Armonikos Corp. Ltd. v. Saskatchewan Wheat Pool, 2002 FCT 799

Date: 20020718

Docket: T-906-00

Neutral citation: 2002 FCT 799

Ottawa, Ontario, Thursday the 18^th day of July 2002

PRESENT:      The Honourable Madam Justice Dawson

BETWEEN:

                                           ARMONIKOS CORPORATION LTD.

                                                                                                                                                  Plaintiff

                                                                         - and -

                                              SASKATCHEWAN WHEAT POOL

                                                                                                                                            Defendant

                                                  REASONS FOR JUDGMENT

DAWSON J.

• [1]                 The issue to be determined in this action is whether a charterparty was entered into between the parties, by their respective brokers, on April 20, 2000 by which the plaintiff agreed to let and the defendant agreed to charter the M/V ARMONIKOS. While the plaintiff asserts that a charterparty was fixed, or concluded, the defendant says that no charterparty was ever agreed to because there was no meeting of minds on one significant term: whether the vessel was certified by the International Transport Workers' Federation ("ITF").

THE BACKGROUND

• [2]                 Armonikos Corporation Ltd., the plaintiff, is the owner of the ARMONIKOS. Prior to the events at issue in this action the ARMONIKOS had ballasted across the Altantic from Amsterdam in the hope of finding employment in North America. After anchoring off Newfoundland, the vessel was ordered to Montreal and then into the St. Lawrence Seaway, finally being sent to Thunder Bay because the owner viewed there to be commercial value in being in that area at the start of the shipping season.
• [3]                 The vessel was represented in North America by a ship broker, Scandia Shipping Agencies ("Scandia") of Montreal. Scandia's principal was, and is, Mr. Stavros Stavrinidis, and he personally conducted most of the negotiations on behalf of the ARMONIKOS. Prior to those negotiations, Scandia had publicized the ARMONIKOS and her availability among brokers and charterers in an effort to find employment for the vessel.

• [4]                 The Saskatchewan Wheat Pool (sometimes the "Wheat Pool" or "SWP") is a publically traded co-operative which markets grain products throughout the world. Its exclusive freight broker was CTL Westrans ("CTL") of Vancouver. Mr. Paul Varley was the employee of CTL who conducted the negotiations on behalf of the Wheat Pool.
• [5]                 The ITF is a labour organization of transport workers' unions which works to improve labour standards for seafarers. A requirement that a vessel be "ITF or equivalent" means that the vessel's crewing contracts must be approved by the ITF or an equivalent organization. At all material times the ARMONIKOS was not ITF or equivalent.

• [6]                 The Wheat Pool had made known to CTL its general instructions that any vessel chartered on the Wheat Pool's behalf be certified to be ITF compliant or equivalent. The Wheat Pool also required vessels chartered on its behalf to be certified under the International Safety Management Code ("ISM").
• [7]                 The first evidence of communication between the respective brokers about the ARMONIKOS is an e-mail sent from Scandia to CTL on March 21, 2000 inquiring if the SWP had any business for Cuba because the vessel ARMONIKOS would be willing to take cargo there "if the price is right". In the e-mail the ARMONIKOS was described by Scandia to have been built in 1979, to be Maltese flagged, and to be gearless (that is without cranes or derricks to permit self-loading). The description was silent as to ITF or ISM compliance.

• [8]                 Later, on April 7, 2000 CTL sent a firm bid to Scandia to load a described cargo on the ARMONIKOS on specified terms and conditions. Relevant conditions were that the vessel be a maximum of 20 years of age, although the e-mail noted "try older", geared, ITF or equivalent and ISM compliant throughout the voyage. This, notwithstanding Scandia's prior advice to CTL about the age and gearless nature of the ARMONIKOS.
• [9]                 Scandia did not reply within the time specified in CTL's bid, but instead, by an e-mail sent on April 10, 2000, made its own offer in respect of the Wheat Pool's cargo. In this offer, in addition to repeating that the vessel was built in 1979 and was gearless, Scandia described the vessel to be "fully ISM compliant". No mention was made of the vessel's ITF status.

