C.P. Ships (Bermuda) Ltd. v. Panther Max (The), 2002 FCT 305

Date: 20020321

Docket: T-104-02

Neutral citation: 2002 FCT 305

Action in rem in admiralty against the ship PANTHER MAX, EX CANMAR SUPREME and in personam against PANTHER MARINE ENTREPRISES LIMITED

BETWEEN:

C.P. SHIPS (BERMUDA) LIMITED

Plaintiff

and

THE OWNERS AND ALL OTHERS

INTERESTED IN THE SHIP PANTHER MAX,

EX CANMAR SUPREME

and

PANTHER MARINE ENTREPRISES LIMITED

Defendants

REASONS FOR ORDER

RICHARD MORNEAU, PROTHONOTARY

[1]        This case concerns a motion by the owners of the ship Panther Max and by the ship itself ("the defendants") pursuant to Rule 221 of the Federal Court Rules (1998) ("the Rules"), the essential purpose of which is for portions of the statement of claim in personam and in rem ("the statement of claim") in the action brought by the charterer of the ship on January 21, 2002, namely the plaintiff, be struck out on the ground that the statement of claim disclosed no reasonable cause of action within the jurisdiction ratione materiae of this Court laid down in ss. 22(1) and 43(2) of the Federal Court Act, R.S.C. 1985, c. F-7 ("the Act").

[2]        Alternatively, the defendants asked that the affidavit requesting distraint ("the affidavit") be quashed on the ground that there are major discrepancies therein which must lead to the conclusion that the affidavit does not contain a full and complete disclosure of the relevant situation.

[3]        These two principal challenges were filed for the ultimate purpose of releasing the ship from the seizure to which it has been subject in this Court since January 21, 2002, in return for a guarantee of performance which was as low as possible.

[4]        It appeared that the plaintiff, as time charterer of the ship under a charter-party entered into on March 26, 2001, brought an action in this Court as in its submission the charter-party had not been observed by the defendants as a result of two seizures of the ship by a financial group, the first in France on August 26, 2001 and another in Montréal on November 1, 2001.

[5]        These seizures allegedly had consequences regarding computation of the time the ship could be regarded as off hire and with respect to an agreement between the plaintiff and another shipping company (Senator Lines) about the sale of space on the ship in question, among others.

[6]        The affidavit set out the plaintiff's claims as follows, in paras. 9 to 11:

9.         The defendant owners Panther Marine Enterprises Limited are indebted to the plaintiff in an amount not less than U.S. $1,075,537.73.

10.       This claim divides down into

a)         overpaid hire, the value of bunkers on re-delivery and owners' expenses paid by charterers of $307,937.23;

b)        charterers' potential liability to its slot charterers Senator Lines for under provision of slots due to the two seizures, the one in Fos and the one in Montreal in the amount of $260,113.00;

c)         breach of an agreement as to settlement of disputed hire amounts following the first arrest in Fos in the amount of $507,487.50 which is calculated at an overpayment of hire of 30 days at $16,916.25 per day.

11.       The claim is one relating to the use or hire of the defendant ship. The plaintiff invokes this Court's in rem jurisdiction pursuant to Sections 22(2)(i) and 43 of the Federal Court Act . . .

Quashing the affidavit

[7]        Although the defendants were at some pains in their written submissions, made in support of the instant motion, to dispute in detail the approach and the wording used by the plaintiff in the affidavit, after considering each of the challenges, individually and as a group, I am unable to conclude that in this affidavit the plaintiff engaged in a deficient exercise leading the Court to decide that it had not made a full and complete disclosure.

[8]        Undoubtedly the defendants would have liked the plaintiff to take a different approach to the facts in the affidavit and to provide through the affidavit greater detail about the various situations of which it complained. However, I do not think the affidavit here needs to be quashed on the basis suggested by the defendants.

[9]        The defendants' argument then dwelt at length on each of the claims contained in paras. 10(a) to (c) of the affidavit cited above in para. [6].

Paragraph 10(a):         overpaid hire, the value of bunkers on re-delivery and owners' expenses paid by charterers of $307,937.23

[10]      The parties agreed at the outset that the maximum amount owed by the defendants under this heading would be some US$94,568.91. The defendants argued, however, that the sum of US$87,964.50 should be deducted from this amount (thereby leaving a balance owing of US$6,604.41), since at the start of the seizure of the ship in Montréal in August 2001 the plaintiff proceeded under clause 6 of the charter-party to repair crane No. 2 on the ship, and accordingly this repair, which lasted 5.20 days, subjected the ship to payment of hire during that period (on hire).

