Cyber Sea Technologies Inc. v. Underwater Harvester, 2002 FCT 794

Date: 20020716

Docket: T-445-02

Neutral citation: 2002 FCT 794

BETWEEN:

                                                CYBER SEA TECHNOLOGIES, INC.

                                                                                                                                                         Plaintiff

                                                                                 and

                             UNDERWATER HARVESTER REMOTELY OPERATED

VEHICLE, SERIAL NO. UHROV-101

AND TRITON LOGGING COMPANY INC.,

aka TRITON LOGGING COMPANY LTD.

                                                                                                                                               Defendants

                                                            REASONS FOR ORDER

HARGRAVE, P.

             In this action the Plaintiff, a builder, seeks to recover the balance of the price of a submersible device which is designed to be manoeuvred through a flooded but unlogged reservoir, to cut off standing timber and then to float each particular tree to the surface, using one of a number of air bags which it carries aboard. This unmanned device, which for the present I shall neutrally designate as the submersible, manoeuvres by means of four propellers, however it is tethered to and manoeuvred from a barge or shore-mounted control cabin by means of a 400- foot umbilical cord consisting of power cables, control cables and a compressed air line. The operator, who controls the movement of the submersible from the surface, is guided by closed circuit video.

             The submersible was arrested in this action. The Defendant, apparently as an entity with an ownership interest, seeks to set aside the arrest by reason of want on the part of the Court of jurisdiction over the submersible, or that the proceeding be stayed in favour of arbitration. However, in the event the Court has jurisdiction, the corporate Defendant asks that the arrest be set aside, or that the submersible be released without bail, or that bail be set.

             In deciding this motion I have kept in mind that I need not determine, in absolute terms, whether the submersible is a ship. Certainly, were I able to make an absolute decision as to whether or not the submersible is a ship, thus clearly indicating whether or not this Court has jurisdiction, that could well be determinative. However, since the question is in the context striking out for want of jurisdiction under Rule 221, I need only determine whether, on the one hand, the action plainly and obviously cannot succeed by reason of the absence of a ship over which to take jurisdiction or, on the other hand, whether there is some possibility, even a slight possibility, that the submersible is a ship, in which instance the outcome would not be beyond doubt. This concept, that it must be plain and obvious that the object in question is not a ship, before the statement of claim ought to be struck out, is one use by Mr Justice Dubé in Imperial Oil v. The Expo Spirit (1987), 6 F.T.R. 156 at 158. In this instance I hesitate to say, in absolute terms, that the submersible is a ship, however there is a strong indication to that end. Thus, the action must proceed, with the caveat that the trial judge, who may well have further and better evidence together with fuller argument on the material, is certainly not barred from finding want of jurisdiction.

CONSIDERATION

Jurisdiction

             There are several approaches to jurisdiction. Under the general head of relief pursuant to Canadian maritime law and the class of matters within navigation and shipping, as set out in section 22(1) of the Federal Court Act, the Plaintiff submits there is jurisdiction. Similarly, the Plaintiff submits there is jurisdiction under several of the specific heads of section 22(2), more specifically the heads of jurisdiction are 22(2)(a), claims with respect to title, possession or ownership of a ship; (m), claims in respect of goods, material or services supplied to a ship for operation or maintenance; and (n), claims arising out of contract relating to construction of a ship. Central to any jurisdiction is that the submersible comes within the Federal Court definition of a ship, being:

             I will elaborate on the necessity that, except for section 22(2)(j) and (k) jurisdiction over aircraft and perhaps section 22(2)(s) dock charges, there must be a ship involved, as defined in the Federal Court Act, to come within section 22 of the Act. The general jurisdiction under section 22(1) requires that the matter come within "navigation and shipping". The term "shipping" speaks for itself: it requires involvement of a ship. However, as to navigation, I am unaware of any exhaustive definition in the case law, a point to which I will shortly turn. The specific heads of section 22(2) jurisdiction, upon which the Plaintiff also relies, are all clearly dependent upon the involvement of a ship.

             Two definitions of navigation, which are quoted from time to time, appear in The "Warkworth" (1884) 9 P.D. 145 (C.A.) and in SS Lord v Newsum, Sons & Company Ltd. [1920] 1 K.B. 846 (K.B.). In The "Warkworth", Lord Justice Fry accepted a dictionary meaning of navigation, proffered by Dr Phillimore that "... navigation is the science or art of conducting a ship from place to place through the water; ..." (page 148).

