Docket:
T-970-08
Citation: 2014 FC
6
Ottawa, Ontario, March
7, 2014
PRESENT: The Honourable Mr. Justice Harrington
ADMIRALTY
ACTION IN REM AND IN PERSONAM
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BETWEEN:
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OCEANEX INC.
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Plaintiff
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and
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PRAXAIR CANADA INC.
AND THE OWNERS AND ALL OTHERS INTERESTED IN THE TANKTAINER “C‑156”
EX THE SHIP M.V. “CABOT”
AND THE TANKTAINER “C‑156”
EX THE SHIP M.V. “CABOT”
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Defendants
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AND BETWEEN:
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PRAXAIR CANADA INC.
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Plaintiff by
Counterclaim
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and
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OCEANEX INC.
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Defendant by
Counterclaim
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AMENDED REASONS FOR JUDGMENT AND
JUDGMENT
[1]
This case is about liquid oxygen which leaked
from a cryogenic tank container while on board the m.v. Cabot. As a result, part
of the Cabot’s deck and shell plating became extremely brittle and fractured.
Her owners, Oceanex, have taken action in rem and in personam for
the cost of repairs and for net revenue lost during that downtime. The
defendant, Praxair, the bailee in possession of the tank, alleges that the
leakage was caused by rough and improper handling by Oceanex or by those for
whom it is responsible. It has counterclaimed for the cost of repairs.
[2]
The Cabot set sail from Montréal on 11 December
2007 bound for St. John’s, NL, with a mixed cargo of rolling stock and
containers. All went well until, during cargo operations at St. John’s in the
early morning of 15 December, a loud unusual bang was heard.
[3]
The ship’s watchkeeper, who was forward on the
weather deck, thought that perhaps a container had been dropped. However, he
could see nothing amiss ashore. The officer of the watch, and longshoremen who
were working down below in the after part of the main deck, which runs the
entire length of the cargo space as the Cabot is a ro-ro ship, heard the noise
coming from forward. Upon coming underneath container Bay 2, they observed
cracks in the weather deck plating, so much so that the sky could be seen. A
snow-like substance was falling down and sizzling when it landed on the main
deck. They also saw a crack in the side shell plating which was opening and
closing by as much as two inches.
[4]
The officer then called the watchman on the
weather deck. He proceeded to Bay 2 where he could see a substance falling down
through cracks in the deck plating.
[5]
The ship was immediately evacuated. No one was
hurt. Cargo operations were halted. The ship’s crew then stopped the cracks
from propagating by drilling holes at their ends. The master adjusted the
ballast to minimize the width of the cracks. It turns out that the defendant’s
20-foot tank container, filled with liquid oxygen, had just been discharged
from Bay 2. It was seen spewing its contents on the dock. It was then removed
to an isolated part of the terminal.
[6]
An ice-like substance coated the weather deck in
the general area where the container had been stowed. As confirmed by a
metallurgists’ report prepared by Eric Duchene and Gilles L’Espérance, of the
École Polytechnique de Montréal, the likely cause of the fracturing of the
Cabot’s plating was that it had become extremely brittle after coming into
contact with liquid oxygen which boils at a temperature of -196 degrees
Celsius. I so find.
[7]
As she was then unseaworthy, the Cabot underwent
immediate repair at St. John’s. Her owners, Oceanex, have taken this action in
personam against Praxair, which held the container under a net lease from
Neptune Leasing Inc., and in rem against the container itself. The claim
is for the cost of repairs, direct expenses related thereto, and for loss of
net revenue as the Cabot was unable to trade for some nine days. Although the
container was served in rem, it was never arrested. It was eventually,
on consent, returned to its owners in the United States and is said to be back
in trade. Praxair has undertaken to assume such in rem liability as
there may be, so that for all intents and purposes the action in rem is now
moot.
[8]
As mentioned above, Praxair has denied liability
and as bailee in possession has counterclaimed for damage to the container. It
is so entitled in accordance with the The Winkfield, [1902] P 42,
9 Asp MLC 259, [1900-3]
All ER Rep 346.
[9]
The Court is called upon to find, if it can, why
the container commonly known as C156 leaked, and to determine the legal
consequences flowing therefrom.
[10]
There are two prime competing theories. Oceanex
submits that a valve or valves behind the cabinet doors on one side of the container
were not sufficiently tight to withstand the normal rigours of transit by
water. They are bolstered in this view by the fact that two valves leaked some
two months earlier, but only one was tightened. On the other hand, Praxair’s
premise is based on the fact that the bottom lengthwise railings of the frame
of the container had been set up with a sideways motion to the right. This led to
a misalignment of the piping and put undue pressure on various valves, thus
leading to the leak. The railings were set up because the container was either
dropped or set down heavily while in the custody of Oceanex or its
subcontractors.
[11]
In the event that the cause of leak cannot be
determined on the balance of probabilities, both parties rely on the burden of
proof.
[12]
I shall first describe the container and then
break down its history into three parts: its history before the fateful voyage 48
during which liquid oxygen leaked onto the deck of the Cabot; voyage 48; and
the subsequent inspection and testing. Once the cause of the leak is
determined, I shall deal in greater detail with the legal relationship between
the parties, damages, interest and costs.
TABLE OF CONTENTS:
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Paragraphs
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I. Tank Container C156
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13-17
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II. Pre-Voyage History
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18-22
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III. The October Leak
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23-25
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IV. The Switch from Nitrogen to Oxygen
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26-27
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V. Voyage 48
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28-34
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IV. Inspection at St. John’s
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35-45
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VII. Inspection at Oakville
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46-54
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VIII. Testing and Examination at
Bédard Tankers
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55-56
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IX. Testing and Examination at CVA
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57-60
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X. Testing and Examination at Groupe
Laganière
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61-63
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XI. Challenges of Expert Witnesses
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64-76
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XII. The Cause of the Leak
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77-81
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XIII. The Contract Between Oceanex and
Praxair
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82-87
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XIV. Liability
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88-102
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XV. Damages
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103-120
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XVI. Interest
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121
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XVII. Costs
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122
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I. Tank
Container C156
[13]
C156 is a 20-foot cryogenic intermodal portable
tank container built in 2005 by Cryogenic Vessel Alternatives, Inc. in Texas. Its customer was Neptune Leasing Inc. The tank itself is a 20-foot cylinder fitted
into a standard container frame some 20 feet in length, 8 feet in width and 8 feet
six inches in height. The frame is fitted with eight corner posts which extend slightly
beyond the railings, also called angles, which are made of sturdy steel.
[14]
Gases in liquid form, such as oxygen, nitrogen
and argon, are carried within an interior pressurized vessel. A number of
insulators help maintain the extremely cold temperatures required, but the main
means of keeping such cold temperatures over a long period of time is a vacuum
between the inner vessel and the outer shell. The container was designed to
hold liquid nitrogen for up to 66 days and liquid oxygen for up to 97 days.
