Federal Commerce and Navigation Co. Ltd. v. Eisenerz—G.m.b.H., [1974] SCR 1225

Supreme Court of Canada

Federal Commerce and Navigation Co. Ltd. v. Eisenerz—G.m.b.H., [1974] S.C.R. 1225

Date: 1972-10-18

Federal Commerce and Navigation Company Limited and Halifax Overseas Freighters Limited (Defendants) Appellants;

and

Eisenerz—G.m.b.H. (Plaintiff) Respondent.

1972: February 16, 17, 18: 1972: October 18.

Present: Abbott, Ritchie, Hall, Pigeon and Laskin JJ.

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA

Shipping—Admiralty—Stranded vessel—Discharge and reloading of cargo—Damage—Combined negligence of the master and his servants—Liability of shipowners not shared by owner of cargo—Liability of master as servant of shipowner—Clause in charter-party relating to settlement of general average—York/ Antwerp Rules—Rules C, D and E—Meaning of the expressions “general average act” and “general average loss”—Damage not resulting from general average act—No causal connection between unseaworthiness and stranding.

Appellant Halifax Overseas Freighters Limited owned a vessel which it time chartered to appellant Federal Commerce and Navigation Company Limited, hereinafter referred to as “Federal”, who in turn chartered it to respondent under a voyage charter. Federal issued two bills of lading covering the respondent’s pig iron cargoes which incorporated the terms of the voyage charter-party and by both of which the owners are bound by virtue of the master’s signature thereon. In accordance with the charter-party the two cargoes were loaded onto the vessel, in separate holds, as the two types of pig iron, which were uniform in size, length, shape and weight, differed in quality and in the purpose for which they were to be used. Appellants were required to carry, care for and deliver the cargoes to Genoa in the same apparent good order and condition in which they had been loaded at Sorel.

The vessel stranded near Lauzon and it was necessary to discharge the cargo pending repairs at Lévis. In the course of reloading, respondent’s cargoes of pig iron at Lévis were mixed in the different holds of the vessel and hematite, taken on board with the pig iron, was also mixed with them to such an extent that the cargoes were lost and destroyed. Appellants were

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jointly and severally condemned by the Judge in Admiralty in the Quebec Admiralty District to pay for the damages sustained by respondent. Hence the appeal to this Court.

Held: The appeal should be dismissed.

Dealing first with the allegation of unseaworthiness made by respondent, the warranty that the ship was “tight, staunch and in every way fit…” made in the charter-party included an undertaking to exercise due diligence to make the vessel seaworthy. But the stranding was solely caused by a serious error in navigation on the part of the pilot who was in charge of the vessel at the time, and no causal connection was shown between unseaworthiness and stranding.

The inclusion of paragraph 13 of the charter-party introduced a term into the contract of carriage whereby in the event of general average loss or damage occurring the York/Antwerp Rules were incorporated as a part of that contract for the purpose of settling the “average”. The stranding was the event which made it necessary for the cargo to be unloaded. This decision was made by the master for the benefit of the ship and cargo alike and can therefore be properly described as a “general average act” which was occasioned through negligent navigation, for which the owners are exempted from liability under the charter-party. However, it does not necessarily follow that the loss and damage to the respondent’s cargo was a “general average loss” coming within the ambit of the York/Antwerp Rules.

The effect of Rule D is to provide that general average is to be settled without reference to the question of whose fault gave rise to the general average act, but that the remedies against the party responsible for that fault are none the less to be preserved. However, it should be noted that under Rule C “only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average.”

In entering upon the general average act and in making all reasonable and necessary expenditures consequent thereon, the master is to be taken as acting with the implied authority of the cargo owners as well as the ship, but this authority does not extend so as to identify the cargo owners with the negligence of the master or those employed by him in carrying out the general average procedure or to derogate from his overriding responsibility to care for the

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cargo in his capacity as the servant of the shipowner. The expenses incurred in handling the cargo were a direct consequence of the general average act, but the combined negligence of the master and of the surveyors and stevedores who were acting as his servants, which occasioned the damage, was not attributable to the general average act; it constituted a separate and independent cause which can only be said to have been foreseeable if it is to be taken that the master should foresee the possibility of his own negligence and that of his servants. Appellants have not shown that the damage complained of was the “direct consequence of the general average act”, as they were bound to do under Rule E.

