Société Telus Communications et al. v. Peracomo Inc. et al., (2014) 457 N.R. 75 (SCC)

• Judge: McLachlin, C.J.C., Rothstein, Cromwell, Karakatsanis and Wagner, JJ.
• Court: Supreme Court (Canada)
• Case Date: November 15, 2013
• Jurisdiction: Canada (Federal)
• Citations: (2014), 457 N.R. 75 (SCC);2014 SCC 29;[2014] 1 SCR 621;[2014] SCJ No 29 (QL)

Telus Com. Soc. v. Peracomo Inc. (2014), 457 N.R. 75 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Temp. Cite: [2014] N.R. TBEd. AP.012

Peracomo Inc., Réal Vallée, the owners and all other persons having an interest in the fishing vessel "Realice" and the fishing vessel "Realice" (appellants) v. TELUS Communications Company, Hydro-Québec, Bell Canada and Royal & Sun Alliance Insurance Company of Canada (respondents)

(34991; 2014 SCC 29; 2014 CSC 29)

Indexed As: Société Telus Communications et al. v. Peracomo Inc. et al.

Supreme Court of Canada

McLachlin, C.J.C., Rothstein, Cromwell, Karakatsanis and Wagner, JJ.

April 23, 2014.

Summary:

A snow crab fisherman, who was master of a fishing vessel, The Realice, cut a submarine fibre optic cable belonging to Telus Communications et al., while conducting fishing operations on the St. Lawrence River. Repair costs approached $1,000,000. Telus et al. took action in personam against the vessel owner (Peracomo Inc.) and the master, and in rem against the fishing vessel. The defendants instituted third party proceedings against their underwriters, Royal and Sun Alliance Insurance Co., who denied coverage.

The Federal Court, in a decision reported (2011), 389 F.T.R. 196, allowed the Telus action against the defendants. The court held that the defendants were not entitled to limit their liability to $500,000 under the Convention on Limitation of Liability for Maritime Claims and s. 29 of the Marine Liability Act (Can.). Further, the defendants had lost their insurance coverage because of the wilful misconduct of the vessel's master. The defendants appealed.

The Federal Court of Appeal, in a decision reported (2012), 433 N.R. 152, dismissed the appeal. The defendants appealed again, the main issues being the limitation of liability and loss of insurance issues. In addition, the master contended that he was not personally liable for the loss.

The Supreme Court of Canada, Wagner, J., dissenting in part, allowed the appeal in part. The court held that the limit on liability under the Convention applied and the defendants' liability was capped at $500,000. However, the loss was excluded from their insurance coverage as it resulted from the master's "wilful misconduct". The master could be held personally liable for the damage. Wagner, J., dissented on the insurance/wilful misconduct issue.

Company Law - Topic 4183

Directors - Liability of directors - For torts - A snow crab fisherman and master of a fishing vessel got his cage anchor caught in a Telus Communications' submarine fibre optic cable, while fishing on the St. Lawrence River - The fisherman/master believed the cable was not in use and cut it with a saw - Repair costs approached $1,000,000 - Telus sued the fisherman/master, the fisherman's company (Peracomo), which owned the vessel, and the vessel - The fisherman/master claimed that he could not be held personally liable - The Supreme Court of Canada disagreed - Corporate personalty was not a relevant consideration in this case since the fisherman/master was personally negligent in cutting the cable - The company was liable as a result of his acts, not the other way around - See paragraphs 15 to 17.

Insurance - Topic 8582.1

Marine insurance - The risk - Exclusions - Wilful misconduct - Section 53(2) of the Marine Insurance Act excluded coverage for any loss attributable to the "wilful misconduct" of the insured - Article 4 of the Convention on Limitation of Liability for Maritime Claims, 1976, provided 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" - The Supreme Court of Canada rejected a submission that the fault standard under the insurance exclusion and the Convention were the same - The court stated that both the purposes of the text and the provisions were different - The court elaborated on its conclusion and the interrelationship between the two provisions - See paragraphs 48 to 54.

