[1] By Bill of Sale dated March 1st, 1994, Mr. Allen Cox (the defendant), apparently acting on behalf of Mr. Douglas Gilling (the plaintiff), sold the ship September (the vessel) to Mrs. Denise Sheppard, a Canadian citizen. On September 15, 1994, the sale was registered at the port of Toronto, Ontario, Transport Canada, Registry of Ships and Seafarers (the Canadian Register). Until recently, the Canadian Register showed Mrs. Sheppard as sole owner of the vessel which has been renamed 'Desperado' in the meantime.
[2] By the present action instituted in January 1997, and as amended on November 15, 2004, the plaintiff seeks the following relief from this Court:
(a) a declaration that the owner of the vessel is the plaintiff;
(b) an order requiring the defendant to return the vessel to the plaintiff;
(c) a declaration that the Bill of Sale purporting to sell the vessel to Mrs. Sheppard dated March 1, 1994, is void and of no effect;
(d) general damages from the defendant in the amount of $500,000;
(e) special damages from the defendant in the amount of $440,000;
(f) punitive damages from the defendant in the amount of $20,000;
(g) exemplary damages from the defendant in the amount of $20,000;
(h) such further order as this Court seems just;
(I) costs on a solicitor client basis; and
(j) pre and post-judgment interest pursuant to the Federal Courts Act, R.S.C. 1985, c. F-7, as amended (the Act).
[3] The plaintiff's original Statement of Claim also included as co-defendants Her Majesty the Queen in right of Canada (Her Majesty) and Mrs. Sheppard (collectively, the other defendants). All three defendants opposed the action and filed separate defences. Mrs. Sheppard made a counterclaim seeking damages from the plaintiff in the amount of $168,975 and punitive and exemplary damages in the amount of $20,000. By order dated December 15, 2003, the matter was set down for trial to begin on November 15, 2004, in Ottawa. In the meantime, separate settlements were reached between the plaintiff and the other defendants. As a result, Notices of Discontinuance were served and filed sometime in November 2004. This left only the action against the present defendant, Mr. Allen Cox. A week before trial, Prothonotary Morneau dismissed the defendant's last minute demand for a postponement of the trial.
[4] The plaintiff appeared on November 15, 2004 but the defendant was not present at the hearing (which incidently was concluded on November 16, 2004). Counsel for Her Majesty, Mr. Carter, also appeared at the Court's request. Mr. Carter confirmed at that occasion that he was authorized to speak on behalf of Her Majesty, and also for Mr. Fortier, counsel for Mrs. Sheppard, as to the terms of the recent settlements. He also proposed to act as amicus curiae. Being satisfied that notice of the hearing was duly given to the defendant, and considering that it was not in the interest of justice that the trial be adjourned, the Court proceeded in the absence of the defendant. Further considering that both the plaintiff and the defendant are self represented, the Court appointed Mr. Carter and his colleague, Mr. Lester, as amicus curiae.
[5] The plaintiff testified at length at the trial on the facts that have led him to take the present action and on the losses and damages he claims against the defendant. No other witness was heard viva voce at this occasion. However, the Court accepted the affidavit of one Tony Stephen Pringle which, in accordance with the pre-trial directions, had been duly served and filed on June 18, 2004, by the plaintiff for use at the trial.
[6] The plaintiff was born in 1921. He is an Australian resident and a retired architect. In 1976, he commissioned a firm of Hong Kong builders, Cheoy Lee Shipyards, to build the vessel, an Offshore 47. The vessel is a sailing yacht, known as a ketch and she was launched in December 1976. Before sailing from Hong Kong, the plaintiff registered the vessel with the Hong Kong Registry. A Certificate of British Registry, giving full particulars of the vessel bearing the name of 'September', was issued in favour of the plaintiff.
[7] Together with a crew of four, the plaintiff left Hong Kong in December 1976, and sailed the vessel to Europe by way of the Suez Canal. At the end of that voyage, which terminated in Rhodos in Greece, he left the vessel in charge of one of his crew members, Michael Wignall. Mr. Wignall stayed with the vessel until late in 1979. During that period, he acted as the person in charge of the vessel and carried out some charters under the arrangement that the plaintiff would send some friends from Australia to charter the vessel. Over a period of about 18 months, they had three such charters. In December 1979, Mr. Wignall had other things on his mind, not the least of which was that he was an expectant father. The vessel stayed for a certain time in Bodrum, Turkey, and was then moved from Bodrum to Kusadasi, also in Turkey.
[8] The plaintiff testified that he was unable to return to the vessel from late 1981 until July 1985, where he came to Kusadasi. It was apparent that the vessel required a fairly extensive refit, as she had laid virtually unattended for a number of years. She was lifted from the water and put on what is called the "hard". The mast and spars were taken out. While in the process of doing the painting, the plaintiff met the defendant, Allen Cox. He introduced himself as an Englishman who also owned a vessel which was a 36-foot yacht named Chaika of Vah and which he had chartered for some years. The defendant asked the plaintiff whether he would be prepared to hire his 17-year old son, Allen Cox Junior, but known as Fred, as an extra hand in addition to himself and Mr. Pringle. The latter, a builder and a furniture maker, and also the plaintiff's future-son-in-law, was assisting the plaintiff in relation to the refurbishment of the timber work. The plaintiff had a fair undertaking ahead of him, both in respect of the repainting of the vessel and attending to the varnishing of the spars. Therefore, the plaintiff hired Fred to assist them. Once Fred had been hired, the defendant voluntarily helped in the work - especially in the repainting of the hull.
