Wire Rope Industries of Canada (1966) Ltd. v. B.C. Marine Shipbuilders Ltd. et al., [1981] 1 SCR 363

Supreme Court of Canada

Wire Rope Industries of Canada (1966) Ltd. v. B.C. Marine Shipbuilders Ltd. et al., [1981] 1 S.C.R. 363

Date: 1981-03-19

Wire Rope Industries of Canada (1966) Ltd. (Third Party) Appellant;

and

B.C. Marine Shipbuilders Ltd. and Straits Towing Ltd. (Plaintiffs) Respondents;

and

F.M. Yorke & Son Limited (Defendant) Respondent;

and

Wire Rope Industries of Canada (1966) Ltd. (Defendant) Appellant;

and

B.C. Marine Shipbuilders Ltd. and Straits Towing Ltd. (Plaintiffs) Respondents.

1980: March 11, 12, April 23, 24; 1981: March 19.

Present: Martland, Ritchie, Dickson, Beetz, Estey, McIntyre and Chouinard JJ.

ON APPEAL FROM THE FEDERAL COURT OF APPEAL

Courts—Jurisdiction—Federal Court of Canada—Trial Division—Canadian maritime law—Third party proceedings, while related to action in maritime law, based in tort and contract—Whether or not jurisdiction to entertain third party proceeding—British North America Act, s. 91.10—Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, ss. 2, 22(1), (2), 42—The Admiralty Act, 1891, 1891 (Can.), c. 29, ss. 3, 4—An Act to improve the Practice and extend the Jurisdiction of the High Court of Admiralty of England, 1840 (U.K.), c. 65, s. 6—The Admiralty Act, 1934, 1934 (Can.), c. 31—Colonial Courts of Admiralty Act, 1890, 1890 (U.K.), c. 27.

Maritime law—Barge lost at sea—Towline socket failure—Socket resocketed under contract—Tug’s contract requiring seaworthiness at outset of voyage—No liability of due diligence proved—Whether or not tug owner liable—Whether or not third party liable to indemnify other parties for loss of third party negligent in resocketing process.

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These appeals raised questions of liability for loss at sea of a log barge, owned by the respondent B.C. Marine Shipbuilders Ltd. and chartered to Straits Towing Ltd., while the barge was being towed by the Lorne Yorke, a tug owned by F.M.Yorke & Son Limited. Pursuant to the contract with the tug owner the ship had to be seaworthy at the outset of the voyage, and if it were otherwise, the burden lay on the tug owner to prove due diligence with respect to seaworthiness. The loss occurred because of the failure of a manganese steel socket that formed part of the towline between the tug and the barge. The socket had been resocketed—a process by which a socket was reattached to the wire rope or cable—and because the process had been performed by Wire Rope, that company was joined in the action as a third party. Claims were made by the owner and the charterer of the barge against the tug’s owner; claims for indemnity were made against Wire Rope; as well, the jurisdiction of the Federal Court of Canada to deal with the third party claim was in issue.

At trial, judgment was ordered against Yorke in favour of Straits and B.C. Marine, and a reference directed. The actions against Wire Rope were dismissed. The Court of Appeal allowed Yorke’s appeal from the judgment in favour of B.C. Marine but dismissed its appeal from judgment in favour of Straits. The third party claim by Yorke and the appeals by B.C. Marine and Straits against Wire Rope succeeded, rendering Yorke liable for the barge’s loss with right of indemnity against Wire Rope and making Wire Rope liable to B.C. Marine and Straits for their losses. In this Court, Wire Rope appealed and sought the restoration of the trial judgment. B.C. Marine and Straits sought dismissal of the appeal made by Wire Rope and Yorke, and B.C. Marine also sought a reversal of the Court of Appeal’s dismissal of its action against Yorke. Yorke cross-appealed the judgment made against it in favour of Straits, and alternatively, sought an order for indemnification against Wire Rope for damages and costs for which it could be held liable.

Held: The appeals of Wire Rope against the judgments in favour of B.C. Marine, Straits and Yorke should be allowed and the part of the trial judgment dismissing the actions against Wire Rope restored; the cross-appeal by Yorke should be allowed; the action by

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B.C. Marine and Straits against Yorke should be dismissed; and the cross-appeal of B.C. Marine and Straits should be dismissed.

The Federal Court had jurisdiction to deal with the claims made against Wire Rope. Those claims alleged breach of contract and negligence in the resocketing of the main towing cable which formed part of the equipment of the Lorne Yorke. The claims made against Wire Rope were encompassed within the meaning of “Canadian maritime law” as used in the Federal Court Act. Jurisdiction broad enough to include these claims had been granted the British High Court of Admiralty, and had been transmitted through a succession of courts to the Federal Court. In addition, the substantive law relating to the claims fell within federal legislative competence under s. 91.10 of the British North America Act. There was therefore law of Canada relating to the issues upon which the Federal Court could operate. It was of no significance that Yorke’s claim was one for indemnity. Claims for indemnity and third party actions, generally, are not mere incidents to the principal action but are independent, standing on their own feet.

The appeals against Wire Rope were dismissed for it could not be shown that its work on the socket caused or contributed to the socket’s failure leading to the loss of the barge. There was evidence to support the conclusion that resocketing did not significantly embrittle the socket and cause its failure. Any claim that the defect was caused by an indefinite number of resocketings could not be sustained for no affirmative evidence was adduced to establish more than one socketing and resocketing. As the resocketing did not cause the socket’s failure, no liability could fall on Wire Rope.

Yorke was not liable in the main action brought by B.C. Marine and Straits for the loss of the barge. Any implied warranty respecting the ability of the crew, tackle and equipment at the outset of the voyage to meet the circumstances reasonably expected, was replaced by the inclusion of specific provisions in the contract between Yorke and Straits. Yorke was liable to B.C. Marine or Straits only if the Lorne Yorke, because of a failure by Yorke to exercise due diligence, was not seaworthy when it put out on the voyage that led to the accident, and if the loss was caused by lack of seaworthiness. Yorke successfully met the burden of showing that the socket’s failure was caused by a latent defect. The exercise of due diligence would not have revealed the defect. Even if the socket had had no latent defect, there was evidence that the manganese steel socket could be

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safely resocketed and that the practice of re-using sockets after resocketing was regularly followed in the industry with no apparent ill-effects. The state of the socket at the outset of the voyage was not such as to make the vessel unseaworthy and so render Yorke liable pursuant to the contract. There was no evidence of loss being caused by faulty navigation or seamanship.

R. v. Thomas Fuller Construction Co. (1958) Limited and Foundation Company of Canada Limited, [1980] 1 S.C.R. 695, distinguished; Tropwood A.G. and the Owners of the Vessel Tropwood v. Sivaco Wire & Nail Company and Atlantic Lines & Navigation Company, Inc., [1979] 2 S.C.R. 157; Quebec North Shore Paper Company et al. v. Canadian Pacific Limited, et al., [1977] 2 S.C.R. 1054; McNamara Construction (Western) Limited et al. v. The Queen, [1977] 2 S.C.R. 654; Bank of Montreal v. Royal Bank of Canada, [1933] S.C.R. 311; Charles Goodfellow Lumber Sales Limited v. Borromée Verreault, Captain Fernand Hovington and Verreault Navigation Inc., [1971] S.C.R. 522, applied; Maxine Footwear Company Ltd. et al. v. Canadian Government Merchant Marine Ltd., [1957] S.C.R. 801; Western Canada Steamship Company Limited v. Canadian Commercial Corporation and Others, [1960] S.C.R. 632; Riverstone Meat Co. Pty. Ltd. v. Lancashire Shipping Co. Ltd., (“Muncaster Castle”), [1961] A.C. 807; Toronto Elevators Limited v. Colonial Steamship Limited, [1950] Ex. C.R. 371; Robin Hood Flour Mills Limited v. N. M. Paterson & Sons Limited, [1967] 1 Ex. C.R. 431, aff’d [1968] 1 Ex. C.R. 175, referred to; Scottish Metropolitan Assurance Company, Limited v. Canada Steamship Lines, Limited, [1930] S.C.R. 262; The “Dimitrios N. Rallias” (1922), 13 L1. L.R. 363, considered.

