Date: 20000711
Docket: T-311-00
ADMIRALTY ACTION IN REM AND IN PERSONAM
Between:
ORDINA SHIPMANAGEMENT CO. LTD.
and
ASHTON SHIPPING LTD.,
Plaintiffs,
AND
UNITED MED LINES INC.
and
THE OWNERS AND ALL OTHERS INTERESTED
IN THE BUNKERS ON BOARD THE VESSEL
"SHERINGHAM"
and
THE OWNERS AND ALL OTHERS INTERESTED
IN THE FREIGHT PAYABLE WITH RESPECT
TO THE CARGO LOADED ON BOARD THE
VESSEL "SHERINGHAM",
Defendants.
REASONS FOR ORDER
RICHARD MORNEAU, PROTHONOTARY:
[1] This case concerns a motion to strike by the defendant United Med Lines Inc. ("the defendant") pursuant to Rule 221 of the Federal Court Rules (1998) ("the Rules"), essentially on the ground that the plaintiffs' statement of claim in personam and in rem ("the statement of claim") discloses no reasonable cause of action that is within this Court's jurisdiction ratione materiae under s. 22(1) of the Federal Court Act, R.S.C. 1985, c. F-7 ("the Act"). Alternatively, the defendant maintains that the statement of claim discloses no reasonable cause of action in rem within the meaning of s. 43(2) of the Act.
[2] By its motion the defendant is also asking this Court to find that the plaintiffs' action falls within s. 221(1)(c) and (f), that is to say, it is scandalous, frivolous or vexatious and an abuse of the process of the Court. In view of this, it is claiming costs on a solicitor-client basis. It is also asking the Court to reserve the right to sue for damages in the Superior Court which it considers it has against the plaintiffs.
Background
[3] The facts necessary to assess the defendant's involvement and the property here seized, namely the freight owed and the bunkers on board the vessel "SHERINGHAM", can be largely seen from reading the first 13 paragraphs of the statement of claim and from reading the affidavit applying for seizure ("the affidavit").
[4] This reading of the statement of claim does not mean that in an analysis under s. 221(1)(a) of the rules on absence of jurisdiction the evidence may not be considered. Since MIL Davie Inc. v. Société d'exploitation et de développement d'Hibernia Ltée (1998), 226 N.R. 369 (F.C.A.), it has been recognized that the limitation contained in s. 221(2) of that rule does not apply.
[5] The relevant paragraphs of the statement of claim read as follows:
1. By charter party dated January 9th 1998, Unispeed Group Inc. ("UNISPEED") chartered the vessel "ALESSIA R" from her owners, the Plaintiff Ordina Shipmanagement Co. Ltd. ("ORDINA") for a period of one year, with options thereon (the "ALESSIA R Charter Party");
2. By charter party dated September 30th, 1997, UNISPEED chartered the vessel "MONTREAL" from her owners, the Plaintiff Ashton Shipping Ltd. ("ASHTON") for a period of one year, with options thereon (the "MONTREAL Charter Party");
3. Certain disputes arose between UNISPEED, ORDINA and ASHTON with respect to the operations of the "ALESSIA R" and the "MONTREAL", and the Plaintiffs terminated the said charter parties as a result thereof;
4. As a result of the said disputes, ORDINA and ASHTON instituted, separately, arbitration proceedings against UNISPEED in London as provided for in the ALESSIA R. Charter Party and MONTREAL Charter Party respectively;
5. On or about December 14th, 1998, ORDINA obtained a Final Interim Arbitration Award against UNISPEED (the "Award");
6. On January 25th, 1999, this Honourable Court issued an Order in action T-2341-98, granting ORDINA's Motion for Enforcement and Recognition of the Foreign Arbitration Award and rendering such Award a judgment of this Honourable Court (the "Judgment");
7. Following negotiations between ORDINA, ASHTON, and UNISPEED, on February 18th, 1999, these parties entered into a settlement agreement (the "Settlement Agreement") wherein UNISPEED admitted owing US $855,000.00 to the Plaintiffs (as their respective interests may be) and agreed and undertook to make payment of the said amount by way of consecutive monthly instalments, the whole pursuant to the terms and conditions of the Settlement Agreement;
8. The terms and conditions of the Settlement Agreement state clearly that upon any breach thereof, the Plaintiffs continue to enjoy their rights and remedies under the Award or Judgment;
9. In furtherance of the Settlement Agreement, the Defendant United Med Lines Inc. executed an agreement whereby it agreed and conceded that the Settlement Agreement, the Award and the Judgment, may be enforced upon, and the execution thereof may be obtained against, any and all assets of United Med Lines Inc. as if the Settlement Agreement was entered into with, or the Award or Judgment obtained against, United Med Lines Inc.;
10. UNISPEED and the in personam Defendant defaulted under the Settlement Agreement by omitting or neglecting to make the monthly instalment that was due and payable on September 1st, 1999;
11. Following further discussion between the parties, UNISPEED and the in personam Defendant were provided by the Plaintiffs with an additional delay for the resumption of the monthly instalments which were to begin on February 1st, 2000;
12. UNISPEED and the in personam Defendant are once again in default of the Settlement Agreement in that the settlement that was due and payable on February 1st, 2000 has not been paid, notwithstanding that a Notice of Default has been issued and the cure period provided for in the Settlement Agreement has now expired;
13. As a result of the agreement entered into between the parties, the Plaintiffs have a right of possession in execution of marine property on which the in personam Defendant has granted a contractual or equitable lien, charge and privilege in favour of the Plaintiffs . . .
