Supreme Court Judgments

Supreme Court of Canada

Drew Brown Ltd. v. The ‘Orient Trader’, [1974] S.C.R. 1286

Date: 1972-12-22

Drew Brown Limited (Plaintiff) Appellant;

and

The Ship “Orient Trader” and her owners (Defendants) Respondents.

1972: March 14, 15, 16; 1972: December 22.

Present: Ritchie, Hall, Spence, Pigeon and Laskin.

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA

Conflict of laws—Contracts—Carriage of goods by sea—Proper law of the contract—Deviation—Application of foreign law where contract rescinded or repudiated.

Interest on claim—Interest on general average.

The respondents contracted to carry two shipments of tin slabs from Malaysia to Hamilton, Ontario. The two bills of lading contained, as is the common practice liberty clauses which purported to permit to the carrier great discretion, and clauses providing that the contract was to be subject to U.S. Law. The vessel proceeded to Toronto rather than Hamilton and it was agreed that the tin be trucked to Hamilton. Due to cargo slippage and possible danger in unloading the tin the stevedores after unloading some of the tin insisted on requirements involving much extra time and work. Thereupon, the carrier decided to proceed to Ashtabula, Ohio and discharge its cargo, including the tin, there. A fire broke out in a hold prior to the vessel departing from Toronto. The ship was a total loss and the cargo seriously damaged. There was no connection established between the deviation and the occurrence of the fire. The owners of the tin, as holders for value of the bills of lading, brought an action for damage to the cargo and the carrier counter-claimed for contribution in accordance with the general average terms of the contract. The owners of the tin contended that the deviation resulted in the rescission or repudiation of the contract which was therefore of no effect, that accordingly the clause providing that the contract was subject to U.S. Law was ineffective and that the Court should determine the rights of the parties on Canadian Law. In terms of U.S. Law the carrier could succeed unless the deviation caused the fire. The trial Judge dismissed the claim of the owners and allowed the counter-claim for general average adjustment but refused to allow

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interest to the date of judgment and this was the subject-matter of a cross-appeal.

Held (Hall and Spence JJ. dissenting): The appeal should be dismissed and the cross‑appeal should be allowed.

Per Ritchie J.: This action is brought claiming damages for breach of a contract manifested by bills of lading which contain a clause requiring them to be construed in accordance with U.S. Law, unless otherwise provided. As the parties gave legal force to their agreement in accordance with U.S. Law, that is the proper law of the contract. It was proved that U.S. Law would not hold the respondent liable in the absence of causal connection between the deviation and the fire and as no such connection was established the respondent cannot as carrier be found liable in damages.

Per Pigeon J.: All questions of substantive law pertaining to a breach of contract are governed by the law of the contract. Under the law of the United States an unreasonable deviation does not appear to deprive a carrier of the protection of the Fire Statute.

Per Laskin J.: The unreasonable deviation did not, per se, bring the contracts of carriage to an end; it entitled the appellant to avoid or terminate them and to sue for damages subject to the terms of the proper (in this case U.S.) law. The respondent is entitled to succeed in the claim for general average contribution and should have interest from the date of the general average adjustment to this date of judgment.

Per Hall and Spence JJ., dissenting: Having determined by reference to U.S. Law that there was an unreasonable deviation in the performance of this contract the contract is at an end. The appellant is not bound by either the provisions of the Fire Statute of the United States or the provisions of U.S. Law as to the interpretation of the contract. The law of the United States and the law of the U.K. and of Canada makes the liability of a carrier that of an insurer

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subject to exceptions. The respondents have failed to bring themselves within these exceptions.

[Canadian General Electric Co. Ltd. v. Pickford and Black Ltd., [1972] S.C.R. 52 applied; Livesley v. Horst, [1924] S.C.R. 605; Allen v. Hay (1922), 64 S.C.R. 76, Federal Commerce and Navigation Co. Ltd. v. Eisenerz-G.m.b.H. [1974] S.C.R. 1225, referred to]

APPEAL from a judgment of the Exchequer Court of Canada dismissing a claim for damages and allowing a counter-claim but without interest; CROSS-APPEAL from the refusal to award interest on the counter-claim. Appeal dismissed, cross-appeal allowed.

F.O. Gerity, Q.C., and T. Marshall, for the appellant.

A.R. Paterson, Q.C., and D.B. MacDougall, for the respondents.

RITCHIE J.—I agree with the reasons for judgment prepared for delivery by my brother Pigeon.

This action is brought claiming damages for breach of a contract of carriage manifested by bills of lading containing a clause which requires them to be construed in accordance with the law of the United States of America unless otherwise provided.

The appellant’s cause of action arises out of the contract and although the deviation which was proved to have taken place entitles the appellant to declare itself as no longer bound by its terms, the rights generated by that contract subsist and its breach forms the basis of the appellant’s action.

As the parties gave legal force to their agreement in accordance with the law of the United States of America, that is the proper law of the contract and the law by which, in accordance with their own choice, the legal rights and remedies of the parties, in relation to the carriage of the appellant’s cargo, are to be determined.

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As it was proved at trial that United States law would not hold the carrier respondent liable for damage to the cargo, unless there was proof of a causal connection between the deviation and the fire, and as no such causal connection has been established, the carrier cannot be found liable for damages resulting to his goods from the fire.

As I have indicated, like my brothers Pigeon and Laskin, I would dismiss this appeal with costs and I would allow the respondent’s cross-appeal with costs for the reasons stated by my brother Laskin.

The judgment of Hall and Spence was delivered by

SPENCE J. (dissenting)—This is an appeal from the judgment of Chief Justice Wells, sitting as Local Judge in Admiralty, pronounced on May 28, 1971. By that judgment Chief Justice Wells dismissed a claim by the appellant for the sum of $21,686.78 which had been claimed by the appellant as compensation for the damage to slabs of tin, and allowed a counterclaim by the respondents in the sum of $112,367.48, being the amount of the general average adjustment charged against the appellant under an adjustment of general average made on May 1, 1968.

The appellant took its action as holder for value of two bills of lading whereby the respondents had contracted to carry two shipments of tin slabs from Penang in Malaysia, to Hamilton. The bills of lading were identified as bill of lading No. D.B. 2 and bill of lading No. D.B. 3, and were produced at trial as exhibits 1 and 2. Each shipment weighed 56,000 lbs. The slabs of tin were loaded in the Orient Trader on or about June 5, 1965, the bills of lading purported to be of that date. The Orient Trader had arrived at Penang with No. 5 lower hold filled to capacity. Across the hatch which provided entry from the ’tween deck to the lower hold had been laid hatch beams set in sockets at each side of said hatchway and then across these beams,

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about 6 in number, were laid hatch boards so as to constitute a solid board covering over the hatchway. According to the evidence of Pateras, the Chief Officer of the Orient Trader, the slabs of tin were loaded in the ’tween deck area of hold No. 5 across the ship from the one wing of the ship to the other. The slabs were loaded on the deck of the ’tween deck hold to about 6 slabs in depth and then were also loaded over the forepart of the hatch cover to a depth of two or three slabs. As I have said, these slabs were consigned to Hamilton, Ontario.

After the slabs had been loaded at Penang, the Orient Trader took on another 92 metric tons of rubber consigned to Ashtabula, Ohio, and according to the evidence of Pateras, this rubber in bales was laid across the top of the slabs both on the tin which had been loaded on the deck of the ’tween decks and on the hatch cover. After the rubber had been loaded in Penang on top of the tin, it was impossible to see the square of the hatch from above. The Orient Trader then departed from Penang and called at Betawan, where it loaded a further 102 metric tons of rubber, also consigned to Ashtabula. When this rubber had all been loaded into No. 5 ’tween deck hold it filled the hold and came right up to the coaming of the hatch, that is, the coaming around the hatch on the main deck, and this was the situation which Captain Agar observed when he first boarded the Orient Trader in the Port of Toronto.

As the Orient Trader sailed through the Indian Ocean it encountered rough weather, with winds up to 8 on the Beaufort scale, and the respondents in their pleadings pleaded “perils of the sea”. However, the Ship’s Officer, Pateras, in his evidence described such weather as only what one would expect in that part of the Indian Ocean in the month of June, and therefore I think, as did Chief Justice Wells, that the defence of the “perils of the sea” may well be ignored.

The Orient Trader, rather than proceeding directly to Hamilton when it reached Lake Ontario, turned into the Port of Toronto, as it

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had much cargo to unload in that port. It was arranged between respondents and the appellant that the 1,120 slabs of tin would be unloaded in the Port of Toronto and would be carried by truck from the port to the consignee’s place of business in Hamilton. The appellant had acquiesced in this revision of the contract and had arranged for a dispatch of the trucks from Hamilton to pick up the load of tin.

