Docket: T-2001-11
Citation:
2014 FC 1200
Ottawa, Ontario, February 13, 2015
PRESENT: The
Honourable Madam Justice Gagné
ADMIRALTY
ACTION IN REM AGAINST
THE
SHIP “SAMATAN”
AND IN PERSONAM
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BETWEEN:
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NORWEGIAN BUNKERS AS and
ATLAS BUNKERING SERVICES B.V.B.A.
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Plaintiffs
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and
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THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP “SAMATAN”, BOONE
STAR OWNERS INC. and KRISTIANIA MARINE LTD. BVI
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Defendants
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AMENDED JUDGMENT AND REASONS
I.
Overview
[1]
In the present motion for summary trial and
judgment, I am asked to determine whether Brazilian law applies to the claim
raised by Norwegian Bunkers AS [Norwegian], a Norwegian company, and Atlas
Bunkering Services B.V.B.A. [Atlas], a Belgium company, in personam
against Boone Star Owners Inc. [Boone Star], a Marshall Islands company, and
Kristiania Marine Ltd. BVI [Kristiania BVI], a British Virgin Islands company,
and in rem against the Maltese flag ship M/V Samatan, for the payment of
the bunker fuel ordered by Kristiania Marine S.A. [Kristiania Norway],
Kristiania BVI’s agent, also a Norwegian company, and delivered to the Samatan
in Brazil by Petróleo Brasileiro S.A.—Petrobras [Petrobras], a Brazilian
company.
[2]
If it does, the plaintiffs contend that they
have a maritime lien on the Samatan, which was arrested in Vancouver, Canada,
to cover the value of the unpaid bunkers (US$
666,915.19). If it does not, Canadian law is deemed to apply and the defendants
contend that the supply of bunkers to a vessel does not give rise to a maritime
lien against the vessel thereby determining that the plaintiffs have no in
rem action. In any case, the defendants argue that the conditions are not
met for the in personam claim to be successful.
[3]
This Court has
jurisdiction to enforce valid foreign maritime liens, should the rules
concerning Canadian conflict of laws deem that jurisdiction’s law applicable.
However, Canadian maritime law does not generally create a maritime lien in
favour of a supplier of necessaries. While an exception to this rule was enacted
in 2009 under subsection 139(2) of the Marine Liability Act, SC 2001, c
6 [Act], it has thus far been interpreted as rather limited in scope.
[4]
For the reasons discussed below, I will grant
the plaintiffs’ motion for summary trial
and judgment in rem against the defendant ship.
II.
Background
[5]
The facts in this matter are not contested, as
the parties have submitted a Statement of Agreed Facts and a Book of Agreed
Documents.
III.
The Parties
[6]
Norwegian and Atlas are in the business of
selling bunker fuel to deep sea ships in a variety of jurisdictions across the
world. Atlas has been assigned Norwegian’s claim arising out of the sale of
bunkers to the Samatan.
[7]
Bominflot is the name of a group of companies
incorporated in multiple jurisdictions which also supply bunkers to deep sea
ships. In this case, the German Bominflot company was involved in the purchase
and sale of the bunkers.
[8]
Boone Star is the registered owner of the
Samatan and employed its Masters, Officers and Crew.
[9]
Cargill International SA [Cargill], a company
incorporated under the laws of Switzerland, time chartered the Samatan from
Boone Star on or about July 1, 2011, on the New York Produce Exchange [NYPE]
form.
[10]
Kristiania BVI sub-time chartered the Samatan
from Cargill on or about July 19, 2011, also on the NYPE form.
[11]
The NYPE form is the most commonly used time
charter form for bulk carriers. It provides, among other things, that the
charterer agrees neither it, nor its agents, are to create maritime liens
against the vessel it is chartering which might have priority over the title
and interest of the owners in the vessel.
[12]
Kristiania Norway was the agent for Kristiania
BVI, whereas Seabulk Management [Seabulk], a company incorporated under the
laws of Norway, was its managing commercial agent.
[13]
TMS Bulkers LTD [TMS], a company incorporated
under the laws of Greece, was the ship manager of the Samatan.
[14]
Agencia Maritima Cargonave LTDA [Cargonave], a
company incorporated under the laws of Brazil, was the port agent of Kristiania
BVI.
[15]
Petrobras was the physical supplier of the
bunkers, and though not mentioned in the agreed statement of facts, it is a
Brazilian operation, located in Rio de Janeiro.
IV.
Ordering the Bunkers for the Samatan
[16]
Norwegian had supplied bunkers to Kristiania BVI
through the agency of Kristiania Norway on 24 occasions, excluding this case,
between November 2009 and August 2011. It had supplied those bunkers all over
the world.
[17]
On or about August 9, 2011, Kristiania Norway
placed a telephone order, on behalf of its principal Kristiania BVI, with
Norwegian for heavy fuel oil and marine gas oil for the Samatan, to be
delivered in Brazil.
[18]
The same day, Norwegian sent Kristiania Norway a
standard form Bunker Confirmation, which was addressed in its standard manner
stating that the bunkers had been ordered for “Master
and/or Owner and/or Operator and Kristiania [Norway]” for the Samatan
for delivery in Paranagua, Brazil.
[19]
The Bunker Confirmation specified amounts, price
rates, approximate delivery dates and payment terms, including interest on late
payment. It also identified the physical supplier of the bunkers as “Petrobras”
and stated that its terms were subject to the physical supplier’s general terms
and conditions. The Petrobras General Terms and Conditions were never supplied
to Kristiania Norway or Kristiania BVI and neither ever requested a copy.
[20]
All oral and written communications between
Norwegian and Kristiania Norway with respect to the ordering of the bunkers, in
circumstances of both this order and previous orders, took place in Norway. For
previous orders, all payments had occurred in Norway and payment in this case
was expected to be made in Norway.
[21]
Norwegian knew that Kristiania BVI was a time
charterer of vessels, but did not know which charter party was in use.
