This is an appeal from Société Telus Communications v Peracomo Inc [2011] FC 494 (CMI674).

In October 1999, two submarine fibre optic cables were laid across the St-Lawrence River. One of the cables was the Sunoque I, co-owned by Société Telus Communications and  Hydro-Québec with Bell Canada having a right of use in it (the respondents). Mr Réal Vallée is a fisherman and sole shareholder of the company Peracomo Inc, which is the owner of the fishing vessel Réalice (the appellant).

At the time of the incident, the appellant was fishing for snow crab in the St-Lawrence River. The fishing technique involves laying cables on the river bottom measuring approximately one mile in length with cages attached approximately every 400 feet. The cables are secured at both ends by anchors which are attached to buoys to mark their location and to identify the owner of the cages. The anchors must be lifted from the river bottom to haul the cages and unload the catch. Often these anchors become entangled with debris such as lost crab cages, ship lines and other abandoned items. The appellant said that this would happen seven or eight times a year. The season extends from mid April to early June.

In 2005, one of the appellant’s cage string anchors got hooked on something at the bottom of the river. He managed to pull a brown cable with a diameter of approximately one inch close to the surface and released the anchor. This was the Sunoque I. A short time after this, the appellant visited Église Saint-Georges, a former church which is now a museum. There he saw a chart illustrating an abandoned underwater cable, part of which was resting on the river bottom within the fishing zone. The appellant said the word ‘abondonné’ was written across the chart. He concluded that this was the brown cable that he had hooked with his anchor. The maps on board the Realice were outdated and none of them contained any indication of the Sunoque I.

On 6 June 2006, the appellant was fishing again for snow crab. Once again the appellant lifted the Sunoque I with his string cage anchor. This time the appellant ‘had had it with this cable’ and decided to cut it. Once it was cut, one of the ends stayed trapped in the appellant’s equipment while the other end sank to the bottom. A few days later, one of the appellant’s anchors got hooked in the Sunoque I and once again the appellant cut the cable.

Some weeks later, the appellant read a newspaper article reporting that a Telus cable had been deliberately cut and authorities were seeking the culprit. The appellant came forward and contacted his lawyer and insurers. The insurers denied liability.

The Réalice was found liable in rem and arrested. To prevent the sale of the ship before judgment, the appellant undertook to maintain the vessel so that it would not become a wasting asset. At first instance, the Federal Court held the appellant liable to the respondents for CAD 1,213,320.07 and held that the insurers were not liable to the appellant.

The appellant appealed on the following grounds:

1. Telus was contributorily negligent by failing to give notice of the cable’s existence.
2. The judge erred in finding Mr Vallée personally liable.
3. Liability ought to have been limited to CAD 500,000 by the Limitation of Liability for Maritime Claims Convention 1976 and the 1996 Protocol (LLMC 1996).
4. Insurance coverage should not have been denied on the ground of wilful misconduct.

Held: Appeal dismissed. On ground 1, there was no contributory negligence on the part of Telus. Its failure to inform the Fishermen’s Association of the cable was not causative of the accident. The accident occurred because Mr Vallée cut the cable with an electric saw.

On ground 2, Mr Vallée is the directing mind or alter ego of Peracomo. Canadian law permits officers, employees and directors of companies to be held personally liable for tortious conduct causing property damage. Mr Vallée sought to avail himself personally of the limitation of liability provided by art 1.4 of the LLMC 1996. It is clear that the LLMC 1996 envisages that both the owner and a person for whose actions he may be liable could be sued together. Art 9.a deals with the aggregation of claims in such cases.

On ground 3, the appellant sought to limit liability to CAD 500,000 by reason of s 29 of the Marine Liability Act SC 2001. However, this statutory right to limit is lost if the conditions in art 4 of the LLMC 1996 are met. Article 4 provides that '[a] person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result'. A review of the authorities makes it clear that these words refer to the loss that has actually resulted and which is the subject matter of the claim in which the right to limit is asserted. Given that in this case Mr Vallée intended to cut the very cable for the loss of which he is sued the judge did not err in concluding that Mr Vallée’s act was done with the intent required by art 4. There is no need to make a finding that Mr Vallée knew the exact value of the cable and that it was in use. Mr Vallée did intend to cut the cable into pieces and Telus claims the cost of putting it back together.

On ground 4, the underwriters deny coverage by reason of s 53(2) of the Marine Insurance Act SC 1993 which provides that ‘an insurer is not liable for any loss attributable to the willful misconduct of the insured’. The judge at first instance held that Mr Vallée’s conduct was a marked departure from the norm and thus wilful misconduct. There is nothing other than Mr Vallée’s electric saw that caused the loss. His wilful misconduct was the proximate cause of the loss within the meaning of s 53(2).

[For the appeal to the Supreme Court, see Peracomo Inc v TELUS Communications Co [2014] SCC 29 (CMI147).]