The Orient Trader arrived in Toronto during the evening of Saturday, July 17, 1965. No unloading took place on that evening but the discharging did proceed from 8:00 a.m. on Sunday, the 18th of July. Captain Agar, who was Superintendent of Cullen Stevedoring, produced at trial the working report for such discharge of cargo. That report showed that on the 18th, hold No. 3 alone was opened, but on Monday, the 19th of July, a gang was discharging from hold No. 5 from 8:00 a.m. to 12:00 noon, and another stevedoring gang worked from 1:00 p.m. to 5:00 p.m. Again, on July 20th, the gang worked on hatch No. 5 from 8:00 a.m. to 12:00 noon, but thereafter were shifted to hatch No. 4. The reason given for this alteration in their unloading was that when the Ashtabula rubber which covered the tin slabs had been removed from over the forepart of the No. 5 ’tween deck hatch cover, it was discovered that one of the beams across that hatch, and upon which the hatch boards rested, had slipped from its socket from the port side and had fallen so that it rested on the cargo below. The end of the hatch beam had only descended about 18 inches, but it resulted in the hatch boards tipping so they formed a V or trough and into that trough had slipped both bales of rubber and slabs of tin. Moreover, the wall of rubber bales just to the stern of those which had been removed from the forepart of the hatch had commenced to tip forward so that they overhung the forepart of the hatch. The stevedores regarding this situation as dangerous, refused to work, and upon some safety officers being called and inspecting the situation, that refusal was confirmed and approved. The witness Peacock, an official of Peacock Shipping Limited, the special agents for Hurum Shipping Limited,

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who in turn were agents in Canada for the owners of the Orient Trader, came on board the Orient Trader and inspected this situation. He called his New York office and advised them of the situation and was told that a Captain Goussetis, representing the Hurum Shipping Company, would come to Toronto immediately. He deferred any decision until the latter’s arrival. On the next day, that is, July 21, 1965, Captain Goussetis, together with Peacock, inspected the condition and conferred with the stevedores. Captain Goussetis testified that they, i.e., the stevedores, wanted to discharge the whole ’tween deck and thereby ascertain that there was nothing wrong except the slipped beam and that such a procedure would have entailed sixteen hours or more stevedoring work.

Captain Goussetis continued to testify that the consignees of the rubber shipment in Ashtabula, Ohio, were very anxious to have that cargo, which totalled 2,100 tons, delivered to them and there were another 1,400 tons to be delivered to Detroit, and that therefore he suggested that the Orient Trader proceed to Ashtabula, and there having unloaded the rubber which had been stowed on top of the shipment of tin, with which this action is concerned, then unload that shipment of tin and ship it back to Hamilton by truck. It would appear that Goussetis imparted this intention to Mr. Peacock and Mr. Peacock notified Mr. Taylor, an official of the appellant company. Mr. Peacock testified that Mr. Taylor “was not very pleased about it but I think recognizes the situation that we are under”. Mr. Taylor also testified and his evidence was:

I objected vehemently. It was late in the morning, I had a contract for the delivery of the tin in question to the Steel Company of Canada in Hamilton during July and I couldn’t see how I could keep my terms of the contract if the goods were to be taken to Ashtabula.

Q. What response did you get to this protest?

A. It was more or less a fait accompli. There was nothing I could do about it, nor could the shipping agent do anything.

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The estimate of the delay in the arrival of the shipment of tin at Hamilton had the Orient Trader proceeded to Ashtabula, Ohio, there unloaded the rubber and then in turn transshipped the tin to Hamilton varied from four days to nine or ten days, according to evidence given by witnesses called by the respondent.

The unloading of the hatches of the Orient Trader had been well nigh completed, the ship was preparing to depart from Toronto when a fire broke out in hold No. 4. The evidence given by the District Chief of the Toronto Fire Department, who was also the District Deputy Fire Marshall, was that the fire alarm was received at 2.22 p.m. The Toronto Fire Department responded immediately with automotive equipment and also fire tugs, including one new one being used on the first occasion. Water was poured into hold No. 4 until about 2.40 p.m. Captain Mann, the Toronto Harbour Master, ascertained that the Orient Trader was so low in the water that her keel cleared the bottom by less than a foot and he feared that so soon as the keel would touch bottom the ship would roll and sink right alongside Pier No. 11 to which she had been tied. Captain Mann therefore ordered that the Orient Trader be towed away from the pier and outside of the shipping channels. Mr. Peacock evidently agreed with this, but as Captain Mann testified, the decision was his alone to make and he made it. Across the harbour lay Ward’s Island with a sandy bottom off it and Captain Mann decided that the Orient Trader “could be beached easier and safer” there. Mr. Peacock directed that the Orient Trader be beached by the bow. She was beached, water continued to be poured into the hold and the fire was still burning at 1 p.m. on July 22nd, when Fire Marshall Carson arrived. The result of the fire was that all cargo, including the slabs of tin, was very seriously damaged. The Orient Trader became a total loss and was scrapped.

The general average adjustment fixed against the appellant amounted to $112,367.48 and the appellant sustained damages of $21,686.78 cov-

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ering total loss of a portion of the shipment of tin and partial damage to the balance, causing it to be sold at a loss, together with various disbursements, such as survey fees. The appellant sued for such damages by a writ issued on August 2, 1968, and the respondents asserted their counterclaim in a statement of defence, dated March 18, 1969.

The first consideration in determining the issues involved in the appeal depends on the conditions of the contract between the parties, i.e., the bills of lading. These two bills of lading are exact counterparts and reference need only be made to one of them. Chief Justice Wells has cited in his lengthy and very carefully considered reasons for judgment the various provisions of the bills of lading. He quoted first the clause paramount:

Except as provided in the following paragraph designated ‘A’, this Bill of Lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States of America, approved April 16, 1936, and the Carrier (which term shall be deemed to include the ship and the ship-owner) shall be entitled to avail itself of all the rights and immunities and all other restrictions upon liability contained in said Act, even although the goods are not being carried to or from a port in the United States, and shall not be deemed to have surrendered any of its said rights or immunities or restrictions upon liability or to have increased any of its responsibilities or liabilities; whenever said Act shall apply, any term of this Bill of Lading which is repugnant to said Act to any extent shall be void to that extent but no further.

Clause A is not relevant, but Clause B provides:

B. The Carrier shall further be entitled to avail itself of the provisions of Sections 181 to 189 (both inclusive) of Chapter 46 of the Code of Laws of the United States of America and of all statutes supplemental and amendatory thereof and of the like statutes of other countries in so far as they may be applicable.

Clause 30 of the bill of lading:

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Unless otherwise provided, this bill of lading shall be construed in accordance with the law of the United States of America. Nevertheless, paragraph No. 16 of this bill of lading (“Both-to-Blame Clause”) to remain in effect, even if unenforcible in the Courts of the United States of America. At the Carriers’s option, the Courts of the United States of America shall have exclusive jurisdiction of all disputes arising hereunder.

It will be apparent therefore from the latter clause that the issue in this action must in so far as the interpretation of the contract is concerned, be determined in accordance with the laws of the United States of America. Dicey, in the 8th ed., at p. 1113, outlines the manner in which this foreign law is to be proved as follows:

(i) Expert evidence. It is now well settled that foreign law must, in general, be proved by expert evidence. Foreign law cannot be proved merely by putting the text of a foreign enactment before the court, nor merely by citing foreign decisions or books of authority. Such materials can only be brought before the court as part of the evidence of an expert witness, since without his assistance the court cannot evaluate or interpret them.

Duff J., as he then was, adopted a similar view in Allen v. Hay[1], at pp. 80-81:

It is not disputed that the plaintiff must fail if the right of recovery depends upon the rules of the law of British Columbia. It is therefore incumbent upon him to prove the law of the State of Washington. This he must prove as matter of fact by the evidence of persons who are experts in that law. These experts may, however, refer to code and precedents in support of their evidence and the passages and references cited by them will be treated as part of their testimony; and it is settled law that if the evidence of such witnesses is conflicting or obscure the Court may go a step further and examine and construe the passages cited for itself in order to arrive at a satisfactory conclusion.

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In compliance with this requirement, the parties adduced the evidence of two attorneys from the United States of America, Mr. Martin F. Scholl for the appellant, and Mr. Tallman Bissell for the respondents. Both of these witnesses gave long and very carefully detailed evidence which was examined with particular care by Chief Justice Wells who described the witnesses as very eminent counsel. It is my intention to have regard only to their testimony and to the authorities cited and discussed by those two witnesses when dealing with the law of the United States of America. My first consideration will be with the clause in the bill of lading which has been referred to in United States jurisprudence as a liberties clause. This clause, No. 1, reads as follows:

1. The steamer shall have liberty to sail without pilots, to proceed via any route, to proceed to and stay at any port or ports whatsoever in any order in or out of the route or in a contrary direction to or beyond the port of destination once or oftener for bunkering or loading or discharging cargo or embarking or disembarking passengers or any other purposes whatsoever, and to carry the within cargo into and then beyond the port of discharge named herein and to return to and discharge the said cargo at such port, to tow or to be towed, to make trial trips with or without notice, to adjust navigational instruments, or to repair or drydock with or without cargo on board, to take any reasonable measures in order to inspect and/or repair damages, including but not limited to tipping or listing vessel with or without cargo onboard, all as part of the contract voyage.

Both Mr. Scholl and Mr. Bissell referred to such liberties clauses and gave it as their expert opinion that despite the wording of such clauses the courts in the United States invariably interpreted them to require that the owner must act reasonably. Mr. Bissell testified:

Now, all bills of lading, or almost all bills of lading today, and this one in particular, contain clauses which purport to permit the carrier to do almost

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anything he wants, and these so-called “liberty clauses” are not construed to be given their literal meaning. However, in attempting to find out whether a deviation is unreasonable or not the courts do look at the terms of the bill of lading and interpret the so-called liberties clauses in a way which is fairly applicable to the agreed or contract voyage. In other words, the courts have said these—to suggest the clause, the carriers must act reasonably under all the circumstances.

Therefore, the extremely broad provisions of the liberties clause, clause No. 1 which I have quoted, must always be considered in the light of determining what was reasonable conduct of the owner under all the circumstances. Mr. Scholl testified:

Even if the liberties clause—so called—were broad enough to permit the over carriage, the deviation or the alleged deviation they [United States Courts] still would consider whether the act of over carriage or the decision to over carry was reasonable under all the circumstances.

(The underlining is my own.)