Insurance - Topic 8582.1

Marine insurance - The risk - Exclusions - Wilful misconduct - Section 53(2) of the Marine Insurance Act excluded coverage for any loss attributable to the "wilful misconduct" of the insured - The Supreme Court of Canada discussed the meaning of the phrase "wilful misconduct" as it was used in s. 53(2) - The court concluded that wilful misconduct included not only intentional wrongdoing but also other misconduct committed with reckless indifference in the face of a duty to know - See paragraphs 55 to 62.

Insurance - Topic 8582.1

Marine insurance - The risk - Exclusions - Wilful misconduct - A snow crab fisherman, who was master of a fishing vessel, sawed apart a submarine fibre optic cable belonging to Telus Communications, while conducting fishing operations on the St. Lawrence River - Telus sued the fisherman, the vessel and the vessel owner (the defendants) - The defendants instituted third party proceedings against their insurance underwriters, who denied coverage claiming that the defendants lost their coverage because of wilful misconduct (Marine Insurance Act, s. 53(2)) - The Supreme Court of Canada held that, in the context of this case, the Act required misconduct with reckless indifference to the known risk despite a duty to know - The trial judge's reasons, read in light of the record, showed that at the time he cut the cable the master, who had a duty to know better, subjectively adverted to the risk that the cable might be live and decided to cut it anyway on the sole basis of some handwriting that he had seen for a few seconds on a map on a museum wall, a map which was not a marine chart and was of unknown origin or authenticity - Cutting the cable in those circumstances constituted wilful misconduct - The insurance coverage was lost - See paragraphs 55 to 67.

Insurance - Topic 8582.1

Marine insurance - The risk - Exclusions - Wilful misconduct - Section 53(2) of the Marine Insurance Act excluded coverage for any loss attributable to the "wilful misconduct" of the insured - It was argued that the phrase "wilful misconduct" in the Act should be equated with the concept of "faute intentionnelle" in Quebec civil law (i.e., art. 2464 of the Civil Code of Québec), which not only included cases of intentional conduct, but also reckless conduct taken with knowledge that the loss would probably result - The Supreme Court of Canada rejected argument - The court noted that the meaning of "faute intentionnelle" is well established in Quebec civil law and it was equally well established that the term "wilful misconduct" in marine insurance law had a wider meaning - The provisions of the Act had their origins in English admiralty law and the English Marine Insurance Act, 1906 and the French version of the Act expressed this by using the term "l'inconduite délibérée", not the well-known civil law term "faute intentionnelle" - See paragraphs 68 to 70.

Shipping and Navigation - Topic 1164

Masters - Liability of master - Negligence - [See Company Law - Topic 4183 and third Insurance - Topic 8582.1 ].

Shipping and Navigation - Topic 5351

Collisions and groundings - Negligence - Duty of ships - Telecommunications cables - [See Company Law - Topic 4183 and third Shipping and Navigation - Topic 5749 ].

Shipping and Navigation - Topic 5749

Collisions and groundings - Damages - Limitations on liability - Article 4 of the Convention on Limitation of Liability for Maritime Claims, 1976, provided 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" - The Supreme Court of Canada discussed the purpose of art. 4 of the Convention and interpreted this provision - See paragraphs 24 to 35.

Shipping and Navigation - Topic 5749

Collisions and groundings - Damages - Limitations on liability - The Supreme Court of Canada explained that s. 29 of the Marine Liability Act limited liability for property damage caused by the operation of ships under a certain tonnage - However, because of s. 4 of the Convention on Limitation of Liability for Maritime Claims, incorporated into Canadian law by s. 26 of the Marine Liability Act, the s. 29 limit did not apply if the loss "resulted from [the defendant's] personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result" - The court stated that whether the limitation on liability was excluded by art. 4 depended on the fault of the person liable - Art. 4 set out two types of fault, either of which barred the operation of the limitation on liability - The first was an intention to cause "such loss" and the second was to cause the loss "recklessly and with knowledge that such loss would probably result" - See paragraphs 18 and 19.