[9] Both the plaintiff and Mr. Pringle were very impressed by the defendant's talents. It was obvious that the latter was a skilled craftsman. However, the defendant and his son were filling in time until the defendant's then wife, Valerie Cox, arrived from England (with their daughter and a sister). They were to go away on a sailing holiday in their vessel, Chaika of Vah. A few days before they were due to leave, the plaintiff decided to make the following offer to the defendant (which was presented while they were having dinner together with Mr. Pringle and the defendant's son in Kusadasi one night). In return for the defendant keeping 'September' in the condition necessary to attract top charter clients and paying for the day-to-day expenses, the defendant could keep all the money which he earned from the charters. It appears that the defendant had been chartering his own vessel for some years in Turkey but was experiencing certain difficulties because she was really too small to do the job profitably as she had only 4 or 5 berths. Therefore, the plaintiff felt that the defendant would be in a good position to earn a considerable sum of money in adding 'September' to his own vessel. On the other hand, such an arrangement would relieve the plaintiff of the actual maintenance costs of the vessel. The plaintiff testified that there was no agreement to pay any skipper's fees or wages to the defendant for maintaining and operating the vessel. As explained by the plaintiff, this is an arrangement which is very common in chartering yachts. It is used in Florida and in the Caribbean and, to a large extent, in Europe, whereby an owner who has a yacht leaves the yacht with a charter company and the charter company runs it. That said, the plaintiff also testified that "if there were major capital things, other than those things which might have arisen out of the chartering operation", he would be financially responsible for those. The defendant accepted the plaintiff's offer immediately.
[10] Before he left Kusadasi with his family, the defendant said to the plaintiff: "When I come back from my holiday, I will need to have some authority to be able to operate, not only in relation to further work that is needed to be done on the vessel, but authority to be on your vessel". This condition was naturally accepted by the plaintiff. The plaintiff forthwith executed a handwritten Appointment of the defendant as Captain of the vessel while he was still in Kusadasi. Moreover, the following days or weeks, the plaintiff carried on with the refit work with Mr. Pringle, who then himself had to go back to Australia. The plaintiff also prepared a report on the work done on the vessel and an inventory of the vessel's goods and equipment for the use of the defendant when he would return to Kusadasi. He left same with the people on the boat adjacent to the defendant (who undertook to give him the documents on his return). The plaintiff left Turkey sometime in September 1985. Further to the undertaking he had previously given to the defendant, the plaintiff executed on March 7, 1986, in Australia, a Power of Attorney and an Appointment as Captain of the vessel in favour of the defendant (exhibits P-7 and P-8).
[11] The plaintiff testified that the charter season in Turkey runs from mid-April until mid-September. That's virtually 20 weeks. The arrangement the defendant had in relation to his own vessel, Chaika of Vah, was that once the charter season was over in the month of September, he packed up the vessel and usually went back to England and spent Christmas with his family, coming back to Turkey in March to get the vessel ready for the new charter season. The plaintiff testified that he was not involved in the charter operations. He had little or no information in respect of the charter operations that were actually conducted by the defendant, except what he learned occasionally from the defendant or his wife. That said, the plaintiff testified that 1986 was very bad for the defendant. That year, the Achille Lauro was hijacked in the Mediterranean. As a result, the Americans stayed away from Europe. In 1987, the defendant wrote to the plaintiff to inquire whether it was true that he was planning to sell the vessel. The defendant stated in his letter: "... I've put so much into bringing September into almost first class order I really would be left out on a limit if you sold her now. Plus on top I've made new contacts throughout the world, I feel it is going to take at least five years to recoup my investments...". However, the plaintiff had no prospect of selling the vessel and he re-assured the defendant.
[12] Apparently, nothing particular happened in 1988 and 1989. On February 27, 1990, the plaintiff inquired as to the possibility of having a friend charter the vessel from August 25 to September 8, 1990 and asked the defendant to confirm the availability of the vessel and the charter fees and conditions. The answer came from Valerie Cox on March 20, 1990: "Yes 'September' is available from 25th August to 8th September in fact we only have two booking for her this years ... the charter fee is £ 2,250 per week for Skipper and Hostess and includes breakfast and a light lunch". Indeed, according to the comments made by Valerie Cox in her letter: "Things are extremely bad. I say she [September] is available, that is of course providing Allen can make enough money to keep himself out there all summer". The letter continues with a cautionary remark: "Obviously we would be delighted to have your friends on board for a holiday as long as it doesn't turn out like Bill Burrows who at the last minute decides that he is not coming". The plaintiff testified that Mr. Burrows was an architect friend of his who at the last minute decided he was not coming. After the appointment of the defendant as Captain of the vessel in 1985, those two charters were the only ones that were arranged from Australia through the plaintiff.
[13] The plaintiff testified that there was a side agreement with the defendant to the effect that if he arranged any charter from Australia, he would receive 50 per cent of the charter fee. However, the plaintiff was never really interested in earning revenues derived from charter operations. As he stated in his testimony, "it wasn't my business to be going around trying to, what we would call in Australia, "drum up charters". I had a few other things on my plate at that time". Moreover, the plaintiff already had the experience with the three charters that were carried out during the 18-month period in the late seventies under the arrangement he previously had with Mr. Wignall: "But then, having received the money from the charters in Australia, I had difficulties with my accountant saying: "Well, how are we to account for this income in your tax return?" I said: "Well, it's just income that I have earned personally." and he said: "Well, in those circumstances, you should be in a position of de-valuating the vessel for tax purposes." and I said: "Well, that seems to me to be an enormous hassle associated with it" - and indeed it was. The Tax Department was exceptionally suspicious of such an arrangement, and I didn't want, five years later or six years later, to have that same circumstance happening to me again."
[14] It appears that from 1985 to 1997, the plaintiff did not return to Turkey. Those were difficult years professionally speaking for the plaintiff so he stayed in Australia. The plaintiff further testified that during all these years, he had very little, if no, communication with the defendant and explained in this regard: " ... I was continuing in the fond belief that the arrangement that had now been in place for a considerable period was in fact going smoothly". However, the Court notes in this regard that the plaintiff's own documentary evidence produced at the trial casts serious doubt on the validity of the assertion made by the plaintiff. In any event, in November 1992, the plaintiff received an undated, but registered letter of three pages from the defendant claiming that the plaintiff owed him a vast sum of money in connection with maintenance, repairs renewals, insurance, marina fees, etc., and further complaining that "as you did not honour our original agreement you now owe me for my time, hours and hours of work on bringing September back from the empty rotten shell that she was to a serviceable yacht."
