Date: 20030128
Docket: T-448-98
Neutral citation: 2003 FCT 86
SIMPLIFIED ACTION
BETWEEN:
GEORGE STRACHAN
Plaintiff
(Defendant by counterclaim)
and
THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP
"CONSTANT CRAVING", GRANT HUSDON, ANNE HUSDON,
PACIFIC MARINE ENTERPRISES LTD. AND ALL OTHER PERSONS
HAVING CLAIMS AGAINST THE PLAINTIFF, THE SHIP "KYHITA"
OR THE FUND HEREBY TO BE CREATED
Defendants
and
PACIFIC MARINE ENTERPRISES LTD.,
Plaintiff by counterclaim
and
GRANT HUSDON AND ANNE HUSDON
Plaintiffs by counterclaim
REASONS FOR JUDGMENT
GIBSON J.:
INTRODUCTION
[1] This action was initiated by Statement of Claim filed the 18th of March, 1998. The plaintiff, George Strachan, sought the following reliefs pursuant to section 575 et seq. of the Canada Shipping Act[1]:
(a) a declaration that the Plaintiff is not liable for damages in respect of any loss or damage to property or the infringement of any rights beyond the aggregate amount prescribed by Section 575 of the Canada Shipping Act;
(b) a declaration that the tonnage of the "Kyhita" ascertained in accordance with the provisions of the Canada Shipping Act is 12.49 tonnes;
(c) a declaration of the amount to which the Plaintiff is entitled to limit his liability as calculated with reference to the Canada Shipping Act the Canada Shipping Act Gold Franc Conversion Regulations, SOR/78-73, and the tonnage of the "Kyhita";
(d) a declaration that the Plaintiff be at liberty to pay into court the said amount to which his liability is limited, together with interest as aforesaid, to constitute the Fund for the satisfaction of the liability of all persons who have liability in respect of this event, which is limited by virtue of Section[s] 575 and 577(1) of the Canada Shipping Act and that upon such payment into Court being made:
(i) any proceedings in any Court then pending shall by virtue of Section 576 of the Canada Shipping Act be stayed, except for the purposes of taxation, assessment and payment of costs;
(ii) the Defendants shall thereafter be restrained from taking any action in any Court against the Plaintiff, the ship "Kyhita" and all persons who have liability that is limited by virtue of Sections 575 and 577(1) of the Canada Shipping Act in respect of the subject accident; and
(iii) the Plaintiff shall thereafter be entitled to the relief prescribed by the provisions of the Canada Shipping Act against any other action in respect of this event;
(e) That all proper directions be given by this Honourable Court for ascertaining the persons who may have any just claim against the Fund;
(f) that the Fund be rateably distributed amongst the persons who may make out their claims thereto and that proper directions may be given for the exclusion of such claimants as shall fail to bring in their claims within a certain time to be fixed for such purpose;
(g) costs; and
(h) such further and other relief as to this Honourable Court may seem just.
[2] Both Grant Husdon and Anne Husdon ("the Husdons") and Pacific Marine Enterprises Ltd. filed statements of defence and counterclaim. In their counterclaim, the Husdons claimed general damages, special damages, pre-judgment interest, costs of the action and further and other relief. In its counterclaim, Pacific Marine Enterprises Ltd. claimed equivalent reliefs.
[3] By Order dated the 26th day of April, 2001, the plaintiff's action as against Pacific Marine Enterprises Ltd. was dismissed on consent without costs. By the same order, Pacific Marine Enterprises Ltd.'s counterclaim against the plaintiff was dismissed, once again on consent and without costs.
[4] By Notice of Discontinuance filed the 12th of September, 2002, the plaintiff's action was discontinued against all remaining defendants.
[5] Thus, when this matter came on for trial before me at Vancouver on the 17th of September, 2002, there remained for adjudication only the counterclaim by the Husdons against the plaintiff. In the result, in the balance of these reasons, George Strachan, plaintiff and defendant by counterclaim will be referred to as the "defendant". The Husdons, defendants and plaintiffs by counterclaim will be referred to as the "plaintiffs".
BACKGROUND
[6] The proximate facts giving rise to this action are essentially not in dispute. The following brief summary of those facts is extracted largely from an affidavit of George Strachan filed the 19th of August, 2002.
[7] At all times material to this action, George Strachan, the defendant, was the owner and principal operator of the motor vessel Kyhita (the "Kyhita"), a ship registered at the port of Vancouver, British Columbia under Official Number 369601, and having a gross tonnage of 12.49 tons. Once again at all times material to this action, the Kyhita was kept moored when not in use at the premises of Skyline Marina, Richmond, British Columbia.
[8] On Wednesday the 18th of June, 1997, the defendant attended at the Kyhita at Skyline Marina in mid-afternoon in order to take on additional fuel for the Kyhita in preparation for a navigational contest in which the defendant and his wife planned to participate on the upcoming weekend. Earlier in the week, the defendant's wife had attended at the Kyhita to stock her with food, linens and other supplies, also in preparation for the navigational contest.
[9] The defendant boarded the Kyhita and turned on a "JW Sniffer" gasoline vapour detection system (the "sniffer") that was part of the equipment of the Kyhita. He attests that all indicators on the sniffer showed conditions aboard the Kyhita were safe, and no alarm sounded. He then turned on the Kyhita's bilge blower and allowed it to run for two or three minutes before starting the engines. He manoeuvred the Kyhita out of her slip and departed the marina. He proceeded to the fuel dock at another marina which he attests is located approximately one quarter-mile north of Skyline Marina. On arrival, he attests that he carefully fuelled the two gas tanks of the Kyhita, filling each to within two or three gallons of full capacity.
[10] The defendant returned with the Kyhita to Skyline Marina, returned her to her slip and shut off the engines, the sniffer and the bilge blower. He plugged in the Kyhita's shore power connection in order to ensure that when the refrigerator onboard the Kyhita, which was stocked with food, drew power from the Kyhita's batteries, the onboard battery charger would operate to maintain the charge on the batteries. The onboard battery charger was of an automotive style and was not approved for marine use.
[11] Shortly thereafter, the defendant left the Kyhita and Skyline Marina. He attests that at no time during the visit to the Kyhita that day did he recall smelling gasoline vapours except while he was at the fuel dock. The defendant arrived home at approximately 4:35 p.m.
