Précis: The Federal Court and Federal Court of Appeal gave effect to an exclusion clause in a ship lifting contract notwithstanding that the clause did not specifically refer to negligence.
Facts: The fishing boat "Myrana I" was damaged when it was dropped into the water while being lifted with a crane. The ship owner demanded damages in excess of $550,000 from the crane operator and its employee operating the crane at the time. The crane operator and employee denied liability and further asserted that they were protected by an exclusion clause in the contract. The crane operator, its employee and their insurer commenced this action for a declaration that they had no liability. The defendant ship owner counter-claimed for damages to the ship. The exclusion clause in the contract provided "I accept liability for any risk resulting from the towage, docking, wintering and/or launching of this vessel, and I release the Owner of this dry dock and its Operator, ____, from any civil liability resulting from these associated operations or handling".
At first instance (2014 FC 456), the trial Judge held the plaintiffs had failed to rebut the presumption that they were liable as bailees. However, the Judge further held the exclusion clause was broad enough in scope to cover any negligence. The Judge relied on Tercon Contractors v British Columbia, 2010 SCC 4, where Justice Binnie said "There is nothing inherently unreasonable about exclusion clauses…" and added that there are many valid reasons for contracting parties to use exemption clauses, most notable to allocate risks. The trial Judge further held that the clause was neither abusive nor draconian and that the defendant should have been aware of it as the contract was sent to the defendant on at least 36 prior occasions. The defendant appealed.
Decision: Appeal dismissed.
Held: The interpretation of a contract is a question of mixed fact and law and is reviewable only if the trial Judge made a palpable and overriding error. The same is true of the Judge’s conclusion as to whether the exclusion clause was harsh or unconscionable. The defendant argues that the clause does not expressly exclude negligence and the trial Judge failed to read it contra proferentem. However, the clause in question releases the plaintiff from “any civil liability” and it is clear that the term “liability” is synonymous with negligence. There was no ambiguity in the clause so as to attract the contra proferentem doctrine. In addition, the Judge’s finding that the defendant was bound by the exclusion clause is supported by the evidence as is his conclusion that the clause was not abusive or draconian. “Allocating the risks makes it possible to avoid disputes and the great expenses these entail.”