Docket: T-1683-14
Citation:
2016 FC 570
Montreal, Quebec, May 26, 2016
PRESENT: The
Honourable Mr. Justice Harrington
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BETWEEN:
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BALLANTRAE
HOLDINGS INC.
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Plaintiff
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and
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THE OWNERS AND
ALL THOSE INTERESTED IN THE SHIP “PHOENIX SUN” AND THE SHIP “PHOENIX SUN”
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Defendants
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JUDGMENT AND REASONS
[1]
If things seem too good to be true; they
probably aren’t good and probably aren’t true. So it is with the schemes of
Mengu Pasinli. His plan was to buy the Canadian ship, the PHOENIX SUN, then
under arrest at the port of Sorel; render her sufficiently seaworthy for one
last voyage; find a cargo to carry overseas and then sell her in Turkey for
scrap. When all was said and done, he projected a profit in excess of
$1,000,000.
[2]
On November 26, 2013, he, through one of his
companies, Goldrich Waters International Shipping Ltd. of Hong Kong, purchased
the PHOENIX SUN from the acting marshal in admiralty for $1,050,000. The ship
was then deleted from the Canadian registry. He had borrowed that entire amount
from the plaintiff, Ballantrae Holdings Inc., which took out a mortgage and
other security. Thereafter he hired a crew in Turkey, and a Canadian welder to
work on the ship. He persuaded others to pay the crew’s passage to Canada, and ship
chandlers to provide necessaries on credit. Some of the crew’s wages and some
of the claims of the ship chandlers were paid by others. It seems that Mr.
Pasinli is not out of pocket at all.
[3]
It all came to nought. The PHOENIX SUN was never
rendered seaworthy. In fact she never left her berth. Creditors refused to
advance further sums. The crew was left penniless and hungry. They were fed by
the good people of Sorel.
[4]
On July 29, 2014, Ballantrae filed an action in
rem and in personam in this court. The following day the PHOENIX SUN
was arrested. She was later sold by the acting marshal on November 12, 2014,
for $682,500.
[5]
In addition to Ballantrae, various creditors had
filed caveats and in accordance with directions of the Court have filed their
claims. As is the practice the evidence consists of affidavits and
cross-examinations. The only exception is the Master and crew whose evidence
was taken de bene esse. Not everyone contested the claims of the other
creditors. For instance, it was clear that there were sufficient funds available
to pay in full the crew and the necessaries men who enjoyed a maritime lien. Unfortunately
the proceeds of this sale do not nearly approach the amount of the claims, so
the issues at the hearing in Montreal on April 7 and 8, 2016, were the validity
of the claims and the ranking of priorities. I will set out the claims in order
of the ranking the claimants assert, leaving aside claims which had been struck
before the hearing and the claim of Jarud Corporation Limited which was
discontinued during the hearing. The defendant owners did not participate.
[6]
When there are insufficient funds to meet the
claims of all the creditors they must persuade the Court that their claims
enjoy priority. Otherwise valid claims rank pari passu.
[7]
There is no statute or single case which
establishes an exhaustive list of priorities. Limiting myself to this case
there are four groups of claims. I need not deal with maritime liens inter
se or possessory liens.
[8]
The first group, enjoying the highest priority,
are the claims for costs incurred in converting the ship into a fund available
for distribution to the creditors. These are the Marshal’s fees and
disbursements and the costs of the party which brought the ship to sale.
[9]
The second group consists of maritime liens and
those liens created by statute which enjoy the same status.
[10]
Mortgages came next. One complication is that
Ballantrae’s mortgage was not registered.
[11]
The rest of the claims consist of alleged
equitable charges. Some of these claimants may simply be entitled to arrest the
ship in an action in rem and do not enjoy priority. Some may have claims
against the shipowner which do not sound in admiralty at all.
[12]
Furthermore, on occasion when the interests of
justice so require, our court in the exercise of its admiralty and equitable
jurisdiction may alter the traditional ranking.
[13]
This case also raises the issues of both
pre-sale and post-sale interest. Some, but not all, of the claims carry with
them an agreed contractual rate of interest. The fund on deposit in court earns
interest, but at a paltry rate.
[14]
These reasons are broken down as follows:
Priorities
[15]
The claim with the highest priority is without
doubt the claim by the acting marshal for his fees and expenses in the amount
of $39,106.37.
[16]
The second ranking claim would be that of
Ballantrae Holdings Inc. for its costs incurred in converting steel into cash.
At the hearing its solicitors tentatively asserted $25,000, but were called
upon to furnish better particulars. They have now come up with a claim of
$42,419.37.
[17]
The next ranking claims would be those of the Master
and crew members of the PHOENIX SUN (the twelve seafarers) for wages and other
remuneration or benefits arising out of their employment. Their best arguable
case, converting the principal amount of their claim which is in US dollars to
Canadian dollars as of the judgment date (assuming no difference in exchange
between the hearing date and the judgment date), is $180,716.68.
[18]
There is another alleged crew member, Mr. Mustafa
Hakan Etiz, who entered into an employment contract with the owners as a
fitter/duty officer. He also asserts a mariner’s maritime lien in the amount of
$50,875.
[19]
The next ranking claim, if well founded, is that
of la Ville de Sorel-Tracy for berthage in the principal amount of $75,460.01
and for the supply of electricity in the principal amount of $22,407.02. The
interest claimed thereon shall be dealt with later in these reasons. It claims
a high ranking statutory lien in accordance with section 122 of the Canada
Marine Act. Failing that it claims a statutory lien in virtue of section 139
of the Marine Liability Act. Finally, if those provisions, on which more
shall be said, do not apply, it submits that if it only has an ordinary right in
rem, the Court in the exercise of its admiralty and equitable jurisdiction
should grant it a higher priority.
[20]
Next follows the claims of three necessaries
men, Blue Water Agencies Limited, Pronova Systems Limited, and 185888 Canada
Inc. (formerly North Star Ship Chandler Inc.). The principal amount of their
claims totals $59,571.63. As a result of the enactment of section 139 of the Marine
Liability Act, all three enjoy a statutory lien, which carries with it the
priority of a maritime lien.
[21]
Mr. Ian Hamilton and his company, Through Logistics
Corp, claim $240,578.47. Mr. Hamilton paid to get the crew from Turkey to
Canada, paid some of their wages and paid some of the claims of the ship
chandlers. They claim a lien pursuant to section 139 of the Marine Liability
Act for part of the claim, and an equitable charge over the balance.
[22]
Skylane Worldwide Limited asserted a registered
Panamanian mortgage, and has claimed USD 1,350,000 which at the hearing, based
on an exchange rate of 1.28, was CAD 1,728,000.
[23]
The last and remaining creditor is Ballantrae.
It lent Mr. Pasinli the $1,050,000 needed to purchase the PHOENIX SUN. It
entered into security agreements including a mortgage which, due to a breach of
contract on the part of the defendants, was never registered. It nevertheless asserts
it has a security interest in virtue of the mortgage. It also asserts priority
rights as the holder of a registered personal property security interest
pursuant to the Ontario Personal Property Security Act. At the heart of
Ballantrae’s claim is a loan agreement with Trenton Shipping and Trading Limited,
of which Mr. Pasinli represented himself as the sole shareholder. The plan was
that Trenton would buy the PHOENIX SUN. However, for reasons Mr. Pasinli did
not fully disclose, he had the bill of sale made out to another company of
which he claimed to be the sole shareholder, Goldrich Waters International
Shipping Co. Ltd. Mr. Pasinli, Trenton, Goldrich, and other Pasinli companies
were all prête-noms, one for the other, and no distinction should be
drawn amongst them.
[24]
Thus, the principal amount of the claims asserted
at the opening of the hearing on April 7, was $3,496,669.83 against a fund of
$682,500.
Skylane’s Claim Dismissed
[25]
Skylane has prevented the orderly and timely
development of this case. It constantly missed deadlines and obtained
extensions. It was called upon to file evidence as to the validity of its
mortgage under Panamanian law. Finally Prothonotary Morneau ordered it to file
its evidence as to Panamanian law, failing which its claim would be struck. It
failed to do so. Mr. Hamilton and his company thereafter moved that the claim
be struck.
