Docket: A-101-14
Citation: 2014 FCA 231
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CORAM:
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NADON J.A.
DAWSON J.A.
TRUDEL J.A.
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BETWEEN:
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WESTSHORE TERMINALS LIMITED PARTNERSHIP by its General Partner WESTSHORE
TERMINALS LTD., WESTSHORE TERMINALS INVESTMENT CORPORATION, and WESTAR
MANAGEMENT LTD.
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Appellants
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and
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LEO OCEAN, S.A., KAWASAKI KISEN KAISHA LIMITED ('K'-LINE), AND THE
OWNERS AND ALL OTHERS INTERESTED IN THE SHIPS "CAPE APRICOT",
"ASIAN GYRO", "BORON NAVIGATOR", "CIELO DI
AMALFI", "LEO ADVANCE", "LEO AUTHORITY", "LEO
FELICITY", "LEO MONO", "LEO OSAKA", "LEO
PERDANA", "MEDI GENOVA", "MOL PARAMOUNT", "MOL
SOLUTION", "OOCL OAKLAND", "ROYAL ACCORD",
"ROYAL CHORALE", and "ROYAL EPIC"
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Respondents
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and
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TOKEI KAIUN COMPANY LIMITED, JEFFREY MCDONALD, SEASPAN ULC,
"SEASPAN OSPREY", "SEASPAN RESOLUTION" and "CHARLES
H. CATES VII"
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Defendants
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REASONS FOR
JUDGMENT
NADON J.A.
I.
INTRODUCTION
[1]
In this appeal, the appellants seek to set aside
an order (2014 FC 136) made by Madam Justice Heneghan (the Judge) on February
7, 2014 wherein she held that a legally binding agreement was entered into by
the appellants pursuant to which they agreed to waive their right to arrest
sister ships of the respondent Leo Ocean, S.A.’s (Leo) ship, the “Cape Apricot”
(the Vessel) in consideration of security being provided by Leo for their claim
of damage against the Vessel.
[2]
The Judge further held that pursuant to
subsection 43(8) of the Federal Courts Act, R.S.C, 1985, c. F-7 (the
Act) the appellants could not arrest both the “Cape Apricot”, i.e. the
ship which caused the damage giving raise to their claim, and a sister ship
thereof. The relevant legislation is set out in the appendix to these reasons.
[3]
For the reasons that follow, I am of the opinion
that the Judge was correct in concluding as she did and that, as a result, the
appeal should be dismissed.
II.
FACTS
[4]
There is no real dispute between the parties
with regard to the relevant facts. There is, however, a real dispute with
regard to the legal consequences which flow from these facts. A brief summary
of the facts will therefore suffice to put the issues in proper context.
[5]
The Vessel is owned by Leo. On December 7, 2012
while at the port of Vancouver, British Columbia at a marine terminal facility
situated at Roberts Bank, owned by the appellants, the Vessel struck and
damaged part of the trestle leading from the shore to Berth #1 of the terminal.
[6]
As a consequence, Berth #1 became unusable until
repairs were effected and parts replaced. It was estimated at the relevant time
that at least two months or more would be required to restore the operability
of the Berth and that the cost to the appellants would be in the order of
$60 million.
[7]
Following the allision, the Vessel was sent to
Berth #2 of the marine terminal, the only remaining Berth, where it commenced
loading coal.
[8]
On December 7, 2012, the appellants commenced an
action in the Supreme Court of British Columbia (the BCSC) and arrested the
Vessel at Berth #2.
[9]
Between December 7, 2012 and December 11, 2012,
the parties, through their respective solicitors, namely Mr. Peter Roberts for
the appellants and Mr. Gary Wharton for Leo, negotiated the release of the
Vessel from arrest. More particularly, their negotiations dealt with the amount
of security required for the release of the Vessel and the availability of
sister ships to satisfy the security required by the appellants.
[10]
During the course of negotiations Mr. Wharton
expressed his view to Mr. Roberts that security for the appellants’ claim was
limited to the value of the Vessel and that the right to arrest a sister ship
was “weak”.
[11]
On December 11, 2012, Mr. Wharton sent an email
to Mr. Roberts advising him that he was instructed by Leo and the Japan shipowners’ mutual protection and indemnity association (P & I Club) to
issue a Letter of Undertaking (LOU) in the sum of $26 million so as to secure
the release of the Vessel from arrest.
[12]
In short, the LOU provided that the P & I
Club and Leo agreed to submit to the jurisdiction of both the BCSC and the
Federal Court, that upon demand bail would be furnished in an amount not
exceeding US$26 million and that the appellants’ recourse and recovery for
damage “shall not be limited by the terms of the [LOU]”.
[13]
In consideration of the LOU, the appellants were
to agree to release the Vessel from arrest and to refrain from arresting any
other ship owned by Leo.
