Date:
20110225
Docket: A-148-10
Citation: 2011 FCA 73
CORAM: LÉTOURNEAU
J.A.
NADON J.A.
TRUDEL
J.A.
BETWEEN:
WORLD FUEL SERVICES
CORPORATION
Appellant
and
THE SHIP "NORDEMS"
and
THE OWNERS AND ALL OTHERS
INTERESTED
IN THE SHIP “NORDEMS”
and
REEDEREI “NORD” KLAUS E.
OLDENDORFF GMBH
and
PARTENREEDEREI ms “NORDEMS”
and
PARKROAD CORPORATION
Respondents
REASONS FOR JUDGMENT
NADON J.A.
[1]
This
is an appeal from a decision of Harrington J. of the Federal Court (the
“Judge”), 2010 FC 332, dated March 25, 2010, who allowed a motion for summary
judgment brought by the respondents Partenreederei ms “Nordems” and Reederi
“Nord” Klaus E. Oldendorf GMBH, and dismissed a similar application brought by
the appellant World Fuel Services Corporation. As a
result, the Judge
dismissed the appellant’s Statement of Claim with costs as against all the
respondents other than the respondent Parkroad Corporation (“Parkroad”).
[2]
Although
the action brought against the respondents, an action for non-payment in the
sum of US $328,282.09 (invoiced amount of US $304,905.97 plus administration
fees and interests totalling US $ 23,282.12) for the supply of 500 metric
tonnes of fuel oil (the “bunkers”) to the Cyprus-flag bulk carrier ms “Nordems”
(the “ship” or the “vessel”) at Cape Town, South Africa, appears to be a
straightforward matter, it is nothing of the sort. As the Judge points out in
the first paragraph of his Reasons, the matter before him, and now before us in
this appeal, raises difficult issues, namely, the liability of the owners of
the vessel for the supply of the bunkers and whether, irrespective of liability
on the part of the owners, the vessel itself is liable in rem for the
amount sought by the appellant.
[3]
More
particularly, the appeal once again brings to the fore the very important
differences between Canadian maritime law and American maritime law with regard
to the rights of suppliers of necessaries – which include the supply of bunkers
– seeking to assert their unsatisfied claims against the vessel to which the
necessaries were supplied (see our recent decision in Kent Trade &
Finance v. JP Morgan Chase Bank, [2009] 4 F.C.R. 109 (C.A.)(“The Lanner”).
The action instituted by the appellant results from the type of transaction
which Stone J.A. accurately described at paragraph 22 of his Reasons in Imperial
Oil v. Petromar Inc., 2001 FCA 391, [2002] 3 F.C. 190 (“Imperial Oil”),
where he wrote:
[22] While the present
controversy involves transactions said to be connected to either Canada or the
United States, it is not unusual in the marine shipping industry for fuel to be
supplied to a vessel under a contract between parties located in several
countries, negotiated in one country and performed in another sometimes by a
person who was not a party to the original contract. Fortunately, complexities
of that order are not present in the fact situation to be examined in this
appeal.
[4]
The
appellant submits that the Judge erred in a number of ways. First, it says that
the Judge was wrong to conclude that it did not have a claim in personam
against the shipowners or in rem against the vessel. Second, it submits
that the Judge erred in holding that American law did not govern the bunker
supply contract. Lastly, the appellant says that the Judge erred in finding
that American law, if applicable, did not grant a maritime lien in the
circumstances of this case.
THE FACTS
[5]
I
now turn to a brief summary of the facts, which are mostly uncontested and
which reveal complexities of the type which Stone J.A. referred to in Imperial
Oil.
[6]
At
the relevant time, the ship was owned by the respondent Partenreederei ms “Nordems”
(the “shipowners”) and managed by the respondent Reederi “Nord” Klaus E.
Oldendorf GMBH (the “managers”), both German entities. As to the respondent Parkroad,
a South Korean entity, it was, at all times material herein, a sub-time
charterer of the vessel.
[7]
Also
at the relevant time, the seller of the bunkers was either World Fuel Services (Singapore) Pte Ltd. (“World Fuel Singapore”), a Singapore corporation and a subsidiary of the
appellant, a Florida corporation, or the appellant itself. I have used the word
“or” because there is a dispute between the parties as to whether the appellant
is entitled to bring this action and, hence, this appeal. At paragraph 37 of
his Reasons, the Judge dealt with that issue in the following terms:
[37] As to the defendants’
assertion that the party which contracted with Parkroad was not World Fuel
Services Corporation [the Appellant] but rather World Fuel Services (Singapore) Pte. Ltd., there is simply not enough information in the record to allow me to
dismiss the action on that basis. Given the credit provisions and the general
terms and conditions, I will proceed on the basis that World Fuel Services
Corporation of Miami is a proper plaintiff, but that it does not lie in the
mouth of World Fuel Services (Singapore) Pte. Ltd. to later claim that it is
the contracting party, and is not bound by the judgment herein.
[8]
The
bunkers were supplied to the vessel on October 15 and 16, 2008, following an
exchange of e-mails between Parkroad and World Fuel Services Seoul, a division
of World Fuel Singapore. The e-mail sent to Parkroad confirming the sale of the
bunkers informed it that the sale was “on the credit of the VSL [vessel]” and
that it was “presumed to have authority to bind the VSL with a maritime lien”.
The e-mail further provided that “disclaimer stamp placed by VSL on the bunker
receipt will have no effect and do not waive the seller’s lien”. Finally, the
e-mail informed Parkroad that the sale was made subject to the seller’s general
terms and conditions which, inter alia, provided that the sale would be
governed by the laws of the United States and the State of Florida.
[9]
The
bunker delivery receipt is on a Caltex Oil (SA)(Pty)(Ltd.) (“Caltex”)
letterhead and shows delivery of 500.001 metric tonnes on October 16, 2008. The
following stamp was apposed thereon by the master of the vessel:
This service/supply is for the account
of vessel’s Time Charterers, Messrs. Parkroad Corp. On behalf of vessel’s
owner, I herewith declare that neither Owner nor vessel are responsible for
payment of this service/supply.
[10]
On
October 20, 2008, an invoice in the sum of US $304,905.97 was issued by World
Fuel Services Seoul and directed to the vessel, its owners and to Parkroad at
an address in South Korea, presumably Parkroad’s business address, and calling
for payment to be made at the appellant’s bank located in Chicago, Illinois, U.S.A.
[11]
Some
time after the supply of the bunkers, Parkroad became bankrupt and did not pay
for them. As a result, the vessel was arrested on December 12, 2008 at Baie Comeau, Quebec. The shipowners posted bail for the release of their ship and proceeded
to defend the action taken against them and their ship. Parkroad, needless to
say, has not sought to defend the action against it.
