A barge, the Rivtow 901, while being towed by the Sheena M, a tug owned by Bayside Towing Ltd (the plaintiff), hit the protection pier and the swing-span of the Mission Railway Bridge, causing extensive damage estimated at USD 5,000,000. Canadian Pacific Railway Co (the defendant) commenced an action against the plaintiff claiming damages for the loss of the bridge. As a result, the plaintiff commenced this action and sought a declaration that it was entitled to limit its liability in respect of the bridge collision to USD 515,183.4 based on the tonnage of the Sheena M alone pursuant to s 577(1)(b) of the Canada Shipping Act, RSC 1985, c S-9 (the Act). The defendant challenged both the right to limit liability and the amount of the limitation fund. Among other things, the defendant submitted that the plaintiff was not entitled to limit its liability under art 4 of the LLMC 1976, alleging wilful default against the plaintiff due to negligent navigation. In addition, the defendant submitted that, in spite of the Supreme Court of Canada decision in Rhône (The) v Peter AB Widener (The) [1993] CanLII 163 (SCC), [1993] 1 SCR 497 (CMI1006), the limitation fund should be based on the flotilla principle of limitation on the combined tonnages of the tug and the barge. This was a motion to strike out the defendant's defences.

Held: Motion partially granted.

A 'wilful default' is not the term used in the LLMC 1976 as constituting conduct barring limitation. Rather art 4 of the LLMC 1976 refers to acts or omissions committed with an intent to cause harm, and to actions taken recklessly with knowledge of the result. Thus, the test set out in art 4 of the LLMC 1976 has nothing to do with negligence but is phrased in terms of recklessness and knowledge. The allegation of wilful default against the plaintiff could not succeed.

Previously, the Court was compelled to adopt a restrictive approach by the dilemma that if the crew of the tug were navigating both tug and tow and the causative negligence was negligence in the navigation of both, it necessarily followed that there would be unlimited liability in respect of the navigation of the tow unless tug and tow were in common ownership. That dilemma had been removed by the much more open wording of the LLMC 1976. However, the flotilla principle might be very much alive under the LLMC 1976. Although limitation of liability is a right based on policy and not on justice, the basis is the concept of causative negligence in the 'navigation or management' of a vessel. The party wishing to limit its liability only has to show that liability arose 'in direct connection with the operation of the ship'. There may be less reason to restrict the fund to the tonnage of the tug alone. Thus, while the defendant's argument might be thin, it was not plainly and obviously one which would fail.

[For subsequent proceedings in this matter, see Bayside Towing Ltd v Canadian Pacific Railway Co (CMI992).]