Bow Valley Husky Ltd. (1997), 158 Nfld. & P.E.I.R. 269 (SCC);
490 A.P.R. 269
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: [1997] Nfld. & P.E.I.R. TBEd. DE.011
Husky Oil Operations Ltd. (appellant/plaintiff) v. Saint John Shipbuilding Limited, Raychem Canada Limited and Raychem Corporation (respondents/defendants) and Bow Valley Husky (Bermuda) Ltd. and Bow Valley Industries Ltd. (plaintiffs)
Bow Valley Industries Ltd. (appellant/plaintiff) v. Saint John Shipbuilding Limited, Raychem Canada Limited and Raychem Corporation (respondents/defendants) and Bow Valley Husky (Bermuda) Ltd. and Husky Oil Operations Ltd. (plaintiffs)
Saint John Shipbuilding Limited (appellant by cross-appeal/defendant) v. Bow Valley Husky (Bermuda) Ltd., Husky Oil Operations Ltd. and Bow Valley Industries Ltd. (respondents by cross- appeal/plaintiffs) and Raychem Canada Limited and Raychem Corporation (defendants)
Raychem Canada Limited and Raychem Corporation (appellants by cross-appeal/defendants) v. Bow Valley Husky (Bermuda) Ltd., Husky Oil Operations Ltd. and Bow Valley Industries Ltd. (respondents by cross-appeal/plaintiffs) and Saint John Shipbuilding Limited (defendant)
Bow Valley Husky (Bermuda) Ltd. (appellant by cross-appeal/plaintiff) v. Saint John Shipbuilding Limited, Raychem Canada Limited and Raychem Corporation (respondents by cross- appeal/defendants) and Husky Oil Operations Ltd. and Bow Valley Industries Ltd. (plaintiffs)
(24855)
Indexed As: Bow Valley Husky (Bermuda) Ltd. et al. v. Saint John Shipbuilding Ltd. et al.
Supreme Court of Canada
La Forest, Sopinka*, Gonthier Cory, McLachlin, Iacobucci and Major, JJ.
December 18, 1997.
Summary:
The plaintiffs Husky Oil Operations Ltd. (HOOL) and Bow Valley Industries Ltd. (BVI) formed the plaintiff Bow Valley Husky (Bermuda) Ltd. (BVHB) and transferred ownership of a not yet built oil rig to BVHB. HOOL and BVI contracted with BVHB for the rig’s hire. While drilling on the Grand Banks, a fire caused damage to the rig’s electrical cables and it had to be towed to port for repairs. The plaintiffs sued Saint John Shipbuilding Ltd. (SJSL) (the builder of the rig) and Raychem Canada Ltd. and Raychem Corporation (the supplier and manufacturer of a heat trace system installed on the rig). BVHB claimed for loss of revenue and damages for the cost of repairs. BVI and HOOL claimed for loss of monies paid while the rig was out of service.
The Newfoundland Supreme Court, Trial Division, in a decision reported 118 Nfld. & P.E.I.R. 271; 369 A.P.R. 271, held that fault should be apportioned 60% to the plaintiffs and 40% to the defendants. However, the plaintiffs could not recover from the defendants because the case was governed by Canadian maritime law, which did not provide for apportionment of liability.
The defendants sought clarification as to how the 40% fault would have been apportioned between them if the Contributory Negligence Act had applied and apportionment been allowed.
The Newfoundland Supreme Court, Trial Division, in a decision reported 120 Nfld. & P.E.I.R. 228; 369 A.P.R. 228, held that if the Contributory Negligence Act had applied, liability would have been divided equally between the Raychem defendants and SJSL and the defendants would have been jointly and severally liable. The plaintiffs appealed the trial decision.
The Newfoundland Court of Appeal, in a decision reported 130 Nfld. & P.E.I.R. 92; 405 A.P.R. 92, allowed the appeal. The court held that BVHB was entitled to 40% of its damages. HOOL and BVI appealed. BVHB and the defendants cross-appealed.
