McAsphalt Marine Transport Ltd. v. Liberty International Canada

In Marine Insurance on (Updated )

This was an application for leave to appeal the decision of an arbitrator. The Applicant was the owner of the barge “Norman McLeod” which it had purchased in China. Arrangements were made to have the barge towed from Shanghai to Vancouver together with another barge also destined for Canada. Prior to the tow the Applicant arranged with its underwriters for the barge to be included on its existing insurance policy. The Respondent underwriters agreed to hold the barge covered provided: the tug was approved by a surveyor; the surveyor “attend and approve all stages of the towing operation”; the surveyor “approve prevailing weather conditions or stipulate acceptable weather criteria for each stage of the towing operation”; and, the recommendations of the surveyor were complied with. A surveyor did issue a Certificate of Approval which required, inter alia, that the departure from Shanghai or intermediate ports take place in favourable weather and on receipt of a suitable weather forecast. The tug and two barges departed Shanghai on 30 April 2001. The contemplated route was to proceed via Japan where bunkers were to be taken aboard. However, after leaving port the Master decided to take on bunkers at Nakhoda, Russia which was done. Within a few hours of leaving Nakhoda the flotilla encountered rough weather. The two barges collided and both were damaged. The Applicant paid $2.5 million to repair the “Norman McLeod” and suffered an additional $500,000 in losses. Subsequent to the incident the Applicant and Respondent entered into an agreement to submit any dispute to “final and binding” arbitration. At the arbitration, the arbitrator found that the survey warranty and Certificate of Approval constituted true warranties and that they had been breached in that the departure from the intermediate port of Nakhoda did not take place in favourable weather conditions and no surveyor attended at Nakhoda. In addition, the arbitrator found that the change of course was a deviation within the meaning of s. 43(2) of the Marine Insurance Act. (The held covered clause in the policy would have protected the Applicant if it had given the requisite notice.) Finally, the arbitrator held that there was no waiver or estoppel on the part of underwriters in sending a surveyor to survey the loss and in approving the continuation of the tow. The first issue the Court had to consider on this application was whether the parties had excluded a right of appeal. The Court noted that if the parties had provided that the arbitration was “final and binding with no right of appeal” there could be no serious argument on the issue. However, the agreement merely provided the arbitration was to be “final and binding” and therefore the Court had to determine the intent of the parties. The only evidence of this outside the agreement was a statement by the lead underwriter that “a judicial resolution would have no value in this case other than to result in heavy costs to the parties, to the benefit only of their lawyers”. The Court held that this statement taken together with the wording of the agreement indicated the parties wished their dispute to be resolved by the arbitrator without any appeals. This was sufficient to dispose of the application but the Court nevertheless continued to consider whether the issues on appeal were questions of law, upon which an appeal could be allowed, or questions of fact for which there could be no appeal. The Court held that the issues as to whether the weather warranty and the warranty requiring surveyor approval at intermediate stages were true warranties were questions of law. The arbitrator’s findings with respect to notice and waiver and estoppel were, however, questions of fact upon which no appeal was allowed.