A-126-87
Wishing Star Fishing Co. Limited, Ocean Fisher
ies Limited, John Reid, Dennis Walsh, Phillip
Weber, Elvin Phillips, Sean Napier and Dave
Burton (Appellants) (Plaintiffs)
v.
The Fishing Vessel B.C. Baron, Baranof Fishing
Ltd. and Raymond Krause (Respondents)
(Defendants)
INDEXED AS: WISHING STAR FISHING CO. V. B.C. BARON
(THE)
Court of Appeal, Pratte, Stone and MacGuigan
JJ.—Vancouver, December 4; Ottawa, December
21, 1987.
Maritime law — Torts — Limitation of liability — Trial
Judge finding accident caused solely by negligence of master
of respondent vessel — Master also "principal shareholder" of
respondent corporation — Respondent corporation's liability
not limited by Canada Shipping Act, ss. 649 or 647 — S. 649
applying only to natural persons — S. 647 not limiting liabili
ty as accident occurring with corporation's actual fault or
privity — Master "directing mind" of corporation when acci
dent occurred — No distinction between master and principal
shareholder — Acts or omissions of one becoming acts or
omissions of other.
Corporations — Master of vessel found solely responsible
for accident — Master also principal shareholder of corpora
tion — Master directing mind of corporation at time of
accident — No distinction between acts of master and acts of
principal — Canada Shipping Act, s. 647 not limiting liability
as accident occurring with corporation's fault and privity — S.
649 applying only to natural persons — That individual
owner's liability limited, but one-man corporation's liability
not, result of legal fiction of separate legal identities —
Master remaining subject to corporation's direction and con
trol, even though giving orders to himself — Incorporation
sometimes working unexpected, even undesirable, results.
Construction of statutes — Canada Shipping Act, s. 649
referring to any person acting in capacity of master — "Per-
son" meaning natural person, notwithstanding Interpretation
Act, s. 28 — Interpretation clauses applied when nothing
contrary indicated in context or subject-matter — Necessary
to look to other sections of Act to ascertain Parliament's
intention, and within s. 649 itself — Use of "his" contextual
indication of intention to give meaning contrary to provision in
Interpretation Act.
This is an appeal from the trial judgment, whereby the
respondents were found liable for damages to the appellants'
fishing nets and the resulting loss of fish. The Trial Judge
found that the respondent master's negligence was the sole
cause of the losses, but he limited the corporate respondent's
liability as owner of the B.C. Baron pursuant to section 649 of
the Canada Shipping Act. The master was the principal share
holder of the corporation and was in charge of its business
affairs. The appellants argued that section 649 should not apply
to limit a corporation's liability and that the section 647
limitation should be denied because the losses occurred with
"the actual fault or privity of the corporation."
Held, the appeal should be allowed.
Section 649 provides that sections 647 and 648 apply to any
person acting in the capacity of master of a ship. Notwithstand
ing that "person" is defined in the Interpretation Act as
including a corporation, in the particular context "person"
refers to a natural person. Any other interpretation would lead
to an absurdity. Where "master" is used elsewhere in the Act,
Parliament was obviously speaking of a natural person (i.e.
section 128). Within subsection 649(1) itself, the use of "his"
provides another strong indication that Parliament meant a
natural person when it used the word "person". Although
subsection 26(6) of the Interpretation Act provides that words
importing male persons includes corporations, the context and
subject-matter clearly indicate otherwise. An interpretation
clause is not meant to deprive a word from being given its
ordinary meaning but to enable its application to things to
which it would not be applicable so long as there is nothing to
the contrary in the context or subject-matter.
While it may seem inconsistent that an individual owner
could limit his liability but a one-man corporation could not,
one must remember that the individual and the corporation are
separate and distinct legal persons. Any failure to appreciate
the distinction could lead to confusion and unforeseen legal
consequences. Although the master in a practical sense gave
orders to himself, he remained subject to the direction and
control of the company. If the business had remained unincor-
porated, the master could have limited his liability pursuant to
section 649. The introduction of the corporation meant that an
uncertain basis for limitation (section 647) was substituted for
a sure basis under section 649, illustrating that incorporation
may work unexpected, even undesirable, results.
