Date:
20130618
Docket:
T-2145-12
Citation:
2013 FC 671
Ottawa, Ontario,
June 18, 2013
PRESENT: The
Honourable Mr. Justice Scott
ADMIRALTY ACTION IN REM AND IN PERSONAM
BETWEEN:
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SDV
LOGISTIQUES (CANADA) INC.
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Plaintiff
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and
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THE
DIESELGENSET TYPE 8M 25, ENGINE NO. 45085 EX THE BARGE “ANDREA”
and
THE
OWNERS AND ALL OTHERS INTERESTED IN THE DIESELGENSET
TYPE
8M 25, ENGINE NO. 45085 EX THE BARGE “ANDREA”
and
THE
DIESELGENSET TYPE 8M 25, ENGINE NO. 45086 EX THE BARGE “ANDREA”
and
THE
OWNERS AND ALL OTHERS INTERESTED IN THE DIESELGENSET
TYPE
8M 25, ENGINE NO. 45086 EX THE BARGE “ANDREA”
and
THE
DIESELGENSET TYPE 8M 25, ENGINE NO. 45087 EX THE BARGE “ANDREA”
and
THE
OWNERS AND ALL OTHERS INTERESTED IN THE DIESELGENSET
TYPE
8M 25, ENGINE NO. 45087 EX THE BARGE “ANDREA”
and
THE
DIESELGENSET TYPE 8M 25, ENGINE NO. 45088 EX THE BARGE “ANDREA”
and
THE
OWNERS AND ALL OTHERS INTERESTED IN THE DIESELGENSET
TYPE
8M 25, ENGINE NO. 45088 EX THE BARGE “ANDREA”
and
THE
LIFTING-DEVICE EX THE BARGE “ANDREA”
and
THE
OWNERS AND ALL OTHERS INTERESTED IN THE LIFTING-DEVICE EX THE
BARGE “ANDREA”
and
EXPORT
DEVELOPMENT CANADA
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Defendants
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and
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OCEAN HOTELS I LTD
and
OCEAN HOTELS II LTD
and
DAVIES
YARDS INC
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Mises-en-cause
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REASONS FOR
ORDER AND ORDER
I.
Introduction
[1]
This
is an appeal by Plaintiff, SDV Logistiques (Canada) Inc. (SDV), pursuant to Rule
51(1) of the Federal Courts Rules, SOR/98-106 (the Rules), for an
Order in Appeal reversing the decision rendered by Mr. Richard Morneau,
Prothonotary, on May 14, 2013, refusing to allow the sale of 4 marine diesel
generators (the generators) and a lifting device located in Hamburg, Germany,
under Rule 379 of the Rules, for lack of jurisdiction of this Court.
[2]
For
the reasons that follow, this appeal is dismissed with costs.
II.
The
facts
[3]
In
April 2010, Davie Yards Inc. (Davie 1) instructed SDV to arrange for the
pick-up and shipment of various cargoes including the generators. SDV, pursuant
to its agreement and further to additional instructions issued by Davie on May 28, 2010, arranged for the pick-up of the generators from Kiel and their
delivery and storage to the port of Hamburg where they arrived aboard the barge
Andrea on June 2, 2010.
[4]
Since
June 2, 2010, the generators have been placed in warehousing at Unikai’s
Terminal, shed 48, at the port of Hamburg. The warehouse is operated by another
company of the SDV Group, namely SDV Projects Gmbh.
[5]
The
successor company to Davie 1 paid for the monthly storage fees of approximately
13 000 euros until March 12, 2012, despite the fact that it has been
carrying business since February 24, 2010, under the Companies’
Creditors Arrangement Act, (RSC, 1985, c C-36).
[6]
Since
that date Davie 3, a new company that has purchased the assets of the Davie
Shipyard, has ceased to make payments to SDV for the storage and warehousing
costs the latter is incurring on a monthly basis. The current balance owed to
SDV stands at $234 264.05.
[7]
On
October 5, 2009, the Export Development Corporation (EDC) entered into a loan
agreement (the loan agreement) with the mises-en-cause, Ocean Hotels I Limited and
Ocean Hotels II Limited, as borrowers, whereby certain sums of money were
loaned to complete the construction by Davies of Hulls 721 and 722.
[8]
The
loan agreement granted EDC a first priority mortgage on Hulls 721 and 722 and
all appurtenances pertaining to each one, including machinery and equipment,
such as the Generators.
[9]
On
October 30, two separate moveable hypothecs and shipbuilder’s mortgage
agreements were entered into between EDC and Ocean Hotels I Limited and Ocean
Hotels II Limited.
[10]
EDC
did register first priority shipbuilder’s mortgages on each hull and
appurtenances related to each and registered first priority hypothecs in Quebec over each hull and all appurtenances pertaining to each.
[11]
Under
the RDPRM, that is the Quebec Register of Personal and Movable Real Rights, EDC
remains in first priority position and is the sole marine mortgagee.
[12]
SDV
alleges that the generators and lifting unit (the Defendants’ cargoes) are in
rem defendants. The generators and lifting device were purchased and paid
for on behalf of Ocean Hotels I Limited and Ocean Hotels II Limited, they are
appurtenances to be installed on Hulls 721 and 722.
[13]
Davie has
recently resumed operations and is now owned by a new entity (Davies 3) and
Hulls 721 and 722 are still in a partially-constructed state.
[14]
The
Defendants’ cargoes are still in Hamburg and have never been in Canada.
[15]
Ocean
Hotels I Limited and Ocean Hotels II Limited have defaulted on the loan agreement
and EDC claims to be in a position to sell Hulls 721 and 722 pursuant to
section 69 of the Canada Shipping Act 2001, SC 2001, c 26 (the Shipping
Act).
[16]
A
warrant for the arrest of the Defendants’ cargoes was issued on November 28,
2012 but was never served in rem.
[17]
SDV
amended its pleadings on May 1st, 2013 to pursue its action in
personam against EDC.
III. Relevant legislation
[18]
The
applicable section of the Canada Shipping Act 2001, SC 2001, c
26, and the applicable Rules of the Federal Courts
Rules,
SOR/98-106 are
appended to this decision.
IV. The issues
1.
What
is the standard of review for an appeal of a Prothonotary’s decision?
2.
Does
the Federal Court have jurisdiction in the present case?
V.
The
standard of review
[19]
Both parties point
the Court to the well known principles established by the Federal Court of
Appeal in R v Aqua Gem Investments,[1993] 2 FC 425 (FCA) and Merck
7 Co. v Apotex Inc, [2004] 2 FCR 459 (FCA) and by the Supreme Court in
Z. I. Pompey Industrie v ECU-line N. V., [2003] 1 S.C.R. 450 that
discretionary orders of prothonotaries ought not to be disturbed on appeal to a
judge unless they are clearly wrong or they raise questions that are vital to
the final issue of the case.
[20]
EDC
argues that the Court should not have to determine whether the Protonotary’s
findings were vital to the final issue of the case as his decision concerned
the jurisdiction of the Court, which is a pure question of law that attracts a
standard of correctness as determined by the Supreme Court in Housen v
Nikolaisen, [2002] 2 SCR 235.
[21]
The
Court disagrees with EDC’s position as Dunsmuir clearly states that in applying
the standard of correctness the reviewing Court, must set aside the findings in
first instance and conduct its owns analysis (see Dunsmuir v New Brunswick,
2008 SCC9, [2008] SCJ No 9).
[22]
The
Court will consequently proceed on a de novo basis.
VI. Position of the parties
A. SDV’s position
[23]
SDV
argues that the Prothonotary erred in refusing to apply Rule 379 of the Federal
Court Rules, for the following reasons:
a) the
Federal court has jurisdiction to hear cases dealing with navigation and
shipping, which includes warehousing and storage that arise out of a contract
for the carriage of goods by sea ( see ITO-International Terminal operators
Ltd v Milsa Electronics, [1986] 1 S.C.R. 752);
b) the
Court’s jurisdiction may be exercised in personam, as in the present
instance, and there exists no geographical restrictions on the exercise of its
jurisdiction nor on the place where the cause of action originates;
c) citing
the decision in Alpha Trading Monaco SAM v the ship “Sarah Desgagnés”, 2010
FC 695 [Alpha Trading Monaco], where the Court ordered the arrest of a
ship under arrest in another forum, there is no impediment for the Court to
issue an order to sell the Defendants’ cargoes notwithstanding that they are
located in Hamburg, because it is under the control of a Canadian company
subject to its jurisdiction; and
d) the
Court has the power to order the judicial sale of goods while these goods may
not be under arrest, since the location of these goods is irrelevant as they
are within the power and control of SDV, a Canadian company (see Imperial
Trusts Co v Lequesnoy,1921 CarswellNat 17 [Lequesnoy].
[24]
Finally,
SDV argues that if the Court refuses to reverse the Prothonotary’s decision and
issue an Order for the sale of the generators because there is peril to the
Defendants’ cargoes, this would be inequitable since SDV will be forced to
institute proceedings in Germany.
B.
EDC’s
position
[25]
EDC
alleges that the Prothonotary’s decision should be upheld for the following
reasons:
a) firstly,
the action before the Court at this time is no longer an action in rem but
solely an action in personam against EDC;
b) while
there is no doubt that the Federal Court’s jurisdiction may, in all cases, be
exercised in personam, by abandoning the in rem portion of the
present action, SDV is left with solely one in personam defendant;
c) under
section 69 of the Shipping Act, EDC has a statutory power of sale over
the Defendants’ cargoes which are not in Canada, as mortgagee, and is the only
party who benefits from a statutory provision granting it such right;
d) the
Federal Court being a statutory court, in absence of a precise statutory empowerment,
cannot sell property such as Defendants’ cargoes which have never been in Canada and were never served with an action;
e) in
the present case, there is no need for a forum non conveniens analysis since
there is no competing jurisdiction;
f) in
this in personam action for unpaid storage charges, Rule 379 cannot
apply as the generators are not the subject of the action and there is no
evidence before the Court that they are deteriorating; and
g) Rule
379 can only apply to property in Canada in the possession of a party to the
action.
VII.
Analysis
[26]
It
is clear that the Federal Court has in personam jurisdiction over cases
dealing with navigating and shipping including claims for warehousing arising
out of the carriage of goods by sea, but in the present case, it is to be noted
that there exists no contract for the storage of goods between SDV and Davies 3
or with EDC, the sole defendant in this in personam action, for
unpaid storage charges. While the Federal Court has in personam jurisdiction,
there needs to be a statutory provision granting the Court power to force the
sale of cargoes which have never been in Canada. The sole existing provision is
found in section 69 of the Shipping Act. It empowers the mortgagee, in
this instance EDC, to seek an order from the Court for the sale of mortgaged
property which is not in Canada.
[27]
The
Court rejects SDV’s argument that Lequesnoy cited above, in fact should
be read as granting such statutory power to order the sale of the generators
for unpaid storage charges in the present instance. It is clear, from a reading
of Lequesnoy, that there existed an enabling provision specifically
granting power to a mortgagee notwithstanding that the ship was not within the
power of the Exchequer Court at the time by arrest. Sections 29 and 35 of the Merchant
Shipping Act, 1894, c 60, granted such powers to the Court to issue an
order in favor of mortgagees. There is no equivalent provision in the Shipping
Act granting such power to issue an order in favour of SDV who does not
hold mortgagee’s rights against the generators as does EDC. SDV could not point
the Court to another statute. Hence, the Court is without any enabling
provision to grant the relief sought.
[28]
Similarly
for SDV’s reference to the Alpha Trading Monaco case cited above. That
case is clearly distinguishable from the case at bar for a number of reasons. Firstly,
the ship in Monaco had previously been arrested in Canada and released on bail,
which is quite different from the present case where the generators were never
in Canada and the warrant for there arrest which was issued on November 28
2012, was never served in rem. More so, as SDV released its warrant on
May 1, 2013, thereby limiting its action to one in personam.
[29]
It
is also quite apparent that Rule 379 cannot be applied because the generators
are not and have never been in Canada. Furthermore, there is no evidence before
the Court that the generators are likely to deteriorate. The affidavit of Mr.
Fontan submitted by SDV does not constitute binding evidence of deterioration since
he merely states an opinion as financial manager of SDV that he fears that the
value of the stored generators may be diminishing.
[30]
Rule
379 is a general provision in the Court’s Rules. It is found in Part 8 of the Rules
which deals with preservation of rights in proceedings. Part 13 of the Rules
is the section devoted to admiralty actions. Rule 475(2) is at the very
beginning of Part 13 and states that; “[e]xcept to the extent that they are
inconsistent with this Part, the rules applicable to other actions also apply
to Admiralty actions.”
[31]
For
the Court to be able to issue an Order pursuant to Rule 379, there needs to be
an enabling provision granting it the right to issue such Order for property
that is outside its jurisdiction. As stated above, there is no provision in the
admiralty section of the Rules as the action against the Defendant EDC
is strictly in personam. There is also no other statutory enabling
provision and there is no evidence before the Court that the cargoes are
actually in peril.
[32]
Consequently,
this appeal is dismissed with costs because the Prothonotary was correct in
affirming that the Court has no jurisdiction in the present case to issue the
Order sought by SDV.
ORDER
THIS
COURT ORDERS that the appeal be dismissed with costs.
“André F. J. Scott”
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