The Supreme Court of Canada dismissed the appeal, BVHB’s cross-appeal and the Raychem defendants’ cross-appeal. The court allowed SJSL’s cross-appeal. La Forest and McLachlin, JJ., dissenting in part, would also have dismissed SJSL’s cross-appeal.
* Sopinka, J., took no part in the judgment.
Admiralty – Topic 6025
Principles of law – Canadian maritime law – Contributory negligence – While drilling on the Grand Banks, an oil rig’s electrical cables were damaged by fire – The rig’s owner and others sued the rig’s builder and others for damages – The Supreme Court of Canada held that the case was governed by maritime law and the Newfoundland Contributory Negligence Act did not apply – The court removed the maritime contributory negligence bar to allow apportionment of liability between plaintiffs and defendants – The court held that a defendant’s liability was joint and several, subject to a right of contribution between defendants – See paragraphs 1 to 13, 94 to 117.
Admiralty – Topic 6030
Principles of law – Canadian maritime law – Application – [See
Admiralty – Topic 6025
].
Company Law – Topic 313
Nature of corporations – Lifting the corporate veil – Related companies – HOOL and BVI formed BVHB and transferred ownership of an oil rig to BVHB – HOOL and BVI contracted with BVHB for the rig’s hire – A fire damaged the rig – HOOL, BVI and BVHB sued the rig’s builder and others for damages – The trial judge held that BVHB’s contributory negligence was attributable to all three plaintiffs, where BVHB was created as part of a joint venture by HOOL and BVI and it was a “stand-in” for the other plaintiffs – The appellate court disagreed, holding that there were no grounds to lift the corporate veil – The Supreme Court of Canada also held that there was no joint venture – See paragraphs 1 to 13, 62.
Contracts – Topic 2126
Terms – Express terms – Exclusionary clauses – Interpretation – A fire damaged an oil rig’s electrical cables – The trial judge found that the fire started when an electrical fault occurred on the rig’s heat trace system causing arcing – It was likely that the thermaclad wrapping used in conjunction with the system caught fire and that fire caught onto the residue on dirty cables – The thermaclad was “owner directed supply” – The trial judge held, inter alia, that the rig’s builder (SJSL) and the system’s manufacturer and supplier were negligent in failing to warn that the thermaclad wrap was flammable – The Supreme Court of Canada agreed that SJSL had a duty to warn, but held that the duty was negated by exclusionary provisions in the construction contract respecting owner directed supply – See paragraphs 1 to 13.
Contracts – Topic 4005
Remedies for breach – Negligent breach – Availability of tort action – [See
Contracts – Topic 2126
].
Contracts – Topic 4005
Remedies for breach – Negligent breach – Availability of tort action – The Supreme Court of Canada stated that where the planned contractual obligations of two parties negate tort liability, contract will “trump” tort – See paragraphs 3, 40.
Contracts – Topic 4605
Discharge and termination – Accord and satisfaction – What constitutes – An oil rig builder was sued after a fire damaged the rig’s electrical cables – The plaintiffs sued in contract and tort – The appellate court held that there was no action for breach of contract because there was a valid accord and satisfaction – However, the accord and satisfaction did not waive any tort action – The Supreme Court of Canada agreed that the contractual issues were settled and no longer litigable – See paragraphs 1 to 13, 118 to 123.
Damages – Topic 531
Limits of compensatory damages – Remoteness – Torts – Recoverable damages – Purely economic loss – The Supreme Court of Canada revisited its decision in Canadian National Railway Co. v. Norsk Pacific Steamship Co. (1992), addressing the issue of where contractual relational economic loss can, and where it cannot, be recovered – See paragraphs 1 to 2, 55 to 69.
Damages – Topic 531
Limits of compensatory damages – Remoteness – Torts – Recoverable damages – Purely economic loss – HOOL and BVI formed BVHB and transferred ownership of an oil rig to BVHB – HOOL and BVI contracted with BVHB for the rig’s hire – A fire damaged the rig – HOOL and BVI sued the rig’s builder and others, seeking reimbursement for their day rates which they alleged they were still required to pay under their contract with BVHB – The Supreme Court of Canada held that the case did not fall into any of the three categories of recovery of relational economic loss defined to date – There was no joint venture, HOOL and BVI had no possessory or proprietary interest in the rig and the case was not one of general averaging – See paragraphs 1 to 13, 61 to 62.