In order to limit its liability under section 647, a corporation
must show that the losses occurred without its "actual fault or
privity." However, a corporation is a legal fiction, and it can
only act through natural persons. For an act to be that of the
corporation, it must be the act of somebody whose action is the
very action of the company itself. The master was "the direct
ing mind" of the corporation at the time of the accident. The
individual as master could not be separated from the individual
as principal. The negligence on the part of the master became
the negligence of the corporation itself and the corporation
cannot limit its liability under section 647. The person who acts
is not speaking or acting for the company, but as the company.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Canada Shipping Act, R.S.C. 1970, c. S-9, ss. 647, 649,
651(1)(a) (as am. by S.C. 1976-77, c. 38, s. 6).
International Convention relating to the limitation of the
liability of owners of sea-going ships ([Singh, Inter
national Conventions of Merchant Shipping] (British
Shipping Laws, Vol. 8, 2nd ed. London: Stevens &
Sons, 1973)).
Interpretation Act, R.S.C. 1970, c. I-23, ss. 26(6), 28.
Merchant Shipping Act 1979 (U.K.), 1979, c. 39, s.
17(1), Sch. 4.
Responsibility of Shipowners Act (U.K.), 7 Geo. II, c. 15
(1734) (as am. by 26 Geo. III, c. 86 (1786), 53 Geo.
III, c. 159 (1813)).
CASES JUDICIALLY CONSIDERED
APPLIED:
Robinson v. Local Board for Barton-Eccles ( 1883), 8
App. Cas. 798 (H.L.); Lee v. Lee's Air Farming Ltd.,
[1961] A.C. 12 (P.C.); Lennard's Carrying Company v.
Asiatic Petroleum Company, [1915] A.C. 705 (H.L.);
Tesco Supermarkets Ltd. v. Nattrass, [1972] A.C. 153
(H.L.).
CONSIDERED:
The Bramley Moore, [1964] P. 200 (C.A.); H. L. Bolton
(Engineering) Co. Ltd. v. T. J. Graham & Sons Ltd.,
[1957] 1 Q.B. 159 (C.A.).
REFERRED TO:
Ricard v. Lord, [1941] S.C.R. 1: Walithy Charters Ltd.
v. Doig (1980), 15 B.C.L.R. 45 (S.C.); The "Annie Hay",
[1968] 1 Lloyd's Rep. 141 (Adm. Div.); The "Alastor",
[1981] 1 Lloyd's Rep. 581 (C.A.); Salomon v. Salomon
& Co., [1897] A.C. 22 (H.L.); Vaccher et al. v. Kaufman
et al., [1981] 1 S.C.R. 301; Paterson Steamships Ltd. v.
The Canadian Co-operative Wheat Producers Ltd.,
[1935] S.C.R. 617; Leval & Company Incorporated v.
Colonial Steamships Limited, [1961] S.C.R. 221; British
Columbia Telephone Company and Others v. Marpole
Towing Ltd., [1971] S.C.R. 321.
AUTHORS CITED
Gower, L. C. B. Gower's Principles of Modern Company
Law, 4th ed. London: Stevens & Sons, 1979.
COUNSEL:
David F. McEwen for appellants (plaintiffs).
Timothy P. Cameron for respondents
(defendants).
SOLICITORS:
McEwen & Company, Vancouver, for appel
lants (plaintiffs).
McMaster, Bray, Cameron & Jasich, Van-
couver for respondents (defendants).
The following are the reasons for judgment
rendered in English by
STONE J.: This is an appeal from the judgment
of Joyal J. in the Trial Division, rendered on
February 26, 1987 [(1987), 9 F.T.R. 220]. By his
amended judgment of April 1, 1987 the Trial
Judge fixed the rate of judgment interest and
allowed post-judgment interest.
On March 28, 1985, the propeller of the
respondent fishing vessel (the B.C. Baron), while
under command of Mr. Krause, became entangled
in a purse seine net of the Ocean Horizon owned
by the corporate appellants, damaging the net and
permitting fish to escape. The appellants claimed
the resulting losses. The incident occurred in the
Kitkatla Inlet on the coast of British Columbia on
the opening day of the herring fishing season.
Many vessels had assembled on the grounds
including the B.C. Baron. Two other vessels in
setting their nets, had left a passage of only 50' to
75° between their cork lines floating on the sur
face. The passage was further constricted by the
billowing of the nets under the surface of the
water. The incident occurred when the B.C. Baron
attempted to manoeuvre between the two nets with
a view to setting its own.