In fact, respondent’s claim is a claim for damages for negligent performance of a contract of carriage and is not a claim in general average. Appellants are the only party claiming in general average. The acts of neglect of the master, even if committed during the general average procedure, cannot be held as those of the respondent so as to prevent the latter from successfully recovering the damages to its cargo. The responsibility of the “shipowners” will be shared by the time charterers and the liability of the two appellants is joint and several.

APPEAL from a judgment of Noël J. sitting in Admiralty in the Quebec Admiralty District[1]. Appeal dismissed.

L.S. Reycraft, Q.C., for the appellants.

P.R. D. MacKell, Q.C., and B. Cleven, for the respondent.

The judgment of the Court was delivered by

RITCHIE J.—This is an appeal from a judgment of Mr. Justice Noël, sitting as Judge in Admiralty in the Quebec Admiralty District, whereby he held the respondent cargo owner entitled to recover a sum of $107,621.26 with interest, jointly and severally, from the appellants, in respect of damage sustained to cargoes of pig iron owned by the respondent and carried on board the S.S. “OAK HILL” when that vessel stranded near Lauzon dry dock in the St. Lawrence River. As a result of the stranding it

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became necessary to discharge the cargo pending repairs to the vessel and it was in the course of reloading the respondent’s cargoes of pig iron at Lévis, P.Q., that the two cargoes became intermingled and to a limited extent lost and destroyed.

The circumstances giving rise to this action are fully and, in my view, accurately described in the reasons for judgment of Mr. Justice Noël, which are now reported in [1970] Ex. C.R. at p. 192. (The page references hereinafter made to that judgment refer to that report.) This relieves me of the necessity of restating the facts except in so far as I consider it necessary to do so in order to provide a setting for discussion of the questions of law to which they give rise.

The “OAK HILL” was owned by the appellant, Halifax Overseas Freighters Limited, and had been time chartered to the appellant, Federal Commerce and Navigation Company Limited (hereinafter referred to as “Federal”) who, in turn chartered to the respondent under a Voyage Charter. Federal issued two bills of lading covering the respondent’s pig iron cargoes which incorporated the terms of the Voyage Charter Party and by both of which the owners are bound by virtue of the master’s signature thereon.

The separate cargoes of the respondent’s pig iron which were then in apparent good order and condition had been received and loaded on the “OAK HILL” at Sorel, P.Q., in separate holds on August 24, 1962, and it should be mentioned that a further and different shipment of hematite belonging to other owners had been taken on board and separately stowed prior to the Sorel loading.

The various types of iron ore were all uniform in size, length, shape and weight, differing only in quality and in the purpose for which they were to be used. It was obviously important that these cargoes should be kept separate at all times and provision was made in this regard by

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paras. 24 and 49 of the Charter Party, to which reference is made in the reasons for judgment of the learned trial judge, who also points out at page 196 that:

It is common ground between the parties that it was understood, well known and agreed, that the pig iron of different qualities must be kept separate…

After the stranding, the vessel proceeded to Wolfe’s Cove on the Quebec side of the St. Lawrence River, where certain cargo other than pig iron was discharged, and then went across the river to Lévis, P.Q., where the greater part of the pig iron was unloaded. The vessel was repaired at a local dry dock and the cargo having been reloaded at Lévis, proceeded to Genoa, where it was discovered that the respondent’s cargoes had been mixed in the various holds of the vessel and that the hematite previously loaded was also mixed with the respondent’s pig iron. It was apparently conceded on behalf of the appellants that any loss, damage or intermixture of the pig iron must have occurred during the handling of the cargo at Lévis.

In this regard the learned trial judge observed:

Counsel for the defendant even took the position (and this, in my view is fully supported by the evidence) that the mixture, excess breakage and shortage occurred during the enforced discharge, the storing and reloading in Quebec…

The respondent’s action was initially based on the appellant’s breach of the obligation evidenced by the bills of lading to carry, care for and deliver the cargoes to Genoa in the same apparent good order and condition in which they had been loaded at Sorel, and more particularly that while in the care of the appellants, the cargo was broken, carelessly handled, lost and mixed with other cargoes and then improperly reloaded. It was also pleaded that the “OAK HILL” was unseaworthy on departure from Sorel by reason of overloading, that this unseaworthiness directly contributed to the loss and that the appellants failed to exercise due diligence to make the vessel seaworthy.

