Elders Grain Company Limited v. Carling O'Keefe Breweries of Canada Limited, docket T-1836-90

     T-1836-90

     ACTION IN REM AGAINST THE VESSEL M/V RALPH

     MISENER AND IN PERSONAM AGAINST MISENER

     HOLDINGS LTD. AND/OR MISENER SHIPPING AND THE

     OWNERS AND ALL OTHERS INTERESTED IN THE

     VESSEL M/V RALPH MISENER

BETWEEN:

     ELDERS GRAIN COMPANY LIMITED

     - and -

     CARLING O'KEEFE BREWERIES OF CANADA LIMITED

     Plaintiffs

AND:

     THE VESSEL M/V RALPH MISENER

     - and -

THE OWNERS AND ALL OTHERS INTERESTED IN THE VESSEL M/V RALPH MISENER

     - and -

     MISENER HOLDINGS LIMITED

     - and -

     MISENER SHIPPING

     Defendants

     REASONS FOR ORDER

JOYAL, J.:

     The plaintiffs bring a motion appealing from part of the Order of Prothonotary Morneau dated June 27, 1996, refusing to recognize the sufficiency of service of the re-amended Statement of Claim in rem, and refusing to issue a warrant for the arrest of the vessel. The defendants Misener Holdings Limited and Misener Shipping ("Misener") appeal from the other part of the Prothonotary's Order allowing an extension of the limitation for in rem service on the defendant vessel, and seek a declaration that the vessel is therefore not implicated in the action. Finally, the current owners of the vessel Ralph Misener (now renamed the Gordon C. Leitch), Jackes Shipping Inc. ("Jackes") file a conditional appearance seeking an order setting aside the Prothonotary's Order altogether and an order striking the in rem action and all references thereto from the record.

Facts

     On May 22, 1989, a cargo of alfalfa pellets was loaded on board the M/V Ralph Misener (the "vessel") in Thunder Bay for carriage to Quebec City. On May 29, 1989, while discharging the cargo, a fire broke out in the cargo on board the vessel. The Quebec City Fire Department extinguished the fire, but the pellets suffered approximately $450,000 in damage.

     May 16, 1990, the in personam defendants Misener consented to the request of the plaintiffs to extend the time for the filing of suit until June 29, 1990. On June 28, 1990, the plaintiffs filed a Statement of Claim in rem and in personam, but failed to serve it on any of the defendants. On June 21, 1991, the plaintiffs filed a re-amended Statement of Claim in rem and in personam against Misener for damage to the cargo. On June 25, 1991, the re-amended Statement of Claim was served on the defendants in personam.

     On June 27, 1991, a copy of the re-amended Statement of Claim for the action in rem was delivered to the master of the vessel who was then on board. It is this latter service which is challenged, since Rule 1002 of the Federal Court Rules requires that service in rem be effected by posting the pleading on the mast of the vessel or some other conspicuous location.

     On April 1, 1992, defendants Misener filed and subsequently served a Statement of Defence and Counterclaim denying any implication of the vessel by reason of the re-amended Statement of Claim never having been properly served. The plaintiffs delivered a reply on September 16, 1992. For almost four years, no further steps were taken in respect of the vessel, which in the meantime, on April 4, 1994, was sold to Jackes and her name changed to M/V Gordon C. Leitch.

     The parties were engaged in negotiations for almost seven years after the fire which gave rise to the cause of action. On April 17, 1996, the plaintiffs brought a motion for a declaration that the service of the re-amended Statement of Claim was valid with respect to the action in rem and for an order issuing a warrant for the arrest of the vessel. In the alternative, they sought an extension of time for service of the re-amended Statement of Claim.

     On June 27, 1996, Prothonotary Morneau of this Court held that the service of the re-amended Statement of Claim upon the vessel was not proper or valid. However, he ruled that the insufficiency of the service should not be fatal to the plaintiffs' claim and granted an extension of time for service on the vessel until September 27, 1996, three months from the date of the Order.

Issues

     The three motions before me give rise to three issues. They are:

1.      What is the standard of review to be applied on an appeal from a decision of the Prothonotary?

2.      Did the Prothonotary commit a reviewable error in declaring that the service of the re-amended Statement of Claim upon the vessel was not valid?

3.      Did the Prothonotary commit a reviewable error in allowing an extension of time for the service of the re-amended Statement of Claim?