[12]
A
few words concerning the charterparties pursuant to which the vessel was
operated will be useful.
[13]
On
May 9, 2007, the shipowners and AS Klaveness Chartering of Oslo, Norway, entered into a time charterparty agreement, in the 1992 New York Produce Exchange Form.
Pursuant thereto, the vessel was time-chartered for a period of between 34 and
37 months in the charterer’s option and the charterer was given the right to, inter
alia, sub-charter the vessel. As a result, the vessel was sub-chartered on
seven occasions, the last sub-charter being that in favour of Parkroad, which
took delivery of the vessel in Japan on February 25, 2008, and redelivered it
on October 30, 2008, to its contracting party, Cosco Oceania Chartering Pty
Ltd. (“Cosco”) of Australia.
[14]
It
is of importance to note that the head charterparty and that between Cosco and Parkroad
both contained a clause relating to the payment of bunkers and the prohibition
of liens. More particularly, the clause expressly prohibited the charterers
from taking bunkers on the credit of the shipowners and, hence, on the credit
of their ship. The relevant clause reads as follows:
The Charterers will not directly
or indirectly suffer, nor permit to be continued, any lien or encumbrance,
which might have priority over the title and interest of the Owners in the
Vessel. The Charterers undertake that during the period of this Charter
Party, they will not procure any supplies or necessaries or services, including
any port expenses and bunkers, on the credit of the owners or in the Owner’s
time.
[Emphasis
added]
[15]
I
also point out that both of the charterparties called for arbitration in London and provided that all disputes were to be governed by English law.
DIFFERENCES BETWEEN CANADIAN AND
AMERICAN LAW
[16]
Before
turning to the Judge’s Reasons, it will be useful to say a few words concerning
the differences between our law and that of the United States with regard to
the rights of suppliers of necessaries. It will also be useful to briefly set
out the arguments made by the parties before the Judge, which arguments are
essentially the same in this appeal.
[17]
The
differences between our law and that of the United States are of crucial
importance in this appeal since Canadian maritime law, contrary to American maritime
law, does not create a maritime lien in favour of a supplier of necessaries.
Further, under Canadian maritime law, personal
liability of the shipowner is required for a
successful action in rem by a supplier of necessaries, whereas, under
American law, personal liability of the shipowner is not required for such an action
to be successful.
[18]
Also
of relevance is the fact that under American law, a charterer is presumed to
have authority from the owner of the ship to subject the ship to a maritime
lien for necessaries, in the absence of the supplier’s actual knowledge of a
prohibition of lien clause in the charter party. In other words, there exists a
presumption that a necessaries man has contracted on the credit of the ship,
which presumption can only be rebutted by showing that the necessaries man knew
that his contracting party was not authorized to bind the ship. Failing
rebuttal of the presumption, the supplier of necessaries can enforce his
maritime lien on the ship.
[19]
Although
there is also a presumption under Canadian maritime law that necessaries were
ordered on the credit of the ship, our law does not go as far as requiring
actual knowledge of lack of authority on the part of the supplier for a
successful rebuttal of the presumption. This is why the Judge, in the course of
his Reasons, characterized the presumption under Canadian law as a “weaker
presumption” (paragraph 40 of Judge’s Reasons).
[20]
These
principles – elaborated during the course of the 19th and 20th
centuries by English, Canadian and American courts – were fully discussed by
our Court in a number of recent decisions, namely: Imperial Oil, at
paragraphs 23 to 27; The Lanner, at paragraphs 8, 9, 20, 21, 22 and 23; Mount-Royal/Walsh
Inc. Jensen Star (The), [1990] 1 F.C. 199, 99 N.R. 42 (“Mount-Royal”)
at pages 214 to 217; and in Marlex Petroleum Inc. v. “Har Rai” (The),
[1984] 2 F.C. 345 (C.A.), affirmed [1987] 1 S.C.R. 57 (“The Har Rai”),
at paragraphs 3 to 11.
[21]
Hence,
if American maritime law is the law of the transaction at issue, the
appellant’s chances of success in recovering its claim against the ship are
dramatically increased.
THE PARTIES’ CONTENTIONS
[22]
Before
the Judge, the appellant took the position that Parkroad had contracted, not
only on its behalf but also behalf of the shipowners and their ship. The
appellant further argued that the contract was deemed, by reason of its terms
and conditions, to have been entered into in the United States and that it was
subject to American law. As a result, the appellant had a maritime lien over
the ship in regard to its unpaid claim, irrespective of whether or not the
shipowners are personally liable.
[23]
As
to the shipowners, they first argued that they were not bound by the contract
entered into by Parkroad and the appellant, adding that there could be no doubt
that Parkroad did not have actual or ostensible authority to contract on their
behalf or on the credit of their ship. The shipowners further asserted that the
law which governed their relationship and that of their ship with the appellant
was not the law of the United States and that as no other law had been alleged,
their relationship with the appellant was subject to Canadian maritime law.
Consequently, in their view, since a supplier of necessaries does not have the
benefit of a maritime lien for its claim under Canadian maritime law, the
appellant was required to demonstrate that they were liable in order to succeed
in rem against the vessel.
[24]
Finally,
the shipowners argued that even if the laws of the United States were
applicable, they did not, in the circumstances of this case, give the appellant
a maritime lien over the vessel.
[25]
With
the above in mind, I now turn to the Judge’s decision.
THE FEDERAL COURT DECISION
[26]
After
setting out the relevant facts and the parties’ respective positions, the Judge
began a discussion with regard to the law governing the relationship between
the appellant and the shipowners and their ship. He referred to the Supreme
Court of Canada’s decision in Tropwood A.G. v. Sivaco Wire & Nail Co.,
[1979] 2 S.C.R. 157 (“Tropwood”), where the Court made it clear that the
conflict rules that were to be used to determine the law that applied to the
relationship at issue were those of the forum (Tropwood at pages
166-167).
[27]
The
Judge further indicated that parties to a contract were entitled to choose the
law governing their relationship, unless the forum’s principles of public
policy prevented such choice. He added that the fact that American law,
contrary to Canadian maritime law, gave a maritime lien to suppliers of
necessaries did not offend Canada’s sense of public policy. For this
proposition, the Judge referred to this Court’s decision in The Har Rai.
He then stated that failing a choice of law by the parties, the Court’s task
was to weigh the factors which linked the transaction to one or more
jurisdictions.
