Date: 20100610
Docket: T-1606-08
Citation: 2010 FC 634
ADMIRALTY ACTION IN REM AND IN PERSONAM
BETWEEN:
ST. ANTHONY SEAFOODS LIMITED PARTNERSHIP
Plaintiff
and
THE SHIP “F.V.
“INDEPENDENCE”,
THE OWNERS AND ALL
OTHERS INTERESTED
IN THE SHIP F.V. “INDEPENDENCE”, AND
VSP ENTERPRISES
LIMITED
Defendants
REASONS
FOR ORDER
PROTHONOTARY
MORNEAU
[1]
This is a motion by the plaintiff St. Anthony Seafoods
Limited Partnership (the plaintiff St. Anthony or the Company) for an
order from this Court approving the taking into possession of the defendant
vessel “F.V. Independence” (the Vessel) in order to thereafter sell it as
set out, inter alia, in section 69 of the Canada Shipping
Act, 2001, S.C. 2001, c. 26 (the Act). The Vessel is the
property of the defendant VSP Enterprises Limited (the defendant VSP).
Background
[2]
It appears that on December 18, 2006, the
plaintiff St. Anthony agreed to loan $375,000 to the defendant VSP and its
principal director and shareholder, Bruce Hiscock, in a loan agreement
entitled “Loan and Assignment of Catch Agreement” (the Loan).
[3]
To guarantee this Loan, the defendant VSP agreed, in return,
to a marine mortgage in favour of the plaintiff St. Anthony. The terms and
conditions of the mortgage are contained in a Deed of Covenants.
[4]
Clause 3.01(vii) of the Deed of Covenants provides
essentially that, in the event of default, the plaintiff St. Anthony may, in
accordance with the Act, sell the Vessel by private sale.
Section 3.01(vii) reads as follows:
3.01 ACCELERATION AND REMEDIES IN EVENT OF DEFAULT ‑ In
case any Event of Default shall occur under the terms of this Deed of
Covenants, the other Security Documents, or any other agreement or security
granted to the Lender in respect of the Loan whether or not delay may have been
granted to the Company, the Lender, in addition to all other rights and
remedies herein or by law provided and without previous notice or demand, may
in its discretion:
. . .
(vii)
in accordance with the Canada Shipping Act, sell the Vessel or any
or all of the shares therein upon such terms and conditions as the Lender may
determine, free from any claim of or by the Company, at public or private sale,
by sealed bids or otherwise. Any such sale may be held at such place and at
such time as the Lender may determine and may be conducted without bringing the
Vessel to the place designated for such sale and the Lender may become the
purchaser at any public sale and shall have the right to credit on the purchase
price any and all sums of money due under this Deed of Covenants, the Security
Documents, or under the security therefore, in favour of the Lender including
any Protective Disbursements and any disbursements made by the Lender on behalf
of the Company or for the protection of the Lender’s security;
[5]
The relevant section of the Act, section 69, reads as
follows:
|
69. (1) A
mortgagee of a vessel or a share in a vessel has the absolute power, subject
to any limitation set out in the registered mortgage, to sell the vessel or
the share.
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69. (1) Tout
créancier hypothécaire d’un bâtiment ou d’une part dans un bâtiment a le
pouvoir absolu, sous réserve des restrictions prévues dans l’hypothèque
enregistrée, de vendre le bâtiment ou la part.
|
|
(2) If there is more
than one registered mortgage of the same vessel or share, a subsequent
mortgagee may not, except under an order of the Federal Court or of a court
of competent jurisdiction whose rules provide for in rem procedure in
respect of vessels, sell the vessel or share without the agreement of every
prior mortgagee.