[15]
Behind three cabinet doors, on the bottom half
of one side of the outer shell, are an array of pipes and valves which serve various
purposes. On the other side are a series of fins through which liquid decanted from
the inner vessel may be circulated so as to increase temperature and thus return
to its natural gaseous form. On reinsertion into the inner vessel, the gas
helps build up pressure, which may facilitate the discharge of the cargo. At
the top of one end of the container are relief valves similar to those on a
pressure cooker, designed to allow gas from within the inner vessel to escape
should the pressure therein exceed 144 psi. There is also a plate which is held
in place by suction, which indicates that the space between the inner vessel
and the outer shell is under vacuum.
[16]
A drip pan is attached to the bottom railings
underneath the cabinet doors. Its purpose is to catch any minor leakage from
various valves and to prevent road dirt and the like from coming into contact
with the valves. It has no structural value.
[17]
The container, model number CVA-6K-144-ISO, was
designed to the United Nations Portable Tank Rules and approved by the
United States Department of Transportation. Canadian Department of Transport’s
approval was only obtained after the incident. However, no legal consequences
flow therefrom.
II. Pre-Voyage
History
[18]
Praxair leased the container, which it
designated as C156, from Neptune Leasing in 2005. It was delivered brand new to
Praxair’s premises in the east end of Montréal that autumn. Praxair had a new
customer in Newfoundland who required regular deliveries of liquid nitrogen. Service
began in February 2006.
[19]
C156 was only used to carry liquid nitrogen, and
later liquid oxygen, to St. John’s. The only carrier was Oceanex - either on
the Cabot or on its other ship which sailed between Montréal and St. John’s, the Avalon.
[20]
Although Praxair and Oceanex are not in full
agreement as to the content of their contract, there is no disagreement as to
what happened in fact. Shipments were on a house-to-pier basis, from Praxair’s
premises in Montréal to Oceanex’s terminal in St. John’s. Praxair paid freight
which covered movement from Montréal and back again. Leaving aside the initial
carriage, on which memories are a bit unclear, the arrangement was such that on
return of the empty container from St. John’s it would be stored without additional
charge at a terminal operated by Oceanex’s stevedores, Empire Stevedoring. When
the container was needed, Praxair would telephone Oceanex who would dispatch a
cab and chassis, at its expense, to Empire’s terminal. Empire would use a top
lifter to place the container on the chassis. The driver would then proceed to
Praxair’s premises and stand by while the tank was being filled. Thereafter, he
would return to the Empire terminal. Depending on the state of loading, the
container would either be taken directly from the chassis and put on board or
placed in an area of the terminal designated for dangerous goods. From there,
it would be brought to ship’s side by a top lifter.
[21]
Empire would then load the container by means of
a gantry crane and place it upon designated container fittings on board.
Regulations required that the container always be stowed on deck.
[22]
After a voyage of approximately 65 hours, depending
on weather, the ship would arrive at St. John’s. The container would be
discharged by crane at Oceanex’s terminal by Oceanex’s in-house longshoremen
and either placed directly on a chassis maintained by Praxair’s trucking
company, Quinnsway Transport, or landed pending Quinnsway’s arrival. Quinnsway
would then deliver the cargo to Praxair itself, or to Praxair’s customers. In
the normal course, the empty container would be returned to the Oceanex
terminal where longshoremen would offload it and either place it directly on a
ship for the return voyage or land it pending the ship’s arrival.
III. The October Leak
[23]
C156 had been shipped from Montréal to St. John’s with a cargo of liquid nitrogen in late August 2007. It remained in the St. John’s area, partially filled, for some time. On 12 October 2007, C156, which had then
been in Quinnsway’s yard for approximately three weeks, developed a leak from
the bottom of the piping compartment. Liquid nitrogen was running out and down
to the ground. There was a considerable cloud of fog. Eventually, the cabinet
doors were opened and a vent valve was adjusted to blow down the pressure which
had been at 144 psi, liquid level 40 inches. Based on the testimony of the two
individuals who first dealt with the container, as well as Dave Harbec,
Praxair’s transportation manager, eastern region, who was constantly taking phone
calls and making contemporaneous notes, and upon the photographs taken, I find that
the leak emanated from the two-spring operated “fire block valves”. Daniel Axworthyraxair, was sent from Halifax to investigate. He was told
that only one fire block had leaked. He simply tightened or “snugged” the nut
of that fire valve.
[24]
The fire block valves are fitted with a fusible
link which melts at a relatively low temperature. Their purpose is to seal the
tank should there be a nearby fire. Liquid gases could fuel a fire with disastrous
consequences. The larger of the two valves identified as V1 on the piping
arrangement plan is a two-inch valve. The smaller one inch valve, known as V2,
sits to its right. These two valves are quite distinct in appearance from the
other valves as their actuator tops resemble yellow mushrooms. Mr. Axworthy recalls
that he only snugged the nut on V1.
[25]
Oceanex was not informed of this incident.
IV. The
Switch from Nitrogen to Oxygen
[26]
C156 was returned to Montréal on 22 October
2007. By then, demand for Praxair’s product in Newfoundland had changed so that
C156 was converted to carry oxygen, rather than nitrogen. This required a
change of brass fill connections. Oxygen and nitrogen have unique fittings so
as to ensure that the wrong product is not delivered, with potentially deadly consequences.
The oxygen fittings are bigger.
[27]
This conversion was carried out by one of
Praxair’s mechanics, Pierre Lallemant. Prior to the conversion, he pressured up
the inner vessel and found no signs of leakage. He then changed the fittings,
which required some manipulation on his part as he did not have all the
necessary pieces at hand. In particular, an inverted U-bolt which connected the
drip pan, the bottom railing of the frame and the piping, was found to have
been cracked. After inserting the larger oxygen fittings, he tried to force it
back in place, but it broke in two. The bracket below the larger fill
connections comes in two parts in order to accommodate different sizes. It had
to be adjusted. Nevertheless, he believed the piping was secure. Part of the
work required the use of a three-foot wrench which gave rise to considerable
discussion by the experts.
V. Voyage
48
[28]
As expert opinions had been exchanged more than
two years prior to trial, and given that Oceanex had properly taken Praxair’s
expert Keith Hall to suggest that C156 had been dropped or set down heavily in
connection with voyage 48, that voyage was described in excruciating detail.
The truck driver who picked up the empty container at Empire, and brought it to
Praxair where it was filled by the same Mr. Lallemant, the various longshoremen
involved in the reception of the container back at the terminal, the loading on
board and securing, as well as the crew who described the calm voyage,
testified in detail, as did the longshoremen at St. John’s.
[29]
Mr. Lallemant described the loading procedure.
The cab and chassis were brought to the filling station. The wheels were
chalked. The chassis was simply a frame, so it was possible to inspect the
bottom of the container. However, neither the bottom nor the top were examined.
He walked around looking for obvious damage and verified that the vacuum plate
was in place. He understood he was to ignore any indents of less than two and a
half to three inches. He believes there is something in writing to that effect,
but no such document was produced by any of Praxair’s witnesses.
[30]
He sealed the cabinet doors. He and the driver
exchanged documents. He inadvertently described the cargo as liquid nitrogen,
but the required placard indicated liquid oxygen, and Oceanex was aware it was
to carry liquid oxygen. Nothing turns thereon. The interchange receipt is
clean. The receipt is not relevant as any damage to the piping system was concealed.
