On 21 April 1987, a fire broke out on the Bow Drill III, a semi-submersible drilling rig owned by Bow Valley Husky (Bermuda) Ltd (the appellant). The resulting damage prevented the rig from operating for months. During that time, Bow Valley Industries Ltd (BVI) and Husky Oil Operations Ltd (HOOL) continued to pay daily rates to the appellant. They were required to do so under the terms of their respective agreements.

The Bow Drill III was constructed by Saint John Shipbuilding Ltd (the respondent) using certain materials manufactured and supplied by Raychem Canada Ltd (Raychem). Following the fire, the appellant, BVI and HOOL commenced an action against the respondent alleging breach of contract and negligence, and against Raychem for negligence.

The Supreme Court of Newfoundland, Trial Division found the appellant to be 60% and the respondents 40% at fault. The trial Judge held that maritime law applied because this case arose as the result of negligence, the first act in the chain of causation being the operation of the heat trace without ground fault circuit breakers, which occurred while the rig was working offshore. The trial Judge rejected the suggestion that the Newfoundland Contributory Negligence Act could apply on the basis that Canadian maritime law was federal law which was uniform throughout Canada and the application of the different provincial contributory negligence statutes would destroy that uniformity. Finally, the trial Judge held that all parties were negligent but the appellant, whom he found to constitute a joint venture, was unable to recover anything because maritime law, which included the common law contributory negligence bar, was applicable to this case.

One of the issues on appeal was whether maritime law was applicable to this case; and, if so, what was the impact of maritime law on a finding of contributory negligence.

The appellant argued that the fact that a rig might be classified as a ship for some purposes did not mean that all matters arising from the activities of a rig were matters of shipping and navigation. The appellant, BVI and HOOL noted that at the time of the fire the rig was anchored for drilling and that the origin of the fire was in the heat trace on a mud line, part of the drilling equipment rather than the equipment associated with shipping and navigation. The respondents argued that a system of law which classified the Bow Drill III as a ship, subject to maritime law when travelling, and as something else, not subject to maritime law, when it was not travelling, was unsatisfactory.

The appellant claimed that this was essentially a product liability case concerning a product not manufactured or sold exclusively for use on drilling rigs or ships but having wide industrial applications and that under the proper analysis maritime law had no application. The appellant further made the argument that the heat trace system in issue in this proceeding had nothing to do with the maritime aspect of the rig, and at the time of the fire the rig was anchored and drilling, connected to the ocean floor. It was not at the time under tow or under self-propulsion.

Held: Appeal allowed.

In Canada, claims arising out of contracts relating to the construction, repair and equipping of a ship are governed by maritime law. There is no error in the trial Judge’s conclusion that maritime law is applicable to this case. If one merely examines this as a product liability case, it concerns a tort which resulted in damage to a rig while it is operating in navigable waters. The damage affects not only the drilling operation but other aspects of the operation of the rig. The Bow Drill III, like others in its class, is capable of self-propulsion; even when drilling, it is vulnerable to the perils of the sea; it is not attached permanently to the ocean floor; and it can travel world-wide to drill for oil. The activities of the Bow Drill III are essentially maritime in nature, albeit a modern view of maritime activity, and the tort having resulted in damage to the vessel while at sea, maritime law governs.

The respondents argued that to change the common law contributory negligence bar as it applied to maritime law would be to encroach on the role of Parliament. Counsel also suggested that maritime law, because of its nature, changes slowly in response to international Conventions and that in the absence of such a Convention a domestic court should not alter the current arrangements.

English admiralty law, which had its origins in Civil Law, had a rule of equal division in collision cases where the fault could be attributed to both ships. This rule eventually became codified in legislation and subsequently equal division was changed to reflect apportionment of fault. In Canadian law, apportionment in collision cases is now contained in ss 565-567 of the Canada Shipping Act, RS 1985, c S-9, which gives domestic effect to art 4 of the Collision Convention 1910.

The respondents argue that the existence of these sections shows that Parliament has addressed, in part, the matter of division of liability and that this court should not now intervene. It was suggested that the action of the US Supreme Court in United States v Reliable Transfer Co, [1975] AMC 541; (1975) 421 US 397 (US SC), in adopting apportionment of fault in tort cases is perhaps acceptable because the US Government had failed to act on the Collision Convention 1910. The implication is that the Court was merely bringing US law in line with the Convention, an acceptable step; but, as the Canadian government had adopted the Convention, that rationalisation was not open to this Court.

It is time for the courts to respond to the injustice of the application of a contributory negligence bar and to declare that liability for tort in maritime law should be borne in relation to the degree of fault of the parties. If the contributory negligence bar was once seen by the judges who developed it as a fitting response to the problem of a defendant being held responsible for all the damage when it was in fact caused in part by the plaintiff and in part by the defendant, that should no longer be the case. It is not necessary for this Court to examine and declare what is to be done in respect of each problem which might arise in the field of maritime law with the elimination of the contributory negligence bar. Traditionally the common law has developed on a case by case basis, responding on an incremental basis to problems as they arise. There is no need to break with that tradition. Apportionment of fault has been the tradition of maritime law in collision cases. It is a logical extension of that tradition to extend apportionment to other areas.

The Newfoundland Contributory Negligence Act therefore applies to this case. If that finding is not correct, the Court would conclude that maritime law no longer includes a contributory negligence bar and that, consistent with the approach of the law respecting collisions, liability here should be attributed based on fault.

Therefore, the appellant is entitled to 40% of its damages.

[For the unsuccessful appeal to the Supreme Court of Canada, see Bow Valley Husky (Bermuda) Ltd v St John Shipbuilding Ltd (CMI964).]