Shipping and Navigation - Topic 5749

Collisions and groundings - Damages - Limitations on liability - A snow crab fisherman, who was master of a fishing vessel, cut a submarine fibre optic cable belonging to Telus Communications, while conducting fishing operations on the St. Lawrence River - Telus sued the fisherman, the vessel and the vessel owner - The defendants claimed that any liability was limited to $500,000 (Marine Liability, s. 29) - Telus argued that s. 29 was inapplicable because the loss resulted from the fisherman's "personal act or omission committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result" (Convention on Limitation of Liability for Marine Claims, 1976, art. 4) - The Supreme Court of Canada stated that the "loss" that "resulted" from the fisherman's act was the diminution in value of the cable measured by the cost of repairing it - On the trial judge's findings of fact, the fisherman did not intend to cause the loss or know that it was a probable consequence of his actions - He thought the cable was useless, no matter how recklessly he may have reached that view, and therefore did not think it would be repaired because he thought it had no value - That did not constitute either "the intent to cause such loss" or "knowledge that such loss would probably result" - The court concluded that the defendants did not intentionally or recklessly cause the loss in question within the meaning of art. 4 of the Convention - They were therefore entitled to its limitation on liability - See paragraphs 18 to 35.

Shipping and Navigation - Topic 5749

Collisions and groundings - Damages - Limitations on liability - [See all Insurance - Topic 8582.1 ].

Statutes - Topic 1806

Interpretation - Intrinsic aids - Bilingual statutes - Interpretation of one version by reference to the other - [See fourth Insurance - Topic 8582.1 ].

Words and Phrases

Such loss - The Supreme Court of Canada discussed the meaning of this phrase as it was used in art. 4 of the Convention on Limitation of Liability for Maritime Claims, 1976 - See paragraphs 27 to 34.

Words and Phrases

Wilful misconduct - The Supreme Court of Canada discussed the meaning of this phrase as it was used in s. 53(2) of the Marine Insurance Act, S.C. 1993, c. 22 - See paragraphs 55 to 62.

Cases Noticed:

London Drugs Ltd. v. Brassart and Vanwinkel, [1992] 3 S.C.R. 299; 143 N.R. 1; 18 B.C.A.C. 1; 31 W.A.C. 1, refd to. [para. 15].

London Drugs Ltd. v. Kuehne & Nagel International Ltd. - see London Drugs Ltd. v. Brassart and Vanwinkel.

AGDA Systems International Ltd. v. Valcom Ltd. et al. (1999), 117 O.A.C. 39; 43 O.R.(3d) 101 (C.A.), leave to appeal denied [2000] 1 S.C.R. xv; 254 N.R. 400, refd to. [para. 16].

Nugent v. Michael Goss Aviation Ltd., [2000] 2 Lloyd's Rep. 222 (C.A.), refd to. [para. 21].

Goldman v. Thai Airways International Ltd., [1983] 3 All E.R. 693 (C.A.), refd to. [para. 22].

Margolle v. Delta Maritime Co. (The "Saint Jacques II" and "Gudermes"), [2003] 1 Lloyd's Rep. 203; [2002] EWHC 2452, refd to. [para. 24].

Schiffahrtsgesellschaft MS "Merkur Sky" mbH & Co. K.G. v. MS Leerort Nth Schiffahrts GmbH & Co. K.G. (The "Leerort"), [2001] 2 Lloyd's Rep. 291; [2001] EWCA Civ. 1055, refd to. [para. 24].

Ship Bowbelle, Re, [1990] 1 Lloyd's Rep. 532 (Q.B.), refd to. [para. 24].

Daina Shipping Co. v. Te Runanga O Ngati Awa, [2013] 2 N.Z.L.R. 799; [2013] NZHC 500, refd to. [para. 29].

MSC Mediterranean Shipping Co. S.A. v. Delumar BVBA (The MSC Rosa M), [2000] 2 Lloyd's Rep. 399 (Q.B.), refd to. [para. 29].