[28]
This
led the Judge to say that unless it was demonstrated that a law other than
Canadian maritime law applied, which law had to be proven as a fact, Canadian
maritime law would govern the relationship between the parties. Because only
American law had been alleged by the appellant, the relationship between the
parties was either subject to that law or to Canadian maritime law. He then
went on to say, at paragraph 40 of his Reasons:
[40] … The second point is
that it may not even be necessary to determine whether American law is
applicable at all. If, as stated earlier, the owners of the Nordems are party
to the World Fuel Services contract, or if they have not rebutted the weaker
presumption under our law that the bunkers were supplied on the credit of the
ship, it does not matter which substantive law applies. World Fuel Services
would be entitled to judgment even if it only has a statutory right in rem.
[29]
Consequently,
the Judge proceeded to determine the shipowners’ liability and that of their
ship under Canadian maritime law. In other words, he sought to determine
whether the shipowners were bound by contract to pay for the bunkers and, if
not, whether the presumption that the necessaries were ordered on the credit of
the ship had been rebutted.
[30]
After
stating that it was beyond doubt that Parkroad did not have actual authority
from the shipowners or its managers to take on bunkers on their behalf or on
the credit of the ship, since the terms of the relevant charterparties
expressly prohibited Parkroad from doing so, the Judge indicated that lack of
actual authority was not fatal to the appellant, adding that the conduct of the
parties had to be examined. As an example, the Judge stated that it would be
sufficient for the shipowners to show that the supplier of necessaries was
aware that it was dealing with a time charterer as a principal rather than as an
agent of the shipowners. However, the Judge found that the appellant did not
have actual knowledge of the fact that Parkroad was expressly prohibited by the
terms of the relevant charter party from procuring necessaries on the credit of
the shipowners and their ship.
[31]
The
Judge then turned to two decisions which, in his view, provided the answer to
the question of whether the shipowners were contractually bound to pay for the
bunkers. The first decision is that of this Court in Mount-Royal, wherein
necessaries were supplied to the ship “Jensen Star” while under demise charter.
[32]
At
pages 216 and 217, Marceau J.A., writing for a unanimous Court, concluded,
after reviewing the relevant case law, that an action in rem for
necessaries could not succeed without personal liability on the part of the
ship’s owners. In so concluding, Marceau J.A. elaborated on the circumstances
which might lead to personal liability on the part of a shipowner with regard
to the supply of necessaries to its ship:
Most of the decisions of
the Trial Division of this Court rendered since 1970 have taken the view that
the involvement of the owner in the supplying of the necessaries has to be
complete and direct enough to entail his personal liability. These decisions
repeat, in effect, that an action in rem is sustainable only if the
owner is personally liable for the amount claimed. [citations omitted]. Some
doubts have occasionally been expressed as to the validity of this view (for
instance Thorne Riddell Inc. [Thorne Riddell Inc. v. Nicolle N.
Enterprises Inc., [1985] 2. F.C.31 (T.D.)]… , Western Stevedoring Co. v.
Ship "Anadolu Guney" Cargo et al. (1988), 23 F.T.R. 117
(F.C.T.D.), and of course the decision under attack here), but I believe that
it is basically indisputable. To contend that an action in rem could be
sustained even in the absence of any personal liability on the part of the
owner would go against the whole idea behind the system which is, again, the
protection of the owner. A claim against a ship cannot be viewed apart from the
owner; it is essentially a claim against the owner. It may be that the terms in
which the principle has been put in many decisions was somewhat too broad. This
personal liability of the owner could exist, I suggest, only in relation to the
vessel, that is to say only to the extent to which the proceeds of sale of the
vessel may be applied to the claim; in other words, a liability to be satisfied
strictly out of the res (see in that respect the interesting decision of
the Privy Council in Foong Tai & Co. v. Buchheister & Co.,
[1908] A.C. 458 (P.C.)) Is it not a fact that there are three possibilities
which have to be reckoned: the owner may have contracted himself, or he may
have authorized someone to contract on his personal credit, or he may have
expressly or implicitly authorized a person, in possession and control of a
ship, to contract on the credit of the ship (rather than on the entirety of his
personal assets). But, I essentially agree that liability as a result of
some personal behaviour and attitude on the part of the owner is required.
Would that mean, though, that a judgment in rem cannot be rendered
without being accompanied by a judgment in personam against the owner?
If it were so, the whole notion of a distinct action in rem would be
defeated, it seems to me, and to my knowledge no one has ever contended that
such could be the case (comp D.C. Jackson, Enforcement of Maritime Claims,
1985, at p. 59).
[Emphasis
added]
[33]
In
Mount-Royal, the work which led to the claim against the vessel had been
requested by an officer of both the owners of the ship and of its demise
charterer, a corporation related to the shipowners. As a result, our Court held,
on its understanding of the law as explained by Marceau J.A. in the above
passage, that the demise charterer had authority from the shipowners to
contract on the vessel’s credit and, thus, to render the shipowners liable for
the work done to their ship.
[34]
The
Judge then turned to the facts before him and found that the appellant was
aware or ought to have been aware that Parkroad was not the owner of the ship.
Consequently, it ought to have taken steps to ascertain whether Parkroad had
authority from the shipowners to contract on their behalf or to bind their
ship. The Judge formed that opinion after reviewing the seller’s general terms
and conditions, in regard to which he made the following remarks at paragraph
35 of his Reasons:
[35] These general terms and
conditions, and confirmation of order, attempt to cover every possible
permutation and combination which may arise in the delivery of bunkers to a
ship. They recognize the possibility that the bunkers may have been ordered by
and on the account of a charterer who had no authority to bind the ship or her
owners. Indeed, if the plaintiff relied upon Lloyd’s Register of Shipping, it
would have known perfectly well that Parkroad was not the owner of the Nordems
and that the owners could be found at an address in Germany. It knew, or ought
to have known, that Parkroad was not the ship’s port agent, as another was
identified in the order confirmation. Furthermore, it accepted orders from
Parkroad with respect to other ships which according to Lloyd’s have no
connection whatsoever to the owners of the Nordems.
[35]
Based
on his careful review of the seller’s general terms and conditions, more
particularly of clauses 8(d) and (e) thereof, which provide that in contracting
with the buyer, the seller “has relied on vessel ownership listings provided in
Lloyd’s Register of International Shipowning Groups… and any other
available resource to establish and/or confirm same”, the Judge found that the
appellant’s practice, in dealing with clients requesting a supply of bunkers,
was to rely on commercial ship registries, such as Lloyd’s Register of
Shipping, in order to identify the ownership of the vessel to which it was
being asked to provide the bunkers. Further, the Judge’s examination of Lloyd’s
Register of Shipping revealed that the respondent Partenreederei ms
“Nordems” was the owner of the vessel. This led him to state at paragraph 49 of
his Reasons:
[49] … The contract clearly
demonstrated World Fuel Services’ own experience that the person ordering
bunkers may not have actual authority to bind the ship. Had it followed the
general provisions of its contract, which was not to extend credit, it would
either have been paid or would not have delivered the bunkers at all.
