Date: 20060615
Docket: T-1478-05
Citation: 2006 FC 764
Ottawa, Ontario, Thursday, this 15th day of June 2006
PRESENT: MADAM PROTHONOTARY MIREILLE TABIB
Admiralty Action in rem and in personam
BETWEEN:
CALOGERAS & MASTER SUPPLIES INC.
Plaintiff
- and -
CERES HELLENIC SHIPPING ENTERPRISES LTD., -and- THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP ACAP LAURENT@-and- THE SHIP ACAP LAURENT@-and- THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP ACAP ROMUALD@-and- THE SHIP ACAP ROMUALD@-and- THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP ACAP GEORGES@-and- THE SHIP ACAP GEORGES@-and- THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP ACAP LEON@-and- THE SHIP ACAP LEON@-and- THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP ACAP JEAN@-and- THE SHIP ACAP JEAN@-and- THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP ACAP DIAMANT@-and- THE SHIP ACAP DIAMANT@-and- THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP ACAP PIERRE@-and- THE SHIP ACAP PIERRE@
Defendants
REASONS FOR ORDER AND ORDER
[1] The motion before the Court was brought by the Defendant, Ceres Hellenic Shipping Enterprises Ltd., and seeks an order setting the amount of bail to be given for the release or to prevent the arrest of the in rem Defendants and other relief.
[2] The Defendant's original motion had also requested, as its principal relief, an order quashing the warrants of arrests issued against the in rem Defendants. However, well before the hearing of this motion, the Defendant served and filed an amended notice of motion and motion record, by which it formally discontinued and abandoned that part of the motion. As a result, no cross-examinations were conducted on those parts of the parties' respective affidavits relevant to the existence of a lien or right in rem against the Defendant vessels. Notwithstanding this, the Plaintiff included in its responding record argument going to these issues, to which the Defendant raised an objection in advance of the hearing. Still, in view of the fact that the Plaintiff had made written argument on the existence of a lien or right in rem, the Defendant's counsel at the hearing attempted to resurrect that part of the motion. Despite the fact that both parties had prepared and would have been ready to make argument on the legal aspect of these issues, I was of the view that the factual record was incomplete and clearly insufficient to support a determination of these issues and dismissed the Defendants' informal verbal motion to re-amend its notice of motion.
Amount of bail
[3] It is trite law that the general rule which governs the amount of bail to be provided in order to obtain the release of a ship or prevent its arrest is that bail must be sufficient to cover the Plaintiff's reasonably arguable best case, including interest and costs, but limited by the value of the arrested vessel. Here, the value of the vessel that might be arrested does not come into play, being vastly superior to the claim asserted by the Plaintiff.
[4] Both parties have presented evidence as to what the Plaintiff's reasonably arguable best case ought to be. The issues are contentious, the evidence contradictory, and clearly incomplete. At the hearing, I asked the Defendant's counsel what standard the Court should apply in weighing the evidence before it. Counsel could point to no authority that would have discussed or determined that standard, but suggested that the standard should be similar to that applied to motions for summary judgment. In other words, a Plaintiff is prima facie entitled to such security as will cover the amounts claimed in its statement of claim and affidavit to lead warrant. Once a Defendant files a motion to set the bail at a lower amount, it would then behoove the Plaintiff, as if it were facing a motion for summary judgment, to put its best foot forward to show that the amount as claimed constitutes a genuine issue for trial; the Plaintiff did not disagree with that suggestion. I am not certain that such a standard might not be setting the bar higher than it ought to be for the Plaintiff. Nevertheless, applying that standard as the standard most favourable to the Defendant, it is my conclusion that the amount of bail already filed by the Defendant ought not to be reduced.
[5] The Plaintiff's claim is for amounts outstanding under invoices issued for goods and services provided, together with interests and penalties allegedly accruing thereon. On the motion before me, the initial amounts covered by the invoices are not at issue, nor is it at issue that the Defendant has paid a substantial portion of the initial invoices. The Defendant in fact concedes that the Plaintiff has a reasonably arguable case to claim the sum of $104,753.25 in capital outstanding on the invoices. The bone of contention between the parties is whether the Plaintiff is entitled to claim interest on outstanding invoices at all, and if so, how and from when such interest should be calculated and how payments made by the Defendants should be or should have been applied by the Plaintiff as between capital outstanding and accrued interest.
