Berhad v. Canada, 2003 FC 992

Date: 20030820

Docket: T-609-99

Citation: 2003 FC 992

BETWEEN:

                                     BUDISUKMA PUNCAK SENDIRIAN BERHAD,

                   MARITIME CONSORTIUM MANAGEMENT SENDIRIAN BERHAD

                                                                                                                                                       Plaintiffs

                                                                                 and

                                                        HER MAJESTY THE QUEEN

                                                         IN THE RIGHT IN CANADA,

                                                        B.S. WARNA and D.A. HALL

                                                                                                                                               Defendants

                                                            REASONS FOR ORDER

HARGRAVE P.

[1]                  These reasons arise out of a failed motion to strike out the Statement of Claim. At the conclusion of the hearing I advised counsel that, in my view, there were two aspects. First, such an important and complex case involving, among other things, the overlap and interplay of various aspects of law, the Canada Shipping Act and particularly section 310, the Paris Memorandum of Understanding on Port State Control, the Tokyo Memorandum of Understanding on Port State Control in the Asia Pacific Region and the International Convention for the Safety of Life at Sea, 1974 (also referred to as the "SOLAS Convention"), ought not to be decided on a motion to strike out. Second, while I was of the view that the Plaintiffs did not necessarily have an easy case, it was far from plain and obvious that the Plaintiffs would certainly fail, at the hearing of the action, on any of the substantive points raised by the Defendants. I begin with some relevant background.

BACKGROUND

[2]                  The Lantau Peak is a 249.18-metre bulk carrier of 62,112 gross metric tonnes, built in 1978, owned by Budisukma Puncak Sendirian Berhad (Budisukma) and managed by Maritime Consortium Management Sendirian Berhad, both of Kuala Lumpur, Malaysia.

[3]                  Two Canadian steamship inspectors, employed by the Department of Transport, Messrs Warna and Hall, detained the Lantau Peak in Vancouver in early April 1997, primarily by reason of wastage of the ship's frames requiring, in the view of the steamship inspectors, major repair work, as a condition of release. The vessel's classification surveyor took the contrary view, that minor repairs having been completed and a certificate of seaworthiness having been issued, the vessel was fit to proceed on her voyage. Apparently Budisukma wished to move the vessel into a jurisdiction in which permanent repairs could be done more economically than in Vancouver. The Defendants refused to release the Lantau Peak.

[4]                  Major repair work was completed at Vancouver, at a higher cost than would have been the case in some offshore shipyards. The Lantau Peak departing Vancouver 13 August 1997. The Plaintiffs, in the present action, say that the Defendants were negligent in many ways, including as to inspection, as to criteria used to evaluate the condition of the Lantau Peak and generally in dealing with both the Plaintiffs and the Malaysian government. In the result the Plaintiffs now seek damages to recoup, among other things, additional cost of repair, port and other ongoing expenses, loss of use and cost of surveyors.

[5]                  The Defendants, some three years after the action was begun, moved to strike out the Statement of Claim, utilizing a 146-page argument, 319 pages of affidavit evidence and 14.61 kilograms of bound case material. This became, in part, subject of a 19 March 2002 Order, requiring that the written argument be reduced to 45 pages.

[6]                  The Defendants seek to strike out the Statement of Claim on the basis that it contains no reasonable cause of action, is scandalous, frivolous and vexatious and that it is an abuse of process. One is tempted to observe that if it takes 392 paragraphs of argument, 319 pages of affidavit evidence and 14.61 kilograms of case material to move to strike out an 8-page Statement of Claim which was answered quite coherently and concisely through a 9-page amended defence, which contains no reservations, there are probably serious doubts as to the substance of the motion and thus the Statement of Claim should stand and the action, which raises important issues, be allowed to proceed. This leads to a consideration of the motion, beginning with some procedural matters.

CONSIDERATION

Procedural Matters

[7]                  The Defendants pleaded, as I say, quite concisely and clearly to the Statement of Claim without reserving, in their Defence, or in their Amended Defence the right to challenge the Statement of Claim as vexatious, scandalous, frivolous or an abuse: this failure to plead reservations bars the Defendants from challenging the Statement of Claim on the basis of those shortcomings, as set out in Proctor & Gamble Co. v. Nabisco Brands Ltd. (1985), 62 N.R. 364 (F.C.A.) at 366. In Nabisco the Court of Appeal noted that clauses 1(b) through (f), of what is now Rule 221(1) were not a basis on which to strike out a Statement of Claim when the moving party had already pleaded to the impugned allegations. The Court of Appeal observed that pleading over did not necessarily establish a bar to a motion to strike out for want of a reasonable cause of action, but that "the lengthy delay of over six months in bringing the motion to strike after pleading to the Statement of Claim, undoubtedly were among the factors which led ... [the motions judge] to deny the motion.... [to strike out].". In the present action, some two years after pleading over in their Defence, the Defendants tried, unsuccessfully, to amend their Defence to reserve the right to mount a broad Rule 221 striking out challenge.

[8]                  The Defendant's present motion seeks to strike out the Statement of Claim not only for want of a reasonable cause of action, but also as vexatious and abusive. The Plaintiffs then filed a motion to strike out the latter portion of the Defendants' motion. A motion upon a motion serves no useful purpose: the point that having pleaded to the statement of claim a defendant may not utilize all of the heads under Rule 221(1), except want of reasonable cause of action under Rule 221(1)(a), may be made in argument. That being the case I have looked upon the Plaintiffs' motion to strike out a motion and the motion record of the Crown in response as merely submissions on point, with the motion itself being adjourned indefinitely.

[9]                 The submissions on that adjourned motion go on to pick up the point made by the Court of Appeal in Nabisco, that delay can be a factor in dealing with want of jurisdiction. Appropriate here is a passage from Dene Tsaa First Nation v. Canada, heard 19 July 2001 resulting in an unreported 25 July 2001 decision of Mr Justice Hugessen in action T-705-97, 2001 FCT 820, in which he differentiated between a late motion alleging want of a cause of action and a late motion based on the remaining paragraphs of Rule 221:

The Dene Tsaa decision was reversed, on a different aspect, reported as Prophet River Indian Band v. Canada (2002), 288 N.R. 157 (F.C.A.).