Mr. Scholl cited Surrendera (Overseas) Private Limited v. S.S. Hellenic Hero[2], where Cashin J. said at p. 101:

Thus I find that clause 5 the [liberties clause] was applicable to the situation presented. Nevertheless the respondent is entitled to the protection afforded by clause 5 only if, in its deviating from Vizag to Madras respondent acted reasonably under all the circumstances.

I therefore proceed on this principle to consider whether the acts of the owner were reasonable under the law of the United States commencing with the loading of the shipment of tin in Penang and continuing until the occurrence of the fire in the harbour at Toronto.

Mr. Scholl testified that a court in the United States would consider all of the circumstances that gave rise to the events which occurred in

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the Port of Toronto in order to determine whether an unreasonable deviation had resulted.

Q. Secondly, as to the dealings with the plaintiff’s goods, being as has been related in evidence over-stowed by rubber and on arrival in Toronto being in such condition that either the ship owner was unwilling or did not care to discharge sufficient cargo to reach them and do the job in safety and made the decision that it would be more appropriate for him to continue the voyage and discharge them at another place, what is your view of the law that might be applied by a court of the United States in those circumstances?

A. I would think they would find it was an unreasonable deviation by reason of which the carrier became the insurer of the cargo and responsible for the damages that occurred thereafter.

Q. And insofar as the clauses of the contract depended on a foreign law would the carrier have the benefit of any of them?

A. He would not.

Q. Nor whether they were dependent on foreign law or not, is that the case?

A. Under our law he would not have the benefit of any contractual clause.

In my opinion Mr. Bissell gave evidence to the same effect. One paragraph of his evidence, I think, summarizes his statement:

So, under this present bill of lading I think a United States court would consider the question of deviation in the terms I have just outlined, including assessing the conduct of the carrier or the ship in the light of what was reasonable under the circumstances here at Toronto and also in the light of the bill of lading clauses of which I have spoken, one, five and twenty.

Therefore, to recapitulate very shortly the circumstances, the shipment of tin was loaded at Penang bound for Hamilton and after it was in the ‘tween deck hold there was loaded over the top of it a shipment of rubber bound for Ashtabula, Ohio. Although the ship, during the voyage over the Indian Ocean, encountered

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heavy weather, on the evidence of her First Officer, such weather could be expected in those seas at that time of year and no defence of “perils at sea” has been established. The ship was directed into the port of Toronto and it was determined that the shipment of tin should be unloaded in that port and trans-shipped by truck to Hamilton, Ontario, its designation by the terms of the contract. This arrangement was assented to by the appellant and, in my view, does not constitute a deviation but a mere variation of the contract. However, on arrival in Toronto, the respondents attempted to unload the shipment of tin first removing only a part of the rubber which the respondents had stowed over the top of the tin, that part being the rubber stowed over the forepart of the hatch to the lower hold. When the collapse of the hatch beam was discovered and the straight wall of rubber left standing over the aft part of the hatch started to overhang the portion of the hatch which had been cleared, the stevedores, confirmed by the safety inspectors, refused to work in the hatch because of the dangerous conditions. To quote Captain Goussetis, the Port Captain of the respondents in charge of loading and discharging operations:

The thing what they wanted to do was discharge the whole ’tween deck, to be sure that there is nothing wrong except these beams which seemed to be out of place. At the time you couldn’t see any further.

According to Captain Goussetis’ evidence, to have removed the whole of the rubber from the ’tween deck hold would have taken more than 15 working hours, but Captain Agar said that the 80 tons of rubber over the square of the hatch could have been removed in between 4 and 4½ hours. Rather than subject the ship to this delay, the respondents determined to sail on to Ashtabula, Ohio, have their crew sort out and bolster the rubber cargo en route and then have the stevedores in Ashtabula, Ohio, unload first the rubber and then the appellant’s shipment of tin, trans-shipping the load back from Ashtabula, Ohio, through the Canadian Customs at

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the border and into Hamilton, Ontario. On all of the evidence it would appear that this would have caused a delay of from 8 to 10 days.

The determination to sail on to Ashtabula with the appellant’s cargo still in the hold, apart from a few slabs which had been unloaded prior to the collapsed hatch beam having been discovered, was transmitted to the appellant’s agent Taylor about noon on Wednesday, July 21, 1965, and Mr. Taylor objected vehemently to such a decision. No objection can be taken to the respondents stowing the rubber bound for Ashtabula over the appellant’s tin bound for Hamilton, although the tin was due to be unloaded at Hamilton at an earlier stop on the voyage than Ashtabula, Ohio. The respondents were entitled to load their ship as completely as its size permitted in order to take the maximum profit from the voyage. However, particularly in the view of the proviso to s. 4(4) of the Carriage of Goods by Sea Act:

Provided however that if the deviation is for the purposes of loading or unloading cargo or passengers it shall, prima facie, be regarded as unreasonable.

I am of the opinion that the conduct of the respondents constituted an unreasonable deviation from the contract.

It is the submission of the appellant that the deviation, being an unreasonable deviation from the terms of the bill of lading, constituted a fundamental breach of contract and therefore the appellant had the option of declaring the contract to have been voided and claiming against the respondent for the damage to the appellant’s goods as an insurer of such goods. That position is advanced in the appellant’s factum and was advanced during the course of the trial by the appellant’s counsel:

MR. GERITY: My Lord, I will have some submissions on that head. It will be my submission to your lordship that if it is decided that the contract was avoided, being a contract construed according to American law or the law of the United States, then the law of this country applies as to the liabilities of the parties in the circumstances. I will not be con-

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tending that the law of the United States has further application to the dealings of the parties.

Of course, to determine whether or not an unreasonable deviation did occur I necessarily had regard to the law of the United States of America. Both Mr. Scholl and Mr. Bissell discussed various cases upon this subject. They referred, inter alia, to Atlantic Mutual Insurers Company v. Poseidon Schiffahrt G.m.b.H.[3] a judgment of the United States Court of Appeals 7th Circuit, 1963, where Hastings, Chief Judge, at p. 874, adopted the statement of the court below:

All of these cases indicate that such material “deviations” constitute fundamental breaches of a contract of shipment, under the law, either before or after the enactment of the Carriage of Goods by Sea Act.

I cite this case as illustrating the result of an unreasonable deviation. I am not concerned with the application of the facts in that particular case to the facts in the present case. Similar indications were given in two other cases cited by Mr. Scholl: Surrendera (Overseas) Private Limited v. S.S. Hellenic Hero, supra, and United Nations Childrens’ Fund v. S.S. Nordstern[4]. I accept Mr. Scholl’s analysis of the law of the United States upon this point and am of the opinion that the deviation of the Orient trader being an unreasonable deviation caused a fundamental breach of the contract which breach entitled the appellant to exercise its option of declaring the contract void.

An apt statement of the effect of deviation in an English text may also be found in Carver, Carriage by Sea, 12th ed., (British Shipping Laws, vol. 3) at p. 626, citing Lord Wright in Hain S.S. Co. v. Tate and Lyle[5]:

The breach by deviation does not automatically cancel the express contract, otherwise the shipowner by his own wrong can get rid of his own contract. Nor does it affect merely the exceptions clauses, this would make those clauses alone subject to a condi-

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tion of no deviation, a construction for which I can find no justification. The event falls within the ordinary law of contract. The party who is affected by the breach has the right to say, “I am not now bound by the contract whether it is expressed in charterparty, bill of lading or otherwise”.

Another statement may be found in Bartle, Introduction to Shipping Law, at pp. 101-2:

The effect of deviation

Deviation in the sense in which we have been considering it is a fundamental breach of the contract of carriage. In such circumstances the charterer or cargo-owner has alternative remedies. He may either rescind the contract or he may waive the breach and thus be restricted to an action for damages.

In my opinion, the appellant, here as plaintiff, did elect to accept the repudiation by the respondents and declare the contract void. The appellant issued a statement of claim and in paragraph 8 thereof distinctly set out its claim that the respondents had terminated the contract by their action and therefore claimed damages for the loss of goods. In such circumstances, the provisions of the contract were no longer available to the respondent whose position was reduced to that of a common carrier. The liability under such circumstances was cited by Mr. Scholl from Gilmour and Black, the Law of Admiralty Part 2, p. 119:

The general law of maritime carriage made the public carrier of goods by sea absolutely responsible for their safe arrival, unless loss or damage was caused by the Act of God or of the public enemy, or by the inherent vice of the goods or the fault of the shipper—and (even where the loss was caused by one of these) the carrier was not negligent or otherwise at fault. Except for the qualification indicated this liability did not rest on fault. All the shipper had to do to make his case was to prove receipt for carriage in good order, and non-delivery or delivery in bad order. If the carrier could not show that one of the “exceptions” just listed was the cause of the loss or damage, he had to pay.

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A series of English cases on the topic should be considered in order. In Joseph Thorley Limited v. Orchis Steamship Company Limited[6], the Court considered the situation where a carrier had deviated from the voyage as described in the bill of lading but where the shipment had arrived safely at the Port of London. During the unloading of the ship in the Port of London, the stevedores negligently mixed with the plaintiffs’ goods certain poisonous earth with the result that the plaintiffs’ goods became useless. The plaintiffs claimed damages and the carrier replied alleging an exception clause in the bill of lading which exempted the ship owners from liability for loss arising from, inter alia, negligence of stevedores employed in discharging the ship. It was held that the deviation had caused a rescission of the contract containing the bill of lading and that the defendant ship owner could not allege in its favour the exemption clause contained in such bill of lading.

