Overview of the Marine Liability Act and Limitations of Liability
The MLA came into force in August 2001 and was later amended in January 2010. The MLA outlines various limitations of liability in a single piece of legislation. In doing so, it contains several distinct parts1 and incorporates by reference a number of international conventions.
Part 3 of the MLA stipulates limitations of liability for maritime claims by adopting Articles 1 to 15 and 18 of the Convention on the Limitation of Liability for Maritime Claims, 1976 (the "Convention"), which is annexed at Schedule 1 of the Act. In accordance with the Convention, claims subject to limitation include:
- Personal injury and property damage claims occurring on board or in connection with a ship;
- Claims for loss resulting from delay in the carriage by sea of cargo, passengers or their luggage;
- Any other type of loss claim arising from the infringement of rights (other than breach of contract) occurring in the marine context;
- Claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned;
- Claims in respect of the removal, destruction or the rendering harmless of the cargo of the ship; and
- Claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with the Convention.2
Claims exempt from the limitation of liability include:
- Claims for salvage;
- Claims for oil pollution damage;
- Claims subject to any international convention or national legislation governing or prohibiting limitation of liability for nuclear damage;
- Claims against the shipowner of a nuclear ship for nuclear damage; and
- Claims by employees of the shipowner or salvor whose duties are connected with the ship or the salvage operations if the law governing the employment contract states that the shipowner or salvor is not entitled to limit his liability in respect of such claims.3
Moreover, the limitation may be broken if the loss results from the actions or omissions of a person who (i) acts with intent to cause the loss; or (ii) acts recklessly with the knowledge that such loss will likely occur.4
For loss of life or personal injury to passengers of a ship of less than 300 gross tonnage5, s. 28(1) of the MLA establishes a minimum liability of 2,000,000 units of account (approx. $3,129,588.40)6, which increases by 175,000 units of account (approx. $273,838.99) once the number of passengers exceeds 11. The above limitations do not apply for ship’s crew or master, for passengers carried on board a ship that is not operated for a commercial or public purpose, or to parties involuntarily aboard (e.g. through a vessels obligatory response to shipwrecked/in distress vessels, stowaways, etc.).
The limitation of liability for all claims other than those involving passengers is set out in s. 29. Under this section, the maximum liability is $1,000,000 in respect of claims for loss of life or personal injury and $500,000 in respect of any other claims.
Part 4 of the MLA pertains solely to liability for carriage of passengers by water. It incorporates as schedule II the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 1974, as amended by a 1990 Protocol. Part 4 of the MLA applies the Athens Convention to commercial passenger vessels and to people carried on board any ship operated for a commercial or public purpose, regardless of whether the person is paid to be on the ship (excluding crewmembers, shipwrecked persons, or stowaways).
Part 4 does not apply to adventure tourism activities where the participants (i) are exposed to an aquatic environment, (ii) encounter greater risk than normally encountered in the carriage of passengers, (iii) require safety equipment and procedures beyond that normally used in the carriage of passengers, and (iv) the risk were presented and excepted in writing. Part 4 also permits that further conditions may be prescribed by regulation, which is discussed further below.7
Compulsory Liability Insurance
Transport Canada is in the process of implementing regulations which will compel all marine vessels that carry passengers to obtain liability insurance, including a special type of compulsory insurance for passenger-specific vessels. Transport Canada’s current initiative will require that proof of compulsory insurance must accompany every vessel failing within Part 4. Such vessels will be required to carry proof of liability insurance dedicated for passenger claims and to make such available for inspection upon request.
Interestingly, the intended compulsory regime will require every carrier, whether they be the performing vessel, or the contracting carrier, to have available and be prepared to produce for inspection its proof of passenger liability insurance cover. This initiative was bolstered by the findings of a report prepared by an independent group for Transport Canada. The report— entitled "Recommendations on Regulations on Compulsory Passenger Insurance Pursuant to Marine Liability Act"—considered a scheme of compulsory insurance for owners and operators of commercial passenger vessels. The report found that most ferries and cruise vessels in Canada were already aware of the MLA’s liability requirements and most could already show proof of the appropriate insurance coverage. However, the "adventure tourism" market were—for the most part—completely unaware of the MLA and its liability implications.
Indeed, vessels used for the entertainment of passengers may be where the imposition of this insurance regime is targeted: it is not difficult to understand why cruise ships, ferries, tour boats, white water rafts and rented kayaks and canoes should be subject to insurance requirements. Questions arise, however, in considering the myriad of ways a person can find himself aboard a vessel otherwise employed in a commercial setting. The program will extend to such parties as well and could even include contracting carriers, which may mean that actors engaged in the mere organization of such vessels will also have to provide proof of appropriate insurance.
What is certain is that when the regulations are introduced – which will likely occur this mid-2012— there will be a compulsory liability insurance regime for all vessels regulated by Part 4 of the MLA.
Recent Judicial Interpretation of the MLA Liability Limitations
While Transport Canada works to introduce regulations under the MLA as a foundation of compulsory insurance, the Federal Court of Justice is actively interpreting the limitations of liability available under the Act.8 The following cases look at the manner in which limitations apply to individuals as persons carried on a ship or as operators of a vessel.
Limitation of Liability for Personal Injury
In Buhlman v. Buckley9, the plaintiffs, James Buhlman and Cindy Maisonville, were owners and operators of a sport fishing lodge in Ontario that offered lodging and sports activities, including the use of boats. The defendants are members of the Buckley Family, including Joe and Brad Buckley, who reserved a holiday package at the lodge with the use of a seventeen-foot boat owned by the lodge (Boat A). A few days after the defendants’ arrival at the lodge, the plaintiff took them out on the water for a tour. The plaintiff operated another seventeen-foot boat owned by the lodge (Boat B) with two members of the Buckley family. Joe Buckley operated Boat A with Brad as a passenger. After some fishing, the two boats travelled back to the lodge and on the way, Boat A collided with Boat B injuring both Joe and Brad Buckley.
Originally, the Buckleys brought an action against James Buhlman and Cindy Maisonville in the Ontario Superior Court of Justice, advancing claims in negligence and damages pursuant to the Family Law Act, R.S.O. 1990, Chapter F.3. The Buckleys sought approximately $8.2 million in damages. James Buhlman and Cindy Maisonville then brought a motion for summary judgment at the Federal Court dealing only with the issue of liability pursuant to the MLA.
Interpreting the MLA, Justice Heneghan of the Federal Court first held that Part 4 of the MLA was inapplicable because the injured parties were not aboard the vessel under a contract of carriage for the purpose of being carried from one point to another. She also found that neither Joe nor Brad Buckley could properly be considered passengers under s. 28 of the Act. Thus, the limitation of liability under that section could not apply.
However, s. 29(1) of the Act is broader and applies to "maritime claims that arise on any distinct occasion involving a ship with a gross tonnage of less than 300 tons, other than claims mentioned in section [28]". Judge Heneghan found that s. 29(1) applied and thus limited liability for the personal injuries to $1,000,000.
Breaking the Liability Limitation
While the Court in Buhlman imposed a limitation of liability, the following case acknowledges that the MLA’s limitations are not all encompassing. This case may represent the first instance of a court breaking the limitation of liability under the MLA (or more specifically, the limitation pursuant to schedule 1, article 4 of the 1976 Limitation Convention).
The Societe Telus Communications v. Peracoma Inc.10 case arose when Mr. Rene Vallée, an unsuspecting owner/operator of a fishing vessel, was fishing for snow crab near Baie Comeau. Snow crab fishing in that area involved laying a line of cages on the river bed, which were secured by anchors at both ends.
When it came time to haul up his line, Mr. Vallée found a cable had caught on one of his anchors. He was able to free it from his anchor and toss it back in. The next year, while fishing in the same area, he again hooked the cable. This time, purportedly believing it to be abandoned, he deliberately cut the cable in two with an electric saw. The cable again hooked on his anchor a few days later, and he hauled it aboard with much greater ease, and cut it again.
After the fishing season ended Mr. Vallée noticed "a strange looking ship in the area where he usually fished. Later, he saw a photo of the ship in the local newspaper. The accompanying article stated that the cable had been deliberately cut and a search was on for the culprit." He promptly attended to a lawyer to explain his circumstances and notified his underwriters of the situation, who denied coverage. After making a voluntary statement to the police, he was charged (and later acquitted) with mischief by wilfully damaging property. His vessel was arrested by the plaintiffs11, where it remained.
For the purposes of this discussion, the case looked at three issues: (i) primary liability, (ii) damages (damages claimed for the ensuring repair was approximately $980,000 and the defendant and third party insurer accepted almost $900,000 of such damages); and (iii) whether limitations of liability were available under the MLA.12
As to the first issue of primary liability, Justice Harrington concluded that the cable’s owner was under no obligation to bury the cable to otherwise take steps to ensure it could not come into contact with anchors, for instance. The cable was acknowledged to be a navigational hazard. Nevertheless, there were sufficient notices available to alert fishermen in the area as to the presence of the cable. Given its status as a hazard, the operator was even more duty bound to know of its existence. However, the evidence showed that the vessel had onboard an out-of-date paper marine chart and an unapproved electronic chart, both of which predated the installation of the cable.
As to the second issue, the court found that the loss is the diminution in value of the cable, not the cost of repair.
As to the issue of limitation of liability under the MLA, reciting the language of the MLA the Court stated that "...in order to succeed under Article 4 of the 1976 Convention, the plaintiff must 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."