Damages – Topic 531
Limits of compensatory damages – Remoteness – Torts – Recoverable damages – Purely economic loss – HOOL and BVI formed BVHB and transferred ownership of an oil rig to BVHB – HOOL and BVI contracted with BVHB for the rig’s hire – A fire damaged the rig – HOOL and BVI sued the rig’s builder and others, seeking reimbursement for their day rates which they alleged they were still required to pay under their contract with BVHB – HOOL and BVI argued that the loss was not contractual relational economic loss, but loss transferred from BVHB because they were involved in a common venture with BVHB – The Supreme Court of Canada rejected the argument – See paragraphs 1 to 13, 70 to 71.
Damages – Topic 531
Limits of compensatory damages – Remoteness – Torts – Recoverable damages – Purely economic loss – HOOL and BVI formed BVHB and transferred ownership of an oil rig to BVHB – BVHB contracted with HOOL and BVI for the rig’s hire – A fire damaged the rig – HOOL and BVI sued the rig’s builder and others, seeking reimbursement for their day rates which they alleged they were still required to pay under their contract with BVHB – The Supreme Court of Canada held that HOOL and BVI could not recover this contractual relational economic loss (i.e., loss suffered as a result of damage to the property of a third party) – While the defendants owed HOOL and BVI a duty to warn, it was negatived by policy considerations, particularly, the problem of indeterminate liability – See paragraphs 1 to 13, 55 to 83.
Torts – Topic 61
Negligence – Causation – Causal connection – A fire damaged an oil rig’s electrical cables – The trial judge found that the fire started when an electrical fault occurred on the rig’s heat trace system causing arcing – It was likely that the thermaclad wrapping used in conjunction with the system caught fire and that fire caught onto the residue on dirty cables – The trial judge held that the rig owner (BVHB) was negligent for operating the system without a ground fault circuit breaker system to prevent arcing and the builder, manufacturer and supplier were negligent in failing to warn that the thermaclad wrap was flammable – The Supreme Court of Canada affirmed that causation was established on either a subjective or an objective standard – A reasonable plaintiff or BVHB itself would have either declined to use thermaclad or taken steps to deal with its inflammability had it been warned – See paragraphs 1 to 13, 51 to 52.
Torts – Topic 4303
Suppliers of goods – Negligence – Contributory negligence – Misuse – [See
Torts – Topic 6603
].
Torts – Topic 4335
Suppliers of goods – Negligence – Manufacturers – Duty to warn users respecting dangers – HOOL and BVI formed BVHB (plaintiffs) and transferred ownership of an oil rig to BVHB – HOOL and BVI contracted with BVHB for the rig’s hire – A fire damaged the rig – The trial judge found that thermaclad wrapping used in conjunction with the heat trace system contributed to the fire – He found that the rig’s builder and the manufacturer and supplier of the system (defendants) were negligent in failing to warn that the thermaclad wrap was flammable – The appellate court held that there was no duty on the defendants to warn HOOL and BVI where there was no joint venture between HOOL, BVI and BVHB – However, the defendants breached their duty of care to HOOL and BVI by failing to warn BVHB – The Supreme Court of Canada held that the duty to warn extended to all the plaintiffs – See paragraphs 1 to 13, 72 to 74.
Torts – Topic 4468
Suppliers of goods – Defences – Products liability – “Learned intermediary defence” – A fire occurred on an oil rig – Thermaclad wrap, used in conjunction with a heat trace system, contributed to the fire because it was flammable – The thermaclad was owner directed supply and the manufacturer and supplier of the thermaclad had direct contact with the rig’s owner – The manufacturer and supplier submitted that they had no duty to warn the owner where they had advised the rig’s builder – The Supreme Court of Canada held that the manufacturer and supplier were not entitled to rely on the learned intermediary defence – See paragraphs 1 to 13, 48 to 50.