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I find it convenient to deal first with the allegation of unseaworthiness and in this regard I adopt the test described in Carver’s Carriage by Sea, 12th ed. at p. 90 (para. 103) where it is said:

The shipowner is responsible for loss or damage to goods, however caused, if the ship was not in a seaworthy condition when she commenced her voyage and if the loss would not have arisen but for that unseaworthiness. The goods owner must, in order to make the shipowner liable, establish both these facts, and cannot recover for the loss or damage merely on the ground that the ship was unseaworthy, unless it is also shown that the loss or damage was caused by that unseaworthiness.

I do not find it necessary to consider the provisions of the Water Carriage of Goods Act, R.S.C. 1952, c. 291 (now the Carriage of Goods by Water Act, R.S.C. 1970, c. C-15 or of the Quebec Civil Code in relation to the duty of the master to provide a seaworthy ship and to exercise due diligence to make it so because Clause 2 of the Charter Party contains a Warranty that the ship was “tight, staunch, strong and in every way fit for the voyage” and that the loading at Sorel would not exceed what she could “reasonably stow and carry” and I think that this includes an undertaking to exercise due diligence to make the vessel seaworthy.

If it had been shown that the stranding was caused by the unseaworthiness of the vessel through overloading or otherwise, the ship owners would then have been responsible for any damage caused as a direct consequence of such unseaworthiness, but in the present case there is an express finding by the learned trial judge, with which I agree, that the stranding was solely caused by a serious error in navigation on the part of the pilot who was in charge of the vessel at the time, and no causal connection has been shown between any unseaworthiness and

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stranding. Furthermore, the respondent’s contention is that the damage was not a direct consequence of the stranding but rather that it was caused by an independent act of negligence in handling the cargo. It follows, in my view, that even if it were accepted that the vessel had been overloaded, no responsibility would attach to the owner for the breach of the guarantee and warranty above referred to.

Mr. Justice Noël’s finding as to the cause of the stranding is to be found at p. 210 of the Report where he said:

One must, I believe, from this, infer that whoever was on the bridge directing the vessel had committed a very serious error of navigation to have, on a clear night, so misdirected this ship as to ground her on the wrong side of the buoy and outside of the channel. This accident can, under these circumstances, be explained only by a serious error of navigation of the pilot who, at the time, was in charge of the vessel. It strikes me also that the captain was somewhat remiss in not remaining on the bridge for some time after the new pilot had taken over.

Under the terms of Clause 20 of the Charter Party, the shipowner is exempted from liability for “the neglect… of the pilot in the navigation of the Steamer” in the following terms:

20. …damage… from any act, neglect, default or error in judgment whatsoever of the Pilot, Master, Crew or other servants of the Shipowners in the management and/or the navigation of the Steamer, and all and every other Dangers and Accidents of the Seas, Rivers and Canals of whatever nature and kind whatsoever, before and during the said voyage always excepted.

The claim of the respondent is not, however, based on the negligence which caused the stranding, but rather upon the allegation that the damage was sustained by the cargo through negligent handling whilst in the custody and care of the appellants during the unloading, handling and reloading at Lévis.

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The appellants’ defence to this latter claim is that the discharge of the cargo at Lévis was a general average act done for the benefit of ship and cargo alike and that any damage sustained while at the port of refuge occurred in the course of carrying out the general average procedure and should therefore be contributed to proportionately by all interests concerned.

As the defence is somewhat technical in nature and involves an interpretation of the York/Antwerp Rules, 1950, I think it desirable to refer to the pleadings. Having referred to the contract evidenced by the bills of lading and the Charter Party, the respondent went on to plead:

4—That in particular it was understood, well known and agreed that the pig iron of different qualities must be kept separate and the Charter Party is particularly to this effect especially at paragraphs 28 and 49.

5—That in breach of contract on or about August 25, 1962, at 10:30 P.M. near Quebec City, the S.S. OAK HILL stranded on the south bank of the St. Lawrence River, P.Q., Canada, said cargo was discharged from the vessel and said cargo was broken, carelessly handled, lost and mixed with other cargo and then reloaded in part and improperly, the whole to the prejudice of the Plaintiff.

