T-4783-80
Interocean Shipping Company (Plaintiff)
v.
The Ship MIV Atlantic Splendour and Her
Owners (Defendant)
T-4784-80
United States Steel Corporation (Plaintiff)
v.
The Ship MIV Atlantic Splendour and Her
Owners (Defendant)
Trial Division, Dubé J.—Montreal, January 24;
Ottawa, October 7, 1983.
Maritime law — Torts — Stated case in negligence action
— Mechanical difficulties of defendant ship and consequent
delay in departure from only available berth causing delay in
loading and sailing of plaintiffs' ships — Whether damages
recoverable for economic loss not linked to physical damage to
property — Law unsettled but allowing recovery if loss direct,
reasonably foreseeable consequence of breaching duty of care
owed by defendant to plaintiff — Regulations imposing obli
gation not to encumber harbour — Vessel obstructing access to
wharf having common-law duty to make way — Duty arising
since those on board must or ought to have noted arrival and
idleness of other ships, realized berth monopolized and harm
would result — Delay by defendant ship directly causing
economic loss — Could have been towed away immediately —
Suffering of economic harm by waiting vessels foreseeable by
reasonable seamen — Entitlement to damages affirmed —
National Harbours Board Act, R.S.C. 1970, c. N-8 (now
Canada Ports Corporation Act: S.C. 1980-81-82-83, c. 121, s.
1) — National Harbours Board Operating By-law, C.R.C., c.
1064 (now Canada Ports Corporation Operating By-law: S.C.
1980-81-82-83, c. 121, s. 17(1)), s. 6 (as am. by SOR/78-558,
s. 2) — Federal Court Rules, C.R.C., c. 663, R. 475.
A stated case came before the Court under Rule 475.
According to the agreed statement of facts, the defendant ship
Atlantic Splendour arrived at Sept-Îles, Quebec, and berthed
at a certain dock to take on a cargo of iron ore. She then
experienced mechanical difficulties, which caused a delay of
her departure from the berth. The plaintiffs alleged that these
difficulties were attributable to negligence.
Between them the plaintiffs had chartered a total of four
ships, which were to load iron ore at the aforementioned
facilities on certain scheduled dates. Because of the Atlantic
Splendour's mechanical difficulties, and her associated over
staying, the loading and sailing of each of these ships had to be
delayed. These delays caused damages to the plaintiffs.
The question was whether the plaintiffs would be entitled to
recover damages from the defendant, if these facts were
established.
Held, the plaintiffs would be so entitled.
The issue is whether damages may be recovered in respect of
economic losses that are not linked to any physical damage to
property. The solution to this problem has not yet been conclu
sively formulated in the case law. However, a review of Canadi-
an and British decisions dealing with the point indicates that, at
present, the law does allow a plaintiff to recover for economic
losses even if no physical damage has occurred, provided four
conditions are met. First, the defendant has to have owed a
duty of care to the particular plaintiff. Secondly, that duty
must have been breached. Thirdly, the economic losses must
have flowed directly from the defendant's duty-breaching negli
gence. Fourthly, the consequences of the negligence—i.e., the
economic losses—must have been reasonably foreseeable.
The facts in the case at bar do satisfy these conditions. With
respect to the first of them, it may initially be observed that by
virtue of the National Harbours Board Operating By-law,
there is an obligation not to encumber a harbour. Apart from
this legislative obligation, though, as a vessel obstructing access
to a wharf, the Atlantic Splendour had a common-law duty to
make way for the incoming ships. She had such a duty because
those on board her must have noted (or ought to have noted)
the arrival of the other ships and the fact that they were sitting
idle, and must have realized (or ought to have realized, as
reasonable seamen would) that the Atlantic Splendour was
monopolizing the only available berth and that this would
occasion some harm to the other vessels.
Those in charge of the Atlantic Splendour could have had
their ship towed away from the wharf immediately, and could
thereby have prevented the economic damage suffered by the
other vessels, but for their own reasons they chose not to do so.
The procrastination on the part of the defendant ship was
indeed the direct cause of the losses sustained by the plaintiffs.