[10]            Counsel for the Plaintiffs makes the point that this Court has, from time to time, denied a motion to strike for want of a reasonable cause of action when the defendant has delayed too long. In Control Data Canada Ltd. v. Senstar Corp. (1988), 23 C.P.R. (3d) 421 (F.C.T.D.) Mr Justice McNair felt that a four-year delay in bringing a motion to strike out for want of a reasonable cause of action "... smacks of being cavalier, if not oppressive" (page 426).

[11]            Mr Justice Gibson in MacNeil v. Canada (2000), 183 F.T.R. 127 (F.C.T.D.) at 131 dealt with a motion in the striking out of a statement of claim, for want of a cause of action. He felt that the motion had been brought late, four years too late. He turned to Control Data Canada Ltd. (supra) and the above view of Mr Justice McNair, that the motion to strike "... smacks of being cavalier, if not oppressive", before going on to dismiss the motion.

[12]            In the present instance there must be some balancing between, on the one hand, a motion to strike out that has been brought at a late date and, on the other hand, issues which have apparently not yet been canvassed and which are important, involving the scope of section 310 of the Canada Shipping Act, the impact of two international memoranda of understanding and the SOLAS Convention. A point to keep in mind here is that serious issues of law should not be determined by way of a summary motion to strike out unless the proceeding is so futile as to warrant such a drastic stroke: see for example Vulcan Equipment Co. v. Coats Co. (1981), 39 N.R. 518 (F.C.T.D.) leave to appeal to the Supreme Court of Canada refused (1981) 63 C.P.R. (2d) 261n, and Huzar v. Canada (1997), 139 F.T.R. 81 at 87 (F.C.T.D.).

[13]            To summarize, it is not open to the Defendants to bring a motion to strike out pursuant to Rules 221(1)(c) and (f). While the motion to strike out for want of a reasonable cause of action has not been brought in a timely manner, it is proper in this instance that the motion be allowed to proceed. However, pursuant to Rule 221(2), I will not take into account the voluminous affidavit evidence except to the extent that it goes to jurisdiction.

Jurisdiction Over the Steamship Inspectors

[14]            I turn first to the position of Messrs Warna and Hall, the steamship inspectors. The Deputy Attorney General has filed a defence both on behalf of the Crown and on behalf of Messrs Warna and Hall. There is no suggestion that the inspectors were on a frolic of on their own, but rather the Deputy Attorney General of Canada says, in paragraph 18 of the amended defence, that the steamship inspectors, in boarding and detaining the Lantau Peak "... were acting within a scope of their duties as Steamship Inspectors within the meanings of section 310 of the Canada Shipping Act ...". Section 310 of the Canada Shipping Act allows, among other things, a steamship inspector to board and inspect a ship, to detain the ship if considered unsafe and to question those in charge.

[15]            Counsel for the Defendants made two interesting submissions as to the position of the steamship inspectors. First, the Crown says that there is no jurisdiction in the Court to hear the claims against the two steamship inspectors for various reasons including that they are not officers, servants or agents of the Crown, but exercise duties imposed strictly by Parliament and in any event the claim against the steamship inspectors is based on provincial tort law. The second proposition is that the Crown cannot be held liable for any negligence on the part of the inspectors because they are exercising independent discretion.

[16]            Dealing first with the jurisdictional issue, I may treat it as want of a reasonable cause of action under Rule 221(1)(a), provided that there is a limited exception: I may look at affidavit evidence. Here I refer to Cairns V. Farm Credit Corp. (1991), 49 F.T.R. 308 (F.C.T.D.) and to MIL Davie Inc. v. Hibernia Management and Development Co. (1998), 226 N.R. 369 (F.C.A.) at 373.

[17]            Further, for the purpose of this motion, I must take what is set out in the Statement of Claim, so long as it is not completely too far fetched, or incapable of proof, as deemed to have been proven: see for example [1980] 2 S.C.R. 735">Canada (Attorney General) v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735 at 738 and 740. From the Statement of Claim we therefore learn that the two individual Defendants were employed by the Crown as steamship inspectors pursuant to Part V of the Canada Shipping Act; that they attended on board to conduct a safety inspection and subsequently detained the vessel, requiring the owner to make various repairs; and that the detention had the intended and immediate effect of stopping the vessel both from undertaking cargo work and from leaving Vancouver. From the defence it is clear that the legislative jurisdiction for the detention of the Lantau Peak is found in section 310 of the Canada Shipping Act and the International Convention for Safety of Life at Sea, 1974, of which Canada was a signatory, with accession in 1978.

[18]            I also accept the Plaintiffs' submission that a claim arose on board a vessel, in Vancouver and that it relates to the use, operation, condition and repair of that vessel. However to find that the steamship inspectors, Warna and Hall, come within the jurisdiction of the Federal Court one must look to ITO-International Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752 at 766 where the Court sets out the essential requirements to support jurisdiction in the Federal Court. These requirements are:

[19]            The common approach to jurisdiction over a Crown employee is section 17(5)(b) of the Federal Court Act which provides, in part, that:

Here, as pointed out by Sgayias on Federal Court Practice, Carswell, 2003 edition at page 70, resolution of the obvious question, whether a particular defendant is a servant of the Crown, does not resolve the issue of jurisdiction for a claim against such a servant must be supported by existing and applicable federal law. However counsel for the Defendants submits that there is no statutory grant of jurisdiction in the Federal Court against the steamship inspectors in any event. The argument here is that the doctrine or rule of independent discretion is applicable and thus, while the steamship inspectors are employed by the Crown, they are not servants of the Crown.

[20]            The gist of the independent discretion rule is that if a Crown servant is exercising a power or a duty conferred on that servant by law, the Crown is not vicariously liable, for the servant in exercising an independent discretion is not acting in the course of his or her employment: see Hogg and Monahan on Liability of the Crown, 3^rd edition, Carswell, 2000 at page 125. However, Hogg and Monahan have more to say about the rule:

Hogg and Monahan here point out that the rule is based on long discredited theory and that the "... rule has been abolished in all but a few jurisdictions.". When Hogg and Monahan were writing, in 2000, the rule had not been abolished in British Columbia, Quebec and Canada. However the matter does not end there.