[15] In his letter of November 1992, the defendant was complaining that the plaintiff had neglected over the years to respond to his previous correspondence and that he did not show any interest in the vessel. The defendant was making express reference to his previous letter of March 20, 1990 (not the short letter written by Valerie Cox at that date but an extended one written by the defendant himself) and his correspondence of 1991, all of which were apparently left unanswered. The plaintiff did not produce this correspondence nor did he claim at the hearing that he had not received it. But more importantly, the defendant was further announcing to the plaintiff that there was a number of structural and latent defects affecting the vessel. The problems in question were of a serious nature and needed to be addressed immediately by the plaintiff. Great expenditures had already been incurred by the defendant or were about to be incurred. In this regard, the defendant felt that he was not responsible for same under the agreement he had with the plaintiff.
[16] The relevant parts of the November 1992 letter read as follows:
Back in October 1991 cracks were found inside September, in the Saloon area. I was sailing in quite strong winds back to Marmaris. I had to drop the sails and resort to the engine. Two steel plates had parted, i.e. broken in pieces, photographs enclosed. (I have enclosed photographs to support all that it is written in this letter and I have written on back of photos explaining what is in the photo for your information). I almost lost the mast. Further investigations showed bow fitting cracked, welding had parted, this had to be replaced.
The front stay frayed and had to be replaced. Work had to be done all throughout the Winter to get September into commission by 1st May. I worked 14 hours a day.
It was never my intention to get so involved with September the work carried out (as in photos) alone cost me £ 10,000+. I have replaced every bit of steel aboard September from bow to stern, even the mast fittings have had to be replaced. The masts had to be removed as they were in danger of falling down. I am not sure Doug but I believe you may have a legitimate claim against Cheoy Lee. I can get an insurance assessor to confirm all works carried out by me to date but it will cost £ 60.00. I do not want to pay this, it is your responsibility.
If you do decide to contact Cheoy Lee and they say that September is an isolated case you can inform them that the yacht Eole, a French owned boat is here with September, she is also suffering from the same problems and will confirm as much.
I wish to be fair about all this as I have been working September but without your originally promised support and financial support at the outset I have not made enough money to cover all what has happened to her.
Materials alone have cost over £ 3,000 this year. I have had to replace bulk heads in the saloon and aft cabin. The exhaust system has had to be ripped out and replaced. The masts have had to be repaired, revarnished and rerigged. I have had to carry out a vast amount of glass fibre work, new bulk heads under berths and have had to supply and fit new drawer bearer, new drawer runners etc. etc.
Recently whilst polishing the Hull I find hairline cracks in the forward bulkhead, i.e. chain locker. I am extremely worried about this but I cannot do a thing until the end of the Season but it means an awful lot of work and then to strengthen the bow section. At sometime or another September has had repair work carried out in this area, it could be the cause of the hairline cracks, I do knot [sic] know, one thing I do know is that September is not built very well. I was under the impression that she had been built under Lloyds supervision, this is obviously not the case. The engine bearers came loose from the hull, the engine fell over to one side breaking the mounts and breaking the coupling. I now find the battery platform is coming away from the hull. It really is a never ending task just keeping the boat together.
(My emphasis)
[17] In his letter of November 1992, the defendant concluded: "Doug, you now owe me around £ 40,000 for all the years that I have been looking after September for you. I would be prepared to accept £ 35,000 but I really would like to get a firm proposal from you as to how you will settle this debt. Every year that goes by I invest more and more of my own money into September and I am not getting any returns. The time is now here when I must hear from you." (My emphasis) It is important to remark that in this letter, the defendant also indicated to the plaintiff: "I want to know whether you are in a position to pay me what you owe me in cash or alternatively sign September over to me on a legal Bill of Sale in lieu of money owed and services rendered ... If you do not respond to this letter I will have to contact my Solicitor, and then find a buyer for September." (My emphasis).
[18] The plaintiff testified that the defendant's claim was "a bolt from the blue" and was a "great surprise" to him, as he had received absolutely nothing in that period that would substantiate a claim of £ 40,000. The Court finds the plaintiff's testimony in this regard not very convincing. In his testimony, the plaintiff did not comment on the numerous complaints contained in the letter of November 1992, except to say the he did not owe any wages to the defendant and that the defendant was solely responsible for the maintenance of the vessel. The plaintiff apparently made no inquiries to verify the accuracy of the statements made by the defendant in his letter. It also appears that photographs were enclosed with the November 1992's letter. Same were not produced at the hearing. Moreover, the plaintiff has already recognized in his testimony that "major capital expenditures" were his sole responsibility. Indeed, he testified that back in 1985 "there were outstanding matters which were to be done on the vessel, where I was required to provide material, to an agreed list". He referred, in particular, to the sail covers and the awning that was used over the cockpit. The plaintiff also testified that back in 1985 the defendant had drawn his attention to the fact the aluminium pedestal upon which the steering wheel was mounted and the compass, which is a hollow pillar in which the wire for the steering is hidden, was cracked. As it was cast aluminium, one of those points had cracked and the plaintiff had undertaken to replace same by placing an order with Cheoy Lee Shipyards and asking them to ship the pedestal to Turkey. It appears that after 1986 or 1987, no sums of money were advanced or reimbursed to the defendant in relation to any expenditures of a "capital" nature. Assuming the defendant's allegations of structural or latent defects made in the letter of November 1992 were substantiated, the defendant was certainly in a strong position to argue that the expenditures were of a "capital" nature and were not simply related to the maintenance of the vessel. Accordingly, the plaintiff would have to put money up-front and reimburse the defendant for same.