[14]
Following receipt of Mr. Wharton’s email, Mr.
Roberts informed Mr. Wharton that the terms of the LOU were acceptable to the
appellants, subject to a number of minor changes. In an email sent at 8:09 a.m.
on December 11, 2012 to Mr. Wharton, Mr. Roberts stated “Once
you send me a signed copy, I will consent to the release of the arrest and,
subsequently, will file the required release in the BCSC”.
[15]
At 10:29 a.m. on December 11, 2012, the signed
copy of the LOU was sent to Mr. Roberts together with a draft release of
arrest.
[16]
Shortly thereafter, the appellants had a change
of heart regarding the agreement contained in the LOU. More particularly,
during a conference call in which Mr. Wharton, Mr. Roberts and Mr. David
McEwen, a highly regarded maritime lawyer whose experience with regard to ship
arrests is considerable, also counsel to the appellants, participated, the
appellants advised Mr. Wharton that the clause in the LOU preventing the
appellants from arresting a sister ship of the Vessel was unacceptable to them.
Mr. Wharton, in turn, advised Messrs. Roberts and McEwen that there was a
binding agreement and that Leo was therefore entitled to have its Vessel
released from arrest.
[17]
Because of their differences, the parties agreed
to seek a hearing before the BCSC in the afternoon so as to resolve their
conflicting positions. Although Mr. McEwen sought Mr. Wharton’s
consent to have the Vessel moved from Berth #2, Mr. Wharton refused to accede
to this demand until the Court dealt with the terms of the release.
[18]
The parties appeared later in the day before a
Judge of the BCSC and the appellants sought an order permitting the Vessel to
be moved. However, the Judge agreed with Leo that the Vessel could not be moved
until the question of the binding nature of the agreement had been decided and
thus, the Judge put the matter over for hearing on the following day.
[19]
To avoid further delays, it was agreed between
the parties that a second LOU would be agreed to, similar in terms to the first
one, but without the clause pertaining to the waiver of sister ship arrest. It
was also agreed that the second LOU would not be binding unless a Court ruled
that the first LOU was not binding and that under Canadian law a claimant could
arrest both the offending ship and a sister ship.
[20]
The appellants, both before the Judge and now
before us, say that their agreement to the first LOU is not binding on them.
Leo says that the agreement is binding and that there is no basis to conclude
otherwise.
III.
THE APPELLANTS’ SUBMISSIONS
[21]
I will now set out the appellants’ submissions
which will explain why the parties disagree as to the binding nature of the
agreement contained in the first LOU. These submissions address the two issues
before us on this appeal, namely the binding nature of the agreement and
whether, pursuant to subsection 43(8) of the Act it was open to the appellants
to arrest not only the Vessel but also a sister ship thereof.
[22]
The appellants firstly argue the issue arising
from subsection 43(8) of the Act. They say that the Judge erred in concluding
that they could not arrest more than one ship.
[23]
In support of their view, they refer to
Prothonotary Hargrave’s decision in Norcan Electrical Systems Inc. v. FB XIX
(The), [2003] F.C.J. No. 904, 2003 FCT 702 (Norcan) where, at
paragraph 14, he opined that Canadian law did not place a limit on the number
of sister ships which could be arrested. The appellants also invoke the view
expressed by Professor William Tetley, Q.C. in a number of his works, namely Maritime
Liens and Claim, 2nd ed., (Montréal: International Shipping
Publications, 1998) at 1041-1042, “Arrest Attachment and Related Maritime
Procedures”, Tulane Law Review, (1999), Vol. 73 at 1895- 1924 [Arrest
Attachment], and International Maritime and Admiralty Law, (Toronto:
Carswell, 2003) at 776-778, that under Canadian law more than one ship can be
arrested by a claimant to secure a claim.
[24]
The appellants say that in failing to consider
the views of both Prothonotary Hargrave and Professor Tetley, the Judge erred.
They further say that the Judge was wrong to consider the 1952 International
Convention for the Unification of Certain Rules relating to the
Arrest of Sea-Going Ships, (May 10, 1952), 439 UNTS 193 / UKTS 47 (1960),
Cmnd. 1128 [Arrest Convention 1952] which provides that a claimant can arrest
either the “offending ship” or “any other ship” owned by the owner of the
offending ship. The appellants point out that Canada did not adopt the Arrest
Convention 1952 nor did it schedule it. To the contrary, they say that Canada enacted legislation, i.e. subsection 43(8) of the Act, which imposes no limit
on the number of ships which a claimant can arrest to secure his claim.
[25]
Thus, in the appellants’ view, the Judge not
only did not give subsection 43(8) a “fair, large and
liberal construction and interpretation” as required by section 12 of
the Interpretation Act, R.S.C. 1985, c. I-21 but she read subsection 43(8)
down so as to make it accord with the Arrest Convention 1952.
[26]
The remainder of the appellants’ submissions
address the issue of mistake which, in their view, renders the agreement
contained in the first LOU unenforceable. In brief, the appellants argue that
during the negotiations which led to the impugned agreement of December 11,
2012, Mr. Wharton, an experienced maritime lawyer, advised its counsel, Mr.
Roberts, who had no experience in matters pertaining to the arrest and release
of ships, that security could not exceed the value of the Vessel and that the
appellants’ right to arrest a sister ship was, at best, “weak” and that it was
on his acceptance of that advice that Mr. Roberts agreed to the terms of the
first LOU.
[27]
The appellants say that Mr. Wharton’s advice to
Mr. Roberts, who understood this advice to be correct, was erroneous. In their
view, it is clear that more than one ship can be arrested under Canadian law
and that security is not limited to the value of the offending ship. More particularly,
they say that they were entitled to security above and beyond the value of the
arrested ship, i.e. to a sum representing the interest that would accrue
if the full value of the arrested ship had been paid into Court.
[28]
Thus, the appellants say that because of common
mistakes between Mr. Wharton and Mr. Roberts regarding the amount of
security to which the appellants were entitled and the number of ships which
the appellants could arrest, the agreement should be set aside.
[29]
These mistakes, the appellants say, were
mistakes of law which destroyed the basis of the agreement contained in the
first LOU.
[30]
At page 39 of their memorandum of fact and law,
the appellants put their argument as follows:
Here, the erroneous belief on the part of both
parties that the amount of security was capped at the value of the Vessel and
that the appellants could not arrest a sister ship were fundamental to the
agreement. The estimate of the claim amount was much greater than the value of
the Vessel. The contracting parties intended to provide (Leo), and to obtain
(Westshore), the maximum security provided by law. Limiting the security to the
value of the Vessel was a common mistake as of the essence of what was
contracted for, as the very purpose of the LOU was obtain security for
Westshore’s losses. The acceptance of only the value of the Vessel, and the
waiver of sister ship rights, was determinative of the security obtained.
[31]
As a result, the appellants seek a declaration
that no binding agreement exists between them and Leo with regard to the first
LOU preventing them from arresting a sister ship and that subsection 43(8) of
the Act allows them to arrest sister ships of the Vessel so as to obtain
additional security for their claim.
IV.
ANALYSIS
A.
Is the LOU binding on the appellants?
[32]
I will first deal with the question pertaining
to the agreement contained in the first LOU. In my view, the Judge correctly
concluded that there was no error which could vitiate the agreement. Because I
agree essentially with her reasoning on this question, I shall set out her
reasons more fully.
[33]
She began her analysis by recognizing that a
contract could be set aside by reason of mistakes on the part of one or both
parties thereto because it meant that there was no consensus at idem: see Colonial
Investments vs. Bortland, (1911), 1 WWR 171, 19 WLR 588.
[34]
She then turned to the first mistake raised by
the appellants, i.e. that Mr. Roberts had erroneously been advised by
Mr. Wharton that the right to arrest more than one ship was weak and thus of
little help to the appellants. She reviewed the evidence which consisted of the
affidavits of Messrs. Roberts, Wharton and Nick Desmarais, a lawyer and
corporate secretary of the appellants, which led her to conclude that Mr.
Wharton had not given any advice to Mr. Roberts. In the Judge’s view, Mr.
Wharton, as counsel to Leo, was obviously under duty as a solicitor to give
advice to his client but not to Mr. Roberts nor to the appellants.
[35]
She then dealt with the suggestion made by the
appellants that Mr. Roberts had no experience regarding ship arrests by saying
that Mr. McEwen had been retained by the appellants and was therefore available
for consultation and advice to Mr. Roberts. Thus, if Mr. Roberts was uncertain
about some of the questions discussed with Mr. Wharton, it was open to him to
raise these matters for discussion with Mr. McEwen.
[36]
Consequently, as the terms of the LOU had been
freely negotiated between counsel for the appellants and for Leo and, as no
mistake had been found to vitiate the agreement, the parties were bound to give
effect to their agreement. Further, the Judge made it clear that she was not
convinced that Mr. Wharton’s view of the matter was wrong. In the end, she
concluded, as I do, that there is no right to arrest more than one ship.
[37]
With regard to the second mistake, i.e.
that Mr.Wharton had advised Mr. Roberts that the security was limited to
the value of the offending Vessel, she also concluded that there was no
mistake.
[38]
In her opinion, Mr. Wharton’s view was correct.
In so concluding, she referred to Norcan where Prothonotary Hargrave, at
paragraph 10 of his reasons, on the authority of the Staffordshire, The
(1872), 1 Asp. M.L.C. 365 (P.C.) at page 372; Charlotte, The,
[1920] P. 78 (Adm.) at page 80 and by Kenneth C. McGuffie, P.A. Fugeman and
P.V. Gray, British Shipping Laws: Admiralty Practice, Vol. 1, (London:
Stevens & Sons Ltd., 1964) at page 140, held that a claimant’s entitlement
to bail was limited to the value of the offending ship.
[39]
I cannot find any basis on which I could disturb
the Judge’s conclusions on the alleged mistakes. I would add that it is clear
from the evidence that all concerned, Messrs. Roberts, McEwen and Wharton were
uncertain as to whether the appellants could arrest a sister ship in addition
to arresting the offending ship as that issue had never been properly addressed
by the Federal Court or this Court nor by any other Court in Canada.
[40]
In Mr. Wharton’s view, that right was “weak”
while Mr. McEwen believed that there were good arguments to be made for
arresting more than one ship. It is in that context that the first LOU was
negotiated. With respect, it was open to the appellants to refuse to sign the
first LOU and have the matter determined by the Courts.
[41]
It thus cannot be said, in the circumstances of
this case, that Mr. Roberts was mistaken as to the law. He obviously was
uncertain but he was not the only one. What he received from Mr. Wharton
during the course of the negotiations was not legal advice but simply
Mr. Wharton’s opinion as to what he believed the law to be.
[42]
The appellants were clearly aware of the
uncertainties regarding the right to arrest more than one ship and made a
decision to agree to the terms of the first LOU in full light of divergent
opinions on the issue. The words of the British Columbia Court of Appeal in Mayer
v. Mayer Estate, (1993) 8 W.W.R. 735, 1993 CanLII 6861 at paragraph 17 are
apposite:
… But where it is apparent that a statement is,
and would be understood as, an expression of opinion, whether as to law or
anything else, the person to whom it is made must, as I have said, know that it
may be in error, and anyone who chooses to act on such a statement in such
circumstances does so with that knowledge. …
[43]
Here Mr. Roberts, I have no doubt, did not
consider Mr. Wharton’s view as advice or as a definite statement of the law but
rather as Mr. Wharton’s opinion as to the prevailing law. He must have known
that Mr. Wharton’s view could be in error but notwithstanding that decided to
advise his client that the terms of the first LOU should be agreed to. Thus, no
mistake as to law was made.
[44]
In any event, as I have already indicated
earlier, I am of the opinion that Mr. Wharton’s view on the right to arrest
more than one ship was correct. I will now turn to that issue in respect of
which I conclude that the appellants, having arrested the offending Vessel,
could not arrest a sister ship under subsection 43(8).
B.
Does subsection 43(8) allow the appellants to
arrest more than one ship?
[45]
I begin by reproducing subsections 43(2) and
43(8) of the Act which are relevant to the exercise of the Federal Court’s
jurisdiction in rem. These
provisions read as follows:
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43. …
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43. […]
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(2) Subject to subsection (3), the jurisdiction conferred on the
Federal Court by section 22 may be exercised in rem against the ship,
aircraft or other property that is the subject of the action, or against any
proceeds from its sale that have been paid into court.
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(2) Sous réserve du
paragraphe (3), elle peut, aux termes de l’article 22, avoir compétence en
matière réelle dans toute action portant sur un navire, un aéronef ou
d’autres biens, ou sur le produit de leur vente consigné au tribunal.
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(8) The
jurisdiction conferred on the Federal Court by section 22 may be exercised in rem against
any ship that, at the time the action is brought, is owned by the beneficial
owner of the ship that is the subject of the action.
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(8) La
compétence de la Cour fédérale peut, aux termes de l’article 22, être exercée
en matière réelle à l’égard de tout navire qui, au moment où l’action est intentée,
appartient au véritable propriétaire du navire en cause dans l’action.
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[46]
As is clearly apparent from the two provisions,
subsection 43(2) allows the Court to exercise its in
rem jurisdiction “against the
ship … that is the subject of the action” whereas subsection 43(8)
allows the Court to exercise its in rem jurisdiction “against any ship that, at the
time of the action is brought, is owned by the beneficial owner of the ship
that is the subject of the action”.
[47]
In other words, subsection 43(2) allows a party
to arrest a ship that causes damage to its property, i.e. here the “Cape
Apricot” and subsection 43(8) allows a party to arrest a ship owned by the
beneficial owner of the offending ship, i.e. a sister ship.
[48]
There can be no doubt that a claimant, such as
the appellants in this appeal, can institute proceedings and name more than one
ship as defendants in its statement of claim. That is precisely what the
appellants have done here by naming as defendants, not only the “Cape Apricot” but sixteen other ships which they believe to be sister ships of the “Cape Apricot”.
