Docket: T-484-11
Reference: 2012 FC 324
Ottawa, Ontario, March 19, 2012
PRESENT: The
Honourable Mr. Justice Harrington
BETWEEN:
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CAMECO CORPORATION
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Plaintiff
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and
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THE
OWNERS AND ALL OTHERS INTERESTED IN THE SHIP “MCP ALTONA”, THE SHIP “MCP
ALTONA”,
MS MCP ALTONA
GMBH & CO KG, HARTMANN SCHIFFAHRTS GMBH & CO, HARTMANN SHIPPING ASIA
PTE LTD., FRASER SURREY DOCKS LP AND
PACIFIC RIM
STEVEDORING LTD.
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Defendants
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and
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THE CONTAINER
GUY LTD.
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Third Party
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REASONS FOR ORDER AND ORDER
[1]
The saga of the MCP Altona’s disastrous last
voyage has generated a great deal of activity in this Court with just about
each and every party in this action, and in other actions, pointing the finger
of blame at someone else.
[2]
In December 2010, the MCP Altona, owned by MS
MCP Altona GmbH & Co. KG and managed by Hartmann Schiffahrts GmbH & Co.
KG, set sail from Vancouver
bound for China and Australia
with two cargos on board. The Chinese cargo, shipped by Cameco, consisted of
uranium ore concentrates in drums which were stowed within containers. The
Australian cargo consisted of an oil rig. During the voyage, in circumstances
not yet known to the Court, the containers collapsed in stow, and some of the
uranium spilled. Uranium is a radioactive cargo, and the situation had become
dangerous. The ship had to return to Vancouver.
[3]
The Canadian Nuclear Safety Commission was
alerted. The uranium cargo had to be discharged in safety, and the ship
decontaminated. The task fell upon the shipper Cameco who had the specialized
knowledge necessary to carry out this work. The work would take several months.
[4]
It was inevitable that the MCP Altona would be
arrested. She was, and later sold by the court. Those interested in the uranium
blamed those interested in the ship. Those interested in the oil rig blamed
those interested in the ship and in the uranium. On the other hand, those
interested in the ship, apart from also pleading perils of the sea, blamed
those interested in the uranium.
[5]
With a view of securing their claim against
Cameco without the need of actually arresting its cargo on or lately on board
their ship, the owners of the MCP Altona, through their managers, allegedly
instructed counsel in Vancouver, Borden Ladner Gervais, to endeavour to obtain
security on a voluntary basis. They did, to the tune of $4,600,000. The trouble
is that unbeknownst to counsel, and to Cameco and its counsel, by the time the
security was in place, the shipowners had gone bankrupt in Germany. The truth did not come out in Canada until some months later.
[6]
Cameco now moves for the return of its security.
It submits that the contract was void as there was no party in existence with
whom it could contract; owners’ counsel had no mandate as their principal was
no longer in existence; the trustee in bankruptcy did not and could not ratify
the contract, which in any event is tainted with mutual mistake.
[7]
In the alternative, Cameco submits that the
security was given under the superintending power of this Court, that the
amount thereof is excessive, and should be reduced.
[8]
Were it not for the intervening bankruptcy, the
arrangements between the parties were fairly common and enforceable. Security
is often given in order to avoid the arrest of maritime property, be it ship,
cargo or freight. A claimant who could otherwise arrest may demand security on
its reasonably arguable best case in principal, interest and costs up to the
value of the property in question (The “Moschanthy”, [1971] 1
Lloyd’s Rep 37 and Amican Navigation Inc v Densan Shipping Co (1997),
137 FTR 132, [1997] FCJ No 1538 (QL)).
DECISION
[9]
There is simply not enough evidence on the
record to allow me to set aside the security arrangements at this time.
Although the amount of security demanded and obtained at the outset,
$4,600,000, was not at that time unreasonable, in the circumstances, it has now
become excessive. I order that the security be reduced to $1,500,000, and
that the balance currently held in trust by Cameco’s solicitors together with
accumulated interest thereon be released and returned to it.
DISCUSSION
[10]
There were two components to the security
demanded by the shipowners. The first was that the MCP Altona, a revenue
earning chattel, could earn no income while she was being remediated. The
security sought and obtained was $1,500,000 inclusive of principal, interest
and costs. The other component was that the owners anticipated that they would
be facing a claim by those interested in the oil rig. They demanded security,
excluding interest and costs, of $2,600,000 to cover their potential indemnity
claim against Cameco. Since the total amount ultimately furnished was
$4,600,000, I consider that $3,100,000 was given with respect to the oil rig.
Indeed, those allegedly interested in the oil rig, Saxon Energy Services Inc.
and Saxon Energy Services Australia Pty Ltd., have taken action in this Court
under docket no. T-2081-11 for general and special damages in excess of
$2,000,000, and ITAC Services (Aust) Pty Ltd. have taken proceedings under
docket no. T‑2082-11 for an amount in excess of $1,000,000. Although both
say that the security arrangements were in part entered into for their benefit
and that they are entitled to enforce same, neither appeared on Cameco’s
motion, notwithstanding that they were on notice.