Torts – Topic 6601
Defences – Contributory negligence – What constitutes – [See
Torts – Topic 6603
].
Torts – Topic 6602
Defences – Contributory negligence – Application of contributory negligence statutes – [See
Admiralty – Topic 6025
].
Torts – Topic 6603
Defences – Contributory negligence – Apportionment of fault – A fire damaged an oil rig’s electrical cables – The trial judge found that the fire started when an electrical fault occurred on the rig’s heat trace system causing arcing – It was likely that the thermaclad wrapping used in conjunction with the system caught fire and that fire caught onto the residue on dirty cables – The trial judge held that the rig’s owner (BVHB) was 60% contributorily negligent for operating the system without a ground fault circuit breaker system to prevent arcing and in allowing residue to accumulate on the cables – The rig’s builder (SJSL) and the system’s manufacturer and supplier were negligent in failing to warn that the thermaclad wrap was flammable – SJSL was negligent in failing to provide approval certificates – The appellate court reversed the findings that BVHB was negligent in allowing residue to accumulate on the cables and that SJSL had a duty to provide the certificates, but did not interfere with the apportionment of liability – The Supreme Court of Canada affirmed that BVHB was 60% liable – However, the manufacturer and supplier were liable for the entire 40% quantum where SJSL had contractually protected itself against liability – See paragraphs 1 to 13, 53 to 54, 84 to 93.
Torts – Topic 7100
Joint and concurrent tortfeasors – Elements of joint liability – What constitutes joint or concerted action – [See
Company Law – Topic 313
].
Cases Noticed:
Canadian National Railway Co. et al. v. Norsk Pacific Steamship Co. and Tug Jervis Crown et al., [1992] 1 S.C.R. 1021; 137 N.R. 241, appld. [paras. 1, 58].
Falcon Lumber Ltd. v. Canada Wood Specialty Co. (1978), 95 D.L.R.(3d) 503 (Ont. H.C.), dist. [para. 8].
Miida Electronics Inc. v. Mitsui O.S.K. Lines Ltd. and ITO-International Terminal Operators Ltd., [1986] 1 S.C.R. 752; 68 N.R. 241, folld. [paras. 9, 97]
ITO-International Terminal Operators Ltd. v. Miida Electronics Inc. – see Miida Electronics Inc. v. Mitsui O.S.K. Lines Ltd. and ITO-International Terminal Operators Ltd.
Lamport & Holt Lines Ltd. v. Coubro & Scrutton (M. & I.) Ltd. (The “Raphael”), [1982] 2 Lloyd’s Rep. 42 (C.A.), refd to. [para. 10].
Upper Lakes Shipping Ltd. v. St. Lawrence Cement Inc. (1992), 89 D.L.R.(4th) 722 (Ont. C.A.), refd to. [para. 10].
Giffels Associates Ltd. v. Eastern Construction Co. et al., [1978] 2 S.C.R. 1346; 19 N.R. 298, refd to. [paras. 12, 44].
Lambert v. Lastoplex Chemicals Co., [1972] S.C.R. 569, refd to. [para. 32].
Hollis v. Dow Corning Corp. et al., [1995] 4 S.C.R. 634; 190 N.R. 241; 67 B.C.A.C. 1; 111 W.A.C. 1, refd to. [para. 32].
Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189, refd to. [para. 32].
BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 39].
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. 40].
London Drugs Ltd. v. Kuehne & Nagel International Ltd. – see London Drugs Ltd. v. Brassart and Vanwinkel.
Central Trust Co. v. Rafuse and Cordon, [1986] 2 S.C.R. 147; 69 N.R. 321; 75 N.S.R.(2d) 109; 186 A.P.R. 109, refd to. [para. 40].
Syncrude Canada Ltd. et al. v. Hunter Engineering Co. et al., [1989] 1 S.C.R. 426; 92 N.R. 1, refd to. [para. 41].
