Arcelormittal Mines Canada Inc. v. AK Steel Corporation

In Admiralty Jurisdiction on (Updated )

Précis: The Federal Court of Appeal confirmed the trial judgment holding that the sale of cargo to be transported by ship was a matter of navigation and shipping, and within the jurisdiction of the Federal Court and further confirming the judgment for indemnity obtained by the purchaser of a cargo of iron ore pellets against the vendor of the pellets on the basis that the pellets delivered had excessive moisture content.

Facts: The plaintiff was the purchaser of a cargo of iron ore pellets and the voyage charterer of the “Rt. Hon. Paul J. Martin”, a self-unloading bulk carrier and the ship that was to carry the pellets. The defendant was the vendor of the pellets. The cargo was sold FOB ship’s hold. The terms of sale specified the cargo was to have a maximum moisture content of 2.5% (to prevent freezing) and required the vendor to indemnify the purchaser for additional costs incurred in the event the pellets were frozen. The cargo of iron ore pellets was loaded in very cold weather, about -18 degrees Celsius, at Port Cartier, Quebec. The “Rt. Hon. Paul J. Martin” then sailed to Toledo, Ohio where it was to discharge the cargo. Upon discharge it was discovered that the cargo was frozen and, as a consequence, the plaintiff was required to pay to the ship owner demurrage, additional loading costs and costs to repair damage to the ship during the unloading. The plaintiff brought this indemnity action against the defendant alleging that the moisture content of the cargo was in excess of that required by the contract of sale. The defendant argued that it was not in breach of its contract with the plaintiff, that the cause of the loss was the failure of the carrier to properly load, carry and discharge the cargo and that it had not been given timely notice of the alleged breach of contract.

At trial (2014 FC 118), the Judge addressed two issues; whether the Federal Court had jurisdiction; and whether the defendant was liable. On the first issue, the trial Judge held that the claim was really about the suitability or fitness of the cargo for transport, a matter of navigation and shipping, and therefore within the maritime jurisdiction of the Federal Court. On the second issue the trial Judge held that the cause of the freezing was the excessive moisture content of the pellets and was not due to any fault on the part of the carrier. The Judge further held the defendant was aware of the breach before the plaintiff and did not require notice. Accordingly, judgment was rendered for the plaintiff. The defendant appealed the substantive finding that it was liable (but apparently not the decision concerning the jurisdiction of the Federal Court).

Decision: Appeal dismissed.

Held: The appellant challenges the trial Judge’s findings on liability, reasonable notice, and spoliation. These are, however, questions of fact or mixed fact and law and the appellant must show the Judge committed a palpable and overriding error. The appellant has failed to meet this threshold. The Judge’s findings are supported by the evidence.