Date: 20020528
Docket: T-687-02
Neutral Citation: 2002 FCT 609
Ottawa, Ontario, May 28, 2002
Present: The Honourable Mr. Justice Blais
BETWEEN:
MR. AND MRS. STEPHEN STRIEBEL
Plaintiffs
and
SOVEREIGN YACHTS (CANADA) INC.,
THE OWNERS AND ALL OTHERS INTERESTED
IN THE MOTOR VESSEL CHAIRMAN,
also known as SOVEREIGN HULL NUMBER 7644
Defendants
REASONS FOR ORDER
RELEVANT FACTS
[1] This is a motion to appeal the orders of Prothonotary Hargrave dated April 29, 2002 and May 6, 2002.
[2] The plaintiffs Striebel and the defendant Sovereign signed a construction agreement ("Agreement") in June 2000 with a delivery date of June 30, 2001.
[3] Pursuant to this Agreement, Sovereign remains the owner of the vessel until the vessel is completed and delivered; and Mr. Striebel, in order to protect his investment in the vessel, holds a mortgage on the said vessel which incorporates the terms of the Agreement.
[4] For different reasons, Sovereign failed to meet the construction schedule and the parties agreed that the completion date be postponed until September 1, 2001. Again for different reasons, the completion date was further postponed due to changed orders made after September 1, 2001.
[5] On December 18, 2001, a notice of material default was provided by the plaintiffs as Sovereign was not making best efforts to complete and deliver the vessel.
[6] Provided with an undertaking by Sovereign that the vessel would be completed by April 8, 2002 and following a meeting held on January 14, 2002, the plaintiffs agreed on February 14, 2002 to hold the notice of material default in abeyance.
[7] Finally, the plaintiffs filed a motion which concluded by the issuing of the orders by Prothonotary Hargrave.
[8] On April 29, 2002, prior to the commencement of this action and the arrest of the vessel, Mr. Stephen Striebel served a notice of taking possession as the mortgagee of the vessel.
ISSUES
[9] Should the discretionary orders of Prothonotary be disturbed on appeal?
The Federal Court of Appeal in Canada v. Aqua-Gem Investments Ltd. (1993), 149 N.R. 273 (Fed. CA) at page 295 stated:
| [95] I also agree with the Chief Justice in part as to the standard of review to be applied by a motions judge to a discretionary decision of a prothonotary. Following [page 463] in particular Lord Wright in Evans v. Bartlam, [1937] A.C. 473 (H.L.) at page 484, and Lacourcière J.A. in Stoicevski v. Casement (1983), 43 O.R. (2d) 436 (Div. Ct.), discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge unless:
(a) they are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts, or
(b) they raise questions vital to the final issue of the case. [Note 15 not reproduced.]
Where such discretionary orders are clearly wrong in that the prothonotary has fallen into error of law (a concept in which I include a discretion based upon a wrong principle or upon a misapprehension of the facts), or where they raise questions vital to the final issue of the case, a judge ought to exercise his own discretion de novo.
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[11] I have no hesitation in concluding that the exercise of discretion by the Prothonotary was not based on a wrong principle of law, nor a misapprehension of the facts, nor that it raises questions vital to the final issue of the case.
[12] The Prothonotary rendered a decision on an ex parte motion presented on April 29, 2002, but the defendant was allowed to make its case before the Court on May 6, 2002 in response to the arguments made by the plaintiffs.
[13] At the time the vessel was arrested, Mr. Striebel had served a notice of taking possession of the vessel as mortgagee.
[14] As soon as Mr. Striebel alleged that there had been a breach of the Agreement by the defendant and had served a notice of taking possession of the vessel as mortgagee, he became entitled to the possession of the vessel.
[15] The plaintiffs have filed a statement of claim and several motions requesting assistance from the Federal Court for the arrest of property pursuant to Rule 481 of the Federal Court Rules, 1998. Rule 481(2) provides that the party seeking the warrant shall file an affidavit and describe what is needed therein. As soon as this Rule is invoked, the party is entitled to take possession of the vessel as mortgagee. In the case at bar, the mortgagor disputes the mortgagee's right to possession but I agree with the plaintiffs that the remedies available to the mortgagor are either damages or an injunction, if the appropriate test is met.
