Marine Insurers may wish to take note of the conditions under which a crab fisherman was found liable, and uninsured, for an act of property damage.
"Réal Vallée is a good man; a decent man; an honest man - a fisherman. However he did a very stupid thing." So begins the judgment of Justice Harrington of the Federal Court of Canada in Société Telus Communications v. Peracomo Inc., the first Canadian decision interpreting article 4 of the Convention on the Limitation of Liability for Maritime Claims 1976 (LLMC). The LLMC, together with its 1996 Protocol, have the force of law in Canada pursuant to the Marine Liability Act.
Vallée was a snow crab fisherman in Québec. When the anchor of his crab cage got hooked onto an underwater cable stretching across the St. Lawrence River between Pointe au Père and Baie Comeau, Vallée, thinking (mistakenly) that the cable had been abandoned, hauled the cable out of the water and cut it with an electric saw, on two occasions, to free his anchor. He and his wholly owned company (Peracomo Inc.) were later sued for nearly one million dollars by Société Telus Communications (the cable's owner) and Hydro-Québec (the cable's user). They alleged that the defendants were liable for damaging the cable and that they had lost the right to limit their liability, because, as provided for by article 4 of the Limitation Convention, the cable's loss had been caused by the defendant Vallée's "personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result".
In defence, Vallée alleged that he should have been notified of the cable's existence, that its installation on the riverbed had been defective and that there was contributory negligence on the part of Telus. The defendants also sought to limit their liability to the principal sum of $500,000 under the Marine Liability Act. The defendants also took third-party proceedings against their insurers, who denied liability on the ground that the loss had been caused by the "wilful misconduct" of the assureds, within the meaning of Canada's Marine Insurance Act.
The judge concluded that the defendants were liable for cutting the cable. The Department of Fisheries and Oceans did fail to notify the association of crabbers to which Vallée belonged, of the cable's location. However, the federal government had published many notices to mariners and given radio warnings of the presence of the cable, and marine charts (which Vallée was obliged to carry aboard his vessel but did not carry) had been amended to show the cable. In addition, the annual edition of the Notice to Mariners warned that such cables might constitute a danger to navigation. Vallée owed a duty of care to the plaintiffs, obliging him to know of the cable's existence. He had failed miserably in that regard, thus becoming liable for the resulting damage. His company was similarly liable, as he was its directing mind or alter ego. The vessel was also liable in rem, under the Federal Courts Act, for damage caused by a ship. Nor had there been any contributory negligence on the part of Telus. The cable had been installed in a correct manner and neither the failure to bury it in the riverbed nor the failure to inform the association of crabbers of its existence had caused the loss. Rather the loss had been caused because Vallée had intentionally cut the cable with his saw.
The defendants did not qualify for the $500,000 limitation of liability in this case, because the loss resulted from Vallée's personal act or omission committed deliberately, in that he intended the very damage that occurred because he thought the cable had no value. In any case, the defendants had acted recklessly and with knowledge that "such loss" (the diminution in value of the cable that actually resulted, not the cost of its repair) would probably result. They had the actual knowledge required by article 4 of the Limitation Convention to break the limitation, which could include the knowledge resulting from "turning a blind eye" to the existence of the risk.
The defendants' underwriters, for their part, were held entitled to deny liability under the Marine Insurance Act, because of the "wilful misconduct" of the defendants, whose behaviour constituted either a deliberate act intended to cause the harm or such blind and uncaring conduct that they could be said to have been heedless of the consequences. Vallée's conduct was in marked departure from the norm, so the assured had lost the benefit of the insurance policy.
Damages of $980,433.54 were awarded, as well pre-judgment interest at 5% (the legal rate), not compounded. The third party action against the underwriters was dismissed, the whole with costs in favour of the plaintiffs. Justice Harrington's judgment is now under appeal to the Federal Court of Appeal. The final decision will no doubt attract attention in Canada and around the world.
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