Domtar Inc. v. Lineas de Navigation Gema S.A., docket T-2873-96

     T-2873-96

B E T W E E N:

     DOMTAR INC.,

     Plaintiff

AND:

     LINEAS DE NAVIGATION GEMA S.A.,

     - and -

     POSEIDON NAVIERA,

     - and -

     ADECON SHIPPING INC.,

     - and -

     THE OWNERS AND ALL OTHERS INTERESTED IN

     THE VESSEL PINE ISLANDS;

     - and -

     THE VESSEL PINE ISLANDS;

    

     Defendants

REASONS FOR ORDER

NADON J.:

     Before me is a motion by the owners of the vessel PINE ISLANDS ("the shipowners") to set aside the arrest of their vessel and to strike the in rem portion of the Plaintiff"s statement of claim on the grounds that the statement of claim discloses no reasonable cause of action in rem and is otherwise an abuse of the process of this Court.

     In support of the motion, the shipowners filed the affidavit of Glen W. Lewis, a partner in the firm of Lewis & Clark Shipping Limited, shipbrokers who, at all material times herein, acted on behalf of the Defendant Adecon Shipping Inc. ("Adecon").

     The thrust of Mr. Lewis" affidavit is that he was employed by the Defendant Adecon to conduct negotiations which culminated in a booking note contract dated at Montreal on October 17, 1996, between Adecon and the Plaintiff. On the basis of this evidence, the shipowners argue that their ship could not be arrested by reason of a breach of the booking note contract because they were not and are not a party to that contract. The shipowners point out that the Defendant Adecon, in its statement of defence, has admitted that it was a party to the booking note contract with the Plaintiff and that if any liability arises out of that contract, it is Adecon who would be liable.

     The shipowners" motion is made pursuant to Federal Court Rules 341 and 419. These rules read as follows:

341. A party may, at any stage of a proceeding, apply for judgment in respect of any matter

(a) upon any admission in the pleadings or other documents filed in the Court, or in the examination of another party, or

(b) in respect of which the only evidence consists of documents and such affidavits as are necessary to prove the execution or identity of such documents,

without waiting for the determination of any other question between the parties.

419. (1) The Court may at any stage of an action order any pleading or anything in any pleading to be struck out, with or without leave to amend, on the ground that

(a) it discloses no reasonable cause of action or defence, as the case may be,

(b) it is immaterial or redundant,

(c) it is scandalous, frivolous or vexatious,

(d) it may prejudice, embarrass or delay the fair trial of the action,

(e) it constitutes a departure from a previous pleading, or

(f) it is otherwise an abuse of the process of the Court,

and may order the action to be stayed or dismissed or judgment to be entered accordingly.

(2) No evidence shall be admissible on an application under paragraph (1)(a).

(3) In this Rule, "departure" means that which is prohibited by Rule 411.

     The first ground advanced by the shipowners is that the Plaintiff"s statement of claim, as amended, does not disclose a reasonable cause of action in rem . To the extent that the shipowners rely on Rule 419(1)(a), the motion must fail. It is now well settled that this Court will only strike pleadings in plain and obvious cases. In the present matter, it is not "plain and obvious" that the Plaintiff cannot succeed against the in rem Defendants.

     In its statement of claim, as amended, the Plaintiff alleges that the Defendants, including the shipowners, undertook to carry their cargo from St. Catherine, Quebec to Bandar Abbas, Iran, before the end of December 1996. Specifically, the Plaintiff makes the following allegations in paragraphs 2, 7 and 8 of its amended statement of claim:

2.      At all material times, Defendants were the Owners and/or the charterers and/or the parties interested in the vessel PINE ISLANDS who had agreed to perform the carriage of the Cargo from St. Catherine to Bandar Abbas before the end of December 1996;

7.      Defendants are in breach of the Liner Booking Note and the contract of carriage and they are unable to carry the Cargo from St. Catherine to Bandar Abbas;

8.      Defendants are also negligent and are liable to Plaintiff in delict and in tort since they provided a vessel that is unseaworthy and unfit to sail in the Canadian waters and to carry the Cargo.

     There is no doubt that the Plaintiff could, and probably should have, provided more particulars with respect to the issue raised in the above paragraphs of their Statement of Claim. However, that is an entirely different question. As the matter now stands, I am unable to conclude that the Plaintiff cannot succeed against the in rem Defendants since the Plaintiff alleges that the shipowners of the PINE ISLANDS were a party to the contract entered into on October 17, 1996.