[12] At approximately 6:00 p.m. the Kyhita exploded and a fire ensued. The plaintiffs' pleasure craft, the Constant Craving, was moored in the slip next to that occupied by the Kyhita when it exploded. The Constant Craving was extensively damaged.
THE PARTIES, THE "KYHITA" AND THE "CONSTANT CRAVING"
[13] The plaintiffs are husband and wife. The male plaintiff has extensive experience dating back to his youth in the operation of small pleasure craft. In 1991, the plaintiffs purchased their first pleasure craft, a twenty (20) foot "Bayliner". In early August, 1994, they traded their pleasure craft in to purchase the Constant Craving, a 1994 Bayliner Ciera Sunbridge 2855 at a price of very close to $78,000. The male plaintiff described the Constant Craving as his "dream boat".
[14] The plaintiffs were meticulous in their maintenance of the Constant Craving and used it extensively for day, weekend and holiday trips although the number of hours of operation of the engine of the Constant Craving was relatively limited, amounting to some 180 to 200 hours by June of 1997. The plaintiffs maintained insurance on both their first pleasure craft and the Constant Craving. I am satisfied on the evidence that was before me that they had no experience with the kind of insurance claim that resulted from the explosion and fire that impacted the Constant Craving on the 18th of June, 1997.
[15] The defendant is a more experienced pleasure boat owner and operator having approximately twenty-three (23) years of experience as owner and operator of a number of vessels each of which he purchased at least second-hand and when they were of some vintage. For example, the Kyhita itself was a 1961 thirty-two (32) foot Chris Craft, twin screw, gasoline fuelled, wooden hulled vessel, which the defendant purchased in August of 1996.
[16] The defendant had extensive experience in what might be referred to as the restoration of his various vessels, as well as in their day to day maintenance.
THE EVIDENCE
[17] By Order dated the 20th of March, 2001, on consent of the parties, this proceeding went forward as a simplified action. Thus, by virtue of Rule 299 of the Federal Court Rules, 1998[2], all evidence in chief was adduced by affidavit served and filed in advance of the opening of trial. All witnesses whose evidence in chief was relied on at trial, save one, were made available for cross-examination at trial. The evidence in chief of the one witness who was not made available for cross-examination was received on consent.
[18] With the exception of the evidence of the parties themselves, much of the evidence adduced related to the condition of the Kyhita at the time the defendant purchased her, to the likely cause of the explosion, to the resultant damage to the Constant Craving, its repairability and the related negotiations between the plaintiffs and the representative of their insurer, the process of repair and the condition of the Constant Craving and its value following repair. More specific reference to the evidence will be made in the portion of these reasons under the heading "Analysis" as it is particularly relevant to elements of that analysis.
THE ISSUES
[19] In an outline of argument presented during trial on behalf of the plaintiffs, the issues are dealt with under the following headings and subheadings:
1) Liability
a) what caused the explosion aboard the Kyhita?
b) did negligence on the part of the defendant give rise or contribute to the explosion?
2) Damages
a) decrease in the value of the Constant Craving;
b) inconvenience or loss of use;
c) collateral benefit;
d) miscellaneous items.
I will adopt the foregoing categorization of the issues for the purposes of my analysis which follows.
ANALYSIS
1) Liability
a) what caused the explosion aboard the Kyhita?
[20] It was not in dispute before me that the explosion which occurred at the Skyline Marina in the early evening of the 18th of June, 1997 occurred abroad the Kyhita. Three (3) witnesses provided "expert" reports under cover of their affidavits, all on behalf of the plaintiffs, as to the cause of the explosion. Each was cross-examined at trial on behalf of the defendant. I accept their "expert" qualifications.
[21] The first of the plaintiffs' three (3) "expert" witnesses was Ronald W. Gaudette who, at all times material to the origins of this action was the fire inspector and fire investigator for the Richmond Fire and Rescue Department. Mr. Gaudette attended at the scene of the explosion and fire following those events and on the day of their occurrence. He was unable to inspect the remains of the Kyhita on that day as the Kyhita had sunk. He returned to the scene to conduct his inspection shortly after the remains of the Kyhita had been raised and removed to dry land.
[22] Mr. Gaudette noted that, when he attended the scene of the explosion and fire for the first time, there was "...a noticeable aroma of gasoline in the area in which the vessel had sunk" and that "There appeared to be a small gasoline slick on the surface of the water."
[23] From his second attendance at the scene, Mr. Gaudette made the following observations:
the two gasoline tanks of the Kyhita "appeared" to be constructed of non-galvanized steel; certain portions of the tanks had been painted with what "appeared" to be automotive primer paint but the lower outboard corners of the tanks were bare and unprotected steel; there was an area of heavy rust at one of the bottom corners of the port-side tank and within the area of rust there was a small perforation and "...places in which the steel appeared paper-thin and almost porous". An "automotive-type" battery charger was connected by "alligator clips" to one of the Kyhita's on-board batteries. The battery charger was not ignition protected, that is, it was not sealed to protect against electric spark. Other electrical appliances were found among the Kyhita's contents that were similarly not ignition protected. Finally, Mr. Gaudette observed that the Kyhita's wiring was a combination of marine and household wiring with the household wiring and a household junction box similarly not ignition protected.
[24] Mr. Gaudette expressed the opinion that the explosion aboard the Kyhita was the result of the ignition of accumulated gasoline vapours within her hull with the source of the gasoline vapours being the perforation in one of the bottom corners of the port-side fuel tank. He further expressed the opinion that the source of the ignition of the gasoline vapours was the automotive-type battery charger which came into operation when power was drawn from the Kyhita's batteries. He wrote:
When the charger cycled, it produced an unprotected electric spark which ignited the gasoline vapours.[3]
[25] The plaintiffs' second "expert" witness was Chris Small. Mr. Small is a marine surveyor and owner and the principal surveyor for Chris Small Marine Surveyors Ltd. He had previously been qualified as an expert witness in other matters. Mr. Small inspected the wreckage of the Kyhita on the 2nd of July, 1998 and at the same time performed a cursory inspection of the Constant Craving. While his inspection of the Constant Craving is not relevant to this element of my analysis, I note here that he concluded that the Constant Craving was "a constructive total loss"[4]. I will return to this opinion later in my analysis.