The Trial Judge found the respondents liable
and assessed damages at $100,920.48. It was his
view that the losses occasioned had been caused
solely by the negligence of Mr. Krause. He said [at
page 2241:
There is not much room for any doubt as to the defendants'
liability. Although one might sympathize with the B.C. Baron's
attempt to find open space quickly and get its own fair share of
the herring catch in the two or three hours available to it, I find
that the master acted negligently and was the exclusive cause of
the damage suffered to the Ocean Horizon's net.
Neither that conclusion nor any finding of fact is
challenged in this Court. The only point that arises
is whether he erred in deciding that the corporate
respondent (the "corporation"), as owner of the
B.C. Baron, was entitled to limit its liability pursu
ant to the Canada Shipping Act, R.S.C. 1970, c.
S-9. Mr. Krause was described by the learned
Trial Judge as "the principal shareholder" (at
page 226 F.T.R.). He appears to have had charge
of the business affairs of the corporation.
The claim in limitation of liability was pleaded
in this way in a counterclaim that was incorpo
rated in the statement of defence:
5. The Defendants (Plaintiffs by Counterclaim) repeat the
allegations contained in the Statement of Defence and say that
if the Plaintiffs (Defendants by Counterclaim), or any of them,
have any claim as a result of damage to the aforesaid seine nets
against the Defendants, or any of them, which is not admitted
but specifically denied, the said damage occurred without
actual fault or privity on the part of the Owner of the M/V
"B.C. BARON", the Defendants Prince Rupert Fishermen's
Co-Operative Association and Baranof Fishing Ltd., and the
Defendant Raymond Krause was acting in his capacity as
Master of the M/V "B.C. BARON" at all times material; and
that any liability on the part of any of the Defendants, and the
aggregate of any such liabilities, would therefore in any event
be limited by Sections 647 and 649 of the Canada Shipping Act
to the Canadian dollar equivalent of 300,000 gold francs, as
defined therein and in the Canada Shipping Act Gold Franc
Conversion Regulations.
Paragraph 651(1) (a) [as am. by S.C. 1976-77, c.
38, s. 6] of the Act is also relevant in view of the
fact that the B.C. Baron had a tonnage of less than
300 tons. It provides that for the purposes of
section 647 "the tonnage of any ship that is less
than three hundred tons shall be deemed to be
three hundred tons".
The appeal was argued on two bases. First, it
was submitted that the Trial Judge erred in find
ing that the corporation could limit its liability
pursuant to section 649. Secondly, it was said that
the case is governed by section 647 of the statute
and that limitation should be denied because the
losses occurred with "the actual fault or privity" of
the corporation.
In deciding that the corporation was entitled to
limit liability, the learned Trial Judge made a
number of pertinent observations in his reasons for
judgment. It would be helpful for me to recite the
passages in which they appear. At page 222 he
said:
It was also to be expected that the master and owners of the
B.C. Baron would resist the claims. They would deny liability
of course but far more important, they would allege that if any
claim be found in favour of the plaintiffs, the damages occurred
without actual fault or privity on the part of the owners of the
B.C. Baron and that these damages were, by reason of ss. 647
and 649 of the Canada Shipping Act, limited to $33,271.74.
Again, at pages 226-227 he added:
It will be observed that the rule governing the owner's
liability is different from that imposed on the master of the
vessel. The latter's responsibility is limited in the cases covered
by s. 647 of the Canada Shipping Act notwithstanding any
actual fault or privity on his part. When the two are effectively
the same person, I should think that the test to be applied is
that stated in the celebrated case of Walithy Charters Ltd. v.
Doig (1979), 15 B.C.L.R. 45, when the court was asked to
determine (at page 53) "At the relevant time here, was Mr.
Doig in fact performing the functions normally associated with
the master of a vessel, or was he acting in this capacity as
owner?..."
And, finally, at page 227 he concluded:
I must conclude that the conduct of Mr. Krause was attribut
able to his duties as master of the B.C. Baron. He was
performing duties wholly within his field of responsibility. The
owners cannot be found at fault for or privy to acts or omissions
of the master in this respect.
I turn now to examine the arguments presented
in the light of the statutory language with which
we are concerned.