[19] The plaintiff testified that following the receipt of the letter of November 1992, he immediately sought legal advice. However, contrary to the advice he received from his lawyer, he did not immediately terminate the Power of Attorney, nor the Appointment as Captain given to the defendant. The plaintiff explained: "I was not in a position to go immediately to deal with the vessel, and therefore I would be, as it were, placing myself in a position where my boat was bobbing around in Turkey unattended. So what I did do was the second part of my lawyer's advice to me, which was to negotiate a position with Mr. Cox.". What exactly that "position" was, the plaintiff did not tell the Court. Apparently, the plaintiff sent a letter to the defendant "which unfortunately is lost; but is acknowledged that it was received". In his testimony, the plaintiff was very evasive on the content of his letter. Indeed, the Court has been left ignorant of any proposal or offer which may have been made by the plaintiff at that time to settle the defendant's claim of £ 40,000. Coincidently, the Court notes that on December 2, 1992, the registration of the vessel was closed in the Hong Kong Register of Ships and a Certificate of Deletion was issued following the plaintiff's failure to pay annual tonnage charges. The plaintiff explained in this regard that the Hong Kong Registry had changed the rules so that they required an annual fee for registering the vessel which, in the plaintiff's opinion, was "of fairly extortionist proportion". The plaintiff did not indicate in his testimony exactly what this annual fee was.
[20] The plaintiff had a telephone conversation with the defendant in late January 1993. The plaintiff did not tell the Court what he may have told or offered to the defendant at that time, or if any money was put on the table. Moreover, he did not tell the Court whether or not he was in a financial position to support the costs of repairing the vessel and of reimbursing the defendant for any expenditure of a capital nature. What is certain though, the plaintiff wanted a breakdown of the amounts claimed, for they also included unpaid wages which the plaintiff has always denied being due to the defendant. However, the plaintiff testified that he had paid certain sums of money in 1986 to the defendant's son as "salary". Following their telephone conversation, in January 1993, the plaintiff received a one-page unsigned letter from the defendant dated February 19, 1993. The defendant simply did not trust the plaintiff anymore. He did not want to deal directly with the plaintiff and was asking him the name and address of his solicitors or lawyers. There is no proof that the required information in the letter dated February 19, 1993 was indeed given to the defendant by the plaintiff.
[21] On March 9, 1993, the defendant wrote again to the plaintiff to inform him that he had changed his fax number. The defendant also wanted to let him know that "Val and I are divorced (she has remarried) and she is no longer handling my business affairs." The defendant also mentioned in his letter that he was "still in the process of compiling the breakdown as you requested", which apparently was taking him considerable time to complete. The defendant concluded by stating that "it is approximately 75% complete at this time and I shall forward same to you upon its finalization". The plaintiff testified that this is the last piece of correspondence that he ever received from the defendant. However, the plaintiff omitted to indicate in his testimony whether he kept a telephone contact or if he himself ever wrote to the defendant during this period. Months passed. Apparently, the plaintiff made no request for information and did not pursue the matter further with the defendant. The plaintiff explained that he had medical problems. He had to undergo nose surgery in October 1993. It was also a difficult time professionally. His firm had instituted a suit worth $1.9 million against a client in Australia. The client in question had also sued his firm for $5.4 millions. In other words, his mind was not in Turkey at that time.
[22] This now brings us to the subject matter of the present action. By Bill of Sale dated March 1, 1994, the vessel was transferred to Mrs. Sheppard in consideration of the sum of £ 10.00 and "due considerations". Same were apparently paid to the plaintiff according to the copy of the Bill of Sale executed and signed by the defendant "for and on behalf of Douglas Lawrence Gilling", the plaintiff (Exhibit P-26). The defendant admitted in his pleadings that following the sale, the old markings from the vessel were removed and she was re-named 'Desperado'. On September 15, 1994, the vessel was registered on the Canadian Register under the name 'Desperado'. Until recently, the Canadian Register showed Mrs. Sheppard, a Canadian citizen, as sole owner of the vessel.
[23] The plaintiff formally denies in his pleadings having consented to the sale or having been informed of its existence back in 1994. That said, according to the testimony given by the plaintiff at trial and the mention made by the plaintiff in the June 13, 1996 letter he addressed to the Secretary of the Australian Embassy in Turkey (Exhibit P-20, fourth paragraph), sometime in 1994, the defendant had already informed him by telephone that he had moved the vessel from Kusadasi to Marmaris. One may wonder what could also have been discussed at this occasion since the defendant had apparently never paid the sums of money the defendant was claiming from him in November 1992. In May 1996, instead of communicating with the defendant and asking him directly what was happening with the vessel, the plaintiff chose to ask friends living in Castlecrag who were chartering a yacht a vessel from Marmaris at that period "to make some discreet enquiries to confirm that "September" was still based in Marmaris and to advise me of its condition". The plaintiff gave them a vivid description of the vessel. According to the plaintiff "when they arrived in Marmaris, about a fortnight later, .... the husband rang me and said: "We've found your boat all right, Doug. There were no problems with that. It's no longer called "September"; it's called "Desperado", and you are no longer the owner. According to the Marina Office, the yacht is now owned by Allen Cox."" This is pure hearsay. The Court finds the evidence that the vessel would now be owned by the defendant himself unreliable and contrary to the documentary evidence on record which shows that the vessel was registered to the Canadian Register in September 1994 solely in the name of Mrs. Sheppard. Accordingly, this hearsay evidence should not be given any weight, except to prove that, at least from May 1996, the plaintiff was fully aware that the defendant had "converted" the vessel. Despite this bad news and the apparent "treatise" of his Captain, the plaintiff took no immediate action against the defendant, but went to the Australian Shipping Registration Office and had the vessel "provisionally" registered under his own name. According to the letter which was subsequently issued on January 20, 1997, emanating from the Deputy Registrar "[r]egistration is provisional rather than permanent only because the ship is presently outside Australia and has not yet been marked with its Australian marking". The plaintiff also wrote to the Secretary of the Australian Embassy in Ankara sometime in June 1996 to ask him "if you could advise me of a suitable lawyer or firm, cognisant with my type of problem, and who may be based near Marmaris so that any necessary action could be promptly executed". However, the plaintiff apparently did nothing to alert the defendant. Months passed.