Goulet v. Compagnie d'assurance-vie Transamerica du Canada, [2002] 1 S.C.R. 719; (2002), 284 N.R. 139; 2002 SCC 21, refd to. [para. 45].

Goulet v. Transamerica Life Insurance Co. of Canada - see Goulet v. Compagnie d'assurance-vie Transamerica du Canada.

McCulloch v. Murray, [1942] S.C.R. 141, refd to. [para. 55].

Studer v. Cowper, [1951] S.C.R. 450, refd to. [para. 56].

Thompson v. Fraser, [1955] S.C.R. 419, refd to. [para. 56].

Walker v. Coates, [1968] S.C.R. 599, refd to. [para. 56].

Markling v. Ewaniuk, [1968] S.C.R. 766, refd to. [para. 56].

Goulais v. Restoule and Maryland Casualty Co., [1975] 1 S.C.R. 365; 2 N.R. 153, refd to. [para. 56].

R. v. Boulanger (D.), [2006] 2 S.C.R. 49; 350 N.R. 326; 2006 SCC 32, refd to. [para. 57].

Attorney General's Reference (No. 3 of 2003), [2005] Q.B. 73; 2004 EWCA Crim. 868, refd to. [para. 57].

Lewis v. Great Western Railway Co. (1877), 3 Q.B. 195 (C.A.), refd to. [para. 59].

Thomas Cook Group Ltd. v. Air Malta Co., [1997] 2 Lloyd's Rep. 399 (Q.B.), refd to. [para. 60].

Russell v. Canadian General Insurance Co. (1999), 11 C.C.L.I.(3d) 284 (Ont. Gen. Div.), refd to. [para. 82].

Avgeropoulos v. Karanasos (1969) 6 D.L.R.(3d) 34 (Ont. Dist. Ct.), refd to. [para. 82].

Forder v. Great Western Railway Co., [1905] 2 K.B. 532, refd to. [para 87].

Horabin v. British Overseas Airways Corp., [1952] 2 Lloyd's Rep. 450 (Q.B.), refd to. [para. 87].

Kenyon Son v. Baxter, Hoare & Co., [1971] 1 Lloyd's Rep. 232 (Q.B.), refd to. [para. 87].

Compania Maritima San Basilio S.A. v. The Oceanus Mutual Underwriting Association (Bermuda) Ltd. (The "Eurysthenes"), [1976] 2 Lloyd's Rep. 171 (C.A.), refd to. [para. 87].

Rustenburg Platinum Mines Ltd. v. South African Airways, [1977] 1 Lloyd's Rep. 564 (Q.B. Com. Ct.), refd to. [para. 87].

Sidney G. Jones Ltd. v. Martin Bencher Ltd., [1986] 1 Lloyd's Rep. 54 (Q.B.), refd to. [para. 87].

National Oilwell (U.K.) Ltd. v. Davy Offshore Ltd., [1993] 2 Lloyd's Rep. 582 (Q.B. Com. Ct.), refd to. [para. 87].

National Semiconductors (U.K.) Ltd. v. UPS Ltd., [1996] 2 Lloyd's Rep. 212 (Q.B. Com. Ct.), refd to. [para. 87].

Laceys Footwear (Wholesale) Ltd. v. Bowler International Freight Ltd., [1997] 2 Lloyd's Rep. 369 (C.A.), refd to. [para. 87].

Symons General Insurance Co. v. Sabau Construction Inc., [1986] R.J.Q. 2823, refd to. [para. 93].

Aetna Casualty and Surety Co. v. Groupe Estrie, mutuelle d'assurance contre l'incendie, [1990] R.J.Q. 1792 (C.A.), refd to. [para. 93].

Terrasses Jewellers Inc. v. Triglav, [1983] 1 S.C.R. 283; 54 N.R. 321, refd to. [para. 93].