Fletcher Moulton L.J. said at p. 669:

The cases show that, for a long series of years, the Courts have held that a deviation is such a serious matter, and changes the character of the contemplated voyage so essentially, that a shipowner who has been guilty of a deviation cannot be considered as having performed his part of the bill of lading contract, but something fundamentally different, and therefore he cannot claim the benefit of stipulations in his favour contained in the bill of lading. In what position does he stand? He has carried the goods to their place of destination, and is therefore entitled to some remuneration for that service, of which their owner has received the benefit. The most favourable position which he can claim to occupy is that he has carried the goods as a common carrier for the agreed freight. I do not say that in all circumstances he would be entitled as of right to be treated even as

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favourably as this, but in the present case the plaintiffs do not contest his right to stand in that position. That, however, still leaves him liable to the plaintiffs for the amount which they have recovered in this action.

Many years later, the same problem was considered again in the Court of Appeal and on appeal from there to the House of Lords in Hain Steamship Company Ltd. v. Tate & Lyle Ltd.[7] There again, a carrier contrary to the provisions of the bill of lading deviated from the course therein set out but was recalled to that course while it traversed the seas and then on leaving San Domingo, a port at which the provisions of the charter party required it to call, was stranded and damage to both ship and cargo resulted. It was held in the Court of Appeal that the deviation was unjustified and this unjustified deviation destroyed all provisions in the bill of lading or charter party as to the lien and general average. It is significant that the bill of lading contained a very broad liberties clause.

Scrutton L.J. said:

Unless it is possible to excuse the 265-mile deviation, it seems to me the ship-owner cannot claim the protection of any exception in the contract or claim general average contributions for sacrifices incurred in carrying out the joint adventure, because the joint adventure has been abandoned by doing something which is inconsistent with the contract under which the adventure is carried on. I understand Counsel for the ship to admit that if the loss had occurred while the “Tregenna” was on the deviation in the neighbourhood of Inagua Island, he would have had no answer, but to suggest that when he got back to his chartered route at San Pedro he was not liable for a loss incurred by some cause not connected with the deviation. In my opinion, the decision of this Court in Joseph Thorley v. Orchis Company, [1907] 1 K.B. 660, negatives this contention unless the shipowner can prove that if he had not deviated the same loss would have happened.

[Page 1305]

In the House of Lords, the appeal was allowed upon the basis that the shipper, although not the endorser of the bills of lading had waived the right to object to the deviation. Lord Atkin, however, referred to the position had that waiver not occurred and at p. 601 said:

I venture to think that the true view is that the departure from the voyage contracted to be made is a breach of such a serious character that however slight the deviation the other party to the contract is entitled to treat it as going to the root of the contract, and to declare himself as no longer bound by any of its terms.

And on the same page said:

The party who is affected by the breach has the right to say, I am not now bound by the contract whether it is expressed in charterparty, bill of lading or otherwise. He can, of course, claim his goods from the ship; whether and to what extent he will become liable to pay some remuneration for carriage I do not think arises in this case for reasons I will give later: but I am satisfied that once he elects to treat the contract as at an end he is not bound by the promise to pay the agreed freight any more than by his other promises. But on the other hand, as he can elect to treat the contract as ended, so he can elect to treat the contract as subsisting: and if he does this with knowledge of his rights he must in accordance with the general law of contract be held bound.

Lord MacMillan was a member of the House of Lords which considered the appeal and specifically concurred with Lord Atkin. Lord Wright delivered other reasons to the same end and, in fact, quoted and approved Fletcher Moulton L.J. in Thorley which I have cited above.

After this decision, the appeal in Heyman v.

[Page 1306]

Darwins Ltd.[8], came before the House of Lords. It is significant that in the House which considered the appeal both Lord MacMillan and Lord Wright were members of the House which considered this appeal and, as I have pointed out, both actually sat in the Hain v. Tate & Lyle case. Here, the written contract dealt not with a marine matter but with the sale of steel by the respondents through an agency of the appellants. The parties became so much at odds as to the carrying out of that contract that the respondents informed the appellants as follows:

Under our contract with you these claims are your responsibility and we therefore cannot make any further remittances to you until we are satisfied that no such claims will be made, or alternatively that any that have been made have been settled.

Further in the correspondence, the respondents informed the appellants:

In the circumstances we would either suggest cancelling this agreement altogether or entering into negotiations with the view to drawing up another arrangement which would have to be such that satisfaction would be assured for all parties concerned.

The appellants’ solicitors took this notification as a repudiation of the agreement and issued a writ asking that the respondents had repudiated the agreement and claiming damages under various heads.

One of the terms of the agreement had been that all and every dispute in reference thereto should be settled by arbitration and therefore the respondents applied for and obtained in the Court of Appeal an order staying the action, that court holding that the arbitration clause applied. Lord MacMillan’s reasons are directed alone to such matters as an arbitration clause and his words on p. 373 must be so understood. This would seem perfectly plain from the learned Law Lord’s statement on pp. 374-5:

There still remains the difficulty raised by the dicta of Lord Shaw and Lord Haldane which I have quoted. It is said to be wrong to allow a party to a contract who has refused to perform his obligations under it at the

[Page 1307]

same time to insist on the observance of a clause of arbitration embodied in the contract. The doctrine of approbate and reprobate is said to forbid this. I appreciate the apparent dilemma, but with the greatest respect I venture to think it is based on a misapprehension. The key is to be found in the distinction which I have endeavoured to draw between the arbitration clause in a contract and the executive obligations undertaken by each party to the other. I can see nothing shocking or repugnant to law in one business man saying to another that he regrets he finds himself unable to go on with his deliveries under a contract between them and at the same time asking the other to join with him in a reference under an arbitration clause in their contract to ascertain what compensation is to be paid for his default. The parties have both agreed that all questions between them shall be settled by their own tribunal. The question of the consequences which are to follow from a breach, including a total breach, of the obligations undertaken by one of the parties is just such a question as both parties have agreed should go to arbitration. It is not a case of one party refusing to perform the obligations he has undertaken in favour of the other and at the same time insisting that obligations in favour of himself shall continue to be performed. The arbitration clause, as I have said, is not a stipulation in favour of either party. I am, accordingly, of opinion that the doctrine of approbate and reprobate does not apply to prevent a party to a contract who has declined to proceed further with the performance of his obligations to the other party from invoking an arbitration clause in the contract for the purpose of settling all questions to which his declinature has given rise. In all this I have assumed that the arbitration clause in its terms is wide enough to cover the dispute.

I emphasize the words “It is not a case of one party refusing to perform the obligations he has undertaken in favour of the other and at the same time insisting that obligations in favour of himself shall continue to be performed”. I can see no distinction between obligations which the party must perform and exemptions to which a party is entitled when both are derived from the provisions of a contract which has been repu-

[Page 1308]

diated by one party and the repudiation accepted by the other.

Having already determined that there was an unreasonable deviation in the performance of this marine contract which unreasonable deviation was not waived by the shipper, I am of the opinion that the effect in law is that the contract is at an end and apart from any procedural provisions as to the adjustment of the compensation no party can depend on the provisions of that contract. I am of the opinion that the appellant is not bound by either the provisions of the fire statute of the United States of America or the provisions as to the law which is to be used in interpreting the contract. As I have said, the contract has been rescinded and, therefore, the “applicable law” clause is no longer effective.

As pointed out in the authorities which I have cited above and which were all cited by either of the expert witnesses at the trial, the carrier must therefore be regarded as insurer absolutely responsible for the safe arrival of the goods unless the loss or damage thereto was caused by the Act of God, public enemy, the inherent vice of the goods or the fault of the shipper. Whether or not the contract has been rescinded or repudiated or wholly brought to an end or whatever words have been used in various cases is a question which I determined by reference to the law of the United States but having determined that it was so brought to an end, I consider that the “applicable law” clause was no longer effective.

What then is the proper law of the contract, that is, the implied contract, which makes the carrier liable as insurer? Really that question is academic because authorities I have already quoted show that the law of the United States and the law of the United Kingdom, from which Canadian law came, makes the liability of a carrier that of an insurer subject to the exceptions I have cited above. The respondents cannot bring themselves within these exceptions to the insurer’s liability, and are therefore liable for the loss to the appellant. The amount of such loss was stated in the Statement of Claim

[Page 1309]

at $21,686.78 and throughout the litigation the parties took the position that such was an agreed amount.

Chief Justice Wells dismissed the appellant’s claim for that amount and awarded the respondents the sum of $112,367.48 upon its counterclaim, with which I shall deal hereafter. The learned Chief Justice refused interest on that amount exercising his discretion in view of the delay found in asserting the counterclaim. In this court in Canadian General Electric Company Ltd. v. Pickford and Black Limited[9], Ritchie J., giving judgment for this Court, adopted the view taken by Mr. Justice A.K. MacLean, sitting as President of the Exchequer Court in the case of The Pacifico v. Winslow Marine Railway and Shipbuilding Company[10], at p. 167 as follows:

The principle adopted by the Admiralty Court in its equitable jurisdiction, as stated by Sir Robert Phillimore in The Northumbria (1869), 3 A. & E.5, and as founded upon the civil law, is that interest was always due to the obligee when payment was delayed by the obligor, and that, whether the obligation arose ex contractu or ex delicto. It seems that the view adopted by the Admiralty Court has been, that the person liable in debt or damages, having kept the sum which ought to have been paid to the claimant, ought to be held to have received it for the person to which the principal is payable. Damages and interest under the civil law is the loss which a person has sustained, or the gain he has missed. And the reasons are many and obvious I think, that a different principle should prevail, in cases of this kind, from that obtaining in ordinary mercantile transactions. I think that in the exercise of the equitable jurisdiction of this court, and in view of the fact that the Admiralty Court has always proceeded upon other and different principles from that on which the common law principles appear to be founded, that the plaintiff is in this case entitled to the claim of interest as allowed by the Court below, in its formal order for judgment.

and stated:

It is thus well settled that there is a clear distinction between a rule in force in the common law courts and

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that in force in Admiralty with respect to allowing a claim for interest as an integral part of the damages awarded.

This Court therefore dismissed the motion to vary the report of the Registrar by deleting therefrom the provision entitling the appellant to interest from the date when the cargo should have been delivered. Adopting the same principle, I would allow interest on the sum of $21,686.78 from July 20, 1965, the date when the cargo should have been delivered on the dock at Toronto.

I turn now to the counterclaim for the general average adjustment. That counterclaim was asserted under the provisions of s. 15 of the contract between the parties, the bill of lading. Section 15 reads as follows:

15. In the event of accident, danger, damage or disaster before or after the commencement of the voyage, resulting from any cause whatsoever, whether due to negligence or not, for consequence of which, the carrier is not responsible, by statute, contract or otherwise, the goods, shippers, consignees or owners of the goods shall contribute with the carrier in general average to the payment of any sacrifices, losses or expenses of a general average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the goods.

If a salving ship is owned or operated by the carrier, salvage shall be paid for as fully as if the said salving ship or ships belonged to strangers. Such deposit as the carrier or his agents may deem sufficient to cover the estimated contribution of the goods and any salvage and special charges thereon shall, if required, be made by the goods, shippers, consignees or owners of the goods to the carrier before delivery.

Chief Justice Wells, having found that there was no unreasonable deviation, a finding with which I, with respect, disagree, and that therefore the contract between the parties remained in full force and effect, awarded the respond-

[Page 1311]

ents upon their counterclaim the full adjustment of the general average loss arrived at in accordance with the provisions of s. 15. As I have said, I have found that an unreasonable deviation did result, and therefore at the time of such unreasonable deviation, which was not later than the notification to the appellant’s agent Taylor of the decision to have the Orient Trader proceed on to Ashtabula with the appellant’s tin still in its hold, the contract came to an end.

The result in law of such a situation was stated by the learned authors in Lowndes and Rudolph on General Average, 9th ed., para. 71:

The legal effects of a deviation are more far reaching than those of any other breach of the contract of affreightment. So far as general average contribution is concerned, it is submitted that deviation, unless waived or justifiable, destroys all right to contribution either under the York-Antwerp Rules or at common law because the interests were not voluntarily parties to the new adventure constituted by the deviation and cannot have agreed, expressly or impliedly, to contribute towards the losses incident to that adventure.

Scrutton L. J., in Tate & Lyle Ltd. v. Hain Steamship Co. Ltd., supra, said at p. 131:

Now assume a deviation before or at the time of the loss by perils of the sea. One effect would be that the underwriter was relieved from his liability. He had not insured the deviated voyage. So also the cargo-owner could sue the shipowner for the loss by perils of the sea, because the bill of lading contract had been destroyed by the deviation, and the shipowner had no exception of “perils of the sea” to protect him. It would also follow that neither the shipowner nor other cargo-owners could sue that cargo-owner, for they were not parties by agreement to the adventure after the deviation. The basis of general average contribution, the “common adventure”, had been destroyed by the deviation.

This appears to be the law in England and in Canada.

[Page 1312]

Mr. Scholl, in giving expert evidence on the United States law at trial, quoted the Tate & Lyle Ltd. v. Hain Steamship Co. Ltd. judgment as it had been dealt with in Robinson on Admiralty Law, p. 772, and then, in answer to the counsel for the appellant, said:

The case cited in the text is Court of Appeal 1934 which is reported 49 Lloyds, 123 and 39 Commercial Cases, 259; not an American case, apparently. But, I believe this to be the law of the United States and the basis of general average is the same, found in common adventure, common adventure in the voyage.

(The underlining is my own.)

I am therefore of the opinion that the respondents should fail in their counterclaim and I would dismiss the same.

For these reasons, I would allow the appellant’s claim, give judgment for the appellant for $21,686.78 with interest from July 20, 1965 and dismiss the respondents’ cross-appeal. The appellant is entitled to its costs throughout. The cross-appeal should be dismissed without costs.

PIGEON J.—The facts of this case are stated in the reasons of my brother Spence which I have had the advantage of reading. I am not without some doubt respecting his conclusion as to the unreasonableness of the deviation. However, I do not find it necessary to reach a firm view on that point, because it appears to me that, in any event, respondent is entitled to the benefit of the U.S. Fire Statute.

In order to deny to the cargo carrier the benefit of the Fire Statute, it is said that, by the deviation a fundamental breach of the contract was committed whereby respondent was put in the situation of insurer of the cargo. This might well be true at common law but, in this case, this Court has to deal with a contract governed by the law of the United States by virtue of an express stipulation. It is by reference to the law of the United States that the deviation is held to be a breach of the contract although there is a

[Page 1313]

clause purporting to authorize it. On the basis that under the proper law of the contract the deviation is to be treated as a breach, the further question whether such a breach gives a right of recovery irrespective of the defence afforded by the U.S. Fire Statute is, in my view, a question that must be considered under U.S. law because it has to do with the substance of the remedies available under the contract and, therefore, must be decided according to the proper law of the contract. We are not dealing here with a tort committed in Canada but with a breach of contract. There is conclusive authority to show that all questions of substantive law pertaining to a breach of contract are governed by the law of the contract. In Livesley v. Horst[11], Duff J. speaking for this Court said (at pp. 607, 608):

In principle, it is difficult to discover a solid ground for refusing to classify the rights to damages for breach of contract with other rights arising under the proper law of the contract, and recognizable and enforceable as such.

Where rights are acquired under the laws of foreign states (said Turner L.J., in Hooper v. Gumm, 1866, 2 Ch. App. 282 at p. 289), the law of this country recognizes and gives effect to those rights, unless it is contrary to the law and policy of this country to do so.

The exception embraces a very wide field, and among other things excludes procedure, because the policy of the English law recognizes no vested rights in procedure, and a party invoking the jurisdiction of the courts must take procedure as he finds it. The concept of procedure, too, is, in this connection, a comprehensive one, including process and evidence, methods of execution, rules of limitation affecting the remedy and the course of the court with regard to the kind of relief that can be granted to a suitor. But it does not, of course, extend to substantive rights; and here questions as to substantive rights include all questions as to the “nature and extent of the obligation” under the foreign contract. Fergusson v. Fyffe (1840, 8 C1. & F. 121 at p. 140) per Cottenham L.C.

[Page 1314]

It is most important to observe that it is not the foreign agreement to which effect is given by English law but, as the language of the accurate judge, whose judgment is quoted, suggests, it is the civil or legal right generated by the contract. The right of action, as Willes J., said in Phillips v. Eyre (1870 L.R. 6 Q.B. 1 at p. 28), is a “creature” of the law by which the contract is governed.

A similar decision was rendered in D’Almeida Araujo Lda. v. Sir Frederick Becker & Co. Ltd.[12], in which the head note reads:

In an action for damages for breach of a contract governed by foreign law, questions of remoteness of damage are governed by the proper law of the contract, whereas the quantification of damage, which according to the proper law is not too remote, is governed by the lex fori.

The plaintiffs entered into a contract, the proper law of which was Portuguese, to sell 500 tons of palm-oil to the defendants. As a result of a breach by the defendants, the plaintiffs committed a breach of a contract with a third party for which they were liable to pay the third party an indemnity. In an action by the plaintiffs for damages for breach of contract, the question whether the plaintiffs were entitled to recover the indemnity from the defendants as a head of damage was a question of remoteness of damage to be decided according to Portuguese law.

Livesley v. Horst (1924) S.C.R. (Can.) 605 considered.

In Dicey & Morris, Conflict of Laws, 8th ed., 1967, at p. 773 one reads:

Whether a contract gives rise to a claim for performance or to a claim for damages, whether, in the event of a breach of contract, the other party has a right to rescind it, whether interest is payable on a debt—all these are matters which, on a proper analysis, should be regarded as affecting the rights and obligations to which the contract gives rise. It is clear that, in the view of the English courts, the liability to pay contractual interest and the rate of such interest are determined by the proper law, and the proper law of the contract also applies to the question of the “remoteness of damage”. The rules which indicate “what kind of loss actually resulting from

[Page 1315]

a … breach of contract is actionable” belong to the substantive law. “In principle, it is difficult to discover a solid ground for refusing to classify the right to damages for breach of contract with other rights under the proper law of the contract and recognisable and enforceable as such.”

In Richardson & Sons Ltd. v. S.S. Burlington[13], Cannon J. speaking for the majority of the Court said (at p. 79):

If a contract of carriage were to be governed by the law of the country of destination because the last act of the contract, the delivery, is to be performed there, what would happen if goods were shipped together having several destinations to different countries? It is inconceivable that the contract of carriage must be governed by the laws of the several destinations. There must and can be only one law governing the carriage and clothing the contract once and for all with all the privileges, obligations and immunities belonging to that law.