• [10]            The negotiations were not successful. Then, on April 19, 2000 CTL sent a further e-mail to Scandia. Mr. Varley, on behalf of CTL, noted that he was willing to give negotiations another try, although he was "not too optimistic" given the previous difference between the parties as to the proposed freight rates. It is common ground that no agreement was reached between the parties on April 19, 2000. The April 19, 2000 negotiations were conducted by e-mail between Mr. Varley and Mr. Chris Malecki of Scandia Hellas who had been asked by Scandia to conduct negotiations on April 19, 2000 as Mr. Stavrinidis was unavailable that day. At the end of the day both Mr. Varley and Mr. Malecki separately reported by e-mail to Mr. Stavrinidis as to the status of negotiations.

• [11]            The following day was Thursday, April 20. It was the last working day before the long Easter weekend. At this point both CTL and Scandia were desirous of concluding a charterparty for their principals. The ARMONIKOS had been unemployed for some time. The Wheat Pool had contracted with the purchaser of a quantity of feed peas to ship the peas to Spain between April 1 and April 30, 2000 at the seller's option. The vessel and cargo were both available in Thunder Bay and if a charterparty was to be concluded the parties did not want to delay loading over the long weekend until the following Tuesday.
• [12]            On the morning of April 20, 2000 at 11:28 a.m. in Montreal¹, Mr. Stavrinidis sent an e-mail to Mr. Varley. This e-mail began "To avoid any misunderstandings we herewith recap what has been agreed so far. All previous exchanges null and void". The ARMONIKOS was described by way of its age, as being gearless, and ISM compliant. A number of proposed terms were set out, the final one being that the terms would otherwise be "as per" the NEA DOXA. This was a reference to a prior charterparty which had been negotiated between CTL on behalf of the Wheat Pool and Scandia on behalf of the owner of the vessel NEA DOXA. The NEA DOXA charterparty contained an ITF/ISM clause in the following terms:

Clause 33                                  ITF / ISM Clause

The Owners guarantee that the vessel is ITF approved.

The Owners also guarantee that the vessel has onboard valid Compliance and Safety Management certificates under the International Safety Management Code (ISM) or vessel has been approved by same, and any damages including lost profits and/or time lost and/or any extra expenses incurred due to non-compliance, are to be for Owners' account and laytime or time on demurrage not to count.

If required by Charterers, Owners shall provide a copy of the relevant documents on Compliance and the Safety Management certificate.

• [13]            It is agreed by the parties that the effect of such reference to a previously executed charterparty is to supply the balance of the terms and conditions of the fixture which are in addition to those expressly negotiated by the parties.
• [14]            Shortly thereafter, at 11:43 a.m., Mr. Stavrinidis sent a second e-mail to Mr. Varley which made some additions to the earlier e-mail and stated that the offer contained in the two e-mails was open for acceptance until noon, Montreal time.

• [15]            While there is little contention between the parties as to the events which transpired to this point in time, there is substantial divergence as to the subsequent events. Therefore, having summarized the events which led up to April 20, 2000, I will next review the respective positions of the parties as to the events of April 20, 2000.

THE POSITIONS OF THE PARTIES

(i) The Plaintiff

• [16]            The plaintiff asserts that the charterparty was fixed on the Baltimore Berth Grain Charterparty Form "C" with deletions, amendments and additions for a voyage from Thunder Bay with a cargo of approximately 19,500 metric tons of feed peas for discharge at one or two safe ports in Spain. The charterparty incorporated an Amended Centrocon Arbitration Clause London.

• [17]            The plaintiff says that the charterparty was fixed as a result of the exchange of a series of e-mails between Mr. Stavrinidis and Mr. Varley on April 20 which culminated in a telephone call between them at 1:11 p.m. where Mr. Stavrinidis told Mr. Varley that they had a deal.
• [18]            The plaintiff states that after this Mr. Varley required that the charterparty contain the same clause as in the NEA DOXA charterparty to the effect that the vessel was ITF certified or equivalent. The plaintiff further says that while there had been no warranty made in the negotiations that the ARMONIKOS was ITF compliant, the owner dealt with this concern by agreeing, as Mr. Varley suggested, to accept responsibility for all consequences, costs, and risks which might arise due to the lack of ITF certification.

• [19]            The plaintiff says that once it agreed to this the fixture was again affirmed.

(ii) The Defendant

• [20]            The Wheat Pool asserts there was no fixture because the parties never reached agreement on one significant term: whether the ARMONIKOS was ITF compliant. The defendant expressly denies that Mr._ Stavrinidis ever told Mr. Varley that they had a deal, and expressly denies that Mr. Stavrinidis agreed that the owner would be responsible for any adverse consequences flowing from the lack of ITF certification. Thus, says the defendant, the negotiations collapsed on April 20, 2000 because Mr. Stavrinidis refused to agree to any proposal to deal with the lack of ITF certification. The defendant says that as a result of the course of the negotiations and the reference to terms being otherwise as per the NEA DOXA charterparty, the plaintiff in the negotiation warranted that the ARMONIKOS was ITF certified or equivalent.

