Date: 20000906
Docket: T-689-95
| PRESENT: THE HONOURABLE MR. JUSTICE JOHN A. O'KEEFE |
ACTION IN REM AND IN PERSONAM
BETWEEN:
Enter Style of Cause just after [Comment] code
-
THE CANADIAN SALT COMPANY LIMITED,
a body politic duly incorporated and having a place
of business in Pointe-Claire, Quebec, Canada
and
MORTON INTERNATIONAL INC.,
a body politic duly incorporated and having a place
of business in Chicago, Illinois, U.S.A.
and
ALLIANZ INSURANCE COMPANY OF CANADA,
a body politic duly incorporated and having a place
of business in Toronto, Ontario
Plaintiffs
- and -
THE SHIP "IRVING CEDAR"
and
THE OWNERS, MANAGERS, CHARTERERS, OPERATORS, AGENTS
AND ALL OTHERS INTERESTED IN THE SHIP "IRVING CEDAR"
and
ATLANTIC TOWING LTD.,
a body politic duly incorporated and having a place
of business in St. John's, New Brunswick, Canada
Defendants
REASONS FOR ORDER AND ORDER
O'KEEFE J.
[1] This is an action, IN REM and IN PERSONAM, by the plaintiffs against the defendants for damages sustained to its dock and dockside equipment when the dock was struck by the ship "Irving Cedar" when it was breaking ice for the plaintiff, The Canadian Salt Company Limited. The following are the issues:
| 1. Does the Towcon contract apply? |
| 2. If the Towcon contract applies and the defendants are negligent, are the defendants liable to pay the plaintiffs' damages? |
| 3. Is the plaintiffs' action barred by clause 18 of the Towcon contract? |
| 4. If the plaintiffs' action is not barred, were the defendants negligent? |
| 5. What is the quantum of damages if the defendants were negligent? |
FACTUAL BACKGROUND
| [2] Compagnie d'Assurance du Home Canadien issued an insurance policy to the |
plaintiffs, The Canadian Salt Company Limited and Morton International Inc. on November 1, 1991. By virtue of an endorsement to the policy, Compagnie d'Assurance du Home Canadien was replaced by Allianz Insurance Company of Canada, which assumed the obligations of the original insurer.
| [3] The Canadian Salt Company Limited owned and operated the Mines Seleine |
operations in Îles-de-la-Madeleine, Québec.
| [4] The defendant IN REM is a ship named the Irving Cedar which is owned by |
Atlantic Towing Ltd.
| [5] On April 2, 1993, the plaintiffs retained the services of Atlantic Towing Ltd. to |
carry out ice breaking in the channel and in the area of the plaintiff, The Canadian Salt Mines Limited's ("Canadian Salt") wharf and basin and to assist the motor vessel Sauniere in docking at the wharf in Îles-de-la-Madeleine (the "services").
| [6] These services were obtained as a result of a series of telephone conversations and |
letters. On April 2, 1993, Guy Genois of Canadian Salt contacted Atlantic Towing Ltd. requesting a quote to supply the services and on the same day, Rio St. Amand wrote to Guy Genois quoting a price for the tug, Irving Cedar or its equivalent to carry out the services. This letter included a copy of the Towcon contract.
| [7] On April 2, 1993, Mr. Genois wrote back to Mr. St. Amand accepting the terms of |
Mr. St. Amand's quote with the exception that the extra time above 48 hours would be at the rate of $300 Canadian instead of $500 Canadian.
| [8] Mr. Genois testified that he telephoned Mr. St. Amand and told him that certain |
parts of the Towcon contract were not acceptable to his company. Mr. Genois testified that he had the telephone conversation with Mr. St. Amand on April 2 or April 3, 1993 and he also testified that he was not sure whether the telephone call was made before or after the time when the tug arrived at the fairway buoy at Îles-de-la-Madeleine.
| [9] Mr. St. Amand has no recollection of any phone call concerning the Towcon |
contract, but testified that if the Towcon contract was not to apply, then another contract would have had to be negotiated. He was always required to have a contract.