[26] Mr. Small noted that the Kyhita was fitted with two (2) "... steel or iron fuel tanks located below and aft cockpit sole on the port and starboard sides of the Vessel". He noted that the port-side tank "... was suffering from heavy rust scale in the lower aft outboard corner" and that a "... small perforation was noted in the tank in the area of this heavy scale". He further noted that the fuel supply lines from the tanks to the main engines of the Kyhita revealed over forty (40) separate connections in those lines. Finally, of relevance to this issue, Mr. Small noted that the Kyhita "...contained a variety of wiring, some of which was not marine approved".
[27] Mr. Small's opinion resulting from his inspection of the Kyhita reflected the following elements that are relevant to the issue of cause of the explosion: first, the degree of damage sustained by the Kyhita indicated the explosion occurred from a quantity of fuel vapour being ignited; secondly, he expressed the opinion that the perforation of the port-side fuel tank allowed the escape of sufficient gasoline to fuel the violent explosion; thirdly, he noted that the explosion and fire might have damaged the fuel supply lines "... and thus there was no way to determine whether any of the over 40 separate connections in the lines had been leaking prior to the explosion"; and finally, he concluded:
The time between refuelling and the actual explosion was sufficient to allow the build up of explosive fuel vapours from the leak in the port fuel tank.
It is my opinion that the source of ignition was most likely the automotive-style battery charger, but could also have been the refrigerator compressor motor or the non-marine approved wiring found on board.
The build up of gasoline vapour continued to the point where an explosive atmosphere was present. Normal cycling of the battery charger and/or fridge compressor could then have caused ignition. As the fridge compressor operated on the Vessel's 12V supply only, it drew power from the Vessel's 12V batteries. As the fridge drew power from the batteries, the automotive-style battery charger would have cycled regularly to keep the batteries charged. Gas vapours accumulated and likely eventually entered the battery charger, whereupon cycling likely ignited the gasoline vapour resulting in the explosion.[5]
[28] The plaintiffs' third witness on the issue of causation was Mr. Lynn M. Johnson, a professional engineer with extensive relevant experience. Mr. Johnson inspected the remains of the Kyhita in late June or very early July, 1997.
[29] Mr. Johnson's investigative report notes the following: first, the fuel tanks were manufactured from non-galvanized steel; secondly, the tanks were painted but there was significant corrosion "...on the surfaces where the tanks had been sitting on the "bed" for tank mounting..."; thirdly, the tanks showed overall corrosion as well as localized corrosion pitting and, more particularly, "The corrosion pitting of the port tank was of sufficient depth that the surface was wetted from leakage... . A large piece of surface scale had "flaked off" [the port-side] tank... and the remaining material showed a surface crack which would have allowed gasoline leakage."
[30] Mr. Johnson's opinion reads in part as follows:
The presence of gasoline vapour in the vessel would concentrate in the lowest portion of the bilge. Since gasoline vapour is heavier than air, the volume would gradually build up. Only when the vapour level reached the sources of ignition did the explosion occur. Possible sources of ignition were the battery charger which was present on the vessel and the refrigerator motor. It is certain that there was a source of ignition since this was a prerequisite for the explosion.
It is my opinion that the source of the explosive vapour which caused the explosion and the burning of the vessel was leakage from the port side fuel tank.
It is my opinion that the leakage occurred at corrosion pitting which perforated the skin of the welded steel tank. The corrosion pitting occurred in an area which could not be inspected unless the tank was removed.[6]
[31] The defendant adduced no evidence to contradict the plaintiffs' evidence regarding cause of the explosion aboard the Kyhita apart from the evidence from one witness[7] who indicated that, in August of 1994, two (2) years before the defendant acquired the Kyhita, the port-side fuel tank had been removed from the Kyhita for repair and, while it was removed, it had been prime-coated with anti-rust primer paint. I found this evidence on behalf of the defendant to be quite unsatisfactory. The memory of the shipwright who swore that, based on the notations on a time card, he prime-coated the tank, was shown on cross-examination to be clearly strained. Further, his description of the anti-rust primer paint that he used and of his practice in preparing fuel tanks for prime-coating and then painting them clearly demonstrated a less than satisfactory practice when compared with evidence of a witness on behalf of the plaintiffs[8], whose testimony I found substantially more reliable, as to "best practices".
[32] Counsel for the defendant attempted, through cross-examination and in argument, to satisfy the Court that the evidence on the issue of cause of the explosion as well as on negligence on the part of the plaintiff giving rise to or contributing to the explosion was simply not, on a qualitative basis, sufficient to discharge the burden on the plaintiff of proving on a balance of probabilities that negligence on the part of the defendant caused the damage that befell the Constant Craving as a result of the explosion and fire on the Kyhita.
[33] Before turning to what I consider to be the most relevant case law on the issue of liability, I will briefly turn to the evidence regarding negligence.
b) Did negligence on the part of the defendant give rise or contribute to the explosion?
[34] It was not in dispute before me that the defendant did not have a survey of the Kyhita done when he purchased her in August of 1996. Further, against the evidence of rust in the lower-aft outboard corner of the port-side fuel tank of the Kyhita, it was not evident to me that a survey would have disclosed that defect. The fuel tanks of the Kyhita were mounted in such a way that it would have been impossible to detect the alleged defect without removing the fuel tanks and the evidence clearly established that that would be a major undertaking and that it was not undertaken after August, 1994. That being said, the defendant was aware that the fuel tanks of the Kyhita were vulnerable to rust and that they were far from new. Indeed, the defendant attested to a program to upgrade the Kyhita which included replacement of the fuel tanks and the electrical wiring but his time frame for achieving that upgrading was indeterminate.
[35] During the time that the defendant owned the Kyhita, he was aware that the port-side fuel tank had earlier been removed and inspected. He acknowledged under cross-examination that some surface rust had been found on it but went on to testify that the surface rust, "...had been removed", and that the areas in question had been painted with metal priming paint. He acknowledged that the port-side fuel tank "... was a tank that's prone to rusting"[9]. He made no special inquiries of the repairer as to the condition of the fuel tank when it was removed in 1994.