[31]
C156, containing liquid oxygen, was shipped out
of Montréal on 25 October2007, returning 12 November 2007, then shipped again
on 15 November 2007, returning 26 November 2007, both times without incident.
[32]
I am satisfied that the setting up of the bottom
rails of the container in way of the piping did not occur during or in
connection with voyage 48. As shall be seen, the setting up had to have
occurred at least two months earlier.
[33]
There were two incidents during the voyage which
bear mention. The first is that while making rounds before arrival at St. John’s, the chief officer noted some smoke coming out of a relief valve at the top end
of C156. However, this is an ordinary occurrence. Normal ship movements may
well contribute to the build up of pressure within the tank. Nothing was made
of it by him, or by me.
[34]
The other is that one of the longshoremen, who were
unlashing cargo prior to discharge, saw a glassy substance on the weather deck in
the vicinity of C156. He thought nothing of it and did not report it. This
might have been a few hours before C156 was discharged. However, there is no
evidence that earlier discharge would have made any difference.
VI. Inspection
at St. John’s
[35]
The incident occurred shortly before 04:00 hrs
local time. Larry Gosling, Oceanex’s pier superintendent, was called at home at
about 04:15 hrs and arrived at the pier half an hour later. He first met with the
master who stated that the cargo operations had ceased as he had adjusted the ballast
in an effort to close the cracks in the shell plating, and to keep them away,
as far as possible, from the water line.
[36]
At approximately 07:00 hrs, Quinnsway’s driver, Dean
Simms, arrived and pried open two of the three compartment doors. It was Mr.
Simms, who had received some training from Praxair, who identified a fire block
valve which was leaking two steady streams of liquid. As confirmed by a photo
taken by Mr. Gosling, the leak was from the larger fire block valve, V1, the
one snugged by Mr. Axworthy two months earlier. However, although not 100%
certain, Mr. Gosling believes that the smaller fire block was also leaking. Mr.
Simms is not certain if the smaller valve was leaking. On the balance of
probabilities, I find that V2 was also leaking. Mr. Simms opened a valve to
depressurize the tank. Nevertheless, leaking continued for hours. Subsequent
examination showed that there was no fractured piping.
[37]
Frost could be seen everywhere within the
compartment. As later explained by Oceanex’s expert, John Davis, the frost was
water vapour, not liquid oxygen. Given the difference between the temperature
of liquid oxygen and the ambient temperature, condensation would occur. This is
similar to what happens when one takes a bottle of liquid out of a refrigerator
on a warm day.
[38]
Dave Harbec was quarterbacking Praxair’s
operations from Montréal. All the appropriate authorities were notified. He was
in constant communication with Mr. Axworthy, who lived in the Halifax area, and
with Keith Pike who was Praxair’s Newfoundland territorial manager. Mr. Pike
was asked to go to the site. According to the security log, he arrived at 09:09
hrs. He would take notes about the pressure and liquid levels showing on the gauges
and then report to Mr. Harbec. After the leak had stopped, Mr. Axworthy advised
what tools would be necessary in order to tighten a packing nut. Mr. Pike
believes he tightened V1, the bigger mushroom valve, but is not absolutely sure.
[39]
C156 was examined that day and on subsequent
days after it had been brought to Praxair’s yard. William Maybee, who is a
marine surveyor and engineer, was retained on behalf of Oceanex to survey the
damage to the ship and to examine C156. He does not purport to have any
specialized knowledge with respect to cryogenic vessels, but has observed
damage to ships and cargo over the years. I qualified him to testify as an
expert based on his experience as a marine surveyor and his training as an
engineer.
[40]
Robert Hollings was retained on behalf of
Praxair. He is also an experienced marine surveyor but was not called as an
expert witness.
[41]
Both took a great number of photographs which
proved useful in appreciating the structure of the container and the location
of various valves. However, given that there had been leaking for several hours
before the compartment doors were opened but had stopped before their
inspections, these photos, unlike Mr. Gosling’s, do not lend themselves to a
finding as to the source of the initial leaks.
[42]
On 27 December after the tank container had been
emptied and defrosted, Mr. Maybee noted that the bottom of the piping
compartment cabinet was indented and set up. The deformation to which he
referred was to the drip pan and was approximately three feet inboard from the
railing of the container frame itself. It was not visible when the tank container
was either on the ground or on a flat bed trailer. He thinks that none of the
damage noted in way of the valve cabinet, which he considered to be minor,
contributed to the leak. He was of the view that the December leakage arose from
insufficient or improper tightening of the packing gland nut on one or both of
the two fire block valves. This was an inference on his part given that he
considered the blemishes on the tank container itself were not causal.
[43]
Mr. Hollings, who also has an engineering background,
first inspected the container after it had been moved, with Transport Canada authorization, to Praxair’s yard at Mount Pearl. Like Mr. Maybee, he is not a specialist
in cryogenic vessels, but has been a marine surveyor for many years. He also noted
that the bottom of the drip pan was distorted, which he initially attributed to
normal wear and tear.
[44]
Mr. Harbec arrived on the scene on 27 December.
In the presence of Messrs Maybee and Hollings, he read the pressure in the
vacuum by means of a Hastings vacuum gauge. The valve between the tank and the
thermo couple was not as tight as Mr. Harbec would like, but no one has
suggested that this played a role in the leak. The gauge indicated one thor,
while the preferred level would be 0.01 to 0.1 thor or 10 to 100 microns of a
millimetre of mercury. Mr. Harbec was concerned that the vacuum may have been
compromised. In such event, the space between the inner vessel and the outer
shell begins to take on the ambient temperature. This leads to heat build up
within the vessel, which causes the liquid oxygen to begin to boil, which in
turn leads to an increase in pressure.
[45]
Praxair decided to bring the tank to its
premises in Oakville, Ontario, where it could be properly examined indoors. By
this point, Oceanex had decided to no longer carry Praxair’s products. The
container therefore was moved by road to Port Aux Basques, carried on a Marine Atlantic
ferry to North Sydney, and from there trucked to Oakville.
VII. The Inspection at Oakville
[46]
The container was removed from its chassis and
examined indoors at Praxair’s premises in Oakville on 8 and 9 January 2008.
There was still some concern that the vacuum of C156 had been compromised, and
as Praxair was not licensed to carry out the further work required, it decided
to send the container to Bédard Tankers in Montréal. However, the container was
closely examined by Praxair’s personnel, Keith Hall, a representative of the
manufacturer, Mr. Maybee and Glenn Buck on behalf of Oceanex, as well as a
representative of Transport Canada, who was concerned that the container did
not have Canadian regulatory approval.
[47]
The parties assumed that the container suffered
no damage on its way from Newfoundland to Oakville. Mr. Lallemant was shown
photographs taken at Oakville. He confirms that they reflect the condition of
the container at the time it was filled in Montréal in order to be shipped on
the Cabot’s voyage 48. Based on those photographs, as compared with the
photographs taken in St. John’s at the time of the October 2007 spill, the
parties’ assumption that C156 suffered no damage on its way from Newfoundland to Oakville is well founded.
[48]
Although this is truly a case where a picture is
worth a thousand words, the blemishes, if you will, were behind and below the
middle piping compartment door.
