Andrei Korottchenko Blog – M/V Matterhorn – Federal Court’s ADR powers at work

The case of the M/V Matterhorn is a great example of Federal Court’s alternative dispute resolution powers at work.

The Facts

The M/V Matterhorn, a 60-year-old, 48-metre tug, sank at her moorings on August 10, 2014, in Mount Carmel, Newfoundland, resulting in an oil spill around the vessel. The Coast Guard ordered the vessel owners to install a boom around the vessel to contain the pollution. The owners made some initial attempts to secure the contaminated area, but quickly stopped responding to Coast Guard’s orders.

The vessel continued leaking pollutants for approximately two years until the Coast Guard engaged contractors, who removed around 5,000 litres of waste oil and 22,000 litres of waste water from the vessel. Coast Guard’s expenses in relation to the clean up operation were $172,751.64.

Polluter Pays

Section 103 of Canada’s Marine Liability Act (the “Act“) allows any person in Canada, who has sustained loss or damage, or incurred costs and expenses, in respect of actual or anticipated oil pollution damage to file a claim directly with the Administrator of the Ship-source Oil Pollution Fund (the “Fund“):

In addition to any right against the Ship-source Oil Pollution Fund under section 101, a person may file a claim with the Administrator for the loss, damage, costs or expenses if the person has suffered loss or damage, or incurred costs or expenses, referred to in section 51, 71 or 77, Article III of the Civil Liability Convention or Article 3 of the Bunkers Convention in respect of any kind of loss, damage, costs or expenses arising out of actual or anticipated oil pollution damage, including economic loss caused by oil pollution suffered by persons whose property has not been polluted.

The purpose of the Fund is to compensate claimants whose claims comply with the requirements of the Act. Once the Fund administrator compensates the claimant, it is subrogated into all of the claimant’s rights in relation to the incident up to the amount of the paid claim. That is the essence of the “polluter pays” principle adopted in Canada.

After Coast Guard submitted its claim to the Fund, the Fund paid the claim claim and commenced an action in the Federal Court against the vessel owners to recover the money paid to the Coast Guard.

Mediation and Resolution

Section 387 of the Federal Courts Rules provides for the possibility of the case management judge presiding over a mediation in an attempt to resolve the dispute without going to trial. Such mediation could be a very useful tool for the litigants to resolve the case economically, because unlike commercial mediators, the Federal Court does not charge for such mediation service.

The parties held a judicial mediation presided over by Madam Prothonotary Tabib, which ultimately resulted in an agreement between the parties to resolve the dispute. As part of the settlement, the parties consented to seek an order from the Court with reasons setting out the uncontested facts underlying the dispute.

The terms of the settlement agreement are confidential, but it is likely that the Fund received a settlement amount which at least in part compensated it for the money to the Coast Guard. The Fund can now also take advantage of a published decision setting out how the Fund operates which can be used in subsequent cases. The owners of the vessel in all likelihood escaped this litigation without paying the full amount of the claim. And both sides saved a considerable amount of legal fees by mediating the case at an early stage. An all-around pragmatic decision.

Andrei Korottchenko, July 24, 2019

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