[26]
A few days before the scheduled hearing on April
7, Skylane’s solicitors stated that they should no longer be considered as
Skylane’s counsel of record. I pointed out that under Rule 125 they were required
to make a formal motion. At the opening of the hearing a motion was ready, but
had not been served. I declined to accept it for filing. The Court frowns upon
last-minute motions of this sort and in any event even if granted it could only
have taken effect after Skylane was served in the British Virgin Islands. The
hearing, which had been scheduled for some time, was not to be postponed.
[27]
I then granted Mr. Hamilton’s motion with costs
against Skylane.
[28]
As stated during the hearing there were at least
two other reasons why Skylane’s claim should be struck. The first was that the
only evidence as to the validity of its mortgage under Panamanian law was the
expert evidence of Eduardo Antonio Real Solis, a Panamanian attorney. His
evidence, which in no way was contradicted, and which the Court accepts, is
that for several reasons Skylane’s alleged mortgage was null and void and of no
effect.
[29]
The third reason is that the alleged mortgage
was entered into November 11, 2014. The PHOENIX SUN had been under arrest in
this court since July 30, 2014, and had been advertised for sale by auction the
following day, November 12, 2014.
[30]
A shipowner cannot deal with a ship under arrest
in such a way as to dissipate its value to the then existing creditors.
[31]
I referred to the obiter remarks of Mr.
Justice Forest of the Quebec Superior Court in Security National Bank c
Fournier (24 February 1976), Montreal 05-000357-75. Peripheral to the claim
in that action which was on loan guarantees, the ship in question, the Atlantean
I had been sold by the Small Claims division of the Quebec Provincial Court
while she was under arrest in this court. Mr. Justice Forest was of the view
that the alleged sale was null and of no effect. In the circumstances he had no
need to cite the cases which he said had been put before him.
[32]
Those authorities would have included the Cella,
(1888) 13 PD 82, where Lopes L.J. said at page 88:
From the moment of the arrest the ship is
held by the court to abide the result of the action, and the rights of parties
must be determined by the state of things at the time of the institution of the
action, and cannot be altered by anything which takes place subsequently.
(As quoted by Brandon J. as he then was, in The
Monica S., [1967] 3 All ER 740 at 754)
The Marshal’s
fees and disbursements
[33]
The acting marshal’s fees and disbursements of
$39,106.37 have already been paid out by court order, without interest.
Ballantrae’s costs
[34]
It is well established that the costs of the
moving party, usually, as in this case, the plaintiff, in bringing the ship to
sale rank with Marshals’ costs: McGuffie, Fugeman & Gray, British
Shipping Laws: Admiralty Practice, vol 1 (London, UK: Stevens & Sons,
1964) at para 1574; Chircop et al, eds, Canadian Maritime Law, 2nd
ed (Toronto: Irwin Law, 2016) at 263–265. The underlying philosophy is that all
creditors benefit from a fund against which they can claim, and hopefully
receive payment. However, the costs of Ballantrae, and the others, in asserting
their own claims and contesting the claims of others do not fall into this
category.
[35]
There is one caveat in this case. Long
after the sale, Prothonotary Morneau ordered Ballantrae to prepare a “joint record for adjudication and ranking of claims”.
These three volumes were of great assistance to the Court, and I daresay to all
parties, and so Ballantrae should receive some compensation.
[36]
Ballantrae claims $42,419.37 on a
solicitor-client basis. It points out that Mr. Justice MacKay ordered
solicitor-client costs in Holt Cargo Systems Inc v The Ship Brussel et al,
185 FTR 1, 2000 FCJ No 197 (FCTD) (QL). However, it is rare for costs to be
awarded on a solicitor-client basis. I see no reason why I should not apply the
default provision of Tariff B, Column III, mid-range.
[37]
Mr. Hamilton suggests that since Ballantrae is
receiving some funds from a guarantor, the equitable doctrine of Marshaling
should apply. I disagree. Such sums as it may receive from guarantors of the shipowners’
debt simply reduce the capital amount of that debt. Any such payment does not
relate to the costs of bringing the ship to sale.
[38]
Ballantrae is entitled to the preparation of and
filing of the statement of claim, affidavit to lead warrant, warrant of arrest,
the motion to sell, appearances on motions including attending at the sale and
preparing the joint record. I grant it 40 units at $140 per unit, or $5,600. I
accept its disbursements in the amount of $5,819.60 – of which $5,252.74 is subject
to Ontario HST of 13% – for a total of $12,830.46.
The Claim of the Twelve Seafarers
[39]
The contracts of the Master and eleven crew
members called for payment of wages and benefits in US dollars. Most of their
claim is beyond doubt. However, there are three unresolved issues. They were
promised a retainer or stand-by fee of one-third of a month’s salary for not
working on the ship. Although this claim is perfectly valid against the owners,
does it benefit from a maritime lien? The second issue is the length of their
employment contract. The third is the date on which their claim should be
converted into Canadian dollars. They submit that in the circumstances the
conversion should be at the date of judgment (or at the date of hearing) rather
than on the date of breach. On the breach day rule, the US dollar was worth CAD
1.10. On the judgment day (or hearing day) the rate would be CAD 1.28.
[40]
The Master and crew submit that they suffered a
loss in the rate of exchange due to delays in obtaining a hearing date. In
equity they should be compensated.
[41]
As stated during the hearing, I am not prepared
to depart from the breach day rule. This court is not a currency speculator.
Our dollar goes up and our dollar goes down against the US dollar, the Euro and
the Special Drawing Rights of the International Monetary Fund. At times the breach
day rule will benefit claimants, other times not.
[42]
Furthermore the breach day rule is the rule set down
by the Supreme Court (Gatineau Power Company v Crown Life Insurance Company,
[1945] S.C.R. 655). In NV Bocimar SA v Century Insurance Co, (1984) 53 NR
383, [1984] FCJ No 510 (FCA) (QL) (The Hasselt), Mr. Justice
Hugessen, speaking for the Federal Court of Appeal, held it was not open to
that court to change the rule adopted by the Supreme Court. That decision was
reversed in the Supreme Court, but not on this point: [1987] 1 S.C.R. 1247, [1987]
SCJ No 39 (QL).
[43]
I am bound by the rule of stare decisis.
In Carter v Canada (Attorney General), 2015 SCC 5, [2015] 1 S.C.R. 331, the
Supreme Court set out the narrow circumstances in which a lower court might not
follow the decisions of a higher court:
[44] The
doctrine that lower courts must follow the decisions of higher courts is
fundamental to our legal system. It provides certainty while permitting the
orderly development of the law in incremental steps. However, stare decisis
is not a straitjacket that condemns the law to stasis. Trial courts may
reconsider settled rulings of higher courts in two situations: (1) where a new
legal issue is raised; and (2) where there is a change in the circumstances or
evidence that “fundamentally shifts the parameters of the debate” (Canada
(Attorney General) v. Bedford, 2013 SCC 72, [2013] 3 S.C.R. 1101, at
para. 42).
[44]
There is nothing new in this case. Currencies go
up and currencies go down.
[45]
It is unfortunate that there has been a delay in
paying the crew members. That delay was attributable to parties who had
departed the scene by the time of the hearing. It was clear that parts of the
claim of the Master and crew were unassailable and so I ordered the immediate
payment out of $62,775.54 in principal plus interest of $407.67. It should be
noted that the other parties were prepared to consent to a higher interlocutory
payout, but I had to study the evidence with respect to the termination of the
contract.
[46]
Ballantrae, supported by Mr. Hamilton, contests
two parts of the claim by the Master and the eleven crew members. Each claims a
retainer or stand-by fee of one-third of a month’s wages. The crew members were
supposed to be dispatched to the ship earlier than they were. In consideration
of their not seeking employment elsewhere, Mr. Pasinli promised this additional
payment. The issue is not whether the promise was made; I accept that it was.
The issue is whether this portion of the claim benefits from a maritime lien.
In my opinion, it does not.
[47]
The second issue is the date employment was
terminated. Ballantrae submits that the cut-off date should be September 21,
2014, the date on which the crew left the ship and returned to Turkey. The
twelve seafarers submit that under the terms of their contract they were entitled
to further payment. I agree.
[48]
It should be mentioned that neither they, nor
anyone else, is claiming the cost of repatriation from Canada to Turkey. It
appears that an unnamed Good Samaritan paid their way but does not seek
compensation from the fund generated by the sale of the ship.
[49]
Turning now to the retainer fees, they total
some USD 11,766.69.
[50]
The courts both here and elsewhere have been
increasingly generous when it comes to crew wages, which include emoluments as
set out in section 22(2)(o) of the Federal Courts Act and sections 2 and
86 of the Canada Shipping Act, 2001. See also Tetley, Maritime
Liens and Claims, 2nd ed (Montreal: Yvon Blais, 1998), ch 8.
[51]
Counsel for the seafarers submits that
the retainer or stand-by fee was an integral part of their employment
contracts, even though not reduced to writing. Reliance was placed on a general
statement by Fisher J. in Mobil Oil New Zealand Ltd v The ship “Rangiora”
(No 2), [2000] 1 NZLR 82 (HC), that wages should include “any form of payment which has been promised in return for
the seafarers’ agreement to work on the ship”. It was submitted that
this New Zealand case is in line with Canadian jurisprudence particularly the
decision of Madam Justice Snider in Canadian Imperial Bank of Commerce v Le
Chene No. 1, 2003 FC 873. Madam Justice Snider accepted that the scope of
the seamen’s maritime lien has evolved and expanded to meet the ever changing
nature of their employment.
[52]
Both the Rangiora and Le Chene No. 1
relate to termination of employment issues after the seamen joined the ship in
question. There are many reasons why a seaman may be employed and paid before
joining a specific ship. A prudent shipowner may well wish to provide training
in its policies and procedures and alert the prospective crew to the intricacies
and particularities of the ship in question. While I am prepared to accept that
the Master and crew have a claim in personam against the owners and in
rem against the ship, they do not benefit from a maritime lien arising from
a promise that they not work elsewhere.
[53]
Turning now to the length of employment, as
noted by Madam Justice Snider in Le Chene No. 1, our law has evolved
with respect to entitlements after the ship and crew have parted company. The
owner may have gone into formal liquidation or wrongfully dismissed the crew.
[54]
In this case, the first six crew members (Messrs.
Karasu, Ergun, Cenik, Meral, Guray and Ucman) signed on the ship in Canada on April
6, 2014, four more (Captain Ozkan and Messrs. Kan, Ates and Kaan) on April 12,
2014 and the remaining two (Messrs. As and Gumusoz) on June 2, 2014. All signed
a “Seafarer Employment Agreement” with Menpas
Shipping and Trading Inc., a Pasinli company which acted, among other things,
as the crewing agent. Each was “employed for a period
of 2+2+2 months (at shipowner’s option) commencing on the date of embarking to
the ship at Sorel --”.
[55]
It was further provided that unless a notice of
termination was given before the end of each two-month period, the contract was
prolonged for another two months. The required notice if given by the shipowner
was seven days; if given by the seafarers, fifteen days. No formal notice, so
called, was ever given.
[56]
The crew were paid through to the end of June
2014 and should have received their July wages by August 5th. Nevertheless,
Mr. Pasinli assured them they would eventually be paid and so they continued to
work the ship until they left on September 21, 2014.
[57]
Mr. Pasinli was served with the seafarers’
caveat and motion to have their evidence taken de
bene esse on September 9, 2014. Both the notice of
motion and the supporting affidavit of the Master, Semih Ozkan, stated that all
twelve were scheduled to leave Canada and return to Turkey on September 21,
2014. In the circumstances, I find that the service of the motion upon Mr.
Pasinli on September 9th served as constructive notice of
termination of employment.
[58]
On that basis, the contracts of the six crew
members who arrived on April 6th and the four who arrived on April
12th were extended on August 6th and August 12th
respectively. As no timely termination notice was given during the second term,
the third two-month employment term came into play so that they are entitled to
compensation to October 6 and to October 12, 2014. Based on Le Chene No. 1,
it matters not whether compensation for the period after they left the ship on
September 21, 2014 is characterized as severance pay, wrongful dismissal or
simply completion of the contract.
[59]
Unfortunately, the situation with respect to the
remaining two crew members who joined on June 2nd is somewhat
different. The initial two-month period ended August 2nd and the
second on October 2nd. They gave notice within the required fifteen
days and so are only entitled to four months’ payment, all told, while the
first ten crew members are entitled to six months’ payment.
[60]
I shall calculate the principal amount to which
each is entitled, before subtracting the amounts in principal ordered to be
paid out on April 11, 2016. I have also taken into account that each of the
twelve members was paid $100.00 after July 1, 2014 by Mr. Hamilton and that, furthermore,
Captain Ozkan is entitled to additional back pay, due to a change of position,
of USD 818.67 and Mr. Ucman is entitled to back pay of USD 532.00.
[61]
On that basis, Captain Ozkan is entitled to $28,741.89
less the earlier payment out by the Court of $13,448.34 leaving a balance owing
in principal of $15,293.55. Likewise the rest of the crew is owed, in Canadian
dollars:
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Crew Member
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Total Owed
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- Already Paid
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= Remaining Owed
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Mr. Karasu
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$26,246.77
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- $12,550.00
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= $13,696.77
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Mr. Ergun
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$9,560.49
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- $4,538.50
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= $5,021.99
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Mr. Kan
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$7,351.61
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- $3,273.50
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= $4,078.11
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Mr. As
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$6,641.93
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- $3,273.50
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= $3,368.43
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Mr. Cenik
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$5,169.35
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- $2,430.00
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= $2,739.35
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Mr. Gumusoz
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$6,641.93
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- $3,273.50
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= $3,368.43
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Mr. Meral
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$5,169.35
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- $2,430.00
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= $2,739.35
|
|
Mr. Guray
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$6,925.81
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- $3,273.50
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= $3,652.31
|
|
Mr. Ates
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$5,127.13
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- $2,261.50
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= $2,865.63
|
|
Mr. Kaan
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$12,754.03
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- $5,719.00
|
= $7,035.03
|
|
Mr. Ucman
|
$12,604.71
|
- $6,304.20
|
= $6,300.51
|
Mustafa Hakan Etiz
[62]
According to his evidence, Mr. Etiz joined the PHOENIX
SUN on December 7, 2013, and worked through until June 16, 2014. He signed a “Seafarer Employment Contract” in the same form as did
the Master and the crew members. He was said to be employed as a “fitter/duty officer”. He claims unpaid wages of
$50,875 and asserts a maritime lien.
[63]
Mr. Etiz had no qualifications whatsoever which
would allow him to serve as a duty officer. Furthermore, he was not going to
sail with the ship if, as and when she ever departed Sorel. He was self-represented
throughout and acted through a Turkish-English interpreter. His evidence was
extremely vague. When there was no work onboard he carried out unspecified
tasks ashore for Mr. Pasinli. He did not state what these tasks were and gave
no breakdown as to how his time was divided between ship and shore.
[64]
He may possibly have served as a watchman from
time to time before the Master and crew began to arrive in April 2014. On the
other hand, he slept ashore, which detracts from his submissions.
[65]
Nevertheless, he was a qualified welder and did
some work on the ship’s piping.
[66]
I find he was not a crew member at all. It seems
that only one crew member was even aware of his existence. He was shore labour.
He has no maritime lien and does not benefit from section 139 of the Marine
Liability Act. He was an employee. He was not carrying on business.
[67]
Giving him every benefit of the doubt, I fix his
onboard work at $25,000. He has a statutory right in rem for that amount
with no priority. To the extent he was a watchman he was not a crew member (Jorgensen
v The Christina, [1926] Ex CR 110). To the extent he was a welder he was
shore labour (MacBeth v Chislett, [1910] AC 220). The balance of his
claim could only be considered after all maritime claims are met. However by
that time the fund will be exhausted.