Hunter Engineering Co. v. Syncrude Canada Ltd. – see Syncrude Canada Ltd. et al. v. Hunter Engineering Co. et al.
University of Regina v. Pettick et al. (1991), 90 Sask.R. 241; 45 C.L.R. 1 (C.A.), refd to. [para. 43].
Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 44].
D’Amato et al. v. Badger et al., [1996] 2 S.C.R. 1071; 199 N.R. 341; 79 B.C.A.C. 110; 129 W.A.C. 110, refd to. [para. 56].
Ultramares Corp. v. Touche (1931), 174 N.E. 441 (N.Y.), refd to. [para. 56].
Murphy v. Bentwood District Council, [1991] 1 A.C. 398 (H.L.), refd to. [para. 57].
Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.), refd to. [para. 60].
Nielsen v. Kamloops (City) and Hughes et al., [1984] 2 S.C.R. 2; 54 N.R. 1, refd to. [para. 60].
Hercules Managements Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241, refd to. [para. 64].
Winnipeg Condominium Corp. No. 36 v. Bird Construction Co. et al., [1995] 1 S.C.R. 85; 176 N.R. 321; 100 Man.R.(2d) 241; 91 W.A.C. 241, refd to. [para. 78].
Nance v. British Columbia Electric Railway Co., [1951] A.C. 601 (P.C.), refd to. [para. 86].
Jones v. Livox Quarries Ltd., [1952] 2 Q.B. 608 (C.A.), refd to. [para. 89].
Snell v. Farrell, [1990] 2 S.C.R. 311; 110 N.R. 200; 107 N.B.R.(2d) 94; 267 A.P.R. 94, refd to. [para. 89].
Hughes v. Lord Advocate, [1963] A.C. 837 (H.L.), refd to. [para. 89].
Overseas Tankship (U.K.) Ltd. v. Miller Steamship Co. Pty, [1967] 1 A.C. 617 (P.C.), refd to. [para. 89].
Sparks v. Thompson, [1975] 1 S.C.R. 618; 1 N.R. 387; 6 N.S.R.(2d) 481, refd to. [para. 91].
Asody v. Taylor, [1975] 2 S.C.R. 414; 3 N.R. 381, refd to. [para. 91].
Whitbread v. Walley et al., [1990] 3 S.C.R. 1273; 120 N.R. 109, refd to. [para. 97].
Stein Estate v. Ship Kathy K, [1976] 2 S.C.R. 802; 6 N.R. 359; 62 D.L.R.(3d) 1, refd to. [para. 102].
Butterfield v. Forrester (1809), 11 East. 60; 103 E.R. 926 (K.B.), refd to. [para. 103].
Toronto Transportation Commission v. R., [1949] S.C.R. 510, refd to. [para. 103].
Sobieski, The (1949), 82 Ll. L.R. 370 (C.A.), refd to. [para. 103].
Gartland Steamship Co. v. R., [1960] S.C.R. 315, refd to. [para. 103].
Algoma Central & Hudson Bay Railway Co. v. Manitoba Pool Elevators Ltd., [1964] Ex. C.R. 505, refd to. [para. 103].
Fraser River Harbour Commission v. Hiro Maru, The, [1974] 1 F.C. 490 (T.D.), refd to. [para. 103].
Watkins v. Olafson et al., [1989] 2 S.C.R. 750; 100 N.R. 161; 61 Man.R.(2d) 81; 61 D.L.R.(4th) 577; [1989] 6 W.W.R. 481; 39 B.C.L.R.(2d) 294; 50 C.C.L.T. 101, refd to. [para. 106]
R. v. Salituro, [1991] 3 S.C.R. 654; 131 N.R. 161; 50 O.A.C. 125; 68 C.C.C.(3d) 289, refd to. [para. 106].
Peters v. A.B.C. Boat Charters Ltd. (1992), 73 B.C.L.R.(2d) 389 (S.C.), refd to. [para. 106].
Max Morris, The (1890), 137 U.S. 1, refd to. [para. 109].
Cooper Stevedoring Co. v. Fritz Kopke Inc. (1974), 417 U.S. 106, refd to. [para. 109].