Analysis

1.      Standard of Review:

     Although not in dispute, it is useful to preface a consideration of the Prothonotary's Order with a few remarks on the standard of review to be applied on such an appeal. The Federal Court of Appeal in Canada v. Aqua-Gem Investments Ltd.¹ stands for the proposition that the Prothonotary's decision ought not to be disturbed unless it is clearly wrong in that it is based upon a wrong principle or a misapprehension of the facts, or unless it raises questions vital to the final issue of the case.

     In the present case, it is clear that the questions addressed by the Prothonotary are vital to the final issue of the case in that the limitation for service of the re-amended Statement of Claim has now elapsed. Had he rejected entirely the plaintiffs' motion before him, it would have been fatal to the continuation of the plaintiffs' action. When the exercise of the Prothonotary's discretion is reviewable, the Aqua-Gem case holds that a judge ought to exercise his discretion de novo. Thus, I find that I must exercise my discretion anew with respect to the issues which were raised before the Prothonotary.

2.      The Validity of Service:

     I am satisfied that the Court is seized of in rem jurisdiction only if service of the re-amended Statement of Claim is properly effected. The method of service of a Statement of Claim in rem is set out in Rule 1002 of the Federal Court Rules. This Rule reads as follows:

[ ... ]

(5)      In an action in rem, the statement of claim or declaration shall be served

(a)      upon a ship, or upon cargo, freight or other property, if the cargo or other property is on board a ship, by attaching a certified copy of the statement of claim or declaration to the main mast or the single mast, or to some other conspicuous part of the ship, and leaving the same attached thereto;

[ ... ]

     The owners of the vessel defend the Prothonotary's decision that the service was invalid, relying principally on the reasons of Mr. Justice Dubé of this Court in Mona Lisa Inc. v. The Ship "Carola Reith" et al.² In that case, service of a statement of claim in rem on a ship was purported to have been effected by service on a secretary at the offices of one of the corporations which owned the ship. Dubé J. considered Rule 1002(5) and concluded as follows:

Obviously the ship is not a person or a corporation to which Rule 309 dealing with personal service, or Rule 310 with reference to substitutional service, would apply. The applicable Rule 1002(5) is mandatory. In The "Mesis" v. Louis Wolfe & Sons (Vancouver) Ltd.3, the Chief Justice of this Court had this to say at page 435:

Whatever the correct view of the nature of a Canadian Admiralty action in rem is, in my view, Rule 307 does not authorize the Rule 1002 type of service out of the jurisdiction. In my view, not only is Rule 307 applicable only to service on a legal person but, having regard to the mandatory requirements of Rule 1002(5), Rule 1001 does not make Rule 307 applicable to the service of a statement of claim in an action in rem.

It is very clear, therefore, that the service of the statement of claim as against the ship is contrary to the Rules and ought to be set aside.

     The new owners of the vessel rely on the above case for the proposition that Rule 1002(5) is mandatory, not allowing of the exceptions to the prescribed manner of service which is available with respect to service on a corporation. Rule 309, they say, permits service on a corporation to be effected on an agent of a corporation, but makes no provision for substitutional service on a ship.

     I will concede that historically, an institution as old as maritime or admiralty law will have developed and maintained any number of formalistic rules where even incidental as opposed to more substantial deviations will invite strenuous resistance. I will also recognize that the formalistic requirements of in rem service by a posting on the mast of the ship continues to apply in England. In The "Marie Constance"⁴, Sir R. Phillimore stated bluntly that

Service on the captain, even on board the ship, is not an alternative allowed by the rules of practice, nor sufficient notice to all parties who may have an interest in the ship; as, for example, mortgagors or others, between whom and the captain there is no privity, either real or implied.

More recently, in 1963, Mr. Justice Hewson of the English Admiralty Division applied this strict, formalistic reading of the method of service in The "Prins Bernhard"⁵. He stated that although the attachment of a pleading on the mast of a ship is not a perfect method, no better alternative has yet been devised.

     If such be the law in England, one would be traditionally inclined to follow it in Canada. On the strength, however, of the Federal Court of Appeal decision in Antares Shipping Corp. v. The "Capricorn"⁶, there might be no grounds for such diffidence. At p. 277, LeDain J.A. notes as follows:

Neither the Federal Court Act nor the Federal Court Rules contain a provision making the English Rules of practice applicable to matters not otherwise provided for. Section 42 of the Act provides that "Canadian maritime law as it was immediately before the 1st day of June 1971 continues subject to such changes therein as may be made by this or any other Act", but "Canadian Maritime Law" as defined by the Act would not appear to contemplate matters of practice and procedure provided for by Rules and orders.