[21]            In Baird v. The Queen, [1984] 2 F.C. 160 the Federal Court of Appeal dealt with and allowed an appeal from the Trial Division in which a statement of claim had been struck out for want of a reasonable cause of action. In Baird the Crown contended that it should not be liable for the wrongful acts and omissions of a servant who had an independent duty or discretion which had been imposed or conferred directly upon the servant by law and not by the employer's instruction. Mr Justice of Appeal Le Dain referred to the independent discretion rule as a rule found in the Australian cases, noted it had been strongly criticized and said, at page 186, that "... it is arguable ... that it should not be applied under the Crown Liability Act, despite the absence of a provision expressly excluding it similar to that found in the United Kingdom and Ontario statutes.".

[22]            Given the strong views of both Hogg and Monahan on Liability of the Crown (supra) and of Mr Justice Le Dain in Baird (supra) I doubt that the Court would apply the independent discretion rule either to exclude the steamship inspectors from a position as servants of the Crown or to find that the Crown was not vicariously liable for the actions of Messrs Warna and Hall. Here I would also observe that section 306 of the Canada Shipping Act requires the Chairman of the Board of Steamship Inspection not only to supervise the steamship inspectors, but also to examine their reports and leaves the Chairman with the responsibility for seeing that the law relating to steamship inspection has been properly administered. The Chairman has the final say as to the issuance or withholding of certificates of inspection as set out in section 307(2) of the Canada Shipping Act. This is inconsistent with the concept of independent discretion on the part of steamship inspectors themselves. I am not prepared to assume that the Federal Court, even were it interested in applying independent discretion concept, would extend it beyond police officers and ship pilots, for while it is arguable that individuals in those categories do, in certain circumstances, have an independent discretion to exercise, a discretion which must be exercised on the spot and without any control or time to consult whatsoever, this differs from the situation of steamship inspectors who, while they have discretion, are certainly subject to direction from and review by their superior. To carry this further, I expect that both steamship inspectors and the steamship inspection service itself would be horrified at the thought of applying this rule because of its ramifications in the case of a steamship inspector injured in the course of his or her employment. Here I have in mind Griffiths v. Haines [1984] 3 NSWLR 653, an Australian decision, in which the court applied the independent discretion rule and held that because no master or servant relationship existed, between a police officer and his employer, that employer, the government, did not owe the police officer a duty to take reasonable care for his safety.

[23]            In summary, Crown counsel fails to convince me that the independent discretion rule would be applied to the two steamship inspectors. I have reached this conclusion notwithstanding the oath taken by steamship inspectors pursuant to section 303 of the Canada Shipping Act as to impartiality in execution of the duties assigned to the offices of steamship inspectors and the various rights and liberties given to steamship inspectors, including under section 310 of the Canada Shipping Act. It is reasonably arguable that there is jurisdiction over the steamship inspectors, Messrs Warna and Hall, pursuant to section 17(5)(b) of the Federal Court Act which grants concurrent original jurisdiction over acts or omissions done in the performance of their duties by an officer, servant or agent of the Crown. However the approach of the Plaintiffs to jurisdiction does not end with section 17(5)(b).

[24]            Counsel for the Plaintiffs also submits that steamship inspection and the relations between vessel owners and steamship inspectors fall within the statutory grant of jurisdiction in section 22(1) of the Federal Court Act, as a matter of navigation and shipping, with the relations between owner and inspector coming within the definition of Canadian maritime law. This is certainly an arguable second approach to the need for a statutory grant of jurisdiction.

[25]            There is also the jurisdiction granted by section 22(2)(e) of the Federal Court Act over claims for damage sustained by a ship. Here I have in mind the sort of case which was presented by the owners in Hindustan Steamship Shipping Co. Ltd. v. Siemens Brothers & Co. [1955] 1 Lloyd Rep. 167, which hinged upon the issue of reasonable care in providing equipment and instruction and the duty to warn the plaintiff of dangers inherent in an electric telegraph. While the plaintiff failed in the Hindustan case, Mr Justice Willmer observed that there was nothing static about the question as to what amounted to reasonable care. Assuming, as I must for the purposes of striking out for want of a reasonable cause of action, that the pleadings are proven and that steamship inspectors did not take reasonable care, but were negligent and in breach of duty owed to the Plaintiffs, as set out in paragraph 16 of the Statement of Claim, there may well be jurisdiction for the resulting damage sustained by the ship pursuant to section 22(2)(e) of the Federal Court Act. Thus there are several reasonable arguable routes which could well provide the statutory grant of jurisdiction necessary to satisfy the first branch of the test in the Miida Electronics case.

[26]            I now turn to the second branch of the Miida Electronics test, being the existence of a body of federal law essential to the case and which nourishes the statutory grant of jurisdiction. The Defendants say that the law to be applied is provincial tort law and not federal law. The concept of a tort and tort law is not to be, invariably, attributed to provincial law, is a point made by Chief Justice Laskin, writing for the Court in [1980] 2 S.C.R. 442">Rhine v. The Queen, [1980] 2 S.C.R. 442 at 447. In the [1980] 2 S.C.R. 442">Rhine case the Chief Justice found that there was a statutory framework and that what was at stake was the administering of federal legalisation, a matter well within the jurisdiction of the Federal Court. In the present instance the Canada Shipping Act and specifically those portions relating to safety, to steamship inspectors, to inspection of ships, and to detention of ships, provide a detailed statutory framework.

