Date: 20010828
Docket: T-1723-00
Neutral Citation: 2001 FCT 958
BETWEEN:
TRANS TEC SERVICES INC.,
Plaintiff,
- and -
THE SHIP "LYUBOV ORLOVA" and
THE OWNERS AND ALL OTHERS INTERESTED IN
THE SHIP "LYUBOV ORLOVA",
Defendant.
REASONS FOR ORDER
MacKAY J.:
[1] This is a motion for summary judgment brought by the defendant, 1414847 Ontario Inc. carrying on business under the name Marine Expeditions ("ME"), as operator in possession of the ship "LYUBOV ORLOVA," pursuant to Rule 213(2) of the Federal Court Rules, 1998, heard in St. John's, Newfoundland. The moving party seeks an order dismissing all of the claims set out in the plaintiff's Statement of Claim, with costs to the defendant.
Facts
[2] The plaintiff, Trans-Tec Services Inc. ("Trans-Tec"), is in the business of supplying fuel ("bunkers") to ships. This action stems from the provision of bunkers pursuant to a contract between the plaintiff and a former charterer of the defendant ship, Marine Shipping Company Inc. ("MSCI"), whereby a substantial debt accumulated. As charterer of the ship, MSCI contracted with Marine Expeditions Inc., a third company, to provide the defendant ship, fully crewed and supplied, to carry that third company's travel tourists. The charter to MSCI was terminated for financial reasons and thereafter the defendant, 1414847 Ontario Inc. dba Marine Expeditions ("ME"), became the sub-charterer of the defendant ship by an agreement with another company to which the vessel's owners had granted a time-charter after termination of the charter by MSCI.
[3] While negotiations to arrange the sub-charter by ME were underway counsel for the plaintiff wrote on May 23, 2000, to MSCI, with a copy to "Marine Expeditions, Attn. Dugald Wells..." demanding payment by May 25 of MSCI's account in relation to several ships and advising that if accounts were not settled legal action would commence. The arrest of the ships against which maritime liens were claimed was suggested as likely. In a letter of May 30, 2000, Mr. Dugald Wells, a director and officer of Marine Expeditions Inc. on that company's letterhead paper, wrote to the plaintiff's accounts manager, proposing arrangements for payments to be made on the outstanding debts of MSCI in respect of several vessels, of which the defendant ship was one. With regard to the defendant ship, a series of two payments was proposed in the following terms:
Lyubov Orlova
We propose to settle this invoice directly in two payments as follows:
June 1 $20,000.00
June 8 $29,543.60 (adjusted as appropriate for interest)
No correspondence from the plaintiff was forwarded which indicated rejection of the proposed settlement of accounts for this vessel, or any other proposals in the letter of May 30. It is equally clear on the evidence that officers of the plaintiff did not expressly agree with the proposal set out by Mr. Wells. Affiants for the plaintiff, officers of that company, aver that they did tell Mr. Wells that they would not vary the contract terms applicable to the sales invoiced to MSCI.
[4] On June 2, 2000, a payment of $20,000US was forwarded by Mr. Wells for Marine Expeditions Inc. to the plaintiff under a confirmation letter which indicated the payment was made "as promised in my letter of May 30th". On June 8, 2000, the remaining amount of $29,548.60US invoiced in respect of the "Lyubov Orlova" was remitted to the plaintiff, in accord with a bank confirmation sent to the plaintiff with a fax cover sheet from Mr. Wells for Marine Expeditions Inc. indicating that he considered the debt of the defendant ship, "Lyubov Orlova," to be paid in full. The two payments were received by the plaintiff, but they were applied to outstanding debts owed by MSCI with respect to bunkers provided to other vessels. The plaintiff does not dispute the payments were received, but it claims the right, pursuant to its standard form of contract incorporated in its contract with MSCI under which the bunkers were supplied, to apply those payments to debts owed by MSCI on account of supplies to other ships.
[5] On June 19, 2000, the plaintiff demanded of MSCI payment of all outstanding accounts and a statement of those accounts indicated that the payments received in early June had been applied to the oldest MSCI account and not to the debt in respect of the defendant ship.
[6] In September 2000, the plaintiff initiated this action and the "Lyubov Orlova" was arrested in St. John's, Newfoundland. Thereafter it was released on a bond for $75,000 as security for the plaintiff's claims and costs. The plaintiff's claim is based on its supply contract with MSCI, the terms and conditions of which permit payments rendered by a purchaser to be applied to the oldest outstanding accounts of the purchaser who could not designate the account to which a payment would be applied. The plaintiff contends that the debt of the defendant ship remains unpaid.
Submissions of the Defendant (Moving Party)
[7] It is the position of the defendant that this is an appropriate situation for summary judgment as there is no genuine issue to be resolved. It was urged at the hearing of this motion that the debt claimed against the defendant ship has been paid, and that the plaintiff was not at liberty to accept the funds and then fail to apply them in accordance with the terms under which they were remitted, that is, only as payments on the debts outstanding in respect of the defendant ship.
