Global Enterprises International Inc. v. Aquarius (The), 2002 FCT 150

Date: 20020208

Docket: T-16-01

Neutral citation: 2002 FCT 150

BETWEEN:

                                          GLOBAL ENTERPRISES INTERNATIONAL INC.

                                                                                                                                                          Plaintiff

                                                                            - and -

                                                    THE OWNERS AND ALL OTHERS

                                              INTERESTED IN THE SHIPS "AQUARIUS",

                                          "SAGRAN" and "ADMIRAL ARCISZEWSKI",

                                       THE SAID SHIPS "AQUARIUS", "SAGRAN" and

                                     "ADMIRAL ARCISZEWSKI", THE SAID SISTERSHIPS

                             "AQUARIUS", "SAGRAN" and "ADMIRAL ARCISZEWSKI"

                                            and GRYF DEEP SEA FISHING COMPANY

                                                                                                                                               Defendants

                                                                            - and -

                                                             S.K. SHIPPING CO. LTD.

                                                                                                                                                    Intervenor

                                                              REASONS FOR ORDER

NADON J.

[1]                 By Notice of Motion dated October 15, 2001, the plaintiff, Global Enterprises International Inc., seeks the following Orders:

(a)        an Order granting the plaintiff leave to file a Supplemental Affidavit to correct the amount of its claim under the various headings contained in the Affidavit of Wayne Fallis filed July 11, 2001 ("Affidavit of Claim") and to include invoices for services provided to the defendant ships and/or their respective crew prior to April 24, 2001 but which were inadvertently excluded from the Affidavit of Claim and the Sheriff's Affidavit sworn September 20, 2001 ("Sheriff's Account").

(b)        an Order for payment out from the sale proceeds of the vessels SAFRAN, AQUARIUS and ADMIRAL ARCISZEWSKI, presently held in trust, to the credit of the plaintiff for deemed marshall's expenses incurred during the period January 5, 2001 to April 23, 2001 in the following sums:

(i)         AQUARIUS: CDN $77,289.71 and US $19,900 plus CDN $280 for additional deemed marshall's expenses that were not previously included in the Affidavit of Claim or the Sheriff's Account;

(ii)        SAGRAN: CDN $92,530.48 plus CDN $547.40 for additional deemed marshall's expenses that were not previously included in the Affidavit of Claim or the Sheriff's Account;

(iii)       ADMIRAL ARCISZEWSKI: CDN $52,678.92 plus CDN $241.40 for additional deemed marshall's expenses that were not previously included in the Affidavit of Claim or the Sheriff's Account; and

(iv)       General deemed marshall's expenses incurred on behalf of all of the defendant ships: CDN $9,252.00 plus CDN $1,276.31 for additional deemed marshall's expenses that were not previously included in the Affidavit of Claim or the Sheriff's Account.

[2]                 At the hearing, counsel for the intervenor S.K. Shipping Co. Ltd. ("S.K. Shipping") and for the caveator Triton Marine Group Inc. ("Triton") did not oppose the plaintiff's motion for leave to file the Supplemental Affidavit of Wayne Fallis, sworn October 15, 2001, and to include the invoices which were inadvertently excluded from Mr. Fallis' Affidavit of Claim and the Sheriff's Account of September 20, 2001.^[1] That part of the motion was therefore allowed.

[3]                 In support of its motion for an Order for the payment out from the sale proceeds of the three vessels, the plaintiff relies on the Affidavits of Wayne Fallis, sworn July 11 and October 15, 2001, and on the Affidavit of Bernard J. Jones, the Acting Sheriff, sworn on September 20, 2001. In addition, the plaintiff relies on the Affidavit of Pauline V. Gardikiotis, sworn on October 22, 2001, filed in response to the Affidavit of David Rocksborough-Smith, sworn on October 21, 2001, filed by caveator Triton.

[4]                 This application stems from the Order made on March 26, 2001, by Prothonotary Hargrave. The Order reads as follows:

[...]

THIS COURT ORDERS that

That Plaintiff may have its reasonable costs and expenses, whether by direct obligation or by guarantee, related to preserving the arrested ship [sic], and also related to keeping the ships at dock and in reasonable condition, to the extent those costs and expenses may benefit claimants, parties as claimants and mortgagees, and without limiting the generality of the foregoing shall include berthage, water pilotage, towing, fuel, port charges, victuals, and vessel services. Those expenses, together with crew related expenditures which shall include wages, shall stand in priority as marshal's expenses, so long as such costs and expenditures were incurred, contracted for, guaranteed or became obligations of the Plaintiff between the time of arrest of the ships and any application resulting in an order for sale of the ships, when other arrangements may be spoken to.

The above priority shall not extend to the Plaintiff's agency fees, which are in the interests of the Plaintiff, however this exclusion shall not prevent the Plaintiff, or any other entity which may by court order in the future act as an ad hoc marshal, from making an arrangement for fees at the time the sale order is sought.

[...]

[5]                 The plaintiff's motion which resulted in Prothonotary Hargrave's Order of March 26, 2001, sought the following Order:

[...] that amounts expended by the plaintiff from the date of arrest for necessary, including vessel disbursements and agency fees, are deemed to be expenses on behalf of the marshall, and shall be paid as such from the proceeds of any sale of the vessel.

[6]                 These proceedings, as it has already become obvious, arise from the arrest and sale of the vessels AQUARIUS, SAGRAN and ADMIRAL ARCISZEWSKI. The vessels were arrested by the plaintiff on January 5, 2001 and, on April 24, 2001, Prothonotary Hargrave made an Order for their appraisal and sale. As part of his Order, the prothonotary appointed Bernard J. Jones of Seaspan Shipbrokers Ltd. as acting sheriff of this Court. On July 9, 2001, Prothonotary Hargrave made an Order approving the sale of the AQUARIUS and the SAGRAN to Coltrane Trading Ltd., and the sale of the ADMIRAL ARCISZEWSKI to H. James Norman, or nominee. The ships were sold on July 15, 2001.

[7]                 The issue between the parties is in regard to the expenses claimed by the plaintiff under the heading "Berthage". Specifically, the issue is whether the amounts claimed by the plaintiff are "reasonable costs and expenses" incurred for the preservation and maintenance of the vessels. If so, these amounts stand in priority as marshall's expenses and the plaintiff is thus entitled to reimbursement, pursuant to the prothonotary's Order of March 26, 2001.

[8]                 Mr. Perrett and Mr. Giaschi, counsel for Triton and S.K. Shipping, take the position that the amounts claimed by the plaintiff are not "reasonable costs and expenses" and that, as a result, the plaintiff is not entitled to reimbursement thereof in priority as marshall's expenses.

[9]                 The facts relevant to the dispute are not complicated. They are as follows. At all material times herein, the vessels were at berth at facilities operated by Catamaran Ferry International Inc. ("CFI") in North Vancouver. Although no direct evidence has been adduced, it appears that a sum of $250 per day, with respect to each vessel, was payable to CFI for the lease of the berth. Mr. Perrett and Mr. Giaschi argue that the plaintiff is not entitled, as deemed marshall's expenses, to a sum exceeding $250 per day. It goes without saying that Mr. Bernard, for the plaintiff, does not agree with that position.

[10]            Mr. Bernard relies, in part, on the Affidavit of Ms. Gardikiotis, and more particularly, on paragraph 2 thereof, where she states:

2.             I am advised by Mr. Wayne H. Fallis, President and CEO of the Plaintiff herein, and verily believe that:

(a)            The Plaintiff has acted for the foreign fishing/processing fleet for many years.

(b)           The Plaintiff found that various wharf operators, including Vancouver Port Corporation, would not extend credit to its principals, including the Defendant Gryf Deep Sea fishing Company ("Gryf"), but rather required the Plaintiff to agree to be responsible for berthage even though it was acting as an agent for its principals. Because of the arrangement, the Vancouver Port Corporation required the Plaintiff to carry $10 million in liability insurance.

(c)            The Plaintiff established its division, Global Terminals, to act as principal in arranging berthage. Global Terminals would arrange to lease the berth and charge its own tariff rates to the shipowners. The Plaintiff's customers were well aware of the process and have paid Global Terminal's [sic] berthage account on the same basis is [sic] used in the present situation with the Defendant Gryf in 2000-2001. Attached hereto and marked as Exhibit "A" are copies of invoices billed by Global Terminals to shipowners other than the Defendant Gryf for berthage under similar arrangements with Global Terminals.

(d)           When the Plaintiff approached Catamaran Ferries International ("CFI") for extended use of the Cassiar dock for the AQUARIUS, SAGRAN and ADMIRAL ARCISZEWSKI (the "Defendant Ships"), CFI advised that the Plaintiff would have to be directly responsible for the cost of the berth. The Plaintiff, on behalf of Global Terminals, agreed and invoiced the Defendant Ships on its own tariff as in the past.

(e)            Attached hereto and marked as Exhibit "B" is a copy of a letter dated June 5, 2001 from CFI to Global Marine Services, another division of the Plaintiff, confirming the arranging for the Plaintiff to be directly responsible for all obligations arising from moorage of the Defendant ships.

[11]            It appears that Global Terminals, a division of the plaintiff, made arrangements with the wharf operator, prior to the arrest of the vessels, to lease space to berth the three vessels. In doing so, Global Terminals acted as principal and not as agent on behalf of the shipowners. As a result, Global Terminals was invoiced by CFI (presumably $250 a day per vessel) and then charged "its own tariff rate to the shipowners". That tariff, if I am not mistaken, is the one explained by Mr. Fallis at paragraph 9 of his Affidavit of October 15, 2001, where he states:

Berthage fees which form part of the Plaintiff's claim for pre and post-arrest expenses and fees and deemed marshall's expenses are calculated using the following formula:

[(# of days x 24 hours/day)/8 hours] x Length of the Vessel (LOA) x $1.50

This formula applies to GRYF Deep Sea Fishing Company and also has been used in the past with various other shipowners.

[12]            According to Mr. Perrett, the amounts for which the plaintiff is now seeking reimbursement, represent berthage charges of $472 a day, $432 a day and $418 a day. Mr. Perrett submits that on that basis, the plaintiff's markup on a total charge of $81,000 is $60,000. He relies on the Affidavit of David Rocksborough-Smith, a Director and Vice-President of Triton, sworn on October 21, 2001. Mr. Rocksborough-Smith's Affidavit is fairly short, and I therefore reproduce paragraphs 2 to 6 thereof:

2.             Triton Marine Group Inc., through one of its divisions, Arya Marine Supply, supplied necessaries to the Defendant ships between October 3, 2000 and March 7, 2001.

3.             When the Defendant ships were sold we agreed through one of our divisions, Triton Ship Agency, to act as port agent on behalf of the Intervenor Coltrane Trading Limited who had purchased two of the Defendant ships. As part of our responsibility as port agents we arranged with Catamaran Ferries International Inc. ("CFI") to berth the ships at CFI's facility in North Vancouver. This is the same facility that was used by the Defendant ships during their arrest both prior to the Order for Sale and after the Order for Sale was made until the sale was completed.

4.             I was directly involved in making the arrangements for berthage with CFI. I understood that the charge for each vessel would be $250.00 per day.    I also understood that as between CFI and ourselves, this daily charge would be for our account and not directly for the Intervenor Coltrane. There was no discussion of our guaranteeing the account of the owners. In other words, we were not contracting as agents for Coltrane whereby they would be responsible for payment to CFI; rather we would be responsible as the contracting party with CFI to make payment and to thereafter recover the amount paid from our principal.

5.             From my knowledge, this form of arrangement is typical for service providers in the Port of Vancouver. The port agent does not guarantee payment by its principals. It is the direct contracting party. When we entered into this agreement with CFI we had no funds on hand from Coltrane Trading Limited for the purpose of paying berth age [sic] nor a promise to send funds for berthage other than the understanding that they would pay berthage accounts which we rendered when they became due.

6.             Now produced and shown to me and marked Exhibit "A" to this my affidavit is a copy of a typical statement of account received from CFI. It is addressed to Triton Ship Agency. We paid this account to CFI. We then invoiced Coltrane Trading Limited. Now produced and shown to me and marked as Exhibit "B" to this my affidavit is a copy of two of our invoices to Coltrane Trading Limited for the same period. The amount we invoiced our principal was $250.00 per day for each vessel (i.e. the amount we were charged by CFI) and an addition 2.5 percent representing our handing and administrative charges. It is my understanding that this is a usual charge for port agents expending funds on their principal's behalf.

[13]            The arrangements made by Global Terminals with the wharf operator were obviously made prior to the arrest of the vessels. They were made in the normal course of the plaintiff's business activities, and were made at a time when the plaintiff fully believed that the shipowners were solvent and would meet their financial obligations.

[14]            It also appears that the aforesaid arrangements were not particular to these owners, but were arrangements which the plaintiff made with the majority of its clients. There is no doubt, in that context, that the plaintiff could make any arrangements acceptable to it and its clients. Consequently, the plaintiff could bill its clients according to the formula set out at paragraph 9 of Mr. Fallis' Affidavit of October 15, 2001.

[15]            However, the issue before me is not whether the plaintiff can claim its tariff rate from the owners of the vessels, but rather whether the amounts claimed are"reasonable costs and expenses" which will allow them to stand in priority as marshall's expenses. In my view, they are not.

[16]            It is not disputed that the costs and expenses incurred by the plaintiff in relation to berthage are costs and expenses made for the purpose of maintaining and preserving the vessels during their arrest. However, that does not settle the issue, as those costs and expenses must be "reasonable".

[17]            The plaintiff, in my view, is seeking to obtain not only the reimbursement of its "reasonable costs and expenses", but is seeking to obtain reimbursement of its profits. It is clear, and in fact it is not denied by the plaintiff, that the amounts that it is claiming include more than its actual costs and expenses. In my view, the "reasonable" cost of berthage is, on the evidence, the sum of $250 per day per vessel charged by CFI to Global Terminals.

[18]            I note from the prothonotary's Order of March 26, 2001, that he refused to grant priority to the plaintiff in regard to its agency fees which, in his view, were in the interests of the plaintiff. The prothonotary then went on to state that the plaintiff could make arrangements for its agency fees with the person or entity appointed as ad hoc marshall at the time applications were made to sell the vessels. In his Affidavit of September 20, 2001, Mr. Jones, the acting sheriff, states that he retained Global Marine Services as agents for the vessels, for the sum of CDN $5,000 per month, plus approved costs (to be shown by original invoices).

[19]            Exhibit I to Mr. Jones' Affidavit shows the costs which were billed by Global Marine Services to the acting sheriff with respect to the period of April 24 to July 15, 2001. Two amounts appear under the heading "Berthage". The first one is a sum of $33,750 for the period of June 1 to July 15, 2001. The second one is a sum of $28,500 for the period of April 24 to May 31, 2001. It is clear that the basis of these costs is a sum of $250 per day per vessel. This evidence supports my view that $250 per day per vessel is the "reasonable" cost of berthage. If the plaintiff incurred additional charges in connection with the berthage of the vessels, proof of these costs has not been made.

[20]            The plaintiff shall therefore be entitled to payment out from the proceeds of sale of the three vessels, under the heading "Berthage", to a sum which will be calculated on the basis of $250 per day per vessel.

[21]            During the hearing, Mr. Bernard informed me that the amounts claimed under the heading "Fishing Licence", i.e. $15,204.41 and $16,625.70, did not constitute marshall's expenses and therefore would not stand in priority.

[22]            I believe that with respect to all the other items claimed by the plaintiff as marshall's expenses, there is no dispute between the parties. Consequently, I will ask counsel to prepare a draft Order giving effect to these Reasons. Should counsel have difficulty calculating the amount of the payment out from the sale proceeds, they shall contact me as soon as possible. I will therefore expect to receive a draft Order by February 22, 2002.

[23]            Should counsel wish to speak to me regarding costs, they shall contact me through the Registry by February 22, 2002.

                                                                                               Marc Nadon

                                                                                                       JUDGE

O T T A W A, Ontario

February 8, 2002