[36] The defendant acknowledged in testimony that he was aware of the risk of explosions on board sea going vessels like the Kyhita and he testified to the procedures that he adopted while on board the Kyhita to eliminate or at least minimize the risk of an explosion. There was no evidence before the Court that he exercised the same or equivalent caution when neither he nor any other person was aboard the Kyhita.
[37] Quite apart from the cavalier attitude that I found the defendant to demonstrate with regard to the condition of the Kyhita's fuel tanks, he acknowledged that he was aware that the battery charger that he installed on board the Kyhita was not ignition protected. He further acknowledged that he was aware that the electrical wiring on board the Kyhita was substandard. His understanding of the risk of explosion on board a vessel such as the Kyhita clearly extended to a knowledge of the impact of arcing or an open spark in the presence of gasoline vapour.
[38] On the basis of the evidence before me, if I accept the evidence on behalf of the plaintiffs regarding the cause of the explosion on board the Kyhita, and I do, I cannot but conclude on the totality of the evidence before me that negligence on the part of the defendant gave rise or contributed to the explosion and, thus, also gave rise to the resultant damage to the Constant Craving.
c) Applicable Legal Principles and Conclusion on Liability
[39] On the basis of my findings of fact regarding the cause of the explosion aboard the Kyhita and the defendant's responsibility in relation to that cause, the conclusion regarding liability would appear to follow as night follows day or, put another way, the facts speak for themselves. In the time honoured tradition of the law, the foregoing conclusion and the basis for it was expressed as res ipsa loquitur. But the doctrine of res ipsa loquitur has fallen into disfavour.
[40] The Supreme Court of Canada has recently addressed the question of application of res ipsa loquitur in negligence cases such as this one. In Fontaine v. British Columbia (Official Administrator)[10]. Justice Major, for the Court, wrote at page 431:
Res ipsa loquitur, or "the thing speaks for itself" has been referred to in negligence cases for more than a century. In Scott v. London and St. Katherine Docks Co. ... Erle C.J. defined what has since become known as res ipsa loquitur in the following terms:
There must be reasonable evidence of negligence.
But where the thing is shewn to be under the management of the defendant or his servants, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of explanation by the defendants, that the accident arose from want of care.
These factual elements have since been recast (...See ... and [1972] S.C.R. 165">Hellenius v. Lees, [1972] S.C.R. 165, at p. 172 :
The doctrine applies (1) when the thing that inflicted the damage was under the sole management and control of the defendant, or of someone for whom he is responsible or whom he has a right to control; (2) the occurrence is such that it would not have happened without negligence. If these two conditions are satisfied it follows, on a balance of probability, that the defendant, or the person for whom he is responsible, must have been negligent. There is, however, a further negative condition: (3) there must be no evidence as to why or how the occurrence took place. If there is, then appeal to res ipsa loquitur is inappropriate, for the question of the defendant's negligence must be determined on that evidence.
[some citations omitted]
[41] Here, there was some evidence before me as to why or how the explosion aboard the Kyhita took place, albeit all ex post facto evidence based on examinations of the wreckage of the Kyhita conducted some days after the explosion. Thus, the defendant's negligence must be determined on that evidence.
[42] At pages 433-4 of Fontaine, Justice Major provides the following further guidance:
...the effect of the application of res ipsa loquitur is as described in The Law of Evidence in Canada (1992), by John Sopinka, Sidney N. Lederman and Alan W. Bryant, at p. 81:
Res ispa loquitur, correctly understood, means that circumstantial evidence constitutes reasonable evidence of negligence. Accordingly, the plaintiff is able to overcome a motion for a non-suit and the trial judge is required to instruct the jury on the issue of negligence. The jury may, but need not, find negligence: a permissible fact inference. If, at the conclusion of the case, it would be equally reasonable to infer negligence or no negligence, the plaintiff will lose since he or she bears the legal burden on this issue. Under this construction, the maxim is superfluous. It can be treated simply as a case of circumstantial evidence.
Should the trier of fact choose to draw an inference of negligence from the circumstances, that will be a factor in the plaintiff's favour. Whether that will be sufficient for the plaintiff to succeed will depend on the strength of the inference drawn and any explanation offered by the defendant to negate that inference. If the defendant produces a reasonable explanation that is as consistent with no negligence as the res ipsa loquitur inference is with negligence, this will effectively neutralize the inference of negligence and the plaintiff's case must fail. Thus, the strength of the explanation that the defendant must provide will vary in accordance with the strength of the inference sought to be drawn by the plaintiff.
Justice Major concludes at page 435:
It would appear that the law would be better served if the maxim [res ipsa loquitur] was treated as expired and no longer used as a separate component in negligence actions. After all, it was nothing more than an attempt to deal with circumstantial evidence. That evidence is more sensibly dealt with by the trier of fact, who should weigh the circumstantial evidence with the direct evidence, if any, to determine whether the plaintiff has established on a balance of probabilities a prima facie case of negligence against the defendant. Once the plaintiff has done so, the defendant must present evidence negating that of the plaintiff or necessarily the plaintiff will succeed.
[43] Weighing the circumstantial evidence with the direct evidence regarding the cause of the explosion aboard the Kyhita and the relationship of the defendant to that cause, I am satisfied that the plaintiffs have established on a balance of probabilities a prima facie case of negligence against the defendant.
[44] The circumstantial evidence before me as to why and how the explosion aboard the Kyhita took place came from three (3) witnesses. Their "expert" opinions supported by their testimony under cross-examination were essentially unanimous. Gasoline leaked through a fissure close to the lower-aft outboard corner of the port-side fuel tank of the Kyhita. It vaporised and accumulated. Over time, and the only evidence before me was to the effect that there was sufficient time between when the defendant left the Kyhita on the afternoon of the 18th of June, 1997 and the explosion aboard the Kyhita later the same day, the gasoline vapour accumulated in sufficient quantity to reach the battery charger on board the Kyhita. That battery charger was not ignition protected. The battery charger was connected to a shore-based power source. There was reason for the battery charger to engage or "cycle" and there was a reasonable explanation as to why it would have engaged or "cycled" on the evening in question. Since the battery charger was not ignition protected, there was a reasonable chance that when it engaged or cycled, it would produce an open spark. An open spark in the presence of sufficient gasoline vapour can, and perhaps inevitably will, result in an explosion. No evidence, direct or circumstantial, was introduced by or on behalf of the defendant to contradict the circumstantial evidence giving rise to the foregoing theory as to the cause of the explosion.
[45] By contrast, there was much direct evidence of the relationship of the defendant and of no other person to the cause of the explosion. The defendant was the owner and principle operator of the Kyhita. On the afternoon in question, he had been aboard the Kyhita, had operated her and refuelled her. He was aware that the port-side fuel tank of the Kyhita was "prone to rusting" and that the lower corners of that tank had not been inspected for close to three (3) years. He connected the on-board battery charger to a shore-based power source. He did so because he was aware that appliances on board the Kyhita, particularly the refrigerator, would be drawing power from the Kyhita's batteries and it would therefore be necessary to ensure that they remained charged. He was equally aware that the on-board battery charger was not ignition-protected.
[46] Finally, it was not in dispute before me that the explosion aboard the Kyhita on the 18th of June, 1997, and the resulting fire, were the sole causes of the damage done to the Constant Craving on that day.
[47] Based upon the foregoing and to reiterate, I am satisfied that the plaintiffs have established, on a balance of probabilities, a prima facie case of negligence against the defendant. The plaintiffs having done so, and the defendant having presented no sufficient evidence to negative the plaintiffs' evidence, the plaintiffs succeed.
2) DAMAGES
a) Decrease in the Value of the Constant Craving
[48] As indicated earlier in these reasons, Chris Small, a marine surveyor who inspected the remains of the Kyhita in the aftermath of the explosion and fire, at the same time performed a "cursory inspection" of the Constant Craving. He attested that, based on that inspection, it was his conclusion that the Constant Craving was a constructive total loss.
[49] Captain Jan J. de Groot, also a marine surveyor, inspected the Constant Craving "in or about September 1997", well before any repairs had been undertaken. By letter dated the 15th of September, 1997, he provided to counsel for the plaintiffs a reasonably detailed report flowing from that inspection. That report was in evidence before me under cover of an affidavit of Captain de Groot[11]. The report concluded in the following terms:
In view of the concerns narrated above, and considering the newish vintage of the yacht [the Constant Craving], I recommend that the owners not repair the vessel but offer same to the insurance company for her pre-damaged market value, which according to research amounts to approximately $55,000.00 plus GST. It should also be taken into account that the claim originated in April of this year, thus, the owners have not been able to use the vessel during this summer's boating season.
The reference in the foregoing quotation to the plaintiffs' claim having originated in April of 1997 is, of course, incorrect. The claim originated in June of 1997.
[50] The plaintiffs shared the view that the Constant Craving should be, effectively, written off. In a letter dated the 16th of July, 1997, signed by both plaintiffs and addressed to Mr. Roy Waine of Inter-City Claim Services Ltd., apparently acting as an adjuster for the plaintiffs' insurance company, the plaintiffs wrote:
We wish to be paid out 100% of the insured value of our boat. In this case, that would be $80,000.00. We should not be held responsible for any deductible of any kind. We have paid for insurance coverage for the past three years on a timely basis and bought that insurance to provide for loss and damage. After paying us out for our loss, the boat would then belong to the insurance company and sold for the value you would be able to receive.[12]
[51] The plaintiffs' insurer did not agree. Through its representatives, it obtained at least three (3) repair estimates, the lowest of which, inclusive of tax, was in the amount of $24,071.00. The boat yard that submitted the lowest bid advised Mr. Roy Waine in a letter dated the 29th of October, 1997 that "...we feel it is well within our capabilities and upon completion, this vessel will not have any visual or structural deficiencies."[13]
[52] Negotiations dragged on. The Constant Craving was moved ashore and under cover. On the 22nd of January, 1998, F.I. Hopkinson, a marine surveyor apparently retained on behalf of the plaintiffs, wrote to the plaintiffs suggesting that they consult with a number of "qualified" boat yards among which was included "[d]espite your [the plaintiffs'] concerns" the low bidder earlier referred to which, Mr. Hopkinson wrote, "...we find [the boat yard in question does] excellent work at competitive prices." Mr. Hopkinson concluded:
Once you have selected a yard to do the repairs, you may wish to consult with us further to oversee those repairs. We recommend that this work proceed as quickly as possible since the boat is not improving with age and it is difficult sometimes to remember the fact that the original intent in buying a boat was to have fun.[14]
[53] By the 10th of March, 1998, the low bidding boat yard had increased its quotation to $29,882.00. It commenced repairs in early July, 1998 on the basis of that bid. The repairs did not proceed as quickly as might have been hoped. It was not until the end of June, 1999 that Mr. Hopkinson conducted a "condition and detail survey" with regard to the Constant Craving. He concluded his survey in the following terms:
In consequence of this inspection made on the 30th June 1999 whilst the vessel lay afloat at Shelter Island Marina Richmond, we are of the opinion that she is in suitable condition for operation in her intended trade namely pleasure boating subject to compliance with [five relatively minor] recommendations. This report is issued for insurance purposes only and is based on our inspection of accessible portions of the vessel at the time of survey.[15]
[54] Despite Mr. Hopkinson's optimism, the repairs proved, in the following months, to not have been satisfactorily performed if, indeed, they could have been. Some of the plaintiffs' worst fears were realized.
[55] Mr. Hopkinson attended at trial for cross-examination on behalf of the plaintiffs.
Mr. Hopkinson testified that he prepared his report of the 22nd of January 1998 for the plaintiffs who had retained him in part to advise them whether the Constant Craving should be repaired. He testified that he was aware that Captain de Groot had advised the plaintiffs that the Constant Craving could not be repaired.
