Reano v. Jennie W (The Ship), docket A-362-97

Date: 19971211

Docket: A-362-97

CORAM:      STONE J.A.

LINDEN J.A.

         GRAY D.J.

BETWEEN:

CESAR REANO, JOSE SANCHEZ, LUIS ARCE VELA, HELMANN PALMA, DAVID LOAYZA, PABLO MEZA AGUILAR and BENITO HUANGAL

     RESPONDENTS

     - AND -

THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP "JENNIE W"

     APPELLANT

Heard at Toronto, Ontario, Thursday, November 6, 1997.

Judgment delivered at Ottawa, Ontario, Thursday, December 11, 1997.

REASONS FOR JUDGMENT BY:      STONE J.A.

CONCURRED IN BY:      LINDEN J.A.

     GRAY D.J.

Date: 19971211

Docket: A-362-97

CORAM:      STONE J.A.

LINDEN J.A.

GRAY D.J.

BETWEEN:

CESAR REANO, JOSE SANCHEZ, LUIS ARCE VELA, HELMANN PALMA, DAVID LOAYZA, PABLO MEZA AGUILAR and BENITO HUANGAL

     RESPONDENTS

     - AND -

THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP "JENNIE W"

     APPELLANT

     REASONS FOR JUDGMENT

STONE J.A.

[1]      This is an appeal in an Admiralty action in rem from an order of the Trial Division of May 6, 1997, denying the appellant's motion under Rule 439(3) to set aside a default judgment in an order of November 26, 1996, in favour of the respondents. The judgment awarded amounts for "wages and expenses", "wages, expenses and repatriation expenses" and for "security and expenses", in the aggregate amount of $192,882.72. The respondents were declared to be entitled to a maritime lien, and the ship was ordered to be sold to satisfy the judgment.

[2]      The operative part of the judgment reads:

Judgment is hereby pronounced against the Defendant in favour of Cesar Reno (sic) for $65,950.04, Jose Sanchez for $24,453.14, Luis Arce Vela for $23,104.60, Helmann Palma for $27,959.27, David Loayza for $22,442.20, Pablo Meza Aguilar for $10,809.44, Benito Huangal for $10,809.44, and for security and other expenses for $7,354.59;

The Plaintiffs are entitled to a maritime lien for wages, benefits, repatriation and expenses;

In default of payment of the aforementioned amounts, this Court orders that the Defendant ship "Jennie W" be sold.

Background

[3]      In December 1995, the respondents arrived at St. John's, Newfoundland, to take up positions as master and crew, respectively, of the "JENNIE W", then lying alongside in the harbour. The ship was then in the course of being purchased by Peruvian interests and its registry changed from Great Britain to Peru.

[4]      Before proceeding to St. John's, each of the last five respondents entered into employment contracts at Lima, Peru, dated December 10, 1995. The original Spanish text of these contracts and translations were filed in support of the appellant's motion to set aside the default judgment in April 1997. Each of these contracts was for a period of two months from the date of signing, with the employer reserving the right to prolong or diminish the period for a period of one month. A crew member wishing to stay on board was required to sign a new contract of service with the master. The "work journey" was to be forty hours per week, eight hours per day, from Monday to Friday. Compensation for "extra hours" and for "vacations" at agreed rates was to be in addition to the base salary.

[5]      It seems that the purchasers of the "JENNIE W" (the "Owners") had anticipated completing the purchase and transfer of the ship to Peruvian registry and returning the ship to Peru within the period of these employment contracts. This optimism turned out to be misplaced. Difficulties were soon encountered, rendering it necessary for Owners to seek registration of the ship in Panama. The record includes a provisional Panamanian navigation licence and a radio licence, dated January 25, 1996. Further delays were experienced in securing various certificates from the Panamanian authorities which were needed to prosecute the homeward voyage to Peru.

[6]      By the spring of 1996, the "JENNIE W" was still in the harbour at St. John's. Wages and benefits owing under the above-mentioned contracts of employment, which had terminated on March 8, 1996, were in arrears. However, by April 1996, all amounts owing under these contracts were paid, as were subsequently agreed to bonuses with respect to the pre-March 8, 1996 periods of employment.

[7]      At the request of the master, the respondents remained on board the ship beyond March 8, 1996, although the written contracts had expired. The record suggests that Owners and the respondents negotiated back and forth with respect to the remuneration to be paid to each of them subsequent to March 8, 1996, and that the respondents wanted to be paid the international rates set by the International Transport Workers' Federation - so called "ITF rates".

[8]      By the end of May 1996, the respondents had received no remuneration for the period from March 8, 1996, onward. However, on May 28, 1996, Owners made a "pay offering" in the following terms:

Regarding Mr. John R. Sinnott's communication on the arrest of the ship due to wage claims and the crew's repatriation, we request your intervention in order to reach an agreement and solve this problem. We are aware of the situation, but at the same time we believe the figures claimed are not fair.

We wish to pay the 3 due months plus 2 compensation salaries, considering the basic wage that appears in that document, as well as the cost of the voyage back to Lima, provided that the claim is cancelled.

Likewise, we'd like to inform you that today we requested a meeting with officials of the Banco Latino who have offered their assistance in order to comply to what is stated in your fax dated May 14 on the requirements for the ship to sail. This assistance will become effective very soon; therefore, we consider that as soon as the next payment is due (June 8) theuy (sic) would be ready to sail.