     Although affidavits were filed both by the shipowners and the Plaintiff, I have not, for the purposes of Rule 419(a), considered this evidence as Rule 419(2) precludes me from so doing.

     The shipowners also rely on Rule 419(1)(c) which allows the Court to strike pleadings where, in the opinion of the Court, the pleadings are scandalous, frivolous or vexatious. Contrary to the position concerning Rule 419(1)(a), it is open to the parties to adduce evidence by way of affidavit where the motion is brought under Rule 419(1)(c). It goes without saying that the parties are then entitled to cross-examine on the affidavits.

     As I have already indicated, the shipowners rely on the affidavit of Glen Lewis which is to the effect that the booking note contract dated October 17, 1996 was entered into by the Defendant Adecon. Consequently, Mr. De Man, for the shipowners, argues that there is no cause of action against his clients and that the arrest of the PINE ISLANDS and the in rem portion of the statement of claim should be set aside.

     The Plaintiff relies on the affidavit of Denis P. Gillespie, Vice-President, Containerboard Sales, Domtar Inc.. Paragraphs 12 through 19 of Mr. Gillespie"s affidavit are relevant and they read as follows:

12.      Further to the Fixture, in which the M.V. ALIMONOS [sic] had been nominated, Lewis & Clark informed OIT on October 18th, that the vessel M.V. LOTUS ISLANDS would carry the Cargo. When this latter vessel turned out to be unavailable, the M.V. ALIMONOS [sic] was re-nominated. On October 30th, however, Lewis & Clark informed OIT that the M.V. ALIMONOS [sic] had not yet been released from her previous charter the whole as appears from the copy of several faxes sent by Lewis & Clark to OIT which are produced herewith as Exhibit "C" to this my affidavit:

13.      On November 8th, 1996 Applicant Poseidon Naviera sent a fax directly to OIT stating that the M.V. ALAMINOS (which incidently appears to be the correct name of the vessel previously referred to the "ALIMONOS") had been nominated to carry other cargo and would, therefore, not be available to lift the Cargo. The fax also mentioned that Defendant Adecon was attempting to secure an alternate vessel. The fax, a copy of which is produced as Exhibit "D" to this my affidavit, left the impression that Adecon and the Applicants had a close relationship and that they were acting together in the matter;

14.      In light of the fact that Defendants could not lift the Cargo on schedule, the Cargo was consolidated with another shipment destined for Iran for a total shipment of approximately 3,600 metric tons;

15.      On November 11th, Lewis & Clark advised OIT that the vessel M.V. PINE ISLANDS could be made available to lift the Cargo. The vessel was accepted by OIT on November 12th, and confirmation of the nomination was received from Lewis & Clark on November 15th. Lewis & Clark also indicated that the vessel would arrive at Cote St. Catherine at the end of November, the whole as appears from copy of an exchange of telefaxes produced together herewith as Exhibit "E" to this my affidavit;

16.      The vessel was apparently delayed and Lewis & Clark suggested that the M.V. EAST ISLANDS could be made available to Domtar in lieu of the M.V. PINE ISLANDS. Finally, and after further delays, Lewis & Clark renominated the M.V. PINE ISLANDS on December 15th and advised that the vessel was expected to arrive in Montreal on December 18th, 1996, the whole as appears from the copy of an exchange of telefaxes produced herewith as Exhibit "F" to this my affidavit;

17.      It should be noted that all of the vessels nominated to lift the Cargo were owned and/or controlled by the Applicants, the whole as appears from extracts of the Lloyd"s List of Shipowners and the Register of Ships produced herewith as Exhibit "G" to this my affidavit;

18.      On November 20th, 1996 OIT wrote to Lewis & Clark to indicate that the letter of credit opened by Domtar"s customer in Iran was on the point of expiring and had to be extended. Domtar was concerned that in view of the delays encountered to date, its customer in Iran would refuse to extend the letter of credit and it advised the Applicants that it was essential that the vessel be present on time as it did not want to find itself in the position where it had to inform its customer of a further "non-shipment", the whole as appears from a copy of the telefax of November 20th produced herewith as Exhibit "H" to this my affidavit;