THE LAW

• [21]            As can be seen from the review of the parties' positions above, this action turns upon resolution of the conflicting factual evidence adduced by the parties. The parties are agreed as to the applicable legal principles.
• [22]            In sum, those principles are:

i)           In order for an enforceable charterparty to be concluded there must be a meeting of minds on all significant terms. See, for example, Socanav Inc. v. Greater Sarnia Investment Corp. (1988), 21 F.T.R. 162 (T.D.).

ii)          Where there is no single document evidencing the intentions of the parties, the Court must view the negotiations as a whole, and give effect to the objective, not subjective, intentions of the parties. See, for example, Socanav, supra, and Rahal v. Perdale Developments Corp., [1996] B.C.J. No. 1221 (BCSC).

iii)          A charterparty may be enforceable even in the absence of the execution of a formal document. See, for example, Socanav, supra.

THE FINDINGS

(i) Was there an initial agreement?

• [23]            As noted above, the initial communication between the parties on April 20 was Mr. Stavrinidis' e-mail of 11:28 a.m. and its companion of 11:43 a.m. which set out the owner's offer which was open for acceptance until noon. The offer opened with the phrase "[t]o avoid any misunderstandings we herewith recap what has been agreed so far. All previous exchanges null and void". Among other things, the offer described the ARMONIKOS to be ISM compliant, 21 years of age and gearless. There was no reference to the vessel's ITF status, but after setting out a number of proposed terms the e-mail concluded "o[ther]wise as per" NEA DOXA.
• [24]            The plain meaning of the words "[a]ll previous exchanges null and void" was to start negotiations afresh. Mr. Varley confirmed in cross-examination the truthfulness of his answer given on discovery that it was his understanding of Mr. Stavrinidis' 11:28 a.m.      e-mail "that for whatever reason the discussion and negotiations that had taken place the day before on the nineteenth (19th) were being removed or forgotten, whatever the choice of word is" so that the parties were beginning again with this document.

• [25]            On receipt of the communication from Mr. Stavrinidis, Mr. Varley sought instructions from the Wheat Pool by forwarding a copy of the 11:28 a.m. e-mail to it. At 11:54 a.m. he then replied to Mr. Stavrinidis using the "accept/except" formula. Both Mr. Stavrinidis and Mr. Varley understood this to mean that whatever was contained in Mr. Stavrinidis' offer that was not specifically "excepted" in Mr. Varley's response was accepted by Mr. Varley. The evidence established that this is a standard practice used in the industry for the purpose of narrowing during the course of negotiations the number of outstanding issues.
• [26]            Mr. Varley's responsive e-mail of 11:54 a.m. dealt largely with the commercial terms of the charterparty. There was no reference to the vessel's description or to its ITF status. This would by application of the accept/except formula be taken to mean that Mr. Varley accepted the owner's description of the vessel in that there was no exception taken to the absence of mention of ITF certification. Mr. Varley's response did propose that the pro forma charterparty be one relating to the M/V UNITED and this charterparty did contain a clause by which the owners guaranteed the UNITED to be ITF approved. However, the evidence did not establish that terms in a pro forma charterparty supercede terms which were the subject of express negotiations.

• [27]            Mr. Varley's counteroffer of 11:54 a.m. was not acceptable to the owner. Mr. Stavrinidis responded by e-mail at 12:35 p.m. rejecting the charterer's counteroffer and repeating the owner's offer for immediate reply.

• [28]            At 12:59 p.m. Mr. Varley sent a brief e-mail in response as follows:

I spoke with Don and he say can agree with yr proposal on ‘Other' cargo being loaded as long as other cargo is not Peas and Feed Peas.

- Maintain 7 days declaration of disports.

- Maintain Charts agents bends.

- To reconfirm all cargo will be available to the vessel as required.

- Otherwise asper Neo Doxa c/p dated 11/19/98 with logical amendments.

end

Trust above should be acceptable which pls cfmn.