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(2) S’il y a plus
d’une hypothèque enregistrée à l’égard d’un même bâtiment ou d’une même part,
le créancier hypothécaire subséquent ne peut, sauf en vertu de l’ordonnance
de la Cour fédérale ou d’un tribunal compétent dont les règles permettent les
actions réelles à l’égard des bâtiments, vendre le bâtiment ou la part sans
le consentement de chaque créancier hypothécaire antérieur.
|
[6]
On August 1, 2008, counsel for the plaintiff
St. Anthony sent the defendant VSP and Mr. Hiscock a letter (the
letter of August 1, 2008) stating that the Borrowers were in breach
or default under the Loan. The relevant part of the letter reads as follows:
REGISTERED AND REGULAR
MAIL
PERSONAL AND
CONFIDENTIAL
VSP Enterprises
Limited
and Bruce Hiscock
P.O. Box 574
Spaniard’s Bay, NL
A0K 3X0
Dear Sir:
RE: Our Client –
St. Anthony Seafoods Limited Partnership (the “Company”)
Loan and Assignment of
Catch Agreement made 18 December 2006
VSP Enterprises
Limited and Bruce Hiscock (collectively the “Borrowers”)
We are the
solicitors for the Company, and have been retained by it in connection with the
above-noted Loan and Assignment of Catch Agreement executed
on 18 December, 2006 (the “Agreement”).
We are
advised by the Company that the Borrowers are indebted to the Company in the
amount of $420,785.56, which amount is secured against:
a)
the Agreement which includes a security interest granted in favour of the
Company against fishing enterprise C502575 (the “Licenses”);
b) Marine
Mortgage on the vessel the M.V. “Independence” (the “Vessel”);
c)
Deed of Covenants executed on 18th December 2006;
d) an
assignment of marine insurance on the Vessel; and
e)
a personal guarantee by Bruce Hiscock.
We are
further advised by the Company that the Borrowers are in breach of the
Agreement in that they have:
1.
Failed to diligently use all fishing opportunities available to them
during the term, contrary to section 2.01 of the Agreement and constituting a
default under sections 5.01 (c) and (e) of the Agreement.
2.
Failed to offer to sell 100% of shrimp, crab, all other crustaceans and
all fish species of any nature or kind made or landed under the conditions set
forth in section 2.02 (i) and (ii) to the Company contrary to section
2.02 of the Agreement and constituting a default under sections 5.01(a)
and (c) of the Agreement. Further for landings that were made to alternate
processors no funds were forwarded to St. Anthony in compliance with the
Borrowers obligations under the Agreement.
We have been instructed by the Company to demand payment
from you of the total amount due and owing. This amount must be paid in full
with 14 days from the date hereof. . . .
[7]
Given that the defendant VSP and Mr. Hiscock did not
comply with the requirement in the letter of August 1, 2008, the
plaintiff St. Anthony commenced an action in this Court in this docket on
October 17, 2008, and simultaneously had the Vessel arrested. The
Vessel has been under arrest since that date. The defendant VSP did not or
could not provide a bond to obtain a release from the arrest.
[8]
On May 21, 2009, the plaintiff St. Anthony
filed this motion because it believed that the authorization of this Court was
necessary to legally take possession of the Vessel since the defendant VSP and
Mr. Hiscock refused to voluntarily hand over the keys to the Vessel.
[9]
In support of this motion, the plaintiff St. Anthony submitted
an affidavit dated May 15, 2009, of Ms. Caroline Davis (the
Davis I affidavit), who is the General Manager of the plaintiff
St. Anthony and who appears to have been the key player in the relevant
steps that the plaintiff St. Anthony took.
