On 14 December 1982 a barge owned by Riedel International Inc, the Green Giant, broke loose from its moorings at Roberts Bank, suffered hull damage and was moved to the Genstar Cement Dock. The ship repair contract was awarded to BC Marine, and RivTow Straits Ltd (RivTow) was responsible for towing the Green Giant to BC Marine's shipyard in Vancouver Harbour.

A tug owned by Continental Bank of Canada (CBC) but demise chartered to RivTow, the Westminster Tyee, was towing the Green Giant to BC Marine's shipyard on 21 January 1983. At 19h00, the boom of the tug's crane collided with the Lion's Gate Bridge, causing damage to the bridge, the boom and the Green Giant. There were miscommunications during operations on the height of the boom, especially between the day shift master, Captain Michaud, and the night shift master, Captain Rose, which made it unclear whether the height was 150 ft or 200 ft. CBC played no part in operating the Westminster Tyee.

The action in limitation of liability was launched via s 648 of the Canada Shipping Act, RSC 1970, c S-9, and the four plaintiffs were CBC, RivTow, Captain Michaud and Captain Rose. The plaintiffs sought: (1) a declaration that they were not liable for damages beyond the aggregate amount prescribed by ss 647, 649 and 651; and (2) an order staying any proceedings pending in any court against the plaintiffs in relation to the accident.

Both Captain Michaud and Captain Rose were entitled to limit their liability regardless of fault. The remaining question was whether RivTow could limit its liability.

Held: Action dismissed.

The accident did not occur without the actual fault or privity of Rivtow.

RivTow was required to show that the losses occurred without its actual fault or privity, notwithstanding its entitlement to limit liability where the accident occurred 'without its actual fault or privity' (ss 647(2) and 649(1)(a)). This burden was a heavy one (Wishing Star Fishing Co Ltd v Fishing Vessel 'BC Baron' (1987) CanLII 5429 (FCA); (1987) 45 DLR (4th) 321, 328­–330) and not discharged merely by showing that the acts of RivTow were not 'the sole or next or chief cause' of the mishap (Stein v The Ship 'Kathy K' (1975) CanLII 146 (SCC)).

The applicable test was 'whether the doer of the act occupied such a position in the corporation that at the time it was done it may be said to have been the very act of the corporation itself' (Wishing Star Fishing v BC Baron, 331). This test was adopted from statute law in the United Kingdom before the introduction of the drastically different test by the 1979 legislative changes, which were based on the LLMC 1976.

The directing mind of RivTow emanated from the directors and managers who represented the directing mind and will of RivTow and controlled what it did, like its senior vice-president, Norman Cosulich, and also extended to the managers, including the traffic administrator and the dispatcher, who told the captains where to go, what to do and what to tow. Although the Westminster Tyee was seaworthy, properly equipped and carried on board the necessary instruments, charts, timetables, standing orders, radar and compass, there was a missing link either in its policy or its implementation by its managers. The management of RivTow was under a duty to establish a clear policy to the effect that all tows were to be inspected by qualified staff for clearances and suitability for towing and to enforce that policy.

RivTow's management was not exonerated by blaming Captain Rose, who could have prevented the accident, or Captain Michaud, who was negligent for not making sure that Captain Rose was aware of the height of the boom when he came on board to relieve him. Captains Michaud and Rose, while masters of the Westminster Tyee, were not the directing mind of RivTow. Although it was not for RivTow to interfere with the discretion of a qualified master in controlling the Westminster Tyee, it was a different matter when any question of policy was involved in which RivTow should have realised that there was implicit an actual or potential effect on the safety of RivTow or other property (The 'Lady Gwendolen' [1965] 2 All ER 283, 299–300 (Winn LJ)). Hence, RivTow was not absolved of actual fault or privity.

Accordingly, the plaintiffs were not entitled to a declaration that they were not liable for damages beyond the aggregate amount ie CAD 26,720.58 under ss 647, 649 and 651 of the Canada Shipping Act.