[6] There is sufficient evidence on the record before me to establish, on a prima facie basis, the existence of a written agreement between the parties that outstanding invoices should bear interest at the rate claimed by the Plaintiff, in accordance with the calculations made by the Plaintiff, and that payments made by the Defendant could properly have been allocated by the Plaintiff so as to support the full amount of the claim as presented. The Defendant's approach to this motion has not been to undermine the prima facie validity of the Plaintiff's claim and calculations but to establish its own defence to the claim. Indeed, the Defendant asserts the following defences:
(a) that whatever the written contractual terms contained in the Plaintiff's invoices, statements of account or general terms and conditions, those are superseded by an agreement between the parties that the Defendant would not pay any interest on any of the Plaintiff's invoices even when overdue;
(b) that in light of its conduct during the seven years of the business relationship between the parties, and as a result of certain representations made by the Plaintiff to the Defendant, the Plaintiff has waived or should be estopped from claiming interest on the amounts overdue; or
(c) in the alternative, that if it is entitled to claim interest, the Plaintiff's claim should be limited to the amount of $277,537.34 plus interest at the rate of 26.825% per annum from June 15, 2005, the whole as per the Plaintiff's own calculations contained in a statement of account prepared on June 15, 2005 and which the Defendant submits constitute a binding extrajudicial admission.
[7] The evidence tendered by the Defendant in support of its first argument is unconvincing. It rests solely on hearsay statements and appears contradicted by such documentary evidence as has been adduced so far by the Plaintiff. The Defendant has not succeeded in establishing that there exists an agreement between the parties superseding the written terms and conditions of the agreement.
[8] As to the Defendant's argument of a general estoppel or waiver, it is not so much based on evidence of the Plaintiff's conduct toward the Defendant as on the Defendant's own conduct in having never acknowledged or paid interest on outstanding invoices. Furthermore, is lacking from the Defendant's evidence any element tending the show that the Defendant altered its conduct or acted in any way to its prejudice in reliance on the expectation that the Plaintiff would not claim interest. That second argument of the Defendant therefore also fails to cast sufficient doubt that the amounts claimed by the Plaintiff are reasonably arguable.
[9] The third, subsidiary argument of the Defendant is by far the most serious. The Plaintiff sent to the Defendant on June 15, 2005 an electronic document stated to be an up-to-date "A/R [accounts receivable] customer transaction listing" for all of its accounts, indicating a total of $136,132.25 for outstanding invoices plus interest charges of $172,884.09, for a total amount overdue of $309,016.34. It is common ground between the parties that following that updated statement, on June 17, 2005, the Defendant remitted the sum of $31,479.00 to the Plaintiff, and that no new charges for goods or services were incurred by the Defendant and no new invoices were issued by the Plaintiff. Yet, when the Plaintiff issued its statement of claim on August 26, 2005, it claimed the amount of $740,359.90, being over twice the amounts claimed by the Plaintiff to have been owed as of two months earlier; that increase cannot be accounted for by mere accrual of interest over a period of two months.
[10] This glaring discrepancy required a response and explanation from the Plaintiff. The explanation, such as it is, it to be found in paragraphs 35 and 36 of the affidavit in reply of Sotirios Moutsios and is twofold: That "the payment so far received by the Defendant had not been applied against interest first as provided for in the governing terms and conditions" and that "due to a problem with the programming of our system the calculation of interest was suspended for a duration corresponding to the payment terms of our invoices every time it was posted in our system (which should not have been)". The Defendant did not cross-examine Mr. Moutsios very closely on that explanation. As a result, there is insufficient evidence to determine whether the two "errors" that resulted in the accounts receivable transaction listing of June 15, 2005 are limited to that specific report or are "errors" that have been repeated throughout the business relationship between the parties. It is far from obvious that a single instance of incorrect calculation or error cannot validly be corrected later. It is another matter if the alleged "miscalculation" or the method of allocation of payments have been consistently and continuously present in the Plaintiff's accounting practices. The former is an error and the latter is a course of conduct. The former would clearly present a reasonably arguable case for the Plaintiff. The latter might still present an arguable case, but the very significant increase between the amounts now asserted and the amounts that would then have been historically charged by the Plaintiff might have justified setting bail at a lower amount.
[11] This quandary, however, does not present itself in this case as the evidence before me falls short of showing, with any degree of certainty, that the calculations upon which the Plaintiff's current claim is based constitute a departure from an established course of conduct.
[12] Accordingly, I find that the Plaintiff has established a prima facie claim for the amounts set out in its statement of claim and that the Defendants have failed to show that the Plaintiff does not have a reasonably arguable case for these amounts. The Court accordingly confirms that bail is to be set in the amount that has already been filed by the Defendant.
Costs
[13] The Defendant having been unsuccessful on this motion, the general rule would dictate that costs be awarded in favour of the Plaintiff. The Defendant, however, argues that costs should be awarded in its favour as a way of recognizing and sanctioning what the Defendant sees as the Plaintiff's misconduct in requesting and obtaining a warrant of arrest in the face of a caveat warrant. The Defendant's argument also relies on the provisions of Rule 494(1), which reads as follows:
| "494. (1) A person at whose instance a warrant is issued for the arrest of property in respect of which there is a caveat warrant outstanding is liable to payment of all resulting costs and damages, unless the person can satisfy the Court that the person should not be liable therefor."
