A-245-8(
Nisshin Kisen Kaisha Ltd. (Plaintiff) (Respond-
ent)
V.
Canadian National Railway Company and al]
other persons having claims against the plaintiff
its ship Japan Erica or the fund hereby to bE
created (Defendants) (Appellants)
Court of Appeal, Thurlow C.J., Heald and Uric
JJ.—Vancouver, January 27 and 28; Ottawa,
March 17, 1981.
Maritime law — Appeal from order of Trial Judge staying
action for damages pursuant to s. 648 of the Canada Shipping
Act — Plaintiff-respondent commenced action to limit
liability, and therein admitted liability for the purposes of
action only up to the amount of a fund to be created —
Whether Trial Judge erred in ordering stay of proceedings it
the absence of an unqualified admission of liability — Appear
allowed in part — Canada Shipping Act, R.S.C. 1970, c. S-9,
s. 648(1), as amended by Federal Court Act, R.S.C. 1970 (2na
Supp.), c. 10, s. 65, Schedule II, item 5, s. 7.
Appeal by Canadian National Railway Company (herein-
after CN) from an order of the Trial Division in an action
brought by Nisshin Kisen Kaisha Ltd. (hereinafter Nisshin) for
limitation of its liability for damage caused by the collision of
its ship with a railway bridge. Nisshin admitted liability for the
purposes of its action only up to the amount of a fund to be
created. CN and others brought actions claiming damages. The
order under appeal stayed CN's actions for damages pursuant
to section 648 of the Canada Shipping Act which confers a
discretion on the Court to "stay any proceedings pending in any
court in relation to the same matter". The Trial Judge observed
that the question was not whether there was an admission of
liability, but whether the admission of liability was too restrict
ed, and held that as the admission was binding on Nisshin for
all purposes of the action, the objection that it was incomplete
in the sense that it would not be binding in other proceedings.
failed. The issue is whether the Trial Judge erred in ordering a
stay of proceedings in the absence of an unrestricted admission
of liability by Nisshin.
Held, the appeal should be allowed in part, and paragraph 5
of the order varied so as to permit CN to proceed with one
action against Nisshin to establish Nisshin's liability. The
question is not whether an admission of liability is sufficient for
the specific purposes of a limitation action. Rather, it is wheth
er when an alleged tortfeasor seeks to establish his right to a
statutory limitation of his liability, the injured party should be
prevented or delayed in pursuing his right to establish the legal
responsibility of the tortfeasor for his loss when the tortfeasor
refuses or fails to admit his responsibility and thus reserves to
himself the opportunity to defend the injured party's action, if
he, the tortfeasor, fails in his action to limit his liability. When
responsibility is not admitted by the shipowner the injured
party's recourse is to have it established by judgment in the
damage action, and this is particularly so when the injured
party does not concede but contests the shipowner's right to
limit his liability.
Miller v. Powell 2 Sess. Cases, 4th series (1875) 976,
agreed with. Hill v. Audus (1855) 1 K. & J. 263, agreed
with. Georgian Bay Transportation Co. v. Fisher (1880) 5
O.A.R. 383, agreed with. Normandy (1870) L.R. 3 A. &
E. 152, agreed with. London and South Western Railway
Co. v. James (1872) L.R. 8 Ch. App. 241, distinguished.
APPEAL.
COUNSEL:
E. Chiasson and C. J. O'Connor for appellant
(defendant) Canadian National Railway
Company.
P. D. Lowry and J. Marquardt for respondent
(plaintiff).
W. B. Scarth, Q.C. and R. Winesanker for
Attorney General of Canada.
C. Lace for Attorney General of British
Columbia.
SOLICITORS:
Ladner Downs, Vancouver, for appellant
(defendant) Canadian National Railway
Company.
Campney & Murphy, Vancouver, for
respondent (plaintiff).
Deputy Attorney General of Canada for
Attorney General of Canada.
Constitutional and Administrative Law Sec
tion, Ministry of Attorney General for Attor
ney General of British Columbia.
The following are the reasons for judgment
rendered in English by
THURLOW C.J.: This is an appeal by Canadian
National Railway Company and four additional
appeals by other parties having claims against the
plaintiff-respondent (which under Rule 1203(3)
are treated as cross appeals) from an order of the
Trial Division [[1981] 1 F.C. 293] made on April
10, 1980 which varied in some respects and other
wise confirmed an ex parte order of the Trial
Division made on January 18, 1980 in an action
brought by the plaintiff-respondent on January 10,
1980 for limitation of its liability for damage
occasioned when its ship, Japan Erica, collided
with and heavily damaged a railway bridge
belonging to Canadian National Railway Com
pany (hereinafter the appellant) spanning the
Second Narrows in Vancouver Harbour.