[11]      In reply the plaintiff strenuously asserted that the repair was done to accompany seizure of the ship and that under clause 8 of the charter-party that seizure, which was not its responsibility, took precedence and as a result the ship should be regarded as off hire during the period of repair.

[12]      The relevant portions of clauses 6 and 8 of the charter-party read as follows:

6. Charterers' Obligations

. . . . .

(l)        Damage to Vessel: . . .

           Damage for which the Charterers are responsible for affecting seaworthiness, Class, or the proper working of the Vessel and/or her equipment, shall be repaired without delay to the Vessel after each occurrence in the Charterers' time and shall be paid for by the Charterers. Other repairs to damage for which the Charterers are responsible shall also be carried out in the Charterers' time but, if this is not possible, such repairs shall be carried out latest on termination of Charter Party prior redelivery to Owners. All costs of such repairs shall be for the Charterers' account. Any time used by Charterers' repairs in excess of Owners' repairs shall be counted as on hire.

8. Off-Hire

After delivery in accordance with Clause 1 hereof, the Vessel shall remain on hire until redelivered in accordance with Clause 6(m), except for the following periods:

(a)       Unable to Comply with Instructions: If the Vessel is unable to comply with the instructions of the Charterers on account of:

. . . . .

(iii)      arrest or detention of the Vessel at the suit of a party where a claim is not caused by the Charterers, their servants, agents or sub-contractors (See Clause 5(f)).

. . . . .

If any of the above incidents affect the full use of the Vessel, it shall be off-hire. If they partially affect the use of the Vessel, it shall be off-hire to the extent such incidents affect the Charterers' use of the Vessel. Charterers have the option of cancelling this charter if the Vessel goes off-hire for more than 30 consecutive days.

[13]      Under this heading there is no argument for striking out to be considered. The question simply is to determine the amount to be used in setting the bail, namely the plaintiff's reasonably arguable best case ("the applicable principle"). In Atlantic Shipping (London) Ltd. v. Ship Captain Forever et al. (1995), 97 F.T.R. 32 ("the Captain Forever case"), this Court stated the said principle as follows at p. 34:

The general principle, that a plaintiff, having arrested a vessel, is entitled to security in an amount sufficient to cover the reasonably arguable best case, together with interests and costs, capped at the value of the wrongdoing vessel ...

[14]      Further, according to this Court's decision in Amican Navigation v. Densan Shipping Co. et al. (1997), 137 F.T.R. 132, the Court should reduce or diminish the value assigned by a plaintiff to its causes of action with restraint.

[15]      The dispute under this heading amounts to determining whether clauses 6 or 8 of the charter-party have priority. The position adopted by the plaintiff can certainly be used for these purposes as representing the reasonably arguable best case. The sum of US$94,568.91 is accordingly adopted here to determine the bail.

Paragraph 10(b):         charterers' potential liability to its slot charterers Senator Lines for under provision of slots due to the two seizures, the one in Fos and the one in Montreal in the amount of $260,113.00

[16]      The amount now claimed under this heading is US$254,919.44. This heading thus takes us to the agreement existing between the plaintiff and Senator Lines regarding the sale of space on the ship, among others.

[17]      I am unable to conclude, in a motion to strike this heading, that it is clear and obvious that the said agreement does not at least in part fall within s. 22(2)(i) of the Act. That paragraph and ss. 22(1), to which it refers, read as follows:

[18]      I think that at this stage it is not clear and obvious that this agreement cannot be seen as involving use of the ship within the meaning of s. 22(2)(i) of the Act. The agreement undoubtedly involves a linear contractual relationship between the plaintiff and Senator Lines, but it necessarily refers to the use of the ship, inter alia. Consequently, I clearly cannot proceed to strike this heading here on the ground that it does not fall within the jurisdiction ratione materiae of this Court under ss. 22(2)(i) and 43(2) of the Act.

[19]      Additionally, I do not intend to exclude this agreement because it may not be covered by clause 17(g) of the charter-party. Read as a whole, this clause appears to deal with a situation other than the one in question. The claim in question appears to relate to the loss of use of the ship for purposes of the agreement with Senator Lines, not damage caused to property.

[20]      This clause 17(g) reads as follows:

Under no circumstances shall the Owners be responsible for any indirect or consequential loss, arising from loss, damage or delay to goods and containers, howsoever caused, unless Charterers are judged to be liable for such losses pursuant to compulsory applicable law by a court of competent jurisdiction or, with the approval of Owners, have settled such a liability in reasonable anticipation of such judgement, in which case Charterers have the right to seek recovery from the Owners.