19.      Lewis & Clark responded to OIT on December 5th by fax stating that the "head owners" were aware of the Domtar"s problem with the letter of credit, the whole as appears from the said telefax, a copy of which is produced herewith as Exhibit "I" to this my affidavit. Considering that the conversation cited in this telefax refers to the term "Head Owners" as opposed to "Owners", it appears that the Applicants were aware of the letter of credit difficulties referred to in Exhibit H;

     In short, the Plaintiff"s position against the shipowners is that the Defendant Adecon and the shipowners "had a close relationship and that they were acting together in the matter". Further, Mr. Gillespie, at paragraph 17 of his affidavit, points out that all of the vessels nominated by Adecon to load their cargo were either owned or controlled by the same shipowners. What Lloyd"s Register of Shipping reveals is that the vessels nominated by Adecon, except for the vessel MANLEY APPELDORE, were managed by the Defendant Poseidon Naviera for the account of the companies that owned the individual vessels.

     To recapitulate the history of this file, the booking note dated October 17, 1996, shows at box 5 thereof, that the vessel ALAMINOS or a similar substitute would be carrying the Plaintiff"s cargo. On October 18, 1996, Lewis & Clark advised Ocean International, brokers for the Plaintiff, that the nominated vessel was now the LOTUS ISLANDS, which vessel was built in 1983 as a sister to the SOUTH ISLANDS whose details were attached to the faxed transmission. On October 22, 1996, Lewis & Clark advised Ocean International that the ALAMINOS had been renominated to carry Domtar"s cargo. On November 8, 1996, the Defendant Poseidon Naviera advised the buyer of Domtar"s cargo, Lanhope Limited of London, England, that the ALAMINOS would be unable to perform as it had been nominated "for government cargo". On November 11, 1996, Lewis & Clark advised Ocean International that Adecon had now nominated the PINE ISLANDS. On November 20, 1996, Lewis & Clark advised Ocean International that they had been advised by the "head owners" that the PINE ISLANDS "is scheduled ready to sail end of the week or over the weekend - vessel is required to complete repairs before sailing". On November 26, 1996, Lewis & Clark advised Ocean International that the vessel EAST ISLANDS "has been instructed to sail and we expect vessel to depart Cuba tomorrow P.M.". On November 30, 1996, Poseidon Naviera advised the Defendant Adecon that the EAST ISLANDS had encountered delays due to rain at the discharge port and thus would not be arriving Montreal prior to December 10 - 12, 1996. On December 5, 1996, Lewis & Clark advised Ocean International that they had been advised by "head owners" that the EAST ISLANDS would not make it to Montreal before the closing of the seaway. Finally, on December 15, 1996, Lewis & Clark advised Ocean International that the PINE ISLANDS had once again been nominated to carry Domtar"s cargo to Iran.

     As a result of the above delays, the Plaintiff instituted legal proceedings against the Defendants on December 30, 1996. On that day, a warrant for the arrest of the PINE ISLANDS was issued at Halifax at the request of Domtar Inc.. On January 3, 1997, the Plaintiff filed an amended statement of claim in rem and in personam. On January 8, 199, the PINE ISLANDS was arrested.

     In these circumstances, the shipowners submit that the arrest of their ship should be set aside since no cause of action exists against them. The shipowners further submit that the booking note contract entered into on October 17, 1996, was entered into by the Plaintiff with the Defendant Adecon only. Consequently, if there is liability under that contract, it is that of Adecon. In support of this proposition Mr. De Man referred me to the decision that I rendered in Alcan Aluminium Limited et al. v. Unican International S.A. et al. (1996), 113 F.T.R. 81. In that case, I dismissed the Plaintiff-shipper"s action against the shipowners on the ground that the shipowners were not a party to the booking note contract entered into by the Plaintiff and the time-charterer of the vessel.

     I immediately point out that my decision in Alcan was rendered after a trial which lasted approximately two weeks. I concluded, on the facts of that case, that the booking note contract was one entered into by the time-charterers for their own account only. In the present matter, I have obviously not had the benefit of witnesses save for the affidavits of Messrs. Gillespie and Lewis.