             In the Lord case, at 849, Mr Justice Bailhache, in the context of a charter-party, defined navigation as a reference "... to a ship which is in motion, a ship which is being navigated." However, in Hayn v. Culliford (1878) 3 C.P.D. 410, upheld (1879) 4 C.P.D. 182, Mr Justice Denman pointed out that a ship need not be in a state of motion to be in a state of navigation, referring to Good v. London Steam Ship-Owners Association (1871) 6 C.P. 563 (C.A.):

             What these cases involving the meaning of navigation, in various contexts, have in common, is the involvement of a ship. Thus the crux of jurisdiction, in the present instance, irrespective of where the claim might fall in section 22 of the Federal Court Act, depends upon whether or not the submersible falls within the Federal Court Act definition of a ship.

             A starting point is the scope of the definition of a ship, from section 2 of the Federal Court Act, which I will set out again, in part, for ease of reference:

            Counsel for the Defendant submits that this is a narrow and all-inclusive definition because in the current draft of the definition the phrase "includes every description of", modifying candidates in earlier legislation for designation as a ship, a "vessel, boat or craft" has been omitted. A definition is now said to be narrower for the term "ship" means "any vessel or craft". It is unfortunate that those drafting Canadian legislation have, over the years, been unable to agree on a standard definition of a ship. Even within the Federal Court Act those drafting that legislation have, from time to time, vacillated between various in-house definitions and definitions incorporated by reference.

            By defining a ship in terms of both vessel or craft, very general and broad words in themselves, the definition would seem to encompass anything used on or in the water. Indeed, depending upon reasonableness within a given context, "anything that floats may be called a craft ...": United States Shipping Board v. Vigers Brothers [1924] 20 Lloyd's Rep. 62 at 63 (K.B.). The net is thus exceedingly broadly cast, with the only limitation being that the vessel or craft be used at least in part in navigation. I do not see, if one were to make it an inclusive definition, adding the word "including", that the scope of vessels and craft, included in the definition of ship, would be broadened appreciably or at all.

            In reaching the conclusion that the omission of the word "including" does not appreciably change the scope of the definitions, I am well aware of National Harbours' Board v. St. John Ship Building & Dry Dock Co. Ltd. (1982), 43 N.R. 15. In that case, at page 26, the Court of Appeal pointed out that the then definition of a ship, in the Federal Court Act, was an inclusive definition, thus enlarging the term. However, this brings to mind two observations. First, as Mr Justice Urie observed in St. John Ship Building at page 24, the case law does not establish any particular principle to apply in determining whether a given object is or is not a ship. Second, the definition of a ship, which concerned the Court of Appeal in St. John Ship Building, included "any description of vessel or boat ...", presenting a very much narrower choice of objects which might be designated as a ship, as compared with a general and broad word "craft" in the present definition. Third, the then definition of a ship required that it be used in navigation, not merely, as in the present definition, "solely or partly for navigation". While the inclusive definition may, in one past guise or another, have arguably made a broader range of objects possible ships, I do not see in law that the present definition has narrowed, appreciably or at all, and may even have expanded what may designated to be a ship.

            In reaching the conclusion that the submersible is, in all probability, a ship, I rejected the idea that there is any overall particular principle which I might apply in order to determine the issue, but rather have taken as a guide various elements which go into defining a ship, including those set out in page 26 of St. John Ship Building. I say including, because I do not believe that the list set out there is exhaustive, either for or against determining the submersible to be a ship. In St. John Ship Building the Court of Appeal considered various relevant facts in order to determine that a crane barge was a ship:

(a)        the barge was built for use on water;

(b)        the barge was capable of being moved from place to place and was in fact so moved from time to time;

(c)         the barge was capable of carrying cargo and had done so;

(d)        the barge was capable of carrying people and clearly had to do so in order to provide a crew to operate the crane;

(e)        that the barge was neither self-propelled nor capable of navigation herself, did not detract from the possibility that she was a ship.

The present instance I would add additional factors being

         the submersible was designed and built for use in the water;

        the submersible is equipped with its own power in order to navigate from place to place;

       the submersible is to carry equipment to allow it to navigate, including sonar, cameras, lights, ballast and floatation systems;

       the submersible will carry a number of inflatable balloons and other equipment, analogous to cargo, to allow it to float cut trees to the surface;

        that the submersible is unmanned is not a real factor in that towed cargo carrying barges are just one example of unmanned objects which may be ships;

       that the submersible is controlled and navigated from the surface, so that its movement in navigating through the water is not dependent upon someone abroad, is a neutral factor, just as in the case of a towed dumb barge which is, in effect, navigated by the tug;

      that the submersible which is designed to operate largely under water, except when brought to the surface to take on a cargo of more air balloons, tethering lines for the balloons and bolts to drive into trees, navigates under water, is not a factor in determining whether or not the object is a ship and here I have in mind full-scale submarines which are ships.