APPEALS AND CROSS-APPEALS from decisions of the Federal Court of Appeal[1], allowing the appeals from and varying the judgments of Gibson J. Appeals by Wire Rope against the judgments in favour of B.C. Marine, Straits, and Yorke allowed, and that part of the judgment at trial dismissing the actions against Wire Rope restored; cross-appeal by Yorke allowed; the action by B.C. Marine and Straits against Yorke dismissed; and the cross‑appeal of B.C. Marine and

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Straits dismissed.

D. Brander Smith and N. Daugulis, for the appellant.

W. O’M. Forbes, for the respondents B.C. Marine Shipbuilders Ltd. and Straits Towing Ltd.

J.R. Cunningham, for the respondent F.M. Yorke & Son Limited.

The judgment of the Court was delivered by

MCINTYRE J.—These appeals raise questions of liability for the loss at sea of a log barge owned by the respondent B.C. Marine Shipbuilders Ltd. Claims were made by the owners and charterers of the lost barge against the owners of the tug engaged to tow it; claims for indemnity were also made against a company which had performed certain services for the tug; as well the jurisdiction of the Federal Court of Canada to deal with the third party claim for indemnity was in issue.

The respondents B.C. Marine Shipbuilders Ltd. (B.C. Marine) and Straits Towing Ltd. (Straits) commenced these proceedings in the Federal Court against F.M. Yorke & Son Limited (Yorke) claiming damages for breach of a contract of towage and for negligence resulting in the loss of their barge, the Westport Straits. The breach alleged was that Yorke had failed to furnish a seaworthy tug. By the order of Mr. Justice Sheppard, dated January 7, 1970, Yorke issued a third party notice directed to Wire Rope Industries of Canada (1966) Ltd. (Wire Rope) and later filed a statement of claim for indemnity for any damages for which it might become liable to the respondents. Yorke alleged negligence on the part of Wire Rope in the resocketing of a cable used in towing the Westport Straits, a process I will describe later, and breach of an implied warranty of fitness of its work. On January 5, 1973 Collier J. gave leave to B.C. Marine and Straits to add Wire Rope as a defendant, and in their amended statement of claim they claimed negligence in the

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resocketing process and resultant damages against Wire Rope.

Yorke denied negligence and denied breach of any implied term of seaworthiness of the tug and its towing gear. It asserted that it had exercised due diligence in furnishing a seaworthy vessel. In its statement of defence and counterclaim, Yorke said that if any negligence was involved in connection with the towing and loss of the Westport Straits it was attributable to the negligence of one Tobiasen, the mate of the tug, who was an employee of Straits and who had been placed as mate upon the tug by agreement with Yorke. Wire Rope denied negligence in the resocketing and also denied any implied or express warranty as to the quality of its work.

The plaintiff B.C. Marine owned the Westport Straits. By demise charter it chartered the barge to its co-plaintiff Straits. It was to be used to haul logs between Vancouver and a port, or ports, on the westerly coast of Vancouver Island. Straits, in turn, had chartered the tug Lorne Yorke from Yorke. It then engaged Yorke to tow the Westport Straits from Vancouver to a port on Kyuquot Sound on the west coast of Vancouver Island and there to pick up a load of logs and return them to Vancouver. Yorke picked up the barge at Vancouver and commenced to tow it to its destination.

The voyage involved passing through the Straits of Juan de Fuca and proceeding along the west coast of Vancouver Island to the entry to Kyuquot Channel where it was necessary to turn to starboard and pass into the channel and proceed to the destination which was known as Fair Harbour farther up the channel. The weather conditions were bad and on the night of January 31, 1968, while en route to Fair Harbour, the tug had been forced by weather to turn back from the westerly end of the Straits of Juan de Fuca and remain in the shelter of the straits for several hours. By the morning of February 1, the master of the Lorne Yorke elected to proceed with the voyage. He

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continued along the west coast of Vancouver Island towards Kyuquot Sound. At midnight on February 1 he turned over the watch to the mate Tobiasen, and went to bed. At about 0200 hours on February 2 Tobiasen reduced speed to cut down the ‘surging’ effect of the movement of tug and barge on the towline. This had the effect of allowing the towline to sink to the bottom and drag. At about 0245 hours while entering Kyuquot Channel the tug encountered a squall with sleet and snow and strong gusting winds from east-south-east. At this time the towline had been extended to about 2,000 feet. Tobiasen found that the tug was being moved to port, toward the northerly shore of the channel and, as he ordered a change of course to starboard, the towline became snagged on the bottom and the tug would no longer answer to its helm. In these conditions of weather and sea both tug and tow were placed in extreme hazard. The master was called after speed had been reduced to reduce pressure on the towline. The master came to the wheelhouse at once. He ordered the dropping of the towing pins—devices used to guide the towlines straight over the stern of the tug—for the purpose of making it possible to drive the tug hard to starboard, which he did, while at the same time going to full power in an attempt to jerk the towline free. The towline parted and, as a result, the barge Westport Straits was driven ashore and became a total loss.

The towline in use was in three connected sections. The principal section described as the main towline extended from the tug about 1,300 feet where it joined the second section or pennant which was some 350 to 400 feet in length and it, in turn, joined the third section which was of similar length and attached to the barge. The connections between the main towline and the first pennant, and between the two pennants, were effected by the use of sockets at the end of each section of cable, joined by links to the opposite sides of a steel tag plate. The sockets were made of steel. They were provided with an eye through which the link of the tag plate passed and were attached to the end of the towline by a process called socketing. Drawings illustrating the triple towing gear involved in this appeal appear below. Figure ‘A’ illustrates the linkage involved where three barges

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are towed at once. Figure ‘B’ illustrates the method of towing employed by Yorke on the date of the loss of the barge and, as well, gives an idea of the relative positions of tug, tow, and towline at the time the line failed. Figure ‘C’ shows the method of linkage from pennant to pennant, and figure ‘D’ provides a rough sketch showing the broken socket. It was the socketing of the main towline which brought Wire Rope into this action.

When the broken towline, or what remained of it, was taken aboard the Lorne Yorke it was observed that the break in the line had occurred at the main towline socket. The socket itself had broken and allowed the link to the adjoining pennant to escape. The line itself remained intact. Marks about fifty feet from the socket indicated where the towline had apparently been caught on the rocks. It was alleged against Wire Rope that the socket failed because it had been damaged and weakened by the negligence of Wire Rope in resocketing the towline. Wire Rope had performed this service for Yorke on October 13, 1967. Much

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of the evidence at trial was concerned with this issue. The process of socketing must be understood.

The sockets in use by Yorke at the time of the accident were made of manganese steel. This steel is particularly suited for this function, being very strong, ductile, and having great tensile strength. During the manufacturing process of manganese steel sockets the steel is heated to a temperature of some 1,950° F. and then quenched, or cooled very quickly, in cold water. The sudden cooling prevents the precipitation in the steel of undesirable carbides which, if present, would have the effect of making or tending to make the steel brittle, and thus subject to failure and unsuitable for use in this type of socket. After manufacture if it is necessary for any reason to heat the steel beyond 500° F. or 600° F. there is a danger that some embrittlement may result, depending upon the temperature reached and the time it is maintained, particularly if the heating is repeated frequently. To avoid this danger the steel should be reheated to 1,950° F. and quenched suddenly in cold water as above.

The type of socket in use in this case is used upon cable, commonly called wire rope. When put in use the socket is attached to the towline by running the end of the towline into the bottom of the socket so that it is enclosed by a collar or cylinder forming the base of the socket and called a basket. The wires of the cable end are loosened to give what is termed a ‘brushing’ effect and then molten zinc is poured into the base of the socket. When the zinc cools and hardens the end of the cable is securely retained in the socket.

From time to time for various reasons, including wear on the cable which frequently appears in the vicinity of the socket, it is necessary to remove the socket and to cut out any worn part of the line. If the socket is considered to be sound it can be resocketed and returned to use. The evidence indicated that re-use of sockets involving a consequent resocketing was common practice with York and other towing companies on the Pacific coast.