In Heyman v. Darwins, Ltd.[14], Lord Macmillan said (at pp. 373 and 374):

Repudiation, then, in the sense of a refusal by one of the parties to a contract to perform his obligations thereunder, does not of itself abrogate the contract. The contract is not rescinded. It obviously cannot be rescinded by the action of one of the parties alone. But, even if the so-called repudiation is acquiesced in or accepted by the other party, that does not end the contract. The wronged party has still his right of action for damages under the contract which has been broken, and the contract provides the measure of those damages. It is inaccurate to speak in such cases of repudiation of the contract. The contract stands, but one of the parties has declined to fulfil his part of it. There has been what is called a total breach or a breach going to the root of the contract and this relieves the other party of any further obligation to perform what he for his part has undertaken. Now, in this state of matters, why should it be said that the arbitration clause, if the contract contains one, is no longer operative or effective? A partial breach leaves the arbitration clause effective. Why should a total breach abrogate it? The repudiation being not of the contract but of obligations undertaken by one of the parties, why should it imply a repudiation of the arbitration clause so that it can no longer be invoked

[Page 1316]

for the settlement of disputes arising in consequence of the repudiation…

I am, accordingly, of opinion that what is commonly called repudiation or total breach of a contract, whether acquiesced in by the other party or not, does not abrogate the contract, though it may relieve the injured party of the duty of further fulfilling the obligations which he has by the contract undertaken to the repudiating party. The contract is not put out of existence, though all further performance of the obligations undertaken by each party in favour of the other may cease. It survives for the purpose of measuring the claims arising out of the breach, and the arbitration clause survives for determining the mode of their settlement. The purposes of the contract have failed, but the arbitration clause is not one of the purposes of the contract.

In this case, it is clearly established that under the law of the United States, an unreasonable deviation will not deprive a carrier of the protection of the Fire Statute. The expert witness Bissell said, as related by the trial judge:

I find that, assuming that there was an unreasonable deviation, libelants nevertheless cannot recover since they have not sustained the burden of proof that there was a causal connection between any such deviation and the fire.

The last word from an appellate court on the subject is found in Globe & Rutgers Fire Ins. Co. v. United States, 2 Cir., 105 F. 2d 160. There Circuit Judge Augustus N. Hand, in affirming a decision that the Fire Statute barred recovery, said, 105 F. 2d at page 166:

The contention is also made that there was a deviation by the Zada because of an unreasonable delay in sailing from Norfolk and a departure from the usual course in calling at St. Thomas, whereby the shipowner lost the benefit of the Fire Statute. A causal connection between the deviation, if any, and the fire was not established and accordingly the argument is negatived by our decision in The Ida, 2 Cir., 75 F. 2d 278. See Earle & Stoddart v. (Ellerman’s) Wilson Line, 287 U.S. 420, 53 S.Ct. 200, 77 L. Ed. 403.

I take this to be a holding that cargo in attempting to establish that a deviation deprives the ship of the benefit of the Fire Statute limitation, has the burden

[Page 1317]

of showing that there was was some causal connection between the deviation and the fire. If the burden had been the other way around the court would have said “It was established that there was no causal connection between the deviation, if any, and the fire.” That the choice of words was not inadvertent appears from the circumstances that, in a full statement of facts, there was no reference to any evidence on behalf of the ship that the bursting of a fuel oil feed line and the resulting fire which took place in the harbor of Port of Spain, Trinidad, where the ship had put in on a voyage bound for the River Plate from Norfolk, was not casually connected with the call at Port of Spain. In other words there is no discussion of any evidence that the fuel oil feed line would have burst even if there had been no deviation.

I would dismiss the appeal with costs.

As to the cross-appeal of the respondent, I would allow it with costs and give interest on the general average claim from the date of the general average adjustment to the date of judgment for the reasons stated by Laskin J. with whose observations on the application and effect of the law of the United States I also wish to express agreement.

LASKIN J.—I have had the advantage of reading the reasons prepared by my brother Spence, and I agree with him that there was in this case an unreasonable deviation by the respondent carrier, not in the election to put into the port of Toronto (to which the appellant assented) but in the further decision, objected to by the appellant, to go on to Ashtabula, Ohio with the appellant’s cargo still on board and to tranship it from there by truck to Hamilton, Ontario, its port of destination under the bills of lading. I differ, however, from my brother Spence on the consequences which flow from this serious breach of contract, having regard to what I consider to be the applicable law by which the existence of the aforesaid breach and the effects thereof are to be determined: see Morris, The Conflict of Laws (1971), pp. 250ff. and 462ff; Livesley v.

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Horst[15], at p. 607.

The bills of lading not only provided that they should have effect subject to the provisions of the United States Carriage of Goods by Sea Act and that the carrier should be entitled to avail itself of, inter alia, the so-called Fire Statute, 46 United States Code, s. 182, but further, that unless otherwise provided (and this qualification is without effect in this case), “this bill of lading shall be construed in accordance with the law of the United States of America”. I take this to mean that United States law was to govern the contracts of carriage involved in this case or, to put it in familiar terms, that the proper law of these contracts was the law of the United States. In my view, this means that the right to damages, if any, and the items of damage were to be governed by United States law no less than the issue of fundamental breach itself arising out of the unreasonable deviation.

Parties to a contract are entitled, subject to limitations which it is unnecessary to spell out in this case, to choose the law that will govern the interpretation and application of the terms of their bargain. Since the chosen law, that of the United States, does deal with liability for damages arising upon a fundamental breach of contract upon whose performance the contracting parties have entered, there is no ground for contending that the occurrence of a fundamental breach results not only in the effacement of that law but also in the introduction of the substantive law of the forum. Although this is a matter which does not call for decision here, I do not think that it automatically follows that if a contract, originally subject to or governed by foreign law, is held to have lost its force because of fundamental breach, the law of the forum becomes the applicable law to determine the ensuing rights and liabilities of the contracting parties. The attendant circumstances may point to another conclusion.

[Page 1319]

The unreasonable deviation did not, per se, bring the contracts of carriage to an end; it entitled the appellant to avoid or terminate them and concurrently to sue for damages, but subject, both as to termination and damages, to the terms of the proper law. The occurrence of the fire, which resulted in the loss to the appellant for which it is claiming damages, was after the carrier had made its decision to go on to Ashtabula but before the ship actually left the port of Toronto. Accordingly, relying on the Fire Statute, the respondent’s position is simply that unless the cargo owners can prove that the fire would not have occurred but for the unreasonable deviation, it is free of liability. The appellant’s contention was two-fold: first, that the fundamental breach produced by the unreasonable deviation entitled it to escape from the entire contract and to hold the carrier under the insurer’s liability of a common carrier as at common law (whether that operative in the United States or in Canada); or, alternatively, that if United States law, including its Fire Statute, governed, then there was no requirement that the cargo owner establish that the fire resulted from the unreasonable deviation since this requirement ceased to operate where a fire ensued after a fundamental breach by the carrier.

The Fire Statute, first enacted in 1851, reads as follows:

No owner of any vessel shall be liable to answer for or make good to any person any loss or damage, which may happen to any merchandise whatsoever, which shall be shipped, taken in, or put on board any such vessel, by reason or by means of any fire happening to or on board the vessel, unless such fire is caused by the design or neglect of such owner.

There is a comparable provision in s. 4(2)(b) of the United States Carriage of Goods by Sea Act as enacted in 1936; it exonerates not the owner but the carrier or the ship from liability for loss or damage resulting from or arising from fire

[Page 1320]

unless caused by the actual fault or privity of the carrier. However, “carrier” is defined as the owner or charterer, and the expert evidence established that “the design or neglect of the owner or charterer, and the expert evidence meaning as the “actual fault or privity” of the owner under the Carriage of Goods by Sea Act. It will be convenient here to refer only to the Fire Statute on the issues before us.

It was not contended in the present case that the fire which occurred resulted from the “design or neglect” of the owner of the vessel. The trial judge, Wells D.J.A., made two findings which bear on the legal questions before this Court. First, he held that there was no evidence as to how the fire occurred and, second, that the delay in unloading the cargo in Toronto was not a cause of the fire. The second finding related to a submission of the appellant which, as understood by the trial judge, was to the effect that the slipping of some deck beams, after partial unloading, delayed the completion of the unloading and ultimately lead to the decision to go on to Ashtabula and, further, that the fire broke out because of the delay.

Although it is not explicit in his reasons, I think it follows from the trial judge’s observations that in his view the fire was not causally connected with the deviation arising from the decision to go on to Ashtabula. The question of causal connection where a fire occurred after an unreasonable deviation was raised in Haroco Co., Inc. v. The Tai Shan[16], although there on the facts the deviation to the port where the fire occurred was held to be reasonable. However, on the assumption that it was unreasonable, the trial judge, whose opinion was affirmed without more on appeal to the Second Circuit Court of Appeals, held that proof was lacking that the

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vessel, being one proceeding by a direct route, would have completed its voyage before the date of the fire.

In the present case, the vessel’s presence in the port of Toronto was within the permissible terms of the contract of carriage. It arrived in Toronto in the evening of July 17, 1965 and began to discharge cargo the next day. The appellant’s tin, 50 tons of it, was overstowed with bales of rubber consigned to Ashtabula, Ohio, and at least some of the rubber would have to be removed to get at the tin. The decision was taken, with the appellant’s concurrence, to unload the tin at Toronto and ship it by truck to Hamilton. Stevedores discharging the cargo had removed enough of the rubber on July 20, 1965 to get at the tin, and had unloaded about five tons of tin when they refused to continue because of an unsafe condition, so determined by a safety inspector, arising from the slipping of a beam. This stoppage occurred about noon on July 20, 1965 and the carrier made the decision to go on to Ashtabula which was communicated to the appellant on July 21, 1965 about two and one-half hours before a fire broke out in the No. 4 hold of the ship that afternoon. I have already noted that the appellant objected to the decision to go on to Ashtabula, a decision which, in the circumstances, constituted an unreasonable deviation.