Ville de Sorel-Tracy
[68]
The city of Sorel-Tracy, through its organization
La Société des parcs industriels Sorel-Tracy, claims $105,402.31 comprising
unpaid berthage of $81,441.83 and unpaid electricity in the amount of
$23,960.48. The claims in principal are for $75,460.01 and $22,407.02,
respectively. I have no hesitation in finding that the owners and the ship are
liable in that amount. What is in dispute is the ranking which should be given
the city’s claim. It asserts the priority of a maritime lien, only subservient
to crew wages, in accordance with section 122(1) of the Canada Marine Act
which provides:
|
122 (1) A port authority, the Minister or a person who has entered
into an agreement under subsection 80(5), as the case may be, has at all
times a lien on a ship and on the proceeds of its disposition for an amount
owing to the port authority, the Minister or the person, and the lien has
priority over all other rights, interests, claims and demands, other than
claims for wages of crew members under the Canada Shipping Act, 2001, if the
amount is owing in respect of
|
122 (1) L’administration portuaire, le ministre ou la personne qui
a conclu une entente en vertu du paragraphe 80(5) est toujours titulaire d’un
privilège sur le navire et sur le produit de toute disposition qui en est
faite, pour sa créance; ce privilège a priorité sur tous autres droits et
créances, quelle qu’en soit la nature, à la seule exception des créances
salariales des membres de l’équipage, visées par la Loi de 2001 sur la marine
marchande du Canada, dans les cas suivants :
|
|
(a) fees and interest in respect of the ship or goods carried on
the ship; or
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a) pour défaut de paiement des droits et des intérêts exigibles à
l’égard du navire ou de sa cargaison;
|
|
(b) damage to property caused by the ship or through the fault or
negligence of a member of the crew of the ship acting in the course of
employment or under the orders of a superior officer.
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b) pour dommages causés à des biens par le navire ou par la faute
ou la négligence d’un membre de son équipage agissant dans l’exercice de ses
fonctions ou sous les ordres d’un officier supérieur.
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[69]
Unfortunately the city it is not a “Port Authority” as defined in section 2, as it was
not incorporated or continued under that Act. Section 80(5) gives the Minister
certain powers to make agreements with respect to parts of the Saint Lawrence
Seaway. However, Sorel is not within the Seaway.
[70]
The city also submitted, in the alternative,
that it is entitled to a maritime lien in virtue of section 139(2) of the Marine
Liability Act which provides:
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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; or
|
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;
|
|
(b) out of a contract relating to the repair or equipping of the
foreign vessel.
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b) celle fondée sur un contrat de réparation ou d’équipement du
bâtiment étranger.
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[71]
Unfortunately for the city its claim does not
fall within section 139 of the Marine Liability Act either. Mr. Hamilton
submitted that the city was not carrying on business as it was a non-profit
organization. I am not prepared to so find. Many not-for-profit organizations,
such as mutual insurance companies, well known in marine insurance circles,
carry on business.
[72]
The next question is whether the city provided
services for the PHOENIX SUN’s operation or maintenance. I find it did not. Section
22(2) draws a distinction between necessaries and dock charges. Sections
22(2)(m) and (s) read:
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(m) any claim in respect of goods, materials or services wherever
supplied to a ship for the operation or maintenance of the ship, including,
without restricting the generality of the foregoing, claims in respect of
stevedoring and lighterage;
|
m) une demande relative à des marchandises, matériels ou services
fournis à un navire pour son fonctionnement ou son entretien, notamment en ce
qui concerne l’acconage et le gabarage;
|
|
(s) any claim for dock charges, harbour dues or canal tolls
including, without restricting the generality of the foregoing, charges for
the use of facilities supplied in connection therewith.
|
s) une demande de remboursement des droits de bassin, de port ou
de canaux, notamment des droits perçus pour l’utilisation des installations
fournies à cet égard.
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[73]
Section 139 of the Marine Liability Act
was intended to put Canadian necessaries men such as ship chandlers, bunker
suppliers and stevedores on equal footing with those, such as their American
counterparts, who enjoy maritime liens under their own laws. Previously, necessaries
men had a statutory right in rem, with no priority, if they had
contracted with the shipowner. If they knew they were contracting with the
charterer they had no action in rem and no right to arrest the ship (Marlex
Petroleum Inc v The Ship Har Rai and the Shipping Corp of India, [1984] 2
FC 345 (FCA), affm’d [1987] 1 S.C.R. 57; Holt Cargo Systems Inc v ABC
Containerline NV (trustee of), 2001 SCC 90, [2001] 3 S.C.R. 907 (the Brussel).
[74]
If there were any doubt at all about
Parliament’s intention, one need only read the House of Commons debates for
February 25, 2009, as well as the Senate sponsor’s speech.
[75]
It is true that section 22(2)(s) of the Federal
Courts Act is somewhat peculiar in that, like a maritime lien, port charges
survive the sale of the ship (section 43(3) of the Federal Courts Act).
However, Parliament would have had to have been much more direct and specific
before granting ports a statutory lien equivalent to a maritime lien.
[76]
Although it follows that under the traditional
ranking the city has only a statutory right in rem, without priority, it
is well recognized that this Court in the exercise of its admiralty and
equitable jurisdiction, if the interests of justice so require, may alter the
traditional ranking. For instance in Osborn Refrigeration Sales and Service
Inc v The Atlantean I, [1979] 2 FC 661 (FCTD), Mr. Justice Walsh
referred to fuel deliveries having been made after an arrest, which were
essential to preserve the ship in severe winter conditions, and hence tended to
preserve the security of the mortgage creditor. Furthermore, if upon the
arrest, Ballantrae, or others, had moved to have the Marshal put in possession
both berthage and the supply of electricity would have ranked as Marshal’s
costs.
[77]
The authorities were reviewed in considerable
depth by the late Prothonotary Hargrave in Fraser Shipyard and Industrial
Centre Ltd v Expedient Marine Co, (1999) 170 FTR 1, 1999 FCJ No 947 (QL),
varied but not on this point (1999), 170 FTR 57, [1999] FCJ No 1212 (FCTD) (QL).
I also touched upon the issue in Nordea Bank v The Kinguk, 2007 FC 434.
[78]
Prior to Goldrich’s purchase of the PHOENIX SUN,
berthage and electricity had been paid by the then acting marshal in admiralty
under the previous arrest.
[79]
While it could be argued that it was necessary
for the PHOENIX SUN to lie alongside as she was a dead ship, and could hardly
have gone to anchor, I am not prepared to go so far. In the circumstances I
find it plain and obvious that the mass of creditors have benefitted from the
supply of electricity. Consequently, I rank the city’s claim for the supply of
electricity in the amount of $22,407.02 immediately after the claims of the
Master and crew. The balance of $75,460.01 benefits from a statutory right in
rem, but enjoys no priority. Pre-sale interest will be dealt with later.
The Necessaries Men
[80]
Unlike the Ville de Sorel-Tracy, the three ship
chandlers who filed claims do benefit from section 139 of the Marine
Liability Act. The PHOENIX SUN had been deleted from the Canadian registry
and so was not a Canadian ship. The principal amounts of their claims are not
in controversy and they rank after the claims of the Master and crew, and that part
of la Ville de Sorel-Tracy’s claim referred to above.
[81]
Blue Water Agencies Limited’s claim is for the
supply of necessaries being foodstuffs and provisions in the amount of
$9,041.78. It was also claiming interest at the rate of 24% per annum from July
11, 2014, and administrative fees, bringing the claim to $12,511.44. However,
it is no longer claiming pre-sale interest, which for reasons set out in
another portion hereof, I would not have granted anyway. It is entitled to the
principal amount of $9,041.78.Likewise Pronova Systems Inc. provided
necessaries in the amount of $28,182.15. It also claimed, but is now waiving,
interest at 24% per annum from December 29, 2013, which included administrative
fees. Furthermore, it acknowledges that Mr. Hamilton had paid $2,000.00 against
one of the invoices. I fix its claim in the principal amount of $26,182.15.
[82]
The third ship chandler is 185888 Canada Inc.
