Date: 20000621
Docket: A-113-99
CORAM: LINDEN J.A.
ROTHSTEIN J.A.
MALONE J.A.
BETWEEN:
ACADIA SHIPBROKERS LIMITED
SEANAV INTERNATIONAL LIMITED
Appellants
(Defendants)
- and -
KANEMATSU GMBH
Respondent
(Plaintiff)
REASONS FOR JUDGMENT
(Heard at Montreal on June 19, 2000
and delivered from the Bench on June 21, 2000)
LINDEN J.A.
[1] This is an appeal of an order issued by a Justice of the Federal Court Trial Division on February 18, 1999 granting summary judgment to the respondent with damages to be assessed by subsequent reference.
[2] The facts surrounding this action are complex and involve ten different business entities in various ways although only three are before the Court.
[3] Briefly, a cargo of steel originally owned by Ironimpex and later sold to Kanematsu was shipped from Odessa to Bangkok in March and April of 1995 aboard the vessel "M.V. Lark" ("the Lark") owned by Bulklark Shipping Company ("Bulklark"). The original bill of lading issued by Bulklark to Ironimpex and held ultimately by Kanematsu called for this cargo to be discharged and delivered to Nicco Industry Co. Ltd. ("Nicco") at Bangkok. Among its various provisions clause 1 of the Bill of Lading stated:
| "All terms and conditions, liberties and exceptions of the Charter Party dated as overleaf, are herewith incorporated. The Carrier shall in no case be responsible for loss of or damages to cargo arising prior to loading and after discharging". |
[4] The appellants Acadia Shipbrokers Limited ("Acadia") and Seanav International Limited ("Seanav") held charter party agreements relative to the Lark such that they had time chartered the vessel for the voyage from Odessa to Thailand and India. The steamship agent in Bangkok was Pacific Ocean Shipping Co. Ltd. ("Pacific Ocean") who had been originally appointed by Ironimpex. It is admitted by the appellants that Pacific Ocean was acting as their agent as well.
[5] Before the vessel arrived in Bangkok, Pacific Ocean informed Acadia by fax, that Nicco was entitled to the bill of lading but that it would not be ready due to the fact that the vessel would be arriving over a long holiday from April 12-16, 1995. Pacific Ocean thus requested that Acadia persuade the shipowner to allow the discharge of the cargo without the normal surrender of the bills of lading. Acadia did so, apparently without the knowledge of the existence of Kanematsu at this time.
[6] To expedite discharge, without production of the bill of lading to the shipowner, the appellants obtained letters of indemnity from Ironimpex and Nicco and then issued their own letters of indemnity to the shipowner. The appellants, however, in a fax sent at about the same time, instructed Pacific Ocean not to deliver the cargo to Nicco without the original bill of lading or a written guarantee of payment by Nicco"s bank. It is not entirely clear what the appellants" intention was in view of these inconsistent instructions.
[7] Unknown to the appellants, Nicco had paid for the use of the barges on which the steel was offloaded as well as the necessary government import tax. With the offloading of the goods onto the barges, they were thus released to Nicco. These facts are disclosed in investigative reports placed in evidence and commissioned by the appellants long after the event.
[8] Prior to the date of discharge, i.e. mid-April, 1995, Kanematsu was aware that Nicco had already managed to gain possession without payment of two other steel cargo shipments over which it also held bills of lading. These events took place in January and March 1995 involving the vessels M.V. Marabu and Arosa.
[9] It was only in November 1995, more than six months after the discharge of the cargo at Bangkok, that the appellants heard the name Kanematsu and that it purported to be the holder of the original bill of lading. It obtained that information from Watana Inter-Trade Co. Ltd. which was Kanematsu"s agent in Bangkok. Nicco is now bankrupt and Kanematsu is unpaid for its cargo.
[10] The action in the Trial Division of the Federal Court of Canada concerns the conduct of the appellants as charterers of the Lark. The pleadings contain allegations of fraud, conversion and inducing breach of contract by the appellants in causing the release of the cargo without the bill of lading by providing the shipowner with letters of indemnity.
[11] The appellants assert that there was no inducement to deliver the cargo to Nicco; rather, the only inducement given to the owner of the Lark, against whom Kanematsu has also taken action in Malta, was to discharge the cargo onto barges. They say that, according to clause 1 of the bill of lading, once discharge occurred they were not responsible for the loss of the cargo. They contend that discharge onto the barges does not constitute delivery to Nicco.
[12] The Motions Judge allowed a motion for summary judgment, which is under appeal before us.
[13] The decision of this Court in Feoso Oil Ltd. v. The Sarla1, interpreting the Federal Court Rules, is a leading authority on the subject of summary judgment. It has mandated that on a motion for summary judgment both sides must file such evidence as is reasonably available to them on the issues pleaded and which could assist the Court to determine if there is a genuine issue for trial. The responding party cannot rest on its pleadings and must give specific facts showing there is an genuine issue for trial.