[56] In his survey of the 30th of June, 1999, Mr. Hopkinson estimated the then market value of the Constant Craving, as repaired, at $50,000.00. Mr. Hopkinson was confronted with two (2) more recent surveys one of which, dated the 9th of March, 2001, estimated the then market value of the Constant Craving as $36,000.00 while a comparable vessel of the same brand and model in average condition was stated to have a then current market value of $58,900.00.[16] The second report, dated the 25th of July, 2002, after noting significant deterioration that could reasonably be attributed back to the explosion and fire concluded:
If I were to survey this vessel for a potential buyer, and knowing its history, I would be obliged to advise the person against purchase.[17]
[57] Mr. Hopkinson was also confronted with the affidavit evidence of a boat broker employed by a dealership in the lower mainland of British Columbia who attested that the dealership employing him was the "...largest Bayliner dealer in the world". He further attested that he inspected the Constant Craving on the 28th of August, 2002 and that, as a result of his inspection, his dealership "...would not accept a listing to sell the Constant Craving off our dock nor would we accept it in trade of a new boat. The boat quality is so inferior that it is not saleable through [the dealership by which he was employed]."[18]
[58] Against the foregoing, counsel for the plaintiffs urged that this Court should award damages based upon either the cost to replace the Constant Craving at the time of the explosion and fire, that amount being, according to the evidence, $55,000.00 plus applicable taxes, or alternatively, the sum of the amount expended to repair the Constant Craving, which eventually amounted to $32,912.70, and the amount by which the value of the Constant Craving, post-repair, was diminished from the value that would have attached to the Constant Craving, if it had not been damaged, at the time repairs were nominally completed , that is to say, $22,900.00. The alternative submission would thus result in an award in the amount of $55,812.70.
[59] Counsel for the defendant did not dispute the fact of diminution in value of the Constant Craving following repair from what its value would have been had it not been damaged by the explosion and fire. However, counsel urged that such of the diminution in value as was attributable to failure of the repairer to complete repairs contracted for and, in relation to the repairs that were performed, to complete such repairs in a manner that fully restored the Constant Craving, should be disregarded. Counsel urged that such diminution in value was not reasonably foreseeable and therefore did not represent a valid claim against the defendant. In the result, counsel urged that the diminution in value should be fixed at $6,125.00. Counsel further urged that repair costs for which the plaintiffs were reimbursed by their insurer should not again be recovered by the defendant.
[60] In The Law of Damages[19], the learned author writes at paragraph 1.2320:
Where the cost of restoration is equal to or less than the diminution of capital value the cost is always recoverable, even if the plaintiff does not actually incur the cost. This has been often described as a way of measuring the capital diminution, and indeed it is arguable that wherever the cost of restoration appears to be less than the diminution of capital value, the two are, on analysis, properly considered to be equal, for a rational purchaser, knowing that perfect restoration can be achieved for a certain sum, will deduct just that sum and no more from the price she would have been willing to pay for the undamaged property. The cost of replacement will not be allowed if the owner could have repaired at a lesser cost. Where the property, after undergoing repair, would still be of less value than it was originally, the owner will be entitled to the cost of repair and an additional sum to compensate for the residual deficiency. [citation omitted, emphasis added]
[61] The highlighted proposition cited by Professor Waddams is descriptive of the situation before me. Subject to what will be said later in these reasons regarding collateral benefit, I would award the plaintiffs the sum of the repair costs, $32,912.70 and the decrease in value of $22,900.00, that is to say $55,812.70.
b) Inconvenience or Loss of Use
[62] The plaintiffs seek an award of $5,000.00 each as compensation for loss of use of the Constant Craving for, effectively, two (2) boating seasons consisting of the portion of the 1997 season following the explosion and fire aboard the Kyhita, all of the 1998 season and the portion of the 1999 season preceding the return of the Constant Craving to the water following repair work. Counsel on their behalf referred me to St. James v. Squamish (District)[20] where an equivalent award was made to the plaintiffs after they lost their home and all their personal possessions by reason of fire. On the facts of that matter, Justice Lander noted "...that their [the plaintiffs'] whole existence was radically changed because of the loss of their home."[21] As earlier noted in these reasons, the evidence before me demonstrated that the plaintiffs used the Constant Craving extensively for day, weekend and holiday trips throughout the boating season. It was, in effect, their principle source of recreation. Thus, while I am satisfied that the plaintiffs were inconvenienced by reason of loss of use of the Constant Craving, the extent of that inconvenience must be considered to be substantially less than that experienced by the plaintiffs in the St. James case.
[63] Counsel for the defendant, while not denying that the plaintiffs had a legitimate claim for loss of use in the 1997 boating season, urged that the claim as it related to the 1998 and 1999 boating seasons could not be said to be proximately caused by the negligence of the defendant but rather was the proximate result of the failure of the plaintiffs and their insurer to promptly settle the issue of the write-off or repair of the Constant Craving and the extraordinary length of time taken to complete the repair once it was undertaken.
[64] I am convinced of the merit of the case advanced on behalf of the defendant on this head of damage.
[65] Counsel for the defendant referred me to the discussion of calculation of damages for loss of use of non-profit-making chattels that appears in The Law of Damages[22]. While Professor Waddams provides useful background and a range of options for quantifying damages in this area, on the evidence before me, I find it impossible to quantify damages in this area other than by specification of a lump sum in favour of each of the plaintiffs that I estimate to be reasonable in relation to loss of use for the portion of the 1997 boating season following the explosion and fire. I fix the amount of damages for loss of use at $1,500.00 for each plaintiff.
c) Collateral benefit
[66] Counsel for the defendant urged that an award of damages to the plaintiffs for decrease in value of the Constant Craving that is not reduced by the amount recovered by the plaintiffs from their own insurers in respect of repair of the Constant Craving would amount to a collateral benefit to the plaintiffs that cannot be justified.
[67] The issue arises in this matter because of what I must assume to be a relatively unusual set of circumstances. In the normal course of things, the plaintiffs' insurer would have been subrogated to the rights of the plaintiffs as against the defendant to the extent of the loss suffered by the plaintiffs that is recoverable against the defendant and for which the insurer has indemnified the plaintiffs, that is to say, the cost of repairs of the Constant Craving that the plaintiffs recovered from their insurer.
[68] As earlier noted in these reasons, a significant dispute developed between the plaintiffs and their insurer regarding the issue of whether to write off the Constant Craving or to repair her. The repair option was eventually settled upon. The conduct of the repairs took an unconscionably long period. The repairs were never completed to the satisfaction of the plaintiffs. Nonetheless, the plaintiffs' insurer indemnified the plaintiffs for the cost of the repairs. The plaintiffs sued their insurer. That litigation was eventually discontinued on terms such that the insurer surrendered its subrogation rights against the defendant in favour of the plaintiffs. Thus, it is not the plaintiffs' insurer who would recover the amount in which it indemnified the plaintiffs if that amount were to be recovered from the defendant, but rather the plaintiffs themselves. In effect, the plaintiffs would have recovered the cost of repairs to the Constant Craving from their insurer and would again recover the same cost of repairs from the defendant.
[69] This issue of double recovery or collateral benefit was addressed by the Supreme Court of Canada in Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee[23]. While the facts that were before the Supreme Court of Canada in that matter were substantially different from those before me, the discussion of the principles surrounding "collateral benefit" is nonetheless directly applicable.
[70] Justice McLaughlin, as she then was, for the minority, under the headings "The Fundamental Principle" and "Full and Fair Compensation Without Double Recovery", wrote at pages 368-9:
The fundamental principle is that the plaintiff in an action for negligence is entitled to a sum of damages which will return the plaintiff to the position the plaintiff would have been in had the accident not occurred, in so far as money is capable of doing this. This goal was expressed in the early cases by the maxim restitutio in integrum. The plaintiff is entitled to full compensation and is not to be denied recovery of losses which he has sustained: ... It has been affirmed repeatedly by Canadian courts and once again in more recent times by the House of Lords: "...the basic rule is that it is the net consequential loss and expense which the court must measure": ... . At the same time, the compensation must be fair to both the plaintiff and the defendant. In short, the ideal of the law in negligence cases is fully restorative but non-punitive damages. The ideal of compensation which is at the same time full and fair is met by awarding damages for all the plaintiff's actual losses, and no more. The watchword is restoration; what is required to restore the plaintiff to his or her pre-accident position. Double recovery is not permitted.
Cory J. [writing for the majority] and I agree on the basic principle of recovery in a tort action. As he states, it is simply to compensate the plaintiff as fully as money may do for the loss suffered as a result of the tortfeasor's negligence. The plaintiff is not, we both agree, generally entitled to double recovery ... . However, Cory J. suggests that the case is governed by an exception to the general principles called the private insurance exception.
My colleague and I part company on the issue of whether the present case falls within the private insurance exception. Cory J. seems to assume that the benefits in question fall within the private insurance exception; the issue as he sees it is rather whether the private insurance exception should be maintained... . I, on the other hand, do not question that the insurance exception (if indeed if it is an exception) should be maintained. The questions which arise, as I see the matter, are the scope of the so-called insurance exception to the rule against double recovery, and whether employment plans such as those here at issue fall within that exception. [citations omitted, emphasis added]
[71] Justice Cory, for the majority, examines at some length the history of the private insurance exception. He concludes at pages 400-01:
I think the exemption for the private policy of insurance should be maintained. It has a long history. It is understood and accepted. There has never been any confusion as to when it should be applied. More importantly it is based on fairness. All who insure themselves for disability benefits are displaying wisdom and forethought in making provision for the continuation of some income in case of disabling injury or illness. The acquisition of the policy has social benefits for those insured, their dependants and indeed their community. It represents forbearance and self-denial on the part of the purchaser of the policy to provide for contingencies. The individual may never make a claim on the policy and the premiums paid may be a total loss. Yet the policy provides security.
Recovery in tort is dependent on the plaintiff establishing injury and loss resulting from an act of misfeasance or nonfeasance on the part of the defendant, the tortfeasor. I can see no reason why a tortfeasor should benefit from the sacrifices made by a plaintiff in obtaining an insurance policy to provide for lost wages. Tort recovery is based on some wrongdoing. It makes little sense for a wrongdoer to benefit from the private act of forethought and sacrifice of the plaintiff.
There is a good reason why the courts should be slow to change a carefully considered long-standing policy that no deductions should be made for insurance monies paid for lost wages. If any action is to be taken, it should be by legislatures. It is significant that in general no such action has been taken. [emphasis added]
[72] As noted by Justice McLaughlin, Justice Cory "...seems to assume that the benefits in question fall within the private insurance exception...". I go further. I am satisfied that it is beyond question that the insurance arrangements at issue here between the plaintiffs and their insurer with respect to the Constant Craving are four-square within the private insurance exception. Justice Cory, later in his analysis, comments on the impact of subrogation in the following terms at pages 415-6:
Generally, subrogation has no relevance in a consideration of the deductibility of the disability benefits if they are found to be in the nature of insurance. However, if the benefits are not "insurance" then the issue of subrogation will be determinative. If the benefits are not shown to fall within the insurance exception, then they must be deducted from the wage claim that is recovered. However, if the third party who paid the benefits has a right of subrogation then there should not be any deduction. It does not matter whether the right of subrogation is exercised or not. The exercise of the right is a matter that rests solely between the plaintiff and the third party. The failure to exercise the right cannot in any way affect the defendant's liability for damages. However, different considerations might well apply in a situation where the third party has formally released its subrogation right. (underlining of "not" in the original text; underlining of the final sentence is mine]
[73] As earlier noted, Justice McLaughlin found that the facts before her did not invoke the private insurance exception. Under the heading "Conclusion of Law", Justice McLaughlin wrote at pages 392-3:
I conclude that principle, precedent and policy all favour the conclusion that wage benefits paid pursuant to employment plans should be deducted from damages for loss of earnings claimed against the tortfeasor, except where it is established that a right of subrogation will be exercised, thereby avoiding double recovery.
Counsel for the defendant urged that the foregoing words of Justice McLaughlin, like the words of Justice Cory in the last sentence of the last quotation from his reasons that I have emphasized above, urge or, at least in the case of Justice Cory, suggest, a narrow interpretation of the private insurance exception where the result would be double recovery as would occur here by reason of the plaintiffs' insurers' formal release of its subrogation right.
[74] I return to a paragraph from the reasons of Justice Cory following his exposition of the considerations supporting the private insurance exception and repeated here for ease of reference:
There is a good reason why the courts should be slow to change a carefully considered long-standing policy that no deductions should be made for insurance monies paid for lost wages. If any action is to be taken, it should be by legislatures. It is significant that in general no such action has been taken
[75] I paraphrase Justice Cory's words. There is a good reason why the courts, particularly trial courts, should be slow to change a carefully considered long-standing policy such as the private insurance exception which has, to my knowledge, remained unmodified in respect of circumstances where an insurer has formally released its subrogation right. If any action is to be taken to modify the private insurance exception in circumstances such as those before me, it should be taken by legislatures. It is significant that no such action by a legislature was cited before me. The reality that a fact situation such as that before me likely has been, and will continue to be, rare, does not, I am satisfied, justify me in modifying the long-standing policy of the private insurance exception.