[27]            The second approach is that the principles of tort form a part of Canadian maritime law, to be applied by the Federal Court. An appropriate starting point is the Miida Electronics case (supra) at page 774 where Mr Justice McIntyre rejects the confinement of a historical approach to Canadian maritime law and points out that the definition in section 2 of the Federal Court Act, of Canadian marine law, assured that it would include an unlimited jurisdiction in relation to maritime and admiralty matters, interpreted in the modern context of commerce and shipping, with the limitation that there must not be encroachment on matters which are, in pith and substance, matters of local concern involving property and civil rights, or any other provincial matter. He felt it was "... important, therefore, to establish that the subject-matter under consideration in any case is so integrally connected to maritime matters as to be legitimate Canadian maritime law within federal legislative competence." (loc. cit.). This test was adopted by Madam Justice McLachlin as she then was, in Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210 at 1257. She referred to Whitbread v. Wally, [1990] 3 S.C.R. 1273 at 1289 for the proposition that "... tortious liability which arises in a maritime context is governed by a body of maritime law within the exclusive legislative jurisdiction of Parliament".

[28]            It is also useful to refer to Schibamoto & Co. v. Western Fish Prod., Inc., [1990] 1 F.C. 542, in which Mr Justice of Appeal MacGuigan, writing for a strong court, characterized as unsustainable an objection that Canadian maritime law had narrow bounds:

In the present instance at issue is clearly a maritime matter and thus Canadian maritime law, as applied by the Federal Court, is that body of law essential to dispose of the case. There is no question that a second part of the Miida Electronics test has been met in this instance, for there is an existing body of federal law to nourish the statutory grant of jurisdiction.

[29]            I turn to the third part of the Miida Electronics test, being that the law underlying the case must be a law of Canada. Often the second and third branches of the Miida Electronics test are intermingled. Here I would only add that there is nothing to suggest either that the subject matter is within the exclusive competence of the provincial government or that the matter of steamship inspection and steamship inspectors do not come within the term navigation and shipping as used in the Federal Court Act. I am not prepared to deny the Plaintiffs their day in court, as against the steamship inspectors, Messrs Warna and Hall, on the basis of want of jurisdiction.

Jurisdiction of the Court Generally

[30]            Having dealt with jurisdiction over the individual steamship inspectors, I now turn to question of whether the Court has jurisdiction to determine this matter generally, or whether it ought to have gone to the Minister of Transport for a decision. Here I must keep in mind that the proceeding is not judicial review of a decision or decisions, but is a claim for damages arising from a decision or decisions in part pursuant to the Canada Shipping Act, but also very clearly based on the SOLAS Convention. The SOLAS Convention provides, among other things, for control of ships by local government when they are in a foreign port. Chapter I, Regulation 19(f) of SOLAS explicitly recognizes the duty to exercise such control with discretion so as not to unduly inconvenience an owner:

[31]            The Crown makes reference to portion of section 307 Canada Shipping Act, as follows:

The Crown refers to section 307 of the Canada Shipping Act as if it were a complete code. Section 307 does, of course, ignore the damages for delay provision, 19(f) in SOLAS. Appeals of matters within section 307 are in writing: see section 307(4). The Defendant submits that appeals must be within section 307 and may not sound in an action in this Court.

[32]            Section 307(1) provides that disputes arising under the Canada Shipping Act, between an owner and a steamship inspector "... may be referred by either of them to the Chairman, who shall decide upon the matter himself or, if he considers that the circumstances warrant it, shall refer it to the Board for a decision." (emphasis added). The Board of Steamship Inspection is, by section of 304, "composed of the steamship inspectors and such other persons as the Minister may appoint.". Thus we have apparent mechanism for referring matters, in writing, to the Chairman of the Board of Steamship Inspection, being the person who also supervises the steamship inspectors. The Chairman may then refer the matter to the Board of Steamship Inspection, if he feels that the circumstances so warrant. A second, or perhaps it is third level of appeal if the Chairman has referred a matter to the Board of Steamship Inspection, is provided by section 307(3) governing disputes between an owner and the Chairman or the Board which permits the owner to refer the matter to the Minister for a final decision:

[33]            A first observation about this review system, under section 307 of the Canada Shipping Act, is that it is certainly incestuous, a point which has bearing when looking at the exhaustion of an alternative remedy as a pre-condition to a court proceeding. Second, what is set out in the Canada Shipping Act is a review system, not a procedure leading to damages, as provided for under SOLAS. Third, the review system may be merely an option in that disputes may be referred to the Chairman of the Board of Steamship Inspection. The Chairman, only if he considers the circumstances warrant, has an obligation to go to the Board of Steamship Inspectors for a decision. The final step under section 307 is that the ship owner may refer the matter to the Minister.

[34]            The term "may" may be discretionary or alternatively non-discretionary. Sullivan and Driedger on the Construction of Statutes, 2000 edition, Butterworths, makes the point at page 57 that:

Sullivan, the current author of Construction of Statutes, acknowledges that while "may" implies a discretion, that does not preclude an obligation, but rather one must look at the statute or the circumstances which might expressly or impliedly oblige the exercise of the power which has been granted (page 58). In this instance, looking at contextual factors, including that the discretionary system set out in the Canada Shipping Act does not provide for an award of damages, as in section 19(f) of SOLAS, it is certainly arguable that the appeal provisions in Canada Shipping Act are not mandatory.

[35]            To accept that only the Minister may consider disputes between steamship inspection and ship owners is also to misconstrue the nature of claim of Plaintiffs by characterizing it as an application for judicial review. Rather, the Plaintiffs claim is, as I have pointed out, a claim for damages. The case is not for a simple review of the merits of the detention order, but rather of whether the inspection, leading to the detention order, was carried out properly and whether the decision, that the vessel must remain in detention, was arrived at negligently. Thus there is a need to examine the system as a whole, the manner in which the inspection took place and the subsequent conduct on the part of the Defendants. Here a passage from Just v. British Columbia, [1989] 2 S.C.R. 1228 is relevant. In Just Mr Justice Cory, in examining the duty of care applicable to public authorities considered, as an example, inspection of lighthouses, in the context of the policy decision, which is not applicable here, but then went on to indicate when an inspection scheme might be looked at by the courts:

In the Just case at issue was the inspection of a rock slope above a highway by Department of Highways officials. The Supreme Court observed, as set out in the above quotation, that once there was a decision to inspect, it was open to the court to review the scheme of inspection as to reasonability and the manner in which it was carried out, in the light of all of the circumstances. Mr Justice Cory then elaborated on that concept, at page 1247, by saying that:

[36]            The Plaintiffs' submission, which is certainly arguable, is that incorrect or unreasonable conclusions by the inspectors go to determining whether or not the inspectors carried out the inspection in a reasonable manner. Taking another approach, the submission is to the effect that the nature of the conclusion which the inspectors reach may well indicate the manner in which inspections are conducted. Accepting this, the Plaintiffs submit that it is entirely proper for the Court to consider the merits of the detention and the subsequent conduct to the extent that those actions might be indicative of the manner in which the decision to detain the Lantau Peak was reached.