[22]
Norwegian knew that Kristiania BVI was not the
owner of the Samatan. No one from Kristiania BVI ever advised Norwegian as to
whether or not Kristiania BVI had the authority to bind the Samatan, and
Norwegian did not ask.
[23]
On July 28, 2011, Boone Star’s agent TMS
instructed Cargonave by email to send an important notice by registered mail,
email or fax, to all suppliers of goods or services contracted by the time
charterers for suppliers to vessel of goods and services for time charterer’s
account. The email said:
IMPORTANT NOTICE
GIVEN PRIOR TO THE PROVISION OF GOODS/SERVICES
REF M/V. SAMATAN.
ETA: SAO FRANCISCO DO SUL. DATE: AUG/5th wp.
THIS VESSEL IS
CHARTERED TO THE HEAD-CHARTERERS M/S “CARGILL” AND SUB-CHARTERED TO M/S “AC
CRISTIANIA”, WHO HAVE REQUESTED YOU TO PROVIDE GOODS/SERVICES TO VESSEL.
THE OWNERS, MASTERS, OFFICERS, SERVANTS OR
AGENTS ARE NOT LIABLE TO YOU IN RESPECT OF THOSE GOODS/SERVICES AND NO LIEN OR
OTHER ENCUMBRANCE SHALL BE CREATED BY THE SUPPLY TO THE VESSEL OF THE SAID
GOODS/SERVICES THIS NOTICE HAS BEEN GIVEN TO YOU, THE SUPPLIER, PRIOR TO THE
PROVISION OF THE GOODS/SERVICES AND YOU, THE SUPPLIER, ACKNOWLEDGE THAT THE
CHARTERERS OF THE M/S “CARGILL” AND SUB-CHARTERERS “AC CRISTIANIA” ARE SOLELY
RESPONSIBLE TO YOU FOR THE PAYMENT OF YOUR ACCOUNT FOR THE SAID GOODS/SERVICES.
UPON TERMINATION OF THE SAID CHARTER ALL GOODS ON BOARD THE VESSEL SHALL BECOME
THE PROPERTY OF THE VESSEL.
[24]
No notice of any no-lien provision was provided
by anyone on behalf of the Samatan or its owners to anyone on behalf of the
bunkers’ suppliers until after the bunkers had been delivered to the Samatan.
[25]
On August 15, 2011, Seabulk sent an email to the
Master of the Samatan, with copies to Cargill, Kristiania BVI, and TMS,
stating:
Bunkering will take place at Paranagua after
completion of loading.
Bunkers stemmed as follows.
950 mt ifo 380
40 mt mdo
Suppliers Petrobras
Agents Cargonave Paranagua […]
[26]
On August 15, 2011, the Master of the Samatan
forwarded Seabulk’s email to Cargill and Boone Star’s agent TMS.
[27]
On August 24, 2011, TMS emailed the
Master of the Samatan, inter alia, instructing the Master and Chief
Engineer: “REMIND TO STAMP THE B.D.N. [Bunkering Delivery
Note] WITH ‘IMPORTANT NOTICE’ STAMP AS ALWAYS.”
V.
Delivering the Bunkers to the Samatan
[28]
On August 30, 2011, Cargonave sent an email to
the Master of the Samatan, telling him that:
VSL IS SCHEDULED TO SHIFT TO INNER ROADS FOR
RECEIVED BUNKERS TMNW ARND 17:00 HRS … BUNKERS TO BE SUPPLIED: 40 MT/MGO + 950
MT/IFO 380 CST.
[29]
The following day, the Master of the Samatan
forwarded Cargonave’s message to TMS.
[30]
Norwegian purchased the bunkers from Atlas,
which had purchased them prior from Bominflot, which had previously acquired
them from the physical supplier, Petrobras. Petrobras delivered the bunkers to
the Samatan in Paranagua, Brazil, on August 31, 2011. Thus, Norwegian owned the
bunkers when they were delivered to the Samatan.
[31]
Before delivering the bunkers, no agent of the
Samatan owners or charterers notified Norwegian, Atlas or Petrobras of the
“no-lien” clause in the charter agreements which were not public documents.
[32]
The only attempt to give such notice was after
the bunkers were delivered. The Chief Engineer of the Samatan signed for the
delivery on behalf of the Samatan and the owners, acknowledged receipt of the bunkers
and then applied a “No Lien” stamp to the delivery receipt.
[33]
On or about August 31, 2011, Norwegian issued an
invoice for the bunkers to “Master and/or Owner and/or
Vessel and Kristiania Marine Ltd. BVI c/o Kristiania Marine AS” in the
amount of US$ 666,915.19.
[34]
No part of the invoiced amount has been paid.
The invoice provided as follows:
Terms of payment:
Payment to be received in our account at the
latest […] 27.09.2011 The buyer agrees to a late payment charge of
2.0% per month, 24% per annum or the maximum permitted by law from the invoice
due date and agrees to pay any collection or attorney fees if incurred in the
collection of this invoice.
[35]
On December 9, 2011, this action was commenced
in Canada and a warrant to arrest the Samatan was issued by this Court in order
to enforce the maritime lien. The representative of the Samatan posted security
for the claim.
[36]
On December 12, 2011, Cargill issued a Letter of
Undertaking submitting the dispute to this Court’s jurisdiction and securing
Norwegian’s claim herein up to an agreed amount of US$ 730,000. The
plaintiffs accepted the Letter of Undertaking.
VI.
Issues
[37]
The issues raised by this motion are:
A.
Whether the laws of Brazil apply to the
Bunker transaction;
B.
Whether, pursuant to the laws of Brazil, the
plaintiffs have a valid and enforceable maritime lien against the Samatan;
C.
If the laws of Brazil do not apply, whether
the laws of Canada provide the plaintiffs a maritime lien against the Samatan; and
D.
Whether, in enforcing the maritime lien, the
plaintiffs are entitled to summary trial and judgment in rem against the
Samatan and in personam against Boone Star.
