The Mercury XII (aka Wells Fargo) v. The MLT-3

In Carriage of Goods by Sea, In Rem Actions and Arrest on (Updated )

Précis: The Federal Court of Appeal held that the hire of a tug and barge was not a contract of carriage to which the Hague-Visby Rules applied.

The plaintiff’s truck was dumped into the water while being loaded onto a barge. At the time, the lines securing the barge to the loading ramp had been untied due to the rising tide. As a consequence, the barge moved away from the ramp when the truck was half on the barge. The driver of the truck applied the air brakes of the truck hoping to stop the movement of the barge away from the ramp but this was unsuccessful and the front end of truck became submerged. The parties then attempted to pull the truck onto the barge by attaching a line between the tug and truck. However, the truck tipped and sank. The plaintiff brought this action in rem against the barge and in personam against the owner/charterer of the tug and barge. In their defence, the defendants alleged the plaintiff was contributorily negligent and that there was no in rem action as the barge was not the instrument of damage. A further issue was whether the one year limitation period in the Hague-Visby Rules applied.

The trial Judge held (cited as Wells Fargo v The Barge "MLT 3", 2012 FC 738) that the defendants were 90% at fault and the plaintiff 10%. The defendants were negligent for loading the truck without having the mooring lines attached. The plaintiff was negligent for applying the air brakes. Concerning the existence of a claim in rem against the barge, the trial Judge held s. 22(2)(d) of the Federal Courts Act requires that "the ship itself must be the actual instrument by which the damage was done". As the barge was not the actual instrument of the damage, he held there was no claim under s. 22(2)(d) and no action in rem. With respect to the application of the one year limitation period in the Hague-Visby Rules, the trial Judge noted that section 43(2) of the Marine Liability Act provides that the rules apply to domestic carriage "unless there is no bill of lading and the contract stipulates that the Rules do not apply". The trial Judge held, however, that the lack of a bill of lading was sufficient by itself to oust the Rules. He said “oral contracts not evidenced by or incorporated into a bill of lading or similar document are not caught by subsection 43(2) of the Marine Liability Act”. The defendants appealed the ruling that that the one year limitation period in the Hague-Visby Rules did not apply.

Decision: Appeal dismissed.

Held: The trial Judge decided this issue on a grounds that had not been argued before him and the parties were in agreement that the Judge was wrong in holding that s. 43(2) of the Marine Liability Act limits the application of the Hague-Visby Rules to written contracts. The conclusion of the trial Judge was, nevertheless, correct. The appellant must prove all elements of s. 43(2) for the Rules to apply. The respondent argued that the contract was not “from one place in Canada to another place in Canada” since the contract was for a round-trip. This is “an unduly formalistic interpretation”. However, the respondent’s argument that there was no contract for the carriage of goods is accepted. A contract for the carriage of goods within the meaning of s. 43(2) does not include a contract for the charter or hire of a vessel. The plaintiff has not proven a contract for the carriage of goods. In fact, the evidence suggests a contract of hire rather than a contract of carriage. The contract was “for the use of the Tug and Barge” and charges were “on an hourly basis” regardless of whether there was cargo on the barge.

Comment: The parties also addressed whether the trial Judge had erred in holding the Hague-Visby Rules did not apply simply because no bill of lading had been issued. The Federal Court of Appeal did not address these arguments since it concluded the Rules did not apply on other grounds.