[37]            Also relevant where an inspection is exercised without due care is Cervinus Inc. v. Canada (Minister of Agriculture) (2000), 198 F.T.R. 187 (F.C.T.D.). There Mr Justice O'Keefe considered allegations of negligence against the Crown in the case of wrongful removal and slaughter of two herds of New Zealand red deer. In reviewing that decision Mr Justice O'Keefe said, at pages 207 - 208:

Mr Justice O'Keefe, found that negligent action, by inspectors who had no grounds for the decision, left the Crown open to damages. The Cervinus case is certainly applicable in the present instance on which to found a reasonable argument. I thus reject the concept that only the Minister of Transport may consider improper steamship inspections. However I will now turn to a brief consideration of the submission of the Crown that it ought to have the protection of a privative clause.

[38]            Counsel for the Crown submits that the wording in section 307(3), that disputes be referred to the Minister, who shall finally decide the matter, applies as some form of a privative clause. Counsel for the Crown refers to Canada (AG) v. PSAC, [1993] 1 S.C.R. 941 in which the Supreme Court upheld a broad and multi-layered privative clause, but also noted, as pointed out by Mr Justice Cory at page 952, that the clause was explicitly included to make certain that board decisions "... should be final and conclusive and that courts should not have the power to interfere with them at will.". Influencing this approach was the view of Mr Justice Cory, at page 963, that the board or tribunal in that instance was created by Parliament in order to provide a speedy and final means of achieving a resolution of labour-management disputes. That is quite different from being points raised in the present instance, being an objective and measured consideration of damages and of Canada's obligations under SOLAS. Counsel for the Crown also refers to many other cases, all of them decisions of courts of England, however I do not see them as being particularly relevant given the Canada Safeway case to which I now turn. The Supreme Court of Canada, in Canada Safeway Ltd. v. R.W.D.S.U., Local 454 (1998), 226 N.R. 319 considered, in the context of an arbitration provision, the words "final and conclusive" and "binding upon the parties". The majority decision looked upon those words as not a true privative clause, but very close to it (page 328). Certainly the wording in section 307(3) of the Canada Shipping Act, "the Minister, who shall finally decide the matter" is of even less force and effect and all the more so given that this present proceeding is not in a judicial review context, as characterize by the Crown, but rather an action in negligence, seeking damages as suggested by SOLAS Regulation 19(f). Here I prefer the view of the Plaintiffs, as a reasonably arguable case, that it is completely appropriate for a court to examine the present matter in the context of an action, involving the inspection system, the manner in which inspection took place and the subsequent conduct of the Defendants.

Duty of Care

[39]            The Crown submits that neither the inspectors nor the Chairman of the Board of Steamship Inspection, nor the Minister of Transport owe any duty of care to the owners of ships.

[40]            In considering this area I have kept in mind several points. First, one need go no farther than Kajat v. The Arctic Taglu (1997), 135 F.T.R. 161 (F.C.T.D.) in order to see, as a factual matter, the close relationship between a ship owner and the steamship inspection service, not only being reliance by a ship owner on the steamship inspection service, but also a mutual reliance: I recognise that The Arctic Taglu was sent back for a re-trial by the Federal Court of Appeal (2000), 252 N.R. 152 (F.C.A.), however that does not disturb the narrative of fact set out by Madam Justice Reed at the trial level. Second, section 19(f) of the SOLAS Regulations, cautions signatory nations to avoid undue detention or delay of a ship and follows that with an entitlement to damages: this international view is that states signing on to or otherwise adopting the SOLAS inspection regime, which is carried out by that state's steamship inspectors (or equivalent government officers), do owe a duty of care to ship owners. Third, I should be wary of cases involving duty owed, or lack of it, by private classification surveyors to interests who do not employ them and here I have in mind, as an example, cargo interests, where there has been an absence of any dealings between cargo and surveyor, such that there is not the proximity of relationship required to support a duty of care: see The "Nicholas H" [1992] 2 Lloyds Rep. 481 (Q.B.), [1994] 1 W.L.R. 1071 (C.A.). Finally, there are the views of Canadian courts in Just and in Cervinus (supra) where the courts have analysed factors leading to a duty of care and in fact found in duty of care to exist. Thus, rather than try to find and to rely on similar cases, using similar in its proper sense, and I have been referred to none, I have relied upon basic principles in order to determine if there is, arguably, a duty owed by steamship inspection to a ship owner.

[41]            I first turn to the opening proposition of the Crown, that no duty of care is owed to ship owners, a proposition which is derived from [1957] S.C.R. 810">Cleveland-Cliffs Steamship Co. v. The Queen, [1957] S.C.R. 810. In Cleveland-Cliffs Steamship the Supreme Court of Canada dealt with Crown liability in the case of a ship which had grounded approaching a port on the north shore Manitoulin Island in Lake Huron. A close reading of the reasons, written by five judges, indicates that the vessel was out of the channel to begin with and that settled the matter. However Mr Justice Rand, after finding the ship was out of the channel, then went off on a frolic on its own, assumed the channel buoy was in the wrong position and said that no Crown servant, presumably the servant who was to keep the buoy in a proper place, had any duty to a third person, but only to the Crown and that to hold otherwise would be extremely rare. Hogg and Monahan on Liability of the Crown (supra), on the basis of current case authority, give short shrift to Mr Justice Rand's assertion:

Hogg and Monahan go on to refer to many recent instances of Crown liability on the bases of what the Crown's servants have failed to do, including cases subsequently decided in the Supreme Court (pages 180 and 181).