The collision occurred on October 12, 1979. On
the following day the appellant commenced an
action in the Trial Division of this Court against
the ship, her owner Nisshin Kisen Kaisha Ltd., the
master and the pilot. In that action, the respondent
owner has given security in lieu of bail in the
amount of $10,000,000 in respect of the appel
lant's losses which, it is said in an affidavit that is
before the Court, will exceed that amount by an
amount in the millions of dollars. Certain other
parties, whose business operations were disrupted
by the bridge having been rendered unusable, have
also brought actions claiming damages in respect
of which the respondent has posted security for
another $10,000,000. It was said that the total
claims may exceed $40,000,000.
Paragraph 2 of the respondent's statement of
claim is as follows:
On the night of October 12th 1979, "Japan Erica" struck
and severely damaged the railway bridge which spanned the
Second Narrows in Vancouver Harbour. For the purposes of
this action, and this action only, the Plaintiff admits liability to
the Defendants up to but not beyond the aggregate amount of
"The Fund" hereby to be created.
In paragraph 7, it is further stated that:
The damage to the bridge (and any rights thereby infringed),
was caused by an act or omission in the navigation of the ship
and occurred without actual fault or privity on the part of the
Plaintiff.
The order of January 18, 1980, inter alia, set
tled the tonnage of the Japan Erica at 13,709.4
and the statutory amount of limited liability as of
that date at $1,395,627.60, it directed the payment
into Court of that amount with interest, it estab
lished regulations as to making interested persons
parties to the proceedings, as to their rights, as to
the exclusion of claimants who do not come in
within a certain time and as to other procedural
matters, it limited a time for applications to vary
the order and it provided for service of the order.
There is no issue as to any of these provisions of
the order. What is in issue are the provisions of
paragraph 5 which, as amended on April 10, 1980
following an application by the appellant to vary
the order by deleting paragraphs 4 and 5, reads as
follows:
5. Upon such payment into Court being made:
(a) Any proceedings in any court then pending in relation to
this event shall by virtue of section 648 of the Canada
Shipping Act be stayed except for the purpose of taxation
and payment of costs; and
(b) The defendant Canadian National Railway Company
and all other persons wishing to maintain in this Court any
claim against the plaintiff for loss or damages to property or
any infringement of any rights arising out of or resulting
from this event must do so in this present action and,
hereinafter, must refrain from prosecuting, beyond its mere
institution any action in any court against the plaintiff, its
ship Japan Erica and all persons who have liability that is
limited by virtue of sections 647 and 649(1) of the Canada
Shipping Act, in respect of this event ....
The respondent having on January 23, 1980
paid into Court $1,450,764.45 as the fund referred
to in the order, the appellant's action for damages
brought on October 13, 1979, is stayed by these
provisions and the appellant is also effectively
prevented from prosecuting beyond its commence
ment an action for such damages in any other
Court. We were informed that such an action has
been commenced in the Supreme Court of British
Columbia.
The issue in the appeal, as set out in the appel
lant's memorandum, is whether "the trial judge
erred in ordering a stay of proceedings and
restraining order in the absence of an unrestricted
admission of liability by the respondent". The
appellant's case, as I understood it, was that while
what is set out in the respondent's statement of
claim is adequate for the purposes of its limitation
action (since no admission of liability at all is
necessary, at least at the stage the action has
reached) it is wrong and unjust to prevent the
appellant from proceeding with its action in which
it seeks to establish the respondent's liability for
the damages caused by the collision when the
respondent is not prepared to admit that liability
unconditionally. In support of his position counsel
pointed out that the limitation action is being
contested, that it has been set down for trial in
October 1981, that it is not unlikely that there will
be appeals covering a period of several years and
that in the meantime the appellant is being preju
diced by the delay in that in the meantime the
memories of witnesses may be adversely affected
or they may die or become unavailable, that the
Court cannot protect the appellant from the
deterioration of its ability to exercise its legal
rights if they are deferred pending the result of the
limitation action and that the only prejudice that
could be suffered by the respondent, if the appel
lant's actions were permitted to proceed, would be
a matter of costs with which the Court could deal
if it turns out that the respondent is entitled to
limit. Counsel further submitted that there was
enough difference between the appellant's claim
and those of the other claimants to justify permit
ting the appellant to proceed with its action while
continuing the stay of the other damage actions.