In this case Mr. Vallée caused "such loss" intentionally—"Mr. Vallée intended the very damage, he just didn't think the cable would be repaired because he thought it had no value." While the test is disjunctive through the use of "or", the Court went on to consider the reckless conduct. The Court examined UK and French case law on the meaning of Article 4 of the 1976 Limitation Convention, as in Schedule 1 to the MLA, and the notion of the necessary ‘intention’. Noting the facts, the Court stated: "If recklessness is in issue, and I think it is not, Mr. Vallée was reckless in the extreme... Recklessness connotes a mental attitude or indifference to the existence of the risk."
The Court found that Mr. Vallée had not made himself of awareness of dangers, as he was duty bound to do. He also acknowledged that he had seen some passing reference to the cable before, but simply dismissed it without resorting to proper marine charts. Accordingly, the Court found that Mr. Vallée was reckless and dismissed the assertion that ‘such loss’ that occurred was somehow distinct from the loss that actually resulted.
The MLA’s limitation of liability for property damage is also being put to the test in a case arising in this province, however there is not yet a decision on the matter. The case of J.D. Irving v. Siemens et al13arose after parts of two turbine rotors tipped off a barge and into the Saint John Harbour. The rotors were large, costly and specifically manufactured by Siemens in Germany for delivery to New Brunswick’s Point LePreau nuclear generating station. The rotors allegedly suffered significant damage in hitting the harbour bottom and from exposure to the saltwater.
As a result of the incident, Siemens commenced an Ontario Superior Court of Justice action14 to recover its losses. The claim names a wide variety of parties involved with moving the rotors and the damages are in the tens of millions. In contrast, J.D. Irving, who was engaged in the movement of the rotors, commenced an action in Federal Court to establish a limitation fund under the MLA and enjoin all other proceedings against it, i.e. the Siemens action in Ontario. The motion was heard before Justice Heneghan on October 19, 2010. While she has yet to issue a decision one is expected before June 25, 2011.
A preliminary issue appears to be the extent to which this was a marine venture. If it was a marine venture consideration will focus on how or whether the MLA applies. Given the apparent extent of the claim the potential for limited liability will be extremely significant as between the and possibly prevent the effective continuation of the Ontario action by Siemens. However, Siemens has made allegations that defendants were reckless. If defendants are found to be reckless, such a conclusion could potentially suffice to circumvent the liability limitation in the MLA, effectively breaking the liability limitation as seen in the Societe Telus decision. Obviously, much turns on the outcome of the decision in Federal Court.
Part 1. is titled "Personal Injuries and Fatalities"; Part 2 is titled "Apportionment of Liability"; Part 3 is titled "Limitation of Liability for Maritime Claims"; Part 4 is titled "Liability for Carriage of Passengers by Water"; Part 5 is titled "Liability for Carriage of Goods by Water"; Part 6 addresses "Liability and Compensation for Pollution", Part 7 addresses the "Ship-Source Oil Pollution Fund"; and Part 8 concern "General Provisions".
2Marine Liability Act, SC 2001, c 6, Schedule 1, Article 2
3Marine Liability Act, SC 2001, c 6, Schedule 1, Article 3
4Marine Liability Act, SC 2001, c 6, Schedule 1, Article 4
5According to s. 29.1 of the Act, a ship’s tonnage is calculated in accordance with the tonnage measurement rules contained in Annex I of the International Convention on Tonnage Measurement of Ships, 1969
6Under the Act, a "unit of account" is defined as "a special drawing right issued by the International Monetary Fund". As of June 3, 2011 1 SDR equals 1.5647942 Canadian dollars, so 2,000,000 SDR = approx. $ 3,129,588.40.
7Marine Liability Act, SC 2001, c 6, s. 24, s. 37.1. Note that the Part 3 definition of ‘passenger’ still includes a participant in an adventure tourism activity, or one who is carried on board a vessel propelled by paddles or oars and operated for a commercial or public purpose. See Marine Liability Act, SC 2001, c 6, s. 24.
8In Canada, the Federal Court of Justice is a statutory court with no inherent jurisdiction – it only has jurisdiction over those matters that have been specifically assigned to it by statute. Section 22(1) of the Federal Courts Act grants concurrent jurisdiction to the Federal Court in all cases in which a claim for relief is made or a remedy is sought under Canadian maritime law
92011 FC 73, Heneghan J. January 20, 2011
102011 FC 494, Harrington J. April 27, 2011 (revised May 6, 2011).
11Pursuant to section 22 of the Federal Courts Act this was "...a claim for damage caused by a ship within the meaning of section 22(2)(d) as Mr. Vallée’s act was in the management, or the mismanagement, of the ship."
12A fourth issue was whether the defendants had lost insurance cover by virtue of s. 53(2) of the Marine Insurance Act, which states: "... an insurer is not liable for any loss attributable to the wilful misconduct of the insured ..."
13Federal Court File Number: T-520-10. The court’s file current docket index states that the reasons for Order and Order will be issued on or before June 24th , 2011.
14Siemens Canada v. JD Irving Ltd et al, Ontario Superior Court of Justice, Court File No.CV-10-400645.