[42]            Rather than deal specifically with each of the many authorities presented by the Crown in support of their position, many of which are either British or, in one case, an American textbook dealing with certification of aircraft in the United States, it is more productive to deal with issue of duty of care on the basis of basic principles.

[43]            An appropriate analysis of duty of care is that contained in Cooper v. Hobart (2001), 206 D.L.R. (4^th) 193 (S.C.C.). There the plaintiff invested through a mortgage broker who violated legislation and lost the funds. After the mortgage broker had been suspended the plaintiff sued the Crown for the negligence of the registrar of mortgage brokers who was alleged to have delayed in ordering the suspension. In Cooper the Supreme Court was unable to find sufficient proximity to establish a prima facie duty of care. However, for our purposes, it is sufficient to look to the case, which cites many authorities, including Just (supra) and [1984] 2 S.C.R. 2">City of Kamloops v. Nielsen, [1984] 2 S.C.R. 2 and the Anns two-stage test as the proper approach to considering Crown liability by way of a Crown servant as a useful and instructive analysis:

The reasonable foreseeability of harm, referred to the above passage, must be supplemented with the concept of proximity. In Cooper the Supreme Court went on to consider proximity at page 204 and following:

The submission on the part of the Plaintiffs is that the Defendants had the ability to detain the Lantau Peak and that the relationship and indeed knowledge, between he Plaintiffs and Defendants, was clearly such that any errors and omissions on the part of the Defendants, in detaining the Lantau Peak, would directly affect the Plaintiffs. Indeed the relationship between the two sides was close and direct, both in the physical sense and in the sense that the Defendants knew, without any doubt, that the detention of the vessel would cost the Plaintiffs various types of expenses: if the Lantau Peak was wrongfully detained, the Defendants knew that the owner, Budisukma, would be harmed.

[44]            In the analysis set out in Cooper (supra) there is also the issue of "residual policy considerations outside the relationship of the parties that might negative the imposition of a duty of care." (page 203). Here I would observe that in their defence the Defendants rely upon the SOLAS Convention. Moreover, taking into consideration Regulation 19(f), which sets out a duty and a possibility of liability, the Crown can scarcely argue policy considerations to vitiate existence of a prima facie duty of care.

[45]            Still considering Cooper (supra), the Supreme Court went on to refer to a number of cases and their factual situations and then said that "When a case falls within one of these situations or an analogous one and reasonable foreseeability is established, a prima facie duty of care may be posited." (pages 205 - 206). I now turn to the second stage of the Anns test.

[46]            The Defendants refer to policy considerations, the second factor in the Anns analyses as set out in Cooper (supra) as a bar to a duty of care and in liability. I have already dealt with this, in one sense, by pointing out that SOLAS, specifically adopted by the Defendants, is very clear as to the possibility of a duty and liability in an instance such as the present. The Plaintiffs go on to submit that what occurred in the instance of the Lantau Peak was an operational decision, referring to the Supreme Court of Canada decision in Just (supra) at pages 1241 and 1242. There Mr Justice Cory found most helpful the case of Sutherland Shire Council v. Heyman (1985), 60 A.L.R. 1 (Australian High Court) in which Mr Justice Mason, for himself and one other member of the Australian High Court, referred to Anns and then went on to observe that " The standard of negligence applied by the courts in determining whether a duty of care has been breached cannot be applied to a policy decision, but it can be applied to operational decisions.". We then come to a clear and useful test in order to distinguish policy and operational factors:

The emphasis in this passage was added by Mr Justice Cory who went on to say that "

The duty of care should apply to a public authority unless there is a valid basis for its exclusion." (loc. cit.). He then sums up the effect of the decisions in Anns and in Kamloops v. [1984] 2 S.C.R. 2">Nielsen (supra) by saying that once a decision had been made to inspect, the inspection must be a reasonable one:

This brings us back to the lighthouse inspection passage which I referred to in the discussion of the jurisdiction of the Federal Court generally, it being one thing if there were a decision not to inspect, or to reduce inspections, based for example on available funds for that would be a policy decision. However, once there is a policy decision to inspection, it must be carried out in a reasonable manner in the circumstances. Applying all of this to the present situation, it is certainly arguable that the decision, following the inspection, to detain vessel, was purely operational.

[47]            The Defendants raised a number of additional points under the rubric of the duty of care. I will deal only with two of them, being the economic loss argument and an alternate remedy argument. Relying upon [1984] 2 S.C.R. 2">City of Kamloops v. Nielsen (supra) the defendants argue, if I understand it correctly, that to impose a duty of care would open up the Crown to unlimited potential claims and damages. Here the Crown refers to [1984] 2 S.C.R. 2">City of Kamloops v. Nielsen (supra) at page 676, where Madam Justice Wilson set out a 1931 rationale for the economic loss rule:

[48]            This "floodgates" or in terrorem argument has been criticized and debunked over the years and here I have in mind Padda v. Canada (Minister of Employment and Immigration), [1988] 3 F.C. 147 (F.C.T.D.) at 152 and Jones v. Canada (RCMP Public Complaints Commission) (1998), 154 F.T.R. 184 (F.C.T.D.) at 190. However, what is fatal to this argument, as a basis on which to strike out the claim as against some form of public policy, is that Madam Justice Wilson herself, after quoting from Ultramares Corp. v. Touche (supra) went on to permit recovery of economic loss, for she did not believe that to permit such recovery was to expose public authorities to an indeterminant liability. While it may be an argument that the Defendants can use at trial, it is not one to seriously consider on a motion to strike out.

[49]            I turn now to question of other adequate alternative remedies still, in the submission of the Defendants, in the context of duty of care. In considering judicial review as a remedy I note that the Defendants refer to many English cases. Some of these cases are interesting, but to a degree not really useful, for English law differs from Canadian law in that under the English system a claimant may have damages in a judicial review proceeding. Thus I have not referred to the English cases submitted by the Defendants because English law has, in this respect, departed from the Canadian law. I turn first to the Comeau's Seafoods decisions in the Federal Court of Appeal and the Supreme Court.