• [29]            It was Mr. Stavrinidis' evidence that these terms were acceptable to the owner and that he communicated the acceptance of those terms to Mr. Varley by telephone shortly after 1:00 p.m. when he told Mr. Varley words to the effect that "we had a deal". Mr. Stavrinidis pointed to a telephone log of his company's outbound phone calls which showed calls at 1:11 p.m. and 1:32 p.m. to CTL, to support his evidence that he called Mr. Varley to confirm the deal.
• [30]            Mr. Varley testified that after sending his 12:59 p.m. e-mail to Scandia he did not receive any telephone communication from Mr. Stavrinidis and he never received a telephone conversation from Mr. Stavrinidis where Mr. Stavrinidis said that they had a deal or words to that effect.

• [31]            Faced with this conflicting evidence, I find as a fact that shortly after Mr. Stavrinidis received Mr. Varley's e-mail of 12:59 p.m., Mr. Stavrinidis did telephone Mr. Varley and during that telephone conversation he did say to Mr. Varley words to the effect that they had a deal. I so find for the following reasons.

• [32]            First, Mr. Stavrinidis' evidence was on the whole internally consistent. By contrast, there were significant overstatements or inconsistencies in Mr. Varley's evidence. The following are examples:

i)           When being examined-in-chief Mr. Varley was directed to Mr. Malecki's e-mail to him of 8:21 a.m. on April 19. Mr. Varley testified in chief that when he read this e-mail his interpretation was that Mr. Malecki had accepted the ITF clause which meant that the vessel was ITF compliant.

However, Mr. Varley agreed on cross-examination that he had not understood Mr. Malecki to have made any statement in the e-mail that the vessel was ITF compliant. Mr. Varley's evidence on cross-examination was as follows:

Q              Now, take a look at Mr. Malecki's response at Tab 16. [the 8:21 a.m. e-mail]

A              Okay.

Q              You didn't catch that on the nineteenth (19^th), that Mr. Malecki was coming back to you and saying:

"Vessel fully ISM compliant and will remain so throughout the voyage."

A              Okay.

Q              You didn't catch that?

A              I don't recall. I see it here, but ...

Q              But you do agree with me on an accept/except basis, there would have been no need for Scandia to come back ...

A              That's correct.

Q              And you don't recall whether on the nineteenth (19^th), that caused any reaction for you?

A              No, it did not.

Q              Okay.

Could you turn to page 30 of your examination for discovery.

A              Okay.

Q              Okay. And you're being questioned here by Mr. Harrington on specific reference to the counter that you received from Chris Malecki, which is reproduced at Tab 16.

A              Right, okay.

Question 121:

"And did you receive the reply to the e-mail of nineteenth (19^th) of April?"

Answer:

"I believe I received the counter to that."

Question:

"And this is your document, or I should say Defendant's document which seems to be addressed to CTL Westrans and it's Paul/Chris?"

Answer:

"Correct. Yes."

Question:

"And if we look then at what you described as the counter again, you will see that the vessel was described as being ISM compliant?"

Answer:

"Yes."

Question:

"And again, there's no mention of the ITF?"

Answer:

"Correct."

Question:

"Am I right in understanding that from your point of view there was no statement that vessel was ITF compliant?"

Answer:

"That's correct."

You gave those answers?

A              Yes, I did.

Q              And the answers were true?

A              Yes, they were. [underlining added]

ii)          As will be discussed below, at 1:35 p.m. on April 20, 2000 Scandia sent an e-mail to Mr. Varley setting out the logical alterations to be made to the pro forma charterparty in line with the negotiations. In direct-examination Mr. Varley was of the view that most of the items listed were not logical alterations as stated by Scandia, but rather were main terms of the contract. Thus, Mr. Varley testified that there was nothing in Scandia's 1:35 p.m.     e-mail to indicate that the main terms were agreed or completed so that all that was left were details.

On cross-examination, Mr. Varley recanted from his view that there was only one true logical alteration in the 1:35 p.m. e-mail and agreed that a number of the items were in fact logical alterations to the pro forma. He further testified on cross-examination that he considered this 1:35 p.m.       e-mail to be an acceptance of the adjustments which he had set out in his    e-mail of 12:59 p.m. so that he understood the responsive e-mail from Mr. Stavrinidis to be an acceptance of his counteroffer.

iii)          With respect to the importance of the ITF certification to the Wheat Pool, Mr. Varley testified in chief that the SWP was particularly sensitive to the ITF at its own terminal in Thunder Bay which had a unionized work force and that while negotiating the charterparty and on April 19, 2000 he knew that the SWP's primary concern with respect to the need for ITF certification was with respect to loading at Thunder Bay.

However, on cross-examination he agreed that until the early afternoon of April 20 he did not properly understand the SWP's ITF concerns. In particular, he had not known that the SWP had concerns with respect to its own labour force at Thunder Bay.

• [33]            As these inconsistencies were put to Mr. Varley, I observed his responses to be given in a more halting and stressed manner.

• [34]            Accordingly, where their evidence conflicts, I prefer the evidence of Mr. Stavrinidis over that of Mr. Varley.
• [35]            Second, some corroboration of Mr. Stavrinidis' evidence as to the conclusion of a deal and the communication of his acceptance of the terms contained in Mr. Varley's        e-mail of 12:59 p.m. was given by his assistant, Marilyn Gonsalves, who testified that Mr. Stavrinidis told her that he had concluded a charterparty agreement and requested that she send a message confirming the fixture to Mr. Varley.

• [36]            Ms. Gonsalves testified that it was this advice from Mr. Stavrinidis which caused her to prepare and send two e-mails to Mr. Varley. The first at 1:35 p.m. which set out the logical amendments to the NEA DOXA charterparty, the second at 2:07 p.m. which recapped the terms of the fixture. Ms. Gonsalves testified that she automatically prepared the recap so that she would have everything on paper in case she was required to draw the eventual charterparty.
• [37]            I accept Ms. Gonsalves' testimony. While I am conscious that she is a long-time employee of the plaintiff, her testimony was given in a straight-forward and credible manner, was reasonable, internally consistent and not impugned in cross-examination.

• [38]            Third, the actions of Scandia in sending such e-mails dealing with logical alterations to the pro forma charterparty and recapping the terms "for fixture as agreed" are consistent with the parties having in fact fixed the main terms of the charterparty and are inconsistent with there still being a significant issue to be negotiated. At 1:48 p.m. Scandia also sent an e-mail to Mr. Varley requesting the release of the cargo "so that we may comply with the conditions of the c/p" and at 2:07 p.m. Scandia sent an e-mail requesting confirmation of the fixture. Even in the absence of Mr. Stavrinidis' confirmation that they had a deal, this is conduct from which the making of an agreement could be inferred.
• [39]            In contrast, notwithstanding Mr. Varley's evidence that it was his practice to put things in writing, at no time did Mr. Varley respond denying the existence of an agreement as to the essential terms. He responded to the e-mail as to logical amendments by writing at 1:43 p.m. that they "look fine" except with respect to the ITF clause. At 1:53 p.m. he confirmed that the SWP would be instructed to release the cargo shortly so that it would be released by the time the ARMONIKOS berthed. This was confirmed by Mr. Varley at 2:57 p.m.

• [40]            I find this documentation to be more consistent with the conclusion of a fixture as Mr. Stavrinidis testified.

• [41]            As to the conclusion of an agreement on the terms contained in the e-mails exchanged between Mr. Varley and Mr. Stavrinidis, while the existence of an ITF clause was of importance to the Wheat Pool, the conclusion of a deal between Mr. Varley and Mr. Stavrinidis shortly after 1:00 p.m. is consistent with the fact that throughout the negotiations to that point in time Mr. Varley was not particularly alive or attentive to this issue. I find that to this point in time Mr. Varley had not raised the issue with Scandia, nor at the time that Mr. Stavrinidis confirmed the deal would Mr. Varley have viewed the absence of an ITF clause as an impediment to the conclusion of a charterparty. In this regard, it was Mr. Varley's evidence that:

i)           Prior to April 20, he had no discussions with anyone at Scandia or the Wheat Pool about the ITF clause.

ii)          He had not initially assumed that the ARMONIKOS was ITF certified.

iii)          Until the afternoon of April 20, the primary concern was negotiating the commercial terms so that the ITF issue was about the last thing he directed his mind to and that it was only after 1:35 p.m. when he received the e-mail with respect to the logical alterations that ITF became an issue.

iv)         His own knowledge of the ITF was relatively limited with his "learning curve" going up on the afternoon of April 20.

• [42]            On those facts, viewed objectively, a reasonable person would, I find, understand an agreement to have been concluded which did not require the ARMONIKOS to be ITF compliant, or equivalent.
• [43]            It was strenuously contended on behalf of the Wheat Pool that no charterparty could be fixed because during the negotiations the plaintiff had warranted the ARMONIKOS to be ITF certified or equivalent. When CTL became aware that the vessel was not so certified there was, it was submitted, no consensus ad idem on an essential term.

