In Peracomo Inc. v. Société Telus Communication, 2012 FCA 199, the Federal Court of Appeal has upheld Justice Harrington judgment in the “cable-cutting case”.

Vallée, a snow crab fisher, and his wholly-owned company (Peracomo Inc.) were held liable for nearly one million dollars in damages, after Vallée cut the submarine cable belonging to Telus, which stretched across the bed of the St. Lawrence River between Pointe au Père and Baie Comeau, Quebec. When the anchor of his crab cage got hooked on the cable, Vallée, on two occasions, had hauled the cable out of the water and freed the anchor by cutting the cable with an electric saw. He mistakenly thought that the cable had been abandoned. Harrington J. concluded: 1) that Vallée and his company were jointly and severally liable for the damage, because Vallée (had his vessel’s marine charts been up to date) should have known of the cable’s existence as a navigational hazard; 2) that neither Vallée nor his company was entitled to limit liability to $500,000 under the Marine Liability Act, section 29, because Vallée’s cutting of the cable was intentional or, reckless within the meaning of the Convention of Limitation of Liability for Maritime Claims and 3) that the insurer of the fishing vessel was not liable to compensate Vallée or his company for the loss, because the intentional cutting of the cable constituted “damage attributable to the wi ful misconduct” of the insured, within the meaning of subsection 53(2) of Canada’s Marine Insurance Act. The defendants appealed.

The Federal Court of Appeal first upheld the trial judge on the liability and contributory negligence issues. As the judge had determined, Vallée should have known of the cable’s presence, as was required by the Charts and Nautical Publications Regulations, 1995 (SOR/95- 149), and it was open to the judge to find that the cable was a “navigational hazard”. Vallée was not aware, as he should have been, of the repeated notices to mariners about the cable published by the federal government, especially after he first encountered the hazard in 2005. Whatever he saw at the museum in Baie Comeau leading him to conclude that the cable had been abandoned was not a marine chart, and he never made inquiries about the cable. His vessel had an outdated marine chart and an unapproved electronic chart on board, both of which predated the cable. The cable would have been visible with an updated electronic chart. The appellate judges also found that Harrington J. had committed no palpable or overriding error in concluding that there was no contributory negligence on the part of Telus, despite its failure to notify the association of crabbers to which Vallée belonged of the cable’s existence. The cause of the loss was not that failure or the failure to bury the cable or the fact that it got hooked on a snow crab anchor, but rather Vallée’s intentional and deliberate severing of the cable. He had had the “last clear chance” to avoid the accident by simply releasing the cable. Instead of doing that, he severed it. Harrington J. had also been correct in holding that Canadian maritime law included a duty of care on ship operators not to damage underwater cables or pipelines. The judge’s conclusion that Vallée’s tampering with the cable by cutting it without further investigation was a further breach of that duty of care. As Peracomo was a one-man company of which Vallée was the directing mind and will or alter ego, the judge was not in error in deciding that Vallée was personally liable for the company’s tortious conduct causing property damage. In addition, Vallée sought to limit his personal liability under the 1976 Convention, which envisages that both the shipowner and a person for whose acts he may be liable may be sued together and both found liable.

The trial judge also had reasonable grounds for deciding that the appellants were not entitled to limit their liability to $500,000 under section 29 of the Marine Liability Act. That statutory right is lost, pursuant to article 4 of the 1976 Convention, where it is proved that the loss resulted from the limitation plaintiff’s personal act or omission, committed with intent to cause such loss, or recklessly and with knowledge that such loss would probably result. Gauthier J.A., writing for the Federal Court of Appeal, was not persuaded that Harrington J. had made any reviewable error in holding that the only cause of the loss was Vallée’s cutting of the cable, which he found to be a loss caused by Vallée’s personal act, committed with intent to cause such loss. Nor had the trial judge made any palpable or overriding error in interpreting “such loss” (in a manner consistent with case law on that term and other conventions) as referring back to the loss that actually resulted and which is the subject matter of the claim in which the right to limit is asserted. Vallée did not have to know the exact value of the cable and the fact that it was in use.

Nor did the appellate court find any palpable or overriding error in Justice Harrington’s conclusion that Vallée’s deliberate and intentional conduct was a marked departure from the norm, causing a loss “attributable” to wilful misconduct, and thereby discharging the insurer from liability, in accordance with subsection 53(2) of the Marine Insurance Act. There was nothing other than Vallée’s saw that caused the loss. Therefore, his wilful misconduct was the proximate cause of that loss, within the meaning of the subsection.

It remains to be seen whether the defendants will now seek leave to appeal to the Supreme Court of Canada.