Furthermore, reasonable seamen would have foreseen that ves
sels kept waiting would experience economic harm.
Accordingly, the plaintiffs would be entitled to an award of
damages, as against the defendant, in respect of their pure
economic losses.
CASES JUDICIALLY CONSIDERED
CONSIDERED:
"Wagon Mound No. I", Overseas Tanker Ship (U.K.)
Ltd. v. Morts Dock & Engineering Co. Ltd., [1961] 1 All
E.R. 404 (P.C.); SCM (United Kingdom) Ltd v W T
Whittall & Son Ltd, [1970] 3 All ER 245 (C.A.);
Spartan Steel & Alloy Ltd v Martin & Co. (Contractors)
Ltd, [1972] 3 All ER 557 (C.A.); Rivtow Marine Ltd. v.
Washington Iron Works et al., [1974] S.C.R. 1189;
Gypsum Carrier Inc. v. The Queen; Canadian National
Railway Company, et al. v. The Ship "Harry Lun-
deberg", [1978] 1 F.C. 147 (T.D.); Bethlehem Steel
Corporation v. St. Lawrence Seaway Authority et al.,
[1978] 1 F.C. 464 (T.D.).
COUNSEL:
R. B. Holden, Q.C. for plaintiffs.
J. H. Scott for defendant.
SOLICITORS:
R. B. Holden, Q.C., Montreal, for plaintiffs.
McMaster, Meighen, Montreal, for defend
ant.
The following are the reasons for judgment
rendered in English by
Dust J.: This judgment is in answer to a ques
tion arising from a stated case under Rule 475
[Federal Court Rules, C.R.C., c. 663]. The facts
have been conveniently reduced to their bare
essentials by the solicitors of the parties in both
actions.
1. The Defendant Vessel arrived at the port of Seven-Islands
(Quebec) early on January 9, 1980, to take on a cargo of iron
ore.
2. To take on this cargo, she berthed at the Iron Ore Co. dock.
3. While so berthed, she experienced mechanical difficulties
which Plaintiff alleges are due to negligence.
4. Because of these difficulties, she did not leave the berth
before January 26, 1980.
Paragraphs 5, 6 and 7 in T-4783-80 read as
follows:
5. Plaintiff had chartered the PASITHEA, PLOTO and LA
FUMINA to take on a cargo of iron ore at the same facilities on
January 17, 26 and 25, 1980, respectively.
6. Because of the aforementioned mechanical breakdown, the
PASITHEA, PLOTO and LA FUMINA were unable to load and sail
until January 28, 30 and 29, 1980, respectively.
7. This delay caused damages to the Plaintiff in the amount of
(U.S.) $178,494.83, $37,976.83 and $39,029.65 respectively.
Paragraphs 5, 6 and 7 in T-4784-80 read as
follows:
5. Plaintiff had chartered the M/V Konkar Victory to take on a
cargo of iron ore at the same facilities on January 10, 1980.
6. Because of the aforementioned mechanical breakdown, the
MSV Konkar Victory was unable to load and sail until January
28, 1980.
7. This delay caused damages to the Plaintiff in the amount of
(U.S.) $226,110.
The question of law is the same in both actions:
"Assuming that the above stated facts are estab
lished at trial, is the Plaintiff entitled to recover
the damages from the Defendant?"
The two plaintiffs are represented by different
solicitors but their separate written arguments
have been mutually adopted and have been read
together for the purposes of this judgment. Coun
sel for the defendant has filed a memorandum of
arguments applying to both actions.
It was agreed between the parties that even if
the defendant's negligence were admitted, the
defendant would raise an argument in law that any
damage flowing from such negligence would con
stitute an economic loss too remote to be recover
able. The recovery of pure economic losses, with
out physical injury, is the narrow issue to be
resolved under this joint application.
