v. Empire Tug Boats Ltd., 92 F.T.R. 26) If the tug owner fails to provide a seaworthy tug or fails to carry out the work with due care and skill, it will be liable for any resulting loss caused by such failure.

It is uncertain whether the tug owner's obligation to provide a seaworthy tug is an absolute obligation or one that can be discharged by the exercise of reasonable care and skill. The decision of the Supreme Court of Canada in the Wire Rope case would seem to support the view that the obligation is an absolute one. In that case the Supreme Court held that the inclusion of an exemption clause in the towage contract which required the owner to exercise due diligence to make the tug seaworthy replaced the implied warranty. (pp.392-3) Implicit in this reasoning is that the implied warranty is something different than due diligence.

In The West Cock, [1911] P 208, it was said that where the tow is lost or damaged during the course of the tow, the onus is on the tug owner to relieve himself of liability by proving there was no negligence or want of reasonable care or skill on his part. This is likely true fore an unmanned tow where the tow has been transferred to the possession and control of the tug owner (a bailment), however, it is questionable that such a presumption should apply where there is no transfer of possession. For example, the presumption should not apply where a tug is merely assisting a manned vessel. (Fraser River Pile & Dredge Ltd. v. Empire Tug Boats Ltd., 92 F.T.R. 26)

Responsibilities and Liabilities of Tow Owner

The owner of the tow has an obligation to ensure that proper skill and diligence is exercised by those on board the tow (Hamilton Marine & Engineering Ltd. v. CSL Group Inc., (1995), 95 F.T.R. 161), that the tow is fit for the towing operation and to disclose any fact or matter which could affect the towing operation. However, this will not absolve a tug owner from liability where a reasonable inspection of the tow would have disclosed the defect. (Again see Fraser River Pile & Dredge Ltd. v. Empire Tug Boats Ltd., 92 F.T.R. 26)

Additionally, where the tow is manned, there is a presumption that the tow is in control of the towing operation and will be liable for any resulting damage (The Queen v. The Delta Pride et al., 2003 FCT 11). However, the question of who has control is one of fact and the vicarious liability of the tow will depend upon the nature of the negligent act that caused the damage. (Grieg Shipping A/S v. Fortune Marine Ltd. (The Dubai Fortune), 2013 FCA 218)

Towing Conditions

It is quite usual for the common law duties to be varied or eliminated entirely by the terms and conditions of the specific contract between the tug owner and the owner of the tow. There are a variety of common standard conditions that are in use for this purpose. The most well known internationally are the UK Conditions for Towage of which there are various versions. There are essentially three main elements to standard towing conditions: first they provide that the master and crew of the tug are deemed to be the servants of the tow and under the control of the tow (this makes the tow owner vicariously liable for the negligence of the tug crew); secondly, they provide a very broad exemption clause in favour of the tug owner exempting the tug owner from liability for loss or damage however caused, including negligence; finally, they provide that the tow owner shall indemnify the tug owner against and in respect of any claims for loss or damage made against it.

Provided the towing conditions are drafted in a clear and unambiguous fashion, they will be given effect to by Canadian courts. However, if they are unclear or ambiguous, they will be interpreted strictly against the interest of the tug owner or disregarded entirely (Meeker Log and Timber Ltd. et. al. v. The Sea Imp VIII, 1996 CanLII 2229 ).

It is also today quite common to find clauses in towage contracts that require one party or the other to have insurance on either the tug, tow or cargo. Such clauses are generally considered to be for the benefit of the other party and have been held to have the effect of relieving that party from liability for damage that is covered by the insurance. (St. Lawrence Cement Inc. v. Wakeham & Sons Ltd., 1995 CanLII 2482)

Limitation of Liability

Tug owners are entitled to take advantage of the limitation of liability provisions of the Marine Liability Act. An issue which sometimes arises in the context of limitation of liability and towage is whether the tonnage to be used in the calculation is that of the tug or tow or both. In The "Rhone" v The "A.B. Widener", [1993] 1 S.C.R. 497, the Supreme Court affirmed that the limitation fund should be calculated on the combined tonnage of the tug and tow when the tug and tow are in common ownership (the "flotilla principle"). In the absence of common ownership and where the barge is a "dumb barge", the fund is to be calculated on the basis of the tonnage of the tug alone.

Operations

The operational requirements for tug owners are, for the most part, contained in the Canada Shipping Act, 2001 and the Regulations passed under that Act. Particular regard should be paid to: the Hull Construction Regulations, CRC c. 1431, Part VIII, which provide construction standards for tug boats; The Safe Working Practices Regulation, CRC c. 1467; the Marine Personnel Regulations, SOR/2007-115, which mandate the number and qualifications of crew; and, the Towboat Crew Accommodation Regulations, CRC c. 1498, which contain other standards specific to tug boats.

It is also possible that Provincial statutes and regulations relating to safety, hours of work and other aspects of tug boat operations need to be complied with. Such statutes have been held to apply to fishing vessels (see, for example: Jim Pattison Ent. v. Workers' Compensation Board, 2011 BCCA 3, and R. v. Mersey Seafoods Ltd., 2008 NSCA 67) and would likely be held to be equally applicable to tug boat operations unless there is a conflicting Federal statute. In particular, in British Columbia, the hours of work and overtime requirements contained in the Employment Standards Act have been held by the Employment Standards Tribunal to be applicable to tug boat operations except in limited circumstances. (See: Williston Navigation Inc. v. British Columbia, 2000 Carswell BC 3836, and Wichito Marine Services Ltd., Re, 2015 Carswell BC 379, but note that the correctness of these particular decisions is debatable and a court has not yet ruled on the issue.)

Statutes and Regulations

• Canada Shipping Act, 2001
• Marine Personnel Regulations
• Towboat Crew Accommodation Regulations
• Safe Working Practices Regulation
• Hull Construction Regulations

Additional Information

• Towing Conditions and Agreements to Insure - 1996