[36]
Thus,
in the Judge’s view, the appellant was on notice that Parkroad might not have
authority to bind the shipowners or their vessel and, as a result, should have
verified with the shipowners whether Parkroad had such authority. In further support
of that view, the Judge referred to the Supreme Court’s decision in Q.N.S.
Paper Co. v. Chartwell Shipping Ltd., [1989] 2 S.C.R. 683 (“Chartwell.”)
and made the following comments in regard thereto at paragraph 50 of his
Reasons:
[50] In my opinion it was on
notice and should have verified with the owners whether or not Parkroad had
authority. In Chartwell Shipping, above, the necessaries were ordered by
a party which declared itself to be an agent, but which did not identify its
principal. The Court held that the agent was not personally liable and was of
the view that the necessaries man, in that case a stevedore, was put on
inquiry. In this case we are dealing with the reverse situation, but the same
principle holds true.
[37]
As
a result, the Judge concluded that if Canadian maritime law was the governing
law, it necessarily followed that the appellant’s action – both in rem
and in personam – had to be dismissed, since neither the shipowners nor
the managers were personally liable for the supply of the bunkers. The Judge
then turned to the question of the applicable law.
[38]
He
first stated that because the shipowners were not a party to the bunker supply contract
with the appellant, the U.S. choice of law clause had “less significance than
otherwise”, adding that the case law was not consistent “in the manner in which
they ascertain the proper law” (paragraph 52 of Judge’s Reasons).
[39]
He
then proceeded to determine those factors having a connection to the United States, which he found to be as follows:
[53] … The plaintiff’s best
case is that it is an American corporation and that because credit was extended
the contract was deemed to have been made in the United States. Payment was to
be made to a bank in the United States. The contract with Parkroad was governed
by American law, with non-exclusive American jurisdiction. On the other hand,
the bunkers were ordered in South Korea and delivered in South Africa to a Cypriot flag ship, owned and managed out of Germany. At no relevant time did the
Nordems ply American waters, and the ship was arrested in Canada.
[40]
The
Judge then reviewed a number of Canadian decisions where the courts had given effect
to a foreign maritime lien, notwithstanding that in the circumstances of the
case, the claimant would have had no such lien under Canadian maritime law. In
that regard, he referred to the Supreme Court of Canada’s decisions in: Strandhill
(The) v. Walter W. Hodder Co., [1926] S.C.R. 680, 1927 AMC 244 (“The
Strandhill”); in Todd Shipyards Corp. v. Altema Compania
Maritima S.A. (The Ioannis Daskalelis), [1974] S.C.R. 1248, [1974] 1
Lloyd’s Rep. 174, 1973 AMC 176 (“The Ioannis Daskalelis”); and to this
Court’s decision in The Har Rai, noting however that in none of these
cases had it been necessary for the court to carry out a choice of law
analysis.
[41]
He
then turned to the decisions of this Court in Imperial Oil and The
Lanner where a choice of law analysis was undertaken by the Court. With
respect to Imperial Oil, the Judge observed that the Court found that, in
the absence of a contractual relationship between a shipowner and a supplier of
necessaries containing a choice of law clause, the law governing the transaction
was not the law of the contract, but rather the law which had the closest and
most substantial connection thereto. He also noted that in Imperial Oil,
our Court had given serious consideration to the United States Supreme Court’s
decision in Lauritzen v. Larsen, 345 U.S. 571, 1953 AMC 1210, a tort
case where that Court listed seven factors which it found useful in determining
the proper law. Amongst the factors were the law of the flag, the allegiance of
the shipowner, inaccessibility of a foreign forum and the law of the forum.
[42]
With
respect to our decision in The Lanner, the Judge pointed out that Chief
Justice Richard, writing for the majority, had held that generally speaking, a
choice of law clause in a supply contract would govern the transaction. This
led the Judge to say that in that case, contrary to the situations before him
and before the Court in Imperial Oil, the bunkers had been ordered by
the shipowners’ manager, who was so authorized by the shipowners. Thus, in the
Judge’s view, “a contractual link was established between the bunker supplier
and the owner” (paragraph 65 of Judge’s Reasons). The Judge ended his remarks
concerning The Lanner by stating that Richard C.J. had left it open as
to what weight should be given to a choice of law clause in a contract to which
the shipowner was not a party.
[43]
Following
his review of the authorities, the Judge then proceeded to determine what he
characterized as “the non-American factors”, which led him to conclude that
“the non-American factors outweigh the American ones”. He wrote as follows at
paragraph 66 of his Reasons:
[66] In my opinion, the
non-American factors outweigh the American ones. These include the flag of the
ship (Cyprus), the domicile of her owners (Germany), the place where the offer
to purchase bunkers was accepted (South Korea), the place where the bunkers
were delivered (South Africa), and the place where the ship was arrested (Canada). If it is necessary to choose among these laws, the proper law is that of South Africa. There are only two points of contact between the ship owner and the
plaintiff. The first is South Africa where the bunkers were supplied. If a
maritime lien exists, it existed from that moment. Had credit not been
extended, the plaintiff would have been in position to arrest the ship then and
there. Since the law of South Africa has not been alleged and proven to differ
from Canadian law, the arrest would be set aside as there is no personal
liability on the part of the owners and as the presumption that the bunkers
were delivered on the credit of the ship has been rebutted. The bunker receipt
signed by the master does not even refer to World Fuel Services. The receipt is
on the letterhead of Caltex Oil (SA) (Pty) (Ltd), with a Cape Town post office
address and Cape Town telephone number. That receipt gives no indication
whatsoever that the plaintiff was Caltex’s unnamed principal. The second point
of contact was Canada, the place of arrest.
[Emphasis
added]
[44]
As
a result of these findings, the Judge concluded that the applicable law would
have been that of South Africa. However, because such law had neither been
alleged nor proven to be different from Canadian maritime law, our law was the
applicable law and the arrest of the vessel could not stand. In other words,
because the shipowners were not personally liable with regard to the supply of
bunkers and because they had succeeded in rebutting the presumption of
liability, the arrest could not stand and the action, both in rem and in
personam, had to be dismissed. The Judge noted that his conclusion was in
accord with Canadian maritime law, adding that the somewhat contradictory
conclusions reached by our Court in Imperial Oil and The Lanner
found an explanation in the fact that, in The Lanner, there was a contract
between the supplier and the shipowners, whereas in Imperial Oil, as in
this case, no such arrangement could be found. The Judge concluded that part of
his Reasons by stating at paragraph 67 that where no contract existed between
the supplier and the shipowners, “we must tote up the points of contact”, i.e.
add them up to determine the proper law of the transaction.
[45]
The
Judge then went on to determine, although this was not necessary in light of
his conclusion that the transaction was governed by Canadian maritime law,
whether American law, if applicable, would grant the appellant a maritime lien.