VII.
Analysis
A.
Whether the laws of Brazil apply to the bunker
transaction.
[38]
In the matter brought before this Court, the
task is to determine which body of law governs Plaintiffs’ claim, pursuant to
the conflict of law rules in force in Canada (Tropwood A.G. et al v Sivaco
Wire & Nail Co et al, [1979] 2 S.C.R. 157 at para 14). If these rules lead
to the conclusion that the transaction is governed by the laws of another jurisdiction,
and that law is proven to be different from Canada’s, then Canadian courts will
give effect to the foreign law. Reprising the words of Justice Harrington, “the Court will apply its own domestic law unless satisfied
that another law is applicable, a law which must have been alleged and proven
as a fact to be different.” (See also World Fuel Services Corporation
v Nordems (Ship), 2010 FC 332 [The Nordems, FC] at para 40, aff’d
2011 FCA 73 [The Nordems, FCA]).
[39]
Should foreign law be deemed applicable, as
Justice Nadon confirmed in The Nordems, FCA, above, para 40, Canadian
courts will recognize and enforce a foreign maritime lien in an action in
rem in Canada even in circumstances where no lien would arise under
Canadian maritime law.
[40]
In such situations, barring the application of
public policy principles, Canadian courts are free to defer to the choice of
law expressly stipulated by the parties in a contract. Otherwise, the Court is
required to weigh the factors that connect the case before it, to one system of
law or another (The Nordems, FC at para 39).
[41]
In the case at bar, there is no contract between
the owner of the Samatan, Boone Star, and the supplier of the bunkers,
Norwegian. The parties therefore agree that in such circumstances the proper
law is “determined not by reference to the choice of law
provision (in the supply contract), but by an attempt to determine, on the
basis of the facts and events of the case, which jurisdiction has the closest
and most substantial connection to the transaction” of supply (The
Nordems, FCA, above at para 90). Of course, absent a contract
between the parties to the litigation, the term “transaction” is to be
understood as the factual context of the supplying of necessaries.
[42]
In Imperial Oil Ltd v Petromar Inc, 2001 FCA 391 [Imperial Oil],
at paras 16-17, the Federal Court of Appeal, relying on jurisprudence
of the Supreme Court of the United States, set out seven factors that this
Court must weigh to find “With what jurisdiction did the
transactions have the ‘closest and most substantial connection’?”
(1) the place of the wrongful act;
(2) the law of the flag;
(3) the allegiance or domicile of the
injured seaman;
(4) the allegiance of the defendant
shipowners;
(5) the place where the employment
contract was made;
(6) inaccessibility of a foreign forum;
(7) the law of the forum.
[43]
While the parties agree as to the applicability
of this test, they diverge on the weight to be afforded to the listed factors.
In my view, this list must be adapted to the particular nature of a given
situation, as some factors might be irrelevant to a given case while factors
not listed above might need to be considered.
[44]
The plaintiffs argue the fact that fuelling
occurred in Brazil takes precedence over all the facts related to the other factors.
Citing Justice Harrington discussing a similar factual situation in The
Nordems, FC, they submit that the “pride of place
must be given to the place where the necessaries were provided”:
[66] In my opinion [the factors to be
considered] include the flag of the ship (Cyprus), the domicile of her owners
(Germany), the place where the offer to purchase bunkers was accepted (South
Korea), the place where the bunkers were delivered (South Africa), and the
place where the ship was arrested (Canada). If it is necessary to choose among
these laws, the proper law is that of South Africa.
[67] […] Absent a contract, we must tote up the
points of contact. In a fact situation which has contact with several
jurisdictions, pride of place must be given to the place where the necessaries
were provided. In my opinion, in the circumstances of this case, that fact
alone, or if necessary coupled with the place of arrest, outweighs the other factors.
[45]
On this point, they also cite Janet Walker, Canadian
Conflict of Laws, 6th ed vol 2 (Toronto: LexisNexis, 2013)
[Walker] at pages 31-58:
[…] The proper law of the supply contract will
not be decisive, however, if the necessaries are supplied to a party, such as a
charterer, under a contract that does not bind the ship owners. In the latter
case, the ship cannot be bound by the terms of the contract, so the
non-contractual elements, such as the nationality of the purchaser and supplier
and the location of the transaction, assume greater importance. […]
[Emphasis added]
[46]
The plaintiffs contend that in this case, a
Maltese flagged vessel owned by a Marshall Islands company, managed by a Greek
company and served by a Brazilian port agent, was bunkered in Brazil by a
Brazilian supplier acting for a Norwegian bunker seller which had contracted
with a British Virgin Islands company to supply bunkers to the vessel in
Brazil. Moreover, Boone star operated its ship in Brazil where the bunkers were
to be supplied.
[47]
While six distinct jurisdictions are implicated,
only Brazil has the closest and most substantial connection to the supply of
bunkers. They argue that no other jurisdiction has more than a single
connection to the transaction. To the extent that the contract between
Norwegian and Kristiania BVI may be relevant to determining the proper law, said
contract involves Brazilian law by virtue of the reference contained in the
Bunker Confirmation, to the Petrobras’ general terms and conditions, the latter
of which makes Brazilian law applicable under clause 18.2.