6—That upon arrival of the said vessel at Genoa on or about December 5, 1962, the said shipment was found to be short and damaged and mixed with other cargo, defendants noted, inspected and surveyed the loss and damage and notice was duly given to them.

8—That the defendants have thus breached their obligation under the contract and law to keep the said cargoes of pig iron separate and in separate holds and undamaged from receipt at Sorel to delivery at Genoa.

The various admissions made by the parties make it clear that the following matters are not seriously disputed:

(1) That the cargo was properly loaded in apparent good order and condition at Sorel.

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(2) That it was understood and agreed that the pig iron of different qualities must be kept separately.

(3) That at the time of discharge at Genoa there was a shortage, missing and breaking of cargo and that in this regard the loss and/or damage suffered by the respondent to its cargo under Sorel-Genoa bills of lading numbers 1 and 2 as determined at Genoa was $107,621.26.

(4) That the damage to the cargo occurred during the enforced discharge, storing and reloading in Lévis.

In my opinion, these circumstances establish a prima facie case of a breach of the fundamental obligation evidenced by the bills of lading and the Charter Party to deliver the shipment at Genoa in the like good order and condition in which it was when loaded at Sorel, and were it not for the allegations contained in paragraph 8 of the appellants’ statement of defence, I think that the respondent would be entitled to succeed in this action on that ground. There remains, however, the question raised by para. 8 of the appellant’s defence which reads as follows:

8. That if the said pig iron suffered any loss or damage or inter-mixture whilst in the care and custody of the Defendants, which is denied, said loss and damage and inter-mixture was caused in whole or in part in the acts of handling, discharging, storing, reloading and stowing said pig iron subsequent to the aforementioned stranding, which acts were not carried out by the Defendants but by or on the instructions of the General Average Adjuster and/or its agents, appointed on behalf of the Shipowner and Cargo and all other interests, and for whose acts the Defendants are not responsible, and the Defendants plead paragraph 13 of the aforementioned charterparty dated at Hamburg on July 17, 1962, which provides for General Average to be settled according to York/Antwerp Rules 1950 and particularly Rule XII of said Rules.

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Paragraph 13 of the Charter Party reads:

13. Any averages occurring under this Charter to be settled according to York/Antwerp Rules.

In answer to this defence, the respondent pleads in part as follows:

7. That paragraph eight is denied and in particular Plaintiff denies that the Defendants can plead general average in the present action;…

The inclusion of para. 13 of the Charter Party introduced a term into the Contract of Carriage whereby in the event of general average loss or damage occurring the “York/Antwerp Rules” were incorporated as a part of that contract for the purpose of settling “the average”.

By para. 7 of the respondent’s answer to the Defence, the question of whether or not the loss or damage complained of as having been caused by “breach of contract, negligence or delict” was in fact a general loss to be borne by shipowners and cargo alike, was placed directly in issue.

“General average” is a term used to describe a procedure to be followed when by reason of some maritime misfortune both the ship and her whole cargo are in danger. In such cases, if the master deliberately and reasonably takes action for the benefit of all concerned which has a direct consequence of damaging the ship or cargo, the loss becomes a “general average loss”, and is adjusted between all the parties to the marine adventure.

The most obvious and perhaps the earliest recorded example of this is a case where tempestuous seas make it necessary to lighten ship and part of the cargo is jettisoned to save the ship and the remaining cargo. General average may however, apply to any sacrifice or expense intentionally and reasonably incurred for the benefit of all in the face of an emergency. Lowndes and Rudolf on General Average (9th Ed.—British Shipping Laws—Vol. 7) which has

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long been regarded as a standard work, adopts the early definition of general average contained in the judgment of Lawrence J. in Birkley v. Presgrave[2], as having been so widely followed in the courts of England that it has become sort of a maxim. Lawrence J. there says:

All loss which arises in consequence of extraordinary sacrifice made or expenses incurred for the preservation of the ship and cargo comes within general average and must be borne proportionately by all who are interested.

In the present case the stranding at Lauzon was the event which made it necessary for the “OAK HILL” to unload her cargo and go into dry dock. This decision was made by the master and there is no suggestion that it was an unreasonable one. The decision was made for the benefit of the ship and cargo alike and can therefore be properly described as a “general average act” which was occasioned through negligent navigation of the vessel for which the owners are exempted from liability under the Charter Party. Although the decision to unload was a general average act, it does not necessarily follow that the loss and damage to the respondent’s cargo was a “general average loss” coming within the ambit of the York/Antwerp Rules.

