Rough Bay Enterprises Ltd. v. Budden et al.

The Plaintiff, the purchaser of a barge, sued the Defendants for negligence and breach of contract in the towage of the barge. The Plaintiff purchased the barge from the Defendant Budden for $90,000, paying a $5,000 deposit together with an initial payment of $42,500. The Defendant Budden agreed to tow the barge from Port Alberni to Campbell River with his fishing vessel for an additional sum. The balance of the purchase price was to be paid on delivery. The Plaintiff arranged with its insurer to add the barge to its insurance policy. The towage commenced but due to mechanical difficulties was interrupted at Bamfield. Discussions were then entered into between Budden and the Koprino Defendants for the Koprino Defendants to complete the tow with the fishing vessel “Koprino”. The Koprino Defendants advised Budden that they would complete the tow on the condition that the owners of the barge provide insurance for all parties. Budden agreed to this condition but he failed to advise the Plaintiffs of the condition and the Plaintiffs, therefore, did not obtain insurance protecting the Koprino Defendants. The “Koprino” took the barge in tow from Bamfield. At the time of departure the weather forecasts included gale warnings. The barge capsized off Port Renfrew and was later towed to Victoria, where it was repaired and substantially upgraded. The Plaintiff did not pay Budden the balance of the purchase price. The issues in the case included: whether the Defendants were negligent; if so, whether the Plaintiff’s claim was barred by its failure to obtain insurance coverage for the benefit of the Defendants; and if not, what damages were attributable to the Defendants’ actions. The Court held that the Plaintiff did not prove that the Defendants were negligent in deciding to leave Bamfield given the prevailing weather conditions or in continuing with the tow. The Court held that the capsize of the barge was due to localized storm conditions off Port Renfrew and that the Defendants were not negligent in failing to anticipate this. The Court found that the barge capsized because it was unseaworthy due to rot in its bow and stern planking. Notwithstanding the findings that the Defendants were not negligent the Court considered the insurance and damages issues. The Court found that there was an agreement to insure for the benefit of the Koprino Defendants and, even though this agreement was entered into between Budden and the Koprino Defendants, the Court held that Budden was acting as agent for the Plaintiff. Consequently, the Plaintiff’s subrogated insurance claim was barred as against the Koprino Defendants but not as against Budden. With respect to damages the Court held that the repair costs should be depreciated by 25% to take into account betterment.