[48]
For their part, the defendants cite Imperial
Oil, to the effect that the Court must consider all the listed factors and
not take the place where the necessaries were supplied as the most important
connecting factor:
[36] The appellant submits that while all
relevant factors are to be weighed and valued, the place where the marine
lubricants were supplied i.e. Montreal and Sarnia, is the most important
connecting factor to be considered in this case. The submission here is that
the selection of this factor would provide commercial interests with a simple,
certain and straight-forward test that could be easily applied in practice. The
selection of a single connecting factor without regard to others has been
frowned upon by the courts in the United States. Thus in M/V TENTO, supra, Circuit Judge Kennedy
pointed out, at 1195, that the selection of the place where supplies are
furnished to the exclusion of other factors would be "unwise in the
maritime context". Here in Canada, too, Professor Tetley has emphasized
in Maritime Liens and Claims (London: Business Law Communications; Montreal: International
Shipping Pub., 1985), at 527, that in the absence of statutory or contractual
directions:
...facts and circumstances of the
problem...are "connecting factors" or "contacts" and are
the basic "raw materials" of conflict of laws...It is these factors
that the court uses to link the particular set of circumstances of the case to
a particular law. Usually there are many connecting factors to consider. They
may be the place of the contract, the place of the delict or tort, the place of
carrying out of the contract, the flag of the ship, the nationality of the
crew, the domicile of the vessel owners or the domicile of the charterers. All
the connecting factors must be ascertained and valued in order to determine the
applicable law amongst the laws of the competing states.
I accept that it would be unwise to single
our one factor as controlling but, rather, that all connecting factors be
considered and evaluated in order for legitimate state interests to be
accommodated. To my mind, in the present case the
places of delivery in Canada should be accorded somewhat greater weight when
viewed in the context of the several other factors connecting the transactions
to Canada. [Emphasis added]
[49]
The defendants argue that Justice Harrington’s
holding in The Nordems, FC, which places great significance on the place
where necessaries were provided, is not determinative of the present case, as
it was obiter dicta. In that case, the issue was whether or not American
law applied to the transaction, and it was otherwise unnecessary for Justice
Harrington to select the law of a particular jurisdiction. On appeal, Justice
Nadon stated, at paragraph 97 of The Nordems, FCA, that Justice
Harrington’s choice was “clearly open to him”, but had nonetheless emphasized
at paragraph 80 that no single factor should be determinative in selecting the
applicable law.
[50]
In weighing the Imperial Oil factors on
the facts of the present case, the defendants contend that the non-Brazilian
factors related to the transaction greatly outweigh the Brazilian factors.
Norway has at least three connections: the bunker supply contract was made
entirely in Norway, and it was entered into by a Norwegian seller and the
Norwegian agent of the sub-time charterer. Meanwhile, payment was made to a
Norwegian Bank. Kristiania BVI also used a Norwegian managing agent, Seabulk.
The parties to the contract have a history of dealing in Norway, having
negotiated previously 24 contracts there.
[51]
Unlike in Imperial Oil or The Nordems,
the defendants submit that there was a continuing relationship between the
parties all of which was conducted in Norway. It is unreasonable to conclude
that the parties would have expected their relationship be governed by the law
of wherever jurisdiction the bunkers were being supplied. It is much more
reasonable to conclude that the parties would have expected their relationship
be governed by the jurisdiction of the country in which they were negotiating
the transaction.
[52]
Meanwhile, the defendants argue that the choice
of law clause in the Petrobras general terms and conditions should be given no
weight in determining the law applicable to the transaction, as there is no
contract between Boone Star and Norwegian. For this point they cite The Nordems,
FCA:
[85] […] [W]here, as here and in Imperial Oil, there is no contract
between the shipowners and the supplier of necessaries, and the shipowners have
not, by their attitude and conduct, misled the supplier into believing that the
purchaser was authorized to act on their behalf, I am inclined to the view that
the choice of law provision should not be given any weight.
[53]
With all due respect, I arrive at a largely
different conclusion than the defendants. The connecting factors to Norway
alleged by the defendants, for the supply contract, are not much stronger than
those factors found insufficient by Justice Harrington in The Nordems,
as he considered the plaintiff’s best case for connecting it to the United
States.
[54]
In both cases, the country submitted as the
connecting jurisdiction is common to all of the following: the plaintiffs’
principal place of business, the place where the contracts were made, and the
location of payments for the supply of the necessaries, also being their
respective country’s banks. In neither case did the owner operate its vessel in
its own country’s waters during the relevant time, nor was it arrested in its
jurisdiction (see The Nordems, FC, above at para 53).
[55]
I do recognize the contractual history between
the plaintiffs and the sub-time charterer in Norway for supply contracts
executed all over the world. I also note that Norwegian regularly used various
physical suppliers to execute those contracts, and did not pay “too much
attention to” the choice of law clauses, if any, in those country specific
documents.
[56]
However, the defendants’ position is
contradictory. One the one hand, they enumerate all the connecting factors that
would make the laws of Norway applicable to the contract between themselves and
Kristiania BVI (e.g. it is the parties country of residence, the place the
contract was entered to, the place payment was expected to be made, etc.), but
on the other hand, they argue that privity of contract prevents the application
in the case at bar of the Brazilian choice of law clause in the Petrobras’
terms and conditions.
[57]
In fact, as all the factors enumerated by the
defendants relate to the contract between the plaintiffs and Kristiania BVI,
they would mostly be helpful in determining the law governing that particular
contract, absent a choice of law clause. And although I do not have to address
the issue, it could nevertheless be said that the plaintiffs and Kristiania BVI
rather chose the law of Brazil by accepting the terms and conditions of the
physical supplier Petrobras.
[58]
In other words, the defendants enumerate those
factors that would connect their contract with Kristiania BVI to a particular
body of law and not “factors that the Court [should use]
to link the particular set of circumstances of the case to a particular law”
(Imperial Oil, above, at para 36, citing Professor Tetley Maritime
Liens and Claims, at 527). In a non-contractual claim, the perspective to
consider should be that of the parties involved in the claim rather than that
of the contracting parties. Therefore, the outcome of this claim boils down to
a question of applying the law, be it Brazilian or Canadian, and not the
interpretation of contract, along with its accompanying consequences or effects.
The law governing the contract between Norwegian and Kristiania BVI has some
relevancy but it is only one amongst many factors to be considered.
[59]
I would add that in practice, the supply
contract was formed with the specific intent that it be executed between the
Far East and South America, for a ship that was plying Brazilian waters at the
time. Moreover, the contract was carried out by Petrobras, a Brazilian physical
supplier, on behalf of Norwegian, which dealt directly with the Brazilian port
agent, and Cargonave, on behalf of the sub-charterer, Kristiania BVI.