[49]
The question is, however, whether the appellants
should be entitled to obtain from the Federal Court the issuance of more than
one warrant of arrest for the same claim. More particularly, on the facts of
this case, can the appellants, having obtained a warrant for the arrest of the
“Cape Apricot”, obtain a warrant to arrest one or more of its sister ships.
[50]
The Judge concluded that the appellants could
not arrest a sister ship because of her view that the wording and the history
of subsection 43(8) precluded multiple arrests. Her analysis leading to that
conclusion pertains exclusively to the wording of subsection 43(8) of the Act.
Although she does not consider subsection 43(2) in reaching her conclusion, I
am of the opinion that she nonetheless came to the correct result.
[51]
The Judge’s rationale is as follows. In her
view, the question to be asked was whether subsection 43(8) allowed multiple
arrests, stating that the “scope of that right involves
the interpretation of subsection 43(8)” (para. 68 of her reasons) which
she then proceeded to do.
[52]
She began by referring to the Arrest Convention
1952 and more particularly to article 3(1) thereof which provides that a
claimant can arrest either the offending ship or a sister ship. She then
pointed out that subsection 43(8) had been enacted by Parliament, coming into
force on February 1992, and that the subsection had not yet had the benefit of
judicial interpretation.
[53]
She then turned to the subsection and opined
that its scope depended on the meaning of the words “any ship”. She referred to
both English and French dictionaries for definitions of the words “any” and “de
tout navire”, adding that she was bound to consider, by reasons of section 13 of
the Official Languages Act, R.S.C., 1985, c. 31 (4th Supp.),
both the English and French versions of the subsection.
[54]
This led her to ask whether the word “any” was
ambiguous. In her view, both the words “any” and “de tout navire” were
ambiguous. Thus, she had to consider the context in which these words were
found and used.
[55]
She noted that the words were used in the
context of in rem actions
where the power to arrest was available to a claimant and that the Arrest
Convention 1952, to which Canada was not a party, dealt with the arrest of
sister ships. In her view, the ambiguity of the words “any” and “de tout
navire” was answered by the use of the singular “ship” in the English text and
“navire” in the French text. In particular, she opined that the words “any
ship” and “de tout navire” suggested that one ship was intended by the
subsection because otherwise Parliament would have used the words “any ships”
or “any other ship” and “de tous navires” (paras. 87 and 88 of her reasons).
[56]
The Judge then stated that there was no evidence
of Parliament’s intention to confer to claimants the right to arrest more than
one ship “when the Convention makes it clear that only
one ship may be arrested, that is either the offending ship or another ship
that meets the requirement of article 3” (para. 90 of her reasons).
[57]
The Judge concluded her analysis of the issue by
saying as follows at paragraphs 91 and 92 of her reasons:
[91] Shipping is an international
enterprise and ships from the international community frequent Canadian waters.
In the absence of evidence to the contrary, I am not prepared to find that the
Parliament of Canada intended to introduce a radical change in the matter of
multiple arrests of ships, without a clear expression of that intention.
[92] I am satisfied that subsection 43(8)
of the Act does not give the right to multiple arrests. It follows that the
[appellants] are not entitled, as a matter of law, to arrest a sister ship to
the Vessel, once they had exercised their right to arrest the offending ship.
[58]
I agree with the Judge’s determination that the
appellants could not arrest more than one ship. Having arrested the “Cape Apricot”, the offending ship, they were precluded from arresting a sister ship.
However, I would answer the question by a slightly different approach.
[59]
Subsection 43(8) deals only with the Federal
Court’s exercise of its jurisdiction in rem against sister ships. In other words,
subsection 43(8) does not address the question of whether a claimant can arrest
both a sister ship and the offending ship.
[60]
I have already set out the appellants’ arguments
on this question. These arguments are restricted to the question of whether
subsection 43(8) allows for the arrest of more than one ship. Thus, the
appellants must be saying that subsection 43(8) allows for the arrest of more
than one sister ship in addition to the arrest of the offending ship under
subsection 43(2).
[61]
The appellants say that the Judge erred because
she failed to consider the view taken by Prothonotary Hargrave in Norcan and
that of Professor Tetley in his books and articles. For example, in his article
Arrest Attachment, Professor Tetley says at page 1924 that “In Canada sister ship arrest is permitted for any maritime
claim under section 22 of the Act; and more than one ship may be arrested on a
claim”. However, Professor Tetley cites no authority in support of his
view. Professor Tetley’s view can be contrasted with that of authors Edgar
Gold, Aldo Chircop and Hugh Kindred, in Essentials of Canadian Law: Maritime
Law (Toronto: Irwin Law, 2003) at page 776 under the heading of “Arrest of
Multiple Sister Ships?”, where they opine that because Canada did not
incorporate article 3(3) of the Arrest Convention 1952 into the Act, the
question of whether “Parliament intended Canadian law to differ from the
provisions” of the Arrest Convention 1952 remains an open question. However, in
their opinion, the better view based on UK authority “and such Canadian
authority as currently exist” is that multiple ships arrest are not permissible
under Canadian law.
[62]
With great respect for Professor Tetley’s view,
I believe that he is wrong and that Professor Gold et al. are correct.
[63]
I have no hesitation in adopting the Judge’s
analysis of subsection 43(8). Consequently, I can find no error in the Judge’s analysis
of the subsection and in her conclusion that the provision does not allow for
the arrest of more than one sister ship. If the appellants’ submissions
regarding subsection 43(8) were correct, a claimant could arrest, in addition
to the offending ship, any number of sister ships to secure its claim. Needless
to say, such a change would constitute a dramatic departure from the practice
which has prevailed in most maritime countries for at least a century.
[64]
In my view, however, the true question to be determined
in this appeal is not whether subsection 43(8) confers a right of multiple
arrests, which it does not, but whether a claimant can ask the Federal Court to
exercise its jurisdiction in rem both under subsections 43(2) and 43(8) in regard to the same claim
and thus obtain the issuance of more than one warrant of arrest to secure his
claim. To that question, my answer is that the appellants could either proceed
under subsection 43(2) to secure the arrest of the “Cape Apricot” or under
subsection 43(8) to secure the arrest of a sister ship. Having elected to
proceed under subsection 43(2), the appellants are barred from seeking an
arrest under subsection 43(8).
[65]
It should be borne in mind that until a ship is
served with the statement of claim in rem and is arrested (inevitably
the service of the action and the arrest of the ship occur simultaneously), the
Court’s jurisdiction in rem
is not exercised. This question was dealt with by the English High Court,
Queen’s Bench Division (Admiralty Court) in Owners of
Cargo Lately Laden on Board the Berny v. Owners of the Berny, [1977] 2
Lloyd’s Rep. 533 (Q.B. Adm. Ct.), [1978] 1 All E.R. 1065 (the Berny).
In that case, the issue before the Court was a claimant’s right to commence
legal proceedings in rem against more than one ship in respect of the
same cause of action.
[66]
After noting that prior to the adoption by the
UK of the Arrest Convention 1952, the Court’s in rem jurisdiction could
only be invoked against the ship which was the subject matter of the action, Brandon
J. (as he then was), then referred to subsection 3(4) of the Administration
of Justice Act 1956 (the 1956 Act) which permitted a claimant to invoke the
court’s in rem jurisdiction against either the offending ship or a
sister ship thereof.
[67]
Brandon J. then asked himself whether the
existing practice of commencing proceedings against more than one ship was
permissible. After explaining why it was convenient for claimants to file
proceedings against more than one ship, although only one could be arrested, he
turned to the 1956 Act where the words “the jurisdiction
may be invoked by an action in rem” are found. This led him to
ask what these words meant, i.e. was the mere issuance of a writ sufficient to invoke the
jurisdiction in rem or whether the writ had to be served to invoke the in
rem jurisdiction.
[68]
He opined that if the issuance of the writ was
sufficient to invoke the in rem jurisdiction then the practice of naming
more than one ship in proceedings could not be upheld. On the other hand, if it
was the service of the writ upon the ship which invoked the in rem
jurisdiction then the practice was a good one. In other words, if the in rem
jurisdiction is invoked only upon the service of the action on the ship,
nothing prevents a claimant from naming more than one ship in its proceedings.
[69]
Brandon J. then went to the heart of the
matter. He pointed out that although the words “the
jurisdiction may be invoked” had replaced the expression “the jurisdiction may be exercised”, the process, in his view, remained the same.
[70]
He then made the point that although he was not
bound by the Court of Appeal’s decision in Owners of the Monte Ulia v.
Owners of the Banco, [1971]1 Lloyd’s Rep. 49 (C.A.), [1971] 1 All E.R. 524
(the Banco), where the issue before him had only been considered
indirectly, he agreed with the opinion expressed in that case by the majority
of the Court of Appeal. He specifically referred to two passages of that
decision where Denning, M.R. and Megaw, L.J. expressed the view that the
court’s jurisdiction in rem was not invoked by the issuance of the writ
but rather by the service thereof on the ship and the execution of the warrant
of arrest (see Denning, M.R., [1971] 1 AllER 524 at 523 and Megaw, L.J., [1971]
AllER 524 at 538).
[71]
Consequently, as the appellants did here, it is
entirely permissible to name more than one ship in a statement of claim in
rem. The question remains, however, can more than one ship be served with
the statement of claim in rem and arrested in Canada?
[72]
Until the adoption of the Arrest Convention 1952
and its incorporation into domestic law, it was not possible in most countries,
including the UK and Canada, to arrest a ship other than the offending ship. In
the UK, the law now allows for the arrest of only one ship, either the offending
ship or a sister ship (see subsection 21(8) of the Supreme Court Act 1981
(U.K.), 1981, c. 54 and Tetley at pages 1924 to 1928 of Arrest Attachment).
[73]
Subsection 43(8) came into force in Canada in February of 1992. The provision only deals with the arrest of sister ships. It
does not say whether a sister ship can be arrested in addition to the offending
ship. Until that enactment, arrests were restricted to the arrest of the
offending ship. By enacting subsection 43(8) did Parliament intend to break
rank with those countries, like the UK, which either adopted the Arrest
Convention 1952 or incorporated its provisions within their domestic
legislation? I do not believe Parliament so intended.
[74]
My view is that Parliament, in enacting
subsection 43(8), intended to confer upon claimants in Canada the right to arrest a sister ship in lieu of the offending ship. Thus, where a claimant is
unable to arrest the offending ship under subsection 43(2) because that ship is
not available for arrest in Canada or if that ship’s value is insufficient to
properly secure its claim, the claimant may resort to subsection 43(8) and
arrest a sister ship of the offending ship. By enacting subsection 43(8)
Parliament conferred a true benefit to claimants, a benefit which was unavailable
prior to the enactment of the provision.
[75]
In other words, Parliament did not, in my view,
intend for the Federal Court to exercise its jurisdiction in rem under both subsections 43(2) and
43(8) for the same claim. Although the word “or” does not appear in section 43,
I cannot see how the provisions can be read otherwise. The fact that Canada did not adopt the Arrest Convention 1952 does not, as the appellants suggest, militate in
favour of concluding that Canada intended to go its separate way with regard to
ship arrests.
[76]
Although there is no direct authority in Canada
regarding the interpretation of subsections 43(2) and 43(8), other than the
decision below, I find considerable support in the decision of Prothonotary
Hargrave, whose experience and knowledge of maritime law and its practice in
Canada were highly regarded by the whole of the maritime law community, in Elecnor
S.A. v. Soren Toubro (The), [1996] 3 F.C. 422, 1996 CanLII 4057 (Elecnor). In that case, the
owners of the ship brought a motion to set aside an order dated January 15,
1996 made by the Prothonotary granting an extension of time to a claimant to
arrest the offending ship beyond the twelve months prescribed by the Federal
Courts Rules, SOR/98-106, i.e. within twelve months of the issuance
of the statement of claim.
[77]
The Prothonotary had made his order because the
offending ship had not entered Canadian waters within the twelve months
following the issuance of the statement of claim. However, in February or March
1996 the offending ship came to Canada which allowed the claimant to obtain
security for its claim in the form of a P & I letter or undertaking.
[78]
The owners filed a motion to set aside the
Prothonotary’s order of January 15, 1996 on the ground that a sister ship of
the offending ship had been in the port of Vancouver in May and June 1995,
arguing that the claimant, in seeking the extension of time, had failed to
inform the Prothonotary of its presence in Canada during the initial currency
of the statement of claim. The owners further argued that under Canadian law
the claimant was obliged to seek out sister ships of the offending ship and to
add them to the style of cause. Hence, having failed to name in its action the
sister ship which had entered the jurisdiction and to arrest her, the claimant
was barred from seeking the extension which the Prothonotary had granted.
[79]
The Prothonotary rejected the owners’ motion.
[80]
First, he pointed out that a plaintiff could not
be forced to sue a party against its will. He then turned to subsection 43(8)
which, in his view, was permissive and not mandatory. In other words, a
plaintiff could sue a sister ship but did not have to.
[81]
He then remarked that section 43 of the
Act paralleled the Arrest Convention 1952 in that a claimant “may arrest either the wrongdoing ship or a sister ship
in respect of certain maritime claims” (para. 13),
adding, at paragraph 16 of his reasons, that sister ship proceedings “is a
security device which the plaintiff may utilise, if it desires”. The whole of
his paragraph 16 is very persuasive and I reproduce it in full:
Sister ship proceedings are a security device which a plaintiff may
utilize if it desires. There are risks in proceeding against sister ships,
including that a sister ship may not provide the appropriate amount of
security, or that the arrested ship may not be a sister ship at all, thus
leaving the plaintiff open to a claim for damages for wrongful arrest. The
entries in Lloyd's List of Shipowners are not always clear or current. A
plaintiff ought to have the choice to either sue the wrongdoing vessel, at
minimal risk, or to balance the risk and benefit of a sister ship action.
[Emphasis
added]
[82]
In other words, if I understand the Prothonotary
correctly, his view is that a claimant must be extremely careful in proceeding
to arrest a sister ship because that ship may not be, in law, a sister ship and
if it is, its value may be less than that of the offending ship. The
implication of these pitfalls is made clear from his concluding words that a “plaintiff ought to have the choice to either sue the
wrongdoing vessel, at minimal risk, or to balance the risk and benefit of a
sister ship action”. Thus, as a claimant cannot
arrest both an offending ship and a sister ship, it must exercise great
caution in proceeding against one or the other.
[83]
In support of his view, the Prothonotary
referred to both the Banco and the Berny decisions. In the
Banco, Lord Denning, M.R. opined that a plaintiff having sued both the
offending ship and a number of sister ships need not arrest the first one
within the jurisdiction but could wait until the most suitable ship entered the
jurisdiction (para. 20, Prothonotary’s reasons).
[84]
In the Berny, Mr. Justice Brandon also averred
to the fact that a plaintiff could not be forced to “elect irrevocably” between
the offending ship and a sister ship “until he knows that
a suitable ship is about to come, or has come, within the jurisdiction”
(para. 24, Prothonotary’s reasons).
[85]
In my opinion, Prothonotary Hargrave’s view that
section 43 of the Act parallels the Arrest Convention 1952 and that a claimant
has the option of arresting either the offending ship or a sister ship is
correct. Although section 43 does not say expressly that a claimant must
proceed under either subsection 43(2) or 43(8), I do not see how it can be read
otherwise. Reading the section in such a way, not only accords with the Arrest
Convention 1952 but also accords with what I believe Parliament intended when
it enacted subsection 43(8), i.e. to grant claimants in Canada an alternative when the offending ship was not available in Canada for arrest or where its
value was insufficient to secure the claim.
[86]
I believe that had Parliament intended to break
rank with the international maritime community in regard to the right of
arrest, which as I have already said, would constitute a dramatic departure
from the accepted practice, section 43 would no doubt have been worded very
differently so as to make it clear that in Canada claimants were not restricted
to one vessel to secure their claim.
[87]
Before concluding, I wish to briefly deal with
the appellant’s arguments that the Judge failed to address Prothonotary
Hargrave’s remarks in Norcan that there was no limit under Canadian law
as to the number of sister ships which could be arrested. In Norcan, at
paragraph 14 of his reasons, after having set out subsection 43(8) of the Act,
the Prothonotary stated that “[e]vident here is that
there is no limit, under the Canadian sister ships legislation on the number of
ships which may be arrested”.
[88]
In my respectful view, the Prothonotary’s
statement does not stand for the proposition that a sister ship can be
arrested, in addition to the arrest of the offending ship, to secure the same
claim.
[89]
In Norcan there were two Court actions
for necessaries supplied to four different vessels. Action T-1959-02 was
against the vessels “FB XIX” and “FB XX”, both of which had been arrested in
that action. The second action, T-2091-02, was against the vessels “FB XXII”
and “FB XXIII”. The motions before the Court were to set bail in action
T-1959-02 and to either strike the claim in action T-2091-02 or to set bail in
that action. The issue was whether the “FB XIX” and “FB XX”, two vessels
already under arrest in action T-1959-02 could be arrested in action T-2091-02
to secure the claims for necessary supplied to the “FB XXII” and
“FB XXIII”. The resolution of this issue turned on the apparent
contradiction between the English and French versions, of subsection 43(8) and
the proper interpretation of the ownership requirements.
[90]
When applied to the facts of the case before
him, the Prothonotary’s remarks, which the appellants invoke in support of
their submissions, are correct in that there were four independent in rem claims, each of which could support
the arrest of a sister ship. However, the Prothonotary’s statement cannot mean
what the appellants urge us to conclude in this appeal. In other words, the
right to arrest multiple sister ships for a single claim was not in issue in Norcan.
[91]
At paragraph 10 of his reasons in Norcan,
Prothonotary Hargrave made it clear that the rule in Canada was that a claimant
was entitled to bail in an amount which was sufficient to cover its reasonably
arguable best case, together with interest and costs but was limited to the
value of the offending vessel. The Prothonotary went on to state that “This cap on bail applies even though the claim, costs and
interest may exceed the value of the arrested ship”. Thus, in my view,
the Prothonotary did not intend to depart from the accepted practice that a claimant
can only arrest one ship to secure its claim.
[92]
With that perspective in, it should not be
forgotten that the right to arrest a ship is a procedural device. That device
should not be used to allow claimants to obtain security which exceed the value
of the offending ship or the value of the sister ship arrested in lieu of the
offending ship.
V.
CONCLUSION
[93]
For these reasons, I would dismiss the appeal
with costs.
“Marc
Nadon”
“I agree
Eleanor R. Dawson J.A.”
“I agree
Johanne Trudel J.A.”
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