Docket: T-655-15
Citation:
2017 FC 465
Ottawa, Ontario, May 8, 2017
PRESENT: Madam Prothonotary Mireille Tabib
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BETWEEN:
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ATLANTIC
CONTAINER LINES AB
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Plaintiff
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and
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CERESCORP
COMPANY
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Defendant
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and
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APM TERMINAL
GOTHENBURG AB
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Third Party
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ORDER AND REASONS
I.
Overview
[1]
The Plaintiff, Atlantic Container Lines AB
(“ACL”) operated the container ship “HS Beethoven” pursuant to a time charter
party. While the ship was being discharged in Halifax by the Defendant,
Cerescorp Company, (“Ceres”), a stack of eight 20-foot containers toppled
within hold number 4 of the vessel, causing damage to the vessel and to the
cargo. ACL brought the present action against Ceres to be compensated for that
damage, pleading that the collapse was due to Ceres’ negligent operation of the
crane during unloading operations. In particular, ACL alleges that multiple and
unsuccessful attempts by the crane operator to connect the crane’s spreader to
the top container in the stack caused the stow to collapse.
[2]
Ceres, from the outset, defended ACL’s claim by
asserting that the collapse was caused, at least in part, by the longitudinal
misalignment of the containers at the bottom of the stow, which led to the
vertical misalignment of the containers stacked above. Ceres’ original defence
pleaded that the misalignment was solely caused by the negligence of those
responsible for loading the containers. APM Terminal Gothenburg AB (“APM”) was
the stevedoring company who loaded the containers at the load port in
Gothenburg, Sweden. It was subsequently added as a third party defendant by
Ceres.
[3]
Ceres now makes this motion to amend its
statement of defence and counterclaim to raise, as a further cause of the
misalignment of the containers, the alleged “substandard
and inherently dangerous arrangement of the bulkhead vertical cell guides and
tank top spacing bars within the vessel’s number 4 cargo hold”. The
proposed amendments allege that ACL was negligent in failing to detect that
defect, to take the necessary precaution to avoid the misalignment and to warn
Ceres of that danger.
[4]
The proposed amendments also add as a cause of
the collapse the fact that loading a vertical stack of eight 20-foot containers
is contrary to industry practice and created, independently of and in addition
to the misalignment of containers, an inherently unstable and dangerous
condition, for which ACL is ultimately liable.
[5]
ACL does not dispute that a plea that the stow
collapse was caused by an inherently dangerous condition of the vessel or by
the method of stowage, of which the charterer knew or should have known but
failed to warn the stevedores, constitutes a reasonably arguable defense.
[6]
ACL however opposes the amendments on the
following grounds:
•
That the amendments constitute a radical
departure from previous pleadings;
•
That the allegations are unsupported by any
evidence and are doomed to fail;
•
That the amendments are untimely;
•
That the amendments are prejudicial because
evidence has been lost, and also because ACL’s recourses against the ship may
now be time-barred.
[7]
For the reasons that follow, I am satisfied that
it is in the interest of justice that the proposed amendments be made, on
condition that particulars be provided of the way in which the arrangement of
the bulkhead vertical cell guides and tank top spacing bars were “substandard and inherently dangerous”.
II.
Radical Departure
[8]
Pursuant to Rule 221 of the Federal Courts
Rules, SOR/98-106, pleadings may be struck where they constitute a radical
departure from previous pleadings. Proposed amendments which would be capable
of being struck under Rule 221 of the Federal Courts Rules if already
part of the pleadings should not be permitted (Pembina County Water Resource
District v Manitoba, 2008 FC 1390).
[9]
I am not satisfied that the proposed amendments
constitute a radical departure from Ceres’ original pleadings. As mentioned,
Ceres’ position has from the outset been that the collapse was caused by the
misalignment of the containers. The proposed amendments do not resile or depart
from that assertion. Rather, instead of alleging that the misalignment was “solely” caused by the negligence of those responsible
for loading the containers, the proposed amendments add a further root cause of
misalignment, being the arrangement of the vertical cell guides. At the hearing,
counsel for Ceres explained that the cell guides, which are metal rails affixed
to the sides of the hold to help guide and keep containers aligned as they are
lowered into the hold, do not extend all the way down to the bottom in that
particular hold. This allegedly can allow containers to move laterally in the
final stages of being lowered into the hold. The lateral movement would in turn
cause the side of a container to rest on the horizontal spacing bars affixed to
the bottom of the hold (the tank top) and sit at an angle, leading to vertical
misalignment of all containers above.
[10]
The amendments also add the allegation that a
vertical stack of eight 20-foot containers is inherently unstable and
dangerous, independently of and in addition to the misalignment.
[11]
These additional facts are not inherently
contradictory to or mutually exclusive of the facts previously pleaded. They
are consistent with and complementary to Ceres’ original pleadings, which
identified the misalignment and improper stowage of the containers as
contributing causes of the damage.
[12]
The only perspective from which the proposed
amendments could be considered as a departure from previous pleadings is that they
raise the possibility of another person being liable for the collapse, to wit,
the shipowners. The original pleadings, by identifying the sole cause of the
misalignment as the negligence of those by whom containers were stowed, pointed
the finger of contributory negligence solely to the loading stevedores and to
ACL. From ACL’s perspective, the proposed amendments, by pointing to structural
anomalies of the vessel as a contributing cause of the misalignment, change
that dynamic by raising the possibility of the shipowner’s liability towards
ACL.
[13]
If the amendments are allowed, are ultimately
successful and would give rise to liability of the shipowner towards ACL, they
could have significant legal consequences for ACL. However, the facts pleaded
in the amendments do not, in and of themselves, constitute a departure from
Ceres’ prior factual pleadings and accordingly do not offend Rule 221(1)(e). To
the extent the amendments, if allowed, produce prejudicial legal consequences
for ACL, that is a matter more appropriately considered as part of the analysis
on prejudice.
III.
Doomed to Fail/Insufficient Evidence
[14]
ACL argues, and I agree, that the amendments as
proposed do not sufficiently particularize how the arrangement of the vertical
cell guides and tank top spacing bars was allegedly substandard and inherently
dangerous. That said, I am not satisfied that the allegations as proposed
constitute, in the circumstances of this case, a bald assertion of a conclusion
or that they are symptomatic of a frivolous defence. The allegations are not
proposed in the absence of any material facts, or show no reasonable prospect
of success. Counsel for Ceres presented at the hearing a cogent explanation of
how the discontinuity of the cell guides, which is clearly visible in the
photographs taken at the time of the loss, could contribute to the alleged
longitudinal and vertical misalignment. I am thus satisfied that Ceres has
knowledge of particulars which, if provided, would properly define and frame
this defence.
[15]
As worded, however, the pleadings are so vague
that they would cover a whole host of other potential defects; the nature of
the alleged defects of the tank top spacing bars has also not yet been
explained. ACL is entitled to know and understand the full scope of these
amendments, if they are allowed. However, the lack of particulars in the
circumstances is not a reason to refuse the amendments but to impose, as a
condition for the amendment, the obligation of Ceres to provide particulars.
[16]
ACL has pointed to discovery transcripts and
documentary evidence in an effort to show that the proposed amendments have no
reasonable prospect of success. It is not for the Court, on a motion to amend,
to embark on the exercise of weighing competing evidence led by the parties to
determine the strength and chances of success of proposed amendments. The case of
Teva Canada Limited v Gilead Sciences Inc., 2016 FCA 176, on which ACL
relies, stands for proposition that amendments can be refused as having no
realistic chances of success or being doomed to failure where the amending
party cannot point to the existence of any evidence whatsoever which, if
believed, could support the conclusion it seeks. As mentioned above, Ceres has
overcome this low threshold by showing that the discontinuity of the cell
guides is visible on photographs taken at the time of the loss, and by presenting
a cogent argument as to how the discontinuity could lead to misalignment. ACL
may have a strong defence to these allegations, but motions to amend are not
motions for summary judgement. Once Ceres had established the existence of a
credible evidentiary support for its amendments, it did not also have to refute
ACL’s countervailing evidence or put its best foot forward to show that it
could succeed at trial.
IV.
Untimeliness
[17]
ACL argues that Ceres could have made the
allegations it now seeks to add well before now. I agree. However, the mere
fact that amendments could have been proposed earlier does not make them
untimely and is not, of itself, a reason to refuse them.