[50]            The Defendants rely upon Comeau's Seafoods Ltd. v. Canada (Minister of Fisheries and Oceans), [1995] 2 F.C. 467 (F.C.A.), Mr Justice Stone holding that the availability of an adequate administrative law remedy was sufficient not to impose a duty of care on the Minister: see pages 485 and 488. The Crown points out that the Supreme Court of Canada upheld the Federal Court of Appeal [1997] 1 S.C.R. 12. However, it is important to note that the Supreme Court of Canada looked upon what had occurred as a discretionary policy decision of the Minister of Fisheries and Oceans. In the present instance what occurred is more reasonably and more properly characterized as an operational decision, that of applying a standard of care to the operational product of an administrative policy direction, a point made by Mr Justice Cory in Just (supra). This leads to the question of whether there may be a cause of action in negligence outside of an administrative remedy.

[51]            A cause of action, in negligence and outside of an administrative remedy, was the subject of a decision of Mr Justice Aylward of the Newfoundland Labrador Supreme Court, in Keeping v. Canada (Attorney General) (2002), 210 Nfld. & P.E.I.R. 1, affirmed (2003), 224 Nfld. & P.E.I.R. 234, where at issue was negligent tonnage measurement of a fishing vessel. The crown submitted that the availability of judicial review displaced the cause of action of the plaintiffs in negligence, referring to Lapointe v. Canada (Minister of Fisheries and Oceans) (1992), 51 F.T.R. 161 (F.C.T.D.) and Radil Brothers Fishing Co. Ltd. v. Canada (Department of Fisheries and Oceans, Pacific Region) (2000), 197 F.T.R. 169 (F.C.T.D.), reversed in part (2002), 286 N.R. 295 (F.C.A.). In the Radil the Federal Court of Appeal pointed to the dichotomy and indeed resulting confusion between the challenge of a federal board's decision through judicial review and a claim for damages from the Crown through an action in tort. The Court of Appeal was prepared to allow Radil to proceed in terms of negligence. Returning to the Keeping decision, Mr Justice Alyward, in rejecting the proposition that no cause of action in negligence lay where an administrative remedy existed, said:

This analysis, by which a claim in negligence may be appropriate, where administrative law remedy has no real application, is most apt in the present instance, for initial time constraints and subsequently the passage of time have rendered an administrative decision moot. This is a point made by Madam Justice Reed in Creed v. Canada (Solicitor General), [1998] F.C.J. No. 199 (QL), an unreported 16 February 1998 decision in actions T-237-96 and T-2319-95, in which she rejected the submission that Zubi v. Her Majesty the Queen (1993), 71 F.T.R. 168 (F.C.T.D.) stood for the proposition that a judicial review proceeding was a necessary pre-condition to a claim in damages:

Madam Justice Reed being of the view that "An action for damages has always been and remains an independent cause of action." went on to approve an action in damages as an appropriate cause of action.

[52]            Given the reasoning of the various Federal Court and Federal Court of Appeal judges as summarizing Keeping (supra), as confirmed by Supreme Court of Canada in Comeau's Seafoods Ltd. (supra) and as set out by Madam Justice Reed in the Creed decision, a claim in damages, without first proceeding by way of judicial review, is entirely arguable in the present instance. Here the detention order is no longer in effect. Further, relief by way of administrative remedies and judicial review would be pointless, given the circumstances and here I have in mind the relatively short time which elapsed between the detention and release fo the Lantau Peak, April to August 1997.

[53]            It is also pertinent to note that Madam Justice Reed, in the Creed decision, drew a distinction between a challenge by judicial review of a decision and an action seeking damages. This was a distinction picked up and followed by Mr Justice Lemieux in Shaw v. Canada (1999), 167 F.T.R. 233 (F.C.T.D.) at 241 and following where he affirmed the distinction between, on the one hand, actions which attack or challenge an administrative decision, seeking to overturn the decision and, on the other hand, actions seeking damages for acts or omissions which are felt to be illegal, in the final analyses agreeing with Madam Justice Reed's approach in the Creed decision. All of this finds a parallel in the present action by which Budisukma does not seek to overturn or challenge the decision to detain the vessel, but rather seeks damages for wrongful detention. This case law and the final observation which I have made answers the Defendants' argument that correctness of the decision cannot be reviewed in this proceeding: it is not a matter of substituting the opinion of the classification surveyor, for that of a steamship inspector, but rather of examining what the steamship inspector did in the light of the law of negligence. Clearly the Court is able to do directly in an action in negligence that which it was and is unable to do on an application for judicial review and indeed the direct approach of an action based on negligence is also founded in the SOLAS Convention.

[54]            It is also improper to strike out a statement of claim in negligence, on the basis of available alternative remedies. Here I return to the Radil case (supra) where Mr Justice of Appeal Décary, who wrote the decision of the Court, said at page 303:

[55]            Here I return to an observation which I made in the opening of these reasons, that this is an important and complex case, involving overlap of many aspects of law, statutes and conventions. To deny the Plaintiffs at this stage would require a thorough analysis of the facts, something not appropriate on a motion to strike out. This is a concept which Mr Justice Lemieux employed in Hermes Numismatique et Arts Anciens, Inc. v. Canada (Minister of National Revenue) (2000), 193 F.T.R. 133 (F.C.T.D.) where he examined the interaction between administrative remedies, on the one hand, and damages on the other hand, in the context on a motion to strike out a statement of claim. He found that this interrelationship, raised in the context of complex legal and factual issues ought not to be reviewed on a motion by, in substance, deciding the claim on its merits. Here, as I have said, the Plaintiffs have a complex action involving administrative law, statutory remedies and the remedy provided by SOLAS Regulation 19(f), all serious issue which ought not to be determined on a summary motion, but should await a full and complete examination, on the merits, by a judge at trial. Indeed, this is the approach that is set out in Vulcan Equipment Co. v. Coats Co., [1982] 2 F.C. 77 at 78 where the Court of Appeal observed that the appellant had raised serious issues of law, however it was neither necessary nor desirable for the Court of Appeal to make a final decision in the context of striking out, but rather "... the issues raised are serious issues of law and are not of the kind which should be determined on a summary motion to strike.".