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To remove the socket it is necessary to heat the zinc in the socket to its melting point which was, according to the evidence, between 700° F. and 800° F. The molten zinc is then allowed to escape and the cable may be removed. The remaining zinc may then be cleaned out of the socket and after worn portions of the cable are removed the socket may be replaced as described above. It should, however, be noted that the process of heating to 1,950° F. followed by a rapid quenching in cold water is done in the foundry where the socket is cast and could not be carried out, and was not carried out, in the circumstances of the resocketing in this case, which will be described later.

The trial judge found that the mate of the Lorne Yorke, although an employee of Straits, was at all relevant times under the control and direction of Captain McLean, the master of the Lorne Yorke. He therefore considered that, being in the actual control and employment of Yorke, his negligence, if found to exist, would be attributable to Yorke. In this I agree with him and this point was not argued later. It may be observed here that in view of the position taken in this Court on the question of negligence in seamanship and navigation by B.C. Marine and Straits it ceased to be of significance.

He went on to refer to the scientific evidence called by the parties regarding the treatment of the socket and its effect, and expressed his findings in these words:

Having carefully considered all this evidence, I am of the view, using the usual test of more probable than not, in respect to both the expert and lay evidence, what Chapman and Babey of Wire Rope Industries of Canada (1966) Ltd., did at the material time in re‑socketing, because of the manner in which they did it and the time involved, did not result in the subject socket (Exhibit 3) becoming embrittled to any significant extent.

Whatever embrittlement there was in this subject socket, in my view, was caused by the indefinite number of re-socketing operations which were done to it prior to the occasion when Chapman and Babey did their work.

In addition, at the material time when the subject socket broke, it was not subject to just a straight linear pull. Instead, it was subject to a large number of stresses

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in various directions at the moment when it broke. As a consequence, it is difficult to say precisely how much strength and ductility it had lost.

Regarding the position in this matter of Yorke, he went on to say:

In coming to the conclusion I do, I am of the view, firstly either the Defendant, F.M. Yorke & Son Limited through its servants which includes in law the mate Tobiasen, may have caused the tug through improper seamanship to have got itself in the position it reached near the rocks at the southwesterly end of Kyuquot Channel so that even with proper seamanship, the tug could not have been extricated from its difficulty without breaking the towline; or second, it may be that the situation in which the Defendant, F.M. Yorke & Son Limited through its servants, got the tug into at the material time was a situation which it was not unreasonable under the circumstances of time and sea, to have got the tug into and that following that, the actions taken by Captain McLean were the correct actions and that the towline at the socket should not have broken and it broke only because it was a faulty socket which the Defendant, F.M. Yorke & Son Limited, knew or should have known was likely to occur or by contract impliedly warranted would not happen. (cf McKenzie Barge & Derrick Co. Ltd. v. Rivtow Marine Ltd. (1968), 2 D.L.R. 505.)

In either event, the Defendant, F.M. Yorke & Son Limited is liable to the Plaintiffs for the damages that resulted.

He held Wire Rope not liable in the matter and ordered judgment against Yorke in favour of Straits and B.C. Marine and directed a reference as to damages. The plaintiffs were given costs against Yorke and the actions against Wire Rope were dismissed with costs.

In the Court of Appeal, Pratte, Ryan and Smith JJ.A., Ryan J.A. speaking for the Court, allowed the appeal of Yorke against the judgment in favour of B.C. Marine and dismissed Yorke’s appeal against the judgment in favour of Straits. It also ordered that Yorke should succeed in its third party claim against Wire Rope and allowed the appeal by B.C. Marine and Straits against Wire Rope. The effect of this judgment was to render Yorke liable to the plaintiff Straits for the loss of the barge and give Yorke a right of indemnity

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against Wire Rope. It also gave judgment against Wire Rope for the loss to the plaintiffs B.C. Marine and Straits.

These appeals were taken by leave granted on June 29, 1978. The appellant Wire Rope asks that both of its appeals be allowed with costs and that the judgment at trial be restored. B.C. Marine and Straits seek the dismissal of the appeals of Wire Rope and Yorke against the Federal Court of Appeal’s judgment in their favour. B.C. Marine, as owner of the lost barge, also seeks a reversal of the Court of Appeal’s dismissal of the action against Yorke. Yorke asks that its cross-appeal from the judgment against it in favour of Straits be allowed and that the action be dismissed. Alternatively, if the cross-appeal is not allowed Yorke seeks an order for indemnification against Wire Rope for any damages and costs for which it may be held liable.

The hearing of the appeals commenced in this Court on March 11, 1980. On March 12 during argument the Court raised the question of jurisdiction of the Federal Court Trial Division to entertain Yorke’s action for indemnity against Wire Rope. This point had not been raised before. Counsel were referred to the judgment of this Court in R. v. Thomas Fuller Construction Co. (1958) Limited and Foundation Company of Canada Limited[2]. The hearing was adjourned to give time for counsel to consider the position in the light of the Fuller case and to submit new factums on the question of jurisdiction so that it could be argued in full. On April 23, 1980, counsel having filed new factums, argument resumed. The hearing was completed and judgment reserved. I will deal firstly with jurisdiction.

The question of jurisdiction of the Federal Court has been raised and considered in several recent cases, of which the most significant for our purpose is Tropwood A.G. and the Owners of the

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Vessel Tropwood v. Sivaco Wire & Nail Company and Atlantic Lines & Navigation Company, Inc.[3] At no time in these proceedings has it been contended that the Federal Court did not have jurisdiction to deal with the claims made by the plaintiffs B.C. Marine & Straits against Yorke. It is clear that these claims, arising out of a marine accident concerning rights and liabilities under a barge charter and a contract of towage and the exercise of due diligence in connection therewith, come within the ambit of Canadian maritime law as described in s. 2 of the Federal Court Act. The jurisdictional question arises, however, because of the claims against Wire Rope which allege a breach of contract and negligence in the resocketing of the main towing cable. The issue then is, do such claims fall within the jurisdiction of the Federal Court, or are they governed by provincial law and therefore come within the jurisdiction of the Supreme Court of British Columbia?

In Tropwood it was held, following earlier decisions in this Court in Quebec North Shore Paper Company et al. v. Canadian Pacific Limited, et al.[4] and McNamara Construction (Western) Limited et al. v. The Queen[5], that to give the Federal Court jurisdiction there must be a body of applicable federal law upon which that jurisdiction might operate. Such was not the case in Quebec North Shore, nor in McNamara, and accordingly jurisdiction in respect of the issues arising in those cases rested not in the Federal Court but in the Superior Courts of the provinces. However, in Tropwood, it was held that there exists a body of federal law described as Canadian maritime law in the Federal Court Act over which the Federal Court has jurisdiction, that it was within Parliament’s legislative competence under s. 91.10 of the British North America Act, and that certain of the paragraphs of s. 22(2) of the Federal Court Act gave specific jurisdiction to the Federal Court. Laskin C.J.C., speaking for the Court, said at p. 163:

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I come, therefore, to the Federal Court Act. I have already quoted s. 22(1) and I refer to the words “Canadian maritime law” therein, words which are defined in s. 2 of the Act as follows:

“Canadian maritime law” means the law that was administered by the Exchequer Court of Canada on its Admiralty side by virtue of the Admiralty Act or any other statute, or that would have been so administered if that Court had had, on its Admiralty side, unlimited jurisdiction in relation to maritime and admiralty matters, as that law has been altered by this or any other Act of the Parliament of Canada;

This definition is supplemented by s. 42 of the Federal Court Act, reading as follows:

Canadian maritime law as it was immediately before the first day of June, 1971 continues subject to such changes therein as may be made by this or any other Act.

This definition of Canadian maritime law in s. 2 refers to the law that was administered by the Exchequer Court “by virtue of the Admiralty Act or any other statute”. The. reference to the Admiralty Act is undoubtedly to the Act of 1934, but the Admiralty Act of 1891, although it was repealed, may certainly be considered as “any other statute” by virtue of which law was administered by the Exchequer Court on its admiralty side. If therefore there was a deficient incorporation of admiralty law by the Act of 1934, the same cannot be said of the Act of 1891.