[10]
Upon receipt of this motion, the defendants filed a reply
record containing an affidavit of Mr. Hiscock (the Hiscock I
affidavit) dated June 1, 2009. Subsequently, through the Court’s
various directives and orders, there were, inter alia, the
September 9, 2009, cross‑examinations on the Davis I and
Hiscock I affidavits and supplementary written representations filed by
the defendants on November 23, 2009, including an affidavit of
Mr. Hiscock dated November 13, 2009 (the Hiscock II
affidavit), and an affidavit of Mr. Hiscock’s son, one
Shannon Hiscock, dated November 13, 2009 (the
Shannon Hiscock affidavit). On December 7, 2009, the plaintiff
St. Anthony filed supplementary written representations that included an
affidavit of Ms. Davis dated December 4, 2009 (the Davis II
affidavit), and an affidavit of one Edgar J. Coffey (the Coffey
affidavit). The deponents of those two affidavits were also subsequently, at
different times, possibly cross‑examined on their affidavit.
Analysis
[11]
It seems that the success of this motion depends on whether
the evidence establishes a default or breach of the Loan.
[12]
With respect to any default on the Loan, the Davis I
affidavit in support of the motion refers us to the breaches specified in the
letter of August 1, 2008.
[13]
It appears from reading and analysing the transcript of the
September 9, 2009, cross‑examination of Ms. Davis on her
affidavit I that, in fact, the plaintiff St. Anthony ultimately did
not have, as of August 1, 2008, concrete evidence of a default under
clauses 2.01 and 2.02 of the Loan, clauses summarized in the letter of
August 1, 2008, which letter is reproduced above at
paragraph [6].
[14]
Similarly, the letter of August 1, 2008, alleges
the following as a default:
. . . Further for landings that were made to
alternate processors no funds were forwarded to St. Anthony in compliance
with the Borrowers obligations under the Agreement.
[15]
This default appears to refer to clause 2.07 of the
Loan, which reads as follows:
2.07 If the Company does not purchase the catch of any
trip of the Vessel, the Borrower and Hiscock agree that they will immediately
on sale of the catch of the Vessel to another processing company or buyer remit
to the Company the amounts set forth in paragraph 2.05 of this Agreement.
Hiscock and the Borrower shall also remit to the Company 10% of the Gross
Landed Value on (i) the sale of any catch from the Licences or any other
licence held by or on behalf of Hiscock or the Borrower regardless of whether
or not such licence is fished by the Vessel, and (ii) of the catch of another
vessel owned or fished by Hiscock or the Borrower.
[16]
In short, clause 2.07 requires that the defendant VSP
remit to the plaintiff St. Anthony “10% of gross landed value respecting
catch sold to another processing company or buyer”.
[17]
The cross‑examination of Ms. Davis on
September 9, 2009, demonstrated that the allegation in the letter of
August 1, 2008, that “ . . . for landings that
were made to alternate processors no funds were forwarded to St. Anthony
in compliance with the Borrowers obligations under the Agreement” was not
founded because it appears that, on or about July 23, 2008,
Mr. Hiscock’s wife sent a payment of $9,000 to Ms. Davis. In this
regard, although Mr. Hiscock’s cross‑examination on
September 9, 2009, revealed that the instructions he gave to the
other processing plant, i.e., in this case, Labrador Sea Products Inc. (a
member of the Quinlan Group of Companies), were that the 10% be transferred
directly from the company to the plaintiff St. Anthony, it appears that the
10% was deposited into Mr. Hiscock’s personal account and that it was
Mr. Hiscock’s wife, who in fact was the member of the couple with business
knowledge, who wrote a cheque for $9,000 to Ms. Davis.
[18]
At Mr. Hiscock’s September 9, 2009, cross‑examination
on his affidavit I, the plaintiff St. Anthony gave Mr. Hiscock
the Coffey affidavit. Mr. Coffey described himself as follows in his
affidavit:
I am the Fleet and Procurement Manager with the
Quinlan Group of Companies. Labrador Sea Products Inc. is a member of the
Quinlan Group of Companies.
[19]
Essentially, the Coffey affidavit was submitted to
establish that the total number of pounds of crabs landed by the defendants at
Labrador Sea Products Inc. had a value of $132,402.90 and that, therefore,
based on the 10%, the plaintiff St. Anthony should have received $13, 240.29,
not just $9,000.