Absence of a Nominate Tort

[56]            The Defendants characterize the Plaintiffs' claim as one for breach for statutory duty and indeed say that the Plaintiffs allege such a breach as a cause of action. This is an assumption or a reading-in on the part of the Defendants, for the Statement of Claim makes no such assertion. Rather, the Statement of Claim is positive in that it points not to breach of statute, but to negligence and to the remedy provided by statute, the SOLAS remedy. Thus I need not consider the usual case on point, Saskatchewan Wheat Pool v. Canada (1983), 45 N.R. 425 (S.C.C.) as to the effect of a breach of statute, other than to say that, as the Supreme Court of Canada pointed out at page 446, "civil consequences of breach of statute should be subsumed in the law of negligence". That is precisely the Plaintiffs' point: the cause of action is in negligence.

[57]            The Defendants go on to submit that the Plaintiffs also sue on a cause of action called negligent investigation, a separate and narrow tort. The Defendants begin with a reference to Falloncrest Financial Corp. v. Ontario (1995), 33 Adm.L.R. (2d) 87 (Ont. General Division) to the effect that negligent investigation and negligent exercise of a statutory duty or power are subject to being struck out. The Defendants specifically referred to a case relied upon in Falloncrest, by Mr Justice Ground, Hill v. Chief Constable of West Yorkshire [1988] 2 All E.R. 238 (H.L.), to which I will return. However Mr Justice Ground makes the point that following general principles of public policy the plaintiffs in Falloncrest "... cannot succeed insofar as their actions are based on breach of statutory duty, negligent performance of a statutory duty or power or negligent investigation. " (page 104). However, the case on which he relies, Chief Constable of West Yorkshire, is directly of interest, even though it is very much limited to its facts, a failure to solve a number of murders over an 11-year time span. The case hinged upon a finding that individual members of the police force owed no duty of care, in keeping down the incidents of crime, to individual members of the public: the only duty owed was to the general public to enforce the criminal law and that many decisions must be made on matters of policy and discretion, including as to the most advantageous manner in which to use available resources (page 244 of Chief Constable of West Yorkshire). However the decision of Lord Keith, agreed with by four of the five law Lords, contains a pertinent passage which is conclusive:

Here is clear recognition that a claim, such as the present, may be founded in negligence. Indeed, the Plaintiffs point out that their claim is based on the ordinary principles of negligence and the existing body of Canadian maritime law bearing on negligence as recognised by the Supreme Court of Canada in Ordon Estate v. Grail, [1998] 3 S.C.R. 437 at 489 and following. I would also observe that agents of the Crown have been held liable when they conduct inspections negligently, without any reference to what the Defendants characterized as the tort of "negligent inspection": see for example Just, [1984] 2 S.C.R. 2">City of Kamloops and Cooper, all referred to earlier.

[58]            To summarize, these arguments of breach of statutory authority and of negligent investigation, made by the defendants, lead to no conclusions which would justify the action being struck out.

Challenge of the Validity of the Order

[59]            The Defendants have raised a number of additional arguments in support of the motion to strike out. Some of these come under the general headings of the impropriety of challenging a detention order and that the detention order has not been refuted on its merits on the present motion. These lines of argument fail in that they do not recognise the distinction between, on the one hand, a challenge of the order to detain by review and, on the other hand, the examination of the alleged negligent route to that detention order. The Defendants touched upon the argument that a court may not examine the subjective opinions of the steamship inspectors as to safety, for such opinion provided an unsalable basis for a detention order and thus the whole matter raises no judiciable issue. Here the weight of inspection cases, including Just, Cervinus, [1984] 2 S.C.R. 2">City of Kamloops and Cooper (supra) are against the Defendants, as is the concept that once inspection becomes a mandated policy, the inspection procedure must be carried out without negligence.

CONCLUSION

[60]            At the conclusion of the motion and in denying it, I made two points to counsel. First, such an important and complex case ought not to be decided on a motion to strike out. Second, and more important, it was clearly far from plain and obvious that the Plaintiffs would fail on any of the points raised by the Defendants.

[61]            The motion to strike out, brought late in the day, takes a short-gun approach in the sense of a wide-ranging attack. Such an indiscriminative approach bears on costs. I also note that many of the arguments made by the Defendants are based either on a forced or imaginative reading or on one of two equally plausible readings of what is a very straightforward and brief Statement of Claim, answered clearly in an equally brief defence. This is not to say that some of the Defendants' arguments do not have some substance. However those arguments which have some substance still clearly fail to satisfy the difficult onus placed on the Defendants, that of showing it to be plain, obvious and beyond doubt that the action will not succeed. This leads to the issue of costs. The Plaintiffs make the point that rather than concentrate on several of the strongest points the Defendants have taken a short-gun approach which together with in excess of 100 case authorities referred to by the Defendants, in their case books and loose material, has made dealing with the motion extremely complex and difficult.

[62]            The Defendants submit that, in their view, any one of the issues could have been successful. The Defendants take the view that it was their duty to raise all issues and to bring all possible authorities to the attention of the Court, together with all appropriate arguments.

[63]            The all-inclusive approach can be of value, however it does elevate even a motion from that which is necessary to that which is a luxury. An effective counsel usually puts forth only what the cause logically requires, not all that he or she may be able to say. In setting costs, I have kept in mind the length of the motion, two days, and the massive and complex material, however I do not penalize the Defendants merely because none of points taken found favour. Guided by Tariff B the Plaintiffs shall have costs in the amount of $4000.00 payable forthwith.

(Sgd.) "John A. Hargrave"

                                                                                               Prothonotary

Vancouver, British Columbia

20 August 2003

                                                                 FEDERAL COURT

                             NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                            T-609-99

STYLE OF CAUSE:                        Budisukma Puncak Sendirian Berhad et al. v. Her Majesty the Queen in the Right of Canada et al.

PLACE OF HEARING:                   Vancouver, British Columbia

DATE OF HEARING:                      17 and 18 April 2002

REASONS FOR ORDER:            Hargrave P.

DATED:                                              20 August 2003

APPEARANCES:                          

SOLICITORS OF RECORD: