This was an appeal from a judgment of Pinard J who decided in favour of Kruger Inc and Hesselbacher Papier-Import & Export (GmbH & Co) (Kruger and Hesselbacher respectively) against Baltic Shipping Co (Baltic) in the amount of CAD 1,326,206.50 for damage to a cargo of newsprint shipped by Kruger to Hesselbacher on the Mekhanik Tarasov, which was owned and operated by Baltic.

The vessel encountered a severe storm in the North Atlantic on its voyage from Canada to the Port of Hamburg. On 16 February 1982, the vessel sank with the loss of 37 crew members and the cargo shipped by Kruger to Hesselbacher.

The trial Judge concluded that Baltic was liable. In considering direct evidence, the trial Judge found that the vessel sank and the cargo was lost because a considerable amount of sea water was allowed to enter the ship through the openings left on the forecastle deck and/or the weather deck by the loss of two ventilators during the severe storm. Expert evidence was provided that the ventilators were defectively designed, owing to a lack of brackets or support for the ventilator coamings exposed above the deck of the ship, which made the ventilators unduly vulnerable to the kind of weather encountered by the vessel. The trial Judge concluded that the severe weather not only could or should have been foreseen and guarded against, but was in fact foreseen.

The trial Judge drew on Charles Goodfellow Lumber Sales Ltd v Verreault (1970) CanLII 171 (SCC) and Federal Commerce & Navigation Co Ltd v Eisenerz GmbH (1972) CanLII 192 (SCC) (CMI888) and employed the following steps with respect to the burden of proof:

(1) Initially, the cargo owners need only establish their interest in the cargo, that it was not delivered in the same apparent good order and condition as received on board and the value of cargo lost or damaged. If the carrier offers no defence, the plaintiffs will obtain judgment.

(2) The carrier can then shift the burden of proof back to the plaintiffs by establishing that the loss or damage is attributable to one of the excepted perils set out in art 4 of the Hague Rules.

(3) Thereafter, the cargo owners must establish the carrier's negligence or both that the ship was unseaworthy and that the loss was caused by that unseaworthiness.

(4) If the points, in the context of unseaworthiness, are established, the carrier can only escape liability by establishing that due diligence was exercised to make the ship seaworthy.

The trial Judge proceeded through the above steps to conclude that Kruger fulfilled step 1 and that Baltic did not establish that the loss or damage was attributable to one of the excepted perils set out in the Hague Rules or that it had exercised due diligence to make the vessel seaworthy before and at the beginning of the voyage in question.

Baltic appealed, disputed the trial Judge’s findings and pointed to an alleged error by the trial Judge in accepting the expert witness testimony of Kruger’s and Hesselbacher’s expert witness over Baltic’s. In addition, counsel for Baltic argued that the trial Judge erred in in failing to accept either the defence of a peril of the sea (art 4.2.c of the Hague Rules) as the cause of the loss, or that the defective ventilators amounted to a latent defect not discoverable by due diligence (art 4.2.p of the Hague Rules), and that the trial Judge erred in law in holding that Baltic failed to exercise due diligence to make the vessel seaworthy within the meaning of art 3.1 of the Hague Rules.

Held: Appeal dismissed.

The trial Judge made his findings of fact based on an assessment of all the evidence. There is no manifest or palpable and overriding error in what he did.

With respect to the exception for perils of the sea, the phrase 'perils, danger, and accidents of the sea' in art 4.2.c has been interpreted to mean perils which could not have been foreseen or guarded against as probable incidents of the intended voyage. The trial Judge was correct when he concluded on the basis of the evidence that the weather encountered by the vessel 'while unquestionably severe, which is well recognized by the plaintiffs, was in fact foreseen ... and could even have been guarded against. At the very least, it is abundantly clear that the weather could and should have been foreseen and that it could have been guarded against.'

After citing relevant authority and correctly stating the burden of proof that applied to the carrier in invoking the latent defect exception, and reviewing the available evidence, the trial Judge rightly concluded that Baltic failed to discharge the burden of proving the existence of any defect that could have constituted a latent defect within the meaning of art 4.2.p of the Hague Rules.

With respect to art 3 of the Hague Rules, requiring the carrier, before and at the beginning of the voyage, to exercise due diligence to make the vessel seaworthy, there is no error with the findings or reasoning of the trial Judge and the conclusion that Baltic failed to discharge the burden of proving that it exercised due diligence.