[24] On January 7, 1997, the plaintiff obtained written confirmation by fax from the Canadian Registry that the vessel 'Desperado' was registered at the port of Toronto and that the manager owner was Mrs. Sheppard (and not the defendant). The same day, the plaintiff revoked the Power of Attorney and the appointment of the defendant as Captain. In the months of January and February 1997, the plaintiff, who was accompanied by Mr. Wignall, made a few trips in Turkey and in Canada, hired lawyers in both jurisdictions and instituted the present action in Canada and proceedings in Turkey to obtain a Precautionary Judgment. The original Statement of claim was filed on January 22, 1997. A motion ex parte for service outside the jurisdiction was presented on behalf of the plaintiff. It was subsequently served personally on the defendant and Mrs. Sheppard in Turkey and on the vessel apparently in the manner provided by Gibson J. in his order dated January 24, 1997. That said, on February 20, 1997, the plaintiff applied and was granted a Precautionary Judgment (akin to an injunction) by the Civil Court of Marmaris in Turkey which required the defendant and Mrs. Sheppard to vacate the vessel and required the vessel to be placed in the hands of Mr. Metin Erkerman, Manager of the Netsel Marina, as custodian for the Turkish Republic. As stated by the plaintiff, "once the vessel was put in charge of the trustee, access to it was denied to both Mrs. Sheppard and myself". It appears that the Precautionary Judgment remained in force until sometime in November 2001, where the vessel once again came under the control of Mrs. Sheppard following the voluntary withdrawal of the plaintiff's proceedings in Turkey.
[25] Having considered the parties' pleadings and the evidence submitted by the plaintiff, and having determined that the matter should be decided on the basis of Canadian domestic law in this case, the Court concludes that the defendant had no legal authority to sell the vessel to Mrs. Sheppard and that he unlawfully converted the vessel or its proceeds to his own use.
[26] Firstly, the plaintiff had to establish that he was the lawful owner of the vessel or had the immediate right to possession. He has obviously led conclusive evidence on that point. Conversion is an action or an act which is inconsistent with the owner or possessor's rights. Indeed, the defendant admitted that he participated in the sale of the vessel in March 1994 to Mrs. Sheppard. As result of his action, Mrs. Sheppard took possession of the vessel and got it registered on the Canadian Register.
[27] Secondly, there is no evidence on record to support a finding that the plaintiff was really indebted to the defendant for the sums of money mentioned by the defendant in his pleadings. The allegations made by the defendant in this regard remain allegations. Moreover, there is no proof that the said debts were, under the laws of Turkey, as alleged by the defendant in his pleadings, secured by liens against the vessel. If foreign law is not pleaded or, if pleaded, it is not proved or is insufficiently proved, the Court will apply the lex fori. In this regard, it is recognized that "in all cases where foreign law is not proved, the lex fori prevails as it is the only law available" (J.-G. Castel and Janet Walker, Canadian Conflict of Laws, 5th ed., at para. 7-4). Accordingly, in the absence of judicial authorization or consent given by the plaintiff, the defendant had no lawful authority to unilaterally seek a buyer for the vessel and pay the debts of the vessel from the proceeds of the sale as the defendant purportedly did in this case.
[28] Thirdly, based on the documentary evidence presently on record and the uncontradicted testimony of the plaintiff, the Court finds that the plaintiff did not expressly authorize the defendant to sell the vessel to Mrs. Sheppard or any other third party, and that, contrary to the declaration made in the Bill of Sale dated March 1, 1994, no sums of money or considerations were paid to the plaintiff. Moreover, there is no specific reference in the Bill of Sale dated March 1, 1994 to the Power of Attorney granted on March 7, 1986 by the plaintiff to the defendant. There is no evidence on file that the defendant, who was purportedly acting as agent of the plaintiff, reported the sale or its proceeds to the plaintiff, prepared an inventory or submitted a final account to the plaintiff. The uncontradicted testimonial evidence reveals that the Power of Attorney was granted in 1986 at the request of the defendant to avoid any problems he might encounter with the Turkish authorities. Its purpose was not to authorize the defendant to sell the vessel without the consent of the plaintiff. Indeed, there is no express reference in the Power of Attorney to any power to sell the property of the plaintiff. Therefore, the defendant is estopped from relying on the Power of Attorney granted on March 7, 1986, to justify his action. (William Bowstead, A Digest of the Law of Agency, 9th ed. (By Arthur H. Forbes), (London, Sweet & Maxwell, 1938), articles 36 and 37, p. 59 and following). That being said, while the plaintiff's inaction or silence cannot be construed here as an implicit consent to sell the vessel or a ratification of the sale, the plaintiff's inaction and silence certainly affect, in the Court's opinion, the plaintiff's entitlement to obtain damages from the defendant (a point which is addressed later in these reasons for judgment).
[29] Fourthly, the Court was advised at the hearing that the vessel is still physically in Turkey. As a result of the settlement recently reached with the plaintiff, Mrs. Sheppard has executed a Bill of Sale transferring legal title over the vessel from herself to the plaintiff. The sale has been registered in Canada. However, because of the requirements of the Canada Shipping Act, R.S.C. 1985, c. S-9 and, since the plaintiff is a non-resident, he cannot appear on the Canadian Register as owner. Accordingly, the entries showing Mrs. Sheppard as the owner of the vessel registered in Canada have been deleted and a Deletion Certificate has or will be sent to the plaintiff in Australia. Moreover, Mrs. Sheppard has cancelled the Power of Attorney which she had previously given to the defendant to act as skipper and to deal or look at the vessel.
[30] Accordingly, the plaintiff is entitled to the following declarations:
a) a declaration that the owner of the vessel is the plaintiff;
b) a declaration that the Bill of Sale purporting to sell the vessel to Mrs. Sheppard dated March 1, 1994, is void and of no effect.
[31] The plaintiff has also asked that an order requiring the defendant to return the vessel to the
plaintiff be also issued by this Court. However, the plaintiff has presented no evidence at the hearing that the vessel would still be under the control of the defendant. On the contrary, the vessel was sold in 1994 to Mrs. Sheppard and it was indicated at the hearing that as a result of the settlement reached recently with Mrs. Sheppard, the latter has cancelled the Power of Attorney which she had previously given to the defendant to act as skipper and to deal or look at the vessel. In view of the fact that there is no clear evidence on record indicating that the defendant is actually in possession of the vessel, the Court is therefore refusing to make the solicited order of return against the defendant.