(formerly North Star Ship Chandler Inc.), currently in bankruptcy. The
principal amount of its claim, which is not contested, is $24,347.70. However,
unlike the other two chandlers it is claiming the invoice interest rate of 24%
per annum from April 11, 2014, including administrative fees. I fix the
principal amount of its claim at $24,347.70, without interest prior to the date
on which the funds deposited in Court on the purchase of the PHOENIX SUN began
to earn interest. I disallow its claim for pre-sale interest payable from the
fund.
Ian Hamilton and Through Logistics Corp.
[83]
Mr. Hamilton had a business relationship with
Mr. Pasinli and his many companies. He incorporated Through Logistics Corp. to
give partial effect to that relationship. In the circumstances I draw no
distinction between Mr. Hamilton and his company.
[84]
The claim falls into four categories:
a)
Rental of Mr. Hamilton’s van to transport crew
and spare parts. $13,250 is claimed in principal, supported by the lien at
section 139 of the Marine Liability Act;
b)
Advances directly to the PHOENIX SUN’s crew and
service providers in the amount of $130,963.71. Priority under section 139 is
again claimed;
c)
Advance of monies to Mr. Pasinli and his
companies for the specific purpose of paying for the supply of goods, materials
and services to the PHOENIX SUN. $48,244.76 is claimed. Mr. Hamilton asserts an
equitable charge which he submits outranks a statutory right in rem; and
d)
General payments to Mr. Pasinli and his
companies in the amount of $48,120.00 to be used to assist in the maintenance
and upkeep of the PHOENIX SUN and expenses relating to the crew. Again an
equitable charge is asserted.
[85]
Interest is claimed at the rate of 4.9% per
annum.
[86]
Ballantrae does not contest the amounts owing.
However, it asserts that Mr. Hamilton was in a joint venture with Mr. Pasinli
and his companies and therefore is only entitled to payment out of the fund
after all third party creditors have been paid. Nothing will be left over and
so Mr. Hamilton is out of luck, and remains out of pocket.
[87]
At the heart of Ballantrae’s submissions is a
written agreement dated May 2, 2013, between Menpas Shipping and Trading Inc. and
Mr. Hamilton. Menpas was another one of Mr. Pasinli’s companies which appears
to have acted as ship manager and crewing agent. It was specifically agreed “that the project is a joint venture between Ian Hamilton and
Mengu Pasinli”. Decisions were to be made jointly. The ship would be
purchased, repaired to a suitable standard for a last voyage, registered under
the Panamanian flag, carry an eastbound cargo to the Mediterranean and then be
sold for scrap, all at a total profit estimated to be in excess of $1,000,000.
The profit was to be divided equally.
[88]
Mr. Hamilton signed the agreement but says he
never returned it to Mr. Pasinli as it was evident that he could not fulfill
his part of the bargain. The sums he advanced were really by way of loans at
the interest rate of 4.9% per annum.
[89]
In February 2014, Mr. Hamilton e-mailed
Mr. Pasinli under the subject “Ian Hamilton investments
to date”, which were some $85,000.00. Mr. Pasinli replied “cash investments are o.k.”. Notice the word “investments”.
[90]
In August 2014, (which is after Ballantrae
arrested the PHOENIX SUN) Mr. Hamilton e-mailed Mr. Mengu to say “the total amount I have loaned to date --”.
[91]
Mr. Hamilton submits that in determining whether
or not there was a partnership or joint venture, one must not only consider the
documentary evidence but also the surrounding facts including what the parties
actually did (Backman v Canada, [2001] 1 S.C.R. 367 at para 25).
[92]
Mr. Hamilton never knew the ship was purchased
in the name of Goldrich, had never heard of Ballantrae until after the arrest
and was not privy to joint financial records or a joint bank account. What Mr. Hamilton
is really saying is that he did not insist upon his rights.
[93]
I am afraid all of this is wishful thinking on
Mr. Hamilton’s part. He was hoodwinked by Mr. Pasinli, as were all the other
creditors. What he did was lend money to the joint venture. Had the venture
been fruitful, after taking care of expenses, including funds advanced by Mr.
Hamilton, the profits would be split 50/50. There was nothing in the record to
indicate that the relationship was changed by mutual agreement and that Mr.
Hamilton renounced the profit motive which got him into this arrangement in the
first place. Mr. Pasinli’s breach of contract did not convert the joint venture
into a series of loans.
[94]
The Court did not benefit from seeing Mr.
Hamilton, or any of the other witnesses (apart from Mr. Etiz), but this does
not prevent me from making adverse credibility findings. Although Mr. Justice
O’Halloran, speaking for the British Columbia Court of Appeal in Faryna v
Chorny, [1952] 2 DLR 354, [1951] BCJ No 152 (QL), was dealing with the
assessment by the Trial Judge of a witness who had actually appeared before him,
his remarks still hold true. The test of credibility is this:
The test must reasonably subject his story
to an examination of its consistency with the probabilities that surround the
currently existing conditions. In short, the real test of the truth of the
story of a witness in such a case must be its harmony with the preponderance of
the probabilities which a practical and informed person would readily recognize
as reasonable in that place and in those conditions.
[95]
In the Hasselt, above, the Court of
Appeal was of the view that it was in as good a position to assess expert witnesses
as the trial judge, as the evidence was in written form. However the Supreme
Court disagreed: [1987] 1 S.C.R. 1247, 1987 SCJ No 39 (QL).
[96]
Thus Mr. Hamilton is equated with the owner and
is only entitled to claim against such funds as would be left over after third
party creditors were paid (the Kinguk, above). Unfortunately, there is
nothing left for Mr. Hamilton, which, of course, does not prevent him from
pursuing Mr. Pasinli and his companies in personam.
Ballantrae Holdings Inc.
[97]
Ballantrae, an investment company and lender of
funds, entered into a loan agreement with Trenton Shipping and Trading Limited
to finance its purchase of the PHOENIX SUN. The principal amount of the loan
was $1,050,000.00, with interest at 20% per annum, compounded monthly. The operative
loan agreement was dated November 22, 2013, superseding earlier loan agreements
of October 21, 2013 and November 8, 2013. The loan was guaranteed by Goldrich
International Shipping Co., and by Mr. Pasinli. For reasons not stated,
although Trenton, a Canadian company, was originally designated to purchase the
ship, the bill of sale was taken out in the name of Goldrich. In addition,
Trenton was to obtain a guarantee and general security agreement from Goldrich.
[98]
Other security took the form of a marine vessel
mortgage-collateral to loan agreement and the registration of a financing
statement under the Ontario Personal Property Security Act.
[99]
The loan was supposed to be short term,
seventy-five days. No payments were made and so Ballantrae took action in
rem and in personam for the amount owing, including interest and
costs. I will only deal with the principal amount of the claim under this
heading.
[100] The ship was deleted from the Canadian registry and was supposed to
be registered in Panama, along with the mortgage. It did not turn out that way.
Ballantrae filed the uncontested affidavit of a Panamanian attorney, Eduardo
Antonio Real Solis. His opinion is that the procedures for registering the
PHOENIX SUN under the Panamanian flag, as well as the Skylane mortgage, were
never correctly and timely completed and therefore have no legal effect. All
that happened is that the PHOENIX SUN was “flagged”
under a special temporary registry for ships which undertake a single voyage,
such as a voyage to a scrapyard. No steps were ever taken to register
Ballantrae’s mortgage. Indeed, it appears that it could not have been registered
in Panama. After her deletion from the Canadian registry, the PHOENIX SUN was
an unregistered ship.
[101] Ballantrae nevertheless claims a security interest in virtue of the
mortgage, and via registration under the Ontario Personal Property Security
Act.
[102] Counsel for Mr. Hamilton suggested that at best Ballantrae has an
equitable charge in virtue of the unregistered mortgage and that this Court cannot
take cognizance of security registered under the Ontario PPSA.
Furthermore, even if that provincial statute forms part of Canadian Maritime
Law, on the facts of this case it does not give Ballantrae any advantage over
other creditors.
The Mortgage
[103] The Court is first called upon to determine the nature of Ballantrae’s
security under the mortgage contract. Is it a legal mortgage, although
unregistered, or is it an equitable mortgage? Does it outrank or is it outranked
by statutory rights in rem or rank pari passu?