The respondent's position is that the Trial Judge
did not err, that the appellant is but one of eight
een claimants, that to deny the respondent relief
from having to defend a variety of actions in
several courts would undermine and frustrate the
purpose for which section 648 of the Canada
Shipping Act was enacted, that it is essential that
there be a procedure whereby prompt effect can be
given to a shipowner's right to limit his liability
without taxing the administration of justice and
putting the many parties suffering loss to the
added cost of resolving a complexity of issues
when, because of the limitation of the shipowner's
liability, the whole exercise would be rendered
academic and serve only to add to the losses
sustained, that the procedure provided by section
648 has been structured to provide for a trial of
any issue as to the right of the shipowner to limit
with a restriction on the other proceedings in the
meantime, that the authorities establish that to
obtain a stay a shipowner must admit liability up
to the amount of the limitation fund and pay that
fund into Court in order to ensure that (i) upon
the Court determining that the shipowner is en
titled to limit it will have jurisdiction to pronounce
judgment and (ii) there will be a fund available for
distribution and that the admission made by the
respondent meets these requirements and with the
fund created justifies the restrictions on related
proceedings which the Trial Judge saw fit in the
exercise of his discretion to order.
The authority of the Court to make an order in
a limitation action staying other proceedings is
found in subsection 648(1) of the Canada Ship
ping Act'. It reads:
648. (1) Where any liability is alleged to have been incurred
by the owner of a ship in respect of any loss of life or personal
injury, any loss of or damage to property or any infringement of
any right in respect of which his liability is limited by section
647 and several claims are made or apprehended in respect of
that liability, the Admiralty Court may, on the application of
that owner, determine the amount of his liability and distribute
that amount rateably among the several claimants; and such
court may stay any proceedings pending in any court in relation
to the same matter, and it may proceed in such manner and
subject to such regulations as to making persons interested
parties to the proceedings, and as to the exclusion of any
claimants who do not come in within a certain time, and as to
' R.S.C. 1970, c. S-9, as amended by the Federal Court Act,
R.S.C. 1970 (2nd Supp.), c. 10, s. 65, Schedule II, item 5, s. 7.
requiring security from the owner, and as to payment of any
costs, as the court thinks just.
It will be observed that the discretion conferred
by this provision to "stay any proceedings pending
in any court in relation to the same matter" is not
fettered by any statutory wording as to how it is to
be exercised. There is no doubt that it must be
exercised judicially, but there is no statutory
requirement that before the power is exercised, the
shipowner should be required to make an uncondi
tional or indeed any admission of liability. On the
other hand, where the shipowner does not make an
unconditional admission of his responsibility for
the damage, that is an obvious consideration to be
taken into account in deciding whether an injured
party should be prevented, either temporarily or at
all, from pursuing his action to establish the ship-
owner's responsibility for the casualty in which his
loss was sustained. The principle is well stated by
the Lord President of the Court of Session in
Miller v. Powell 2.
It is quite clear on the face of the 514th section that its
provisions are intended to apply whether the owners admit or
deny liability.
When they admit liability the Court will proceed to stop all
actions and suits brought or to be brought for the purpose of
constituting liability.
When they deny liability the Court will allow such actions to
go on.
In dealing with this consideration, the learned
Trial Judge, after observing [at page 298] that
"The question arising in the present case is really
not whether there was in fact an admission of
liability but, more specifically, whether the admis
sion was too restricted", went on to hold, as I
understand his reasoning, that as the admission
contained in the statement of claim is binding on
the respondent for all purposes of this action the
objection that it is "incomplete" in the sense that
it would not be binding in other proceedings be
tween the appellant and the respondent, failed.
Having reached that conclusion, the learned Trial
Judge went on to deal with and to overrule several
other objections raised by the appellant and then
gave reasons, to which no exception is taken, for
2 2 Sess. Cases, 4th series (1875) 976 at page 979.
exercising his discretion in favour of confirming
the stay of proceedings and the injunction, as
amended.
The reasons given by the learned Trial Judge for
exercising his discretion to grant a stay are
weighty. But, with respect, it appears to me that
his view with respect to the admission of liability is
erroneous. The question, as I see it, is not whether
an admission of liability is sufficient for the specif
ic purposes of a limitation action. Rather, it is
whether when an alleged tortfeasor seeks to estab
lish his right to a statutory limitation of his liabili
ty, the injured party should be prevented or
delayed in pursuing his right to establish the legal
responsibility of the tortfeasor for his loss when the
tortfeasor refuses or fails to admit his responsibili
ty and thus reserves to himself the opportunity to
defend the injured party's action if he, the tortfea-
sor, fails in his action to limit his liability. In no
case of which I am aware was a shipowner granted
a stay while reserving to himself that right.