• [44]            In support of this contention much reliance was placed upon an offer which Mr. Varley had sent to Mr. Malecki at 1:55 p.m. on April 19, 2000 which required a vessel that was ITF or equivalent. Mr. Malecki responded by e-mail at 2:21 p.m. in the accept/except format which did not refer to ITF certification, but which stated that the vessel was fully ISM compliant. No further reference to ITF was made in e-mails exchanged on April 19, 2000 and Mr. Varley was not expressly advised that the vessel was not ITF compliant.
• [45]            However, as set out above, Mr. Varley on cross-examination confirmed the truth of his evidence on discovery that from his point of view Mr. Malecki's e-mail had contained no statement that the vessel was ITF compliant.

• [46]            Similarly, Mr. Varley confirmed on cross-examination that on receipt of a prior offer from Scandia on April 10, 2000 he made no assumption that the vessel was ITF compliant and Scandia had made no statement to that effect.
• [47]            On that evidence I have not been satisfied that the Wheat Pool's broker laboured under the belief that the ARMONIKOS was ITF compliant at any time during the course of negotiations on April 20, 2000. I find that the Wheat Pool's agent did not understand there to be any warranty as to ITF compliance made during the course of negotiations.

• [48]            Therefore, on the basis of the terms of the e-mails exchanged between the parties as described above, and on the evidence as a whole, I conclude that the parties purported to fix a charterparty as a result of the exchange of a series of e-mails between Mr. Stavrinidis and Mr. Varley which culminated in Mr. Stavrinidis' advice to Mr. Varley that they had a deal.
• [49]            Notwithstanding this finding, it remains that Mr. Stavrinidis knew that one of the SWP's requirements was a vessel that was ITF or ITF equivalent, and he knew that the ARMONIKOS was not so certified. On the basis of that knowledge Mr. Stavrinidis had therefore instructed Scandia to respond to CTL's offers giving a point by point description of the ARMONIKOS because, in his words, it was for the charterer's broker to go through the description attentively to determine whether the charterer's needs were properly met.

• [50]            It is, however, unnecessary for me to consider the effect of Mr. Stavrinidis' knowledge because, as set out below, I also find that when the issue was raised on the afternoon of April 20 by Mr. Varley after Mr. Stavrinidis had confirmed the deal, an agreement was concluded which specifically dealt with the Wheat Pool's ITF concerns.

(ii) Was there a second agreement by which the owner agreed to accept responsibility for all consequences, costs and risks which might arise due to the lack of ITF certification?

• [51]            There is much common ground between the parties as to the course of dealings that led to the second agreement which the plaintiff asserts.
• [52]            At 1:43 p.m. Mr. Varley, after receiving the logical amendments provided by Ms. Gonsalves at Scandia, responded by e-mail that they looked fine and were agreeable with the exception of clause 33 dealing with the ITF clause. A modification was requested to the charterparty to insert a clause to the effect that the vessel was ITF equivalent.

• [53]            At 1:52 p.m. Mr. Stavrinidis responded that the proposed modification was not acceptable to the owner and that the vessel had previously discharged in two ports in Spain without any problem. At 2:07 p.m. Scandia sent the recap of the terms of the fixture and stated that the owner had not warranted during the negotiations that the vessel was ITF approved.

• [54]            In response, at 2:09 p.m. Mr. Varley sent an e-mail that stated:

Can agree to yours but then ‘Any and All consequences/costs/risks etc' to be for Owners account should a problem occur.

Furthermore, understand from agents that with inspections to be done prior loading wouldn't expect loading to commence until 20:00/21:00 tonight which doesn't leave much time for actual loading to be done on tonight[']s shift. Adding day & afternoon shifts on Saturday probably won't be enuf [enough] time to get the vessel loaded before end of afternoon shift on Saturday. O/T on these 3 shifts alone is expected to be close to CDN20,000. Loading on Friday is at double time so would be close to CDN30,000 not CDN10,000 discussed, all to be split 50/50 as agreed. Just want you to be aware the costs upfront so there's no disagreements after the fact.

As can be seen, this e-mail did not contest Scandia's assertion as to the absence of any ITF warranty by the owners.

• [55]            It is here that the evidence of the parties diverges.
• [56]            Mr. Stavrinidis' evidence was that this 2:09 p.m. e-mail from Mr. Varley was sent in response to Mr. Stavrinidis' last e-mail which had insisted upon the ITF clause being waived. Mr. Stavrinidis said that he was disturbed that new elements were being introduced into a deal that he thought was, to all intents and purposes, consummated. Mr. Stavrinidis' response to this was, he said, to discuss Mr. Varley's e-mail of 2:09 p.m. with Mr. Varley by telephone.