A review of the jurisprudence on economic loss
might well start with the "Wagon Mound No. 1",
Overseas Tanker Ship (U.K.) Ltd. v. Morts Dock
& Engineering Co. Ltd.' A quantity of oil was
negligently spilled into the harbour from the
vessel, spreading to the plaintiff's wharf where
workers allowed some sparks from a welding torch
to touch the water. The ensuing fire damaged the
wharf and another vessel. The Privy Council held
the owners of the Wagon Mound not responsible
for the damage to the wharf, because the damage
was not of a kind foreseeable by a reasonable man.
Thus was born the foreseeability test. The test is
described at page 416 [by Viscount Simonds,
speaking for the Court]:
But if it would be wrong that a man should be held liable for
damage unpredictable by a reasonable man because it was
"direct" or "natural", equally it would be wrong that he should
' [1961] 1 All E.R. 404 (P.C.).
escape liability, however "indirect" the damage, if he foresaw
or could reasonably foresee the intervening events which lead to
its being done .... Thus foreseeability becomes the effective
test. In reasserting this principle, their Lordships conceive that
they do not depart from, but follow and develop, the law of
negligence ....
In SCM (United Kingdom) Ltd v W J Whittall
& Son Ltd, 2 Lord Denning M.R. dealt with dam
ages due to a power failure and concluded that
when a defendant through his negligence causes
physical damage to the property of the plaintiff, in
such circumstances that the plaintiff is entitled to
compensation for the physical damage, "then he
can claim, in addition, for economic loss conse
quent on it".
Lord Denning dealt again with recovery for
economic loss in Spartan Steel & Alloy Ltd v
Martin & Co. (Contractors) Ltd 4 where power
failure damaged the plaintiff's business. The
learned Judge restricted the recovery of the plain
tiff to the losses truly consequential to the physical
damage. He reduced the question of recovering
economic loss to one of policy. The courts must
draw a line "so as to limit the liability of the
defendant". 5
Three Canadian decisions, one from the
Supreme Court of Canada and the other two from
the Federal Court, shed light on the present state
of the Canadian jurisprudence in the matter. In
Rivtow Marine Ltd. v. Washington Iron Works et
al, 6 a logging operator had to take a defective
crane out of operation and sued the manufacturers
for loss of profits during its busy season. The
Supreme Court awarded damages for the loss of
use of the crane while under repair. It was held
that the manufacturers owed a particular duty of
care to the plaintiff, that "there was a proximity of
relationship giving rise to a duty to warn".' Rit-
chie J. said he did "not find it necessary to follow
the sometimes winding paths leading to the formu-
2 [1970] 3 All ER 245 (C.A.).
3 Ibid., at page 248.
° [1972] 3 All ER 557 (C.A.).
5 Ibid., at page 561.
6 [1974] S.C.R. 1189.
7 Ibid., at page 1215.
lation of a `policy decision' ". 8 Laskin J. [as he
then was] said that "it is foreseeable injury to
person or to property which supports recovery for
economic loss". 9
In Gypsum Carrier Inc. v. The Queen; Canadian
National Railway Company, et al. v. The Ship
"Harry Lundeberg", 10 the defendant ship negli
gently damaged a railway bridge thus forcing the
railway to reroute trains. Collier J. of this Court,
after an exhaustive review of the jurisprudence in
the matter, held that the economic loss was not
recoverable, as it could not reasonably have been
foreseen by the defendant and was not a direct
consequence of the collision. He said that econom
ic loss, even though foreseeable, ought not to be
recoverable "unless it results directly from the
careless act"."
In Bethlehem Steel Corporation v. St. Lawrence
Seaway Authority et al., 12 the plaintiffs ship ran
into a canal bridge and destroyed it, thus delaying
shipping for several days. Addy J. did not allow
loss of profits sustained by the ships which could
not use the canal and described the claim for
overland shipping charges as being even more
remote. The learned Judge referred to various
criteria applied by the courts in the field of torts
"in order to formulate logically defensible basis for
creating liability on the one hand and, on the other
hand, for imposing limits to the responsibility for
damages which might otherwise flow from a tor-
tious act or omission".''
My assessment of the present state of the de
veloping jurisprudence on this vexed question of
pure economic loss is that there need not be physi
cal injury for the plaintiff to recover, provided:
firstly, there was a duty owing by the defendant to
" Ibid., at page 1215.
