Pan Ocean Shipping Co. Ltd. v. Tuloma (The), 2003 FCT 56

Date: 20030121

Docket: T-2195-02

Neutral citation: 2003 FCT 56

Admiralty Action in rem against the Ship "TULOMA" and in personam against Breeze Navigation Ltd. and the Owners and All Others Interested in the Ship "TULOMA"

BETWEEN:

                                                   PAN OCEAN SHIPPING CO. LTD.

                                                                                                                                                          Plaintiff

                                                                                 and

                                                        BREEZE NAVIGATION LTD.

                                                                                 and

                                                    THE OWNERS AND ALL THOSE

                                             INTERESTED IN THE SHIP "TULOMA"

                                                                                                                                                    Defendants

                                                            REASONS FOR ORDER

RICHARD MORNEAU, ESQ., PROTHONOTARY:

[1]                 This motion by the Defendants under rule 485 of the Federal Court Rules, 1998 (the Rules) is for an order requesting the Court to determine the amount of bail to be filed into court by the Defendants to obtain the release of the M.V. "TULOMA" from arrest by the Plaintiff.

[2]                 Since time is very much of the essence, I do not intend to make these Reasons longer than necessary.

Facts

[3]                 By time charter, made and concluded in Seoul, on September 4, 2002, the Plaintiff, as time charterer, chartered the ship "TULOMA" from her owners, the Defendants Breeze Navigation Ltd. of Malta.

[4]                 Pursuant to said charter, steel cargos were loaded at Beihai, China, Kwangyanh, Korea and Koahsiung, Taiwan for intended discharge at Miami, Savannah and Camden in the United States and Sorel, Oshawa and Toronto in Canada.

[5]                 Although the said charterparty provides, inter alia, at clause 22 that the ship on delivery and throughout the charter would be tight, staunch, strong and in every way fitted for the service, it appears that the schedule of the vessel was substantially delayed due to engine problems, deviation for crew sickness and other ship deficiencies.

[6]                 The Plaintiff alleges that the ship was in such an unseaworthy state that the United States Coast Guard had not permitted the discharge of her cargo destined for Camden, New Jersey.

[7]                 The vessel arrived at Sorel, Quebec, and had to discharge there its cargo that was originally destined for Camden, New Jersey. In addition as a result of the delays sustained in Camden, the vessel's arrival at Sorel was well beyond the date where the vessel could then proceed to its subsequent discharge ports within the St. Lawrence Seaway, being Oshawa and Toronto. The Seaway had closed, or its closure was imminent, by the time the vessel arrived at Sorel.

[8]                 This resulted in all cargoes for Camden, New Jersey, Sorel, Quebec, Oshawa, Ontario and Toronto, Ontario to be discharged at Sorel.

[9]                 The Plaintiff then undertook to transship the cargo and transport it to the various discharge ports provided for in the relevant bills of lading.

[10]            Any dispute between the parties is to be resolved by way of London arbitration under the governing time charterparty.

[11]            Any dispute between the Plaintiff and those parties having an interest in the cargo is to be resolved by way of New York arbitration pursuant to a voyage charterparty dated fixture dated July 12, 2002.

[12]            In addition, the Plaintiff argues by way of affidavit evidence filed by one of its United States attorneys that, under United States law, it would in all likelihood be found to be the carrier under the relevant contracts of carriage with its customers, and that it may well in fact be found liable in New York arbitration for claims for physical damage to the cargo and possible claims for late delivery or loss of market.

Analysis

[13]            The general rule which governs the amount of bail which must be provided has been stated recently as follows by my brother Hargrave in Mr. and Mrs. Stephen Striebel v. Sovereign Yachts (Canada) Inc. and "The Chairman", 2002 F.C.T. 925 ("The Chairman") at paragraph [14]:

[14] The general rule which governs the amount of bail which must be provided, in order to obtain the release of a properly arrested ship, is that it be equal to the secured party's reasonably arguable best case, interest and costs, limited by the value of the arrested vessel: see The Moschanthy, [1971] 1 Lloyd's Rep. 37 (Q.B.) at 44 and Brotchie v. The Karey T (1994), 77 F.T.R. 71 (F.C.T.D.) at 72.

[14]            In The Chairman my brother Hargrave also made reference to three other useful cases as follows at paragraphs 19 and following:

[19] In The Gulf Venture, [1984] 2 Lloyd's Rep. 445 (Q.B.) Mr. Justice Sheen applied a similar rough and ready approach to setting security: he felt the evidence was incomplete, but was satisfied that the claim would not succeed in full and therefore, while the claim endorsed on the writ exceeded £ 400,000, he set security at £ 250,000:

      When plaintiffs are entitled to keep a ship under arrest until her owners provide security for their claim, that security must be for such sum of money as represents their reasonably arguable best case, including interest, and their costs of the action. There is plenty of scope for debate as to what sum should be secured in respect of this claim. I do not propose to analyse the evidence: it is incomplete. Such a procedure would be entirely inappropriate on a motion such as this. Although the claim endorsed on the writ is, as I have already said, for a sum in excess of £ 400,000, I was satisfied that the claim will not succeed in full. After some discussion with Counsel, the plaintiffs expressed their willingness to accept security in the sum of £ 300,000. I reached the conclusion that a lesser sum would be adequate and fixed the amount in the round sum of £ 250,000.

[20]      In The Tribels, [1985] 1 Lloyd's Rep. 128 Mr. Justice Sheen, while allowing that the salvors were entitled to demand security up to what might be anticipated, on the basis of a reasonably arguable best case, interest and costs, looked upon the demand for security of £ 3.323 million as exorbitant, noting that counsel for the plaintiff conceded the point. He went on to set security at £ 1 million, adding that it might be that even £ 1 million was excessive.