Limitation Under Section 649
The pertinent language of section 649 reads:
649. (1) Sections 647 and 648 extend and apply to
(a) the charterer of a ship;
(b) any person having an interest in or possession of a ship
from and including the launching thereof; and
(c) the manager or operator of a ship and any agent of a ship
made liable by law for damage caused by the ship
where any of the events mentioned in paragraphs 647(2)(a) to
(d) occur without their actual fault or privity, and to any
person acting in the capacity of master or member of the crew
of a ship and to any servant of the owner or of any person
described in paragraphs (a) to (c) where any of the events
mentioned in paragraphs 647(2)(a) to (d) occur, whether with
or without his actual fault or privity.
Mr. McEwen put the case against limitation
under this section in this way. The words "Sections
647 and 648 extend and apply to ... any person
acting in the capacity of master ... of a ship ...
where any of the events mentioned in paragraphs
647(2)(a) to (d) occur, whether with or without
his actual fault or privity", he said, cannot be
applied because the B.C. Baron was owned by the
corporation. They could be applied only if its
owner had been a natural person and then only if
that person had acted in his capacity of master at
the time the negligence occurred.
Mr. Cameron sought to meet this argument in
two ways. First, he invited us to construe the word
"person" in the language I have extracted from
section 649 to include the corporation. This should
be done, he maintained, because of the definition
of "person" in section 28 of the Interpretation Act,
R.S.C. 1970, c. I-23:
28. In every enactment
"person" or any word or expression descriptive of a person,
includes a corporation;
By applying this definition, he argued, the corpo
ration was a "person acting in the capacity of
master" at the time of the incident and, according
ly, is entitled to limit its liability pursuant to
section 649.
I am unable to accept this submission. In the
particular context the word "person", in my view,
refers to a natural person. Any other way of
reading it would plainly lead to absurdity. Where
it used the term "master" elsewhere in the Act, it
is evident that Parliament was speaking of a natu-
ral person. Section 128 offers a good illustration.
It authorizes the Minister to grant an applicant a
certificate as master having received "satisfactory
evidence of his sobriety, experience, ability and
general good conduct on board ship". These words
can only be descriptive of qualities found in a
natural person. Then, within subsection 649(1)
itself, we find a further indication of Parliamen
tary intention. It permits the master to limit liabil
ity whether a loss occurred "with or without his
actual fault or privity". Apparently, these words
were adopted to give effect to the 1957 Interna
tional Convention.' The pronoun "his" when
viewed in the overall context of the section and the
statute read as a whole, provides very strong indi
cation that Parliament had only a natural person
in mind when it employed the word "person". 2
Moreover, I do not think the word "person" in
section 28 of the Interpretation Act, is meant to be
applied blindly without any regard for the context
' The Convention is the International Convention relating to
the limitation of the liability of owners of sea-going ships,
signed at Brussels on October 10, 1957 ([Singh. International
Conventions of Merchant Shipping] (British Shipping Laws,
Vol. 8, 2nd ed. London: Stevens & Sons, 1973) at page 1348 et
seq.), Article 6(3) of which reads in part:
Article 6
3° When actions are brought against the master or against
members of the crew such persons may limit their liability
even if the occurrence which gives rise to the claims resulted
from the actual fault or privity of one or more of such
persons. If, however, the master ... is at the same time the
owner ... of the ship the provisions of this paragraph shall
only apply where the act, neglect or default in question is ...
committed by the person in question in his capacity as master
... of the ship. (Emphasis added.)
2 I say so notwithstanding the presence of subsection 26(6) of
the Interpretation Act:
26....
(6) Words importing male persons include female persons
and corporations.
By parity of reasoning, the word "his" in the portion of section
649 here in question ought not to be read as including the
corporate respondent when the context and the subject-matter
point clearly in an opposite direction.
in which it appears or the subject-matter with
which it is concerned in a particular statute. The
authorities bear this out. Thus, in Robinson v.
Local Board for Barton-Eccles (1883), 8 App.
Cas. 798 (H.L.), the Earl of Selborne L.C. was
concerned with the application of a statutory defi
nition that, like the one under examination, was
inclusive. He said, at page 801:
An interpretation clause of this kind is not meant to prevent the
word receiving its ordinary, popular, and natural sense when
ever that would be properly applicable; but to enable the word
as used in the Act, when there is nothing in the context or the
subject-matter to the contrary, to be applied to some things to
which it would not ordinarily be applicable. [Emphasis added.]