Audet v. Transamerica Life Canada, [2012] R.J.Q. 1844; 2012 QCCA 1746, refd to. [para. 95].

Canadian Indemnity Co. v. Walkem Machinery and Equipment Ltd. et al., [1976] 1 S.C.R. 309; 3 N.R. 523, refd to. [para. 97].

Statutes Noticed:

Civil Code of Québec, art. 2464 [para. 68].

Convention on Limitation of Liability for Maritime Claims, 1976, art. 2 [para. 27]; art. 4 [para. 18].

Marine Insurance Act, S.C. 1993, c. 22, sect. 53(2) [para. 36].

Marine Liability Act, S.C. 2001, c. 6, sect. 29 [para. 18].

Authors and Works Noticed:

Belleau, Claude, L'harmonisation du droit civil et de la common law en droit des assurances au Québec (1991), 32 C. de D. 971, p. 973 [para. 93].

Brown, Craig, Insurance Law in Canada (2002) (2013 Looseleaf Updated, Release 7), pp. 8 to 33 [para. 97].

Cane, Peter, Mens Rea in Tort Law (2000), 20 Oxford J. Legal Stud. 533, pp. 535 [para. 57]; 538 [para. 90].

Damar, Duygu, Wilful Misconduct in International Transport Law (2011), pp. 26 [para. 101]; 41 [para. 55]; 168 [para. 24]; 173 [paras. 28, 29]; 272, 273 [para. 88].

Gilman, Jonathan, Arnould's Law of Marine Insurance and Average (17th Ed. 2008), p. 958 [para. 55].

Gold, Edgar, Chircop, Aldo and Kindred, Hugh, Maritime Law (2003), p. 728 [para. 24].

Griggs, Patrick, Williams, Richard and Farr, Jeremy, Limitation of Liability for Maritime Claims (4th Ed. 2005), pp. 3 [para. 24]; 36 [paras. 28, 29].

Grime, R.P. Implementation of the 1976 limitation convention (1988), 12 Marine Pol'y 306, p. 313 [para. 24].

Heerey, Peter Limitation of Maritime Claims (1994), 10 MLAANZ Journal 1, p. 3 [para. 24].

Hodges, Susan and Hill, Christopher, Principles of Maritime Law (2001), pp. 593, 594 [para. 29].

Lluelles, Didier, Précis des assurances terrestres (5th Ed. 2009), pp. 198, 199 [para. 94].

Mandaraka-Sheppart, Aleka, Modern Maritime  Law  and  Risk  Management (2nd Ed. 2007), p. 865 [para. 24].

Ogg, Terry, IMO's International Safety Management Code (The ISM Code) (1996), 1 I.J.O.S.L. 143, p. 149 [para 24].

Wilson, John F., Carriage of Goods by Sea (7th Ed. 2010), p. 288 [para. 24].

Counsel:

Nicholas J. Spillane and Victoria Leonidova, for the appellants;

Jean Grégoire, John O'Connor and Michel Jolin, for the respondents, the TELUS Communications Company, Hydro-Québec and Bell Canada;

Jean-François Bilodeau and Nick Krnjevic, for the respondent, the Royal & Sun Alliance Insurance Company of Canada.

Solicitors of Record:

Brisset Bishop, Montreal, Quebec, for the appellants;

Langlois Kronström Desjardins, Quebec, Quebec, for the respondents, TELUS Communications Company, Hydro-Québec and Bell Canada;

Robinson Sheppard Shapiro, Montreal, Quebec, for the respondent, the Royal & Sun Alliance Insurance Company of Canada.

This appeal was heard on November 15, 2013, by McLachlin, C.J.C., Rothstein, Cromwell, Karakatsanis and Wagner, JJ., of the Supreme Court of Canada. The following reasons were delivered by the court on April 23, 2014, including the following opinions:

Cromwell, J. (McLachlin, C.J.C., Rothstein and Karakatsanis, JJ., concurring) - see paragraphs 1 to 72;

Wagner, J., dissenting in part - see paragraphs 73 to 110.