J.D. Irving Limited v. Siemens Canada Limited, 2016 FC 69 (2016-01-22)
Facts:Siemens entered into a contract with Irving for Irving to transport heavy cargo. To effect the transport Irving chartered a barge and a tug and retained a marine consultant (“MMC”) to provide architectural and consulting services. While in the process of loading, a piebce of the cargo loaded on a transporter fell off the barge and into the harbour at Saint John, New Brunswick. Siemens commenced various proceedings in the Ontario Superior Court (for $45 million) against Irving and its various subcontractors. Irving commenced this proceeding in the Federal Court for a declaration that it was entitled to limit its liability to $500,000 under the Marine Liability Act and the Convention on Limitation of Liability for Maritime Claims, 1976, as amended by the Protocol of 1996 (collectively, the “Limitation Convention”).
Decision:Irving is entitled to limit its liability.
Held:Siemens argues that Irving and its subcontractors are not entitled to limit their liability as they acted recklessly and with knowledge that the loss of the cargo would probably result, within the meaning of Art. IV of the Limitation Convention. In essence, Siemens argues that Irving knew the barge was too small and was unsuitable to transport the cargo. It further argues that during loading the transporter on which the cargo was loaded veered off the centreline which was not marked and that Irving “knowingly deviated from the load plan in critical respects with knowledge of the consequences”. The evidence establishes that the barge used was, in fact, suitable for the intended move. Further, although the stability calculations and load plan prepared by MMC assumed a divided aft peak ballast tank, based on the expert evidence, this did not render the barge unstable or unsuitable for the planned load-out and voyage. The capsize was due to a number of contributing factors, each of which alone had a minimal effect. The contributing factors included: the cargo was loaded slightly off centre; the aft peak tank was unsealed which reduced the GM of the barge; and, hydraulic manipulation of the transporter decks which raised the centre of gravity. Some combination of these and possibly other factors caused the loss.
There is a presumptive right to limit liability and a very high burden on the party seeking to break limitation to establish that the loss resulted from: (i) the personal act or omission of the person seeking to limit liability, (ii) committed recklessly and, (iii) with knowledge, (iv) that such loss, (v) would probably result. “The contracting states to the Limitation Convention intended the fault requirement to be high resulting in a virtually unbreakable right to limit liability”. The evidence presented does not establish that Irving or its subcontractors acted recklessly and with knowledge that the loss would probably result. They did not know that the combination of factors outlined above would probably result in the loss of the cargo. They took steps to ensure the safe loading of the cargo. Siemens argues that recklessness and knowledge should be inferred from the fact that Irving cannot establish the precise cause of the loss and relies upon cases decided under the Warsaw Convention relating to the carriage of goods by air. The air carriage cases are distinguishable. Here, Irving presented a wealth of direct evidence regarding the circumstances of the loss and it is not appropriate to infer recklessness and knowledge. Article IV of the Limitation Convention requires actual conscious knowledge. It has not been established that Irving and its subcontractors had subjective knowledge that the loss would probably result from their acts or omissions. Accordingly, Irving is entitled to limit its liability.
Comment: This case is notable for its comments with respect to the very high burden upon a person attempting to break limitation, noting that it is a virtually unbreakable limitation. See also the companion decision, 2016 FC 287, for the right of the Irving subcontractors to limit their liability.