[60]
While not argued by either party, I also
consider, based on the foregoing, the core economic activity underscored by
this transaction was at least partly performed in Brazil. On this point, I note
Justice Stone’s discussion of this additional connecting factor to consider in Imperial
Oil:
[38] […] Among these several factors the one
that, in my view, is deserving of significant weight is that the operations of
Socanav, the demise charterer, was based in Canada at the time the marine
lubricants were supplied and it was Canada, where the vessels traded and
were based, that was most economically benefited by the lubricants. In the
United States, the base of operations of the shipowner was regarded by the
Supreme Court in Hellenic Lines, supra, at 309, as "another factor of importance" to be
assessed. This factor has been weighed ever since in appropriate cases by the
courts of that country. Thus in the M/V TENTO, supra, involving a claim for
a maritime lien by an American supplier of fuel oil in Italy by arrangement
with the charterer of a Norwegian vessel, Circuit Judge Kennedy stated, at
1193:
In a subsequent decision, the Supreme
Court declared that the factors in the Lauritzen were not
exhaustive. Hellenic Lines, Ltd. v. Rhoditis, 398 U.S. 306, 309, 90 S. Ct. 1731, 1734, 26 L. Ed. 2d 252 (1970). The vessel's "base of
operations," that is, the shipowner's centre of management and the
location most benefited economically by the business of the vessel, is also
relevant. Id. at 309, 90 S. Ct. at 1734.
These views were later adopted in a case
involving the supply of bunker oil in South Africa by a London based supplier
to a vessel whose owners were also based in London: Forsythe International U.K. Ltd. v. M/V RUTH VENTURE, 633 F. Supp. 74 (D. Or. 1985), at 77.
[39] The base of operations factor was not
considered and weighed by the Trial Judge. However, during oral argument on
appeal, at the invitation of the bench, counsel addressed this factor. When the
factor is weighed with other factors connecting the transactions to Canada, that which connected the transactions to the United States i.e. the supply contracts, seems
less substantial. The actual deliveries of the marine lubricants were made in
Canada where the vessels were registered, where both the shipowner and the
demise charterer had their respective bases of operations and centres of
management and where the vessels traded. Although the parties agree that
Socanav carried on its business primarily on the Great Lakes, St. Lawrence
Seaway and the Canadian East Coast, it is clear from the agreement of January
26, 1993 that Socanav acquired the right under Article 6.1 thereof to provide
all of the appellant's transportation requirements of liquid petroleum products
in Eastern Canada. The underlying purpose of that agreement, apparently, was to
provide for the continuing use of the vessels to that end while the two demise
charter-parties remained in effect. Nothing in the record suggests that in
transporting petroleum products in Eastern Canada the vessels traded into the
United States. All of this would suggest that Canada was the location most
benefited economically by the business of the vessels. It is probably
unnecessary to add that it was not by mere happenstance, mishap or some other
fortuitous circumstance that the vessels were supplied in Canada, but more
likely because the charterer's base of operations was located here.
[Emphasis added]
[61]
On the whole, I am not saying that the place
where the necessaries were provided must inevitably take precedence over all
other factors. The seven Imperial Oil factors must be considered. The
defendants are incorrect in suggesting that Justice Harrington misapplied the
test. A careful reading of The Nordems suggests that he meticulously
weighed the competing factors, ultimately finding that South Africa alone must
be the applicable forum. For Justice Harrington, the deciding factor was the
place where the necessaries had been provided. The Federal Court of Appeal
confirmed his application of Imperial Oil.
[62]
While the factual situation strongly differs
from that in Imperial Oil, I agree with Justice Stone at paragraph 36,
and I too find that “[t]o my mind, in the present case
the places of delivery in [Brazil] should be accorded somewhat greater weight.”
The Court in that case had the benefit of several other factors connecting the
transactions to Canada, namely that the ships in question were
Canadian-flagged, owned by a Canadian corporation and under demise charter to
another Canadian, and they traded in the Great Lakes, i.e. in both Canada and
the United States. On the other hand, the Court had to also consider that the
demise charterers’ managers were American and contracted with an American
bunker supplier on terms subject to American law.
[63]
In the present case, there are six jurisdictions
involved in this transaction. The question I am tasked with answering is which
of these jurisdictions has “the closest and most substantial connection” with
the particular set of circumstances of this case, in the perspective of the
non-contracting parties involved in the claim. In this respect, for the reasons
I have mentioned, the Brazilian factors outweigh the non-Brazilian ones.
B.
Whether, pursuant to the laws of Brazil, the
plaintiffs have a valid and enforceable maritime lien against the Samatan.
[64]
The plaintiffs have submitted the affidavit of Mr.
Marcus Alexandre Matteucci Gomes who is an attorney licensed to practice law in
Brazil and a former law professor with experience in Brazilian maritime law and
ship arrests in Brazil. He asserts that Brazilian law grants a maritime lien in
favour of the plaintiffs for the provision of bunkers.
[65]
Mr. Gomes explains that by virtue of articles
470 and 471 of the Brazilian Commercial Code and article 2 of the International
Convention for the Unification of Certain Rules of Law Relating to Maritime
Liens and Mortgages [Brussels Convention of 1926] to which Brazil ratified in
1931, the credit of the supply of the necessaries is considered “privileged” in
relation to a ship. Essentially, marine fuel expenses give rise to a maritime
lien against a vessel because they are expenses incurred for the vessel’s
preservation and because they are necessary for the continuation of the
vessel’s voyage.
[66]
In the case at bar and according to Mr. Gomes,
Brazilian law would grant a maritime lien in favour of Norwegian against the
Samatan because the bunkers were physically supplied to Samatan by Petrobras on
the order of either Kristiania (sub-time charterer) or Boone Star (owner).
He offers no explanation of Brazilian law principles as regard to how the supplier of necessaries is presumed to
have contracted on the credit of the ship.