• [57]            Mr. Stavrinidis testified that during that telephone call Mr. Stavrinidis told Mr. Varley that he wasn't particularly pleased about what Mr. Varley was attempting to do because to Mr. Stavrinidis' mind, the vessel had been fixed. Mr. Stavrinidis said that Mr. Varley replied that the only way that he would be able to get the Saskatchewan Wheat Pool to agree to the fixture would be if the owner was to assume the consequences should a problem occur because of the ITF at either the loading or the discharge port. The conversation ended with Mr. Stavrinidis saying that he accepted the notice which Mr. Varley had put the owner on in Mr. Varley's e-mail of 2:09 p.m., so that the owner would be responsible for any and all consequences, costs, risks and the like should a problem arise.
• [58]            Mr. Stavrinidis further testified that this agreement was then confirmed in writing by Mr. Varley at 2:31 p.m. when Mr. Varley wrote:

Asper my last Charts can agree No ITF or equivalent, but to be clear asper our telecom, if a problem should occur either at load or at discharge, even though as you say it is unlikely, ‘Any and All consequences/costs/risks etc' to be for Owners account should a problem occur.

Just so we're clear.

• [59]            Thus, in Mr. Stavrinidis' mind the vessel was fixed for a second time.
• [60]            Mr. Varley's evidence was that when the ITF issue surfaced he threw out the suggestion of an indemnity provision, that before Mr. Varley offered this suggestion he had no indication as to whether or not Mr. Stavrinidis might be receptive to it, and that Mr. Stavrinidis' response to the suggestion was to say that the issue had already been dealt with. Thereafter, Mr. Varley said that he never had any telephone discussion with Mr. Stavrinidis indicating that Mr. Stavrinidis had considered this suggestion, that Mr. Stavrinidis never responded to the suggestion, and that Mr. Stavrinidis never advised Mr. Varley that he accepted the indemnity obligation.

• [61]            With respect to this conflict in the evidence, for the reasons previously given where their evidence conflicts I prefer the evidence of Mr. Stavrinidis to that of Mr. Varley.
• [62]            Further, on this issue of the second agreement there was corroborative evidence from Ms. Gonsalves who testified that on April 20 she took a call from Mr. Varley who told her that he wanted to talk to Mr. Stavrinidis about the deletion of clause 33 of the pro forma charterparty. Ms. Gonsalves testified in direct-examination that from her workstation three to four feet away from Mr. Stavrinidis she heard Mr. Stavrinidis say to Mr. Varley on the telephone that the vessel had called Spain before, that the owners had experienced no problems with the ship, and that Mr. Stavrinidis would accept the consequences for anything at all, because he did not see any problem in the ship calling Spain which it had done before.

• [63]            For the reasons stated above, I accept the evidence of Ms. Gonsalves which I do not find to have been contradicted in any material fashion on cross-examination.

• [64]            Moreover, in finding that Mr. Stavrinidis agreed on the owner's behalf to accept the consequences of the lack of ITF certification I have also considered that at this time the vessel had not had any previous difficulty with respect to the ITF. The evidence adduced on this point was that ARMONIKOS had never been an ITF target in Canada or elsewhere, the vessel had been inspected by the ITF in Italy in 1999 without problem, had discharged in two ports in Spain without difficulty in 1998 and had consistently traded through the Great Lakes, including Thunder Bay, without problems. Mr. Stavrinidis had no personal knowledge of any labour problems in Thunder Bay on the ships under Scandia's agency, notwithstanding that they were not all ITF certified. As of March 2000, efforts were underway to have the ARMONIKOS certified by the Panhellenic Seaman's Federation ("PSF"), and on April 25, 2000 an ITF approved agreement was signed with the PSF.
• [65]            Therefore, the agreement to indemnify would not have seemed to present any real risk to the owner.

• [66]            I have reached the conclusion as to the making of this second agreement notwithstanding that Mr. Stavrinidis did not expressly confirm the fixture in writing as requested by Mr. Varley in his e-mails of 3:22 p.m. and 3:48 p.m. Instead, Mr. Stavrinidis replied at 3:38 p.m. in the following terms:

RE: MV ARMONIKOS/SWP

RE ITF, WE HAD MADE IT CLEAR THIS MORNING THAT ALL PREV CORRESPONDENCE WAS NULL AND VOID AND FOR GOOD ORDERS SAKE REPEATED A COMPLETE RECAP OF WHAT WAS AGREED.