United States v. Reliable Transfer Co. (1975), 421 U.S. 397, refd to. [para. 109].
Edmonds v. Compagnie Generale Transatlantique (1979), 443 U.S. 256, refd to. [para. 113].
Merryweather v. Nixan (1799), 8 T.R. 186; 101 E.R. 1337, refd to. [para. 114].
Sparrows Point v. Greater Vancouver Water District, [1951] S.C.R. 396, refd to. [para. 114].
British Russian Gazette and Trade Outlook Ltd. v. Associated Newspapers Ltd., [1933] 2 K.B. 616 (C.A.), refd to. [para. 121].
Authors and Works Noticed:
Baudouin, Jean-Louis, La responsabilité civile (4th Ed. 1994), paras. 490-91 [para. 110].
Baudouin, Jean-Louis, Les obligations (4th Ed. 1993), para. 870 [para. 113].
Benedict on Admiralty (7th Ed. 1995) (1997 looseleaf update)(release 73), vol. 2, p. 1-6 [para. 113].
Canada, Department of Justice, Admiralty and Maritime Law Section, Eliminating Outmoded Common Law Defences in Maritime Torts, Discussion Paper, generally [para. 104], pp. 5 to 6 [para. 114].
Cane, Peter, Tort Law and Economic Interests (1991), p. 293 [para. 40].
Daley, Warren B., and Falter, George H., Contribution and Indemnity in Maritime Actions, generally [para. 113].
Fleming, John, Tort in a Contractual Matrix (1993), 5 Canterbury L. Rev. 269, p. 270 [para. 40].
Heuston, R.F.V., Buckley, R.A., Salmond & Heuston on the Law of Torts (21st Ed. 1996), p. 491 [para. 113].
Klar, Lewis, Contributory Negligence and Contribution Between Tortfeasors, Studies in Canadian Tort Law (1977), pp. 163-64 [para. 113].
Tetley, William, A Definition of Canadian Maritime Law (1996), 30 U.B.C.L. Rev. 137, p. 138 [para. 108].
Williams, Glanville, Joint Torts and Contributory Negligence (1951), pp. 83-84 [para. 114].
Counsel:
Anthony J. Jordan, Q.C., Eric P. Groody and Susan M. Purcell, for Husky Oil Operations Ltd.;
W. Ian C. Binnie, Q.C., Harry Underwood, Bonita Croft and Camille A. Nelson, for Bow Valley Industries Ltd.;
Michael F. Harrington Q.C., and Colin St. R. Seviour, for Bow Valley Husky (Bermuda) Ltd.;
J. Edgar Sexton, Q.C., John F. Rook, Q.C., Stephen J. May and Donald D. Hanna, for Saint John Shipbuilding Ltd.;
W. Wylie Spicer, Q.C., and Aidan J. Meade, for Raychem Canada Ltd. and Raychem Corp.
Solicitors of Record:
Code Hunter Wittmann, Calgary, Alberta, for Husky Oil Operations Ltd.;
McCarthy Tétrault, Toronto, Ontario, for Bow Valley Industries Ltd.;
Stewart McKelvey Stirling Scales, St. John’s, Newfoundland, for Bow Valley Husky (Bermuda) Ltd.;
Osler, Hoskin & Harcourt, Toronto, Ontario, for Saint John Shipbuilding Ltd.;
McInnes Cooper & Robertson, St. John’s, Newfoundland, for Raychem Canada Ltd. and Raychem Corp.
This appeal was heard on June 19, 1997, by La Forest, Sopinka*, Gonthier, Cory, McLachlin, Iacobucci and Major, JJ., of the Supreme Court of Canada.
The judgment of the Supreme Court of Canada was delivered in both official languages on December 18, 1997, and the following opinions were filed:
Iacobucci, J. (Gonthier, Cory and Major, JJ., concurring) – see paragraphs 1 to 13;
McLachlin, J., dissenting in part (La Forest, J., concurring) – see paragraphs 14 to 124.