After consideration of the expert evidence before him with regard to the state
of the law in the United States, the Judge answered that question in the negative
because of his view that American law required more than a U.S. choice of law clause in a contract in order to confer a maritime lien upon a supplier
of necessaries. In reaching this conclusion, the Judge relied on his findings
that the bunkers had not been supplied in the United States, that the ship had
not traded in the United States and that it had not been arrested in that
country. Because these key elements were missing, the Judge was satisfied that
American law would not grant the appellant a maritime lien over the vessel.
[46]
The
Judge concluded his Reasons, at paragraph 86, with the following remarks:
[86] In summary, the
shipowners were not party to the World Fuel Services contact and are not bound
by its terms. Parkroad had no actual or ostensible authority to contract on
their behalf or on the credit of the ship. The presumption that the bunkers
were supplied on the credit of the ship has been successfully rebutted. United States law is not the proper law. Even if it were, it did not create a maritime lien
on the ship or impose personal liability on her owners or managers. The action
in rem and the action in personam against them fail.
ANALYSIS
[47]
In
my view, the Judge made no reviewable error in finding that the shipowners were
not a party to the supply contract, that the presumption had been rebutted and
that American law did not govern the transaction at issue. Consequently, it is
not necessary for us to determine whether American law would grant the
appellant a maritime lien on the vessel, were it the proper law of the
transaction. My reasons for reaching these conclusions are as follows.
(a) Whether the
appellant had a valid claim in personam or in rem under Canadian
maritime law:
[48]
I
begin with the question of whether the appellant has a valid claim in
personam or in rem under Canadian maritime law. The only argument it
puts forward on this question is that the Judge erred in his analysis of what
is required to rebut the presumption and that he erred in concluding that the
shipowners had rebutted the presumption.
[49]
The
appellant argues that the presumption applies, whether the ship is under a time
or demise charter, and that it can only be rebutted by proof that the supplier
of necessaries had actual notice that the charterer was not authorized to
pledge the credit of the ship or that the supplier did not look to the ship for
satisfaction of its claim. This proposition leads the appellant to say that, in
the circumstances of this case, the presumption applies and that it has not
been rebutted.
[50]
The
appellant goes on to say that it is not clear whether the Judge accepted that
the presumption applied. In making that point, it refers to the Judge’s Reasons
at paragraphs 9, 40, 48 and 64. In my view, there is no basis for that
position. It is clear, on my review of the Judge’s Reasons, that he was of the
opinion that the presumption applied, but that it had been rebutted by the
shipowners. At paragraph 86 of his Reasons, which I have reproduced herein at paragraph
46, he clearly says that the shipowners have rebutted the presumption. Hence,
it cannot be said that he did not consider that the presumption applied.
(b) The presumption under
Canadian maritime law:
[51]
I
now turn to the appellant’s specific argument that the Judge failed to apply
the proper test in determining whether the presumption had been rebutted. In
the appellant’s view, when this test is properly applied, the only possible
conclusion is that the presumption has not been rebutted. In my view, this
argument is flawed.
[52]
First,
I am satisfied that the presumption on which the appellant relies is not the
presumption it can invoke under Canadian maritime law. In my view, what the
appellant asserts as the applicable presumption is the one which it would be
entitled to rely on if American law were applicable. In effect, under U.S. law, there exists a legislative presumption that a charterer has authority to bind the
shipowner’s vessel for necessaries. That presumption can only be rebutted by
proof that the supplier had actual knowledge of lack of authority on the part
of the person requesting the supply of necessaries. Hence, in such
circumstances, American law will confer on the supplier a maritime lien which
will allow him to arrest the vessel so as to enforce his claim. In other words,
the supplier of necessaries does not have to demonstrate that it relied on the
credit of the ship or that it made a reasonable inquiry with regard to the
authority of the person ordering the necessaries (The Commercial Instruments
and Maritime Liens Act, 46 U.S.C., sections 30341 et seq.; for a
full discussion of the history of the presumption under American law, see Gilmore
and Black, The Law of Admiralty, 2d ed. (Mineola, New York: The
Foundation Press, Inc., 1975), pages 670 et seq.).
[53]
That
presumption, as the Judge clearly explained in his Reasons, is not the
presumption on which the appellant can rely under Canadian maritime law. It is,
as the Judge noted, a “weaker presumption”. In order to properly understand the
presumption available under Canadian maritime law, it is crucial to remind
ourselves that, under our law, there can be no in rem action and, hence,
no arrest, for a claim of necessaries unless it can be shown that the
shipowners are liable in personam. To paraphrase the words of Marceau
J.A. in Mount-Royal, there must be liability resulting from the acts or
omissions of the shipowners or resulting from their behaviour or attitude.
[54]
I
must emphasize that the bunkers were not ordered either by the master of the
ship or by an agent of the shipowners. They were ordered by Parkroad, a
sub-time charterer who was expressly prohibited from taking on necessaries on
the credit of the shipowners and their ship. The relevant question, in my view,
is whether, in the circumstances of this case, behaviour or conduct on the part
of the shipowners could have led the appellant to believe that Parkroad was
authorized to purchase the bunkers on their behalf or on the credit of their
ship.
[55]
Professor
William Tetley, in his Maritime Liens and Claims, 2d ed. (Montreal: Éditions
Yvon Blais, 1998) deals with this issue at chapter XVI of his learned work. He
starts with the proposition that neither the time charterer nor the voyage
charterer, contracting in its own name, can bind the ship for necessaries,
unless authorized by the shipowners to do so. In support of that proposition, Professor
Tetley refers, inter alia, to the passage of Marceau J.A.’s Reasons in Mount-Royal
(reproduced at paragraph 32 of these Reasons) where our former colleague makes
it clear that a shipowner can, expressly or implicitly, authorize someone, i.e.
a charterer, to contract on the credit of its ship.
[56]
Professor
Tetley then discusses the situation where a shipowner may have led a supplier
of necessaries to believe that the time charterer had authority to bind its
ship, when in fact, the time charterer did not possess such authority. In that
occurrence, Professor Tetley says that “[T]he shipowner (or demise charterer)
may be held liable personally on contracts made by these ostensible ‘agents’,
on the ground that the latter persons have been ‘held out’ to the supplier as
being parties duly empowered to bind the credit of their would-be ‘principals’
(i.e. the shipowner or demise charterer)” (Maritime Liens and Claims,
page 570).
[57]
Professor
Tetley then goes on to state, again at page 570, that in determining whether
there was a “holding out”, i.e. whether the shipowners, by their acts and
omissions, led the supplier of necessaries to believe that the person
purchasing the bunkers was authorized by them to do so, the court will have to
“… consider the facts and balance the purported ‘holding out’ by the owner or
demise charterer against the duty to inquire of the supplier”. In support of a
possible duty to inquire on the part of the supplier, Professor Tetley refers
to Cann v. Roberts, (1874) 30 L.T.R. 424, an English decision where the
Court held that suppliers were not entitled to rely on the master’s authority
to bind the shipowners where, by reasonable inquiry, they would have been in a
position to ascertain the master’s lack of authority. I wish to point out here
that prior to 1971, U.S. law imposed on a supplier of necessaries a duty to
inquire as to a buyer’s authority to bind a vessel. That duty was removed with
the enactment, in 1971, of The Commercial Instruments and Maritime Liens Act
(see Gilmore and Black, pages 670 et seq.).
[58]
Professor
Tetley then concludes his discussion of this issue at page 572 by making the
following remarks:
Neither the time nor the
voyage charterer is regarded as the servant or agent of the shipowner.
Therefore, assuming there is no question of “holding out”, there would seem to
be no need for the owner to notify suppliers that such a charterer, in
contracting with them, does not bind the owner’s personal credit. Moreover,
the supplier’s duty to inquire is another argument available to the owner and
ship.
[Emphasis
added]
[59]
In
my view, Professor Tetley’s exposition of the law is correct. With this in mind,
I now turn to the question of whether or not, on the facts of the case, the
Judge erred in concluding that the presumption had been rebutted by the
shipowners.
(c) Whether the Judge erred
in concluding that the presumption had been rebutted:
[60]
As
I have already indicated, I am of the opinion that the Judge did not make any
error in concluding as he did. First, there can be no doubt in my mind that the
appellant knew or ought to have known that Parkroad was not the owner of the
ship. The appellant had access, as its seller’s general terms and conditions
reveal and the Judge so found, to publications such as Lloyd’s Register of
Shipping, which would have allowed the appellant to determine the ownership
of the vessel. In other words, these publications showed that the ship was
owned by the respondent Partnerreederei ms “Nordems” and not by Parkroad.
Consequently, the appellant was on notice and should have taken steps to verify
whether Parkroad had authority to bind the vessel.
[61]
In
the event, there is no evidence that the appellant made any attempt to contact
the shipowners so as to ascertain whether Parkroad was authorized to purchase
bunkers on their behalf. The only possible inference is that the appellant did
not make such an attempt or, if it did, it did not want to know.
[62]
I
am also unable to detect from the evidence any conduct or behaviour on the part
of the shipowners which could have led the appellant into thinking that
Parkroad was somehow authorized by them to purchase bunkers on their behalf.
[63]
It
is also of some significance that the appellant dealt at all times with
Parkroad only. As proof of this, I note that the invoice for the supply of
bunkers, although addressed also to the shipowners, was sent to Parkroad only and
not to the shipowners. In fact, there was no contact between the appellant and
the shipowners until the time when the appellant began giving serious
consideration to a possible arrest of the ship, at which time the appellant
knew that Parkroad was either bankrupt or that, in any event, it would not
likely be able to satisfy its claim. In fact, as the Judge found, the first
correspondence sent by the appellant to the shipowners is dated December 8,
2008, i.e. 4 days prior to the arrest of the vessel at Baie Comeau.
[64]
Finally,
there is some significance, in my view, to the fact that the e-mail confirming
the sale of the bunkers to Parkroad indicated that “disclaimer stamps placed by
VSL on the bunker receipt will have no effect and do not waive the seller’s
lien”. This supports the view that the appellant had reason to believe that
Parkroad may not have been the owner of the vessel, which should have prompted it
to inquire.
[65]
To
conclude, although there exists under Canadian law a presumption that
necessaries are supplied on the credit of the ship, this presumption is rebuttable.
Whether this presumption is rebutted must be determined by a proper assessment
of all relevant facts, including whether the supplier made reasonable inquiries
to ascertain the authority of the person requesting the necessaries. I would
add to this that the extent to which a supplier must make inquiries will depend
on the particular circumstances of the case. In determining whether the duty to
inquire has been met, we should be mindful of the fact that modern technology
makes it much easier for a supplier to obtain, in a timely manner, the type of
information which it requires to make an assessment as to whether or not a charterer,
or other person, has authority from the shipowner to bind the ship.
[66]
In
the matter before us, I am satisfied that the Judge did not err when he held
that the appellant ought to have inquired with regard to Parkroad’s authority
to bind the ship. The Judge carefully reviewed all of the relevant evidence on
this question and his conclusion that the presumption had been successfully
rebutted by the shipowners should not be set aside. He made no error of
principle, nor did he make any error in his assessment of the facts in light of
the relevant principles.
[67]
I
now turn to the question of whether the Judge erred in determining that the
transaction was not subject to American law and that, as a result, the
governing law was Canadian maritime law.
(d) Whether the
Judge erred in determining that the transaction was not governed by American
law:
[68]
The
appellant submits that the Judge misdirected himself as to the appropriate test
for determining the applicable law. More particularly, the appellant says that
the Judge failed to give sufficient weight to the choice of law clause in the
bunker supply contract and failed to give appropriate weight to the other
factors which connected the claim to the United States. Finally, the appellant
says that the Judge gave disproportionate weight to the place where the bunkers
were supplied to the vessel.
[69]
The
appellant then says that the law applicable to a particular transaction is the
law of the place with the closest and most real and substantial connection to
the transaction. In its view, although the Judge appears to have accepted this
as the correct test, he did not actually apply it. Rather than attempting to
determine which jurisdiction had the closest and most substantial connection to
the transaction, the Judge sought to determine whether the non-American factors
outweighed the American ones.
[70]
The
appellant also says that the Judge misdirected himself with regard to what he
referred to as the “points of contact” (the Judge uses that expression on two
occasions in his Reasons: first, at paragraph 66, where he refers to the
“points of contact” between the shipowner and the plaintiff; and at paragraph
67, where he says “we must tote up the points of contact”, i.e. points of
contact with several jurisdictions). In the appellant’s submission, the proper
approach is not that of weighing points of contact between the shipowners and
the appellant, but rather to consider each relevant factor and to give it the
weight it deserves so as to ultimately decide which jurisdiction has the
closest and most real and substantial connection with the transaction.
[71]
I
will address first the appellant’s submission that the Judge failed to give
appropriate weight to the choice of law clause. In fact, the appellant says
that the Judge gave this factor no weight whatsoever. In order to determine
this question, I must turn to our decisions in Imperial Oil and The
Lanner, where similar issues were addressed by this Court.
[72]
In
Imperial Oil, the two vessels, both Canadian-registered ships, were
owned by a Canadian company, Imperial Oil. The vessels were operating under demise
charter to Socanav, a Canadian operator. Socanav, as demise charterer,
appointed Star, an American company, to manage its vessels. As part of its
duties, Star was entrusted with the responsibility of purchasing bunkers for
the vessels. As a result, Star entered into a contract with Petromar, an
American company, to supply bunkers to the vessels. In turn, Petromar entered
into a contract with Exxon, an American company, pursuant to which Exxon agreed
to sell and deliver bunkers to customers solicited by Petromar. Both of these contracts
were entered into in the United States and provided that their “construction,
validity and performance… shall be governed by the laws applicable in the State
of New York, to the exclusion of any other legal system”.
[73]
Also
noteworthy, in Imperial Oil, is the fact that the ships traded in the
Great Lakes, i.e. both in Canada and in the United States, and that Exxon had
supplied bunkers to the two vessels at the ports of Montreal and Sarnia. In the event, Petromar paid Exxon for the bunkers, but did not receive payment of
its invoices from either Star or Socanav. It is also of interest to note that
when it supplied the bunkers to the ships, Petromar was aware that they were
owned by Imperial Oil and not by Socanav.
[74]
Thus,
as in the present matter, there was no contract between the suppliers and the shipowners.
The only contracts were those entered into between Petromar and Exxon and
between Petromar and Star.
[75]
In
Imperial Oil, the Trial Judge held that the transactions were governed
by American maritime law and that, as a result, Petromar was entitled to a maritime
lien in regard to its unpaid claims. In so concluding, the Trial Judge
determined that the proper test was to apply the law which had the closest and
most substantial connection with the transaction, which led him to weight a
number of factors, including the two contracts pursuant to which the bunkers
were supplied to the vessel. In the Trial Judge’s view, that factor was the
most significant factor, since both contracts had been concluded in the United States and they both contained a U.S. choice of law provision.
[76]
In
appeal before our Court, the shipowners argued that the Judge had given
disproportionate weight to the two contracts between Petromar and Star and
between Petromar and Exxon, and that he had failed to give any weight to many
connecting factors linking the transaction to Canada.
[77]
After
reviewing the authorities concerning both the concept of maritime lien and the
conflict of law principles, Stone J.A. turned to the facts before him and
stated that the Trial Judge had selected the correct test, i.e. that the
applicable law was that with the closest and most substantial connection to the
transaction, adding that that approach was the one favoured by “maritime
conflict of laws textwriters” (Imperial Oil, paragraph 30).
[78]
Stone
J.A. then noted, at paragraph 35 of his Reasons, the fact that the Trial Judge
had considered the contracts entered into the United States between Petromar
and Star and between Petromar and Exxon to be the most significant factor in determining
the applicable law. Stone J.A. then drew attention to the fact that neither
Imperial Oil nor Socanav were parties to these contracts, adding, however, that
it was logical to assume that Star had been authorized by Socanav to order the
bunkers on its behalf, since it had been agreed between Socanav and Imperial
Oil that the procurement of necessaries would be the responsibility of the
demise charterer.
[79]
At
paragraph 37 of his Reasons, Stone J.A. made the following remarks:
[37] While the Trial Judge
was correct in considering and weighing the United States contracts as a
factor, and while that factor carries considerable weight, I am not persuaded
that it is the most significant factor. …
[80]
Stone
J.A. then proceeded to determine which law had the closest and most substantial
connection to the transactions. He reviewed the relevant factors and concluded
that the jurisdiction which had the closest and most substantial connection to
the transactions was Canada. His reasoning, as it appears at paragraphs 36 and
38 of his Reasons, is as follows:
[36] … I accept that it
would be unwise to single out one factor as controlling but, rather, that all
connecting factors be considered and evaluated in order for legitimate state
interests to be accommodated. To my mind, in the present case the places of
delivery in Canada should be accorded somewhat greater weight when viewed in
the context of the several other factors connecting the transactions to Canada. [Emphasis added]
…
[38] The factors linking the
transactions to Canada included vessel registration, flag, ownership,
possession in Canada by demise charterer, operation of the vessels from a base
in Montreal, and actual supply of the lubricants in Canada. Among these several
factors the one that, in my view, is deserving of significant weight is that
the operations of Socanav, the demise charterer, was based in Canada at the
time the marine lubricants were supplied and it was Canada, where the vessels
traded and were based, that was most economically benefited by the lubricants.
In the United States, the base of operations of the shipowner was regarded by
the Supreme Court in Hellenic Lines, supra, at 309, as "another
factor of importance" to be assessed. This factor has been weighed ever
since in appropriate cases by the courts of that country. Thus in the M/V
TENTO, supra, involving a claim for a maritime lien by an American supplier
of fuel oil in Italy by arrangement with the charterer of a Norwegian vessel,
Circuit Judge Kennedy stated, at 1193:
In a subsequent decision, the
Supreme Court declared that the factors in the Lauritzen were not
exhaustive. Hellenic Lines, Ltd. v. Rhoditis, 398 U.S. 306, 309, 90 S. Ct. 1731, 1734, 26 L. Ed. 2d 252 (1970). The vessel's "base of
operations," that is, the shipowner's centre of management and the location
most benefited economically by the business of the vessel, is also relevant. Id. at 309, 90 S. Ct. at 1734.
These views were later adopted in
a case involving the supply of bunker oil in South Africa by a London based
supplier to a vessel whose owners were also based in London: Forsythe
International U.K. Ltd. v. M/V RUTH VENTURE, 633 F. Supp. 74 (D. Or. 1985),
at 77.
[81]
In
the factual context before him, Stone J.A. concluded that the American
contracts, although deserving considerable weight, were not the most
significant factor because of his view that the other factors all pointed to Canada as the jurisdiction with the closest and most substantial connection to the
transactions.
[82]
I
should note that nowhere does Stone J.A. specifically say that the U.S. choice of law provisions are to be given any weight. Rather, what he says is that the
American contracts, so described because they were entered into in the United States between American companies, are deserving of weight.
[83]
I
now turn to our decision in The Lanner, where Richard C.J. held that the
U.S. choice of law clauses found in two of the three bunker contracts were determinative
of the issue. With regard to the third contract, which did not contain a U.S.
choice of law provision but contained a arbitration clause providing that any
dispute arising thereunder would have to be submitted and determined in
accordance with Washington State law, Richard C.J. held that the arbitration
clause was “indicative of the proper law of the contract” (paragraph 31 of his
Reasons).
[84]
As
I have already indicated, the bunkers in The Lanner had been purchased
at the request of the shipowners’ manager who had full authority to purchase
them. I should also point out that the vessel had been supplied at Halifax, Nova Scotia, at Pointe-à-Pierre, Trinidad, and at Singapore. I again emphasize
the fact that Richard C.J. left open the question of what weight a choice of
law clause should be given when the shipowners were not personally liable for
the supply of the bunkers to their ship. In other words, what weight should be
given to a choice of law provision found in a contract to which the shipowners
were not party?
