Précis: The Federal Court refused to give effect to an exclusion clause on the grounds that it did not expressly or impliedly exclude negligence.
Facts: The plaintiff’s/respondent’s fishing vessel was lifted out of the water and placed on a cradle at the premises of the defendant/appellant for the purpose of repairs and maintenance. The cradle failed 13 days later causing the vessel to fall, as a consequence of which it was damaged. The respondent claimed against the appellant for the damages to the vessel and for the costs of fuel containment and clean up. The appellant denied liability saying the cradle was constructed by the respondent and further relied upon a sign that provided “Boats stored at Owner’s Risk” and an exclusion clause that provided:
“I understand and agree that the securing and locking of my boat is my responsibility, and not that of the said Marine Service Centre, or of its agents, servants, employees, or otherwise. Furthermore I agree to indemnify and save harmless the said Marine Service Centre and its officers, agents, employees, servants or otherwise from, any claims on my part with respect to the same.”
At first instance (2014 FC 974) the trial Judge held that a bailment was created and that the cradle had been constructed by the defendant. As bailee, the burden was on the appellant to prove that it was not negligent in relation to the fitness of the materials used to construct the cradle and the manner in which it was constructed. She held that this onus had not been discharged. In doing so she noted that the materials used to construct the cradle were disposed of by the appellant within 48 hours of the incident. She held that this gave rise to a presumption that the materials were intentionally destroyed, which was not rebutted, and an adverse inference that the materials were unfit. With respect to the exclusion clause, the trial Judge held that neither the sign nor the exclusion clause in the contract expressly or impliedly excluded liability for negligence. She also applied the rule of contra proferentum to the words “securing and locking” in the exclusion clause and held that they did not transfer responsibility for the safety of the vessel to the respondent. In result, the respondent was entitled to damages for the vessel (which was declared a constructive total loss), the containment and clean-up costs and the costs of a surveyor. The survey costs were recoverable notwithstanding they were not paid for by the respondent on the grounds that they were a natural and probable consequence of the tort. The appellant appealed.
Decision: Appeal dismissed.
Held: The two issues on appeal are whether the trial Judge erred in drawing an adverse inference for destruction of evidence and whether she erred in her interpretation of the exclusion clause. The appellant argues there was no evidence supporting an inference the cradle materials were intentionally destroyed and that the issue was not pleaded and was raised by the trial Judge propio motu. It argues that procedural fairness was breached as it was not given a chance to respond to the trial Judge’s theory of the case. The respondent, however, notes that the issue had been pleaded, raised in advance of the trial and was argued at trial. In the circumstances, there was no procedural unfairness. The true question is whether the trial Judge made a palpable and overriding error in concluding the appellant failed to rebut the inference of negligence. The appellant as bailee had the onus of proving it was not negligent which required it to prove the materials used to construct the cradle were in good condition. Having removed those materials, the appellant could not disprove the presumption of negligence. There was no need on the part of the trial Judge to find the appellant intended to destroy the materials.
With regard to the exclusion clause, the parties disagree as to the meaning of the words “securing and locking”. The appellant says these words refer to the placing of the vessel on the cradle whereas the respondent says they refer to the securing of lines, buoys and equipment and the locking of hatches, doors and windows. The trial Judge applied the contra proferentem rule of construction and, because it was clear the erection of the cradle was the responsibility of the appellant, held the words could not have had the meaning advocated for by the appellant. There is no basis to interfere with this holding. The main concern of contractual interpretation is to determine the parties’ intent and scope of their understanding. This is not a question of pure law but of mixed fact and law and can only be interfered with on appeal if there is a palpable and overriding error. There is no such error. Moreover, even if the word “securing” was given the meaning advocated for by the appellant, the clause would not protect it since it is not an exclusion clause. Once the appellant assumed the responsibility for securing the vessel, it was bound to secure it properly.