| [10] The tug Irving Cedar departed Halifax on April 3, 1993 and on April 6, 1993 the |
tug arrived at Cap-aux-Meules in Îles-de-la-Madeleine and remained there overnight. After having radio equipment put aboard, the Irving Cedar left for Grande-Entrée, where the ice breaking was to take place and arrived there at 17:35 on April 6, 1993. A representative of the mine, Isaac Hubert who was the harbour master and a radio technician were on the tug when it went from Cap-aux-Meules to Grande-Entrée and Mr. Hubert remained on the tug during the ice breaking activity.
| [11] Canadian Salt's wharf at Grande-Entrée consists of a two level structure with the |
bottom level being the dock itself and the upper level being a salt gallery that carries salt to the ship loader. The dock itself is supported by a series of dolphins and bents.
| [12] There is a turning basin adjacent to the wharf which allows the large ships to turn |
and a channel leads from the turning basin to the ocean.
| [13] At 0700 on April 7, 1993, the tug got underway to start breaking ice in the |
channel and the turning basin to allow the motor vessel, Sauniere to enter the harbour, dock and take on a cargo of salt. The tug left the dock and went out along the edge of the basin and then out into the channel to break ice in the channel. The tug repeated this operation during the day, that is, coming in along the wharf and back out through the turning basin to clear a way for the incoming motor vessel Sauniere.
| [14] On one of the trips during the afternoon, the captain was asked to come in from |
the channel, go along the edge of the turning basin and go back out along the edge of the wharf to clear any ice that was near the edge of the wharf so that the motor vessel Sauniere could be up close to the dock. On previous trips during the day, the tug had come in from the channel along the wharf and then turned away from the wharf and went back out to the channel through the turning basin.
| [15] As the tug was turning towards the wharf, Mr. Hubert asked the captain to break a |
large pan of ice which was located approximately 150 feet from the dock. The captain directed the tug towards the ice pan and when the tug struck the ice pan, it did not go through the pan as the captain expected it would. Instead, the tug veered off the ice pan and the captain was unable to stop the tug before it struck the wharf, causing damage to the wharf. The captain stopped the engine when he hit the ice pan and came astern, but the tug did not stop in time to avoid striking the wharf.
| [16] The Irving Cedar was approximately 150 feet in length. |
| 1. Does the Towcon contract apply? |
| 2. If the Towcon contract applies and the defendants are negligent, are the defendants liable to pay the plaintiffs' damages? |
| 3. Is the plaintiffs' action barred by clause 24 of the Towcon contract? |
| 4. If the plaintiffs' action is not barred, were the defendants negligent? |
| 5. What is the quantum of damages if the defendants were negligent? |
Does the Towcon contract apply?
I have come to the conclusion that the Towcon contract does apply and is part of the contract between the parties. I have reviewed the evidence and I note that the quote that was sent to Canadian Salt for the provision of ice breaking services on April 2, 1993 states that the Towcon contract is included. The testimony of Mr. Genois was that he had a telephone conversation with Mr. St. Amand of Atlantic Towing Ltd. concerning the unacceptability of parts of clause 18 of the Towcon contract. It is not certain when this conversation took place as Mr. Genois stated that it was April 2 or 3, 1993 and maybe as late as when the tug arrived at the fairway buoy at Îles-de-la-Madeleine, which would be April 6, 1993. Mr. Genois accepted the quotation of Atlantic Towing Ltd. on April 2, 1993 with one change only to the quotation, that being the hourly rates for extra hours for the tug. There was no mention in this acceptance that Canadian Salt was not accepting the terms of the quotation which included the Towcon contract. In fact, the acceptance stated that "conditions shall be as per your proposal of April 2, 1993, with the exception of item D, which shall read "`extra time above 48 hours at hourly rate of $300 Cdn.'" Mr. St. Amand did not recall any conversation concerning the Towcon contract and was certain that if the Towcon contract did not apply, another contract would have to had replaced it as he was always required to have a form of contract when contracted for the use of the tug.
| [19] The contract between the defendants and Canadian Salt was concluded by |
Canadian Salt's acceptance on April 2, 1993. I believe that Mr. Genois may have discussed portions of the Towcon contract but it was after a contract existed between Atlantic Towing Limited and Canadian Salt. For these reasons, I find that the Towcon contract does apply to the hiring of the tug.
If the Towcon contract applies and the defendants are negligent, are the defendants liable to pay the plaintiffs' damages?
The defendants argued that even if they were found to be negligent, they would not be liable to pay the plaintiffs' damages as the defendants are absolved from paying by virtue of clause 18(2)(a), the relevant part of which states:
| . . . The tug owner shall not in any circumstances be liable for any loss or damage suffered by the Hirer or caused to or sustained by the Tow in consequence of loss or damage howsoever caused to or sustained by the Tug or any property on board the Tug. |
| [21] The plaintiffs argued that this wording does not apply to the situation in this case |
as the plaintiffs' damages were not caused as a result of the tug being damaged thus causing damage to the plaintiffs. The plaintiffs used the example of the tug sinking and causing damage to the tow. This clause is an exclusion of liability clause and it must be interpreted against the persons who have made it part of their contract, in this case, the defendants. It is my conclusion that the argument of the plaintiffs is correct and this clause does not relieve the defendants from liability to pay damages to the plaintiffs if the defendants are found to be negligent. In this collision with the wharf, the tug was not damaged. I believe this clause covers the situation where, as a result of damages to the tug, the plaintiffs suffer damages.
| [22] In the alternative, if I am not correct in this conclusion, I find that the wording is |
ambiguous and thus, must be construed against the defendants with the result that liability is not excluded. If you wish to successfully exclude liability for damages, you must do so in clear terms.
Is the plaintiffs' action barred by clause 24 of the Towcon contract?
Clause 24 reads:
| Save for the indemnity provisions under Clause 18 of this Agreement, any claim which may arise out of or in connection with this Agreement or of any towage or other service to be performed hereunder shall be notified by telex, cable or otherwise in writing within 6 months of delivery of the Tow or of the termination of the towage or other service for any reason whatever, and any suit shall be brought within one year of the time when the cause of action first arose. If either of these conditions is not complied with the claim and all rights whatsoever and howsoever shall be absolutely barred and extinguished. |
| [24] It is my opinion that the plaintiffs' action is barred by clause 24 of the Towcon |
contract. Clause 24 is a very strong clause and the wording of the clause is most clear. A plaintiff must give notice of the claim in writing within six months of the termination of the service and a plaintiff must bring the suit within one year of the time when the cause of action first arose. The plaintiff, Canadian Salt gave notice of the claim by letter dated April 8, 1993. The action arose on April 7, 1993 and suit was not brought until 1995. This is clearly outside the time period for bringing the suit and thus, one of the conditions of clause 18 has not been complied with. I have reviewed the Statement of Claim and there is no claim for indemnity made under clause 18 of the Towcon contract, hence, clause 24 applies so as to bar the claim of the plaintiffs. This is so because if clause 24 is not complied with "the claim and all rights whatsoever and howsoever shall be absolutely barred and extinguished".
If the plaintiffs' action is not barred, were the defendants negligent?
| The plaintiffs have argued that when a tug strikes a stationary object, in this case a |
dock, there is a presumption that there is negligence on the part of the tug and its owners. The defendants did not disagree in part with this proposition, but they argued that they have rebutted the presumption of negligence by showing that the captain and crew of the tug did everything they could have done in the circumstances.
| [26] The evidence of the captain was that he preceded in a different direction on this |
trip than the previous trips. On prior trips, he had come in from the channel, proceeded along the wharf and then turned to his starboard (right) and went around the turning basin. On this trip, he left the channel and went to his starboard along the outer boundary of the turning basin and then turned towards the wharf to go out along the side of the wharf towards the channel. As he made his turn towards the wharf, he was asked to break a large pan of ice which was about one tug boat length (150 feet) from the wharf. When the Irving Cedar struck the ice pan, it deflected off the ice pan, instead of going through it and the captain was unable to stop the tug before it struck the wharf.
| [27] According to the chief mate, at the speed the tug was moving and the fact that it |
deflected off the ice, a boat length would probably not be enough distance to put the boat full astern and stop its headway. He also testified that the crew did not know the shape of the ice pan below the water surface and it could be two to three feet below the surface and it could have been jagged off to one side or the other.
| [28] The Collision Regulations provide as follows: |
| Rule 2
Responsibility
(a) Nothing in these Rules shall exonerate any vessel, or the owner, master or crew thereof, from the consequences of any neglect to comply with these Rules or of the neglect of any precaution which may be required by the ordinary practice of seamen, or by the special circumstances of the case.
(b) In construing and complying with these Rules due regard shall be had to all dangers of navigation and collision and to any special circumstances, including the limitations of the vessels involved, which may make a departure from these Rules necessary to avoid immediate danger.
Rule 6
Safe Speed--International
Every vessel shall at all times proceed at a safe speed so that she can take proper and effective action to avoid collision and be stopped within a distance appropriate to the prevailing circumstances and conditions.
In determining a safe speed the following factors shall be among those taken into account:
(a) By all vessels:
(i) the state of visibility,
(ii) the traffic density including concentrations of fishing vessels or any other vessels,
(iii) the manoeuvrability of the vessel with special reference to stopping distance and turning ability in the prevailing conditions,
Rule 7
Risk of Collision
(a) Every vessel shall use all available means appropriate to the prevailing circumstances and conditions to determine if risk of collision exists. If there is any doubt such risk shall be deemed to exist.
|
|
| Règle 2
Responsabilité
a) Aucune disposition des présentes règles ne saurait exonérer soit un navire, soit son propriétaire, son capitaine ou son équipage des conséquences d'une négligence quelconque quant à l'application des présentes règles ou quant à toute précaution que commandent l'expérience ordinaire du marin ou les circonstances particulières dans lesquelles se trouve le navire.
b) En interprétant et en appliquant les présentes règles, on doit tenir dûment compte de tous les dangers de la navigation et des risques d'abordage, ainsi que de toutes les circonstances particulières, notamment les limites d'utilisation des navires en cause, qui peuvent obliger à s'écarter des présentes règles pour éviter un danger
immédiat.
Règle 6
Vitesse de sécurité--International
Tout navire doit maintenir en permanence une vitesse de sécurité telle qu'il puisse prendre des mesures appropriées et efficaces pour éviter un abordage et pour s'arrêter sur une distance adaptée aux circonstances et conditions existantes.
a) Par tous les navires:
(i) la visibilité;
(ii) la densité du trafic et notamment les concentrations de navires de pêche ou de tous autres navires;
(iii) la capacité de manoeuvre du navire et plus particulièrement sa distance d'arrêt et ses qualités de giration dans les conditions existantes;
Règle 7
Risque d'abordage
a) Tout navire doit utiliser tous les moyens disponibles qui sont adaptés aux circonstances et conditions existantes pour déterminer s'il existe un risque d'abordage. S'il y a doute quant au risque d'abordage, on doit considérer que ce risque existe.
|
|
| [29] It is my view that these Rules were breached in the circumstances of this case. |
| Rule 2 was breached by the tug proceeding at too fast a speed when breaking ice in the near proximity of the wharf. It would have been more prudent and safer to proceed along the wharf and then turn right into the ice pan, thus avoiding having the tug being in position of approaching the wharf. I am also of the view that Rule 6(a)(iii) was breached when the tug was proceeding at a speed at which it probably could not be stopped before striking the wharf. Finally, I believe that Rule 7 was also breached as the evidence shows that the crew had no idea of the shape of the ice pan below the surface of the water and yet proceeded to break the ice with the tug proceeding in the general direction of the wharf instead of away from the wharf. The first mate testified that: |
| - - it could be jagged. It could be out 20 feet under the water that I can't see or anybody else can see. Even though we hit that straight on you can't say what is going on underneath. She may have glanced off to the right. What made her caused her to glance . . . |
| [30] According to Rule 7(a), every vessel shall use all available means in the |
| prevailing circumstances and conditions to determine if risk of collision occurs. If there is any doubt, the risk shall be deemed to exist. In this case, the crew did not know the shape of the underwater part of the ice pan and thus, should have assumed that it might be projecting out under the water surface and cause them to veer towards the wharf. If this risk was deemed to exist, the tug could have approached the ice pan in a direction going away from the wharf. |
| [31] It is my finding that these breaches of the Rules amount to negligence, which |
| negligence resulted in the damage to the plaintiff, Canadian Salt's wharf. |
| [32] The defendants, in their argument, quoted the following passage from Dr. |
| Lushington's judgment in The "Thomas Powell" v. The "Cuba" (1866), 14 L.T. 603: |
| To constitute an inevitable accident it was necessary that the occurrence should have taken place in such a manner as not to have been capable of being prevented by ordinary skill and ordinary diligence. We were not to expect extraordinary skill or extraordinary diligence, but that degree of skill and that degree of diligence which is generally to be found in persons who discharge their duty. |
| [33] I do not accept the defendants' argument that this was an inevitable accident as I |
| am of the view that the tug could have avoided striking the wharf had it been proceeding away from the wharf as it encountered the ice pan or if it had engaged the ice pan at a distance further away from the wharf than it would take the tug to be full astern and not making headway. |
| What is the quantum of damages if the defendants were negligent? |
| I will now quantify the damages to be paid by the defendants should they be found liable to pay the damages. The parties have agreed that the following damages were incurred by the plaintiffs, but the defendants do not agree that the plaintiffs should be able to claim for G.S.T. and Q.S.T.: |
| Name
|
Total Amount of Invoice
|
Detail of the Invoice
|
|
|
| |
|
Services
|
G.S.T.
|
Q.S.T.
|
| Monenco
|
2,506.10
7,529.24
10,035.34
|
2,252.07
6,766.03
9,018.10
|
157.64
473.62
631.26
|
96.39
289.59
385.98
|
| |
|
|
|
|
| Zodiac
|
100.00
|
100.00
|
0
|
0
|
| Translation
|
751.68
|
751.68
|
0
|
0
|
| |
|
|
|
|
| Sablenex Hose
|
5,405.69
|
4,857.74
|
340.04
|
207.91
|
| |
|
|
|
|
| Arseneault
|
72,332.00
81,066.00
153,398.00
|
65,000.00
72,848.68
137,848.68
|
4,550.00
5,099.40
9,649.40
|
2,782.00
3,117.92
5,899.92
|
| TOTALS
|
169,690.71
|
152,576.20
|
10,620.70
|
6,493.81
|
| [35] It is a fundamental principle of the G.S.T. legislation that no G.S.T. should be |
| added into the cost of inputs used by registrants in commercial activities. In Goods and Services Tax, The Complete Guide, 3rd edition, Ernst & Young and the Canadian Institute of Chartered Accountants, 1999 at page 135 it states: |
| Basic rule [ § 169(1)] -- A fundamental principle of the GST is that no tax should be incorporated into the cost of inputs used by registrants in commercial activities. With certain exceptions outlined in this Tab, registrants are entitled to a refundable credit, called an input tax credit, for tax paid or payable on purchases that relate to a commercial activity. These credits ensure that inputs related to commercial activities bear no GST. In determining the net remittance or refund for a registrant, the total input tax credit for a reporting period is deducted from the tax collected or collectible on taxable supplies made during the period. |
| A registrant who acquires or imports property or a service for consumption, use, or supply in commercial activities of the registrant may claim input tax credits to recover all or part of the tax the registrant paid on the acquisition or importation of the property or service. Thus, an input tax credit is available to a registrant where the following conditions are met: |
| · . the registrant imported the property or service into Canada or acquired it in Canada, whether by purchasing or leasing it or by obtaining the right to use it under a licence; |
| · . the registrant was required to pay tax on the importation or acquisition; and |
| · . the registrant imported or acquired the property or service for consumption, use, or supply in commercial activities engaged in by the registrant. |
| [36] Subsection 240(1) of the Excise Tax Act, R.S.C. 1985, c. E-15 provides for the |
registration of Canadian Salt under the Act and subsection 169(1) of the Act provides the mechanism for calculating input tax credits. The evidence and comments of counsel indicate that Canadian Salt is not exempt from the G.S.T. provisions of the Act. Although there was no evidence that Canadian Salt did claim the credit for the G.S.T. that is claimed that is not the end of the matter. It is my opinion that Canadian Salt should have claimed the credit and if it did not claim the credit, it has failed to mitigate its damages. Accordingly, I would not allow the claim for G.S.T. in the amount of $10,620.70.
| [37] There is also a claim for Q.S.T. in the amount of $6,493.81. Counsel for the |
plaintiffs informed the Court that the same principles would apply to the claim for Q.S.T. as would apply to G.S.T. As a consequence, I will not allow the claim for Q.S.T.
| [38] The plaintiffs have claimed interest but in light of my conclusion, it is not strictly |
necessary to address the issue of interest, but should it be found that the plaintiffs' claim should have been successful, I would allow interest to the plaintiffs to be established pursuant to the Federal Court Rules, 1998.
| [39] The defendants pleaded the provisions of the Canada Shipping Act, R.S.C. 1985, |
c. S-9 and in particular, Part IX thereof. Neither party addressed this pleading at the trial and in light of the finding that I have made, it is not necessary that I make a ruling on this issue.
| [40] In summary, therefore, I have found that: |
| 1. The Towcon contract does apply. |
| 2. Clause 18(2)(a) of the Towcon contract does not absolve the defendants from paying the plaintiffs' claim if the defendants are found to be negligent. |
| 3. The plaintiffs' action is barred by virtue of clause 24 of the Towcon contract. |
| 4. If the plaintiffs' action had not been barred by clause 24 of the Towcon contract, the defendants were negligent and the damages would have been as outlined in these reasons. |
[41] The plaintiffs' claim is therefore dismissed with costs to the defendants. Said costs to be assessed by the assessment officer.
ORDER
[42] IT IS ORDERED THAT: the claim of the plaintiffs is therefore dismissed with costs to the defendants, said costs to be assessed by the assessment officer.
"John A. O'Keefe"
J.F.C.C.
Toronto, Ontario
September 6, 2000
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-689-95
Enter Style of Cause just after [Tab] code. STYLE OF CAUSE: THE CANADIAN SALT COMPANY LIMITED,
a body politic duly incorporated and having a place
of business in Pointe-Claire, Quebec, Canada
and
MORTON INTERNATIONAL INC.,
a body politic duly incorporated and having a place
of business in Chicago, Illinois, U.S.A.
and
ALLIANZ INSURANCE COMPANY OF CANADA,
a body politic duly incorporated and having a place
of business in Toronto, Ontario
- and -
THE SHIP "IRVING CEDAR"
and
THE OWNERS, MANAGERS, CHARTERERS,
OPERATORS, AGENTS AND ALL OTHERS
INTERESTED IN THE SHIP "IRVING CEDAR"
and
ATLANTIC TOWING LTD.,
a body politic duly incorporated and having a place of
business in St. John's, New Brunswick, Canada
PLACE OF HEARING: FREDERICTON, NEW BRUNSWICK
DATES OF HEARING: MONDAY, MARCH 6 AND
TUESDAY, MARCH 7, 2000
REASONS FOR ORDER
DATED: WEDNESDAY, SEPTEMBER 6, 2000
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
APPEARANCES:
Enter Appearances just after [Comment] code.
Ms. Céline Trudeau
Mr. Kenneth McCullough
For the Defendants
SOLICITORS OF RECORD:
Enter Solicitors of Record just after [Comment] code.
Stewart McKelvey Stirling Scales
10th Floor, Brunswick House
44 Chipman Hill
Saint John, New Brunswick
E2L 4S6
For the Plaintiffs
Robinson Sheppard Shapiro
Suite 4700
800 Place Victoria
Montreal, Quebec
H4Z 1H6
FEDERAL COURT OF CANADA
TRIAL DIVISION
Date: 20000906
Docket: T-689-95
ACTION IN REM AND IN PERSONAM
BETWEEN:
Enter Style of Cause just after [Comment] code.
-
Enter Style of Cause just after [Comment] code
- THE CANADIAN SALT COMPANY LIMITED,
a body politic duly incorporated and having a place
of business in Pointe-Claire, Quebec, Canada
and
MORTON INTERNATIONAL INC.,
a body politic duly incorporated and having a place
of business in Chicago, Illinois, U.S.A.
and
ALLIANZ INSURANCE COMPANY OF CANADA,
a body politic duly incorporated and having a place
of business in Toronto, Ontario
Plaintiffs
- and -
THE SHIP "IRVING CEDAR"
and
THE OWNERS, MANAGERS, CHARTERERS, OPERATORS, AGENTS
AND ALL OTHERS INTERESTED IN THE SHIP "IRVING CEDAR"
and
ATLANTIC TOWING LTD.,
a body politic duly incorporated and having a place
of business in St. John's, New Brunswick, Canada
Defendants
REASONS FOR ORDER AND ORDER
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