[6] Paragraphs 9 and 14 of the statement of claim relate to the same agreement and thus indicate the way in which the defendant became mixed up in the transactions involving the plaintiffs and Unispeed.
[7] The relevant paragraphs of the affidavit concern this Court's admiralty jurisdiction over the property seized, in the following way:
3. The nature of the claim of the Plaintiffs against the Defendants is for possession in execution of marine property on which the in personam Defendant has granted a contractual or equitable lien, charge and privilege in favour of the Plaintiffs, the whole arising from a Judgment of this Honourable Court in an action relating to the breach of charter party and non-payment of monies pursuant thereto, and the basis for invoking the in rem jurisdiction of this Court is sections 22(1) and 22(2)(I);
4. I am informed by Dietrich Juepner, chartering manager with Interorient Navigation Inc., the managers for the vessel "MONTREAL" and "ALESSIA R", and do verily believe, that the m/v "SHERINGHAM", presently berthed at the Port of Sorel, is time chartered by the Defendant United Med Lines Inc.;
5. I know from experience that the standard terms and conditions of time charter parties include provisions whereby the purchase of, and ownership in, the bunkers aboard any vessel rests with the time charterers, in this case United Med Lines Inc.;
6. In addition, as it is United Med Lines Inc. that is operating the vessel pursuant to the said time charter party, in the same circumstances, any freight payments with regards to cargo being booked for, and carried aboard, the m/v "SHERINGHAM" would be monies owing to, and assets of, United Med Lines Inc.;
7. The Plaintiffs' claim as set out in the Statement of Claim has not been satisfied;
8. The nature of the property to be arrested is the bunkers aboard the m/v "SHERINGHAM", as well as the freight owing with respect to the cargo to be loaded on board the "SHERINGHAM" presently situated at the berth at the terminal in Sorel and/or loaded on board the vessel, as being the res which forms the subject matter of the action . . .
[8] It will be noted here that the agreement referred to in paragraph 3 of the affidavit is the same as that mentioned in paragraphs 9 and 14 of the statement of claim. It can be seen from paragraph 9 of the statement of claim that this agreement (henceforth "the defendant's undertaking") essentially concerns the defendant's undertaking to permit execution on its property of the arbitral award, the judgment and the principal agreement ("the settlement agreement") between Unispeed and the plaintiffs.
[9] According to paragraph 3 of the affidavit, and so as alleged by the plaintiffs, this undertaking by the defendant authorizes the plaintiffs to rely on s. 22(1) and (2)(i) of the Act.
Analysis
[10] Section 22(1) and 2(i) of the Act reads as follows:
| 22. (1) La Section de première instance a compétence concurrente, en première instance, dans les cas - opposant notamment des administrés - où une demande de réparation ou un recours est présenté en vertu du droit maritime canadien ou d'une loi fédérale concernant la navigation ou la marine marchande, sauf attribution expresse contraire de cette compétence.
(2) Il demeure entendu que, sans préjudice de la portée générale du paragraphe (1), la Section de première instance a compétence dans les cas suivants :
...
i) une demande fondée sur une convention relative au transport de marchandise à bord d'un navire, à l'usage ou au louage d'un navire, notamment par charte-partie . . .
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22. (1) The Trial Division has concurrent original jurisdiction, between subject and subject as well as otherwise, in all cases in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, except to the extent that jurisdiction has been otherwise specially assigned.
(2) Without limiting the generality of subsection (1), it is hereby declared for greater certainty that the Trial Division has jurisdiction with respect to any one or more of the following:
...
(i) any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise . . .
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[11] In my opinion it is clear for the following reasons that the plaintiffs cannot include the defendant's undertaking under s. 22(2)(i) of the Act.