            As I have said, the list of ship characteristics set out in St. John Ship Building is not exhaustive. Moreover, the cases referred to St. John Ship Building indicate that not all of the elements are necessarily essential in determining that an object is a ship. However, the object must certainly, to come within the definition of a ship, be something used in part or in whole for navigation. I have already dealt with the concept of navigation, which includes the movement of a vessel from place to place. I would add that this movement from place to place must be with some purpose, not just a random movement and here I would refer to Steedman v. Scofield and Another [1992] 2 Lloyd's Rep. 163 at 166, for there Mr Justice Sheen pointed out that "navigation is not synonymous with movement on water", but rather navigation was the planned and orderly movement, a purposeful movement, from one place to another, rather than high speed movement for the sake of acceleration itself, as in the case of a jet ski.

            In present instance, keeping all of the above elements in mind as a guide, a submersible is used at least in part in navigation, or must be navigated and in fact does navigate through the water, under its own power, with the purpose of locating a standing tree and, after cutting it off and floating it to the surface using part of its cargo expendable equipment, navigates onward to the next tree. As I have noted, the submersible carries a cargo of expendable equipment, being balloons, tethers and bolts or lag screws by which to attach the balloons to the trees. The submersible is fitted with equipment and appurtenances just as is a ship, including cameras and lights and may or may not have aboard, at present, specified sonar equipment, all being equipment of appurtenances necessary for the navigation of the submersible.

            In reaching the conclusion that a submersible is in all likelihood a ship, I have not overlooked Dome Petroleum Ltd. v. Hunt International Petroleum Corporation, [1978] 1 F.C. 11 (T.D.). In Dome Petroleum the Court dealt with what the parties had called a drilling ship, that is a ship-mounted oil drilling rig in the context of the then Canada Shipping Act definition of a ship, which required, in order to be a ship, that it be "used in navigation". The Court found that any navigation, which consisted of towing the drilling rig into position, was purely incidental. Of course, these comments, as pointed out by Mr Wylie Spicer in his paper in Canadian Admiralty Law, 1990, Dalhousie University, are purely obiter, for the case was decided on the basis that the agreement at issue was not an agreement for the use or hire of a ship, but was substantially an agreement for drilling a well in the ground, unrelated to admiralty. Indeed, the orbiter comments in Dome have subsequently been passed by: here I would refer, by way of an example, both to Mr Spicer's paper and to Re Seafarers's Union and Crosbie Services Ltd. (1982), 135 D.L.R. (3^rd) 485, a decision of the Court of Appeal. There, at page 495, Chief Justice Thurlow commented upon the nature of drill rigs:

The Chief Justice did not refer to the Dome case. Leave to appeal Crosbie Services to Supreme Court of Canada was refused.

            Certainly I am aware of Perks v. Clark [2001] 2 Lloyd's Rep. 431 (C.A.). In Perks the Court of Appeal applied an actual use or a real work test, with the subject matter being a jack-up rig, which only incidentally was towed from one place to another. Moreover, at issue was whether a rig fell within the definition of a ship for taxation purposes. In Perks the court held that a jack-up drilling rig was not a ship, however, the court there limited its findings to the facts, noting that drilling ships and drilling barges were ships, observed that there were other forms of drill rigs, including jack-up rigs, which could not perform their functions unless resting on the bottom and, as such, even though it seems an unsatisfactory division of drill rigs between ships and non-ships, jack-up rigs were not ships because their real work was in drilling wells.

            Neither Dome nor Perks particularly helps the Defendant in arguing that the submersible is not a ship. Dome Petroleum really involved another issue and has been passed by in subsequent decisions. Moreover, such an approach seems to be based on the idea that when a drill rig is drilling it is not a ship, a point which Mr Spicer quite sensibly views as a dangerous and illogical argument. Indeed, it is an argument which is inconsistent with the concept of a ship an object which need only be used, in part, in navigation. Perks not only was decided in a tax context, but also recognized that there were marine drilling rigs which were ships.

            Taking all of the circumstances, it is very likely that a submersible is a ship. Thus, the first branch of the Defendant's motion fails.

Stay

            In the event of a finding of jurisdiction the Defendant seeks a stay, based upon an arbitration clause in the building contract. Quite properly, the Plaintiff does not oppose.

Release Without Security

            The Defendant seeks, in the event that the action is not struck out for want of jurisdiction, that the submersible be released from arrest without bail. The grounds here are that the claim lacks merit. The Defendant refers to much documentation and affidavit evidence said to demonstrate a weak or even non-existent claim. As I pointed out to counsel for the Defendant, this is not a hearing or a summary judgment application. However, I should elaborate on this point.

            In Argosy Seafoods Ltd. v. The Atlantic Bounty (1991), 45 F.T.R. 114 at 119, Mr Justice MacKay observed that "... the Court has discretion to release property held on warrant of arrest and to do so on such terms as it thinks appropriate". Associate Chief Justice Jerome, in Pictou Industries Ltd. v. Secunda Marine Services Ltd. (1994), 78 F.T.R. 78 at 80 said that only rarely, in the absence of a consent, would the court release an arrested vessel without security and that was so even where the parties were pursuing arbitration. Meeson on Admiralty Jurisdiction and Practice, Lloyd Shipping Law Library, 2000, notes that release from arrest is discretionary and while a court could release an arrested vessel without security "... this is only done in exceptional circumstances and only where some satisfactory alternative to ordinary security is provided", there referring to The Vanessa Ann [1985] 1 Lloyd's Rep. 549 at 551 (Q.B.) and to North Saskatchewan Riverboat Co. v. 573475 Alberta Ltd. (1995), 96 F.T.R. 166. In the latter case I denied the release of the "Edmonton Queen", without bail or security, for among other things, "the release of a vessel without bail or security is an implication that the arrest was unlawful and the security unnecessary: ..." (page 170), here relying upon Armada Lines Ltd. v. Chaleur Fertilizers Ltd., [1995] 1 F.C. 3 at 18 (F.C.A.), reversed on other grounds [1997], 2 S.C.R. 617. Indeed, the usual practice is to release the vessel only on the provision of enough security to cover the claim, interest and costs, on the basis of the plaintiff's reasonably best arguable case: The Bazias 3 [1993] 1Lloyd's Rep. 101 at 105 (C.A.).

            Returning to an earlier concept, a vessel will not be released from arrest merely because the underlying dispute is being arbitrated. Moreover, the jurisdiction of the court may be invoked primarily to obtain security for arbitration. This concept is fully canvassed in Atlantic Lines & Navigation Co.v. Didymi, [1985] 1 F.C. 240 (F.C.T.D.), a decision of Madam Justice Reid. There she distinguishes the various cases which may appear to be to the contrary and applies The Rena K [1979] QB 377, in which security was ordered to stand even though arbitration was in progress at the time of the arrest. In this instance, the submersible presently also secures any arbitration award. This leads to the amount of security.

Amount of Security

            It is a well-established 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 interest and costs, capped at the value of the wrongdoing vessel ...": see Atlantic Shipping (London) Ltd. v. The Captain Forever et al. (1995) 97 F.T.R. 32 at 34. An arguable best case ought not to be pre-judged at the interlocutory stage for the court then is not trying the case. Here I would refer to the Captain Forever and to the underlying authority, The Moschanthy [1971] 1 Lloyd's Rep. 37, the decision of Mr Justice Brandon who formed the view that the plaintiff had "... an arguable case in fact and law which cannot, and ought not, to be pre-judged against him at this stage.", the reference to a stage in time being on interlocutory motion to have security reduced. Mr Justice Brandon went on to observe that there was always a remedy for damages for wrongful arrest or for wrongful demand for excess security (page 46).

            In this instance security is sought to the full value of the claim, $206, 535.00 (US), together with 50% for interest and costs. The principal amount is proper, for that is the reasonably arguable best case. However the suggested allowance for interest and costs is high, particularly in that the parties are bound for arbitration, in which each side must pay its own costs. Therefore, allowing two years' interest and a moderate allowance for costs and disbursement in this proceeding, an appropriate amount for security is $235,000.00 (US).

            I thank counsel for the effort they have put into material and submissions.

(Sgd.) "John A. Hargrave"

                                                                                                           Prothonotary

Vancouver, British Columbia

16 July 2002

                                                   FEDERAL COURT OF CANADA

                                                                    TRIAL DIVISION

                             NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                            T-445-02

STYLE OF CAUSE:                        Cyber Sea Technologies, Inc. v. Underwater Harvester Remotely Operated Vehicle et al.

PLACE OF HEARING:                   Vancouver, British Columbia

DATE OF HEARING:                      8 July 2002

REASONS FOR ORDER OF THE COURT BY: Hargrave P.

DATED:                                               16 July 2002

APPEARANCES:                          

Peter G Bernard, QC                                                                 FOR PLAINTIFF

Barrister and Solicitor

John S Waldie                                                                            FOR DEFENDANTS

Barrister and Solicitor

SOLICITORS OF RECORD:

Bernard & Partners                                                                     FOR PLAINTIFF

Barristers & Solicitors

Vancouver, British Columbia

Jones Emery Hargreaves Swan                                             FOR DEFENDANTS

Barristers & Solicitors

Victoria, British Columbia