It was estimated that it would take from four to ten days for the tin to reach Hamilton from the time the ship sailed from Toronto to Ashtabula and unloaded there. The evidence also established that once the overstowed rubber was removed (and an estimate of some fifteen hours was given for this work), it would take but two hours to unload 50 tons of tin. The relevance of this evidence to the issue of the reasonableness of the intended deviation is obvious, but I do not find it of any help on the question of causal

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connection between the unreasonable deviation in this case and the ensuing fire. Causal connection does not exist simply by the coincidence of events which follow one another without any reasonable apprehension that the first, a volitional one, may be succeeded by the other which is accidental, involving no fault in its occurrence. It is one thing to see a causal connection between a deviation and ensuing disaster, as where the deviation is into a hurricane area, and quite a different thing to urge such a connection where upon the deviation being decreed and preparations made to proceed, a fire of unknown origin destroys the ship.

The legal question that arises in these circumstances is whether the absolute terms of the Fire Statute (once design or neglect of the owner is excluded) are nonetheless to be avoided because of the fundamental breach attributable to the owner, although there is no causal connection between the breach in question and the ensuing fire. If the question was whether a limiting or exonerating term of the contract could be invoked by the benefitted owner in the face of an unqualified fundamental breach, the appellant would undoubtedly succeed on the weight of the expert evidence in this case as to the law of the United States. But the question to be decided is the different one whether the law of the United States governing the construction of the contract imposes a common carrier’s liability upon the ship owner guilty of a fundamental breach by denying the owner recourse to the Fire Statute as part of that law, notwithstanding that the fire which resulted in the loss and damage to cargo was not caused by the event constituting the fundamental breach.

The evidence on this point, as given by the two experts (one on each side), was not concordant. The appellant’s expert, M.F. Scholl, distinguished the case where an exempting stat-

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ute is pleaded as part of a contract of carriage and the case where the statute applies as part of the law governing the construction of that contract. Although his evidence is clear that a carrier guilty of an unreasonable deviation cannot rely upon exempting contractual terms where a cargo loss occurs in the course of that deviation, he offered no conclusion as to the effect of an unreasonable deviation upon an exonerating statute which was part of the applicable proper law. Counsel for the appellant in questioning Scholl postulated that the Fire Statute was merely a contractual term but the witness was not definite on whether in the present case it was such a term or was part of the applicable proper law.

The carrier’s expert, Tallman Bissell, testified that under the relevant case law of the United States where an unreasonable deviation was followed by loss of cargo through fire, the Fire Statute (absent “design or neglect” of the owner) protected the owner unless the unreasonable deviation was the proximate cause of the fire. He purported to draw this from the Tai Shan, supra. There, however, the trial judge, whose opinion was affirmed without more by the Second Circuit Court of Appeals, did not speak of “proximate cause” but only of “causal connection”. Whether there is or should be any difference in the assessment and application of these two phrases need not be pursued here because, assuming that “causal connection” dictates a less stringent approach than the phrase “proximate cause”, the evidence, as already indicated, does not support a finding that the fire was “caused” by the unreasonable deviation.

Although Bissell relied mainly on the Tai Shan for his view of the law of the United States he agreed that there were other Circuit Courts of Appeals that took a different view of the Fire Statute on the point under discussion.

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However, his evidence was that the weight of authority accorded with the view he expressed, and I do not think it is open to me to re-examine all the authorities to see if they, on balance (there being no governing decision of the Supreme Court of the United States), support his evidence. At the most, I may look to his sources to see if his reliance on them is borne out: see Allen v. Hay[17], at p. 81.

One of the cases to which reference was made in the evidence was Atlantic Mutual Insurance Co. v. Poseidon Schiffahrt, G.m.b.H.[18] where, notwithstanding an overcarriage resulting from an unreasonable deviation (and a consequent delay of one and one-half years in delivery), recovery was limited to $500 under s. 4(5) of the Carriage of Goods by Sea Act. The Court characterized the situation as amounting to a fundamental breach of contract justifying rescission with the consequence (to use the words of the Court) that “the contract is treated as not having existed and the liability of the carrier becomes that of an insurer”. I would not myself put the legal result of an unreasonable deviation in those terms, but the fact is that the Court nonetheless sustained the limitation of liability because s. 4(5) of the Carriage of Goods by Sea Act stipulated for the limitation “in any event” where (as was the case) the nature and value of the goods have not been declared by the shipper before shipment and inserted in the bill of lading. I cannot distinguish the Fire Statute merely because it does not contain the words “in any event”. They have a context in the preceding subsection (4) of s. 4 of the Carriage of Goods by Sea Act, and the Fire Statute is absolute enough in its terms (design or neglect of the owner aside) to have its effect without them.

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This was the view of the Fire Statute taken in The Ida[19], a leading case in the Second Circuit, where the contract of carriage was broken by a deviation and cargo was destroyed by fire during discharge at the port of destination. The fire was not caused by any design or neglect of the owner, and by virtue of the pleadings the Court accepted as the fact that there was no causal connection between the fire and the deviation.

The Ida was distinguished by the trial judge in The Silvercypress, Hoskyn & Co. Inc. v. Silver Line Ltd.[20], which originally involved eighteen suits, but of these four typical cases were selected for trial. Of the four, three involved the question, decided at the trial adversely to the claiming cargo owners and underwriters, whether the claimants had proved neglect of the owner in respect of the damage to cargo resulting from fire. The trial judge’s decision was affirmed on appeal to the Second Circuit Court of Appeals[21], but no appeal was taken in the fourth case that went to trial and which raised the kind of issue which is at the centre of the present case. The fourth case concerned cargo that had been over-carried and which was destroyed by fire at what was for it the port of deviation. The trial judge held that the exemption of the Fire Statute did not cover this cargo. He said this (at p. 468 of 63 F.Supp.):

In the instant case the respondent was under a duty to deliver the cargo at Manila but negligently carried it on to Ilo Ilo. Conceivably, if there had been no fire, the libellants would have had a cause of action for damage, and it is not logical to say that by reason of the failure to discharge its obligation to make delivery

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at Manila, the respondent is entitled to the same protection under the Fire Statute as it successfully asserted with respect to cargo intended for, but not yet discharged at Ilo Ilo, or at subsequent ports of call. While it is stated the damage involved is small, the decision heretofore made by me must be modified to sustain the libel as to the Pacific Commercial Company.

The reason for distinguishing The Ida, as given by the trial judge in The Silvercypress, was that “the deviation there complained of did not affect the presence of the cargo on board the vessel at destination where it was partially destroyed”. Unless this suggests a distinction based on causal connection in the one case and not in the other, the two decisions appear to be in conflict, a view expressed by Longley, Common Carriage of Cargo (1967), at p. 122. The Ida, moreover, was an appellate decision unlike the decision in The Silvercypress which remained that at trial.

That causal connection is a necessary requirement of liability even where there is unreasonable deviation is the view advanced in Gilmore and Black, The Law of Admiralty (1957), at pp. 159-161. Speaking in terms of the Carriage of Goods by Sea Act rather than the Fire Statute (but having previously asserted that they have the same effect), the authors doubt whether there can be an “ouster” of the statute because of the unreasonable deviation so as to restore the almost strict liability of the carrier, as would be the case where purely contractual limitations are ousted. The weight of the authorities, both Courts and text writers, would seem to be that the Fire Statute exemption is lost in the case of an unreasonable deviation only where the ensuing fire resulting in the loss of cargo is causally connected with that deviation.

The respondent’s expert’s sources bear out his view of the law, and I would accordingly

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dismiss the appeal challenging rejection of the claim for cargo damage.

It remains to deal with the appeal and cross-appeal on the respondent’s successful counterclaim for general average contribution. I accept the conclusion of the trial judge, but for different reasons, that the ship owner was entitled in the circumstances to general average contribution in the amount fixed by the general average adjustment but I do not agree with his refusal to award additional interest on that sum. My reasons on these two matters follow.

First, as to general average contribution. My brother Spence has quoted in his reasons clause 15 of the bill of lading which is the so-called new Jason clause, the predecessor of which was held to be a valid contract provision under American law respecting general average contribution: see The Jason[22]. The material terms of clause 15 are as follows:

In the event of accident, danger, damage or disaster before or after the commencement of the voyage, resulting from any cause whatsoever, whether due to negligence or not, for consequence of which, the carrier is not responsible, by statute, contract or otherwise, the goods, shippers, consignees or owners of the goods shall contribute with the carrier in general average to the payment of any sacrifices, losses or expenses of a general average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the goods.

The effect of the clause is to give the carrier the right to claim general average contribution in the events stipulated where it enjoys immunity from their consequences “by statute, contract or otherwise”. It embraces, therefore, the immunities given by the Carriage of Goods by

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Sea Act of the United States as well as by the Fire Statute.

The question that arises, having regard to the conclusion that there was in this case an unreasonable deviation, is whether the carrier may nonetheless claim general average contribution in respect of its expenditures and sacrifices following upon the fire which destroyed its ship. In this connection I refer also to clause 14 of the bill of lading which provides that “general average shall be adjusted, stated and settled … according to York‑Antwerp Rules, 1950, except Rule XXII thereof, and as to matters not provided for by these Rules, according to the laws and usages at place of adjustment”. Rule III of the York‑Antwerp Rules is in these words:

Damage done to a ship and cargo, or either of them, by water or otherwise, including damage by breaching or scuttling a burning ship, in extinguishing a fire on board the ship, shall be made good as general average; except that no compensation shall be made for damage to such portions of the ship and bulk cargo, or to such separate packages of cargo, as have been on fire.

This Rule, dealing only with various kinds of damage for which general average contribution may be claimed, does not control issues of liability, nor does Rule D of the York-Antwerp Rules, 1950, which reads as follows:

Rights to contribution in general average shall not be affected, though the event which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the adventure; but this shall not prejudice any remedies which may be open against that party for such fault.