[11]
In my opinion, the oil rig portion of the
security only benefited the shipowners in the event that they were condemned in
proceedings taken by Saxon and ITAC and were entitled to be indemnified by
Cameco. Saxon and ITAC arrested neither Cameco’s cargo nor the ship. Their
actions are in personam only. Should they obtain judgment against the
owners in this Court, or file a claim in the bankruptcy proceedings, they will
obtain nothing. The report from the trustee in bankruptcy shows that
liabilities far exceed assets. Since no dividend will ever be paid to Saxon and
ITAC, there is no point in the trustee trying to enforce the security.
Consequently, the oil rig portion of the security falls.
[12]
Both sides relied on the procedural niceties,
and the burden of proof, to an excessive extent. Federal Courts Rule 3 requires
that the rules be interpreted and applied so as to secure the just, most
expeditious and least expensive determination of every proceeding on its
merits. As Mr. Justice Pigeon said in Hamel v Brunelle, [1971] 1 S.C.R. 147
at page 156 “ … that procedure be the servant of justice not its mistress.”
[13]
The first issue is the effect of the bankruptcy.
Under Canadian law, and German law has not been proven to differ, the assets of
the bankrupt devolve to the trustee (Bankrupcy and Insolvency Act, s
71). Federal Courts Rule 117 provides that when an interest devolves upon
another, i.e. the trustee, that person shall serve and file a notice
accompanied by an affidavit setting out the basis of the devolution. That was
not done in this case, according to “owners” counsel, because the devolution
took place before Cameco filed its action. However, Cameco was perfectly
entitled to sue the owners as counsel purporting to act for the owners did not
inform it of the bankruptcy. In fact, those solicitors themselves only found
out some months later. At best, these are procedural points which can be
corrected.
[14]
The next issue is whether the trustee could have
authorized the continuation of the proceedings. In my opinion, he could. The
more important question is whether he did. The trustee, a Hamburg lawyer by the name of Burkhardt
Reimer, has been very cautious in his dealings with this court. He only
appeared by motion once in order to obtain an interlocutory stay pending the
outcome of an application to the British Columbia Supreme Court in which he
seeks recognition and enforcement of the terms of orders made by the Bankruptcy
Court in Hamburg. That petition
has yet to be heard on the merits.
[15]
Nevertheless, his first reports have been filed
in this Court, and various bits and pieces thereof have been relied upon both
by Cameco and the “owners”. The “owners” point out that one cannot segregate
the security given by Cameco from other steps that were taken in their name, subsequent
to the bankruptcy, such as various consents, and court orders to move the ship
while she was under arrest, and before she was sold. I agree.
[16]
Cameco takes the position that the trustee had
authorized the ship managers to carry out some steps, but not to accept
security. In my view, too much is being read into the reports. It would have
been far better if Mr. Reimer had filed an affidavit in reply to the motion,
but he was under no obligation to do so. This is not a motion for summary
judgment which requires a respondent to put its best foot forward. If anything,
this is more akin to a motion to strike. The Court will not drive a party from
the judgment seat hastily.
[17]
Borden Ladner Gervais say that the source of
their mandate is a matter of solicitor-client privilege. In his report, the
trustee refers to the fact that the owners had taken out loss of hire
insurance. It may be, of course, that the underwriters are the real party at
interest with respect to the $1,500,000 security. The normal rule in this Court
is that the underwriter must use the name of the assured (Simpson v Thomson (1877),
3 App Cas 279 (HL)). However, this Court has also permitted underwriters to use
their own name (R v Nord-Deutsche Versicherungs-Gesellschaft, [1971] SCR
849, 20 DLR (3d) 444 and Switzerland General Insurance Co v Logistec
Navigation Inc, 7 FTR 196, [1986] FCJ No 750 (QL)). Consequently, I am not
able to decide based on the current record the permutations and combinations of
Borden Ladner Gervais’ mandate.
[18]
Nor do I find there is sufficient evidence to
reach any conclusion on the submissions that the agreement falls on the basis
of mutual mistake.
[19]
However, the “owners” or “trustee” or “loss of
hire underwriters” have been beating around the bush far too long. Unless the
real party of interest takes proceedings in his or its own name within the next
45 days, in this Court, against Cameco for loss or damage allegedly sustained,
the balance of the security shall be ordered released.
[20]
Cameco has sought costs on a solicitor-client
basis, against Borden Ladner Gervais personally. However, it has asked that
that issue be deferred until these Reasons for Order and Order are issued. I
agree. In the circumstances, that issue shall be deferred until someone comes
out or does not come out of the woodwork within the delays provided.
[21]
Copy of these reasons is to be placed in the
file bearing court docket number T-424-11.
ORDER
FOR
REASONS GIVEN;
THIS
COURT ORDERS that:
1.
Plaintiff’s motion for an order releasing the
security it furnished is granted in part.
2.
The security is reduced from $4,600,000 to
$1,500,000. The sum of $3,100,000, with accumulated interest on that amount,
currently held in plaintiff’s solicitors special trust account, may be released
to plaintiff.
3.
Costs are reserved.
“Sean Harrington”
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