It would, in my opinion, be wrong to assume that, in carrying out the general average procedure, the York/Antwerp Rules are to be treated as a code governing the rights of the parties concerned to the exclusion of other rights and obligations created by the Contract of Carriage. In my opinion, the effect of para. 13 of the Charter Party is simply to include the Rules as a part of the contract and although in carrying out the general average act the master is acting in the interest of all concerned, he is representing the owner and in so doing, his overriding duty to care for the cargo is still paramount and loss or damage sustained by the cargo through a breach

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of this duty is, in my view, not “a general average loss” to which the Rules apply.

There is in my opinion nothing in the York/ Antwerp Rules to relieve the master of his responsibility to see that cargo is properly handled and cared for during the carrying out of the general average procedure. In this regard, Carver’s Carriage by Sea, 12th Ed., Vol. 2, contains the following statement concerning the role of the master when acting on behalf of cargo owners in cases of necessity, at p. 752:

But although such acts are done by the master on behalf of the owner of the goods and with his implied authority so as to bind him, they are still done by the master as servant of and as representing the shipowner and the shipowner is responsible if he exercises that authority improperly.

One of the authorities cited by Carver in support of this proposition is the old case of Notara v. Henderson[3], which was an action against shipowners by the shippers of a cargo of beans, claiming that the shipowners were liable for the alleged negligence of the master in failing to take reasonable care of the beans by drying them at the port of Liverpool, into which the vessel was driven for repairs by an accident of the sea as the result of a collision at sea “for the necessary and immediate consequences of which” the shipowner was exempted from liability under the Bill of Lading. The judgment in this case is a comparatively long one but the effect of it appears to me to be accurately summarized in the first paragraph of the heading which reads:

There is a duty on the master of a ship as representing the shipowner to take reasonable care of the goods entrusted to him, not merely in doing what is necessary to preserve them on board the ship during the ordinary incidents of the voyage, but also in taking active measures where reasonably practical under all circumstances, to check and arrest the loss

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or deterioration resulting from accidents for the necessary and immediate consequences of which the shipowner is not liable by reason of exception in the Bill of Lading. And for neglect of this duty by the master the shipowner is responsible to the shipper.

Before considering whether the appellants can successfully invoke the York/Antwerp Rules in the present case, it seems to me to be desirable to consider the format in which the rules are arranged. The Rules are lettered A to G and numbered I to XII and they are preceded by a rule of interpretation which reads as follows:

In the adjustment of general average the following lettered and numbered rules shall apply to the exclusion of any law and practice inconsistent therewith.

Except as provided by the numbered rules, general average shall be adjusted according to the lettered rules.

In commenting on this Rule, Lowndes and Rudolf supra observe at p. 548, para. 546:

The first sentence of the Rules ensures that the Rules shall not be construed as a mere codification of any national law or any practice national or international. They thus take effect as a contract between the parties and fall to be construed in the same manner as any other contract. They do not however constitute a complete or self-contained code and need to be supplemented by bringing into the gaps provisions of the general law which are applicable to the contract.

Paragraph 8 of the Defence specifically pleads Rule XII which reads as follows:

RULE XII

Damage to or loss of cargo, fuel or stores caused in the act of handling, discharging, storing, reloading and stowing shall be made good as general average when and only when the cost of those measures respectively is admitted as general average.

It is contended on behalf of the appellants that the provisions of Rule XII are to be con-

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strued as meaning that any damage to or loss of cargo occurring in the course of the general average procedure is to be made good as general average.

In this regard, the learned trial judge invoked the provisions of Rule D of the rules which reads:

RULE D

Rights to contribution in general average shall not be affected though the event which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the adventure; but this shall not prejudice any remedies which may be open against that party for such fault.

Noël J. construed this as meaning that:

…general average procedure has nothing to do with nor does it affect the rights of any party to any remedy he may have against one of the parties for any fault committed and which has caused him damage.

and the learned trial judge continues:

Such indeed would be the situation of the Plaintiff here if it can establish that it is entitled to a recourse against the defendants for damage sustained to its cargo during the reloading procedure conducted in Quebec City after the grounding of the vessel, whether or not there is or may be a general average enforcement against all the parties to this common adventure.