[12] In the case at bar, if we refer to the statement of claim, what is covered by s. 22(2)(i) is the charter-party concluded by ORDINA in respect of the vessel "ALESSIA R". Between this charter-party and the defendant's undertaking there are legal acts intervening, with the result that at the stage of the undertaking by the defendant that undertaking, in terms of execution, becomes independent as such and is no way related to the initial charter-party.
[13] The legal acts in question are, first, the arbitral award (see paragraph 5 of the statement of claim), which sets out the parties' obligations under the charter-party. At that point we leave the maritime sphere and enter the sphere of implementation of this award. That is where this Court's judgment in case T-2341-98 comes in, approving the award. Subsequently, the plaintiffs and Unispeed concluded the settlement agreement which mentions the fact that the parties wish to settle all their differences. Then comes the undertaking by the defendant. This undertaking and the settlement agreement are not inseparably linked to the initial charter-party. In this regard, the position of the undertaking by the defendant is very different from the surety contract which this Court had to assess in National Bank Leasing v. Merlac Marine Inc. et al. (1992), 52 F.T.R. 153. In that case, the Court concluded that the plaintiff's claim in respect of the said surety contract depended on the outcome of the plaintiff's claim in respect of a charter-party dealing with the leasing of a ship. The Court accordingly agreed that the plaintiff's claim on the surety contract was based on the leasing of a ship and so maintained its jurisdiction over this claim by the plaintiff.
[14] I also definitely cannot conclude that the Court has jurisdiction over the defendant's undertaking under s. 22(1) of the Act, since for the foregoing reasons the defendant's undertaking is a contract to facilitate the performance of obligations. For the purposes of s. 22(1) of the Act, I see no connection, no ramifications, with maritime law. (For examples in which the courts have recognized that such connections exist in contracts, see Monk Corp. v. Island Fertilizers Ltd., [1991] 1 S.C.A. 779 and Scandia Shipping Agencies Inc. v. Ship Alam Veracruz et al. (1997), 148 F.T.R. 164, (1997) 148 F.T.R. 161. For examples in which such connections have not been recognized, see Pakistan National Shipping Corp. v. Canada et al. (1991), 50 F.T.R. 24, Transports Insurance Co. Inc. v. Ship "Ondine" (The) (1982), 138 D.L.R. (3d) 734 and Intermunicipal Realty & Development Corp. v. Gore Mutual Insurance Co. et al., [1978] 2 F.C. 691.)
[15] I am also not prepared to base my ruling on Textainer Equipment Management B.V. v. Baltic Shipping Co. et al. (1994), 84 F.T.R. 108, so as to conclude that this Court has maritime jurisdiction over the defendant's undertaking. In that case the Court used its equity jurisdiction to refuse to allow an application to quash the seizure of the ship at issue. In the Court's view it would have been inequitable to allow the owner of a ship intended for use in the transportation of containers to avoid the seizure of the transporting ship when that same owner had concluded a contract to lease the said containers containing a specific clause creating a connection to all the shipowner's vessels. The Court also appeared to devote some attention to the fact that various paragraphs of s. 22(2) of the Act could be relied on.
[16] In the case at bar only s. 22(2)(i) was relied on. Further, the defendant's undertaking has none of the precision and connection to the maritime sphere of the leasing contract in Textainer.
[17] Consequently, if we again refer to paragraphs 13 of the statement of claim and 3 of the affidavit, it can be seen that under the defendant's undertaking the plaintiffs are entitled to execution on its property. However, and this is where paragraphs 13 and 3 must be separated, it is in my opinion quite clear that the right is not so related to maritime law as to confer jurisdiction on this Court. The only right of action related to maritime law would have been for the plaintiffs to take, in case T-2341-98, that is the case in which the arbitral award was approved by a judgment of this Court, an enforcement measure within the meaning of Part 12 of the Rules.
[18] Accordingly, both the in personam and in rem portions of the plaintiffs' statement of claim must be struck out and the plaintiffs' action accordingly dismissed on the ground that the statement of claim discloses no cause of action within this Court's jurisdiction ratione materiae within the meaning of s. 22 of the Act.
[19] It goes without saying that the accessory must follow the principal and that the arrest of the freight must be quashed. The same would be true for the seizure of the bunkers if the latter had not been given a release in the meantime.
[20] For purposes of striking out, it is not necessary to consider the other arguments put forward by the defendant either with respect to the statement of claim or the mandate for a seizure.