I refer as well to Ricard v. Lord, [1941] S.C.R. 1,
per Rinfret J., at pages 10-11.
Mr. Cameron then put his case another way. An
inconsistency would arise, he said, if this "one-
man" corporation could not limit its liability
whereas an individual owner acting in his capacity
of master could do so (see Walithy Charters Ltd.
v. Doig (1980), 15 B.C.L.R. 45 (S.C.); The `Annie
Hay", [1968] 1 Lloyd's Rep. 141 (Adm. Div.);
The "Alastor", [1981] 1 Lloyd's Rep. 581
(C.A.)). It is a common practice in Canada, he
asserted, for those engaged in commercial fishing
operations to incorporate their businesses. The cor
porate owner ought to be regarded in the same
way as the individual owner for, as the Trial Judge
put it, the master and the corporation were "effec-
tively the same person" (at page 227 F.T.R.). That
is particularly so where, as here, the previous
owner continues to operate the business much as
he had done prior to incorporation.
This case illustrates a not uncommon situation
where, in a corporate context, the same individual
wears more than one hat e.g. shareholder, manag
er, director etc. It may be tempting in such a case
to disregard separate corporate existence and to
analyze an act in terms of the individual. In the
day-to-day business affairs of a corporation, that
way of proceeding may create no difficulty. The
same cannot be said, however, as a matter of strict
law. The individual and the corporation are sepa
rate and distinct legal persons (Salomon v. Salo-
mon & Co., [1897] A.C. 22 (H.L.)), and any
failure to appreciate that distinction can only lead
to confusion and to unforeseen legal consequences.
The record suggests that Mr. Krause, as the
predominant individual, was in charge of manag
ing the corporation's affairs. The decision to select
him as master of the B.C. Baron was, presumably,
his decision. But in a legal sense, that decision was
the decision of the corporation. He remained sub
ject to its direction and control even though, in a
practical sense, he gave orders to himself. This
important distinction is well illustrated by Lee v.
Lee's Air Farming Ltd., [1961] A.C. 12 (P.C.).
The controlling shareholder of a corporation was
killed in the course of his duties as pilot of its
aircraft while engaged in top-dressing a customer's
field. The deceased and the corporation had
entered into an employment contract for his ser
vices. The question to be decided was whether, in
light of the circumstances, the deceased could be
classified as a "worker" for purposes of a worker's
compensation statute. In giving judgment, Lord
Morris of Borth-y-Gest emphasized the impor
tance of separate legal existence as between the
individual and the corporation, saying, at pages
26-27:
It is said that therein lies the difficulty, because it is said that
the deceased could not both be under the duty of giving orders
and also be under the duty of obeying them. But this approach
does not give effect to the circumstance that it would be the
company and not the deceased that would be giving the orders.
Control would remain with the company whoever might be the
agent of the company to exercise it. The fact that so long as the
deceased continued to be governing director, with amplitude of
powers, it would be for him to act as the agent of the company
to give the orders does not alter the fact that the company and
the deceased were two separate and distinct legal persons. If
the deceased had a contract of service with the company then
the company had a right of control. The manner of its exercise
would not affect or diminish the right to its exercise. But the
existence of a right to control cannot be denied if once the
reality of the legal existence of the company is recognised. Just
as the company and the deceased were separate legal entities so
as to permit of contractual relations being established between
them, so also were they separate legal entities so as to enable
the company to give an order to the deceased.
If the business had remained unincorporated,
there appears no doubt that Mr. Krause could
have limited his liability pursuant to section 649
despite the negligence on his part as master of the
B.C. Baron. The introduction of the corporation
means that an uncertain basis for limitation (sec-
tion 647) has been substituted for a sure basis
under section 649. As I have said, the case illus
trates once again that incorporation may work
unexpected results, and even ones that are undesir
able from a business standpoint for, as has been
aptly observed, "sometimes corporate entity works
like a boomerang and hits the man who was trying
to use it". 3 The argument that limitation ought to
be available in a situation of this kind, seeing that
Mr. Krause continued to operate much as he had
done prior to incorporation, could only be accepted
if the statute so permitted. I can only repeat that
such a possibility is not open on its present word
ing. I may say, with respect, that the argument
might be more appropriately addressed to a legis
lator than to a court of law.
Limitation under section 647
In order to succeed under this head, the corpora
tion must show that the losses occurred without its
"actual fault or privity", and the burden of so
doing is a heavy one indeed (see Vaccher et al. v.