     Mr. De Man"s submission is that there is no material difference between the present matter and the facts in Alcan . I disagree. Upon reading the affidavit of Mr. Gillespie and the transcript of his examination, I cannot conclude that the Plaintiff"s argument that Adecon was either acting on behalf of the shipowners or participating in a joint venture with the shipowners, is such that it should not be allowed to go to trial. Firstly, it is somewhat surprising that most of the ships nominated by Adecon were ships managed by Poseidon Naviera. Secondly, in paragraph 8 of his affidavit, Mr. Lewis refers to the chartering arrangements between Adecon and Poseidon Naviera. According to exhibit "C" to Mr. Lewis" affidavit, a telefax dated December 19, 1996 from Adecon to Poseidon Naviera, Adecon would have chartered the PINE ISLANDS on the basis of a Gencon charterparty "suitably amended". On February 7, 1997, the Plaintiff"s solicitors wrote to the shipowners" solicitors to obtain a copy of the relevant charterparty. Subsequently, the Plaintiff"s solicitors were advised by the shipowners" solicitors that the charterparty in question had never been prepared nor signed and was therefore unavailable.

     All of this evidence leads me to conclude that there are genuine issues for a trial. It is not, as Mr. De Man suggests, obvious that the shipowners are not liable in contract to the Plaintiff. Liability in tort, in these circumstances, might also arise. I am obviously not making any findings of fact or reaching any conclusions of law, but I am stating that at the very least the proceedings instituted by the Plaintiff are not scandalous, frivolous or vexatious.

     The shipowners also invoke in support of their motion Rule 341. In my view, the shipowners cannot succeed under that rule. In Thomas Fuller Construction Co., (1958) Ltd. v. Canada, [1992] 3 F.C. 795 at 798, Marceau J. of the Federal Court of Appeal made the following comments regarding the application of that rule:

[...] And Rule 341(b) which allows for judgment of any matter in respect of which the only evidence consists of documents, was no more applicable, the Court having held over and over again that it is necessary for a determination under that Rule that no relevant facts be in controversy and the law be so clear that there would be no need for a trial [...] .

     In R. v. Gary Bowl Ltd., [1974] 2 F.C. 146, Thurlow C.J., writing for the Court of Appeal, explained the meaning of Rule 341 at 148 and 149:

The Rule is, however, limited, as the passages I have quoted appear to me to indicate, to situations where as a result of admissions etc., there is nothing in controversy either in the action as a whole or in a particular part or parts of it. Even when all the necessary facts have been admitted but the legal result of them is still in controversy the Rule is not appropriate if the legal question is a serious or fairly arguable one. The Rule as I understand it cannot properly be invoked as an alternative to setting down for determination before trial under Rule 474 a point of law that arises on the pleadings. Under that Rule it is for the Court to determine whether a point of law which is in controversy should be dealt with before trial or not and a party is not entitled to circumvent the exercise of that discretion by bringing a motion for judgment on admissions and seeking to have the point argued and determined on the hearing of that motion. On the other hand when the material facts are clearly admitted and the result of the application of the law to them is not in doubt so that it is apparent that a plaintiff is entitled ex debito justitiae to the relief that he claims in the action or that a defendant is entitled to judgment dismissing the action against him, as the case may be, a motion under Rule 341 is an appropriate procedure to obtain such relief immediately in lieu of allowing the action to proceed to a trial which in the end can have no other result.

     In view of what I have already said in regard to Rule 419, it is obvious that the shipowners, on a true construction of Rule 341, cannot succeed. For these reasons, the shipowners" motion is denied. Costs shall be in the cause.

Ottawa, Ontario

April 11, 1997

    

     Judge

     T-2873-96

OTTAWA, ONTARIO, FRIDAY, THE 11TH DAY OF APRIL, 1997.

PRESENT:      THE HONOURABLE MR. JUSTICE MARC NADON

B E T W E E N:

     DOMTAR INC.,

     Plaintiff

AND:

     LINEAS DE NAVIGATION GEMA S.A.,

     - and -

     POSEIDON NAVIERA,

     - and -

     ADECON SHIPPING INC.,

     - and -

     THE OWNERS AND ALL OTHERS INTERESTED IN

     THE VESSEL PINE ISLANDS;

     - and -

     THE VESSEL PINE ISLANDS;

    

     Defendants

ORDER

     The shipowners" motion is denied. Costs shall be in the cause.

     "MARC NADON"

     Judge