[8] The sole issue to be resolved is whether the plaintiff is entitled to rely upon the standard contract terms and conditions of sale that bound MSCI to pay its oldest debts first. ME argues that Marine Expeditions Inc., as a third party and the payor in June 2000, was not bound by those terms and conditions because it was not privy to the contract of sale made between the plaintiff and MSCI. Therefore, the payments, when accepted, should have been applied in accordance with the directions of Marine Expeditions Inc. as payor. The essence of this motion for summary judgment is that the debt claimed has been paid. Therefore, it is urged the plaintiff's claim is without merit.
Submissions of the Plaintiff (Responding Party)
[9] It is the position of Trans-Tec Inc. that genuine issues remain to be resolved by a trial judge, including an issue of credibility, for there are contradictory recollections of facts asserted in affidavits filed in support of the positions of the two parties.
[10] The plaintiff relies on its standard terms and conditions of sale to assert that it retains the sole discretion to apply payments to whatever debts are outstanding for supplies provided under its contract with MSCI, and that the buyer may not designate the allocation of funds to a newer invoice if an older one remains. It is the position of the plaintiff that ME was aware of this condition through Dugald Wells, who was an officer and director not only of ME and of Marine Expeditions Inc. but also of MSCI. While Mr. Wells acknowledges he was only a director, and did not attend all Board meetings of MSCI, it is urged that his status with the various companies binds ME and it became responsible for MSCI's debts.
[11] The plaintiff asserts that none of its representatives, in any dealings with the defendant or with Mr. Wells, indicated willingness or the ability to waive the application of the standard terms and conditions applicable to sales to MSCI. Both the accounts manager responsible for the MSCI account, and the plaintiff's general legal counsel, affiants in support of the plaintiff, claim they communicated to Mr. Wells that waiver of the standard terms of payment would not be undertaken. Both of the affiants for the plaintiff assert they informed Mr. Wells of this policy, but no documentation or correspondence confirming that advice was provided to support their affidavits, and Mr. Wells' affidavit sets out that he was not aware of the policy or the terms of the contract with MSCI until the documents were produced in support of the plaintiff's claim and arrest of the defendant ship.
Analysis
[12] In my opinion, this is not a matter to be decided on the basis of credibility of witnesses. The matter is one of contract issues, particularly whether the plaintiff had the right to enforce against a third party, a contract made with MSCI, and to allocate in its discretion payments received from Marine Expeditions Inc. as provided in the contract with MSCI, without regard to the terms upon which those payments were made in June, 2000.
[13] Both ME and Marine Expeditions Inc. are third parties, not privy to the contract between Trans-Tec and MSCI. It was urged for the plaintiff that ME, Marine Expeditions Inc. and MSCI were all under the same corporate umbrella over which Mr. Wells provided direction. Nevertheless the corporations remain separate legal entities. In my view, the contract with MSCI does not bind ME. When Marine Expeditions Inc. offered to pay the outstanding debts owed to Trans-Tec by MSCI in respect of the "Lyubov Orlova" for bunkers, a new offer was made. That offer was to pay the invoice for supplies to the "Lyubov Orlova" in two payments. Those terms were clear. Payments were made by Marine Expeditions Inc. and received by the plaintiff. In my opinion, the terms outlined in the letter of May 30, 2000, constituted an offer for a unilateral contract, and acceptance of the payments by the plaintiff was acceptance of that offer. The terms of that offer were that the payments be accepted in satisfaction of the indebtedness represented by the invoice for bunkers supplied to the defendant ship.
[14] As noted by Waddams, The Law of Contracts (3rd. ed.) at paragraphs 89 and 90:
Ordinarily ... silence will not operate as an acceptance even though the offeree should prove an intention to accept. ... No reasonable person, on receiving a proposal that looks for a reply, considers the bargain concluded until the manifestation of assent. Nor will a reasonable offeror ordinarily consider that silence on the part of the offeree manifests the latter's acceptance. ... Conduct may constitute acceptance.
Some actions which have been held to be "equivalent to acceptance" are ... acceptance of delivery, payment of money, ... Further, if one party is aware of the other's belief in the existence of a contract, that party may be estopped from later denying that a contract exists. Where a cheque is sent on certain terms such as "in full settlement" of an account, the retention of the cheque may amount to an agreement to the sender's terms.
[15] In The Law of Contract (4th ed.), at page 51, Fridman notes the test for determining if a contract exists:
Whether or not there has been an acceptance depends upon whether the offeree has so conducted himself that a reasonable man would believe that he has accepted, or is accepting, the offer in question, at least as long as the offeror has acted on such belief. The generally adopted theory of offer and acceptance is that the parties' behaviour must be viewed objectively, in terms of how the reasonable man, if he were a bystander, would describe the effect of what he had seen or heard.
[16] The objective test described by Fridman was applied by the Supreme Court of Canada in [1955] S.C.R. 868">Dawson v. Helicopter Exploration Co., [1955] S.C.R. 868 at 876:
While it has been repeatedly held that an acceptance must be absolute and unequivocal ... it is equally clear that such an acceptance need not be in express terms and may be found in the language and conduct of the acceptor.