It is, I think, of some importance to bear in
mind that a limitation action is not a proceeding in
which the liability, (i.e. the legal responsibility for
damage), of the shipowner as between himself and
the injured party is determined. Though this Court
has jurisdiction to entertain such an issue, that is
not the purpose of the proceeding authorized by
subsection 648(1) of the Canada Shipping Act. In
a limitation action, the claim is for a declaration of
the right to limit. The defence, if any, is to deny
that right. The proceedings for establishment of
the fund and for its distribution are incidental.
They come into play, not for the purpose of estab
lishing legal responsibility, but for the purpose of
apportioning the limitation fund among the
claimants.
In The Merchant Shipping Act, 1854' a provi
sion corresponding to subsection 648(1) had con
ferred on the High Court of Chancery in England,
3 1854 (17 & 18 Vict., c. 104) Imp.
and the Court of Session in Scotland, the authority
to entertain limitation proceedings, to distribute
the limitation amount and to stop proceedings in
other Courts in relation to the subject-matter. At
that time the Chancery Court did not have juris
diction to entertain or determine claims of ship-
owners' liability. The scope of what could be dealt
with in the limitation proceeding in the Chancery
Court appears from Hill v. Audus 4 , where the
Vice Chancellor, Sir W. Page Wood, in discussing
the statute and what it provided said at page 267:
... the only question to be tried by this Court is the amount of
damage which each claimant has suffered.
Later, in 1862, the same jurisdiction in limita
tion proceedings was also given to the High Court
of Admiralty when the ship or its proceeds were
under arrest in that Court. That Court had juris
diction to determine the liability issue. But the
practice followed was to keep the proceedings for
limitation separate from those brought to establish
liability.
A useful review of the history of the jurisdiction
in limitation proceedings is found in the judgment
of Patterson J.A. in The Georgian Bay Transpor
tation Co. v. Fishers. In that case, the Court set
aside an injunction against proceeding with a
damage action on grounds which included that the
shipowner had not admitted responsibility for the
loss and had not brought into Court the amount to
which he claimed to limit his liability. Patterson
J.A. said at page 404:
If I correctly apprehend the practice in the Court of Admi
ralty, it did not happen there, any more than in Chancery, that
the question of liability was litigated in the cause of limitation.
I understand it always to have been the subject of a separate
action, brought by the claimants, or some one of them, against
the owner.
Patterson J.A. continued at pages 406-407:
4 (1855) 1 K. & J. 263.
5 (1880) 5 O.A.R. 383.
I do not perceive any reasons of convenience requiring the
intervention of the Court by injunction, inasmuch as the whole
matter can be dealt with by the Queen's Bench, or transferred
at any stage to the Court of Chancery; and there is no necessity
for the injunction in any case until the question of liability has
been decided, because the Court can interpose after judgment
as well as before, and restrain the defendant, if she recover in
the Queen's Bench, from enforcing her damages by execution,
and compel her to come in and share ratably with the other
claimants. Authority for this will be found in Dobree v.
Schroder, 2 My. & Cr. 489, and Leycester v. Logan, 3 K. & J.
446. The Sisters, L. R. 1 P. D. 281, may also be referred to as
shewing that the two causes, for damages and for limitation of
liability, though in the same Court, are kept distinct; the
former prosecuted to judgment; and then the money distributed
in the latter.
Once it is recognized that the legal responsibili
ty of the shipowner to the claimant for the damage
is not something to be dealt with in the limitation
action it seems clear that when responsibility is not
admitted by the shipowner the injured party's
recourse is to have it established by judgment in
the damage action, and this is particularly so when
the injured party does not concede but contests the
shipowner's right to limit his liability. It also
appears that the practice, when responsibility is
not admitted, is to permit the damage action to
proceed.
In Hill v. Audus (supra) where the shipowner
declined to admit liability, an injunction against
proceeding with the action in the Admiralty Court
was refused.
In the Normandy 6 , the collision action in the
Admiralty Court was permitted to proceed for the
purpose of determining the question of responsibil
ity for the collision, and, on the shipowner's under
taking to admit liability to other claimants if the
Normandy should be held to blame, the Court
stayed the actions pending in other Courts.
6 (1870) L.R. 3 A. & E. 152.