[67]
“Privileged” credits are considered to be the
equivalent to “tacit mortgages” on the ship. Accordingly, they have in rem effects,
constituting a maritime lien that persists and follows the ship, whether it is
domestically or foreign owned, even if it is sold or transferred, by any means
whatsoever, to a different owner. This is confirmed by article 8 of the
Brussels Convention of 1926 and article 470 of the Brazilian Commercial Code.
[68]
This privileged credit gives the plaintiffs
rights under Brazilian law, to seek arrest of a defendant ship as a provisional
remedy, in order to enforce the collection of its debts (article 479 of the
Brazilian Commercial Code and article 813 of the Brazilian Code of Civil
Procedure). That ship would then be allowed to provide security for its
release, pending the determination of a judgment in an action at law.
[69]
Mr. Gomes adds that in the case at bar, the “no
lien” stamp on the bunker delivery receipt has no effect as the Chief Engineer
of the Samatan only applied it after the bunkers were loaded onto the
ship. Plaintiffs argue that if anything, its only relevance is that its use by
Boone Star is evidence that Boone Star knew that Brazilian law gave a maritime
lien for bunkers supplied to a ship.
[70]
However, the foregoing analysis is based on the
assumption that the supply contract between the parties is subject to
Petrobras’ general terms and conditions, which are governed by Brazilian law
(page 2 of Mr. Gomes’ affidavit). In addition, Mr. Gomes’ operating presumption
for the creation of the maritime lien is that the Chief Engineer of the Samatan
signed on behalf of the vessel and acknowledged and approved receipt of the marine
fuel. This is despite the fact that the sub-charterer (and not the owner of the
ship) was responsible for its own fuel, and was the one who had ordered the
bunkers, thus the one benefiting from its delivery.
[71]
In their written submissions, the defendants do
not seriously challenge the fact that should I determine that Brazilian law
applies, it provides for a maritime lien on the Samatan for the supply of
bunkers. At the hearing however, counsel for the defendants pointed to paragraph
8, subparagraphs 8 ii) and v) and paragraph 23 of Mr. Gomes’ affidavit which
read as follows:
8. I have been informed of the
following facts by J. Stephen Simms, which I assume to be true and upon which
my analysis and conclusions are based:
Assumed Facts
[…]
ii) Kristiania Marine Ltd. BVI (“Kristiania”)
was, at all material times, a sub-time charterer and/or operator and/or
charterer of the same vessel (Boone Star and Kristiania are hereinafter
collectively referred to as “Owners”);
[…]
v) The sale contract between Norwegian and the
Owners is subject to Petrobras’ general terms and conditions, which are
governed by Brazilian law;
[…]
23. Assuming these facts to be true and
correct, and based upon my comments and assertions above on the relevant
Brazilian laws on maritime liens and arrest of ships, it is my opinion that:
i. Brazilian law grants a maritime lien in
favor of Norwegian against M/V Samatan because the Bunkers that were physically
supplied to M/V Samatan by Petrobras in Paranaguá on the order of either
Kristiana or Boone Star as marine fuel expenses. Pursuant to Brazilian law,
including Article 2 of the Brussels Convention of 1926, marine fuel expenses
give rise to a maritime lien against a vessel because they are expenses
incurred for the vessel’s preservation and because they are necessary for the
continuation of vessel’s voyage;
ii. Norwegian’s claim against M/V Samatan is in
rem, and follows the vessel regardless of its ownership or location
under Article 8 of the Brussels Convention of 1926 and Article 470 of the Brazilian
Commercial Code; and
iii. Under Brazilian law, the maritime lien
existing in favor of Norwegian gives grounds to the arrest of M/V Samatan.
Article 479 of Brazilian Commercial Code allows for the arrest of a vessel
where one of the credits that are qualified as “privileged” by Brazilian law
under Articles 470 and 471 of the Brazilian Commercial Code and Article 2 of
the Brussels Convention of 1926 exists.
[72]
In my view, it was certainly not the best idea
to refer to both Boone Star and Kristiania BVI as the “owners”. Counsel for the
defendants argues that it could make a difference whether the necessaries are
ordered by the owner of the vessel or by a time-charterer. However, I think
that paragraph 23 dispels the doubts we might have on that subject. Mr. Gomes
thereby confirms that whether it was ordered by the owner or by the
sub-charterer, the delivery of bunkers created a maritime lien on the Samatan.
[73]
Finally, the defendants did not challenge Mr.
Gomes’ exposition of Brazilian law, nor have they cross-examined him. In that
context, I am satisfied that the plaintiffs have met their burden to allege and
prove that Brazilian law provided, in the context of this claim, a maritime
lien in favour of Norwegian on the Samatan.
C.
If the laws of Brazil did not apply, whether the
laws of Canada provide the plaintiffs a maritime lien against the Samatan.
[74]
If I was not of the view that the laws of Brazil
applied to the supply of bunkers to the Samatan, the outcome would be far
different. As the law of Norway has not been alleged or proven by the parties,
I would have had to apply Canadian domestic laws (The Nordems, FC at
para 40).
[75]
As previously noted, Canadian maritime law
generally does not create a maritime lien in favour of a supplier of
necessaries. A limited exception to this general rule is found in section 139
of the Act, which was enacted in 2009. Subsection 139(2) provides as follows:
|
139. (2) A person, carrying on business in Canada, has a maritime
lien against a foreign vessel for claims that arise
|
139.(2) La personne qui exploite une entreprise au Canada a un
privilège maritime à l’égard du bâtiment étranger sur lequel elle a l’une ou
l’autre des créances suivantes :
|
|
(a) in
respect of goods, materials or services wherever supplied to the foreign
vessel for its operation or maintenance, including, without restricting the
generality of the foregoing, stevedoring and lighterage; […]
|
a) celle résultant de la fourniture — au
Canada ou à l’étranger — au bâtiment étranger de marchandises, de matériel ou
de services pour son fonctionnement ou son entretien, notamment en ce qui
concerne l’acconage et le gabarage;
|
|
. . .
|
[…]
|
[76]
The plaintiffs argue that the reference to “Canada” in paragraph 139(2)(a) should be read as a reference to “Norway,” and that the
plaintiffs should thus be granted a maritime lien against the Samatan, a
foreign vessel. They concede that no Court has granted one in such
circumstances, but maintain hope that Canadian law is moving in that direction.
[77]
The defendants argue that this interpretation is
not consistent with the history and purpose of section 139 of the Act. It was
enacted to place Canadian ship suppliers in a more equitable position relative
to their American counterparts. The parliamentary debates preceding the
enactment of the section testify to that effect:
[. . .] These are Canadian companies that
supply ships that call at Canadian ports with everything from fuel to water, to
food and equipment that is being purchased. Today these businesses do not
have the same rights as American businesses who supply the same ship in their
own port. Not even our own courts here in Canada will do this. That is because
American ship suppliers benefit from a lien in American law which can be
enforced in Canadian courts.
These Canadian businesses have been telling the
government for some time that they also need the same protection. This
Conservative government is delivering that protection to them. (House of
Commons Debates, 40th Parl, 2nd Sess, No 18 (25
February 2009) at 1605 (Brian Jean – Parliamentary Secretary to the Minister of
Transport, Infrastructure and Communities, CPC))
[78]
In Comfact Corporation v Hull 717 (Ship),
2012 FC 1161, Justice Harrington further confirms that the purpose of the
section’s introduction was to remedy the unfair situation of Canadian ship
suppliers:
[31] […] [T]he mischief which gave rise to
so much complaint related to the unfortunate position Canadian necessaries men
found themselves in as compared to American necessaries men who arrested a ship
in Canada, the principle of “presumption of coherence” is applicable […]
[79]
As such, the defendants claim that this
provision is not intended to grant a lien to a supplier of another nationality
when dealing with a foreign ship. If that were the intent, then it would not
need the phrase “carrying on business in Canada.” In substituting “Norway” for
“Canada” the plaintiffs are not seeking to apply Canadian law to this case but
rather to amend the law as written.
[80]
Whether a Canadian maritime lien would flow from
the purchase of bunkers by a charterer rather than by the owner is a question
that remains to be decided (The Nordems, FC, at paras 27–28; Cameco
Corporation v MCP Altona (The Ship), 2013 FC 23, at paras 49–54).
[81]
In any event, I agree with the defendants that
section 139 was not meant to provide a maritime lien to a foreign necessaries
supplier, in a context where it failed to allege and prove the foreign law and
where Canadian law applies by default. That would defeat the very purpose of
section 139 of the Act.
D.
Whether, in enforcing the maritime lien, the
plaintiffs are entitled to summary trial and judgment in rem against the
Samatan and in personam against Boone Star.
[82]
The plaintiffs argue that they are entitled to
an in rem judgment against the Samatan as a result of the enforcing of
the valid Brazilian maritime lien against it, rather than resulting from a
statutory right in rem against the ship. The former arises as of right
while the latter requires in personam liability of the ship owner. As a
general rule, under Canadian law, suppliers of necessaries do not enjoy a maritime lien, but can only pursue
the ship owner under sections 22 and 43 of the Federal Courts Act, RSC,
1985, c F-7, by virtue of having a statutory right in rem against the ship,
on condition that the ship owner be personally liable. This distinction imports
as, unlike a holder of a statutory right in rem, the holder of a
maritime lien outranks other creditors and his right in rem is not
defeated by the sale of the ship. On this point, I cite Justice
Harrington in The Nordems, FC, at paras 11 and 12:
[11] There are a number of important
distinctions between a maritime lien and a statutory right in rem. Only
one is relevant in this case, that being that a maritime lien may exist even
though the owners of the ship are not personally liable. A maritime lien
arises at the moment of the transaction, be it for instance a collision, while
a statutory right in rem only comes into existence when proceedings are
instituted, or perhaps only when the action in rem is served on the ship
(this issue was extensively reviewed in the light of English statutes by
Mr. Justice Brandon in the “Monica S”, [1968] P. 741, [1967] 3 All E.R. 740,
[1967] 2 Lloyd’s Rep. 113). The maritime lien travels with the ship into the
hands of third-party purchasers for value. However a potential action in rem
is defeated by a legitimate change of ownership, although the original owners,
of course, if personally liable in the first place, remain liable.
[12] In the event of a marshal’s sale by
which all blemishes on the ship, including maritime liens, are transferred to
the fund thereby created (Osborn Refrigeration Sales and Services Inc. v.
Atlantean I (the) reflex, (1982), 7 D.L.R. (4th) 395, 52 N.R. 10
(F.C.A.)) and if the fund so generated is not sufficient to satisfy all
creditors, maritime lien holders enjoy a high priority. They outrank mortgage
creditors, who in turn outrank ordinary creditors. The holder of a maritime
lien is, generally speaking, a secured creditor in bankruptcy proceedings while
the holder of a statutory right in rem, at least a right in rem
which has not been perfected prior to the bankruptcy, is not. [Emphasis
added]
[83]
The defendants argue that the plaintiffs are not
entitled to an in rem action as the ship owners are not liable in
personam. With respect, I find that they are liable by virtue of the valid
Brazilian maritime lien (The Nordems, FC, at para 14).
[84]
However, I agree with the defendants that in
order for Boone Star to be found liable in personam, the plaintiffs
would have had to prove that it (1) was a party to the bunker supply contract;
or (2) had authorized someone to contract on its behalf, “liability
as a result of some personal behaviour and attitude on the part of the owner is
required” (Mount Royal/Walsh Inc v Jensen Star (The), [1989] FCJ
No 450 at para 28).