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« 494. (1) La personne qui fait délivrer un mandat pour une saisie de biens à laquelle il est fait opposition par caveat-mandat est condamnée à tous les dépens et dommages-intérêts en résultant, à moins qu'elle ne convainque la Cour qu'elle ne devrait pas l'être. »
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[14] The facts surrounding the filing of a caveat warrant and the issuance of a warrant of arrest are as follows: On August 26, 2005, the Plaintiff transmitted to the Defendant a copy of the statement of claim issued herein, demanding either satisfactory resolution of its claim or acceptable security within three days, failing which it would arrest one of the Defendant vessels. On August 30, 2005, the Defendant filed a caveat warrant in form 493 of the Federal Courts Rules, undertaking to give bail in an amount of up to $1,600,000.00 "within three (3) days after being required to do so". The Plaintiff took the position that its letter of August 26, 2005 triggered the undertaking contained in the caveat warrant. The Defendant took the view that the three day delay provided for in the caveat warrant ran from the time it was "required" to furnish security, and that the requirement had to come from the Court, either in the form of a notice that an affidavit to lead warrant had been filed or by way of direction, and could not come from the Plaintiff itself. Upon this impasse, the Plaintiff not only elected to file an affidavit to lead warrant but to request the issuance of a warrant, which it did on September 7, 2005. The warrant was issued after the Registry had duly notified the Plaintiff of the existence of the caveat warrant and the provisions of Rule 494(1). One of the Defendant vessels having been scheduled to berth at St-Romuald on September 9, 2005, the Defendant filed a motion to quash the warrants of arrest and set the form and amount of bail and asked that it be heard prior to the arrival of the vessel at St-Romuald. It is to be noted that whilst there initially was an issue between the parties as to the form of the bank letter of guarantee which the Defendant proposed to file as bail, the bulk of the Defendant's motion concerned the quashing of the warrants on the grounds of the absence of a right in rem against the vessels and the fixing of bail to an amount less than the $1.6 million set out in the caveat warrant. Eventually, the parties reached an agreement as to the form of the letter of guarantee, which allowed bail to be posted without the arrest of a vessel and without the need for a determination by the Court, and leaving the issues of the validity of the warrants and the appropriate amount of bail to be determined at a later and less hurried date.
[15] It seems plain to me that Rule 494(1) contemplates the ability of a Plaintiff to request, and upon request in accordance with the Rules, be issued a warrant of arrest notwithstanding the existence of a caveat warrant. I find no merit to the Defendant's suggestion that a warrant issued in the face of a caveat warrant is invalid or capable of being struck for that sole reason. By setting out the consequences to the Plaintiff of requesting a warrant in the face of a caveat warrant, Rule 494 necessarily confirms the ability of a Plaintiff to do so.
[16] How, then, do the consequences and sanctions contemplated by Rule 494(1) apply to the facts of this matter? The plain reading of the Rule suggests that, having obtained the issuance of a warrant while a caveat warrant was outstanding, the Plaintiff is prima facie liable for "all resulting costs and damages", unless he can satisfy the Court that he should not be so liable.
[17] The first step in the analysis must therefore be to identify what, if any, costs and damages have resulted from the issuance of the warrant.
[18] As no vessel was arrested pursuant to the warrant that was issued, it is clear - and the Defendant concedes - that it has suffered no damages from the issuance of the warrant. The Defendant's sole claim is for the costs of the present motion, to be paid in any event of the cause.
[19] However, the Defendant's motion and the costs associated with it do not arise as a result of the issuance of the warrant. Had the Plaintiff proceeded in the manner suggested by the Defendant - by filing an affidavit to lead warrant and a request for the Court to direct the Defendant to file bail in accordance with the caveat warrant - it is clear that the Defendant would have brought the same motion for the same relief. Indeed, save for that part of the motion seeking directions as to the form of the letter of guarantee, the ultimate purpose of the motion is not to rectify the consequences of the Plaintiff having arrested the vessel despite the Defendant's undertaking to file bail, but to relieve the Defendant of the obligation to comply to the full extent of the undertaking given as part of its caveat warrant. I am not questioning here the ability of a Defendant who has filed a caveat warrant to seek judicial determination of the validity of the in rem proceedings or of the amount of bail that should be given, but I cannot see how that exercise results from the issuance of a warrant; nor can I see why its costs should automatically fall on the Plaintiff, whatever the outcome, due to the mere fact that a caveat warrant had been filed.
[20] I therefore find that there are no costs or damages resulting from the issuance of the warrant for which the Plaintiff would be liable pursuant to Rule 494(1). There is, accordingly, no reason why the costs of the Defendant's unsuccessful motion should not be awarded to the Plaintiff.
ORDER
1. The Defendant's motion is dismissed, with costs to the Plaintiff.
2. The parties shall, either jointly or separately and no later than July 15, 2006, file written submissions as to the further steps to be taken in this proceeding.
"Mireille Tabib"
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