[85]
In
my view, a situation where a shipowner, as in The Lanner, has contracted
with a supplier and has agreed to the insertion of a U.S. choice of law clause
in the contract, poses no difficulty to giving, as Richard C.J. did, prime
consideration to the law chosen by the parties. However, where, as here and in Imperial
Oil, there is no contract between the shipowners and the supplier of
necessaries, and the shipowners have not, by their attitude and conduct, misled
the supplier into believing that the purchaser was authorized to act on their
behalf, I am inclined to the view that the choice of law provision should not
be given any weight.
[86]
In
his Reasons in Imperial Oil, at paragraphs 28 and 29, Stone J.A. refers
to Professor J.-G. Castel’s work, Canadian Conflicts of Laws, 4th ed.
(Toronto: Butterworths, 1997), more particularly at paragraphs 448 and 452
thereof, where Professor Castel states that the proper law of the contract will
usually be the law selected by the parties to govern their contract. However,
where there is no express selection or where no selection can be inferred, the
applicable law will be that with which the transaction has the closest and most
real connection.
[87]
Thus,
Richard C.J.’s disposition of the issue before him in The Lanner is
clearly in accordance with the above principles. However, where, as here, the
shipowners are not a party to the supply contract, it cannot be said that they
have agreed to the U.S. choice of law provision found in the contract between
the appellant and Parkroad. Clearly, they have not.
[88]
This
conclusion leads me to say that had Stone J.A. been of the view that the U.S.
choice of law provisions in the American contracts were, per se,
deserving of weight, he would have said so. In my view, he did not say so
because he was not of that view. As I indicated earlier, he was of the opinion
that the American contracts were relevant, a proposition with which I have no
difficulty. By that, I mean that I have no difficulty in considering as a
factor the fact that, in Imperial Oil, the supply contracts had been entered
into in the United States between American companies. However, these contracts
were only one factor among many.
[89]
Consideration
of the American contracts in Imperial Oil as a factor cannot mean, as
the appellant seems to suggest, that the choice of law provisions in those
contracts were treated or ought to have been treated as if they were part of contracts
to which the shipowners were privy. Put another way, the American contracts
were a factor, among many, relevant to a determination of the proper law of the
transactions, the purpose of this exercise being the determination not of the
proper law of the American contracts, but of the law governing – if I may
describe it in the following terms – the non-contractual relationship between
the supplier of necessaries and the ship. Clearly, in these circumstances, the
choice of law provisions were not relevant to that exercise because of a lack
of privity of contract.
[90]
The
Judge was of the view that because the shipowners were not a party to the
contract with the appellant, the choice of law clause had “less significance
than otherwise” (paragraph 52 of Judge’s Reasons). At paragraph 67 of his
Reasons, he expanded on that by saying that “[a]bsent a contract, we must tote
up the points of contact”. In other words, the proper law is determined not by
reference to the choice of law provision, but by an attempt to determine, on
the basis of the facts and events of the case, which jurisdiction has the
closest and most substantial connection to the transaction. In my view, the
Judge made no reviewable error in the way he dealt with the choice of law
provision found in the contract between the appellant and Parkroad.
(e) Whether the
Judge failed to give proper weight to the factors connecting the transaction to the United States and whether he gave too much weight to the place of supply:
[91]
I
now turn to the appellant’s submission that the Judge failed to give proper
weight to the other factors connecting the transaction to the United States and that he gave too much weight to the place of supply. Subsumed in this argument is
the appellant’s view that the Judge erred in failing to consider each relevant
factor by reason of his approach, which consisted of toting up the points of
contact between it and the shipowners.
[92]
These
arguments, in my view, are without merit. The Judge clearly understood the relevant
test and he made no discernible error in applying the test to the facts before
him. At paragraph 58 of his Reasons, the Judge, after referring to Stone J.A.’s
Reasons in Imperial Oil, adopted the correct test, observing that “…absent
a contract with the shipowner (as opposed to one with the charterer) which contains
a choice of law clause (which is the case here), the proper law is not the law
of the contract but rather the law with which the transaction has the closest
and most substantial connection”.
[93]
He
then weighed the factors connecting the transaction to the United States and those connecting it to other jurisdictions, which led him to conclude that the
relevant factors did not point to the United States. His use of the expressions
“non-American factors” and “American factors”, which the appellant criticizes,
is clearly not an error, because he could only conclude, on the evidence before
him, that the proper law was either American or Canadian law, no other law
having been alleged nor proven.
[94]
In
my opinion, one must look very hard to find any link connecting the transaction
to the United States. Other than the seller’s general terms and conditions,
which deem the contract between the appellant and Parkroad to have been made in
the United States and made subject to the laws of that country, there is
nothing whatsoever in the evidence connecting the transaction with the United
States.
[95]
The
evidence is that the vessel, registered in Cyprus, owned by German owners, was
supplied in South Africa by Caltex, a South African company, following a
request for a supply of bunkers made by World Fuel Korea, a Division of World Fuel
Singapore. To this, I would add that the vessel was arrested in Canada, not in the United States. Thus, a fair examination of the evidence does not disclose any
real or substantial connection to the United States.
[96]
The
Judge, having carefully considered all the factors, held that the United States could not possibly be the jurisdiction having the closest and most
substantial connection to the transaction. He added that were it necessary for
him to choose the jurisdiction with the closest and most substantial connection
to the transaction, he would have chosen South Africa. Specifically, he said
that in a situation such as the one before him, where there was a link with
more than one jurisdiction, “pride of place must be given to the place where
the necessaries were provided” (paragraph 67 of Judge’s Reasons). Hence, as the
law of South Africa had not been alleged nor proven, the governing law was that
of Canada and, as a result, the appellant’s action in rem and in
personam failed.
[97]
In
my view, the Judge’s findings that the United States was not the jurisdiction
with the closest and most substantial connection to the transaction and that,
in the circumstances of the case, the choice had to be South Africa, were clearly open to him. I have not been persuaded that in so concluding, the Judge
made a palpable and overriding error.
[98]
Consequently,
as I indicated earlier, we therefore need not address the issue of whether United States law, on the facts of the case, would have allowed the appellant to exercise
its rights against the ship. Additionally, we need not address the issue of
whether the appellant or World Fuel Singapore was the proper party to bring the
action and, hence, the appeal.
Disposition
[99]
For
these reasons, I would dismiss the appeal with costs in favour of the
respondents other than the respondent Parkroad.
“M.
Nadon”
“I
agree.
Gilles Létourneau
J.A.”
“I
agree.
Johanne
Trudel J.A. »
Email this Content