[104] Counsel for Mr. Hamilton submitted that Ballantrae benefits from an
equitable mortgage which will rank pari passu with that portion of the
Hamilton claim which is not secured by section 139 of the Marine Liability
Act, and that both those claims outrank ordinary creditors in rem
(such as Mr. Etiz). He referred to the decision of Mr. Justice Cullen in Lewmar
Marine Limited v C & C Industries Ltd (1991), 44 FTR 49 (FCTD), and
more particularly the opinion of Professor William Tetley referred to therein.
Paradoxically, the case had also been cited by Ballantrae to support its
proposition that this Court has jurisdiction to entertain claims by provincially
secured creditors.
[105] The Lewmar decision is not really on point, but Mr. Justice
Cullen referred to the first edition of Professor Tetley’s Maritime Liens
and Claims (London, UK: Business Law Communications, 1985), where he
said at page 213:
Equitable mortgages (including unregistered
mortgages) rank after registered mortgages even if the existence of the
equitable mortgage was known to the registered mortgagee at the time of
registration.
The equitable mortgage will however rank
ahead of a necessaries man who brings an action in rem after the date of
the mortgage.
[106] As authority Professor Tetley cited the decision of Mr. Justice
Langton in first instance in the Zigurds, [1932] P 113, also
reported at (1932) 43 Ll LR 387.
[107] With the greatest respect, I do not think that a non-registered
mortgage is necessarily an equitable mortgage, although it will rank after a
registered mortgage.
[108] The Zigurds has to be read with great care. It dealt with three
distinct judicial sales, the sale of the ship, the sale of pending freight and the
sale of demurrage. Each had its own set of creditors. Clamoring for the freight
were Casper Edgar & Co., an English ship agent and necessaries man and
Alfred Harris Smith, the holder of a registered legal mortgage. Both claimed to
be assignees of the freight. Mr. Justice Langton held that the mortgage
creditor properly laid claim to the freight because its equitable assignment
pre-dated Casper Edgar’s equitable assignment.
[109] However, Mr. Justice Langton was reversed in appeal [1933] P. 87, (1933)
45 Ll LR 1. The Court held that the notice given by Casper Edgar to the
receivers of the cargo had constituted sufficient notice of the assignment.
They were the first to give actual notice and so were entitled to the freight.
That decision was affirmed by the House of Lords, [1934] AC 209, (1933) 47 Ll
LR 267. The case relating to the freight had nothing to do with the relative
rankings of mortgage creditors and necessaries men.
[110] There was a separate contest for payment out of the proceeds of the
ship between the same mortgage creditor and a German necessaries man, Kohlen
Co., who claimed a maritime lien under German law and submitted that at the
very least in equity it should be given priority over the mortgagee. Mr.
Justice Langton ranked the mortgage creditor ahead of the necessaries man as a
matter of procedure. That dispute did not proceed further. An English ship
repairer also submitted the traditional ranking should be altered, but did no
better ((1932) 43 Ll LR 156).
[111] The result with respect to the German necessaries man may well have
been different in Canada. On this point, the Zigurds was completely in line with the English position that a claim is
characterized in accordance with the law of the forum, not the proper law of
the transaction. This point was clearly reiterated by the Privy Council in Bankers’
Trust International Ltd v Todd Shipyards Corp (The Halcyon Isle), [1981] AC
221, [1982] 2 Lloyds’ Rep 325.
[112] On the contrary, in Canada, if under the proper law a necessaries
man enjoys a maritime lien he will be given that priority (the Har Rai and
the Brussel, above). I had occasion to review the authorities in World
Fuel Services Corp v Nordems (The), 2010 FC 332, 366 FTR 118, aff’d 2011
FCA 73, [2012] 4 FCR 183. In Canada a necessaries man only enjoyed a statutory
right in rem, with no priority, and had no action in rem at all
if it knew it was dealing with a charterer, rather than a shipowner. As discussed
above, it was this unfairness which led to the enactment of section 139 of the Marine
Liability Act.
[113] Although the Zigurds is not helpful, a case which is very
much on point is the Shizelle, [1992] 2 Lloyd’s Rep 444, a decision of
the English Admiralty Court. The plaintiffs financed the purchase of the yacht Shizelle
on the terms of a loan agreement and marine mortgage. The yacht and mortgage
were to be registered. However neither was.
[114] The purchaser then sold the Shizelle to the defendants
allegedly free and clear of liens and encumbrances. The issue was whether the
purchasers, who were innocent purchasers for value without notice, held the
yacht free and clear of the mortgage.
[115] Deputy Judge Hamilton referred to doctrine to the effect that an
unregistered mortgage was equivalent to an equitable mortgage, and referred to
the view expressed by Professor Tetley. On that basis, the purchasers would
have prevailed.
[116] However the learned judge disagreed. He was of the view that a
mortgage of chattels at common law, before the intervention of any statute, did
not require any formality, such as registration. The mortgage was a legal
mortgage, not an equitable mortgage, even though it was not registered. It was
opposable to a bona fide purchaser for value without notice.
[117] In this case, the PHOENIX SUN was not registered in any country. If the
Shizelle mortgage is opposable to a bona fide purchaser for value
without notice, it certainly follows that a non-registered legal mortgage
outranks equitable charges and statutory rights in rem.
[118]
In the second edition of his Maritime Liens and Claims, from 1998, Professor
Tetley reiterated his view that a non-registered mortgage constitutes an
equitable mortgage. At p 481, in a footnote, he referred to the Shizelle
as a “controversial decision”. It may be but I
agree with it.
[119] In my opinion, Ballantrae holds an unregistered legal mortgage on
the PHOENIX SUN. Although it would face difficulties in ranking against a
subsequently registered legal mortgage, that is not the case here as Skylane’s mortgage
has been struck. Ballantrae’s claim outranks equitable charges, if any, the
claims of holders of statutory rights in rem, as well as Mr.
Hamilton’s claims.
[120] Ballantrae was called upon to report which sums, if any, it has, or
will, recover from the various guarantors. It appears likely it will recover
$199,500 from one of the guarantors. This does not affect its entitlement to
the balance of the fund generated by the sale of the PHOENIX SUN. It would of
course be relevant if it pursues the in personam portion of its
action to judgment.
Ontario Personal Property Security Act
[121] In addition to the execution of mortgage documents, Ballantrae was
given security under the Ontario Personal Property Security Act which,
it submits, also gives it priority over ordinary creditors in rem. Mr.
Hamilton has mounted a vigorous challenge to this proposition. He emphasizes
that Canadian Maritime Law is federal law, not provincial law, and is uniform throughout
Canada. The Federal Court may only apply such provincial law as is incidentally
relevant. The cornerstone of this submission is the decision of the Supreme
Court in ITO – International Operators v Miida Electronics, [1986] 1 SCR
752 (the Buenos Aires Maru). The Ontario PPSA is a provincial
statute of general application applying to marine and non-marine property
alike. Since it creates security interests in property it can hardly be
considered incidental.
[122] Mr. Hamilton adds that even if this Court could take cognizance of
and apply the PPSA Ballantrae would gain no benefit as the requirements
of that Act were never met.
[123] The PHOENIX SUN was never in Ontario at any relevant time and was
never intended to be brought into Ontario. The unwavering intention of her
owners was to sail her from Sorel, Quebec, to Turkey and there sell her for
scrap.
[124] The short answer is that Mr. Hamilton is right. The PPSA
contains conflict of law provisions. In order for the perfection and priorities
provisions of that Act to apply, the collateral, such as the PHOENIX SUN being
tangible personal property, must have been in Ontario, or have recently arrived
in Ontario and then be perfected. For the purposes of this case it is
sufficient to say that the rules relating to the perfection of the security are
based on the location of the property, and not on the debtor’s or creditor’s
residence (RSO 1990, c P.10, ss 5–7). If any provincial statute were relevant
it would have been the provisions of the Civil Code of Quebec relating to
hypothecs on moveable property (Articles 2714, 3012). There was no registration
under Quebec law.
[125] However the point raised is so important to this Court’s
jurisdiction and was so well argued on behalf of Ballantrae and Mr. Hamilton
that I am compelled to comment.