[14] We are all of the view that the facts herein do not give rise to any triable issue based on the distinction between "discharge" versus "delivery" of cargo and the consequences that flow from that distinction as it relates to clause 1 of the Bill of Lading. The evidence is clear that the barges were supplied by Nicco. Discharge onto the barges was coincident with delivery to Nicco.
[15] Nevertheless, we are not satisfied that this decision can stand. The Trial Judge granted summary judgment simply on the basis of two English decisions, clearly stating the law, to the effect that "a shipowner who delivers without production of the bill of lading does so at his peril. The contract is to deliver, on production of the bill of lading, to the person entitled under the bill of lading". (See Hai Tong Bank Ltd. v. Rambler Cycle Co. Ltd. [1959] A.C. 576 (H.L.); see also Barclay"s Bank v. Customs & Excise (1963), 11 Lloyd"s Rep. 81 (Q.B.D.))
[16] The Trial Judge, however, did not consider at all the fact that these appellants were not the ship"s owners, who might well be liable according to these authorities. They were merely charterers. Further, it was not the appellants who offloaded the cargo but the employees of the shipowners. The breach of contract, if any, was with respect to the contract between the consignors or their assignees and the shipowner, i.e. the bill of lading, to which the appellants were not parties.
[17] The claim against the appellants was not as owners, offloading to someone who does not possess the bill of lading, but as tortfeasors who converted the goods or who induced the shipowners to breach their contract. Hence, the venerable authorities relied on by the respondents are not applicable to this situation.
[18] It is claimed that these appellants induced the shipowners to breach their contract under the bill of lading by releasing the goods without obtaining the bills of lading. To be successful on that basis, it must be proven (1) that the defendants knew that there was a contract, (2) that they induced its breach, and (3) that this caused damage. As for (1), there is real doubt about whether the defendants knew of any contract between Kanematsu and the shipowners. They knew the consignor Ironimpex had a contract with the shipowners but they say they did not know about Kanematsu, the assignee, until months later. In fact, when they contacted the consignors, Ironimpex, about the letters of indemnity, it is said they were not told that Ironimpex was no longer the owner of the cargo, having sold it to Kanematsu. It is argued that there was no reason for the appellants to have suspected this. Hence, there is doubt about whether the appellants had knowledge, or even reason to know, about the contract alleged to have been breached by their interference. This is a serious factual issue that must be resolved if there is to be liability for inducing breach of contract. It has not even been considered by the Motions Judge.
[19] Second, for there to be an inducement to breach a contract, the wrongdoer must intend to persuade or procure a contracting party to breach a contract. The wrongdoer must desire to cause a breach or be substantially certain of one. (See Fleming, The Law of Torts (9th ed 1998) at p. 761; Klar, Tort Law (2nd ed.) at p.500). Negligent interference with a contract is not generally considered to be actionable. (See Klar supra, but cf. Nicholls v. Township of Richmond (1983), 145 D.L.R. (3d) 362 leave to appeal to S.C.C. refused (1983), 51 N.R. 397). Hence, if one does not know that one"s conduct will cause a contractual breach, one cannot be liable for inducing one. (See Klar, supra, at p.50). Here there is real doubt about the state of mind of the appellants. As Fleming wrote, there is no liability if they "acted under a bona fide belief that [they] would not infringe contractual rights" (p.762). The Trial Judge failed to deal with any of these factual issues which are triable issues that must be resolved before liability can be found.
[20] Another alternative basis of liability claimed is conversion by the appellants. This issue, also, was not considered by the Trial Judge, who erroneously relied solely on the English authorities on the liability of shipowners who misdeliver cargo. Hence, if the inducing breach of contract ground fails, conversion issues must be canvassed in a trial to determine whether the conduct of the appellants can lead to liability. As for the allegation of fraud in the Statement of Claim, it was not pressed by Kanematsu.
[21] On the basis of these reasons, it is clear that this is not an appropriate case for summary judgment as there are serious factual and legal issues that must be resolved in a trial. Summary judgment should not be granted if all the necessary facts have not been established or if it would be unjust to do so without a trial. This reasoning has been noted in various decisions of the Federal Court Trial Division2 and that is exactly the case before us.
[22] The appeal will be allowed and the order for summary judgment dated February 18, 1999 will be vacated. The case will be referred back to the Trial Division to proceed towards a trial.
[23] Costs in this Court and in the Trial Division shall be in the cause.
"A. M. LINDEN"
J.A.
__________________
1[1995] 3 F.C. 68 (F.C.A.).
2See: Pallmann Maschinenfabrik Gmbh Co. KG v. CAE Machinery Ltd. and PS & E. Projects Ltd. (1995), 98 F.T.R. 125 and Homelife Realty Services Inc. v. Sears Canada Inc. (1996), 108 F.T.R. 19 and Granville Shipping Co. v. Pegasus Lines Ltd. (T.D.) [1996] 2 F.C. 853.
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