9 Ibid., at page 1222.
10 [1978] 1 F.C. 147 (T.D.).
" Ibid., at page 170.
2 [19781 1 F.C. 464 (T.D.).
" Ibid., at page 468.
the plaintiff; secondly, there was a breach of that
duty; thirdly, the economic losses flowed directly
from the defendant's negligence; and fourthly, the
consequences were reasonably foreseeable.
Was there a duty on the part of the M/V
Atlantic Splendour to make way for incoming
vessels? There is a statutory obligation not to
encumber a harbour. Section 6 of the National
Harbours Board Operating By-law [C.R.C., c.
1064 (as am. by SOR/78-558, s. 2; short title
changed to Canada Ports Corporation Operating
By-law, by S.C. 1980-81-82-83, c. 121, s. 17(1))]
enacted under the provisions of the National Har
bours Board Act 14 reads as follows:
6. (1) No person shall do, cause or permit to be done
anything that, or omit to do anything the omission of which,
may cause
(a) an encumbrance of the water or shore of a harbour,
(b) an obstruction or danger to navigation in a harbour,
(c) damage to vessels or property in a harbour, or
(d) any nuisance or endanger life or health,
except that ballast, rubbish or refuse may be placed, left,
transhipped or disposed of at such places in a harbour as may
be designated by the Board.
(2) The Board may
(a) order any person to take such precautionary measures as
are necessary to prevent danger or hazard to life or property;
and
(b) remove, at the expense of the person responsible therefor,
any encumbrance, obstruction or nuisance that constitutes a
danger or hazard to life or property.
Apart from the statutory obligation, is there a
duty upon the owners of a vessel obstructing the
access to a wharf towards the incoming vessels?
Should the negligent encumbering of a harbour
cause a collision with another vessel, then the
negligent vessel would surely be held responsible
for the damages. Undoubtedly, the negligent
driver of a defective automobile completely block
ing a highway, and failing to remove his vehicle
within a reasonable period of time, would also be
14 R.S.C. 1970, c. N-8. [Short title changed to Canada Ports
Corporation Act, by S.C. 1980-81-82-83, c. 121, s. 1.]
found in breach of a duty to the public. Similarly,
those on board the defendant vessel, the M/V
Atlantic Splendour, must have realized, as reason
able seamen would, that they were "hogging" the
berth (the only available berth) for seventeen days
to the detriment of the other vessels, whose arrival
and presence must have been, or ought to have
been, noted by them.
In Gypsum Carrier Inc. v. The Queen, 15 Collier
J. asked himself if "the vessel, and those having
charge of her owe[d] a duty of care to these
particular plaintiffs", 16 his "neighbours". He
answered his own question: "Neighbours are said
to be those persons who are so closely and directly
affected that the author of the careless act or
omission ought reasonably to have had those par
ticular persons in contemplation at the material
time." 17
Those in charge of the vessel in the Gypsum
case could not, of course, have foreseen the rerout
ing of trains as they were heading for the railway
bridge. Similarly, the navigators in the Bethlehem
Steel case did not know they were about to disrupt
ship schedules on the canal. But those in charge of
the M/V Atlantic Splendour purposely kept the
vessel moored at the dock, when they could have
had her towed away immediately. They could have
prevented the economic damage to the other ves
sels, but for their own reasons chose not to do so.
They knew, or ought to have known, that they
were monopolizing the only available berth. They
saw, or ought to have seen, the other vessels sitting
idle in the water. It is not beyond the ken of
reasonable seamen to foresee that vessels in wait
ing suffer economic losses. The procrastination of
the defendant, admitted or to be proven at trial,
was the direct, foreseeable cause of the economic
losses sustained by the plaintiffs.
My answer, therefore, to the question of law is
that, assuming the stated facts to be established,
the plaintiffs are entitled to recover damages from
the defendant.
15 Supra, footnote 10, page 936.
16 Ibid., at page 176.
17 Ibid., at page 176.
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