Telus Communications v Peracomo Inc and Réal Vallée

DMC/SandT/11/15

Canada

Société Telus Communications and Hydro-Québec and Bell Canada v Peracomo Inc, and Réal Vallée and the Owners and all other persons interested in the fishing vessel Realice and the fishing vessel Realice

Federal Court of Canada: Harrington J.: 2011 FC 494: 27 April 2011

Langlois Kronström Desjardins, LLP, Barristers & Solicitors, Québec, Québec, for the Plaintiffs

Dufour Jacques Dufour, LLP, Barristers & Solicitors, Baie-Comeau, Québec, for the Defendants

SHIPPING: SUBMARINE CABLE CUT BY SKIPPER OF FISHING VESSEL: WHETHER DAMAGE CAUSED INTENTIONALLY OR RECKLESSLY AND WITH KNOWLEDGE THAT 'SUCH LOSS' WOULD PROBABLY RESULT: WHETHER DEFENDANTS ENTITLED TO LIMIT LIABILITY UNDER THE 1976 LIMITATION CONVENTION, AS INCORPORATED INTO CANADIAN LAW

Summary

The Court held that, in circumstances where the skipper and owner of a fishing vessel cut a submarine cable that one of his anchors had fouled, erroneously believing it to be abandoned, neither he nor the vessel could limit its liability under the Canadian equivalent of the 1976 Convention on the Limitation of Liability for Maritime Claims for the costs of repair incurred by the plaintiffs in the amount of C$1m approx.

Facts M. Réal Vallée was the owner of a fishing vessel, the Realice, and the sole proprietor of its owning company Peracomo Inc. He fished for snow crab in the waters of the River St. Lawrence, in the area of Baie Comeau. This entailed laying a string of cages on the river bed, secured by small anchors at both ends. On two occasions in the season of 2006, these anchors snagged a fibre-optic cable belonging to the plaintiffs.

Despite Québec government notices of consultation published before the installation of the cable, notices published in local newspapers by Telus, various notices to mariners and notices to shipping from the Department of Fisheries and Oceans, and amendments to other marine publications and to the two applicable marine charts, Mr. Vallée believed the cable was not in use. Accordingly, on each occasion, instead of abandoning his anchor and claiming compensation, he cut it in two with an electric saw.

Telus, its co-owner of the cable, Hydro-Québec, and Bell Canada, which had no ownership interest therein but a right of use, shared the cost of repair in accordance with a pre-existing contract among them. They took action in personam against Peracomo and Mr. Vallée and in rem against the ship.

Although the defendant contested liability on various grounds, the judge found that the cable was a navigational hazard, that it was Mr. Vallée’s duty to know of its existence, and that ‘he failed miserably in that regard.’

The issue of greater interest in the case was whether the defendants were entitled to limit their liability. Given the nature of the loss (no death or personal injury) and the tonnage of the Realice, section 29 of the Canadian Marine Liability Act limited their liability to the principal amount of C$500,000. However, that right to limit would be lost in accordance with article 4 of the Convention on Limitation of Liability for Maritime Claims, 1976, as amended by the 1996 Protocol, Schedule I to the said Act, which provides:

“A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.”

Judgment

The judge found that the loss was caused because Mr. Vallée intentionally and deliberately cut the cable in two with an electric saw. But both Peracomo as owner of the Realice and Mr. Vallée, the master, were eligible to limit liability, since both shipowners and persons for whose act, neglect or default the shipowner is responsible are eligible to limit in accordance with article 1 of the 1976 Limitation Convention. That limitation extends to an action in rem against the ship herself.

The judge noted that it is common knowledge that the 1976 Limitation Convention reflected a trade-off: higher limits, but which are more difficult to break. Furthermore, the burden is now on the claimant, not the shipowner, to establish that the limit should be broken. Further, he noted that, as far as counsel and the Court were aware, this was the first time article 4 of the 1976 Limitation Convention had come up for decision in Canada. It was, therefore, important to put the article in context, keeping in mind that the Limitation Convention is an international convention drawn up in several languages

Article 4 of the 1976 Limitation Convention, the judge said, is both similar to and differs in language from other international conventions covering the liability of carriers, in that it speaks to “such loss.” He was satisfied, however, that the word “loss” in the 1976 Convention certainly includes physical damage.

But unlike in an ordinary negligence action, in order to succeed under Article 4 of the 1976 Convention, the plaintiff had to prove that the defendant’s personal act or omission was committed either

a. with intent to cause such loss; or b. recklessly and with knowledge that such loss would probably result.

The judge continued:

“The personal act or omission of both Mr. Vallée and Peracomo, as Mr. Vallée is its alter-ego, has clearly been established, as has been their intentional act. It also appears to me that “such loss” was caused intentionally. The loss is the diminution in value of the cable, not the cost of repair. Telus was under no obligation to repair the cable, but was under an obligation to mitigate its damages, which it did by effecting repairs, by putting the cable back together. Mr. Vallée intended the very damage, he just didn’t think the cable would be repaired because he thought it had no value. Although probably not relevant, no claim for loss of use has been advanced, should it have been [then it would have been] open to the defendants to allege that although they intentionally cut the cable they did not intend to disrupt telecommunication service.

The judge then went on to consider the issue of reckless conduct. After an examination of certain English authorities, he concluded that the word ‘knowledge’ in Art.4 included so-called ‘blind eye’ knowledge, that is to say, what was known or ought to have been known.

On this basis, the judge found that Mr Vallée had been “reckless in the extreme”. Not only did he not make himself aware of the dangers to navigation off Baie-Comeau, as was his duty, but he turned his eye to a chart of one sort or another, the details of which escape him other than that a line was drawn across the river accompanied by the word “abandonné.” [This is a reference to evidence given by Mr Vallée, that he had seen such a chart in a local museum in Baie Comeau] There is not, and there never was, such a marine chart.”

Recklessness, the judge concluded, connotes a mental attitude or indifference to the existence of the risk. As for the words “such loss”, he held, on the basis of English authority, that they refer to the loss that actually resulted and which is a subject matter of the claim.

On that basis, the judge held that:

“Mr. Vallée’s act was reckless and no matter how fine a point one would put on [it] “such loss” was committed with knowledge that the loss which actually occurred would likely result. In fact the loss was a certainty.”

Accordingly, he held that the defendants were not entitled to limit liability.

The judge also held that the conduct of the defendants amounted to ‘wilful misconduct’ within the meaning of s.53(2)(fn.1) of the Marine Insurance Act of Canada and accordingly disentitled them from recovering the Telus claim from their liability insurers.

Comment

Given the unusual circumstances of the case, where the skipper was effectively the owner of the vessel, the conclusions to which the judge came on the limitation issue were wholly predictable. The case is not dissimilar from the English case of Margolle and another v Delta Maritime Company Limited and others (The St Jacques II) [2003] 1 Lloyd’s Rep 203, in which the court held that the claimant in a collision action against the fishing vessel St Jacques II had a real prospect of breaking its limitation fund where there was evidence that its owner/skipper was in the habit of navigating across shipping lanes in contravention of the Dover Straits Traffic Separation Scheme.

Fn.1 The wording of S.53(2) of the Canada Marine Insurance Act is identical to s.55(2)(a) of the Marine Insurance Act 1906 of the UK