And at 3:51 p.m. as follows:

RE: MV ARMONIKOS /SWP

        CP DD APR 20/00

VESSEL HAS BEEN ORDERED TO PROCEED AND LOAD AS PER CHARTER PARTY. EVERYTHING ELSE IS IN WRITING AND WELL SPELT OUT SO AS TO AVOID ANY MISUNDERSTANDINGS.

WE HAVE NOTHING FURTHER TO ADD.

• [67]            Obviously it would have been preferable for Mr. Stavrinidis to have expressly confirmed the fixture.
• [68]            However, I accept Mr. Stavrinidis' explanation for that failure in that Mr. Stavrinidis testified that he believed that Mr. Varley had confirmed the agreement in his e-mail of 2:31 p.m quoted above, that Mr. Stavrinidis viewed the charterer's actions in releasing the cargo as being consistent with a fixture and that he believed that Mr. Varley was trying to go back on what had been agreed upon.

• [69]            In this regard, after Mr. Varley's e-mail of 3:17 p.m. to the Wheat Pool, Mr. Varley learned that the Wheat Pool was not happy at the offer Mr. Varley had made to accept an indemnity provision and, instead, Wheat Pool wanted the vessel to be, in Mr. Varley's words "ITF or equivalent, period". It is only after Mr. Varley's 3:17 p.m. e-mail to the Wheat Pool that Mr. Varley began to request written responses from Scandia as to the charterparty terms. Prior to this it had been Scandia which at 2:00 p.m. had been requesting re-confirmation of the fixture.

THE CONCLUSIONS

• [70]            There is no dispute that the parties had agreed to all of the main terms and details of the charterparty, but for the ITF clause. I have found that, as asserted by the plaintiff, agreement was reached on this last issue when Mr. Stavrinidis accepted Mr. Varley's proposal that the issue be resolved by the owner accepting all risks that might arise from the lack of ITF certification.
• [71]            It follows that the plaintiff is entitled to the following relief as claimed in the statement of claim:

i)           a declaration that the ship ARMONIKOS was chartered to the defendant by the plaintiff for a voyage from Thunder Bay to Spain; and

ii)          a declaration that the charterparty contained a London arbitration clause.

• [72]            It further follows that these proceedings should be stayed in favour of London arbitration on the issues of damages, interest and costs other than the costs of this proceeding, and judgment will issue on those terms.

• [73]            The costs of this proceeding are reserved, pending further submissions from counsel. Counsel are directed to advise the Registry within 7 days of receipt of these reasons as to when counsel for both parties would be available to discuss by teleconference the form and timing of such further submissions.
• [74]            Counsel for the plaintiff is directed to prepare for endorsement a draft judgment to implement these conclusions, such draft judgment to be approved as to form by the defendant all as provided by Rule 394 of the Federal Court Rules, 1998.

"Eleanor R. Dawson"

                                                                                                                                                    Judge                        

Ottawa, Ontario

July 18, 2002

____________________________

1.                    Throughout these reasons, where it is material to refer to the time of day, all time will be expressed in Eastern Daylight Time, being the time in Montreal where Mr. Stavrinidis was located, and being three hours later than the time in Vancouver where Mr. Varley was located.

                                               FEDERAL COURT OF CANADA

                                                             TRIAL DIVISION

                        NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:       T-906-00

STYLE OF CAUSE:

ARMONIKOS CORPORATION LTD.

-and-

SASKATCHEWAN WHEAT POOL

PLACE OF HEARING:         MONTRÉAL, QUÉBEC

DATE OF HEARING:           MAY 13, 2002

REASONS FOR JUDGMENT OF THE HONOURABLE

MADAM JUSTICE DAWSON

DATED:          JULY 18, 2002

APPEARANCES:

MR. GEORGES POLLACK                 FOR PLAINTIFF

MR. WILLIAM BURRIS                      FOR DEFENDANT

MR. CHRISTOPHER ELSNER

SOLICITORS OF RECORD:

GOWLING, LAFLEUR HENDERSON LLP FOR PLAINTIFF

MONTRÉAL, QUÉBEC

BULL, HOUSSER & TUPPER                         FOR DEFENDANT

VANCOUVER, BRITISH COLUMBIA