[16] The Prothonotary made a clear and precise analysis of the circumstances surrounding the arrest of the vessel and the risks that could result in the circumstances.
[17] The suggestion made by the defendant Sovereign that the decision of the Prothonotary amounts to an injunction should be rejected. The Prothonotary referred to Armada, the decision of the Supreme Court of Canada Armada Lines Ltd. v. Chaleur Fertilizers Ltd., [1997] 2 S.C.R. 617 and The "Evangelismos" (1858) 12 Moo. P.C. 352, 14 E.R. 945.
[18] In his reasons, the Prothonotary also discussed the standard that must be demonstrated in order for the sheriff to take possession. The Prothonotary identified that an arresting party need only demonstrate a reasonable plausibility "in the sense of an acceptable reason with a fair expectation as to its trustworthiness that the vessel ought to be put to the protective care of the sheriff".
[19] To arrive at this conclusion, the Prothonotary relied upon actions by the defendant demonstrated through the affidavit evidence provided to the Court.
[20] Even though the number and the importance of the acts of "petty vandalism and obstructionism" are not of great importance, one could easily imagine an escalation of events over the following weeks to come and therefore, the decision to move the vessel was a reasonable one in the circumstances.
[21] Turning now to more pragmatic solutions, it is now well-known that the plaintiffs have paid more than $5 million for the construction of the vessel that was supposed to be completed by June 2001. Even though the plaintiffs were responsible for some delay until the end of 2001, they could not be seen as responsible for the delay incurred after December 2001, and after a disbursement of more than $5 million, they are still left with nothing but promises and excuses.
[22] The defendant Sovereign suggests that the orders of the Prothonotary should be set aside and that Sovereign should be allowed to continue the completion of the work on the vessel. This suggestion should be rejected on the sole basis that the plaintiffs are entitled to the possession of the vessel based on their mortgagee rights. Additionally, this suggestion should be rejected on the basis that it is unreasonable and completely unacceptable.
[23] The decision to move the vessel is reasonable and the Prothonotary based his decision on a detailed analysis of the reasons why the date of completion was delayed months after months and concluded that it is up to the trial judge to determine the responsibilities and the liability of both parties pursuant to the contract.
[24] The defendant suggests that roughly $400,000 will be owed to it so far. On the other hand, the plaintiffs suggest that they will have to pay much more than that to complete the work on the vessel. Obviously, the plaintiffs risk much more exposure than the defendant.
[25] The Prothonotary also took into account that if there is a default under the Agreement by the defendant, the plaintiffs are entitled to move the vessel to another shipyard for completion. At the end of the day, if the plaintiffs are found to be wrong, the defendant will be entitled to damages.
[26] The Prothonotary also took into account the fact that the defendant, even if it is unable to complete construction of the vessel, will be fully secured by bounding before the vessel is released from arrest and leaves the jurisdiction. The situation could therefore be worse.
[27] Therefore, I have no hesitation whatsoever in concluding that the defendant has failed to convince the Court that the Prothonotary made an error that could justify the intervention of this Court. Rather, I conclude that the orders made by the Prothonotary were reasonable in the circumstances of the case.
CONCLUSION
[28] This motion to appeal the orders of the Prothonotary is dismissed with costs.
Pierre Blais
Judge
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-687-02
STYLE OF CAUSE: MR. AND MRS. STEPHEN STRIEBEL v.
SOVEREIGN YACHTS (CANADA) INC. ET AL.
PLACE OF HEARING: VANCOUVER
DATE OF HEARING: MAY 14, 2002
REASONS FOR ORDER : BLAIS, J.
DATED: MAY 28, 2002
APPEARANCES:
DAVID McEWEN FOR THE PLAINTIFFS
GEOFFREY GOMERY FOR THE DEFENDANT
JAMES MacINNIS SOVEREIGN YACHTS (CANADA) INC.
SOLICITORS OF RECORD:
McEWEN, SCHMITT & CO. FOR THE PLAINTIFFS
VANCOUVER
NATHANSON SCHACHTER & THOMPSON FOR THE DEFENDANT
VANCOUVER SOVEREIGN YACHTS (CANADA) INC.
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