[49]
The two fire block valves (fill and drain and
pressure building inlet) were open. Certainly Mr. Lallemant had not touched
them. It is Praxair’s position that the fire block valves were kept open at all
times, and the nuts only snugged if there was a leak.
[50]
The inverted bronze U-bracket that secured the
fill and drain connections was broken into two pieces at the top of the
inverted U. This break occurred during the conversion of the tank from nitrogen
to oxygen, as per Mr. Lallemant.
[51]
The two-piece overlapping bolted support to
which the U-bracket was secured was severely cocked.
[52]
There was at least a half inch drag mark from
the green plastic Stauff clamp which secured the piping to the outer shell,
indicating a movement of the clamp or the piping. There was a slight
compression buckle in the top of the pipe leading from V1.
[53]
The bottom of the drip pan beneath the broken
fill connection bracket in the piping compartment was bent upwards.
[54]
The bottom lengthwise railing of the container
frame, under the compartment centre door, was bowed upward, as was the lengthwise
railing on the other side. This set-up was about five eights of an inch and also
bowed inward slightly. The frame may have been deformed more than that but
sprang partly back to the condition observed. However, the position of the
corner posts were still within ISO standards, meaning that there would be no
difficulty placing the container onto the fittings on a ship or chassis.
VIII. Testing and Examination at Bédard Tankers
[55]
C156 arrived at Bédard Tankers in Montréal on 13
March 2008. Various tests were conducted over the next few months. It was
filled with liquid nitrogen by means of a special device which did not require
the fittings to be changed and was left in Bédard’s yard. All and all, the tank
was considered sound. On 15 October 2008, the pressure was noted at 148 psi and
the container was venting. On 27 October 2008, no nitrogen was left and the
vacuum was completely lost. No one has made anything out of this given that the
container was only designed to hold liquid nitrogen up to 66 days. The point is
that it was observed to be venting, not leaking.
[56]
Later, C156 was moved back to Praxair’s yard in
Montréal. On 6 and 7 April 2009, a chemist with experience in piping systems, Jean-René
Dumont, was hired by Oceanex. In the presence of representatives of Praxair and
a surveyor, he removed the smaller fire block valve, V2, and the broken
inverted U-bracket. He tried to disassemble valve V1 but was unable to do so. By
agreement, these parts were kept by the surveyors, Hayes Stuart, for safekeeping.
IX. Testing
and Examination at CVA
[57]
By this point in time, arrangements had been made
by Praxair to return the container to its owner. It shipped C156 to the
manufacturer, Cryogenic Vessel Alternatives, in Mont Belvieu, Texas, for
refurbishment. It was inspected on 8 June 2009 and on subsequent days by Keith
Hall, and others, including Tracy MacDonald, Praxair’s distribution engineer,
and a surveyor, Eric Turpin of Silver Clims, who represented Oceanex. Mr.
Turpin did not testify and his report was not produced. However, a number of
witnesses referred to photographs he had taken. Further parts of the container
where cut away and sent back to Montréal. These included the fire block valve
V1, parts of the drip pan, and parts of the front and back bottom horizontal
railings of the container frame.
[58]
Some rust spots were noted underneath the piping
compartment on the bottom frame supports. Mr. Hall is of the view that the rust
had nothing to do with the damage but may have been the result of the container
sitting on a trailer frame, with the rust coming from one of the cross-member
supports on the trailer. This rust does not appear to have been observed at Oakville. In any event, it may possibly have occurred during the movement by truck to Oakville, the subsequent movement to Montréal or the final movement to Texas, with respect
to which no details have been provided.
[59]
The two-inch pipe leading from fire block valve
V1 had a small compression kink or buckle on the top, just to the left of the
green plastic Stauff mounting clamp. Combined with the green plastic scuff
marks which had been noted earlier, Mr. Hall was of the view that the pipe had
been forced to slide through the clamp. This conclusion was challenged by John
Davis, Oceanex’s expert. Given that no expert has suggested that this
compression buckle was in any way causative, and given the subsequent work in
the area by Mr. Dumont, I do not need to consider whether this buckle was caused
by Mr. Lallemant when he changed the brass fittings, or otherwise.
[60]
A small leak was identified at the epoxy joint of
the vacuum valve, the only valve behind the left compartment door. Two of the
four bolts that hold the valve in place were loose. Mr. Hall suggests that the loose
valves might have been the result of vacuum work performed after the incident.
The cracked epoxy on the evacuation valve inlet threads could have resulted
from the extremely cold environment in the piping compartment caused by the
leak. Certainly, there has been no suggestion by anyone that the cracked epoxy
came first, thereby compromising the vacuum, heating up the oxygen to its boiling
point so that the pressure greatly increased.
X. Testing
and Examination at Groupe Laganière
[61]
On 31 May 2011, almost two years later, John
Davis, a mechanical engineer, who testified as an expert on behalf of Oceanex,
carried out a visual inspection at Empire Stevedoring of the components which
had been taken from C156 in Texas and returned to Montréal.
[62]
On the following day, he carried out a visual
inspection and an air pressure testing of fire block V1 at Groupe Laganière’s
garage in Montréal. This was done in the presence of Mr. Dumont and Ms.
MacDonald of Praxair, as well as counsel for both Oceanex and Praxair. The
inspection suggested that the valve was in good condition. He noted that it did
not take much pressure to loosen the nut to bring on a leak.
[63]
Fire block valve V2 was pressure tested by Mr.
Dumont on 16 June 2011. Again, there was nothing untoward.
XI. Challenges
of Expert Witnesses
[64]
Oceanex had submitted that I not even hear the
evidence of Keith Hall, an expert called by Praxair. It did not challenge his
qualifications but rather alleged that he could not be relied upon to give
objective evidence because he was the engineering manager of Cryogenic Vessel
Alternatives which had built C156 and because he still had an ongoing business
relationship with Praxair, even now after he had changed companies.
[65]
John Davis, a mechanical engineer, was the prime
expert witness called by Oceanex. Praxair did not challenge his expertise as
such, but cautioned that it had to be kept in mind that he was not an expert in
cryogenic vessels. He testified after Mr. Hall. In oral argument at the
conclusion of the hearing, Praxair submitted that Mr. Davis’ evidence could
only be considered in relation to Praxair’s counterclaim, and not to Oceanex’s
claim.
[66]
With respect to Mr. Hall, I gave a written order
that I would hear his testimony.
[67]
A number of cases were cited, particularly the
dissenting decision of Chief Justice MacDonald of the Nova Scotia Court of
Appeal in Abbott and Haliburton Co. Ltd. v. White Burgess Langille Inman
(c.o.b. WBLI Chartered Accountants), 2013 NSCA 66, 361 DLR (4th) 659,
[2013] NSJ No 259 (QL). However, I was of the view that the decision of the
majority was more in keeping with the jurisprudence which is to the effect that
the evidence of an otherwise qualified expert usually should be heard before a
decision is made as to what weight, if any, it should be given. Incidentally, that
case is on its way to the Supreme Court.
