In 2008, Siemens Canada Ltd (Siemens) entered into a contract with the New Brunswick Power Nuclear Power Corporation for the delivery of a series of special low pressure rotors to be used for the refurbishment and upgrade of the Point Lepreau nuclear generating station. Siemens contracted with J D Irving Ltd (JDI) for the transport of the rotors. While being loaded on board of a barge using JDI-owned self-propelled transporters, one of the transporters caused the barge to tilt, tipping one of the rotors to starboard and catapulting it off the barge and into the harbour of Saint John. A second rotor which had previously been loaded onto the barge followed suit.

Siemens commenced an action in the Ontario Superior Court against JDI and two of its subcontractors, claiming breach of contract and negligence, for a total of CAD 45,000,000.00. JDI filed a limitation action seeking to limit its liability to CAD 500,000.00. In June 2011 the Federal Court (FC) ordered a limitation fund to be constituted pursuant to s 32 of the Marine Liability Act. Siemens appealed to the Federal Court of Appeal (FCA), but the FCA upheld the original decision. The FC also ordered that the limitation action proceed before the liability action. The limitation action took place in October 2015 and on 22 January 2016 the FC released its decision in J D Irving Ltd v Siemens Canada Ltd 2016 FC 69 (CMI3), with additional reasons being released on 7 March 2016.

The case revolved around the question if JDI was barred from limiting its liability because of its own negligent conduct, pursuant to the Marine Liability Act, which incorporates art 4 of the LLMC 1976.

Siemens asserted that the evidence established that JDI and its subcontractors acted recklessly and with knowledge that the loss of the cargo would probably result. Siemens’ main argument was that JDI had knowingly selected a barge that was too small and that JDI's employees (specifically the project manager (Malcolm) and the rigging engineer (McLaughlin)) knew that the margin of error of bringing the transporters onto the barge was small, were aware of a deviation during loading, and then failed to pause and address the deviation. Siemens argued that the impugned acts and omissions of these employees are attributable to JDI. Finally, Siemens took the position that JDI had the evidentiary burden to explain what caused the loss of the cargo. It argued that JDI had not done a proper investigation into the loss, contrary to its own corporate policy. Siemens urged the Court to infer that JDI called a halt to its investigation because it did not like the early findings. JDI for its part argued that Siemens failed to prove the actual cause of the incident or that recklessness would be one of the causes of the accident. JDI argued that neither Malcolm’s nor McLaughlin’s actions were attributable to it.

Held: The barge was suitable despite the fact that it was smaller than prior barges used. There was no evidence that JDI was made aware prior to the loss that there were any concerns about the barge or the cargo moving operation as a whole. The eventual cause of the accident was not that the barge was unsuitable. Rather, a number of factors contributed to the overall stability being lost when the second transporter rolled onto the barge - including off-centre loading of the transporters on the barge, causing a list, which in turn caused the transporter to tilt to port. The starboard side wheels of this transporter lifted off the barge, causing the centre of gravity of the transporter to shift dangerously off-centre. At that point, the situation became irretrievable, with very limited time between the moment the barge assumed a port list and the rotors tipping overboard. During that limited time, JDI had attempted to deal with the second transporter’s tilt and the list of the barge.

After a thorough review of the purpose and history of the LLMC 1976, the FC concluded that the purpose of the Convention was to create a virtually unbreakable right to limit liability. The FC reviewed the Supreme Court of Canada decision in Peracomo Inc v Telus Communications Inc 2014 SCC 29 (CMI147), which essentially dealt with wilful misconduct of the vessel owner. The FC noted that recklessness in the context of art 4 required subjective knowledge that the occurred loss would probably occur, while recklessness in the context of wilful misconduct has a lower fault element, requiring only reckless indifference to the known risk. In dealing with whether the acts of JDI's employees were reckless, the FC held that recklessness is more than mere negligence or inadvertence and must be assessed on a subjective standard. Absent any allegation of intent, the person challenging the right to limit must cumulatively establish both reckless conduct and knowledge that the relevant loss would probably result. Siemens failed to prove the recklessness of JDI's employees, as it did not prove that the employees knew that the rotors would probably be lost if the loading sequence as established by them were to be followed. The FC also dismissed Siemens’ argument that recklessness and knowledge should be inferred from the circumstantial evidence. The FC concluded that it was not obvious that a number of factors would act in combination to cause the loss. At the time of the incident a number of JDI's and their subcontractor’s personnel were working on the barge. If they had known that the loss was probable, it is unlikely that they would have put themselves in harm’s way.

Accordingly, limitation of liability was granted to JDI.

In the additional reasons, the FC rejected the subcontractor’s application for limitation of liability, as they cannot be considered to be 'persons for whose act, neglect or default JDI, as the ship owner, is "responsible" which would entitle them to avail of limitation under Article 1(4)' (para 11). The mere fact that the shipowner (JDI) used subcontractors to provide certain services that were necessary for the cargo move is insufficient to found legal responsibility as described in art 1.4 of the Marine Liability Act. As a result, these subcontractors are not entitled to avail themselves of the limitation of liability provided for in the LLMC 1976 granted to the ship owner.

[See also Siemens Canada Ltd v JD Irving Ltd (CMI695).]