[18]
Amendments are untimely and can be refused where
allowing them would unduly delay the conduct of an action. Here, the amendments
have been proposed shortly after discoveries, before expert reports have been
prepared and before a trial date has been requested. The amendments, if
permitted, will require amendments to the other parties’ pleadings, and may
require further discovery, but at this time, there is no indication that such
discoveries would be protracted or cause significant delay in the trial of this
matter. I am satisfied that any delay that may be caused by the amendments
would not be undue.
V.
Prejudice: Loss of Evidence
[19]
As recognized by an abundant jurisprudence,
amendments can be refused if to allow them would cause prejudice to the other
side that cannot be compensated by an award of costs. ACL argues that it will
suffer such a prejudice from the fact that evidence relevant to the amendments
has now been lost: The vessel has, last year, been sold and destroyed together
with her documents and computer systems, and ACL is unable to locate the
vessel’s Chief Officer. Situations such as these have led the Court to find that
an amendment would be so prejudicial to the other party that it should be
refused (MacNeil Estate v Canada (Indian and Northern Affairs Department),
2001 FCT 470).
[20]
However, it seems to me that where loss of the
evidence is fortuitous and the amendments were proposed without undue delay,
the Court’s analysis should not stop at considering only the prejudice caused
to the opposing party. In considering amendments, the Court must look at all
the circumstances of the case and consider simple fairness, common sense and the
overarching interest of justice (Continental Bank Leasing Corp. v Canada,
[1993] TCJ No 18, (1993) DTC 298 at page 302, as cited in Merck & Co.
Inc. v Apotex Inc., 2003 FCA 488, [2004] 2 FCR 459, leave to appeal to SCC
refused, 30193 (May 6, 2004)).
[21]
It would be unjust to refuse an amendment that
is not unduly late and raises an arguable case simply because, through no fault
of the amending party, evidence that might assist both parties has unexpectedly
been lost. In such a case, it is appropriate to consider whether, had the
amendments been made earlier, the opposing party could or would have preserved
the evidence. If the Court finds that the evidence would nevertheless have been
lost, it would be unfair that the party opposing the amendment benefit – and
the amending party suffer – from the fortuitous loss of evidence.
[22]
The incident occurred in December 2013 and ACL
issued its Statement of Claim 16 months later, in April 2015. Pleadings closed
in November 2015 and discoveries were held in the summer of 2016, a relatively
short period of time. As early as the summer of 2015, APM requested access to
the vessel to conduct an inspection of hold number 4. The protocol for the
inspection included measuring the vertical and longitudinal cell guides. The
inspection was arranged to take place in March 2016, but could not be fully
carried out because the hold was not emptied of containers. APM reserved its
rights to request a further attendance once the vessel’s hold was empty.
[23]
In October 2016, in the course of answering
undertakings given on discovery, ACL advised the other parties that it had just
learned that the vessel had been sold and was destined to be broken up. In
fact, it now appears that the vessel was at the scrap yard in September 2016
and may well already have been in the process of being destroyed. I am
satisfied that the loss of the vessel, and of any documents or computer files
that had not previously been secured or copied and may have been left on board
the vessel, is a fortuitous and unexpected event. None of the parties appears
to have been warned that this might occur, and there is no suggestion that the
age and condition of the vessel made this a foreseeable event.
[24]
However, I find that ACL either knew, or should
have known, well before Ceres formally expressed its intention to amend, that
the content of the vessel’s computer, it is documents and the physical
arrangements of the cell guides in its hold number 4 were relevant. The record
before me on this motion shows that undertakings that called for consulting the
vessel’s documents and the information in her onboard computer were still
outstanding in October 2016. Ceres had probed, on discovery, whether the vessel
may have listed during loading, presumably to argue that, given the absence of
cell guides at the lower end of the hold, a list would have permitted the
containers to shift off the vessel’s vertical alignment. Requests for
inspection of the vessel’s cell guides had been made but not fully fulfilled.
ACL was either well aware of the relevance of vessel, her documents and
computer system to these lines of inquiry, or could have, with reasonable
diligence, been able to understand and ascertain same. This finding is
corroborated by the correspondence addressed to the case management judge in
August 2016 by counsel for ACL, in which he reports on behalf of all parties
that:
The parties
recognize, and have discussed, the possibility that evidence still to be
elicited from upcoming discoveries, and from responses to undertakings from
earlier discoveries, may demonstrate the need for addition of the shipowner as
a party to this litigation with possible attendant need for motion (s) to be
made to the court to support such addition.
[25]
ACL was in a position to secure, and should have
secured the evidence and information necessary to protect its rights and
interests before August 2016. I do not mean to suggest that ACL deliberately allowed
the evidence to be destroyed. However, the fact that ACL did not take steps to
secure evidence that was in the possession, care and control of the shipowner,
when it knew or ought to have known that this evidence was potentially relevant
to the litigation as engaged and to possible recourses against the shipowner, shows
that ACL would not have acted differently or taken additional measures to guard
against the loss of the vessel had Ceres proposed its amendments earlier.
[26]
The same goes for ACL’s inability to now locate
the vessel’s Chief Officer. Furthermore, the record before me does not indicate
when that witness ceased being employed by the crewing agency responsible for
his presence on the vessel in 2013, or for how long following the end of his
employment the crewing agency would have kept track of him. Access to that
witness could therefore have been lost even before ACL commenced the present
action.
[27]
To the extent, therefore, the fortuitous loss of
the vessel, of evidence carried on board or of a witness is prejudicial to
ACL’s ability to meet the proposed new allegations, I find that this prejudice
would likely have occurred even if the proposed allegations had already been
part of Ceres’ initial pleadings. I should add that while the record before me
suggests that evidence relevant to the issues raised in the proposed pleadings
was likely lost with the vessel, it falls short of showing whether the loss of
that evidence would have greater negative consequences on ACL’s ability to
defend itself or on Ceres or APM’s ability to make their case.
[28]
In the circumstances, I am satisfied that
allowing the proposed amendments does not result in an injustice to ACL.
VI.
Prejudice: Loss of a Recourse
[29]
ACL argues that, had Ceres raised the alleged
inherently substandard and dangerous arrangements of the cell guides in its
original pleading, it could have sought indemnity from the shipowner, but that
this recourse may now be time-barred.
[30]
ACL chose not to implead or claim against the
shipowner, even when it was aware that APM and Ceres were investigating the
cell guide arrangements and their role in the incident. The August 2016
correspondence addressed to the Court by ACL’s counsel, referred to above, also
clearly shows that ACL was aware at that time that the implication of the
shipowner remained possible. I am not persuaded that the course of conduct
adopted by ACL, in failing to protect any right it might have had against the
shipowner, resulted from the position taken by Ceres. I am not satisfied that
ACL would have acted differently had Ceres raised its proposed new allegations
earlier.
[31]
Indeed, it is not entirely clear that ACL has a
good recourse against the shipowner based on Ceres’ new allegations. Ceres’
proposed pleadings are to the effect that ACL should be held contributorily
negligent because it knew or ought to have known of the vessel’s substandard or
dangerous configuration. The apparent nature of the allegedly faulty
configuration and ACL’s knowledge and acceptance of it are both essential to
the success of Ceres’ defence and possibly fatal to any claim ACL might have
against the shipowner: Ceres can hardly claim that ACL was negligent for the
faulty configuration of the ship if ACL was not or could not have been aware of
it; it may be difficult for ACL to claim that the shipowner should indemnify it
for that faulty configuration if it accepted the vessel when the defect was or
should have been apparent. This, rather than Ceres’ failure to raise the faulty
configuration earlier, may explain why ACL did not see fit to implead the
shipowner earlier. In any event, ACL did not lead evidence to suggest that it
relied on Ceres’ failure to formally raise the issue in its pleadings in
deciding not to protect any right it might have had against the shipowner.
[32]
Finally, ACL has stopped short, in its materials
and arguments before me on this motion, of establishing that any recourse it
may have had against the shipowner is clearly time-barred, preferring instead
to limits its submissions to the argument that these recourses “may” be
time-barred.
[33]
In the circumstances, I am not satisfied that
Ceres’ failure to raise the cell guides’ configuration as grounds of contributory
negligence caused ACL to forgo impleading or claiming against the shipowner, or
that it is now difficult or impossible for it to do so.
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