[17] In [1964] S.C.R. 614">St. John Tug Boat Co. v. Irving Refinery Ltd., [1964] S.C.R. 614 at 633, the Supreme Court held:
The test of whether conduct, unaccompanied by any verbal or written undertaking, could constitute an acceptance of an offer so as to bind the acceptor to the fulfilment of the contract was objective, and not subjective; the intention attributed to a man was always that borne by his conduct when reasonably construed, and not that which was present in his own mind.
(See also, Manco Ltd. v. Atlantic Forest Products Ltd. (1971), 24 D.L.R. (3d) 194 (Ont. C.A.), Beer et al. v. Townsgate I Ltd. et. al. (1997), 152 D.L.R. (4th) 671 (Ont. C.A.), and Canadian Newspapers Co. v. Kansa General Insurance Co. (1996), 30 O.R. (3d) 257 (C.A.).)
[18] In my opinion, a reasonable person observing the conduct of the parties would conclude that the conduct of the plaintiff amounted to acceptance of the terms of payment proposed by Marine Expeditions Inc. with respect to the debt attributed to the defendant ship. The correspondence of May 30, 2000 from Marine Expeditions Inc. specifically outlined a proposed payment schedule for each of the outstanding accounts owed by MSCI, the amounts to be applied to each ship in respect of supplies provided, and the arrangements Mr. Wells expected to meet for each payment. Moreover, with each of the two payments provided for the bunkers supplied to the "Lyubov Orlova," Mr. Wells, on behalf of Marine Expeditions Inc., forwarded correspondence ensuring that Trans-Tec was aware of the intended appropriation of the payment under terms set out in the letter of May 30. Trans-Tec accepted the money. Knowing the intentions of the payor and the terms on which payment was made, the plaintiff ought to have refused the funds if it was not prepared to accept payment on the terms proposed. This it did not do and it has not indicated any intent to return the payments made.
[19] I am satisfied on the evidence before me that there is no genuine issue here to be resolved at trial. Although the plaintiff asserts that an issue of credibility exists that should be put to a trial judge for resolution, I do not agree. Gibson J. in Kirkbi AG et al. v. Ritvik Holdings Inc. et al. (1998), 150 F.T.R. 205 at para. 18 (T.D.) quoted from Granville Shipping Co. v. Pegasus Lines Ltd., [1996] 2 F.C. 853 (T.D.), in holding that a "serious" issue with respect to credibility should go to trial. However, "the mere existence of apparent conflict in the evidence does not preclude summary judgment." In my view resolution of the conflict in evidence here would not significantly affect the outcome for the actions of the parties are the key to resolution of the plaintiff's claim, not their understandings of the rights each claimed in respect of the contract arrangements that were applicable.
[20] As was adopted by the Federal Court of Appeal in Feoso Oil Ltd. v. Sarla (The), [1995] 3 F.C. 68 at para. 13 (C.A.), the test to determine if a genuine issue for trial exists
is not whether the plaintiff cannot possibly succeed at trial; the test is whether the court reaches the conclusion that the case is so doubtful that it does not deserve consideration by the trier of fact at a future trial; if so then the parties "should be spared the agony and expense of a long and expensive trial after some indeterminate wait" [quoting Pizza Pizza Ltd. v. Gillespie (1990), 75 O.R. (2d) 255 (Gen. Div.)].
[21] I agree with the words of Reed J. in Pawar v. Canada, [1999] 1 F.C. 158 at para. 16 (T.D.):
I am convinced that in the present case evidence establishing the essential facts to the plaintiff's claim are before the Court. Proceeding to trial would add detail but not significant additional evidence. Proceeding to trial, given the costs involved, is neither necessary nor justified.
Conclusion
[22] In my view, the apparent conflicts in the affidavit evidence relating to the understandings of the parties involved do not raise a serious issue of credibility that could affect the outcome of this case. I find that the plaintiff accepted the payment terms proposed by Marine Expeditions Inc. with respect to the "Lyubov Orlova" through its retention of payments received. In so doing, by its conduct the plaintiff accepted the offer of Marine Expeditions Inc., and a new contract was formed. After that, whatever its rights under the contract with MSCI, the plaintiff could not assert those rights against Marine Expeditions Inc. or against ME as operator of the ship, for neither was a party to the earlier contract.
[23] I find that the debt owed to Trans-Tec respecting bunkers purchased for the defendant ship was paid. It was not an outstanding debt and the plaintiff's action herein, to recover an alleged debt, simply could not succeed.
Order
[24] The motion for Summary Judgment is allowed. The action of the plaintiff, and the claims set out in the plaintiff's Statement of Claim, are dismissed, with costs on the normal party and party basis to the defendant. An Order now issues so providing.
(signed) W. Andrew MacKay
__________________________________
JUDGE
OTTAWA, Ontario.
August 28, 2001.
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