He went on to pose two further questions in these terms:

Two questions, therefore, remain. The first is whether a claim of the kind made here was within the scope of admiralty law as it was incorporated into the law of Canada in 1891. If so, the second question is whether such a claim fell within the scope of federal power in relation to navigation and shipping.

He held that the claim made in Tropwood, “damage to incoming cargo”, had been brought into the admiralty jurisdiction of the Exchequer Court of Canada by The Admiralty Act, 1891, 1891 (Can.), c. 29, and that as a result such a claim, pursuant to s. 2 of the Federal Court Act, would be subject to Canadian maritime law under the jurisdiction of the Federal Court of Canada pursuant to s. 22(1) and certain paragraphs of s. 22(2) of the said Act. He held as well that the claim

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would also fall under federal legislative competence under s. 91.10 of the British North America Act.

Turning to the case at bar, the claim against Wire Rope by Yorke alleges negligence in the resocketing of the main towing cable pursuant to a contract made regarding such work, and claims an indemnity for loss caused by a breach of that contract. The claim by B.C. Marine and Straits involves negligence in the resocketing operation which resulted in their loss. It will be observed that the root of both claims lies in the work done by Wire Rope in resocketing the cable and that the cable was part of the equipment of the tug Lorne Yorke, a seagoing vessel which was involved in the marine accident that gave rise to this action. That such a claim formed part of admiralty law which was incorporated into Canadian law by the Canadian Admiralty Act of 1891 seems clear. That Act constituted the Exchequer Court of Canada a Colonial Court of Admiralty, conferring on it all the jurisdiction given in that Act pursuant to the British Colonial Courts of Admiralty Act, 1890, 1890 (U.K.), c. 27. The jurisdiction of the British High Court of Admiralty was therefore vested in the Exchequer Court of Canada. That jurisdiction was formed, in part, by another English Act, An Act to improve the Practice and extend the Jurisdiction of the High Court of Admiralty of England, 1840 (U.K.), c. 65. Section 6 of that last-named Act provided:

VI. And be it enacted, That the High Court of Admiralty shall have Jurisdiction to decide all Claims and Demands whatsoever in the Nature of Salvage for Services rendered to or Damage received by any Ship or Sea-going Vessel, or in the Nature of Towage, or for Necessaries supplied to any Foreign Ship or Sea-going Vessel, and to enforce the Payment thereof, whether such Ship or Vessel may have been within the Body of a County, or upon the High Seas, at the Time when the Services were rendered or Damage received, or Necessaries furnished, in respect of which such Claim is made.

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It is my opinion that this section is sufficiently broad to comprehend the claims made against Wire Rope in the case at bar.

The Canadian Admiralty Act of 1891 provided in sections 3 and 4:

3. In pursuance of the powers given by “The Colonial Courts of Admiralty Act, 1890”, aforesaid, or otherwise in any manner vested in the Parliament of Canada, it is enacted and declared that the Exchequer Court of Canada is and shall be, within Canada, a Colonial Court of Admiralty, and as a Court of Admiralty shall, within Canada, have and exercise all the jurisdiction, powers and authority conferred by the said Act and by this Act.

4. Such jurisdiction, powers and authority shall be exercisable and exercised by the Exchequer Court throughout Canada, and the waters thereof, whether tidal or non-tidal, or naturally navigable or artificially made so, and all persons shall, as well in such parts of Canada as have heretofore been beyond the reach of the process of any Vice‑Admiralty court, as elsewhere therein, have all rights and remedies in all matters, (including cases of contract and tort and proceedings in rem and in personam), arising out of or connected with navigation, shipping, trade or commerce, which may be had or enforced in any Colonial Court of Admiralty under “The Colonial Courts of Admiralty Act, 1890.”

This jurisdiction was carried forward by The Admiralty Act, 1934, 1934 (Can.), c. 31, and passed into the purview of the Federal Court by the Federal Court Act in its definition of maritime law in s. 2 and by the terms of s. 42 of that Act.

42. Canadian maritime law as it was immediately before the 1st day of June 1971 continues subject to such changes therein as may be made by this or any other Act.

Section 22(1) gives a general statement of jurisdiction, and s. 22(2)(m) and (n) reproduced hereunder are apt to cover the claims in question here and in part are a restatement of the jurisdiction of the British Admiralty Courts contained in s. 6 of the 1840 Statute cited above:

(m) any claim in respect of goods, materials or services wherever supplied to a ship for her operation or maintenance including, without restricting the gener-

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ality of the foregoing, claims in respect of stevedoring and lighterage;

(n) any claim arising out of a contract relating to the construction, repair or equipping of a ship;

I am therefore of the view that the claims made against Wire Rope come within Canadian maritime law as defined in the Federal Court Act. There can be no doubt in my mind that the substantive law relating to these claims falls within federal legislative competence under s. 91.10 of the British North America Act, being in relation to navigation and shipping. There is therefore law of Canada relating to the issues arising in this case upon which the jurisdiction of the Federal Court may operate. In my opinion, it is of no significance that the claim made by Yorke is a claim for indemnity. Claims for indemnity and third party actions, generally, are not mere incidents to the principal action. They are independent actions which stand upon their own feet. On this point I refer to the Fuller case, supra, where Pigeon J. referred to Bank of Montreal v. Royal Bank of Canada[6], at pp. 315-6, where Duff C.J.C. said:

… The Supreme Court of Ontario has jurisdiction, by virtue of the statutes and rules by which it is governed, to entertain and dispose of claims in what are known as third party proceedings. Claims for indemnity, for example, from a third party, by a defendant in respect of the claim in the principal action against him, can be preferred and dealt with in the principal action. But there can be no doubt that the proceeding against the third party is a substantive proceeding and not a mere incident of the principal action.

The Fuller case, in my view, is distinguishable. In that case Foundation Company of Canada, Ltd., a building contractor, brought action against the Crown for a breach of contract relating to damage caused by blasting operations which had been performed by another contractor, Thomas Fuller Construction Co. (1958) Limited. There was no doubt that the Crown had been properly impleaded in the Federal Court which had full jurisdiction to hear the plaintiff’s claim against the

[Page 380]

Crown. The Crown then issued a third party notice claiming indemnity against the Fuller company. In so doing, it relied specifically upon the law of Ontario to support a claim based on negligence. This Court held, as did the Federal Court of Appeal and the Trial Division, that there was no law of Canada to support the jurisdiction of the Court in respect of that particular third party claim. In this respect, the case differs from the case at bar, lacking the essential element of a law of Canada to feed the jurisdiction of the Federal Court. I am satisfied that the Federal Court had jurisdiction to entertain not only the claims made by B.C. Marine and Straits against Yorke, but also the third party claims made by Yorke against Wire Rope and the direct claims made by B.C. Marine and Straits.

I now turn to the question of the liability of Wire Rope in this matter. It will be seen at once that the only connection Wire Rope had with the matters raised in these proceedings resulted from the resocketing which was done for Yorke on October 13, 1967. Whether the claims against Wire Rope sound in contract or tort, and whether they are for direct relief or indemnity, the basis for any liability upon Wire Rope must remain the same. For success against Wire Rope it must be shown that its work on the socket caused or contributed to its failure, leading to the loss of the barge. For this reason the socketing operation must be examined.

On October 13, 1967 two workmen employed by Wire Rope came to the premises of Yorke to do some resocketing at the request of Yorke. Mr. J. C. Yahemech, marine superintendent for Yorke, gave them three or four socketed towlines, the precise number is not clear, and instructed them to remove the sockets and resocket the lines using the same sockets which were then on the lines. One of the lines involved was the line which failed in this accident. Mr. Yahemech left them to their task. He returned some hours later when the job was nearly completed. The whole operation took six hours. The cost to Yorke was in the neighbourhood

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of ninety dollars. When it was completed the cables, including the one used to tow the Westport Straits on the occasion of its loss, were left in the possession of Yorke and Wire Rope had no further part in the matter.

It was alleged that Wire Rope, for a period of something in excess of three years, had done all the resocketing for Yorke. This was not denied and both the trial judge and the Court of Appeal accepted this fact and spoke of an indefinite number of resocketings. It may be observed at this point that the only negligent resocketing alleged against Wire Rope was that of October 13, 1967 and, whatever the evidence of previous resocketings may have been in general terms, there was no evidence of any indefinite number of resocketings of this particular socket. The significance of this fact will be dealt with later.

A review of the evidence of certain of the expert metallurgists who were called by the various parties must now be made. Mr. Ian Heslop, a consulting engineer called by B.C. Marine and Straits, who has specialized in metallurgical engineering, served as a senior metallurgical engineer in industry, and has been called as an expert witness on metallurgical matters in many courts, gave evidence of having examined the socket. He found it to have numerous casting defects (shrinkage cavities and blow-holes); a brittle microstructure, whereas properly treated material would be tough and ductile; and considerable wear. He gave his opinion that the brittleness was the most significant cause of the failure, making the socket likely to fail under “shock, impact or bending loads of relatively small magnitude”. He felt that the socket had been heated above 650° F. and that this had rendered the metal weak and brittle and that this was the result of resocketing. He said that this particular metal should stretch before failing and it had not done so in this accident because of its brittleness. In his view, properly treated material would have a higher breaking point and cumulative damage would result from continued reheatings without proper reheat and quenching treatment.

Another expert, called by Wire Rope, James Pearce McCulloch, a professional engineer with

[Page 382]

high qualifications in metallurgical engineering and with broad experience in that field, gave evidence of various tests which he had made and experiments he had performed on manganese steel in an effort to determine the cause of the failure of the socket in question.

In one experiment Mr. McCulloch fractured a manganese steel socket which had been resocketed numerous times and found a smoother fracture, with only minor porosity, than that found in the failed socket. He then heated the test socket to 900° F. and maintained it at that temperature for one and one-half hours. He had already performed tests from which he concluded that a resocketing operation would take about sixteen minutes—other evidence put the time at twenty to twenty-five minutes. The time and temperature exposure of the socket in this test was therefore substantially greater than in a resocketing. He found again a smoother fracture than that found in the failed socket and concluded that even severe heating would not produce the rough, porous, surface found in the failed socket which, he considered, had been the cause of the failure.

In yet a further test, he heated a manganese steel socket to 1,950° F. for one-half hour with water quenching, leading to the production of a sample of manganese steel of as high a quality as commercially possible. He heated one sample of this steel to 800° F. for an hour, another to 900° F. for one and one-half hours, and another to 1,000° F. for one and one-half hours. He then took micro-photographs of each. He found the more severe the heating the more carbide precipitation appeared, but it was of a different type than that found in the failed socket. Finally, he took another sample of steel and heated it to 1,550° F. for two hours. This temperature was too low for proper heat treating in the production of manganese steel. This steel, on cooling, produced a micro-structure similar to that in the failed socket. From this and other tests, Mr. McCulloch concluded that the embrittlement found in the failed socket was the result not of resocketing but of improper heat treatment at the time of manufacture. Other expert witnesses were called, among them one T.

[Page 383]

H. Williams who generally reached conclusions similar to that of McCulloch. The most helpful evidence, in my view, was that of Heslop and McCulloch.

Upon this and other evidence the trial judge seems to have concluded that the socket had become embrittled and that the embrittlement caused it to fail. He concluded as well that the socketing operation of October 13, 1967 had not caused the defect. His words on this point have been reproduced above.

In the Court of Appeal Ryan J., speaking for the Court and holding that Wire Rope was liable, said:

I am satisfied that the loss of the barge was caused by the breaking of the defective socket, and that the break was caused by the brittleness of the socket. I also accept the trial judge’s finding that the brittleness, to the extent there was brittleness, was caused by the various re-socketings to which the socket had been subjected. He also found that there had been an indefinite number of resocketings.

and later:

I am of opinion that Wire Rope was in breach of its contract with F.M. Yorke. The trial judge found, and I, of course, accept his finding, that Wire Rope, through its servants, did not, by the re-socketing on October 13, 1967, cause the socket to become embrittled to any significant extent.

As is evident from a review of the expert evidence very briefly summarized above, there was evidence upon which the trial judge could find, as he did, that the resocketing on October 13, 1967 did not significantly embrittle the socket and cause its failure. The Court of Appeal accepted this finding and I am of the opinion that it should remain undisturbed. Both the trial judge and the Court of Appeal, however, seem to have been of the opinion that the socket failed because it had been rendered defective as a result of an indefinite number of past resocketings. Leaving aside the fact that the only occasion of resocketing pleaded against Wire Rope was that of October 13, 1967, I am of the opinion that any finding of fact that the defect in the socket was the result of an indefinite number of past resocketings cannot be sustained

[Page 384]

for the reason that there was no evidence adduced of any such “indefinite number of past resocketings” relating to this socket. A trial judge’s finding based on evidence should not be rejected by an appellate court unless he has applied some incorrect principle, or made a palpable error. A finding made without evidence, however, cannot be sustained. Yahemech, who gave the instructions for the resocketing, produced such records as he had and said a new socket had been put on the line on September 20, 1966. He said that ‘new’ could mean new from the factory or a used socket from the company’s stock. He did not know which. If the socket had been new from the factory on September 20, 1966, then it had been socketed on that occasion and resocketed on October 13, 1967. There was no evidence of any intervening resocketing and the records produced by Mr. Yahemech, while sparse, indicated that no more had occurred. If it were new only in the sense that it came from the stock of used sockets belonging to the company, then it would have been socketed on September 20, 1966 and resocketed on October 13, 1967. Doubtless—if it had been used before—it would have been socketed at least on one previous occasion. Yorke bore the burden of proof on this issue. Put at its highest, and accepting the evidence of Yahemech, the socket was socketed once and resocketed once. It may have been socketed once and resocketed twice; and it may, as well, have been resocketed more often. The only affirmative evidence, however, discloses no more than one socketing and one resocketing. All other possible operations remain in the realm of pure speculation and provide no evidence to support such a significant finding. It should also be observed that the expert evidence indicated that damage of the sort alleged here would be cumulative as a result of repeated heating and cooling and would require more of such operations than are revealed in the evidence. The totality of the evidence on this point came from Yahemech and extracts from his evidence at trial appear below:

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THE COURT: Let’s confine it to Exhibit 13 because that is what is relevant. Can you tell from that where the sockets came from?

A. No, I can’t tell.

MR. MERRITT: Q. You can’t say, however, that you didn’t supply the sockets on every occasion?

A. No, I can’t.

THE COURT: Just on this point, does that indicate how many times this particular socket, Exhibit 3, had been resocketed?

A. No, your honour.

Q. Well, it says resocketing on two or three occasions but maybe I am not reading it correctly. It says resocketed October the 19th, ‘65, resocketed 1st June of 1966. Resocketed September 26th, ‘67. Inspection tags, is that it—September the 1st, ‘67. Resocketed October the 13th, ‘67. What do all those notations mean in that?

A. They would be times that that particular socket would have been taken off and reinstalled. There was no way of knowing whether that socket after it had been cut off that portion of the line would have been put directly on that portion of the line. If they cut three sockets out and cleaned them out and then went to put them back they wouldn’t necessarily go back on—I have no way of knowing that they went back on—

THE COURT: This was referring to a socket, a particular socket on Exhibit 13, is it not?

A. It refers that that is the location of the socket but whether the socketing crew cut the socket off of say the one next to the towline and then reinstalled it on the end of the pennant, I would have no way of knowing. They were done as a group.

THE COURT: What good is a record if it isn’t referring to a particular socket. Isn’t that the purpose of that?

A. The record was basically referring to the resocketing, that it had been resocketed on the line in that location.

Q. But there is no record of whether, Exhibit 3, let’s talk about it, was resocketed three or four—four times during the period October the 19th to the 13th of October, 1967?

A. No, the sockets as such were not—

Q. Is there any way you can tell on any of your records whether Exhibit 3 was resocketed before?

[Page 386]

A. No, there is no way I can tell for certain.

Q. Do you know how many times it had been resocketed?

A. No, I do not.

Q. Do you know how old it is?

A. No, I do not.

Q. Does it look old to you?

A. It looks the way all sockets look when they are placed in use for a short time.

Q. From your experience would you say it had been resocketed a number of times prior to the 13th of October 1967?

A. I could only guess, I would assume it had.

Q. Well, from your experience, you are not an amateur like the rest of us.

A. I couldn’t say, my lord, how many times it had been resocketed.

Q. But it was done more than once?

A. I would say yes, more than once.

Q. You have no record to tell you how many times?

A. No.

MR. MERRITT: My lord, may I just follow up on that a bit.

Q. So that Exhibit 13 indicates when an operation of resocketing or inspection was done but it gives no indication at all as to the history of any particular socket, right?

A. Yes.

Q. The answer is it gives no such indication?

A. Yes.

Q. Now, in fact in answer to his lordship you said you thought that it had been resocketed before but I think you don’t hold yourself out as an expert in that field, do you?

A. Resocketing, no.

Q. Or in identifying the results of resocketing?

A. No.

Q. It may only have been resocketed once before for all you know.

A. Yes.

and later:

THE COURT: I thought you said before you didn’t know whether that had been done by you, been

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done by Wire Rope before or at all, resocketed before by Wire Rope or at all. I think Mr. Merritt finally asked you a question, you weren’t sure whether it had been done once or more than once or at all.

A. I thought I had said that it looked as though it had been done more than once. I couldn’t say for certain.

THE COURT: Or by whom? What is the correct answer anyway? Do you know whether Exhibit 3 first of all had been resocketed before the 13th of October 1967?

A. I can’t say for a certainty.

Q. And it follows that you don’t know whether Wire Rope socketed it, that is the end of the answer.

MR. FORBES: Well, in fact though didn’t Wire Rope, that is Wire Rope Industries of Canada (1966) Ltd. do all your resocketing of the towlines while you were there?

A. Yes.

THE COURT: Well, the answer he had given just a minute ago was that Wire Rope had resocketed these same sockets before. Now he says “I don’t know whether this Exhibit 3 had been resocketed before, at all or not.” Now, two answers can’t hang together, can they?

MR. FORBES: He is not my witness, my lord.

THE COURT: NO, I know. I just want to know what the correct answer is, or do you know? The correct answer is you don’t know whether it has been resocketed before or not?

A. There is no identifying marks on it, my lord, so I can’t say for certainty.

THE COURT: The only thing you know is that at the time Wire Rope did your resocketing work in the main, is that a fair statement?

A. Yes. Perhaps I could clarify to the court some of the procedure involved. The reason I am uncertain is that we would take a socket to Wire Rope Industries and say, when we order a new line, would you put this socket on the towline. I would not be present when the towline was resocketed. I would assume that they would have taken the same socket. I would have no way of knowing whether they had used the socket we had actually given them or not.

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Q. Well, let’s just confine it to Exhibit 3. The answer is you don’t know whether that has been resocket-ed before or not?

A. No.

Accepting, as I have done, that the resocketing operation of October 13, 1967 did not cause the failure of the socket and that no indefinite number of past resocketings has been shown, the question arises: What then did cause the failure? While it is not necessary to consider this question in order to dispose of the issue of Wire Rope’s liability, an answer is required in considering the position of Yorke vis-à-vis B.C. Marine and Straits in order to determine whether or not Yorke exercised due diligence in furnishing a seaworthy tug in accordance with its contract of towage.

The conclusion that the socket was defective is, in my opinion, inescapable. The mere failure in use would not necessarily establish that fact, but it must be observed here that a sound manganese steel socket is the strongest part of a towline of this nature and therefore should not be the first part to fail. The line itself, when subjected to excessive strain, is expected to fail before the socket. It may well be that in this case unusual and heavy strains were imposed on the socket, but it failed before the line, which remained intact. Such failure is strong evidence of a defect, particularly when the evidence also indicated that it was not the socket itself which was snagged on the bottom, but a part of the line in the vicinity of the socket.

A review of the evidence of Mr. McCulloch indicates that the socket was defective because of improper heating and cooling in its original manufacture. This evidence received some support in the evidence of Mr. Heslop, who found and described casting defects in the socket which would also be attributable to its original manufacture. Mr. Heslop mentioned that on examination the socket showed signs of substantial wear, but he did not consider that such wear was a significant factor in its failure. I am of the opinion that this socket failed in use because it was defective from the time of its manufacture due to improper treatment in

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the manufacturing process. In this, I am accepting the evidence of Mr. McCulloch supported to some extent by Mr. Heslop. In my view, the fair conclusion on the evidence is that the most probable cause of porosity and embrittlement which caused the failure was improper heat treating in manufacture. The appeals of Wire Rope, therefore, must be allowed.

It now falls to consider the liability of Yorke in the main action brought by B.C. Marine and Straits. Yorke had entered into a contract of towage with Straits. This contract was evidenced in writing in the form of a letter from Yorke to Straits, which provided:

January 24th, 1968.

Mr. Nick Malysh,
Straits Towing Limited,
2215 Commissioner Street,
Vancouver 6, B.C.

Dear Nick:

Confirming our recent telephone conversation we are pleased to charter you our “Lone Yorke” for barge towing under the following conditions:

1. The rate to be $684.00 per day.

2. Your firm to supply, employ, and pay for the Mate on the vessel.

3. That Yorke be held harmless by Straits in connection with any claim or damage arising out of any advice or instructions received from your Mate.

4. The Standard Towing Conditions of the B.C. Tugboat Owners’ Association to apply.

5. The Home Trade Class III certificate shall govern her area of charter.

6. Charges by crew personnel because of performing Duties other than an Officer or Unlicensed Personnel are for the account of Straits.

7. Navigation overtime is for the account of Yorke unless such amount is excessive and inevitable on the type of towing that is being performed.

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                                                         Yours very truly,

                                                         F.M.YORKE & SON LIMITED
                                                         “Walter Nezil”

                                                          Walter Nezil
                                                          Chief Despatcher

The standard towing conditions of the B.C. Tugboat Owners’ Association made applicable to this contract by paragraph 4 of the contractual letter were contained in Exhibit 23, a rate book of the Association. For the purposes of this case the significant term is expressed in these words:

It is a term of all towing contracts, written or verbal, that (providing the tugboat owner uses due diligence to make and keep the tugboat seaworthy) the towboat owner, its servants or agents are not to be liable for loss or damage to the tow or its contents, howsoever caused.

Yorke will be liable then to B.C. Marine or Straits only if the Lorne Yorke, because of a failure by Yorke to exercise due diligence, was not seaworthy when it set out upon the voyage which led to the accident and if the loss was caused by the lack of seaworthiness.

This proposition was accepted by B.C. Marine and Straits as the following extract from their factum in this Court shows. Paragraph 1 on page 18 of the factum provides:

1. The Federal Court of Appeal and the learned Trial Judge did not err in finding that the Appellant F.M. Yorke & Son Limited was liable to the Respondent Straits Towing Ltd. for breach of its contract with the Respondent Straits, by failing to exercise due diligence to make and keep the tug “LORNE YORKE” seaworthy.

and on page 19, in paragraph 3, the following appears:

3. The liability of F.M. Yorke & Son Limited to Straits Towing Ltd. for breach of its contractual obligations with respect to the seaworthiness of the tug “LORNE YORKE” and its towing gear is for damages in the amount of the value of the lost barge “WESTPORT STRAITS”, and any supposed ambiguity in the judgments below on this point should be resolved.

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It should also be noted that before this Court counsel for B.C. Marine and Straits disclaimed any assertion of negligence in seamanship and navigation and placed its whole case against Yorke on an alleged failure to use due diligence in providing a seaworthy tug.

The failure alleged against Yorke is that it suffered Wire Rope to mistreat the manganese steel socket in the resocketing procedure on October 13, 1967. This, it is said, weakened the socket and rendered the tug unseaworthy and finally caused the loss. The burden of proving due diligence rested upon Yorke. This burden could not be discharged by merely showing that it contracted out certain necessary work to an independent contractor, however reliable and skilled it may have been. Yorke, it was argued, instructed or permitted Wire Rope, on October 13, 1967 when the resocketing was done, to put back upon the towline a used socket. In doing so, it knew or ought to have known that the socket had been used and was worn, that it had been resocketed in the past, and that because of alleged repeated heating the socket had become, or might well have become, damaged. The exercise of due diligence would have required more in this matter, including the use of a new socket which, according to the evidence, would have cost sixteen dollars.