     I can only conclude that no matter how persuasive English admiralty cases might otherwise be, this Court must prima facie look for the proper interpretation of any procedure in the context of its own Rules. I should note, in this respect, that the Federal Court Rules have long favoured a more flexible approach to the proper carriage of any proceeding in court.

     Rule 2(2) states unequivocally that the Rules "are intended to render effective the substantive law and to ensure that it is carried out; and they are to be interpreted and applied as to facilitate rather than to delay or to end prematurely the normal advancement of cases".

     Rule 6 states that "the Court may, in special circumstances and subject to such conditions as it considers appropriate, by order, dispense with compliance with any Rule where it is necessary in the interests of justice".

     Rule 302 in turn provides certain guidelines in the application of the Rules in the face of objection or failure to comply, as follows:

(a)      no proceeding in the Court shall be defeated by any merely formal objection;

(b)      non-compliance with any of these Rules shall not render any proceedings void unless the Court shall so direct, but such proceedings may be set aside either wholly or in part and upon such terms as the Court should think fit;

(c)      any application to set aside any proceeding for irregularity must be made within a reasonable time and without the party applying having taken a fresh step after knowledge of the irregularity;

(d)      the several objections intended to be insisted upon must be stated in the notice of motion to set aside a proceeding.

     Rule 310(1) gives the Court power to order substitutional service of any document.

     In a similar vein, I might refer to Rule 420 relating to the amendment of pleadings, and specifically to the power of the Court under Rule 424 to permit amendments even when the relevant period of limitation has expired.

     As well, in the matter of judicial review proceedings, Rule 1619(1) gives authority to the Court to waive compliance with all or part of Rules 1606, 1607, 1608 and 1611.

     The foregoing references are not exhaustive, but in my respectful view, they indicate that in the drafting of the Rules of this Court, a policy of zero tolerance, no matter the pressure of strict formalists, does not appear to have carried much weight. What these references further mean is that in applying or interpreting Rule 1002(5)(a), English jurisprudence does not govern and English precedents are not binding.

     The only relevant Canadian case relating to Rule 1002(5) is that of Mona Lisa Inc. v. "Carola Reith", a decision of Dubé J. to which I have earlier referred. However, I should think my colleague will not think ill of me if I should find that the circumstances in his case are different from those in mine. He had to decide if in rem service of a statement of claim on a receptionist at the offices of one of the ship's owners constituted proper service. On the facts before him, he decided it did not.

     In the case at bar, service was effected by going aboard the vessel and leaving the Statement of Claim in the hands of the ship's master. In effect, the Statement of Claim was left aboard the ship, a process which is substantially what the Rule calls for. Furthermore, it is noted that in a Statement of Defence and Counterclaim filed a year later, the defendants acknowledged their ownership of the ship and admitted that the plaintiffs' claim was in respect of cargo carried on her. In all these circumstances, I can conclude that unlike the case before my colleague Dubé J., the service herein was much more respectful of the spirit of the Rule and more consonant with its purpose as well.

     In the circumstances, and in the absence of any evidence as to prejudice to the defendants, I should allow the plaintiffs' appeal and declare the service effected in the in rem action as proper service under the Rules.

3.      Extension of Time:

     By reason of my conclusions on the first issue, I need not consider whether the Prothonotary was in error in concluding that the plaintiffs should be entitled to an extension of time to properly serve their re-amended Statement of Claim.

Conclusion

     For the foregoing reasons, the appeal by the plaintiffs is allowed. It is declared that service of the re-amended Statement of Claim on July 27, 1991, upon the master on board the vessel was sufficient and valid service to initiate an in rem action as against the vessel. That being the only objection raised by the defendant ship owners to the plaintiffs' Affidavit to Lead Warrant, the Prothonotary or an authorized officer of the Registry of this Court is directed to issue a warrant under Rule 1003(1) for the arrest of the M/V Ralph Misener (now known as the M/V Gordon C. Leitch) anywhere in Canada where the ship may be found. No order issues as to costs.

     L. Marcel Joyal

     _________________________

     J U D G E

O T T A W A (Ontario)

January 17, 1997.

__________________

¹      [1993] 2 F.C. 425.

²      [1979] 2 F.C. 633; 100 D.L.R. (3d) 69 (F.C.T.D.).

³      [1977] 1 F.C. 429.

⁴      (1877) Asp. 505.

⁵      (1963) Lloyd's Rep. 236.

⁶      [1977] 2 F.C. 274; revised on other grounds by the Supreme Court of Canada, [1980] 1 S.C.R. 553">[1980] 1 S.C.R. 553.