[85]
In the case at bar, the plaintiffs argue that
the owner implicitly authorized persons (the Samatan’s Master and Chief
Engineer) in possession and control of the Samatan, to contract on the credit
of the ship and in addition, to ratify the contract under which the bunkers
were supplied on his behalf, based on the following behavior of the owner: (1)
failure to give notice to a necessaries supplier that “no lien” provisions
existed at any time during the more than two weeks it knew that the supplier
would be delivering the bunkers to the owner’s vessel, (2) permitting its Master
and Chief Engineer to allow the supplier to pump the bunkers on board the
vessel without notice of the “no lien” provisions and (3) instructing the Master
and Chief Engineer to accept the bunkers for the ship and to give notice of
those provisions after the delivery. According to the plaintiffs, Boone Star,
by authorizing its Master and Chief Engineer to permit the bunkers to be
delivered on board the Samatan without advance notice of the “no lien”
provision in the charter party, ratified the contract and took the benefit of
using the bunkers.
[86]
The plaintiffs further argue that holding Boone
Star liable in personam is a fair result because it had the use of the
bunkers, and even a property interest in them. The last sentence in the “no
lien” notice that Boone Star created reads: “Upon
termination of the said charter all goods on board the vessel shall become the
property of the vessel.”
[87]
I agree with the defendants that the mere fact
that the owner allows the charterer of a ship to accept bunkers does not
constitute the sort of behavior that would lead to liability on the part of the
owner under Canadian law. While there is a presumption that necessaries are
supplied on the credit of the ship, this presumption is easier to rebut in
contrast to the American context. Justice Nadon sets forth the law on this
matter in The Nordems, FCA:
[57] Professor Tetley then goes on to state,
again at page 570, that in determining whether there was a “holding out”, i.e.
whether the shipowners, by their acts and omissions, led the supplier of
necessaries to believe that the person purchasing the bunkers was authorized by
them to do so, the court will have to “… consider the facts and balance the
purported ‘holding out’ by the owner or demise charterer against the duty to
inquire of the supplier”. In support of a possible duty to inquire on the part
of the supplier, Professor Tetley refers to Cann v. Roberts, (1874) 30
L.T.R. 424, an English decision where the Court held that suppliers were not
entitled to rely on the master’s authority to bind the shipowners where, by
reasonable inquiry, they would have been in a position to ascertain the
master’s lack of authority. I wish to point out here that prior to 1971, U.S.
law imposed on a supplier of necessaries a duty to inquire as to a buyer’s
authority to bind a vessel. That duty was removed with the enactment, in 1971,
of The Commercial Instruments and Maritime Liens Act (see Gilmore and
Black, pages 670 et seq.).
[58] Professor Tetley then concludes his
discussion of this issue at page 572 by making the following remarks:
Neither the time nor the voyage charterer is
regarded as the servant or agent of the shipowner. Therefore, assuming there is
no question of “holding out”, there would seem to be no need for the owner to
notify suppliers that such a charterer, in contracting with them, does not bind
the owner’s personal credit. Moreover, the supplier’s duty to inquire is another
argument available to the owner and ship.
[59] In my view, Professor Tetley’s exposition
of the law is correct […]
[…]
[65] To conclude, although there exists under
Canadian law a presumption that necessaries are supplied on the credit of the
ship, this presumption is rebuttable. Whether this presumption is rebutted must
be determined by a proper assessment of all relevant facts, including
whether the supplier made reasonable inquiries to ascertain the authority of
the person requesting the necessaries. I would add to this that the extent
to which a supplier must make inquiries will depend on the particular
circumstances of the case. In determining whether the duty to inquire has been
met, we should be mindful of the fact that modern technology makes it much
easier for a supplier to obtain, in a timely manner, the type of information
which it requires to make an assessment as to whether or not a charterer, or
other person, has authority from the shipowner to bind the ship. [Emphasis
added]
[88]
Norwegian knew that Kristiania BVI was a time
charterer, and not the owner of the Samatan, and never inquired as to whether
or not it had the authority to bind the ship. In fact, Kristiania BVI did not
have the authority to bind the ship due to clause 18 of the NYPE form.
[89]
Moreover, Boone Star would not have ratified the
supply contract by instructing the Chief Engineer of the Samatan to accept the
bunkers and apply the “no lien” stamp to the Bunker Delivery Note. Applying the
stamp did not make Boone Star a party to the contract. Similarly, its knowledge
that the sub-time charterer was going to order bunkers for the ship did not
have the effect of ratifying the contract.
[90]
Contrary to the assertions of the plaintiffs,
Boone Star had no use of the bunkers. It did not have a property interest in
them. Clause 2 of the NYPE form stipulates “[t]hat the
Charterers shall provide and pay for all the fuel except as otherwise agreed…”
Clause 35 provides that the charterer will take over and pay for all fuel on
the vessel at the port of delivery. These clauses mean the charterers are
vested with the property of the bunkers during the currency of the charter; the
owners only have possession as bailees (Coughlin et al, Time Charters, 6th
ed (London: informa, 2008) at p 260, at 13.4).
[91]
As such, Boone Star cannot be liable in
personam as the presumption that the necessaries were provided on the
credit of the ship has been rebutted.
VIII.
Conclusion
[92]
In light of the above reasons, I find that
Brazilian law applies to the plaintiffs’ claim, as it has the most links to the
particular set of circumstances of this case. I further find that Brazilian law
gives Norwegian a maritime lien on the Samatan for the bunkers delivered in
Brazil, and that said maritime lien entitles the plaintiffs to a summary trial
and judgment in rem against the Samatan.
[93]
The plaintiffs submit they are entitled to
damages in the amount of US$ 666,915.19 plus admiralty interests at the prime
rate compounded semi-annually from September 1st, 2011.
However, in order to comply with section 12 of the Currency Act, 1985 c
C-52, this amount should be converted in Canadian dollars. On September 27,
2011, the date the payment became due and payable (see paragraph 34 of these
reasons), the noon rate of exchange issued by the Bank of Canada was 0.9813 so
that the sum of US$ 666,915.19 converted in Canadian dollars equals $ 679,653.27.
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