As I have already indicated, the case against Wire Rope has failed, Yorke not having shown that Wire Rope rendered the socket defective in the resocketing operation. This fact, however, is not decisive in favour of Yorke in its defence against the claims of B.C. Marine and Straits. Against Wire Rope, Yorke bore the burden of proving negligence. This it failed to do. As against B.C. Marine and Straits, however, it must show due diligence in making the tugboat seaworthy and the fact that Wire Rope has been exonerated does not by itself relieve Yorke, for the evidence shows that whatever may have been the cause the socket was defective and, in the circumstances of this case, its use rendered the Lorne Yorke unseaworthy.

[Page 392]

The Carriage of Goods by Water Act, R.S.C. 1970, c. C-15, and the Hague Rules do not apply to this case. However, the principles enunciated in the many cases decided under the Act and the Rules dealing with the obligation of a shipowner to exercise due diligence to make his vessel seaworthy and the consequences of a failure to do so are clearly applicable to the case at bar because of the contractual provision referred to above. The similarity in the obligations assumed by Yorke and those set out in the Carriage of Goods by Water Act and the Hague Rules may be shown by a reference to Article III of the Schedule to the Act, which is virtually identical to the provisions of the Hague Rules:

Article III

Responsibilities and Liabilities

1. The carrier shall be bound, before and at the beginning of the voyage, to exercise due diligence to,

(a) make the ship seaworthy;

Generally, the obligation of a tugboat owner upon entering into a contract of towage is expressed in Halsbury’s Laws of England, 3rd ed., vol. 35, at p. 589, para. 869:

In an ordinary contract of towage the owner of the tug contracts that the tug shall be efficient for the purpose for which she is employed, and that her crew, tackle and equipment shall be equal to the work to be accomplished, in the weather and under the circumstances reasonably to be expected. There is a warranty implied in such a contract that at the outset the crew, tackle and equipment are equal to the work to be accomplished in circumstances reasonably to be expected, and there is an implied obligation that thereafter competence skill and best endeavours shall be used in doing the work.

In the case at bar, however, the inclusion in the towage contract of the provisions excerpted above replaced any implied warranty in this respect and protects Yorke from failures in this regard and from liability for damage, however caused, where

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it can show that it has exercised due diligence to make the tugboat seaworthy.

The concepts of due diligence and seaworthiness have been discussed in many cases. The leading case on the subject in this Court is Charles Good-fellow Lumber Sales Limited v. Borromée Verreault, Captain Fernand Hovington and Verreault Navigation Inc.[7] While this was a case in which the Carriage of Goods by Water Act applied, the reasoning employed by Ritchie J., who wrote the judgment of the Court, is applicable to the construction of the contractual provision in issue here. At pp. 535-6, he said:

In this regard the first question to be determined is whether or not the evidence discloses that the Claudette V was unseaworthy.

The test of seaworthiness most frequently adopted is to be found in the judgment of Lord Herschell in Gilroy Sons & Co. v. Price & Co., where he said:

That the ship should be in a condition to encounter whatever perils of the sea a ship of that kind, and laden in that way, may be fairly expected to encounter in crossing the Atlantic, or in performing whatever is the voyage to be performed.

He found the ship in that case was unseaworthy and then went on to consider, at pp. 540-1, the question of due diligence. He said:

Where the ship is found to have been unseaworthy the ship owner is seized with the burden of proving that he exercised due diligence to make her so, if he is to escape liability. When the Maxine Footwear case, supra, was heard in this Court, a dissenting judgment was delivered by Mr. Justice Cartwright (as he then was). The dissenting reasons for judgment were affirmed in the Privy Council and in the course of them Mr. Justice Cartwright adopted the following definition of the due diligence required by art. III, Rule 1:

‘Due diligence’ seems to be equivalent to reasonable diligence, having regard to the circumstances known, or fairly to be expected, and to the nature of the voyage, and the cargo to be carried. It will suffice to satisfy the condition if such diligence has been exercised down to the sailing from the loading port. But

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the fitness of the ship at that time must be considered with reference to the cargo, and to the intended course of the voyage, and the burden is upon the shipowner to establish that there has been diligence to make her fit.

It is not enough to satisfy the condition that the shipowner has been personally diligent, as by employing competent men to do the work. The condition requires that diligence to make her fit shall, in fact, have been exercised, by the shipowner himself, or by those whom he employs for the purpose. The shipowner ‘is responsible for any shortcoming of his agents or subordinates in making the steamer seaworthy at commencement of the voyage for the transportation of the particular cargo.’ (Per Brown Dist. J. in The Frey (1899), 92 F. 667).

‘The obligation to make a ship seaworthy is personal to the owners, whether or not they entrust the performance of that obligation to experts, servants or agents.’ (Per Lord Wright in Northumbrian Shipping Company Limited v. E. Timm and Son, Limited, [1939] A.C. 397 at 403, [1939] 2 All E.R. 648). If such experts, servants or agents fail to exercise due diligence to make her seaworthy the owners are liable under Art. III, r. 1 of the Rules.

The burden of proving the exercise of due diligence which is placed upon the carrier under the provisions of art. IV(1) can only be discharged by affirmative proof that due diligence was exercised to make the ship seaworthy.

The Goodfellow case and the authorities cited in it conveniently state the law upon this question and, in addition, several other cases of high authority have declared and illustrated the principles involved. They include Maxine Footwear Company Ltd. et al. v. Canadian Government Merchant Marine Ltd.[8], in which see particularly dissenting reasons of Cartwright J. later affirmed in the Privy Council; Western Canada Steamship Company Limited v. Canadian Commercial Corporation and Others[9], Riverstone Meat Co. Pty. Ltd. v. Lancashire Shipping Co. Ltd., (“Muncaster

[Page 395]

Castle”)[10]; Toronto Elevators Limited v. Colonial Steamship Limited[11]; Robin Hood Flour Mills Limited v. N.M. Paterson & Sons Limited[12].

The rules which may be derived from these and other cases dealing with this point may be summarized in this manner in so far as they relate to the case at bar. Yorke, as the tugboat owner, was bound both at common law and by the terms of the contract to put the tugboat in seaworthy condition at the commencement of the voyage. In the event of damage being caused to the tow or its contents during the voyage by reason of the unseaworthiness of the tug, Yorke could escape liability only by proving that it had exercised due diligence to make the tug seaworthy. In the facts of this case the exercise of due diligence could not be proved by reference to the fact that Yorke had contracted out work, in connection with the towing line which failed, to a reputable and experienced contractor. The burden upon Yorke in the case at bar would extend to showing in the facts of this case that the failure of the socket was caused by a latent defect, that is a defect which would not be discernible upon reasonable examination.

As Ritchie J. said in the first passage from the Goodfellow case quoted above, the first question to be resolved is whether on the occasion in question the Lorne Yorke was unseaworthy. Was she in a condition to encounter whatever perils of the sea a tugboat with a tow such as she had could be fairly expected to encounter in the voyage that she had embarked upon? It would appear from the totality of the evidence that on the disastrous voyage the Lorne Yorke did not encounter in the waters on the outer coast of Vancouver Island any perils or hazards which were beyond normal and reasonable expectation. Bad weather is common, particularly at that time of the year, and the weather on the occasion of the accident, while bad, was not abnormally so and evidence was given of safe passages

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being made without loss in like conditions through the entrance to Kyuquot Channel. The dragging of towlines, intentional or accidental, is not a rare occurrence in these waters and the snagging of towlines on obstructions on the bottom is a hazard which must be expected and encountered in Kyuquot Channel. Despite these facts the socket failed, and as a direct consequence the Westport Straits was lost. There was evidence that in such a situation the socket would be subjected to a variety of stresses and strains but no evidence as to their actual nature, force, or effect. There was no evidence of the maximum strain which the socket could have resisted, or should have been capable of resisting, save for the unquestioned evidence that the normal expectation when a towline is put under excessive strain is that the line itself will fail before the socket. In this case then the failure of the socket while the line remained intact would lead to the conclusion that the socket was the weaker part of the gear, rather than the stronger as it ought to have been. There was evidence that the tugboat master in his efforts to free the line imposed the strain of full power on the line, and evidence that could be said to provide some suggestion of negligence in the manner of entry by the tug into the mouth of the channel. This evidence however, in my view, could not indicate that faulty navigation or seamanship was causative of the loss. It is impossible for us to speculate as to what might have occurred if the socket had not failed and the line had been freed. What did occur was the failure of the socket when it ought to have withstood the strain, as did the other parts of the cable, enabling the cable to be freed and the voyage continued. In my view, the failure of the socket in these circumstances was due to a fault or defect. This accords with the finding, both in the Trial Court and the Court of Appeal, and leads to the conclusion that the towing gear, and hence the tugboat, at the commencement of the voyage were not seaworthy. I part company with the judges at trial and appeal only as to the cause of the defect.