[32] This brings us to the question of damages. First, as explained in Clerk & Lindsell on Torts,
at common law, the measure of damages to which a claimant is entitled for deprivation of his goods is normally their market value, together with any special loss which flows naturally and directly from the wrong. In conversion, the time of conversion is normally the proper time for assessment of the value of the goods. In detinue, the value of the goods is assessed at the date of judgment, when their return has been ordered. Moreover, at common law, no owner may enjoy without payment an unwanted benefit resulting from another's unauthorized improvement of a chattel of which he retains, or without action, regains possession. Furthermore, where a claimant is also seeking by action the return of, or damages for, his converted chattel, he cannot profit from any increase in its value caused by its unauthorized improvement by the defendant (Clerk & Lindsell on Torts, 18th ed. (London, Sweet & Maxwell, 2000)). In the case at bar, in view of the lack of evidence, the Court is not in a position to assess the market value of the vessel at the time of conversion (and also any increase or decrease in the value of the vessel caused by any unauthorized improvement or any wrong by the defendant).
[33] Second, as explained in Clerk & Lindsell on Torts, damages for conversion are in
principle at large and aggravated damages may be awarded "for the circumstances of a conversion". However, exemplary damages are not ordinarily awarded, save in the situation laid down by Lord Devlin in Rooks v. Barrard [1964] A.C. 1129 at 1227; that is, where either goods have been converted in the hope that the gain therefrom will exceed any damages payable, or high-handed action by public authorities is involved. However, the claimant may recover all such damages as are the natural and direct result of the conversion; for example, the loss of profits to be made from the chattel, or the loss of a purchaser for it. But any such damage must be reasonably foreseeable to the hypothetical conversion. Convincing evidence has to be adduced in this regard. Furthermore, the mere capacity for profitable use is part of the value of a chattel and therefore the loss of such is not a separate head of damage, for, if so, the claimant would pro tanto recover twice over (Clerk & Lindsell on Torts, supra, at para. 14-113 and 14-114). In the case at bar, in view of the lack of evidence, the Court is not in a position to assess any loss of profits and cannot determine the amount of any aggravated damages "for the circumstances" of the conversion. Neither can this Court determine in the absence of relevant and credible evidence whether this is a proper case to award exemplary or punitive damages.
[34] Third, when a chattel has been wrongfully taken, deprived or otherwise converted, there
is a vested cause of action which cannot be defeated merely by the fact that the claimant subsequently gets his goods again before judgment. But after such redelivery, the action is merely for any consequential damages or deterioration in value, if any. The position is the same if the claimant, after the action has been brought, thinks it proper to take the chattel back (Clerk & Lindsell on Torts, supra, at para. 14-127). As a result of the settlement reached with Mrs. Sheppard, the plaintiff's right to recover damages would therefore be limited to any consequential damages or deterioration in value of the vessel caused by any wrong done by the defendant since 1994. In the case at bar, in view of the lack of evidence, the Court is not in a position to assess any consequential damages or deterioration in value of the vessel. Mrs. Sheppard was purportedly the owner of the vessel from 1994 to 2004. Accordingly, legally speaking, possession of the vessel could only be given by Mrs. Sheppard. Furthermore, as result of the Precautionary Judgment obtained by the plaintiff, from 1997 to 2001, the vessel was no longer under the guard and custody of the defendant and Mrs. Sheppard, but that of the Trustee appointed by the Turkish Court.
[35] The Court will now specifically address each claim of damages mentioned in the Fresh
Further Amended Statement of Claim of the plaintiff. Besides the general reasons mentioned above by the Court, these claims are denied for the additional reasons indicated below. The plaintiff first claims the sum of $500,000 as "general damages". The plaintiff testified in this regard that he has been deprived of what would normally be a reasonable retirement for somebody who had been a practising architect since 1951. He testified that he closed his office in 1992, keeping the name of the firm going from an office at home, in Castlecrag, in Australia. He then explained that from the onset of these proceedings - which have started virtually at the beginning of 1996 - prospect of any retirement has been denied to him totally. The plaintiff stated that he has not "had a holiday in whole of the period while this matter has been afoot, except [for a] three weeks holiday ... in New Zealand" and also that his family life "has been seriously disturbed as a result of this operation". This Court does not consider that, in the particular circumstances of this case, the plaintiff can claim general damages for the inconvenience or stress of having been deprived of the vessel. The plaintiff did not have physical possession of the vessel before the conversion. Indeed, he was quite happy to leave the actual possession of the vessel to the defendant as long as the latter maintained the vessel in charter condition. Even if it is assumed that the vessel has some kind of value for a collector - a point that has not been satisfactorily proven by the plaintiff - the plaintiff has recovered the vessel and will now be able to sell the vessel if he so desires. As for the fact that the plaintiff or his family having not been able to use the vessel for recreational purposes during their past holidays, the evidence on record does not support a claim in this regard. The fact that the plaintiff did not "have a holiday in whole of the period while this matter has been afoot" is unrelated to any tort committed by the defendant. The Court further notes that prior to the institution of the present action, there is no evidence that the plaintiff or his family even used or attempted to reserve the vessel from the defendant for any period of time during their past holidays.