In my view the effect of Rule D is to provide that general average is to be settled without reference to the question of whose fault gave rise to the general average act but that the remedies against the party responsible for that fault are nonetheless to be preserved. With the greatest respect for the views of the learned trial judge, I am unable to find that the last portion of Rule D has the effect of preserving remedies which may be open against one of the parties for “any fault… which may have caused the damage” and I do not think it is to be read as qualifying the language of Rule XII in so far as that rule provides that “damage to or loss of the cargo… caused in the act of handling… shall be made good as general average

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when and only when the cost of those measures respectively is admitted as general average.”

In finding that Rule D had the effect of preserving the rights of any party to any remedy which he may have against one of the parties to a general average for any fault which has caused the damage, Mr. Justice Noël relied on a judgment of Pearson J. in Gourlandris Bros. v. B. Goldman & Sons Ltd.[4], in the course of which at p. 92 he said:

I understand that the task of compiling an average adjustment in a complicated case may take years. It is highly convenient and desirable, almost necessary, that the task should not be further enlarged and complicated by questions whether the casualty was caused by some fault or faults of one or more of the parties. Moreover, such questions would only be settled by litigation or arbitration as they go beyond the sphere of general average and may affect other matters. The average adjusters ought to be able to produce figures which, so far as they are concerned, are final figures. When they have produced their final figures the question of enforcement arises, and it is at this stage that the second part of Rule D comes into play. The average adjustment shows X owing to Y £100 but that showing is without prejudice to any remedies which may be open to X for Y’s fault having caused the casualty. (The italics are my own).

It is true that in the same paragraph of his reasons for judgment Pearson J. analyzed Rule D in the following manner so as to mean that:

The first part refers to the rights to contribution in general average as they will be set out in the average adjustment and these are properly and naturally called ‘rights’ because normally the holder of such rights is entitled to receive payment. But this second part of the rule provides that the first part is not to prejudice remedies for faults. That implies that in some cases the remedies referred to in the second part of the rule will override the rights referred to in the first part; in other words, the second part operates as a proviso, qualifying, overriding, cutting down or derogating from the first part. The rights may be

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nullified or defeated or diminished or otherwise affected by the remedies. In that sense the rights referred to in the first part of the rule are prima facie rights because they are subject to the remedies.

I think it is this latter passage and particularly the statement “that the first part is not to prejudice remedies for faults” which led Mr. Justice Noël to conclude that the second part of Rule D referred to any fault committed by one of the parties to the general average. In my view, when Pearson J.’s reasons for judgment are read as a whole, it is apparent that the faults to which he was referring were faults causing the casualty which in turn gave rise to the general average sacrifice. The words “such fault” as they occur in the last line of Rule D are, in my view, to be construed as referable to “the fault” referred to in the earlier part of the section and the remedies which are preserved are therefore those against the party whose fault was responsible for the event which gave rise to the general average sacrifice.

Although I am of opinion that Rule D is only effective to preserve remedies which may be open against one of the parties whose fault gave rise to the sacrifice, it does not follow that all damages to or loss of “cargo… caused in the act of handling, discharging, reloading and stowing” are to be made good as a general average, because it is to be borne in mind that under the provisions of rule XII this applies “when and only when the cost of those measures respectively is admitted as general average”.

The only losses or damages to be admitted as general average are those referred to in Rule C which reads:

RULE C

Only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average.

As has been pointed out, the unloading of the cargo at Lévis was the general average act and the handling and reloading at that port were all

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part of the general average procedure, but it is contended on behalf of the respondent that the damage caused to the pig iron cargoes was not a “direct consequence of the general average act” as it was caused by the negligence of the master and those who were employed by him to carry out the procedure.

In carrying out the general average procedure, the master acts on behalf and for the benefit of both the cargo owners and the ship and, in the present case, the master entrusted the discharging and reloading of the cargo to Hayes, Stuart and Company, who are the general average surveyors, but I agree with Mr. Justice Noël that this did not relieve the master of the ultimate responsibility for carrying out the procedure properly.