[21] However, the situation is different for the costs to be awarded in the case at bar. The defendant set out in para. 39 of its written submissions a series of events or circumstances leading it to oppose the action at bar and the seizure proceedings taken thereunder as being in the nature of reasons found in s. 221(1)(c) and (f) of the Rules.
[22] As I see it, the plaintiffs did not attempt to submit evidence to weaken or rebut these statements by the defendant. Consequently, on a balance of probabilities and in accordance with Rules 400(1) and (3)(i), (k) and (o) and 401, the plaintiffs are required to pay "Sproule, Castonguay, Pollack, in trust" as costs on the motion at bar the sum of $10,000 without delay following the award made on this motion. In all other respects, the plaintiff's motion for costs is dismissed.
[23] The Court further reserves the right of the defendant and its president - in so far as this is of any use to them - to claim damages in the provincial courts for "abuse of process, wrongful arrest and/or wrongful interference".
[24] An order will be made accordingly.
Richard Morneau
Prothonotary
MONTREAL, QUEBEC
July 11, 2000
Certified true translation
Martine Brunet, LL. B.
Date: 20000711
Docket: T-311-00
MONTREAL, QUEBEC, JULY 11, 2000
Before: RICHARD MORNEAU, PROTHONOTARY
ADMIRALTY ACTION IN REM AND IN PERSONAM
Between:
ORDINA SHIPMANAGEMENT CO. LTD.
and
ASHTON SHIPPING LTD.,
Plaintiffs,
AND
UNITED MED LINES INC.
and
THE OWNERS AND ALL OTHERS INTERESTED
IN THE BUNKERS ON BOARD THE VESSEL
"SHERINGHAM"
and
THE OWNERS AND ALL OTHERS INTERESTED
IN THE FREIGHT PAYABLE WITH RESPECT
TO THE CARGO LOADED ON BOARD THE
VESSEL "SHERINGHAM",
Defendants.
ORDER
The Court must strike out the plaintiffs' statement of claim, both the in personam and the in rem portions, and thereby dismiss the plaintiffs' action on the ground that the statement of claim discloses no cause of action within the jurisdiction ratione materiae of this Court within the meaning of s. 22 of the Act.
It goes without saying that the accessory must follow the principal and that the freight arrest must be quashed.
In accordance with the weight of the evidence and pursuant to Rules 400(1) and (3)(i), (k) and (o) and 401, the plaintiffs are required to pay to "Sproule, Castonguay, Pollack, in trust" as costs on the motion at bar the sum of $10,000, without delay following the decision on the instant motion. Apart from the foregoing, the plaintiff's motion on costs is dismissed.
The Court further reserves the right of the defendant and its president - in so far as this may be necessary or useful - to claim damages in the provincial courts for "abuse of process, wrongful arrest and/or wrongful interference".
Richard Morneau
Prothonotary
Certified true translation
Martine Brunet, LL. B.
FEDERAL COURT OF CANADA
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT FILE No.: T-311-00
STYLE OF CAUSE: ORDINA SHIPMANAGEMENT CO. LTD.
and ASHTON SHIPPING LTD.,
Plaintiffs,
AND
UNITED MED LINES INC.
and
THE OWNERS AND ALL OTHERS INTERESTED
IN THE BUNKERS ON BOARD THE VESSEL
"SHERINGHAM"
and
THE OWNERS AND ALL OTHERS INTERESTED
IN THE FREIGHT PAYABLE WITH RESPECT
TO THE CARGO LOADED ON BOARD THE
VESSEL "SHERINGHAM",
Defendants.
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: June 21, 2000
REASONS FOR ORDER BY: RICHARD MORNEAU, PROTHONOTARY
DATE OF REASONS FOR ORDER:July 11, 2000
APPEARANCES:
Sean J. Harrington for the plaintiffs
Louis Buteau for the defendants
SOLICITORS OF RECORD:
Borden, Ladner, Gervais for the plaintiffs
Montréal, Quebec
Sproule, Castonguay, Pollack for the defendants
Montréal, Quebec
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Federal Court of Canada
Trial Division
Date: 20000711
Docket: T-311-00
ORDINA SHIPMANAGEMENT CO. LTD.
and
ASHTON SHIPPING LTD.,
Plaintiffs,
AND
UNITED MED LINES INC.
and
THE OWNERS AND ALL OTHERS INTERESTED IN THE BUNKERS ON BOARD THE VESSEL "SHERINGHAM"
and
THE OWNERS AND ALL OTHERS INTERESTED IN THE FREIGHT PAYABLE WITH RESPECT TO THE CARGO LOADED ON BOARD THE VESSEL
"SHERINGHAM",
Defendants.
REASONS FOR ORDER
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