[68]
Mr. Hall proved to be an excellent objective
witness. It is evident that his first opinion issued 15 January 2008, following
his inspection at Oakville, was premature. He had not been made aware that C156
had leaked from its two fire block valves for several hours in October 2007. He
was of the view, and remained of the view, that the container had been dropped or
set down heavily on something raised. This had forced the piping up and to the
right. However, more telling is this passage:
The
occasional packing leak is completely normal for most cryogenic valves. I
have never heard of a catastrophic packing leak happening quickly under normal
circumstances. A packing may leak a little, and the next time the operator
sees the unit and sees that a packing is leaking, he or she will use a wrench
and “snug” down the packing nut just a little. Over-tightening of a packing nut
will render the valve inoperable (the stem won’t be able to rotate within the
overly compressed packing). As the container was not damaged when shipped,
and as the damaged area on the container is directly under the piping circuit,
of which the Fire Block valve is a part of, it is obvious that the impact to
the container (probably dropped onto something) was the cause of the gross
packing leak on the Fire Block Valve.
[My
Emphasis]
[69]
Upon being shown photographs taken just after
the October 2007 spill, and having taken measurements thereon, Mr. Hall was firmly
of the opinion that the set up of the container frame existed at that time and was
visible on very close inspection. I agree, and so find.
[70]
As regards Mr. Davis, I must say he had a first
class knowledge of valves and piping systems in general. He worked his way
through the piping arrangement plan without difficulty. His opinion was very
helpful.
[71]
Praxair’s position that his evidence cannot be
heard as part of Oceanex’s case against it is based on a number of decisions,
including that of Mr. Justice Pelletier, as he then was, in Halford v Seedhawk
Inc, 2003 FCT 141, [2003]
FCJ No 237 (QL). These cases deal with the tendering of expert
evidence in reply. Mr. Justice Pelletier referred to a number of cases which
state that the plaintiff must exhaust its evidence in first instance and not
split its case by relying on prima facie proof, and then after hearing
the defendant, attempt to adduce further evidence.
[72]
That principle has to be considered in context.
In this case, we have a claim and counterclaim. They are both based on common
evidence. Although there was some manoeuvring with respect to the order in
which witnesses would be heard, the schedule was altered to suit Mr. Hall’s
availability. Furthermore, the last proposed order of witnesses prepared by Oceanex
at a trial management conference indicated that while Mr. Hall would precede
Mr. Davis, the final schedule was left to the Court’s discretion.
[73]
As mentioned earlier, expert reports had been
filed more than two years prior to trial. Oceanex was not splitting its case.
What was new is that Mr. Davis testified after hearing Mr. Lallemant while Mr.
Hall was called beforehand. This led Mr. Davis to testify with respect to the
compression buckle on the pipe near fire block valve V1, which I find, in any
event, irrelevant.
[74]
Furthermore, in order to suit his schedule, the
expert accountant called by Praxair, Arthur Lavigne, was heard before Oceanex’s
accounting expert, Lynda Boisvert. The fact that Ms. Boisvert simply stood on
her expert report as filed, and did not comment upon the testimony of Mr.
Lavigne is irrelevant. In fact, her report was not a rebuttal report, which
could well have led to a submission that Oceanex was splitting its case.
[75]
Praxair could point to no prejudice because Mr.
Hall was heard before Mr. Davis and, in any event, Mr. Hall was recalled to
comment upon Mr. Davis’ testimony. Throughout the trial, I mentioned on several
occasions that each side would be given every opportunity to say all that it thought
needed to be said, and perhaps more.
[76]
In my opinion, the decision most on point is
that of Chief Justice Richard in Elders Grain Co Ltd v Ralph Misener (Ship),
2005 FCA 139, [2005] 3 FCR 367, [2005] AMC 1241, [2005] FCJ No 612 (QL), where
he said:
[64] The
trial judge considered and rejected the arguments of counsel for the appellants
that their claim and the respondents' counter-claim should be treated as two
separate proceedings within the same hearing. After weighing submissions from
both parties, the trial judge also decided against granting leave to the
appellants to submit their expert report in rebuttal.
[65] It
was within the trial judge's discretion to determine the order of evidence and
to refuse to grant leave for the submission of rebuttal expert evidence at
trial. Furthermore, it was in the interests of judicial economy to hear both
the claim and the counterclaim at the same time, since there was a common body
of evidence. It was always open to the appellants to apply for severance if
they felt it was necessary to their case.
[66] Based
on the record, the trial judge judicially exercised his discretion. Therefore,
there are no grounds on which to disturb his decision.
XII. The Cause of the Leak
[77]
To understand why the fire block valves leaked, one
must take into account their construction. There is a stem within a bonnet. The
space between the two is sealed at the top, under the yellow mushroom actuators
by a series of teflon type rings which are compressed by tightening or snugging
the packing nut. Both bonnet and stem lead down to a ball valve which easily
rotates - 90 degrees one way the valve is open, 90 degrees the other it is
closed.
[78]
If the bonnet is pushed to one side, so too is
the stem. The integrity of the packing should not be affected according to Mr.
Davis. Although Mr. Hall is in general agreement, he says the stem will not move
quite as much as the bonnet, so that the packing between the two can become
distorted, leading to a leak between the stem and bonnet. In ambient
temperatures, without leakage, the packing reverts to its original shape.
[79]
If the packing nut is not tight enough, liquid
will fill the space between the bonnet and stem. When exposed to a liquid gas,
the packing shrinks faster than the bonnet so that there is the accumulation of
a small amount of liquid oxygen that cannot immediately evaporate, and
therefore leaks. Furthermore, if the fire valves were left open, which they
were, contrary to the manufacturer’s manual, the whole tank is subject to
leakage, as the line runs past fire valve V1 on the way to the filling valve
C1.
[80]
In my opinion, fire block valves V1 and V2
leaked in December 2007 because they were not sufficiently tight. Indeed, the
evidence, including that of Mr. Davis, is to the effect that it is difficult to
put a wrench on the packing nuts under the mushroom shaped actuators. Any
distortion of the piping system did not lead to the leak and, in any event, was
easily preventable.
[81]
There are two other disturbing facts not
attributable to Oceanex. One of the two relief valves was set at 200 psi rather
than 144. No explanation was given. Presumably, the inner vessel could not be
vented as effectively. The other is that the fins on the other side of C156
were covered with frost, suggesting the pressure was being increased in the
tank which Praxair was trying to depressurize. Again, no explanation was given.
XIII. The Contract Between Oceanex And Praxair
[82]
The dispute between the parties was limited to
the freight rate. Oceanex’s other terms and conditions were accepted.
Furthermore, Praxair paid Oceanex’s invoices. The contract is to be found in
the rate quotation which incorporated the Oceanex tariff and non-negotiable
receipt. The rate quotation specifically provided that the shipment is not
subject to the Hague-Visby Rules or the Hamburg Rules. No bill
of lading was issued.
[83]
The non-negotiable receipt stipulates that the
contract is governed by Canadian Maritime Law. Clause 11 deals with dangerous
goods. It reads:
No goods (including radio-active
material) which are or which may become dangerous, inflammable,
contaminating, polluting, dusty, frozen or damaging, or which are or may become
susceptible to damage by other goods or property whatsoever, shall be
tendered to the Carrier for carriage without its express consent in writing.
The Merchant shall insure that the nature of such goods is distinctly marked on
the outside of all packages and containers containing the same. If any such
goods are so tendered without such consent, the same may at any time be
destroyed, disposed of, abandoned or rendered harmless without compensation to
the Merchant and without prejudice to the Carrier’s right to freight. The
Merchant acknowledges that the Carrier has no actual knowledge of the
characteristics of the goods, and stipulates that no enquiries need be made with
respect thereto. Whether or not the Merchant was aware of the nature, or
content of the goods, it shall indemnify the Carrier against all claims,
losses, delays, damages or expenses arising in consequence of the reception of,
or the carriage of such goods, and pay to the Carrier all expenses, costs,
claims, losses and damages resulting therefrom.
[My
Emphasis]
[84]
Clause 11 has no direct application. Liquid
oxygen is inherently dangerous as known by both Praxair and Oceanex, who
expressly consented in writing to its carriage.
[85]
Notwithstanding the contractual ouster of the Hague-Visby
Rules, Oceanex submits that as a matter of public policy they still apply.
It referred to Wells Fargo Equipment Finance Company v MLT3 (The), 2013
FCA 96, 359 DLR (4h) 561, [2013] FCJ No 380 (QL). The reason for the submission
is that article IV, r 6 of the Rules, which are to be found at Schedule 3 to
the Marine Liability Act, provides that if goods of a dangerous nature
are shipped without the carrier’s knowledge of their nature, the shipper is
liable “for all damages and expenses directly or indirectly arising…”
(my emphasis).
[86]
The Wells Fargo decision does not stand
for the proposition advanced by Oceanex. It dealt with a contract which
resembled a charter party. Section 43(2) of the Marine Liability Act
makes it perfectly clear that although the Hague-Visby Rules apply to
cabotage, they do not do so if, as in this case, no bill of lading was issued
and the contract stipulated that the Rules do not apply.
[87]
As shall be seen, in any event we do not have to
consider indirect damages.
XIV. Praxair’s Liability
[88]
The cases cited with respect to dangerous goods
are not exactly on point. They deal with cargo which one would not think of as
being inherently dangerous. The issue in those cases was whether the shipper,
be it under the Hague-Visby Rules, or under common law, is liable even
if it did not know the goods were dangerous.
[89]
In the Giannis NK (Effort Shipping Co Ltd) v
Linden Management SA et al, [1998] 1 Lloyd’s Rep 337, the House of Lords
was dealing with a cargo of ground nuts which were infested with Khapra
beetles. As a result, another cargo was contaminated and had to be destroyed.
Consequently, the ship was delayed because of fumigation.
[90]
The House of Lords held that dangerous goods
within the meaning of the Hague Rules were not confined to goods of
inflammable or explosive nature or their like. In the absence of the carrier’s
informed consent, the shippers were prima facie liable for all damages
and expenses directly or indirectly arising out of the said shipment.
[91]
Lord Lloyd added in obiter that the
liability of a shipper did not depend on his knowledge or means of knowledge
and liability would be the same whether it arose by virtue of an implied term
at common law or by Article IV r. 6 of the Hague Rules. Liability is
strict.
[92]
In Elders Grain Co v Ralph Misener (The), 2003
FC 837, [2003] FCJ No 073 (QL), aff’d 2005 FCA 139, [2005]
FCJ No 612 (QL), above,
the shipment was of alfalfa pellets which caught fire during discharge. The probable
cause of loss was spontaneous combustion. Alfalfa pellets are dangerous as they
can ignite if not properly stored.
[93]
The comment most on point is that of Mr. Justice
Nadon, as he then was, in Industries Perlite Inc v Marina Di Alimuri (The),
[1996] 2 FC 426, [1995] FCJ No 1650 (QL). This was a shipment of peat moss.
Peat moss could become dangerous if loaded wet and therefore be too heavy. He
said at paragraph 98:
The liability for the
damage caused by casualty flowing from the shipment of dangerous cargo is
varied where the carrier, members of the crew, or ship owner(s), know or ought
to reasonably have known of the dangerous nature of the cargo. As will be seen
from the jurisprudence, this exception is based on the assumption that a
carrier who is aware of the dangerous nature of the cargo accepted for
carriage, consents or accepts to assume some of the risks associated with that
shipment. Put another way, where there is an indication that the carrier was
made aware of the dangers involved in a shipment, or where the dangers are
self-evident, and the carrier proceeds in the face of that knowledge, the
general principle stated above is trumped. Therefore, whatever warranty exists
(absolute or qualified) on the part of the shipper as to the suitability of
goods for carriage, the liability for the damage arising out of "dangerous
cargo" is judged on a sliding scale wholly dependent on the knowledge, or
deemed knowledge of the carrier.
[94]
Liquid oxygen and liquid nitrogen are covered by
the Transportation of Dangerous Goods Act, 1992 and Regulations
thereunder. Among other things, the shipment must be properly placarded, which
it was. Refrigerated gases fall within Class 2 of the Act. Under section 5.4 of the Consolidated Transportation of Dangerous
Goods Regulations, the shipper must “load and secure dangerous goods in a
means of containment... in such a way as to prevent, under normal conditions of
transport, damage to the means of containment or the means of transport...”
[95]
In addition, be it under common law or the
non-negotiable receipt, the carrier is not responsible for damage caused by insufficiency
of packing. “No person is entitled to claim compensation from others for damage
occasioned by his neglect to do something which it was his duty to do.” (Barbour
v South Eastern Railway Co (1876), 34 LT 67 per Baron Cleasby as quoted in Carver,
Carriage by Sea, 13th Edition, Volume 1, para 17) Furthermore, the
insufficiency of packing, i.e. the insufficiently tightened packing
nuts, could not be detected by Oceanex. The fire block valves were behind
sealed cabinet doors. Indeed, “who knows what goes on behind closed doors.” In
any event, it was never expected that Oceanex would do anything with the
container other than carry it. Oceanex did not accept the risk that Praxair
would not do the right thing by it.
[96]
Consequently, Praxair is liable.
[97]
Praxair makes the case that the bowing or
setting up of the bottom rails of the container frame had to have occurred when
the container was in Oceanex’s custody, because neither Praxair nor its trucker
in St. John’s, Quinnsway Transport, ever had occasion to take the container off
its chassis. However, no evidence has been led as to how the tank container was
moved from its place of manufacture in Texas to Praxair’s premises in Montréal.
Mr. Lallemant seems to recall that a crane had been hired to lift the tank
container off a truck. It was placed on the ground where it remained for
several months. Given that all the interchange receipts are clean, and given
that Mr. Hollings, retained by Praxair, did not spot anything untoward after
the December spill, it cannot be said on the balance of probabilities that the
setting up of the bottom rails occurred while in Oceanex’s custody, or that of
its stevedores or truckers.
[98]
Presumptions arising from the burden of proof have
limited application. No one has put it better than Mr. Justice Devlin, as he
then was, in Waddle v Wallsend Shipping Ltd, [1952] 2 Lloyd’s Rep 105,
at page 139:
In
a case where substantially all the facts have been brought to light, it is no
doubt legitimate to argue that some cause must be found, and therefore the one
that has most to be said for it should be selected. Where it can fairly be said
that all possible causes have been canvassed, the strongest must be the winner.
But in a case where all direct evidence is missing, there is no ground for
saying that the most plausible conjecture must perforce be the true
explanation. The answer that may well have to be given is that not enough is
known about the circumstances of the loss to enable the inquirer to say how it
happened. All that he can say is that no theory advanced has been able to
collect enough support from the facts to make it more likely than not that it
happened in that way and not in any other...
This is not a case to be decided on the
burden of proof.
[99]
Even if the setting up of the railings would
have been causal, and attributable to Oceanex, Praxair had been on notice for
two months that it had a serious problem. All Praxair did was snug up the nut
on one of the two leaking fire block valves. It did not even write up the
incident. This brings to mind The “Princess Victoria”, [1953] 2 Lloyd’s
Rep 619, a decision from the Northern Ireland Ulster High Court.
[100] The “Princess Victoria” was an inquiry
under the (UK) Merchant Shipping Acts as to whether her sinking was
caused by “wrongful act or default” of her owners and managers. The loss of the
ship was due to her unseaworthiness arising from the inadequacy of the stern
doors on the car deck. There had been an earlier incident in which a large
volume of water had accumulated on the car deck. As Lord MacDermott, Chief
Justice, said at pages 632-633:
The
incident of 1951 does not seem to have excited any concern in the minds of the
owners. Their annual passenger certificate for Larne-Stranraer was renewed with
the ship as she was and nothing about her seaworthiness appears to have been
learnt from what had happened. The importance of the experience of 1951 lay
mainly in the fact that a very large volume of water had been trapped on the
car deck. In the opinion of this Court that circumstance should have put the
owners on inquiry. They should have ascertained the facts as closely as
possible; they should have realized then that the shipping of a heavy sea through
the stern opening could no longer be regarded as beyond the bounds of
possibility; and they should have been at pains to see what could be done to
counter the defect in design which was thus revealed.
[101] It is not necessary to determine whether or not the design of C156
was defective. To paraphrase Lord MacDermott, the incident of October 2007 does
not seem to have excited any concern in the minds of Praxair. The importance of
the experience lay mainly in the fact that an exceptional leak lasting several hours
occurred. In my opinion, that circumstance should have put Praxair on inquiry.
It should have ascertained the facts as closely as possible; it should have
realized that severe leakage through valves hidden behind the cabinet doors
could no longer be regarded as beyond the bounds of possibility; and it should
have been at pains to see what could be done to counter the problem which was
thus revealed.
[102] Ms. MacDonald acknowledged that Praxair was aware that liquid oxygen
was capable of causing certain types of steel to fracture. Indeed, it was most
fortunate that the incident occurred while the Cabot was safely alongside. Had it
occurred at sea in heavy weather, the likelihood is that she would have broken
in two. One could only hope that the crew would have been able to get to the
lifeboats in time.
XV. Oceanex’s
Damages
[103] Oceanex’s damages in breach of contract are governed by Canadian
Maritime Law. That law is based on the English law of contract as may be
modified by Canadian statute and incrementally changed by the courts (ITO-International
Terminal Operators Ltd v Miida Electronics Inc, [1986] 1 S.C.R. 752, [1986]
SCJ No 38 (QL) (the Buenos Aires Maru) and Fraser River Pile &
Dredge Ltd v Can-Dive Services Ltd, [1999] 3 S.C.R. 108, [1999] SCJ No 48
(QL)).
[104] The purpose of damages is to put the plaintiff in the position it
would have been in had the loss not occurred, to the extent the law allows. The
leading case for over 150 years has been Hadley v Baxendale (1854), 9 ExCh341,
156 ER 145. The test as to whether damages are too remote in law is whether the
parties at the time of contracting could reasonably have contemplated the type
of loss given their knowledge of each other’s affairs. A more modern authority
is RBC Dominion Securities Inc v Merrill Lynch Canada Inc, 2008 SCC 54, [2008]
3 SCR 79, [2008] SCJ No 56 (QL).
[105] As stated by Associate Chief Justice Thurlow in Bentsen Line A/S
v F.F. Soucy Inc, [1978] FCJ 815 (QL), the leading case on the measure of
damages when a ship is unable to trade is Smith v McGuire (1858), 3
H&N 554, where Martin B. stated:
[…]
The real damage is the loss arising from the breach of contract? That is to be
ascertained by calculation of the freight to be earned, and deduction of the
expenses which the shipowner would be put to in earning it; and what the ship
earned (if anything) during the period which would have been occupied in
performing the voyage, ought also to be deducted.
[106] If the Cabot were a tramp ship, a bulk carrier or a tanker, which
could be voyage or time-chartered in international trade, expert evidence would
have been led by ship brokers familiar with the market. However, the Cabot was
on a liner service in domestic trade, which for all intents and purposes is
limited to Canadian flag ships. Not all cargos were carried at the same freight
rate.
[107] The claim was first calculated by Daniel Turcotte, Oceanex’s
comptroller. His initial calculation showed a loss of $961,615. However, the
statement of claim is for $946,382. On discovery, it was back up to $979,878.
In final argument, after the expert accountants did some “hot-tubbing”, the
claim was reduced to $832,125.63, but that is subject to some revision as
regards overhead.
[108] There are two components to Oceanex’s claim. The first, the cost of
repairs and attendant expenses, poses no difficulty and has been admitted by
Praxair. The difficulty lies in the second component, business interruption.
This is where the parties stand, subject to a reconsideration of overhead:
|
HEAD OF DAMAGES
|
AS PER OCEANEX
|
AS PER PRAXAIR
|
|
Repair costs
|
$137,581.00
|
$137,581.00
|
|
Extra stevedoring
|
$8,428.08
|
$8,428.08
|
|
Fuel burning during repairs
|
$29,264.00
|
$29,264.00
|
|
Extra port costs
|
$7,522.00
|
$7,522.00
|
|
Crew overtime
|
$966.97
|
$966.97
|
|
Sub-total
|
$183,762.05
|
$183,762.05
|
[109] Oceanex states its profit and loss in terms of TEUs (20-foot
equivalents), the length of a standard container. Many containers are now 40 feet,
48 feet and 53 feet in length, so that, for example, the freight on a 40-foot
container would be expressed as two TEUs.
[110] The figures are then conveniently expressed as contribution per TEU.
This contribution (i.e. net profit) obviously varies with the amount of
cargo carried per voyage. Considering fixed costs, the more cargo, the greater the
contribution or profit.
[111] Mr. Turcotte’s calculations were sent to Deloitte’s for an independent
analysis. Their Denis Hamel filed an expert affidavit, which was testified to
by another Deloitte accountant, Lynda Boisvert. All Mr. Hamel did was tinker
slightly with Mr. Turcotte’s calculations. Praxair called another well
qualified accountant, Arthur Lavigne. Neither expert had any difficulty working
with the concept of TEUs. However, a good part of their respective opinions is not
based upon accounting principles.
[112] The three remaining heads of claim are: a) expenses incurred in
rerouting 76 containers/trailers or 187 TEUs to Newfoundland via Nova Scotia;
b) loss of profit on containers which were not shipped on the Cabot’s intended
sailing of 19 December; and c) overhead, general damages, detention of
containers in St. John’s, Class Survey and loss of westbound shipments.
|
HEAD OF DAMAGES
|
AS PER OCEANEX
|
AS PER PRAXAIR
|
|
Rerouting 187 TEUs
|
$184,190.58
|
Nil
|
|
Loss of profit
|
$389,173.00
|
Range from $118,912 to $297,517
|
|
Overhead
|
$75,000
|
Range from $13,560 to $31,716.50
|
[113] The expenses incurred in rerouting 76 containers/trailers or 187
TEUs from Montréal to Newfoundland by truck to Nova Scotia and then by ferry to
Newfoundland creates considerable difficulty. Praxair submits that this head
of damage did not flow from the spill. It submits that Oceanex incurred these
expenses for commercial reasons, so as to satisfy its major customer, Wal-Mart,
and a few other customers. It could have invoked a force majeure clause in
those contracts because it was unable to perform the voyage originally
scheduled for 19 December. I first tended to the view that Praxair was right,
that Oceanex had failed to mitigate its damages. On further thought, however, I
have come to the opposite conclusion.
[114] Carver, above, Volume 2, at para 2144, refers to the case of James
Finlay & Co, Ltd v NV Kwik Hoo Tong Handel Maatschappij, [1929] 1 KB
400, 32 Ll. L. Rep 245, [1928] All ER Rep 110,
a decision of the English Court of Appeal. In that case, there was a discrepancy
between the date of the bills of lading and the date of shipment. The
plaintiff’s buyers refused to take delivery on the grounds that they had bought
September shipment goods, and the goods were not shipped that month. Rather
than attempt to enforce its contract, the plaintiff sued the defendant carrier.
In upholding the judge of first instance, Mr. Justice Wright, as he then was, Lord
Justice Scrutton, said at page 250:
I
personally cannot think that a man who has broken his contract can compel his
buyer who has not broken his contract to take action to minimize the damages of
a person who has broken his contract, by claiming money to which he knows he is
not entitled, and to take action which will ruin his credit in the business
world.
[115] Praxair knew full well that Oceanex was operating a scheduled liner
service. Had it thought about it, it would have known that the timing of
shipments just before Christmas and boxing week sales were crucial. It would
have been foolhardy for Oceanex to put its relationship with Wal-Mart into
jeopardy. The expenses claimed are not too remote.
[116] Oceanex claims $184,190.58 for net expenses incurred in rerouting 76
containers/trailers or 187 TEUs to Newfoundland via Nova Scotia. This figure
was arrived at by deducting from the expenses actually incurred, the normal
freight it charged Wal-Mart and other customers. That freight had been paid.
Although Praxair submits that this head of damage does not flow from the spill,
for the reasons above I am allowing it. However, as will be explained with
respect to loss of profit I am deducting $63 per TEU or $11,781. Consequently,
I am allowing $172,409.58.
[117] The next item claimed is the loss of profit on TEUs which were not
shipped on the Cabot’s intended voyage of 19 December. As the Cabot maintained
a weekly schedule between Montréal and St. John’s, as did the Avalon, many
bookings were only made at the last minute. Consequently, based on other
voyages, I am of the view that the Cabot would have carried more than the
bookings which were actually cancelled. Oceanex calculates that on a normal
voyage the Cabot would have carried 450 TEUs, a figure not contested. Of those 450
TEUs, 187 were trucked, which leaves 263. However, on her next sailing of
28 December, she carried 504. There was also a little trading between the
Cabot and the Avalon, but I take that point to be neutral. Consequently, after
deducting the additional 54 TEUs which were carried on 28 December, I calculate
that Oceanex lost net revenue on 209 TEUs (450 minus 187 minus 54).
[118] The accountants calculate the net contribution per TEU differently.
Mr. Lavigne, called by Praxair, based himself on December 2007 figures,
while Ms. Boisvert based herself on the entire 2007 year. I base
myself on the December 2007 figures, as cargo volumes can change dramatically
over the course of a year.
[119] Oceanex calculates a contribution per TEU of $1,228. However, Mr.
Lavigne’s study of the December 2007 revenue reduces that estimated amount by
$63 per TEU. I accept Mr. Lavigne’s calculations on this point. Consequently,
the loss contribution per TEU is $1,165. Therefore, the loss under this
heading is $243,485.
[120] To go into more protracted calculations would be intolerable. I
ascribe to the view expressed by Winn, LJ of the English Court of Appeal in Doyle
v Olby (Ironmongers) Ltd and others, [1969] All ER 119, at page 124:
I
think myself with confidence that there is already sufficient evidentiary
material available to enable this court to make a jury assessment in round
figures. It would be wrong and indeed an intolerable expenditure of judicial
time and money of the parties to embark on any detailed consideration of
isolated items in the account on which a balance must be struck.
[121] The last item is somewhat of a catchall. During argument, counsel
for Oceanex put the figure at $75,000 representing overhead, general damages,
detention of containers in St. John’s, a Classification Society Survey for
which it cannot find the invoice, and loss of westbound shipments. The parties
had agreed to an overhead of 10% on respective damages, the 10% with respect to
Oceanex being limited to its business interruption claim.
[122] Oceanex calculated a loss of westbound freight of $50,000. However,
this is not borne out by the figures. I find it suffered no loss. That being said,
a 10% overhead on the business interruption claim, based on general accounting
principles, Oceanex’s testimony as to the scrambling it had to do with
equipment detained in St. John’s and Société Telus Communications v Peracomo
Inc., 2011 FC 494, [2011] FCJ No 602 (QL), aff’d by the Federal Court of
Appeal, 2012 FCA 199, [2012] FCJ No 855 (QL) (decision
of the Supreme Court of Canada pending), is fair and reasonable. Consequently,
I fix the overhead at $41,589.46 being 10% of $415,894.58 (rerouting of $172,409.58
and lost profit of $243,485).
[123] Adding it all up, Oceanex is entitled to damages in the amount of $641,246.09:
a.
Repair costs et al: $183,762.05;
b.
Rerouting: $172,409.58;
c.
Lost profit: $243,485; and
d.
Overhead: $41,589.46.
XVI. Interest
[124] The parties have reasonably agreed to simple interest running at the
annual rate of 5%, in Oceanex’s case from 18 January, 2008.
XVII. Costs
[125] Both parties ask that costs be reserved so that they may make
representations post-judgment.
JUDGMENT
FOR REASONS GIVEN;
THIS COURT’S JUDGMENT is
that:
1.
The action of Oceanex Inc. is maintained against
Praxair Canada Inc. in the principal amount of $641,246.09, plus simple interest
to the date of judgment calculated at the rate of 5% per annum commencing 18
January 2008. Interest thereafter shall run on the judgment debt (principal and
interest) at the same rate.
2.
The action in rem against the Owners and
All Others Interested in the Tanktainer “C 156” Ex the Ship M.V. “Cabot”
and the Tanktainer “C 156” Ex The Ship M.V. “Cabot” is dismissed on the grounds
of mootness.
3.
The counterclaim of Praxair Canada Inc. is
dismissed.
4.
Costs are reserved.
“Sean Harrington”
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