[20]
The plaintiff St. Anthony regards that as the first
default or breach of the Loan to obtain possession of the Vessel.
[21]
However, the plaintiff St. Anthony only became aware
of the information in the Coffey affidavit on or about
September 9, 2009, and, therefore, the Court does not consider that
this information and the conclusions that the plaintiff St. Anthony seeks
to draw from it were within the knowledge of the plaintiff St. Anthony and
informed its decision for purposes of the letter of August 1, 2008,
the statement of claim of October 17, 2008, and this motion of
May 21, 2009.
[22]
Similarly, the plaintiff St. Anthony also relies on
two other breaches (the 2nd and 3rd breaches), which were based on information
it obtained from Mr. Hiscock’s cross‑examination on his
affidavit I on September 9, 2009, and which the plaintiff
St. Anthony noted in its supplementary representations dated
December 7, 2009.
[23]
With respect to the second breach, it appears that during Mr. Hiscock’s
cross‑examination, he acknowledged that, in November 2008, he had
entered into an agreement with another fisher, one Tony Noble, whereby Noble
could fish for shrimp using Hiscock’s licence. The consideration for this
permission was that Mr. Noble would pay Mr. Hiscock 8% of the value
of the catch landed by Mr. Noble, after expenses. Mr. Hiscock
acknowledged that the agreement was put to some use and that he had not remitted
any amount in return to the plaintiff St. Anthony.
[24]
The third breach resulted from a situation similar to the
second breach but occurred in September 2009.
[25]
Mr. Hiscock’s testimony itself on the alleged 2nd and
3rd breaches could, in principle, lead us to conclude that those events
constituted defaults or breaches of the Loan. The sometimes contradictory
evidence between Mr. Hiscock’s and Mr. Coffey’s version on the first
breach is less certain.
[26]
However, even if these three breaches could be positively established,
I do not intend, for the following reasons, to grant the plaintiff
St. Anthony’s motion and allow it to take possession of the Vessel.
[27]
As already mentioned more specifically with respect to the
first breach of the Loan, it is clear in the Court’s view that the plaintiff
St. Anthony did not, at the time of its letter of
August 1, 2008, or at the time of its statement of claim of
October 2008 or even at the time of its motion in May 2009, have the
information that supported, that informed its conclusion regarding the three
breaches. I think that Mr. Hiscock’s cross‑examination on
September 9, 2009, enabled the plaintiff St. Anthony to “play
catch up in its litigation”.
[28]
The plaintiff St. Anthony’s lack of concrete
information about any breach of the Loan at the time of its letter of
August 1, 2008, left the field open, to a certain extent, to the
allegations in Shannon Hiscock’s affidavit and in the Hiscock II
affidavit that the underlying reason why the plaintiff St. Anthony
concluded that the Loan had been breached was the fact that Mr. Hiscock
and his son refused—given that this was not a condition of the Loan—to land
their catches at St. Anthony, despite the insistence of Ms. Davis.
[29]
Shannon Hiscock’s affidavit reveals that, faced with
the defendants’ refusal to travel to St. Anthony:
“ . . . she said [Ms. Davis] that she would take
action against our Enterprise”.
[30]
Although the evidence tends to indicate that the defendants
would have benefited from an additional 3% had they gone to St. Anthony,
the fact remains that the requirement to land at St. Anthony was not in
the Loan and that St. Anthony, compared to the usual places where the
defendants landed their catches, is located much further north in Newfoundland,
about 1,000 km from St. John’s, Newfoundland.
[31]
Accordingly, the Court cannot exclude from the equation
that this requirement, which was not set out in the Loan—and could not
therefore constitute a default or breach of it—played a role in the decision by
the plaintiff St. Anthony to send the letter of August 1, 2008,
and to subsequently commence an action.
[32]
For all these reasons, the Court’s order will dismiss the
plaintiff St. Anthony’s motion, with costs.
“Richard Morneau”
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