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It follows from the foregoing that Yorke, as owner of the tug, would be liable for the damage suffered by the owners of the Westport Straits unless it is shown, the burden of proof being upon Yorke, that it exercised due diligence to make the Lorne Yorke seaworthy at the commencement of the voyage. The question then is—can it be shown that the exercise of due diligence would not have revealed the defect in the socket which caused the loss?

It was clear from the evidence of the experts that the defect, however caused, was not apparent on ordinary visual examination. To discover the defect the expert witnesses required complicated testing and photographic procedures beyond the capacity of those ordinarily concerned with the use of such equipment. By the standard of even careful visual examination then the defect was latent. While as a general rule it may be said that a latent defect is one not ascertainable on adequate examination, it is not in every case that a defect, which is not apparent, will be considered latent. Cases differ and there may be circumstances from time to time which would dictate more than mere superficial investigation before one would be enabled to set up the plea of latent defect. Such a case was Scottish Metropolitan Assurance Company, Limited v. Canada Steamship Lines, Limited[13], where Anglin C.J.C., speaking for the majority of the Court, dealt with a case where a threaded iron bolt which had been in a bent condition, to the knowledge of the shipowner’s servants and employees for several months, broke and caused damage. He said, at pp. 277-8:

There is a mass of testimony not, it is true, uncontradicted, but in our view of great weight and cogency, that the presence of the bend or curve in the bolt afforded a distinct and obvious warning of its weakened condition, which should not have been neglected. We, therefore, find it impossible to assent to the conclusion that the defendant’s employees “exercised due diligence” to make the Hamilton seaworthy. Either their inspection of the steering gear was of such a casual and perfunctory character that they failed to discover the bend or curve, or, having noticed it, they failed to

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discharge the plain duty of either replacing the defective bolt or of making it fit for use, if that were possible. That the bolt broke is only what must sooner or later have occurred, and what should have been expected. The power of resistance of the metal having been much reduced was eventually overcome, it may be by having some slight additional stress or strain put upon it. To speak of such a defect as “latent” seems to involve a misuse of that term. We do not find it necessary for the present further to define “latent defect”. “Not discernible by adequate inspection” seems not an inapt paraphrase.

In somewhat similar vein are the words of Atkin L.J. in The “Dimitrios N. Rallias”[14] at pp. 366‑7 where excessive rusting had cracked rivets in a ship’s hull thereby admitting water which damaged a cargo:

Under these circumstances it appears to me perfectly impossible to say that the defect was a latent defect. The Judge has so found; and it is necessary to inquire shortly what is the meaning of a latent defect. I suppose normally speaking it means some defect that lies hid as opposed to a defect that lies open. But it is suggested that it is not every defect that cannot be perceived by touch or sight or hearing exercised with the most minute examination or observation that is latent; and I can believe that when the word is used with reference to. defects in a ship’s hull and machinery it may not be capable of the very extreme meaning that they cannot be perceived by the most accurate and refined perception. It was suggested to us that the definition contained in a work of authority, Carver, gathered from American decisions, is a better statement of what is meant by latent defect. That definition is:—

A defect which could not be discovered by a person of competent skill and using ordinary care.

In this case I do not think it necessary to say whether that is the true and precise definition of latent defect which would meet every case. But I am prepared to say this, that a defect which does not comply at any rate with these words could not be a latent defect; and I think it is important in bearing in mind the effect of these words, to remember that the phrase is, “which could not be discovered,” not which would not be discovered or which might not be discovered. If these words were used it would appear that there would be no difference between the test of what was a latent defect

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and the test of whether the persons responsible had been negligent or not; and I am quite clear that negligence is not a test of latency.

In this case it is impossible to say this defect could not have been discovered by persons of ordinary skill. One has only to visualise what is meant by a degree of rust of 5-16 in. existing by the side of the opening between the flange of the frame and the side plate, an interstice into which a man could place his finger, to make it impossible to suggest that this defect was a latent defect. It seems to me to have been a latent defect to anyone looking out for rust.

In the case at bar, at least to a stranger, the defect causing the failure was clearly ‘latent’. It is argued, however, that Yorke was not a stranger in these matters. Yorke was a company which used sockets regularly and according to the evidence knew, or ought to have known, through their marine superintendent, Yahemech, his predecessor, and from literature in their possession, that there was a potential for danger in the resocketing of manganese steel sockets. Further, it was said, that a failure to heed that danger by continuing the re-use of sockets was not consistent with the exercise of due diligence, and the knowledge so possessed by Yorke should have served to warn that the practice of resocketing used sockets ought to have been abandoned. Yahemech admitted that he did not know if the socket was new or used when put on the cable on September 20, 1966. Can it be said that, armed with knowledge of the potential dangers involved in resocketing manganese steel sockets, such apparent indifference, both in selecting a socket and keeping records regarding its use, amounted to the exercise of due diligence? Can it be said that this defect was latent, or is this a case where the knowledge attributable to Yorke of the properties of manganese steel played the role of the ‘bent bolt’ in the Scottish Metropolitan Assurance Company case, or the role of the ‘deposits of rust’ in the case of The “Dimitrios N. Rallias”, indicating a problem and robbing the defect of its latent character?

In my opinion, after considering all the evidence I conclude that the claim by Yorke that the defect was latent is well-founded. There was evidence that manganese steel sockets could be safely

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resocketed and the practice of the re-use of sockets after resocketing had been followed regularly by Yorke and other towing companies with no apparent ill effects. Furthermore, the weight of the evidence, as I have indicated, is that the failure did not occur because of any recent resocketing, but as a result of a defect existing in the socket from its manufacture, and there is no affirmative evidence to indicate that anything Yorke did or authorized in connection with the socket and its resocketing operation caused or contributed to that defect. In my view, bearing in mind the words of Anglin, C.J.C. and Atkin L.J. quoted above and approaching the question with the considerations they expressed in mind, the defect was a latent defect and no amount of diligence on the part of Yorke could have detected it. The evidence demonstrates, in my view, that the failure and the resulting loss of the Westport Straits were not caused by any failure on the part of Yorke to exercise due diligence in furnishing the tug in a seaworthy condition.

In the final result I would order that the appeals of Wire Rope against the judgments in favour of B.C. Marine, Straits, and Yorke be allowed, and that part of the judgment at trial dismissing the actions against Wire Rope be restored with costs throughout; that the cross-appeal by Yorke be allowed; and the action by B.C. Marine and Straits, against Yorke be dismissed with costs throughout; and that the cross-appeal of B.C. Marine and Straits be dismissed with costs.

Appeals by Wire Rope against judgments in favour of B.C. Marine, Straits, and Yorke allowed, and that part of the judgments at trial dismissing the actions against Wire Rope restored, with costs; cross-appeal by Yorke allowed; the action by B.C. Marine and Straits against Yorke dismissed with costs; and the cross-appeal of B.C. Marine and Straits dismissed with costs.

Solicitors for the (third party) appellant: Bull, Housser & Tupper, Vancouver.

Solicitors for the (plaintiffs) respondents: Owen, Bird, Vancouver.

Solicitors for the (defendant) respondent: MacRae, Montgomery, Spring & Cunningham, Vancouver.