[21]      Further, it does not seem reasonable and within the spirit of Rule 3 to confine ourselves to the wording used in para. 10(b) of the affidavit and argue that a claim based on [TRANSLATION] "potential liability" should be dismissed as premature. We now know through Godric Baron's affidavit filed by the plaintiff, dated March 4, 2002 ("Baron's affidavit") that the plaintiff updated the amounts it actually paid to Senator Lines. In my opinion it would not be proper to allow the motion to strike on account of the phrase "potential liability", then set the amount of the bail simply so the plaintiff could then urgently claim the right to amend its statement of claim and update the wording used in it.

[22]      Finally, Baron's affidavit, especially Exhibit 10, taken with the cross-examination of the latter on affidavit, provided sufficient information on the agreement between the plaintiff and Senator Lines to avoid having this heading struck for a lack of information or particulars.

[23]      I entirely concur, however, in the comments of the defendants in para. 59 of their written submissions filed in support of their motion. That paragraph reads:

59.           As also revealed by the cross-examination of Mr. Baron (Tab 9), Plaintiff's claim for potential liability does not take into account any deduction for Plaintiff's election not to use the Vessel until October 17^th, 2001 nor for mitigation of damages or for the possibility of mitigating damages as a result of Plaintiff's use of a substitute ship and the decline in hire rates at the time.

[24]      On this basis, I feel that for purposes of determining the guarantee the amount claimed by the plaintiff under this heading should be reduced by 30%. Accordingly, under this heading the plaintiff will have to apply for bail purposes 70% of US$254,919.44, or US$178,443.60.

Paragraph 10(c):         breach of an agreement as to settlement of disputed hire amounts following the first arrest in Fos in the amount of $507,487.50 which is calculated at an overpayment of hire of 30 days at $16,916.25 per day

[25]      Essentially this heading refers to an agreement apparently concluded between the plaintiff and the defendants on October 16, 2001 about whether the ship would be off hire for the period from September 6 to October 17, 2001, the period immediately following the end of the first seizure of the ship in France.

[26]      Whether it was reasonable for the plaintiff not to wish to retake the ship for use during that period because of the risk that it would again be seized by third parties is a question which will ultimately have to be resolved by arbitration in London.

[27]      In reply to this question for the present, the Court clearly cannot exclude the plaintiff's argument that its position was justified during this period and that it had the right to regard the ship as off hire at this time.

[28]      On the central question of whether there was an agreement between the parties on October 16, 2001 to find a solution to this situation of uncertainty, the evidence submitted by either side is conflicting.

[29]      My understanding of this evidence, and in particular the various e-mails which the parties exchanged on that day, indicates that an agreement between the present parties was in fact concluded and that subsequent consultations by representatives of the defendants later the same day with persons in New York led the defendants' representatives to review their position.

[30]      The actions of the parties subsequent to October 16, 2001 can be understood as supporting or opposing conclusion of the agreement. In saying this I am in no way attempting to rule on the merits of whether the agreement existed. I am simply seeking to establish that under the applicable principle the plaintiff was entitled to argue that there was an agreement.

[31]      The fact that this agreement contemplated the settlement of a dispute does not in my view prevent the plaintiff from relying on it here. The discussion in question was one which took place between the parties, outside of the presence of their counsel, at a time preceding the bringing of this action.

[32]      Similarly, the fact that referring to this agreement might infringe the "parol evidence rule" could possibly be a question relating to the merits, but in my opinion in the present circumstances it is not a point which should lead this Court to disregard it.

[33]      Further, the fact this agreement was concluded orally is in the circumstances in no way relevant under any heading.

[34]      Finally, can it be said, as the defendants argued, that the cause of action for any alleged breach of this settlement agreement is not within the jurisdiction of this Court ratione materiae within the meaning of s. 22 of the Act on the ground that this settlement agreement had no maritime law connection or ramification? (For examples in which the Court found such connections in contracts, see Monk Corp. v. Island Fertilizers Ltd., [1991] 1 S.C.R. 779 and Scandia Shipping Agencies Inc. v. Ship Alam Veracruz et al. (1997), 148 F.T.R. 164, (1997) 148 F.T.R. 161. For examples where such connections were not found, see Pakistan National Shipping Corp. v. Canada et al. (1991), 50 F.T.R. 24, Transports Insurance Co. Inc. v. Ship "Ondine" (The) (1982), 138 D.L.R. (3d) 734 and Intermunicipal Realty & Development Corp. v. Gore Mutual Insurance Co. et al., [1978] 2 F.C. 691.)