[21]      A last case to which I shall refer, in this line of cases which the court has exercised a discretion in determining bail, in particular circumstances, is Amican Navigation Inc. v. Densan Shipping Co. (1997), 137 F.T.R. 132 (F.C.T.D.), a decision of Mr Justice Lutfy, as he then was. He observed, at page 135, that "arrest is a powerful weapon." and went on to say that the plaintiff had a right to be secured for the full amount of the claim, interest and costs, but that exceptional power which a law attach to arrest and the right to full security must be balanced so as not to be oppressive:

      It is important, when considering a motion to alter the bail, to keep in mind the exceptional power the law has attached to arrest and the right to exact security for the full amount of the claim. The proper balance must be struck. The power to arrest should not be exercised oppressively and yet the plaintiff has the right to sufficient security.

(Page 135)

Here I would note that at stake was the variation of bail, however the same principle applies in the case of a determination of bail. He then went on to apply the principle set out in The Moschanthy (supra).

(...)

[24]      As I have already made clear, I may not try the case at this point. However, I may, as pointed out by Associate Chief Justice Lutfy, in American Navigation (supra), strike a balance between what might, on the one hand, be an arrest exercised oppressively and, on the other hand, a right to sufficient security. Indeed, as established by Mr. Justice Sheen in The Gulf Venture (supra), on being satisfied that the claim would not succeed in full, he was then able to reduce bail to a lesser but adequate amount.

(my underlinings)

[15]            With these principles in mind, I shall now review the different heads of claim raised by the Plaintiff in order to assess what amounts must be retained for each head.

1.         Overpayment of hire

[16]            Here there is no dispute that for the purpose of this motion the amount of U.S.$75,538.16 can be retained.

2.         Cost of Inland Transportation

[17]            I have decided to retain here the amount of U.S.$588,000. Although it is possible that this figure benefits of some rebate in the future, as of now this amount does represent the Plaintiff's reasonably arguable best case.

3.         Cargo Damage (Physical damages) and Delay or Loss of Market Damages

[18]            I am satisfied for the purpose of this motion that the Plaintiff can reasonably argue that under U.S. law it could be found to be the carrier under the relevant contracts of carriage with its customers, the cargo interests. I also appreciate that it could be found liable in New York arbitration for claims for physical damages to the cargo and for delay or loss of market.

[19]            For the purpose of setting security, the Plaintiff advanced respectively the following amounts for the cargo and loss of market damages:

Cargo damages

Loss of Market

[20]            The evidence of the Plaintiff for both the cargo damages and the loss of market damages is incomplete at this stage and relies to a large extent on uncertainties. No formal claims in writing appear to have yet been formulated. I am satisfied that both claims would not succeed in full.

[21]            As did my brother Hargrave in The Chairman, I must here strike a balance between the interests of both parties. I have decided therefore to cut in half each of the above-mentioned total amounts for the cargo and loss of market damages.

[22]            I appreciate that said reduction displays some degree of arbitrariness but I am satisfied that by doing so the rights of the Plaintiff are nevertheless protected with an adequate amount (see Amican Navigation Inc. v. Densan Shipping Co. (1997), 137 F.T.R. 132, at 139, paragraph [23], note 15).

[23]            Consequently, the general total amount so far for bail in Canadian dollars (using an exchange rate of 1.54) is:

US$      75,538.16

US$    588,000.00

US$    394,246.00

US$    379,500.00

US$1,437,284.16 x 1.54 = CDN.$ 2,213,417.50

[24]            To that amount the reasonably arguable best case for the Plaintiff calls for the addition of interest of 15% (CDN.$332,012.62), costs for the London arbitration (CDN.$616.882.50), costs for the New York arbitration (CDN.$77,000.00) and costs in this Court (CDN.$5,000.00).

[25]            Consequently, bail shall be set at a rounded amount of CDN.$3,244,312.00.

[26]            Bail to be provided in accordance with the Rules.

Richard Morneau    

Prothonotary

Montreal, Quebec

January 21, 2003

                                                                 FEDERAL COURT OF CANADA

                                                                              TRIAL DIVISION

Date : 20030121

Docket : T-2195-02

Admiralty Action in rem against the Ship "TULOMA"and in personam against Breeze Navigation Ltd. and the Owners and All Others Interested in the Ship "TULOMA"

BETWEEN:

PAN OCEAN SHIPPING CO. LTD.

                                                                            Plaintiff

AND

BREEZE NAVIGATION LTD.

and THE OWNERS AND ALL THOSE INTERESTED IN THE SHIP "TULOMA"

                                                                           Defendants

                                      REASONS FOR ORDER

                          FEDERAL COURT OF CANADA

                    COUNSEL AND SOLICITORS OF RECORD

DOCKET:

STYLE OF CAUSE:

T-2195-02

Admiralty Action in rem against the Ship "TULOMA" and in personam against Breeze Navigation Ltd. and the Owners and All Others Interested in the Ship "TULOMA"

Between:

PAN OCEAN SHIPPING CO. LTD.

                                   Plaintiff

and

BREEZE NAVIGATION LTD. and THE OWNERS AND ALL THOSE INTERESTED IN THE SHIP "TULOMA"

                                  Defendants

PLACE OF HEARING:Montreal, Quebec

DATE OF HEARING:January 20, 2003

REASONS FOR ORDER BY RICHARD MORNEAU, ESQ., PROTHONOTARY

DATE OF REASONS FOR ORDER:January 21, 2003

APPEARANCES:

SOLICITORS OF RECORD: