Melso International Inc. v. Adecon Shipping Lines Inc., docket T-2815-96

     T-2815-96

B E T W E E N:

     MELSA INTERNATIONAL INC.

     Plaintiff

AND:

     ADECON SHIPPING LINES INC.

     - and -

     WEST ISLAND SHIPPING CO. LTD.

     - and -

     NAVIERA POSEIDON

     - and -

     THE OWNERS AND ALL OTHERS INTERESTED IN

     THE VESSELS WEST ISLANDS AND PINE ISLANDS;

     - and -

     THE VESSEL WEST ISLANDS;

     - and -

     THE VESSEL PINE ISLANDS;

    

     Defendants

REASONS FOR ORDER

NADON J.:

     The Defendants seek to obtain an order for summary judgment dismissing the Plaintiff"s action on the following grounds:

1.      On the correct interpretation of the charter-party between the Plaintiff and the Defendant Adecon Shipping Lines Inc., dated September 19, 1996, as amended by addendum #1 dated September 30, 1996, the statement of claim discloses no cause of action;

2.      Alternatively, that the charter-party was terminated by a letter of the Plaintiff dated November 1, 1996, and the Plaintiff"s claim for damages was extinguished by such termination.

     The relevant facts required to dispose of this motion are straightforward and can be summarized as follows. The Defendant West Island Shipping Co. Ltd. is the owner of the vessels WEST ISLANDS and PINE ISLANDS. The Defendant Naviera Poseidon is the manager of the aforesaid vessels.

     On or about September 19, 1996, the Plaintiff and the Defendant Adecon Shipping Lines Inc. ("Adecon") entered into a charter-party agreement in the Gencon form for the carriage of pit props from the ports of Valleyfield, Quebec, and Bayside, New Brunswick, to the port of Bandar Abbas, Iran. Pursuant to box 5 of the charter-party, the cargo was to be carried onboard the ship WEST ISLANDS or "similar sister". Box 9 of the charter-party provided that the ship was expected to be ready to load at Valleyfield between October 15 and October 25 and at Bayside between October 25 and November 10, 1996. Pursuant to box 19 of the charter-party, the Plaintiff, as charterer, was given the option of cancelling the charter-party as of October 25, 1996. Clause 10 of the charter-party entitled "cancelling clause" provides that:

Should the vessel not be ready to load (whether in berth or not) on or before the date indicated in Box 19, Charterers have the option of cancelling this contract, such option to be declared, if demanded, at least 48 hours before vessel"s expected arrival at port of loading. Should the vessel be delayed on account of average or otherwise, Charterers to be informed as soon as possible, and if the vessel is delayed for more than 10 days after the day she is stated to be expected ready to load, Charterers have the option of cancelling this contract, unless a cancelling date has been agreed upon.

     Clause 1 of the charter-party is also relevant and it provides that:

It is agreed between the party mentioned in Box 3 as Owners of the steamer or motor-vessel named in Box 5, of the gross/nett [sic] Register tons indicated in Box 6 and carrying about the number of tons of deadweight cargo stated in Box 7, now in position as stated in Box 8 and expected ready to load under this Charter about the date indicated in Box 9, and the party mentioned as Charterers in Box 4 that:

The said vessel shall proceed to the loading port or place stated in Box 10 or so near thereto as she may safely get and lie always afloat, and there load a full and complete cargo (if shipment of dock cargo agreed same to be at Charterers" risk) as stated in Box 12 (Charterers to provide all mats and/or wood for dunnage and any separations required, the Owners allowing the use of any dunnage wood on board if required) which the Charterers bind themselves to ship, and being so loaded the vessel shall proceed to the discharging port or place stated in Box 11 as ordered on signing Bills of Lading or so near thereto as she may safely get and lie always afloat and there deliver the cargo on being paid freight on delivered or intaken quantity as indicated in Box 13 at the rate stated in Box 13.

     On or about September 30, 1996, the Plaintiff and Adecon agreed that the Plaintiff"s cargo would be loaded at the port of Bayside and not, as previously agreed to, at Valleyfied and Bayside. It is not disputed that, as of October 10, 1996, the Plaintiff"s cargo was ready to be loaded on the intended vessel at Bayside.

     On October 23, 1996, the Plaintiff was advised that the vessel nominated for its cargo was now the MV ALAMINOS and that the vessel would be sailing from a Cuban port on October 25, 1996 with an expected time of arrival at Bayside of November 8 to November 10, 1996.

     On the following day, the Plaintiff"s freight-forwarder, Vandick International Forwarders Ltd. ("Vandick"), advised Adecon"s broker by telefax that the estimated time of arrival for Bayside of November 8 to November 10 was not acceptable to the Plaintiff. Vandick ended its fax as follows:

Please help to have this vessel in Bayside before the 31 October and we all can look forward to further business.

     On November 1, 1996, the Plaintiff exercised its right to cancel the charter-party. The Defendants concede, for the purposes of this motion, that the Plaintiff validly exercised its option to cancel pursuant to the Gencon voyage charter-party. On November 2, 1996, the Plaintiff and Desgagnés Shipping International Inc. entered into a voyage charter-party in the Gencon form, pursuant to which Desgagnés Shipping nominated the vessel ANNA DESGAGNÉS to carry the Plaintiff"s cargo from Bayside to Bandar Abbas.

     On December 20, 1996, the Plaintiff filed a statement of claim in rem and in personam against the Defendants and the vessel WEST ISLANDS claiming the difference between the freight payable pursuant to the charter-party, dated September 19, 1996 entered into with the Defendant Adecon, and the freight payable pursuant to the charter-party entered into with Desgagnés Shipping, dated November 2, 1996. According to the Plaintiff, the difference between the freight payable under the two voyage charter-parties is US $125,000.00 which equals the sum of CAN $173,750.00. On March 3, 1997, the Defendants filed their statement of defence to the Plaintiff"s action and, in addition, the Defendant Adecon filed a counterclaim against the Plaintiff claiming the sum of US $500,000.00 for wrongful termination of the charter-party.

ANALYSIS

     I will begin my analysis with the Defendants" second ground for seeking summary judgment which is that the Gencon charter-party dated September 19, 1996 was terminated by the Plaintiff on November 1, 1996 and that, as a result, the Plaintiff"s entitlement to damages was extinguished.

     The Defendants submit that where shipowners are not in breach of the terms and conditions of the charter-party, the charterers may, notwithstanding, exercise their option to cancel if the intended vessel does not, or cannot, arrive at the port of loading by the cancelling date. In support of that position, the Defendants rely on the decision of the English Court of Appeal in The Democritos, [1976] 2 Ll. L. Rep. 149, and more particularly on that part of the judgment delivered by Lord Denning M.R., where he states at 152:

Next the cancelling clause. Its effect is that, although there may have been no breach by the owners nevertheless the charterers are, for their own protection, entitled to cancel if the vessel is not delivered in a proper condition by the cancelling date. That is the sole effect.

     Further on at 152, after reviewing three decisions concerning the ship owner"s obligation to present the intended vessel by the cancelling date, Lord Denning concluded that:

These authorities show that as long as the owner uses reasonable diligence, he is not in breach, but the charterer is entitled to cancel if the vessel is not delivered by the cancelling date.

Mr. Pollock referred to several voyage charters in which there was an "estimated time of arrival". It has been always held that the estimated date has to be given honestly and on reasonable grounds and that he has to sail from his last port on his approach voyage so as to get there in time. That obligation is absolute. But those cases have no application to a charter such as this, where there is no promise at all to deliver by a certain date, but only an option to cancel if it is not so delivered.

     In the present case, there was, contrary to the charter-party before the Court of Appeal in The Democritos, an estimated time of arrival at the load port. Originally, the charter-party provided that the nominated vessel would be ready to load at Valleyfield between October 15 and October 25 and at Bayside between October 25 and November 10. That was modified on September 30, 1996, when the parties agreed that all of the Plaintiff"s cargo would be loaded at Bayside.

     On the authority of The Democritos, the Defendants submit that by exercising its option to cancel on November 1, 1996, the Plaintiff terminated the charter-party and cannot consequently claim damages from the Defendants. Alternatively, the Defendants submit that, on November 1, 1996, the Plaintiff cancelled the charter-party "without any reservation of its rights". The Defendants further state that as they accepted the Plaintiff"s decision to cancel, the rights and obligations of the parties flowing from the charter-party have been mutually discharged.

     Mr. Buteau, for the Plaintiff, takes an entirely different view of the matter. Firstly, he submits that the option granted to the Plaintiff to cancel the charter-party does not preclude the Plaintiff from claiming damages from the Defendants. In support of that proposition, Mr. Buteau referred me to page 409 of J. Cooke, et al., Voyage Charters (New York: Lloyd"s of London Press Inc., 1993) where the learned authors write that:

Furthermore, the exercise of the right to cancel does not deprive the charterer of the right to claim damages if he can establish that the vessel"s failure to arrive by the cancelling date was the result of a breach of the owner of an obligation to be ready to load by a particular date.

     Mr. Buteau also referred me to page 66 of Voyage Charters, supra, where the authors state:

Therefore, the combination of an "expected ready to load" provision and an express obligation to proceed to the port of loading creates an absolute obligation on the owner to sail for the loading port at a time when it is reasonably certain that the vessel will arrive at the loading port on or about the expected date.

     That statement finds support in the judgment of Lord Denning in The Democritos at 152, referred to earlier on. As I understand these authorities, a charterer who exercises his option to cancel a charter-party will also be entitled to claim damages from a shipowner if, on the particular facts of the case, the failure of the vessel to arrive by the cancelling date results from a breach on the part of the shipowner of his obligation to be ready to load by a particular date. In the present case, there is "an expected ready to load" date in the charter-party and an express obligation to proceed to the port of loading. (See clause 1 of the charter-party).

     Mr. Buteau submits that the Defendants are in breach of their obligation to proceed to Bayside at a time when it was reasonably certain that the vessel would arrive by the cancelling date. To support that argument, Mr. Buteau relies on the affidavit of Mr. Gerry O"Connor, the President of the Plaintiff company. Specifically, Mr. Buteau relies on paragraphs 15, 16 and 17 of that affidavit. Mr. O"Connor states that although the vessel ALAMINOS was nominated on October 23, 1996, with the advice that she would be sailing from Cuba on October 25, 1996, with an expected time of arrival at Bayside of November 8 through November 10, 1996, the ALAMINOS had not, by October 23, 1996, yet completed discharge of her cargo in Cuba. Consequently, according to Mr. O"Connor, it was not possible for the ALAMINOS to meet the "expected ready to load" date in Bayside. In making this statement, Mr. O"Connor referred to a telefax sent by brokers Lewis and Clark to Ocean International Transport Limited, brokers for Domtar Inc., who had entered into a booking note contract with the Defendant Adecon and in respect of which contract the vessel ALAMINOS had also been nominated. In their telefaxed transmittal, dated October 30, 1996, Lewis and Clark advised Ocean International that since the ALAMINOS had not yet been released from a previous charter commitment, it would be unable to meet the cancelling date agreed to between Adecon and Domtar Inc.

     Paraphrasing the words of Lord Denning in The Democritos at page 152, it can be said that the Plaintiff"s argument is that the estimated date was not given honestly and upon reasonable grounds and that the Defendants could not sail from the last port on their approach voyage so as to get to Bayside in time. That, in my view, is the substance of the Plaintiff"s argument against the Defendants.

     In The Baleares, [1993] 1 Lloyd"s Rep. 215, the English Court of Appeal at 227 expressed that proposition as follows:

The combination of the e.t.a. provision and the undertaking to proceed with all reasonable despatch resulted in an obligation "to start in time". The breach of that obligation caused the loss.

     The Defendants" motion is one for summary judgment pursuant to Rules 432.1 to 432.7 of the Federal Court Rules, which came into force on January 13, 1994. Rules 432.1(2), 432.3(1) and 432.3(4) provide:

432.1(2) A defendant may, after filing and serving a defence and at any time prior to the fixing of the time and date for trial, make a motion to a judge, with supporting affidavit material or other evidence, for summary judgment dismissing all or part of the claim in the statement of claim.

432.3(1) Where a judge is satisfied that there is no genuine issue for trial with respect to a claim or defence, the judge shall grant summary judgment accordingly.

432.3(4) Where a judge decides that there is a genuine issue with respect to a claim or defence, the judge may nevertheless grant summary judgment in favour of any party, either upon an issue or generally, unless

(a) the judge is unable on the whole of the evidence to find the facts necessary to decide the questions of fact or law; or

(b) the judge considers that it would be unjust to decide the issues on the motion for summary judgment.

     In Feoso Oil Ltd. v. Ship Sarla, [1995] 184 N.R. 307, the Federal Court of Appeal reviewed the procedure for obtaining summary judgment under the new Rules. After reviewing relevant decisions from the Ontario Courts concerning Rule 20 of the Ontario Rules of Civil Procedure, from which Rules 432.1 to 432.7 take their inspiration, Mr. Justice Stone quotes, with approval, part of the judgment rendered by Henry J. of the Ontario Court (General Division) in Pizza Pizza Ltd. v. Gillespie (1990), 45 C.P.C. (2d) 168, where he states at page 183:

In my opinion, there is a lower threshold that is contemplated by the new r. 20 and the case law developing. It is that the court in taking a hard look at the merits, must decide whether the case merits reference to a judge at trial. It will no doubt have to go to trial if there are real issues of credibility, the resolution of which is essential to determination of the facts. That aside, however, the rule now contemplates that the motions judge will have before him sworn testimony in the affidavits and other material required by the rule in which the parties put their best foot forward. The motions judge therefore is expected to be able to assess the nature and quality of the evidence supporting "a genuine issue for trial"; the test is not whether the plaintiff cannot possibly succeed at trial; the test is whether the court reaches the conclusion that the case is so doubtful that it does not deserve consideration by the trier of fact at a future trial; if so then the parties "should be spared the agony and expense of a long and expensive trial after some indeterminate wait" (per Farley, J., in Avery ).

     Mr. Justice Stone then enunciates his understanding of what the test should be. At page 315, he states:

In my view, the new process available under rules 432.1 - 432.7 should not be construed as to prevent a motions judge from doing that which it surely envisages - allowing a summary judgment to be rendered in a proper case with consequent savings in time and expense that a trial would otherwise entail. The intention appears to be that claims or defences clearly without foundation should not take up the time and incur the costs of a trial. [...]

     I accept, as I must, the test proposed by Mr. Justice Stone. Is the statement of claim herein "clearly without foundation" so that it "should not take up the time and incur the costs of a trial"? In my view, the answer to that question is no.

     I am satisfied, on the facts before me, that there is a genuine issue for trial with respect to the Plaintiff"s right to claim damages against the Defendants for their failure to send the nominated vessel to the port of loading. Deciding that issue will necessarily involve assessing factual evidence which the parties will present. The evidence of Mr. O"Connor, and in particular paragraphs 15, 16 and 17 of his affidavit offers a glimpse of what the Plaintiff intends to adduce into evidence. Even though Mr. Jones, for the Defendants, has taken issue with some of the statements made by Mr. O"Connor in his affidavit, that does not deter from the fact that there does appear to be a genuine issue which, in my view, can only be resolved by a trial.

     I should also point out that in paragraphs 18, 19, 20 and 21 of his affidavit, Mr. O"Connor states that at no time whatsoever did the Plaintiff waive its rights to claim damages against the Defendants and that, in the circumstances, the Plaintiff had no choice other than to charter a substitute vessel at a rate of freight substantially higher than the freight agreed to pursuant to the charter-party dated September 19, 1996. These statements, as the matter now stands, have not been challenged or contradicted by the Defendants and for the present purposes I must accept them. Thus, the Defendants cannot succeed on their first ground.

     I now turn to the Defendants" first ground in requesting an order for summary judgment. That ground, it will be recalled, is that on a correct interpretation of the relevant charter-party, the statement of claim discloses no cause of action.

     In my view, the Defendants cannot succeed on this ground. The Defendants" motion is not a motion to strike the statement of claim pursuant to Rule 419(1)(a) but a motion for summary judgment pursuant to Rules 432.1 to 432.7. In Feoso Oil , supra, Mr. Justice Stone clearly explained, at page 315, that when a motion for summary judgment is made, both the applicant and the respondent must adduce "such evidence as is reasonably available to them on the issues raised by the pleadings and from which the Court can determine whether there is a genuine issue for trial".

     Consequently, as I understand the rules and the pronouncement of Mr. Justice Stone in Feoso Oil, a judge, in deciding a motion for summary judgment, must decide the motion on the basis of affidavit material or other evidence adduced by the parties. Rule 432.2(1) provides:

In response to affidavit material or other evidence supporting a motion for summary judgment, a responding party may not rest on the mere allegations or denials of the party"s pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue for trial.

     I have before me the affidavit of Mr. O"Connor, the President of the Plaintiff company. On the basis of the statements made by Mr. O"Connor and the exhibits attached to his affidavit, including the relevant charter-party, I am of the view that there are genuine issues which warrant a trial. Clearly, where, as here, a motion for summary judgment is made, the motion must be decided on the evidence adduced by the parties. The Defendants cannot, in my view, transform their motion for summary judgment into a motion to strike under Rule 419(1)(a). If that be the Defendants" intention, they certainly are entitled to bring on such an application. However, as I have said, such a motion is not before me.

     For these reasons, the Defendants" motion shall be dismissed. Costs shall be in the cause.

Ottawa, Ontario

April 11, 1997

     "MARC NADON"

     Judge

     T-2815-96

OTTAWA, ONTARIO, FRIDAY, THE 11TH DAY OF APRIL, 1997.

PRESENT:      THE HONOURABLE MR. JUSTICE MARC NADON

B E T W E E N:

     MELSA INTERNATIONAL INC.

     Plaintiff

AND:

     ADECON SHIPPING LINES INC.

     - and -

     WEST ISLAND SHIPPING CO. LTD.

     - and -

     NAVIERA POSEIDON

     - and -

     THE OWNERS AND ALL OTHERS INTERESTED IN

     THE VESSELS WEST ISLANDS AND PINE ISLANDS;

     - and -

     THE VESSEL WEST ISLANDS;

     - and -

     THE VESSEL PINE ISLANDS;

    

     Defendants

ORDER

     The Defendants" motion is dismissed. Costs shall be in the cause.

     "MARC NADON"

     Judge