[35]      The defendants placed particular emphasis on the Federal Court of Appeal's judgment in Ondine, supra. However, in that case, as in this Court's judgment in Ordina Shipmanagement Co. Ltd. v. The "Sheringham", an unreported judgment of July 11, 2000 in case T-311-00, the contract in question was concluded by one of the parties to the dispute, the other party to the contract being a third party. Here, the agreement in question was apparently concluded directly between the parties, who are the same as those who formed the charter-party. Further, for the purposes of this exercise it is worth noting that the content of the agreement, as related by the plaintiff in para. 20 of its written submissions, is as follows:

. . . the Plaintiff agreed to pay hire from the 6^th to the 19^th of September, clause 8 of the charterparty was to be amended to permit charterers to terminate the charter if the ship was offhire for 15 days, rather than the 30 days previously provided, and with respect to the other 28 days in dispute, from 19^th September to 17^th October, the charterparty which was to expire 15^th May, 2002 would be extended for 30 days . . .

[36]      It can thus be seen that this agreement apparently modifies the initial charter-party. Accordingly, it is not clear and obvious that the cause of action under this agreement cannot fall under s. 22(2)(i) of the Act.

[37]      There is thus no reason to strike out this heading for lack of jurisdiction ratione materiae.

[38]      As to the amount to be used in determining the bail under this heading, I consider that under the applicable principle the plaintiff is entitled to claim the sum of US$507,487.50.

Conclusion

[39]      It will therefore be ordered that the ship Panther Max, Ex Canmar Supreme be released from seizure on condition that the defendants provide bail in accordance with Rules 485 and 486 equivalent to the total of the amounts in paras. (a) and (b) below, converting the said amounts to Canadian dollars using the Bank of Canada exchange rate in effect on the date the ship was arrested, namely January 21, 2002:

(a)        US$780,500.01;

(b)        20% of the amount in (a) as coverage for interest and costs.

[40]      Since the plaintiff itself suggested the following conclusion, costs on this motion will be in the cause.

[41]      An order will be made accordingly.

Montréal, Quebec

March 21, 2002

Certified true translation

Suzanne M. Gauthier, C. Tr., LL.L.

                                                    FEDERAL COURT OF CANADA

                                                                 TRIAL DIVISION

                                                          SOLICITORS OF RECORD

FILE:                                                T-104-02

STYLE OF CAUSE:                      Action in rem in admiralty against the ship PANTHER MAX, EX CANMAR SUPREME and in personam against PANTHER MARINE ENTREPRISES LIMITED

BETWEEN:

C.P. SHIPS (BERMUDA) LIMITED

Plaintiff

and

THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP PANTHER MAX, EX CANMAR SUPREME

and

PANTHER MARINE ENTREPRISES LIMITED

Defendants

PLACE OF HEARING:              Montréal, Quebec

DATE OF HEARING:                  March 13, 2002

REASONS FOR ORDER BY: RICHARD MORNEAU, PROTHONOTARY

DATED:                                           March 21, 2002

APPEARANCES:

Sean J. Harrington                                                             for the plaintiff

Louis Buteau                                                                      for the defendants

Robert Cox

SOLICITORS OF RECORD:

Borden, Ladner, Gervais                                                   for the plaintiff

Montréal, Quebec

Flynn, Rivard                                                                      for the defendants

Montréal, Quebec

Date: 20020321

Docket: T-104-02

Montréal, Quebec, March 21, 2002

Before: Richard Morneau, prothonotary

Actionin rem in admiralty against the ship PANTHER MAX, EX CANMAR SUPREME andin personam against PANTHER MARINE ENTREPRISES LIMITED

BETWEEN:

C.P. SHIPS (BERMUDA) LIMITED

Plaintiff

and

THE OWNERS AND ALL OTHERS

INTERESTED IN THE SHIP PANTHER MAX,

EX CANMAR SUPREME

and

PANTHER MARINE ENTREPRISES LIMITED

Defendants

ORDER

The Court orders that the ship Panther Max, Ex Canmar Supreme be released from seizure on condition that the defendants provide bail in accordance with Rules 485 and 486 equivalent to the total of the amounts in paras. (a) and (b) below, converting the said amounts to Canadian dollars using the Bank of Canada exchange rate in effect on the date ship was arrested, namely January 21, 2002:

(a)        US$780,500.01;

(b)        20% of the amount in (a) as coverage for interest and costs.

Since the plaintiff itself suggested the following conclusion, costs on this motion will be in the cause.

Certified true translation

Suzanne M. Gauthier, C. Tr., LL.L.