In a recent judgment, Federal Commerce and Navigation Co. Ltd. v. Eisenerz-G.m.b.H.[23], my brother Ritchie speaking for this Court examined Rule D and held that it preserves remedies which might be open against a party whose fault caused the general average casualty which in

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turn gave rise to the general average expenditure or sacrifice; it does not otherwise affect the law governing general average contribution. In the present case, there was no remedy open to the cargo owner in respect of any fault of the carrier for the general average event or casualty.

The issue to be decided on general average contribution may hence be formulated as follows: If the carrier, notwithstanding the unreasonable deviation, can resist liability to the cargo owner for damage to its cargo resulting from the fire, can it at the same time, notwithstanding the unreasonable deviation, impose a liability upon the cargo owner for general average contribution in respect of its expenditure in response to that general average event? The expert evidence points in opposite directions on this question; Scholl emphasized the effect of an unreasonable deviation per se upon the contracts of carriage; and Bissell testified as to the operation of the new Jason clause in those contracts. Undoubtedly, the question must be determined according to whether clause 15 survived as a term of the bills of lading in the face of the unreasonable deviation and, if so, whether it gives the result contended for by the carrier.

Apart from the new Jason clause or similar valid protective provision, the evidence shows that under the law of the United States unreasonable deviation by a carrier would entitle a cargo owner to avoid the contract of carriage and free itself of any obligation to make a general average contribution in respect of any general average expenditure or sacrifice following upon a general average event subsequent to the deviation. This was also true where there was a breach of contract by the carrier in respect of the obligation of seaworthiness. In The Jason, supra, where the Supreme Court was concerned with a general average provision designed to take advantage of s. 3 of the Harter Act which relieved the carrier of liability for fault or error in navigation or in management of

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the ship, provided there had been due diligence to make it seaworthy, Pitney J. for the Court said this:

In our opinion, so far as the Harter Act has relieved the shipowner from responsibility for the negligence of his master and crew, it is no longer against the policy of the law for him to contract with the cargo-owners for a participation in general average contribution growing out of such negligence; and since the clause contained in the bills of lading of the Jason’s cargo admits the shipowner to share in the general average only under circumstances where by the act he is relieved from responsibility, the provision in question is valid, and entitles him to contribution under the circumstances stated.

With the enactment of the Carriage of Goods by Sea Act, it became similarly possible by contract to take advantage for general average purposes of the exemptions from liability expressed in that Act. Thus, in Isbrandtsen Co. Inc. v. Federal Ins. Co.[24] cited in the expert evidence, an exception by a cargo owner to a claim by the carrier of general average contribution where a stranding resulted from faulty navigation before the commencement of the voyage was overruled. The contract of carriage included the new Jason clause, and the Court noted that the cargo owner’s liability to general average contribution depended on the ship owner’s liability, if any, to the cargo owner for the negligent navigation which brought about the general average event. Section 4(2)(a) of the Carriage of Goods by Sea Act gives an unqualified exemption from liability for loss arising from the fault or neglect of the master or pilot or servant of the carrier in the navigation or management of the ship; and there is no requirement that the ship owner prove seaworthiness at the commencement of the voyage to entitle it to take advantage of the exemption. Hence, whether the stranding took place before or after the

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commencement of the voyage, the carrier could assert a cause of action to claim general average contribution by reason of the new Jason clause where negligent navigation caused the general average casualty.

If the same reasoning be applied to deviation as it is dealt with under s. 4(4) of the Carriage of Goods by Sea Act, the position, absent a new Jason clause, is that an unreasonable deviation would engage a carrier’s liability only in so far as loss or damage resulted from that deviation. Section 4(4) of the Act provides, inter alia, that “any reasonable deviation shall not be deemed to be an infringement or breach of this Act or of the contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom”, and it follows from this that a carrier will be liable for loss or damage resulting from an unreasonable deviation. Hence, if it is open to take advantage, by contract, of the exemption in s. 3 of the Harter Act to give a carrier a right to general average contribution, it must equally be open to provide for general average contribution where there is an exemption from liability in the case of an unreasonable deviation. This is the view taken in Gilmore and Black, The Law of Admiralty (1957), at p. 246.

The remaining issue here is whether the new Jason clause in the bills of lading in this case is adequate to that end. Its terms are wide enough to embrace the general average event in the present case, and its incorporation of the exemption given by the Carriage of Goods by Sea Act is evident in the words “by statute, contract or otherwise”. I take American law to be, therefore, that clause 15 is not ousted because of the unreasonable deviation but provides for general average contribution even in

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the event of such a deviation so long as the general average peril did not arise or occur as a result of the deviation.

Section 4(4) of the Carriage of Goods by Sea Act is pertinent on the issue of general average contribution where there has been an unreasonable deviation, not because it deals directly with general average but because of the effect of the new Jason clause in protecting the right to general average contribution where the carrier enjoys immunity from liability “by statute, contract or otherwise”. It is only where the general average casualty is causally connected with the unreasonable deviation that a ship owner’s claim for general average contribution will fail. This was the holding in World Wide Steamship Co. v. India Supply Mission[25], where the Court said (at p. 194):

What is conclusive herein is that there was a causal connection between the unreasonable deviation and the casualty giving rise to the general average claim, that India did not waive this deviation but rather protested it and that the ship owner had notice of the deviation on the part of the time charterer. Under these circumstances this Court concludes that the deviation is a valid defence to World Wide’s claim.

The Court in the foregoing case referred to the judgments of the English Court of Appeal and of the House of Lords in Hain Steamship Co. Ltd. v. Tate & Lyle Ltd.[26], and I wish to comment on them and on another English authority. The House of Lords differed from the majority of the Court of Appeal in holding that there had been a waiver by the charterers of the unjustified deviation which had occurred, and

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hence the right to general average contribution was not lost. In the Court of Appeal, Scrutton L.J. stated that he was unaware of any case where a cargo owner has been held liable for general average contribution after an unjustifiable deviation; and, in the case before him, he concluded that because of the unjustified deviation, the ship owner was not entitled to claim protection from the exceptions in the original contract or take its benefit in claiming a general average contribution.

This is, undoubtedly, the common law position in the absence of statutory or contract qualifications. Louis Dreyfus & Co. v. Tempus Shipping Co.[27], is an illustration of statutory exoneration of a ship owner from liability for loss or damage to cargo by fire where the loss or damage happens without its actual fault or privity. There, the ship owner recovered general average contribution, and the statute was interpreted to relieve the ship owner from liability for loss or damage to cargo notwithstanding the unseaworthiness of the ship from which the fire resulted. It was part of the judgment on this latter point that the statute was not excluded by the bill of lading but was in effect incorporated therein.

The relevance of the Dreyfus case to the present one lies in the treatment of the issues of general average contribution in light of the fact that the fire which gave rise to the general average expenditure resulted from unseaworthiness of the ship. Since the applicable statute exonerated the ship owner from liability for fire happening without its actual fault or privity (as was the case there), the right to general average contribution was not lost. Lord Atkin put the matter as follows (at p. 747): “Where the act causing the peril is by convention of the parties not actionable, the claimant who has committed

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the act is not precluded from obtaining contribution”; and he added that as a matter of principle there is no distinction between a contractual exception and a statutory exception.

I need say no more on the question of the carrier’s right in this case to general average contribution. I come to the second matter, that is, the claim for additional interest which arose in the following way. The general average adjustment was made on May 1, 1968 and the contribution sought from the appellant included interest to that date. The writ in the action was issued on August 2, 1968 and the statement of claim was dated August 14, 1968. The statement of defence was dated August 23, 1968 without any counterclaim being then made. On March 13, 1969 leave was obtained by the respondent to amend its defence and to file a counterclaim and this was done under date of March 18, 1969. Interest was claimed on the contribution alleged to be payable by the appellant. The trial commenced on May 20, 1969, and judgment was reserved on May 23, 1969.

Reasons for judgment were not delivered until October 26, 1970. The trial judge was of the view at that time that there was no issue as to quantum in respect of the general average contribution payable by the appellant to the respondent. No argument had been addressed to him for any interest on the amount of the general average contribution as adjusted as of May 1, 1968. Subsequently, on February 4, 1971, the respondent moved for additional interest from May 1, 1968 to the date of judgment on October 26, 1970.

The trial judge, in additional reasons, refused to allow any interest for the period between the date of the general average adjustment and the date of trial. (Interest to the date of the general average adjustment was conceded in conformity with Rule XXI of the York-Antwerp Rules, 1950, made applicable by the bill of lading.) It was this opinion that the respondent’s delay in

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asserting its counterclaim was a factor to be considered in exercising his discretion to deny interest for that period, and he held further that he could find no basis for allowing interest for the period during which the Court reserved judgment by which the respondent’s claim to general average contribution was vindicated.

I see nothing in the trial judge’s reasons to support his refusal to allow interest to the date of judgment. The delay in asserting the counterclaim, in which interest was claimed on the general average contribution, is not a mitigating factor in favour of the appellant when it had from the outset resisted the demand for such contribution. Moreover, the complexity of the issues with which the trial judge had to deal affected both parties equally. In line with the principle considered by this Court in Canadian General Electric Co. Ltd. v. Pickford and Black Ltd.[28], the respondent should have interest from the date of the general average adjustment to the date of judgment. There are no special considerations to support a discretionary exercise of authority to deny interest for this period.

In the result, I would dismiss the appellant’s appeal in respect of the claim and counterclaim with costs and I would allow the respondent’s cross-appeal with costs.

Appeal dismissed with costs; cross-appeal allowed with costs, HALL and SPENCE JJ. dissenting.

Solicitors for the plaintiff, appellant: McMilland, Binch, Berry, Dunn, Corrigan & Howland, Toronto.

Solicitors for the defendants respondents: Manning, Bruce, Macdonald & MacIntosh, Toronto.