In Miller v. Powell (supra), the owners having
denied liability in the damage actions, they were
carried on to judgment without any motion to have
them stopped even though the petition for limita
tion, which included a claim to stop the actions,
had been presented some two months before the
trial of the damage actions.
In London and South Western Railway Co. v.
James', a later case arising out of the Normandy
sinking, the plaintiff company claimed to limit and
in its bill [at page 243] "admitted, for the purposes
of this suit, their liability to the extent and in the
manner mentioned in the Acts", and stated that
they were willing to bring the limitation amount
into Court. The judgment restrained the prosecu
tion of the damage actions that had been brought
against the plaintiff in other Courts but by that
time the Normandy had already been held to
blame in an action in the Admiralty Court and
judgment by default for damages to be assessed
had been suffered in the other actions. The case is,
therefore, not an authority that such an admission
is sufficient for the purpose of persuading the
Court to stay proceedings in damage actions which
have not proceeded to the extent of a judgment on
the question of legal responsibility for the damages
sustained.
In The Georgian Bay Transportation Co. v.
Fisher (supra), Burton J.A. said at page 413:
I have gone through a number of cases in the English Courts
in which bills of this kind have been filed, most if not all of
which are referred to in the judgment of my brother Patterson,
in most of which, without admitting the claim of the particular
claimant, the parties seeking to avail themselves of the benefit
of the limited liability usually admit that they are answerable
in damages to the extent and in the manner mentioned in part 9
of the Merchant Shipping Act of 1854, that it is insufficient to
meet the claims, and that there was no personal default of the
owner; and then, on placing themselves in a position to pay or
secure the amount, the Court interferes and restrains all
actions.
7 (1872) L.R. 8 Ch. App. 241.
I do not read this, either as referring to
instances in which the right to limit was contested
or as meaning that the admission to which Burton
J.A. refers is one that is limited to use in the
limitation action. Nor have I found any case
wherein a stay has been granted over the objec
tions of the injured party, when the limitation
action was contested or where the shipowner
reserved the right to contest his liability if he
failed in the limitation proceeding.
In the view I have of the matter, the stay of
proceedings and the injunction constitute a serious
interference with the right of the appellant to
pursue its action against the respondent. It is an
interference which it does not appear to me to be
just to require the appellant to suffer so long as the
respondent is unprepared to admit unconditionally
its responsibility for the collision, not alone for the
purposes of the limitation action but for the pur
pose of the appellant's action for damages. It also
appears to me that the respondent is unduly
favoured by the stay when such responsibility has
not been unequivocally admitted and that these
considerations outweigh the not inconsiderable
reasons for the stay cited by the learned Trial
Judge. It is no doubt true that costs may be saved
if the actions for damages are stayed and the
respondent succeeds in its claim to limit its liabili
ty. But, as counsel pointed out, costs can be dealt
with appropriately by the Court if the appellant's
action proceeds and it is considered that because
the limitation action has succeeded, costs have
been needlessly incurred. Moreover, having regard
to the size of the appellant's claim the case does
not appear to be one in which concern about the
costs that may be incurred in pursuing it should be
a critical consideration.
I am accordingly of the opinion that the appeal
should be allowed in part and that paragraph 5 of
the order should be varied so as to permit the
appellant to proceed with one action against the
respondent for the purpose and to the extent of
establishing the respondent's liability for the colli
sion, whether by judgment or admission in that
action, but not further and that to that extent the
injunction of paragraph 5(b) of the order should
be varied and the stay of such action should be set
aside. The appellant should be permitted to elect
to proceed either with its action in this Court or
with its action in the Supreme Court of British
Columbia. The appellant should have its costs of
this appeal. As no one appeared in support of any
of the cross appeals, I would dismiss them without
costs.
I should add a note with respect to the injunc
tion in paragraph 5(b) of the order under appeal.
Counsel for the appellant submitted that it was not
warranted by subsection 648 (1) of the Canada
Shipping Act and that the Court was without
jurisdiction to make such an order. I am not
persuaded that the power to make such an order is
not incidental to and exercisable, as circumstances
may require, in aid of the authority to stay actions
under subsection 648(1). However, assuming that
subsection 648(1) does not authorize the making
of such an order it seems to me that it is within the
power of the Court under section 44 of the Federal
Court Act. Accordingly, save to the extent I have
mentioned in the preceding paragraph, I would not
disturb the order.
* * *
HEALD J.: I concur.
* * *
The following are the reasons for judgment
rendered in English by
URIE J.: I agree with the reasons for judgment
of the Chief Justice and with his proposed disposi
tion of the appeal.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.