Test your understanding of exclusion clauses and negligence in this recent case out of Quebec.

Capitaines Propriétaires de la Gaspésie (ACPG) is an association of fishing boat captains and owners in the Gaspé region. It operates a marina and dry dock in Rivière-au-Renard, where fishing boats are stored or launched by a portal crane. ACPG’s crane at issue was purchased new in 1984. By 2008, Paulin Cotton had operated it without incident for 24 years.

Guy Laflamme of Pêcheries Guy Laflamme Inc., a member of ACPG, had his boat launched with the crane on May 19, 2008. During the launch, a chain broke, the stern of the Myrana I fell into the water, and 800 feet of cable unwound from the crane, striking the boat and coiling around it. The boat sustained damage from both the fall and the crane cable.

The cause of the incident was unclear. Laflamme alleged that the crane was not being maintained as it should have been, since it was in the process of being sold. However, based on later testimony by Cotton and on the various invoices filed, Cotton had followed the instructions in the operating and maintenance manual. Subcontractors checked the hydraulics system and the propulsion system. Notwithstanding this, no government or independent third-party inspection was ever made. This points to metal fatigue in the chain as the suspected cause. No chain had ever broken like this before.

Laflamme initiated discussions with the ACPG to try to reach a settlement, but these failed – partly because of the wide discrepancy in the amount. Laflamme alleged that the damage exceeded $500,000, while the ACPG considered the damage minimal and mostly pre-existing. In any event, the ACPG felt that they and Cotton could not be held liable for the damage, because they were covered by an exclusion-of-liability clause in the one-page “Boat Handling” contract, which read, in part, in bold type (translated): “I, the undersigned, ____, residing at ____, owner of the vessel M/V ____, registration number ____, declare that I accept liability for any risk resulting from the towage, docking, wintering and/or launching of this vessel, and I release the Owner of this dry dock and its Operator, ____, from any civil liability resulting from these associated operations or handling.” ACPG’s insurer denied any liability, so the issue turned largely on the impact of this exclusion clause. If the exclusion clause was of no effect, then the court would decide whether ACPG was negligent, and if so, how much damage had resulted from the crane failure.

After a number of legal wranglings, including a counterclaim by Laflamme for $400,000, and an application for dismissal of the claim by ACPG, Prothonotary Morneau of the Federal Court issued a separate direction for determining the damages owed to Laflamme (if any). That left Justice Harrington of the same Court to deal solely with the issue of liability.

Evidence presented at trial showed that Laflamme had signed the form as “owner or authorized representative of the vessel,” and Cotton witnessed the document as “operator or authorized representative of the dock.” Since becoming owner of the Myrana I in 1988 or 1989, Laflamme had signed at least 16 such forms at the ACPG facility. Cotton claimed that he brings the contract clauses to the attention of everyone who uses ACPG’s services – at least the first time. Laflamme was adamant that the wording of the contract was never brought to his attention. He said that he has difficulty reading, and had never read the entire (one-page) contract. He said that he thought it was just an invoice.

Were the ACPG and Cotton liable, or was the exclusion-of-liability clause in the contract valid and enforceable? Does it matter whether the clause was specifically brought to Laflamme’s attention? Should the counterclaim by Laflamme for $400,000 have been allowed?

Click below to see the unwindings of this complicated case.

» Answer:

 

When Justice Harrington untangled Capitaines Propriétaires de la Gaspésie (ACPG) Inc. v. Pêcheries Guy Laflamme Inc., 2014 FC 456, the ACPG and Cotton prevailed.

As the crane was in the possession and under the control of the ACPG and Cotton, the onus was on them to prove that the loss was not caused by a breach of their duty of reasonable care. Neither ACPG nor Cotton rebutted this presumption of negligence.

However, the Judge was satisfied that the exclusion clause, on its plain wording, was broad enough in scope to cover any such negligence, even though the exclusion clause did not explicitly exclude negligence or fault. Citing Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 S.C.C. 4, the Judge observed that “There is nothing inherently unreasonable about exclusion clauses,” and that there are many valid reasons for contracting parties to use exemption clauses, most notably to allocate risks.

The Judge did not find it necessary to decide whether or not the clause had specifically been brought to Laflamme’s attention. Because he and his company had dealt with numerous such ACPG “Boat Handing” contracts over the years, the Judge found that Laflamme should have been aware of the exclusion-of-liability clause. “I find it totally unacceptable,” he said, “that Mr. Laflamme, an experienced businessman who incorporated the Myrana I and took out a hull and machinery insurance policy covering this boat, never told Mr. Cotton that he could not read, or that he had great difficulty reading.”

The ACPG, he continued, “was entitled to expect there to have been a meeting of the minds between the parties regarding the conditions according to which the work would be performed. Laflamme had had 20 years to read this one-page document, the Judge said, which “contains no subtle points that are inconsistent with the overall purpose of the contract.”

Judge Harrington allowed the request by the ACPG and Cotton for a declaratory judgment that they were not liable for damages, finding that the exclusion-of-liability clause in the contract between the parties was a complete defence. He dismissed Laflamme’s counterclaim and awarded costs to the ACPG and Cotton.

Editor’s Note: This is yet another case in which a very broad but crystal clear exclusion clause was able to resolve an otherwise convoluted and highly contentious negligence claim. One is deemed to have read and understood the commercial contracts one enters into, unless there are very exceptional circumstances. It really is “buyer beware” – if you don’t like a clause or don’t understand it, don’t agree to it by executing the contract.

Reprinted from The Legal Edge Issue 108, October – December 2014

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