[76] In the result, no modification will be made in my earlier conclusion regarding appropriate damages payable by the defendant to the plaintiffs for decrease in the value of the Constant Craving by reason of the fact that the plaintiffs will experience a degree of double recovery. As between double recovery to the plaintiffs and a windfall benefit to the defendant by reason of the prudence of the plaintiffs in maintaining insurance on the Constant Craving, I conclude that the result should favour the plaintiffs. I am satisfied that such a result is consistent with the current state of the law regarding collateral benefit flowing, in these relatively unique circumstances, from the private insurance exception.
d) Miscellaneous Items
[77] An additional sum for items lost following the explosion and fire was agreed upon between the parties at $497.96. Further, it was not in dispute before me that the plaintiffs should be entitled to the sum of $2,095.37 representing towing charges and storage costs.
e) Pre-judgment Interest
[78] The plaintiffs are entitled to pre-judgment interest on the damages awarded in their favour against the defendant. Such pre-judgment interest should be calculated in accordance with law. If the parties have any difficulty in reaching agreement on the quantum of pre-judgment interest, I may be spoken to.
SUMMARY OF CONCLUSIONS
[79] In summary then, the plaintiffs having succeeded in establishing that negligence on the part of the defendant was the cause of the explosion aboard the Kyhita, and there being essentially no issue before me that the explosion and resultant fire aboard of the Kyhita were the sole causes of the damage done to the Constant Craving on the 18th of June, 1997, the plaintiffs succeed on their counterclaim against the defendant. Judgment will go in favour of the plaintiffs for the sum of the repair costs in respect of the Constant Craving, being $32,912.70, and the decrease in value of the Constant Craving by reason of the explosion and fire, that is to say, $22,900.00 for a total of $55,812.70. No adjustment to the foregoing award will be made by reason of the fact that the portion related to be repair costs might be seen as a collateral benefit to the plaintiffs.
[80] In addition, I will award the plaintiffs $1,500.00 each, that is to say, $3,000.00 in total, as compensation for inconvenience or loss of use of the Constant Craving. Finally, I will award special damages for small items lost or destroyed by reason of the explosion and fire and for towing charges and storage costs totalling $2,593.33. The plaintiff will be awarded pre-judgment interest from the date of the explosion and fire to the date of judgment, such pre-judgment interest to be calculated in accordance with law. As noted earlier in these reasons, if the parties have difficulty reaching agreement on the quantum of pre-judgment interest, I may be spoken to.
COSTS
[81] At the close of trial, counsel were in agreement that the question of costs should be left to be dealt with by written submissions, assuming that counsel cannot reach agreement on the subject, to be made following issuance of my reasons and my formal judgment. My judgment will indicate that the subject of costs has been deferred, to be dealt with by supplementary judgment following written submissions. If counsel cannot agree on a timetable for written submissions, on the request to the Registry of counsel for either party, I would be prepared to fix a schedule following a teleconfence with counsel.
________________________________
J. F.C.C.
Ottawa, Ontario
January 28, 2003
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-448-98
STYLE OF CAUSE: GEORGE STRACHAN v. THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP "CONSTANT CRAVING", GRANT HUSDON, ANNE HUSDON, PACIFIC MARINE ENTERPRISES LTD. AND ALL OTHER PERSONS HAVING CLAIMS AGAINST THE PLAINTIFF, THE SHIP "KYHITA" OR THE FUND HEREBY TO BE CREATED AND PACIFIC MARINE ENTERPRISES LTD., AND GRANT HUSDON AND ANNE HUSDON
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: September 17 - 26, 2002
REASONS FOR ORDER : GIBSON J.
DATED: January 28, 2003
APPEARANCES:
Guy Holeksa FOR THE PLAINTIFFS BY COUNTERCLAIM
Barrister & Solicitor
1600-401 W. Georgia Street
Vancouver, B.C. V6B 5A1 -
(604)689-4292
Roger Watts FOR DEFENDANT BY COUNTERCLAIM
McEwen, Schmitt & Co.
Barristers & Solicitors
1615 - 1055 West Georgia Street
Vancouver, B.C. V6E 3R5
(604) 683-1223
[3] Affidavit of Ronald W. Gaudette sworn the 11th of July, 2002, Exhibit "A", page 5.
[4] Affidavit of Chris Small sworn the 17th of July, 2002, paragraph 4.
[5] Exhibit "A" to the affidavit of Chris Small sworn the 17th of July, 2002, page 6.
[6] Exhibit "A" to the affidavit of Lynn M. Johnson sworn the 18th of July, 2002, page 3.
[7] Affidavit of Wayne Point sworn the 4th of September, 2002 and related testimony.
[8] Cross-examination of Lynn M. Johnson, Transcript, volume 2, pages 299 to 304.
[9] Cross-examination of George Robert Strachan, Transcript, volume 2, page 365.
[11] First affidavit herein of Captain Jan J. de Groot sworn the 16th of July, 2002.
[12] Exhibit J-1, Joint Book of Documents, Document 10, page 2.
[13] Exhibit J-1, Joint Book of Documents, Document 15, page 3.
[14] Exhibit J-1, Joint Book of Documents, Document 16, page 2.
[15] Exhibit J-1, Joint Book of Documents, Document 27, page 4, and affidavit of
Francis Ian Hopkinson sworn the 16th of August, 2002.
[16] Affidavit of Captain Dan Gibbons sworn the 16th of July, 2002, Exhibit "A".
[17] Affidavit of Captain Jan J. de Groot sworn the 29th of August, 2002. Exhibit "A".
[18] Affidavit of Daniel J. Greenwood sworn the 28th of August, 2002.
[19] S.M. Waddams, The Law of Damages, 2nd ed., Looseleaf Edition, (Toronto: Canada Law Book Inc., 2001) at 1-110.
[20] [1986] B.C.J. No. 2600 (S.C.).
[21] Supra, note 20, page 13.
[22] Supra, note 18, paras. 1.2030 to 1.2140 at pp. 1-98 to 1.102.
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