[36] Under the head of "special damages", the plaintiff also claims a sum of $200,000.00 in
respect of being deprived of the vessel, which corresponds to the replacement value of the vessel in charter condition with all of its equipment. The Court must also dismiss this claim of damages. As a result of the settlement reached with Mrs. Sheppard, the vessel has been or shall be returned to the plaintiff. Since damages for detention are intended to compensate the plaintiff for his loss and not to punish the defendant, the plaintiff can only receive consequential damages on deterioration in value, if any. The plaintiff has not inspected the vessel. He cannot testify on her present or past condition, except for 1985 which is 9 years before the conversion took place. The plaintiff offered no expert evidence, except his own appreciation of the present value of the vessel, based on a research he had recently done on the Internet. This evidence is inadmissible in the circumstances. Alternatively, the plaintiff indicated in his testimony that he wished to rely on certain parts of the expert report which was prepared by Mr. Ilhan Arican on behalf of the Crown, and more particularly to paragraphs 28 and 34 of his affidavit dated June 24, 2004, which states that, in his opinion, the market value of the vessel on May 26, 2004, in Marmaris in her present condition is US $25,000 and the costs of bringing the vessel up to charter condition would be around US $10,000. Whether the present market value of the vessel is US $25,000 or not, is inconsequential unless the plaintiff is able to prove the fall in the value of the vessel since the conversion took place. The plaintiff has not brought any credible evidence of the value of the vessel at the time of conversion. Mr. Arican's report is of no help in this regard. Any loss of value has not been satisfactorily proven by the plaintiff. As far as the costs of bringing the vessel up to charter condition, which according to Mr. Arican would be around US $10,000, this particular sum of money has never been claimed by the defendant in his action. Moreover, the plaintiff admitted that he did not make a visual inspection of the vessel. He has provided no reasons why he could not personally go himself to Turkey. The underlying material observations made by Mr. Arican constitute hearsay and have not been independently proven by any witness. The report of Mr. Arican was prepared on behalf of the Crown which was no longer a party at the time the Court started to hear the evidence of the remaining two parties. The plaintiff did not inform the defendant prior to the hearing that he intended to rely on the affidavit and report of Mr. Arican. For all these reasons, the Court refuses to accept as evidence the report and affidavit of Mr. Arican, particularly paragraphs 28 and 34 of his affidavit.
[37] The plaintiff also claims as "special damages" a further sum of $350,000 in respect of
being deprived of the use of the vessel, that being the loss of charter revenue for over seven years. The plaintiff has offered very little explanation concerning this particular claim except to state that it "would be that from the time that I became aware that the vessel was no longer mine, which was in May 1996, I have been deprived of the ability to make money from it as a charter should I have chosen at that particular moment to have gone over to Turkey and said, with the one month's notice that I was required to give Mr. Cox: "Sorry, the matter is over now. I am going to take over the vessel, and I am going to charter it"". As to how the plaintiff came up to this particular figure, he testified that it was generally based on the quote of £ 2,250 per week Valerie Cox gave him in 1990, assuming that on a yearly basis the defendant managed to be able to charter the vessel at least 16 weeks. This is pure speculation. This Court is not in a position to determine what the profits made by the defendant were once he paid the maintenance and other costs associated with the charter operations. This evidence is insufficient to establish any loss of profits on the part of the plaintiff. The plaintiff has not satisfactorily proven that he was in a position to charter the vessel from Australia. The plaintiff would have had to find a new Captain in Turkey. Costs would have to be incurred before the plaintiff would be able to make a profit. As it was previously noted, it appears that the mere capacity for profitable use is part of the value of a chattel and therefore the loss of such use is not a separate part of damage, for, if so, the claimant would, pro tanto, recover twice over (Clerk & Lindsell on Torts, supra, at para. 14-116; reference is made to the following cases: Reid v. Fairbanks (1853), 13 C.B. 692; cf. The Llanover, [1947] p. 80). In any event, there is no evidence that the plaintiff had any plans of realizing a profit had he been able to recover the vessel from the defendant the moment he learned that the vessel had been converted. Indeed, the inference can go the other way as the plaintiff was quite happy with the arrangement he had with the defendant as long as the vessel was maintained in charter condition. If the action complained of would not have occurred, the arrangement made with the defendant would have carried on; that is to say, the plaintiff would not have been making a penny out of his charter business. Indeed, the plaintiff's evidence was to the effect that he got out of the charter business with Mr. Wignall, where he shared the profit, because of the tax problems it created for him in Australia. Therefore, the plaintiff cannot claim special damages for any loss of charter revenue.
[38] The plaintiff also claims as special damages the travel, hotel, paralegal, legal, secretarial
and miscellaneous expenses he incurred in relation to the present action and the related proceedings in Turkey. Those expenses are listed at paragraph 2(b) of the Particulars filed on June 6, 2001 (at trial, the plaintiff abandoned his claim with respect to the sum of US $17,000.00 mentioned at item D). Those costs and expenses total some $60,000. Receipts or explanations were provided by the plaintiff with respect to the following items:
Item A
i) referred as document 1: air line tickets for the applicant and Mr. Wignall in the amount of $3,158.00;
ii) the applicant has pledged an oath that the amount of $3,173.00 is the exact fare he and Mr. Wignall paid for their travel from Istanbul to Ottawa;
iii) referred as document 3 and 3A: air line ticket and visa receipt for the return of the applicant in Sidney in the amount of $1,573.00;
iv) referred as document 4: ferry cost in the amount of $125.00;
v) referred as document 5: travel insurance in the amount of $308.00;
vi) the applicant has pledged an oath that the amount of $740.00 is the exact amount he paid for car rental;
vii) the applicant has pledged an oath that the amount of $135.00 is a conservative figure of the true figure of the amount he paid for taxis.
Item B
i) referred as document 6: stay at the Emphe Hotel in Rhodos in the amount of $48.00;
ii) referred as document 7: stay at the Elegance Hotel in Marmaris in the amount of $816.40 (Australian dollars);
iii) referred as document 7A: stay at the Elegance Hotel (in whole) in the amount of $2,456.00;
iv) referred as document 8: stay at the Park Hotel in the amount of $113.00
v) the applicant has pledged an oath that the amount of $186.00 is the exact amount he paid for his stay at the Armada Hotel in Istanbul;
vi) referred as document 10: stay at the Capital Hill Hotel in the amount of $1,146.00;
vii) the applicant has pledged an oath that the amount of $234.00 is the exact amount he paid for his stay at the Mercure Hotel in Ankara;
viii) referred as document 11: stay at the Class Hotel in Ankara in the amount of $1,315.00;
ix) vii) and viii) referred as documents 12 and 13: stay at the Olbia Hotel and Kibaslar Hotel in the amount of $107.00;
x) referred as document 14: stay at the Cinar Hotel in the amount of $26.00;
Item C
i) Document 15: para-legal expenses in Marmaris in the amount of $4,504.00.
Item E
i) document 16: legal expenses of the plaintiff in connection with services provided by his Turkish lawyer Mr. Hasbioglu in the amount of $3000.00 (US);
ii) the applicant has pledged an oath that the amount of $1,500.00 is the exact amount he paid for legal services provided by his Turkish lawyer Mr. Hasbioglu in connection with the appeal process;
iii) document 17: documents in connection with a statutory declaration from the plaintiff.
Item F
i) Document 18: miscellaneous expenses in the amount of $1,500.00.
Item G
i) The applicant has pledged an oath that the amount of $1,850.00 is the exact amount that he paid for secretarial services.
[39] The Court is not satisfied that the costs and expenses referred to above which are claimed
as special damages by the plaintiff are a natural and direct result of the conversion which occurred back in 1994. There was no default notice and no demand made by the plaintiff to the defendant to return the vessel at any time before the institution of the present action in 1997. The plaintiff did not act promptly in revoking the Power of Attorney and the Appointment of the defendant as Captain; that is, where it became apparent that the defendant was no longer satisfied with the arrangement and was pursuing his claim of £ 40,000. Indeed in November 1992, the plaintiff was made aware of the defendant's grievances and his monetary claim. Despite the legal advice he received from his counsel back in late 1992 or early 1993, the plaintiff did not revoke the Power of Attorney and the Appointment as Captain. Indeed, at no time between March 1993 and January 1997, did the plaintiff ever visit Turkey or the vessel, write to the defendant or to anyone on board of the vessel, either by post, telex, messenger service, or fax. It is also apparent that he did not initiate a telephone call to the vessel or to the defendant during this whole period. The explanations given by the plaintiff, whether medical or professional, are personal to the plaintiff. They cannot be opposed to the defendant and later served as a basis for seeking aggravated damages. Since at least 1994, the plaintiff knew that the vessel was in the marina at Marmaris. In May 1996 the plaintiff did not even feel it was necessary to revoke the Power of Appointment or to take immediate conservatory measures. Moreover, no credible evidence was submitted at trial by the plaintiff attesting that there were actually threats made by the defendant to destroy or to disappear with the vessel. The testimony given by the plaintiff in this regard is purely speculative. It is apparent that one reason why the plaintiff commenced these proceedings in Canada was to strengthen his position against the defendant in Turkey, if that was necessary.
[40] The plaintiff is also claiming from the defendant $40,000 in exemplary and punitive
damages. No evidence of a particular reprehensible conduct has been submitted with respect to this element of the plaintiff's claim. Fraud has not been proven and cannot be inferred from the fact alone that the defendant has apparently signed the Bill of Sale of March 1, 1994, without the plaintiff's consent. Though aggravated damages may be awarded in case of a conversion (Owen and Smith v. Reo Motors (Britain) Ltd., [1934] All E.R. 734), it is not permissible to award vindictive or exemplary damages (Rookes v. Barnard, [1964] A.C. 1129), unless "it is necessary to teach a wrongdoer that tort does not pay". Lord Devlin has thus expressed the principle: "where a defendant with a cynical disregard for a plaintiff's rights has calculated that the money to be made out of his wrongdoing will probably exceed the damages at risk, it is necessary for the law to show that it cannot be broken with impunity. This category (of cases) is not confined to moneymaking in the strict sense. It extends to cases in which the defendant is seeking to gain at the expense of the plaintiff some object - perhaps some property which he covets - which either he could not obtain at all or not obtain except at a price greater than he wants to put down." (Rookes v. Barnard, supra). In his defence, the defendant has alleged that he had the right to sell the vessel because he had a secured lien and because the plaintiff owed him money for unpaid charges. Based on the documentary evidence produced by the plaintiff, as far as the defendant is concerned, in November 1992 and February 1993, the latter was certainly asserting a legitimate right against the plaintiff. It is not necessary for the Court to decide whether the defendant was actually right, but this suffices to convince the Court that the plaintiff has not met his burden of proving a "vindictive, reckless or high-handed conduct".
[41] Finally, the plaintiff wishes to recover from the defendant on a solicitor-client basis, the
fees that were charged by Low, Murchison LLP in the nine month period that they represented him in this action and which represent a sum of $18,000 according to the plaintiff's testimony. In view of the particular circumstances of this case, this is not a proper case to allow costs on a solicitor-client basis. Moreover, in view of the divided result of this action and having considered the conduct of the parties in this case, including all relevant factors listed at Rule 400 of the Federal Courts Rules, SOR/98-106, as amended, no costs shall be awarded in favour of, or against any party in this case.
JUDGMENT
For the reasons set out above, this Court adjudges, declares and orders:
1. The plaintiff's action is allowed in part.
2. The Bill of Sale purporting to sell the vessel, September, to Denise Sheppard, dated March 1, 1994, is void and of no effect.
3. The owner of the vessel September (a.k.a. Desperado) is the plaintiff.
4. All other claims for relief in damages or otherwise made by the plaintiff in his Fresh Further Amended Statement of Claim are dismissed.
5. No costs shall be awarded in favour of or against any party in this case.
"Luc Martineau"
J.F.C.
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-109-97
STYLE OF CAUSE: DOUGLAS GILLING
Plaintiff
and
ALLEN COX and THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP SEPTEMBER
(a.k.a. DESPERADO)
Defendants
PLACE OF HEARING: OTTAWA, ONTARIO
DATES OF HEARING: NOVEMBER 15 and 16, 2004
REASONS FOR JUDGMENT
AND JUDGMENT BY: MARTINEAU J.
DATED: December 15, 2004
APPEARANCES:
Douglas Gilling For the Plaintiff, On His Own Behalf
R. Carter
G. Lester For Her Majesty the Queen in Right of Canada and
Denise Sheppard (on the issue of the settlements)
and as Amicus Curiae
A. Cox [did not attend and unrepresented]
SOLICITORS OF RECORD:
Douglas Gilling
Castlecrag, Australia For the Plaintiff
Allen V. Cox, Cpt. For the Defendant
10 Marti Marina
Marmaris Orhaniye, Mugla
Turkey 24700
FEDERAL COURT
Date: 20041215
Docket: T-109-97
BETWEEN:
DOUGLAS GILLING
Plaintiff
and
ALLEN COX and THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP SEPTEMBER (a.k.a. DESPERADO)
Defendants
REASONS FOR JUDGMENT
AND JUDGMENT
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