Kaufman et al., [1981] 1 S.C.R. 301). The rele
vant provisions of section 647 read:
647... .
(2) The owner of a ship, whether registered in Canada or
not, is not, where any of the following events occur without his
actual fault or privity, namely,
(d) where any loss or damage is caused to any property,
other than property described in paragraph (b), or any rights
are infringed through
3 Gower, L. C. B. Gower's Principles of Modern Company
Law, 4th ed. London: Stevens & Sons, 1979, at p. 100.
(i) the act or omission of any person, whether on board
that ship or not, in the navigation or management of the
ship, in the loading, carriage or discharge of its cargo or in
the embarkation, carriage or disembarkation of its passen
gers, ...
liable for damages beyond the following amounts, namely,
(/) in respect of any loss or damage to property or any
infringement of any rights mentioned in paragraph (d), an
aggregate amount equivalent to 1,000 gold francs for each
ton of that ship's tonnage.
The test thus adopted is found in the statute law of
the United Kingdom- where in recent times a dras
tically different testa based upon the 1976 Conven
tion was adopted but not immediately proclaimed.
At the hearing, the case for and against limita
tion under section 647 was put in this way. On the
one side it was submitted that limitation must be
denied because the act of negligence was that of
the corporation itself. On the other, it was said
that one must look to see in what capacity Mr.
Krause was serving at the time of the incident. If it
is found that he was serving as the master of the
B.C. Baron, then the act of negligence (i.e. faulty
navigation) was personal to him. Though it would
render the corporation liable on the footing of
respondeat superior, liability could be limited. If
instead, he was acting as owner in the sense that
he personified the corporation itself, then his act
would have to be viewed as the act of the corpora
tion and, so viewed, liability could not be limited.
Fortunately, the circumstances under which a
corporation may limit its liability is a well trav
elled legal road. The test was developed by English
See Merchant Shipping Act 1979 (U.K.), 1979, c. 39, s.
17(1) and Sch. 4. Article 4 of the International Convention on
Limitation of Liability for Maritime Claims, 1976 provides:
Article 4
A person liable shall not be entitled to limit his liability if
it is proved that the loss resulted from his personal act or
omission, committed with the intent to cause such loss, or
recklessly and with knowledge that such loss would probably
result.
Courts before the 1979 changes in United King
dom legislation based upon the 1976 Convention. I
start by noting what Lord Denning M.R. had to
say in The Bramley Moore, [1964] P. 200 (C.A.),
at page 220:
... limitation of liability is not a matter of justice. It is a rule of
public policy which has its origin in history and its justification
in convenience. 5
The difficulty seen by the Courts in applying the
"actual fault or privity" concept to a corporation
lies in the fact that a corporation, although
endowed by law with a separate personality, is but
a legal fiction. Left alone, it can do nothing. It
springs into action only by the acts of natural
persons. Thus, in H. L. Bolton (Engineering) Co.
Ltd. v. T. J. Graham & Sons Ltd., [1957] 1 Q.B.
159 (C.A.), Denning L.J. observed, at page 172:
5 The doctrine of limitation of shipowners' liability is deeply
entrenched in the statute law of the United Kingdom, dating as
far back as the Responsibility of Shipowners Act (U.K.), 7
Geo. II, c. 15 (1734) which was followed by the statutes of 26
Geo. III, c. 86 (1786) and 53 Geo. III, c. 159 (1813). The
recital in the 1734 statute sets forth the "public policy" which
Lord Denning no doubt had in mind:
WHEREAS it is of the greatest Consequence and Importance
to this Kingdom, to promote the Increase of the Number of
Ships and Vessels, and to prevent any Discouragement to
Merchants and others from being interested and concerned
therein: And whereas it has been held, that in many Cases
Owners of Ships or Vessels are answerable for Goods and
Merchandize shipped or put on Board the same, although the
said Goods and Merchandize, after the same have been so
put on Board, should be made away with by the Masters or
Mariners of the said Ships or Vessels, without the Knowledge
or Privity of the Owner or Owners, by Means whereof
Merchants and others are greatly discouraged from adven
turing their Fortunes, as Owners of Ships or Vessels, which
will necessarily tend to the Prejudice of the Trade and
Navigation of this Kindgom.
This policy was carried forward into the preamble of the 1813
statute:
WHEREAS it is of the utmost Consequence and Importance to
promote the Increase of the Number of Ships and Vessels
belonging to the United Kingdom, registered according to
Law, and to prevent any Discouragement to Merchants and
others from being interested therein.
A company may in many ways be likened to a human body. It
has a brain and nerve centre which controls what it does. It also
has hands which hold the tools and act in accordance with
directions from the centre. Some of the people in the company
are mere servants and agents who are nothing more than hands
to do the work and cannot be said to represent the mind or will.
Others are directors and managers who represent the directing
mind and will of the company, and control what it does. The
state of mind of these managers is the state of mind of the
company and is treated by the law as such.
Obviously, then, only the act of certain servants
or agents will be seen as an act of the corporation
itself. To be such it must fall within the test
enunciated by Viscount Haldane L.C. in Lennard's
Carrying Company v. Asiatic Petroleum Com
pany, [1915] A.C. 705 (H.L.), where he said at
pages 713-714:
For if Mr. Lennard was the directing mind of the company,
then his action must, unless a corporation is not to be liable at
all, have been an action which was the action of the company
itself within the meaning of s. 502 .... It must be upon the true
construction of that section in such a case as the present one
that the fault or privity is the fault or privity of somebody who
is not merely a servant or agent for whom the company is liable
upon the footing respondeat superior, but somebody for whom
the company is liable because his action is the very action of the
company itself.
That view has stood the test of time and has been
consistently applied in this country (see e.g. Pater-
son Steamships Ltd. v. The Canadian Co-opera
tive Wheat Producers Ltd., [1935] S.C.R. 617, at
page 625; Leval & Company Incorporated v.
Colonial Steamships Limited, [1961] S.C.R. 221,
at page 230; British Columbia Telephone Com
pany and Others v. Marpole Towing Ltd., [1971]
S.C.R. 321, at pages 326-327).
In light of these authorities, I think Mr. Krause
was "the directing mind" of the corporation at the
time of the incident in the sense that his action was
"the very action" of the corporation. To hold
otherwise would, it seems to me, require us to draw
a distinction not warranted by the cases. Mr.
Krause the master cannot be separated from Mr.
Krause the principal. At the relevant time he was
clearly the "directing mind and will" of the corpo
ration. Although the incident was due to negli
gence on his part, the act was that of the corpora
tion itself. In Tesco Supermarkets Ltd. v.
Nattrass, [1972] A.C. 153 (H.L.), Lord Reid once
again drew the distinction between acts which are
done for a corporation and acts that are done as a
corporation when he said, at page 170:
I must start by considering the nature of the personality
which by a fiction the law attributes to a corporation. A living
person has a mind which can have knowledge or intention or be
negligent and he has hands to carry out his intentions. A
corporation has none of these: it must act through living
persons, though not always one or the same person. Then the
person who acts is not speaking or acting for the company. He
is acting as the company and his mind which directs his acts is
the mind of the company. There is no question of the company
being vicariously liable. He is not acting as a servant, repre
sentative, agent or delegate. He is an embodiment of the
company or, one could say, he hears and speaks through the
persona of the company, within his appropriate sphere, and his
mind is the mind of the company. If it is a guilty mind then
that guilt is the guilt of the company. It must be a question of
law whether, once the facts have been ascertained, a person in
doing particular things is to be regarded as the company or
merely as the company's servant or agent. In that case any
liability of the company can only be a statutory or vicarious
liability. [Emphasis added.]
As I see it, the distinction between an act of a
particular individual in his capacity of master and
an act in his capacity as owner for purposes of
section 649, has no application in determining
whether the act was done "without the actual fault
or privity" of a corporation for purposes of section
647. In the latter case, as the authorities demon
strate, what is important is whether the doer of the
act occupied such a position in the corporation
that at the time it was done it may be said to have
been the very act of the corporation itself. I have
concluded that Mr. Krause's acts and omissions
were of this kind and, accordingly, the corporation
cannot limit its liability. The losses did not occur
without its "actual fault or privity".
In the result, the appeal should be allowed with
costs. I would vary the judgment below by deleting
the second paragraph thereof and by substituting
the following:
There shall be judgment for the plaintiffs against the other
defendants in the amount of $100,920.48, plus costs.
PRATTE J.: I agree.
MACGUIGAN J.: I agree.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.