[126] Section 22(3)(d) of the Federal Courts Act provides:
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22. (3) For greater certainty, the jurisdiction conferred on the
Federal Court by this section applies
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22. (3) Il est entendu que la compétence conférée à la Cour
fédérale par le présent article s’étend :
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(d) in relation to all mortgages or hypothecations of, or charges
by way of security on, a ship, whether registered or not, or whether legal or
equitable, and whether created under foreign law or not.
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d) à toutes les hypothèques ou tous les privilèges donnés en
garantie sur un navire — enregistrés ou non et reconnus en droit ou en equity
— , qu’ils relèvent du droit canadien ou du droit étranger.
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[127] The Ontario PPSA is capable of creating a charge by way of
security on a ship. For present purposes, it is not necessary to consider
federal paramountcy or interjurisdictional immunity.
[128] In Tropwood AG et al v Sivaco Wire & Nail Co et al,
[1979] 2 S.C.R. 157 (the Tropwood), the Court was dealing with a cargo
claim arising on a shipment from France to Montreal governed by the Hague
Rules as in force in France. The issue was whether the Federal Court could
apply French law. The Hague Rules as in force in Canada only applied to
bill of lading shipments from Canadian parts. Chief Justice Laskin stated at pages
166–167:
What is raised by
the appellant, shortly put, is whether it is open to the Federal Court, in
exercising its jurisdiction in the matter brought before it, to determine,
pursuant to conflict of law rules of the forum, a choice of law rule to govern the
determination of the suit. In the present case, the Federal Court has
jurisdiction over the appellant and over the cause of action and there is a
body of law which it can apply. It is my opinion that this body of law embraces
conflict rules and entitles the Federal Court to find that some foreign law
should be applied to the claim that has been put forward. Conflicts rules are,
to put the matter generally, those of the forum. It seems quite clear to me
that section 22(3) of the Federal Courts Act, which I have already
referred to, envisages that the Federal Court, in dealing with a foreign ship
or with claims arising on the high seas may find it necessary to consider the
application of foreign law in respect of the cause of action before it.
[129] If this Court may take into account foreign law, it certainly may take
into account provincial law.
Federal Court
Jurisdiction
[130] The greater question still remains. Is the Ontario PPSA
incidental? I can only conclude it is and thus, even absent section 23, may be
applied by this Court. This is the only way the Buenos Aires Maru can be
reconciled with the later Supreme Court decisions in Ordon Estate v Grail,
[1998] 3 S.C.R. 437, and Marine Services International Ltd v Ryan Estate,
2013 SCC 44, [2013] 3 S.C.R. 53 (the Ryan’s Commander).
[131] In Ordon, the Supreme Court enumerated four factors to take
into consideration in determining whether a provincial statute is applicable in
a maritime negligence action;
a)
Does the subject matter of the action fall
within the exclusive federal power over navigation and shipping?
b)
If yes, is there a counterpart under existing
Canadian Maritime Law?
c)
If not, should the lex non scripta of
Canadian Maritime Law be changed?
d)
If the lex non scripta should not be
changed, a provincial law of general application is inapplicable if it
indirectly regulates Canadian Maritime Law in that it alters rules which
Parliament has exclusive competence to amend. This is interjurisdictional
immunity. The provincial statute must be read down.
[132] This leads us to the Ryan’s Commander. The Ryan brothers were
Newfoundland fishermen who died in a maritime accident. Their heirs brought
suit in the Supreme Court of Newfoundland and Labrador against the employer. Section
6(2) of the Marine Liability Act specifically provides that a dependant
may bring a claim “under circumstances that would have
entitled the person, if not deceased, to recover damages”. However the
Newfoundland and Labrador’s Workplace Health, Safety and Compensation
Act, like other provincial statutes, bars a fault-based negligence action
in favour of a no-fault compensation scheme. The Supreme Court, in overturning
the Court of Appeal, held that the Newfoundland statute trumped the federal
statute.
[133]
Unfortunately, the Supreme Court offered
no guidance as to whether or not the result would have been the same had the heirs
taken action in the Federal Court which, after all, has concurrent
jurisdiction. Mr. Hamilton submits that a provincial statute which bars a
federal cause of action is hardly “incidental”.
Since the Federal Court may only apply provincial law in limited circumstances,
the result could vary depending upon the choice of forum. This is a scenario
simply too shocking to contemplate!
[134] The Supreme Court considered Ordon in great detail. On the
first point it held that Ryan’s Commander was also a maritime negligence
action, in pith and substance, a federal matter.
[135] On the second point, there was no federal counterpart. There is a
federal Merchant Seamen Compensation Act, but it specifically does not cover
fishermen.
[136] On the third point, the lex non scripta of the Canadian
Maritime Law could hardly be changed because the lex scripta
specifically gave the heirs a cause of action.
[137] Ordon was distinguished on the fourth
point. In Ordon, it was held that a provincial law of general
application was not applicable if it indirectly regulated Canadian Maritime
Law. The provincial statute had to be read down based upon interjurisdictional
immunity.
[138]
In Ryan’s Commander the Supreme
Court, like in Ordon, stated at para 53 that “the
present appeal involves reliance on provincial law in relation to a maritime
negligence action”.
[139] The Court then focussed on interjurisdictional immunity. Subsequent
to Ordon, the Court had developed a two-pronged test. The first is to
determine whether a provincial law trenches on the protected “core” of federal competence. If so, rather than just “affect” the core, as suggested in Ordon, the
provincial law must “impair” it for
interjurisdictional immunity to apply (Ryan’s Commander at paras 54 and
following; Canadian Western Bank v Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3;
Quebec (Attorney General) v Canadian Owners and Pilots Association, 2010
SCC 39, [2010] 2 S.C.R. 536).
[140] The Supreme Court went on to hold that the Newfoundland statute did
indeed trench on the core of federal power over navigation and shipping.
However it concluded that the statute did not “impair”
the exercise of federal power over navigation and shipping. At para 63 it
pointed out that workers’ compensation schemes have been applied in the maritime
context for close to a century.
[141] I can only conclude that the application of “incidental”
provincial law in the maritime context is much broader than I, for one, had
thought.
[142] I revert back to the words of Mr. Justice McIntyre in the Buenos
Aires Maru at p 782:
The Federal Court is constituted for the
better administration of the laws of Canada. It is not, however, restricted to
applying federal law in cases before it. Where a case is in "pith and
substance" within the court's statutory jurisdiction, the Federal Court
may apply provincial law incidentally necessary to resolve the issues presented
by the parties; see Kellogg Co. v. Kellogg, [1941] S.C.R. 242, where, in
a case involving a dispute over patent rights, the effect of an employment
contract had to be considered in the Federal Court, and see as well: McNamara
Construction (Western) Ltd. v. The Queen, supra, where Laskin C.J.
suggested that the provincial law of contribution indemnity may be applied by
the Federal Court where jurisdiction is otherwise founded on federal law.
[143] Post Buenos Aires Maru the Supreme Court did not find it
necessary to apply provincial contributory negligence statutes as it “incrementally” changed the lex non scripta of Canadian
Maritime Law (Bow Valley Husky (Bermuda) Ltd v Saint John Shipbuilding Ltd,
[1997] 3 S.C.R. 1210).
[144]
If I am right in this interpretation and
the Federal Court would have applied provincial law in Ryan’s Commander
notwithstanding section 6(2) of the Marine Liability Act, how can the Ryan’s
Commander be reconciled with Quebec North Shore Paper v CP Limited,
[1977] 2 S.C.R. 1054? That case taught us that it is not enough that the subject
matter of an action fall within a federal legislative power and that
jurisdiction has been given to the Federal Court. In addition there must be
actual applicable federal law at the core of the dispute. Quebec North Shore
was characterized as a case based on interprovincial trade and commerce. There
was no federal law. However, because of the definition of Canadian Maritime Law
in section 2 of the Federal Courts Act, there is federal maritime law
which includes the law which would have been administered by our predecessor
court, the Exchequer Court, had it had unlimited jurisdiction in maritime and
admiralty matters, co-extensive with Parliament’s legislative power over
navigation and shipping. Thus, if as in Ryan’s Commander, and in this
case, the dispute is one which in its pith and substance is based on Canadian
Maritime Law, the Federal Court may apply provincial law. Obviously, “incidental” does not mean unimportant.