The meaning to be given to the words “direct consequence” as employed in Rule C is the subject of a closely reasoned judgment delivered by Lord Denning in Australian Coastal Shipping Commission v. Green et al[5], in which he reviews a great many of the authorities and concludes that:

Direct consequences denote those consequences which flow in an unbroken sequence from the act whereas ‘indirect consequences’ are those in which the sequence is broken by an intervening or extraneous cause.

and the learned judge adds:

I realize that this is not very helpful because the metaphor ‘breaking the chain’ of causation means one thing to one man and another thing to another but still we have to do the best we can with it.

Lord Denning proceeds to state his own view in the following terms:

If the master when he does a ‘general average act’ ought reasonably to have foreseen that a subsequent accident of the kind might occur—or even that there was a distinct possibility of it, then the subsequent accident does not break the chain of causation. The loss or damage is the direct consequence of the original general average act.

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It appears to me that even if Lord Denning’s view be accepted, it does not mean that a master is to be relieved of responsibility for his own negligence by contending that it was “reasonably foreseeable”. In my view, if it be shown that loss or damage to cargo has been caused through the negligence of the master in carrying out the general average procedure, it can no longer be said that it was a direct consequence of the general average act. The chain of causation is broken by the intervention of a new cause and, in my view, it cannot have been the intention of the committee which adopted the York/Antwerp Rules that a master should be able to claim a general average loss because he was able to foresee the possibility that he would be negligent.

The question of fact which must determine the outcome of this appeal is whether the damage to the cargo was caused by negligence for which the appellants are responsible. Notwithstanding the stipulation and obligation to keep the cargoes separate by which the appellants were bound, the evidence is clear that neither the master nor the surveyors and adjusters employed by the appellants took any steps to protect the pig iron from being intermingled at Lévis.

It is apparent from the master’s evidence that he turned over the unloading, handling and reloading of the cargo to the surveyors and not only failed to exercise any supervision, but appears to have regarded himself as under no obligation to participate in the procedure. In this regard he gave the following evidence:

Q. Well, which do you do? Do you maintain control of everything? Were you in charge or were they?

A. They were in charge so far as discharging and loading of the cargo was concerned.

Q. The care of the cargo…

A. Rested with them.

Q. You gave up the care did you?

A. Well, yes.

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The role of the general average surveyor or adjuster in carrying out the general average procedure is described in the evidence of Mr. George Hayes who is President of Hayes, Stuart & Company Limited, the company which was retained on behalf of the appellants to act in that capacity during the unloading and reloading of the “OAK HILL” at Lévis. Mr. Hayes gave evidence on behalf of the respondent and in the course of his direct examination he was asked about the function of such a surveyor and he said:

Q. Is he a watchman?

A. No, he is not a watchman.

Q. Who employs the watchman?

A. Ordinarily people are employed through the vessel’s agents, the watchman, and the stevedores et cetera. It is ordinarily the agent.

Q. Did you employ the stevedores, your firm?

A. No, we did not.

Q. Did you employ the watchman?

A. No, we did not.

Q. You say they are employed by the ship’s agents?

A. Ordinarily the ship’s agents on behalf of the Master. He is the Master’s servant for loading what is necessary.

And later:

Q. And who makes the decisions, for example, you have already said the employee of the charterers and the watchman and so on is not by you, who gives instructions—you have already said the employment of stevedores and the watchman is not made by you, who gives instructions to those stevedores and those watchmen?

A. Actually the watchman and the stevedores are the servants of the Master of the ship. Although you do have discussions with the Master and the stevedores and yourself and you have meetings in order to solve the problems in hand to get at the best manner if the cargo should be wet or under water, the best manner of handling it, but ordinarily this is a meeting between all interests concerned and it is agreed accordingly.

Q. But then the Master carries out whatever decisions he wishes and so on?

[Page 1244]

A. Yes, in theory the Master has the final say.

Finally, on cross-examination by the appellants’ counsel, Mr. Hayes said of the general average adjuster:

A. Ordinarily, a good general adjuster discusses every move with the Master of the ship or the Chief Officer.

There is no evidence of supervision by the surveyor at Lévis and indeed the appellants did not bring a single witness as to what took place there with respect to the handling of the cargo, and in fact their only answer to the allegation of negligence was that the Port of Lévis was so ill equipped for the reception of pig iron that the mixing and breaking might have taken place without anybody’s negligence.

The evidence as to negligence was furnished by the two expert surveyors who examined the cargo at Genoa and who gave evidence on behalf of the appellants. One of these witnesses, Alfonso Oliva, after acknowledging it to be indisputable that the greater quantity of the mixture and breakage occurred at the time of the forced discharge at Lévis, was cross-examined with respect to the mixture and made the following answers:

Q. In enclosure Number 2 it shows, for example, in hold Number 5 instead of twelve hundred and fifty-six (1256) long tons there was twelve hundred and ninety-five (1295) and it says, ‘Mixed with remaining cargo’; that is pretty sloppy mixing and loading, is it, Mr. Oliva, negligent or sloppy?

A. Yes.

Q. I show you hold Number 4 before grounding in enclosure Number 1, eighteen hundred and fifty (1850) tons of Hematite and in enclosure Number 2 there are only seventeen hundred and nine (1709) tons of Hematite and it’s mixed with the remaining cargo. What do you think of that? Is that negligent?

A. Yes, indisputably it is negligent.

[Page 1245]

The other surveyor, Captain Baldi was in general agreement with the fact that the cargo “had been badly handled” at Lévis.

This is the evidence of the opinion of highly qualified experts who were called on behalf of the appellants; it is uncontradicted and in my opinion substantiates the finding of Mr. Justice Noël that:

…the damage here was indeed caused by the combined acts of negligence of the surveyors and of the captain and his officers and crew in the management of the cargo at a time when the ship was not navigating but was moored in the dock where it remained during the whole operation of unloading and reloading.

I think it important to stress the fact that the respondent’s claim is a claim for damages for negligent performance of a contract of carriage and is not a claim in general average. The appellants are the only party claiming in general average and there is an express denial of their right so to plead, so that the burden rests upon the appellants under the pleadings to prove that the loss sustained is a general average loss. This position is reinforced by the provisions of Rule E of the York/Antwerp Rules which reads:

RULE E

The onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly allowable as general average.

This burden cannot, in my opinion, be discharged without proof that the loss and damage complained of were “the direct consequence of the general average act”.

In entering upon the general average act and in making all reasonable and necessary expenditures consequent thereon, the master is to be taken as acting with the implied authority of the cargo owners as well as the ship, but this authority does not extend so as to identify the cargo owners with the negligence of the master or those employed by him in carrying out the general average procedure or to derogate from his

[Page 1246]

overriding responsibility to care for the cargo in his capacity as the servant of the ship owner.

In my opinion the expenses incurred in handling the cargo at Lévis were a direct consequence of the general average act, but the combined negligence of the master and of the surveyors and stevedores who were acting as his servants which occasioned the damage, was not attributable to the general average act; it constituted a separate and independent cause which can only be said to have been foreseeable if it is to be taken that the master should foresee the possibility of his own negligence and that of his servants. As I have indicated, I cannot subscribe to this proposition and it follows that in my opinion the appellants have not shown that the damage complained of was “the direct consequence of the general average act”.

As will be seen, I agree with the assessment made by the learned trial judge of the negligence which he found to have been proved in this case of which he said:

These acts of neglect, even if committed during the general average procedure cannot, in my view, be held as those of the plaintiff so as to prevent the latter from successfully recovering the damages to its cargo.

The amount of $107,621.26, representing the loss or damage to the cargo as determined at the time of discharge at Genoa, does not appear to have taken account of the minor damage which any such cargo might have sustained in the course of the enforced loading and unloading at Lévis, even if there had been no negligence, but as no evidence was called by the appellants to indicate the extent of such incidental damage if any, and as there does not appear to be any dispute as to quantum, I do not think that this Court is in a position to interfere with the award made by the learned trial judge.

[Page 1247]

From time to time in the course of these reasons I have referred to the responsibility of the “shipowners” and I should perhaps make it plain that this responsibility is shared by the time charterers and that the liability of the two appellants is joint and several.

For all these reasons I would dismiss this appeal with costs.

Appeal dismissed with costs.

Solicitors for the defendants, appellants: Brisset, Reycraft, Bishop & Davidson, Montreal.

Solicitors for the plaintiff, respondent: Martineau, Walker, Allison, Beaulieu, Phelan & MacKell, Montreal.