[145] I conclude that this Court may take cognizance of the Ontario PPSA
not only under section 23 of the Federal Courts Act but also in virtue
of the Buenos Aires Maru and the Ryan’s Commander.
[146] After deducting the Marshal’s costs of $39,106.37, Ballantrae’s
costs of $12,830.46, the crew claims of $132,935.00, la Ville de Sorel-Tracy’s
claim of $22,407.02, Blue Water’s of $9,041.78, Pronova’s of $26,182.15, and 185888
Canada’s of $24,347.70, which total $266,850.48, Ballantrae is entitled to the
balance of the $682,500.00 being $415,649.52.
Interest
[147] Section 36 of the Federal Courts Act speaks to prejudgment
interest, but subsection 7 thereof specifically provides that this section does
not apply to cases which arise under Canadian Maritime Law. Post-judgment
interest is covered by section 37 of the Act. If the cause of action arose in a
province, then the provincial law is incorporated and applied. Otherwise, the
Court applies an interest rate it considers reasonable in the circumstances.
Some of the claims, such as that of la Ville de Sorel-Tracy and the
ship’s necessaries men appear to have arisen in Quebec. Others, such as the
claims of the crew and Ballantrae did not, at least not in their entirety. In
the circumstances, and taking into account the great wealth of jurisprudence
relating to interest on the funds generated by the sale of a ship, I shall
apply what I consider to be reasonable.
[148] In Canadian Maritime Law prejudgment interest is a function of
damages, left to the discretion of the Court (Bell Telephone Company of
Canada v The Mar-Tirenno, [1974] 1 FC 294 (FCTD); Kuehne + Nagel Ltd v
Agrimax Ltd, 2010 FC 1303). The Court in its discretion may decide not to
apply the contractual rate agreed between the parties (Mount Royal/Walsh Inc
v The Jensen Star, 17 FTR 289, [1988] FCJ No 141 (FCTD) (QL), varied but
not on this point [1990] 1 FC 199, 1989 FCJ No 450 (FCA) (QL), leave to appeal
to SCC refused, 21593 (23 November 1989) (QL)).
[149] The Court more often than not applies a commercial rate but, given
that commercial rates are very low at the moment, sometimes applies the legal
rate of 5%. Any award of prejudgment interest would, in effect, be taken out of
Ballantrae’s pocket, as I have ordered that it shall receive whatever is left
over after payments out to the Marshal, Ballantrae as to costs, the Master and
crew, la Ville de Sorel-Tracy, and the necessaries men.
[150] In the circumstances, I consider it appropriate that no prejudgment
interest be awarded. It must be borne in mind that none of the claimants has
actually obtained a judgment in personam against the shipowners. In such
a case they certainly would have been entitled to prejudgment interest, but not
against the fund.
[151] As to post-judgment interest, it is customary to award interest at
the rate paid by the Court on funds on deposit. The Kinguk, above, is
but one example. This is exactly what I did on the first payment to the crew.
[152] Interest on the deposit in court accumulates monthly. Since it is
not clear when payments out will be made, payment of interest should be at the
same proportion the award in principal bears to the amount on deposit,
factoring in the fact that the payment out to the Marshal of $39,106.37 carried
no interest with it. For example, Ballantrae’s claim in principal is $415,649.52.
By dividing that sum by $643,393.63 (the $682,500.00 deposit minus the $39,106.37
paid to the Marshal), it should be awarded 64.603% of the total accumulated
interest. To take another example, Captain Ozkan’s claim in principal is
$28,741.89. That is 4.467% of the principal balance of the proceeds of sale,
and thus Captain Ozkan shall receive 4.467% of the accumulated interest. The
$87.33 of interest he was awarded on April 11, 2016, shall have to be deducted
therefrom, as will the previous payments of interest to the rest of the crew.
[153] On that basis payment of accumulated interest is as follows:
|
(a)
|
The Marshal
|
nil
|
|
(b)
|
Ballantrae’s costs
|
1.994%
|
|
(c)
|
The Twelve Seafarers:
|
[BLANK/EN BLANC]
|
|
[BLANK/EN BLANC]
|
(i) Captain Ozkan
(ii) Mr. Karasu
(iii) Mr. Ergun
(iv) Mr. Kan
(v) Mr. As
(vi) Mr. Cenik
(vii) Mr. Gumusoz
(viii) Mr. Meral
(ix) Mr. Guray
(x) Mr. Ates
(xi) Mr. Kaan
(xii) Mr. Ucman
|
4.467% less
$87.33
4.079% less
$81.50
1.486% less
$29.47
1.143% less
$21.26
1.032% less
$21.26
0.803% less
$15.78
1.032% less
$21.26
0.803% less
$15.78
1.076% less
$21.26
0.797% less
$14.69
1.982% less
$37.14
1.959% less
$40.94
|
|
(d)
|
La Ville de Sorel-Tracy
|
3.483%
|
|
(e)
|
Blue Water
|
1.405%
|
|
(f)
|
Pronova
|
4.069%
|
|
(g)
|
185888 Canada Inc (North Star)
|
3.784%
|
|
(h)
|
Ballantrae
|
64.603%
|
Costs
[154]
The only party seeking payment of costs from the
fund on deposit in Court is Ballantrae, for well-founded reasons. The only
other claim with respect to costs is by Mr. Hamilton, who seeks costs from Jarud,
which only discontinued its claim on the first day of the hearing.
[155] Jarud had filed a claim through counsel. It then gave notice that it
intended to represent itself through its president, Mr. Rudnick. This notice
was meaningless as Rule 120 of the Federal Courts Rules provides that a
corporation shall be represented by a solicitor unless the Court, in special
circumstances, grants it leave to be represented by an officer. Jarud made no
such motion.
[156] Nevertheless, its claim was still in the record and would have had
to have been considered by the Court absent the discontinuance. Jarud was a
middle man which essentially claimed a finders fee. However, it also asserted
that it was entitled to priority pursuant to section 139 of the Marine
Liability Act. Consequently it was in the interests of both Mr. Hamilton
and Ballantrae to contest the claim, which they did.
[157] Mr. Hamilton’s motion was in writing pursuant to Rule 369. It is
customary to give the respondent 10 days to reply. As nothing had been heard
from Jarud I directed the Registry to communicate with its President, Mr.
Rudnick. This resulted in a letter from Mr. Rudnick, not served upon the other
parties, and which he asked to be kept confidential. Naturally, I directed the
Registry not to accept the letter for filing.
[158] I might have been open to allow Jarud to respond through its
President with respect to a claim against it, as opposed to its claim against
the fund. However, the Court does not deal with “confidential”
letters which in any event was hardly responsive to the Hamilton claim for
costs.
[159] Rule 402 provides that unless otherwise ordered or agreed when a
motion has been abandoned the other party is entitled to costs. On the other
hand, the Court is somewhat loathe to put roadblocks in the way of
discontinuances.
[160] A small portion of Mr. Hamilton’s efforts did relate to Jarud’s
claim. However, the main focus was asserting his own claim, and defeating the
claims of others, or submitting that they were not entitled to priority.
[161] It is somewhat ironic that Mr. Hamilton’s claim was dismissed
outright. Yet Ballantrae is not seeking costs as against it.
[162] In the circumstances, I award Mr. Hamilton $1,000.00 against Jarud, all
in.
Official Languages Act
[163] La Ville de Sorel-Tracy’s written and oral submissions were in
French. The other parties pleaded in English. Section 20 of the Official
Languages Act provides that final judgments should be issued simultaneously
in both English and French when the proceedings were conducted in whole or in
part in both official languages. However the section goes on to provide that a
judgment may be first issued in one language if simultaneous publication would,
among other things, result in an injustice or hardship to any party. The twelve
seafarers were in dire straits. Given that it will probably take a few months
for a translation, their counsel moved that judgment be first issued in one
language, with a translation to follow. Counsel for the other parties,
particularly la Ville de Sorel-Tracy, kindly agreed.
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