Pay offering:

Jose Sanchez          ($2,621.00 x 5)      US$      13,105.00

Luis Arce Vela          ($1,491.00 x 5)              7,455.00

Helmann Palma          ($1,862.00 x 5)              9,310.00

David Loayza          ($1,491.00 x 5)      7,455.00

Pablo Meza Aguilar      ($ 956.00 x 5)      4,780.00

Benito Huangal          ($ 956.00 x 5)      4,780.00

US$      46,885.00

[9]      The action in rem was commenced at St. John's with the filing of a statement of claim on May 28, 1996. On that day the Statement of Claim and a warrant for the arrest of the ship were served in a manner required by the Federal Court Rules. The claims made in the action were for amounts well in excess of the pay offering. The pleading itself was not complete, in that it did not include at the time it was served the indorsement in Form 4 required by Rule 304.¹

[10]      The respondents returned to their native country during the months of June, July and August 1996.

[11]      On August 13, 1996, the respondents filed an Amended Statement of Claim in the action, and caused it to be served on the ship on August 15, 1996, in the manner required by Rule 1002(5)(a).² This amended pleading had attached to it a "Notice to the Owners and all Others Interested" in the ship as mandated by Rule 1002(4) in an action in rem, with respect to the filing of a defence and the giving of judgment in the event that a defence is not filed within the time allowed by the rules of the Court.

[12]      No defence having been filed, on October 23, 1996, the respondents moved ex parte for default judgment pursuant to Rules 432 and 437, and requested that the motion be dealt with pursuant to Rule 324, that is to say, without the necessity of personal appearance. In a covering letter addressed to the Court at St. John's, counsel for the respondents stated:

The Amended Statement of Claim was served on the 15th day of August as appears from the Affidavit of Service enclosed herewith for filing. The total claim in the Amended Statement of Claim is $196,841.75, which is a liquidated amount. The application is to enter Judgment totalling $192,482.72. The difference is in the security and other expense costs in that while the Amended Statement of Claim claims $11,313.62 for security and other expenses, the amount actually expended is $7,354.59.3 [Emphasis added]

[13]      On the basis of the amended pleading and the written representations of counsel, default judgment was granted on November 26, 1996, in the adjusted amount claimed together with the other relief mentioned above.

[14]      On December 16, 1996, after being informed by respondents' counsel that he had prepared an application to the Court for the sale of the ship, Owners retained solicitors at St. John's. There then followed an exchange of correspondence between Owners' solicitors and the respondents' solicitors. On December 20, 1996, the latter confirmed that "we are holding off filing our Application for sale of the vessel", that "I need to have a written assurance that the vessel is insured", without which "I would have to move very quickly".⁴ On January 17, 1997, Owners' solicitors suggested that "this matter lends itself to settlement without need of protracted and expensive litigation"⁵ and, on January 29 and February 6, 1997, that the appellant post security for the unpaid claims. This was rejected by the respondents' solicitors by letter of February 18, 1997, in which it was suggested that "payment...be forthcoming".⁶ Despite this indication, Owners' solicitors wrote a further letter of March 19, 1997 to the effect that payment of the judgment at a reduced amount was "clearly unacceptable", and that they were prepared to recommend that security be posted to a maximum of "$95,124.95 on the basis that the default judgment be set aside on consent".⁷ The respondents rejected this suggestion on March 21, 1997 and, on March 25, 1997, reiterated that an application would be commenced for the sale of the ship if full payment of the judgment was not "forthcoming".⁸

[15]      The appellant's motion to set aside the default judgment pursuant to Rule 439(3) followed on March 27, 1997, in which it was alleged:

(a)      That there are valid and compelling reasons which explain the Defendant's delay in filing a Defence including service of a defective Statement of Claim without required indorsement, a lack of understanding on the Defendant's part of the significance and effect of the legal proceedings commenced against it in a jurisdiction foreign to it further exacerbated by the fact that the spoken and written language of the Defendant is Spanish while all proceedings and communications in this matter were in the English language.

(b)      That there are strong and substantial grounds of defence in this matter. The Plaintiffs, Cesar Reano and Jose Sanchez have settled their claims against the Defendant and have consented to this motion. Further, the wages and benefits sought by the remaining Plaintiffs greatly exceed the wages and benefits agreed by them in their contracts of employment with the Defendant, are unreasonable and cannot be substantiated or sustained in law

Judgment below

[16]      In rejecting the appellant's motion, the learned Motions Judge stated, at pages 2-3 of his reasons, with respect to the excuse that had been put forth for the delay in filing a defence and the assertion that language difficulties were experienced by the appellant:

With respect to the first ground, I am of the view that the explanations given for the delay to file a defence and for the delay to file the present motion are not satisfactory

I am not ready to subscribe to counsel's submission that her client failed to retain Canadian counsel and enter a defence to the action before November 26, 1996 because of the Defendant's lack of understanding of the nature of the proceedings and an inability to speak or read English as alleged in paragraph (a) above.

Counsel for the Plaintiffs acted with the utmost of fairness in keeping the Defendant informed at all times with respect to the proceedings. On many occasions counsel for the Plaintiffs warned the Defendant to engage Canadian counsel to file a defence and thus prevent a default judgment. The Defendant did not seem to be concerned by the Canadian legal proceedings until it was informed that its ship could be sold to satisfy the default judgment.

In my view, the evidence does not support the Defendant's submission that language difficulties prevented it from understanding the Canadian legal process. I have examined the evidence closely and I see no reasonable explanation for the failure by the Defendant to act prior to November 26, 1996.

[17]          As to the second ground alleged, the Motions Judge stated at page 4 of his reasons that "the Defendant appears to have a serious defence concerning the amounts owing to the Plaintiffs". Later, at page 5, he indicated that his refusal to set aside the judgment was obviously not without some misgiving, as the appellant appeared to have a "serious defence".

Arrest of the ship

[18]      I should first deal with the appellant's suggestion that the Statement of Claim filed and served on May 28, 1996, was defective because it did not include the Form 4 indorsement and, accordingly, that the ship was not validly arrested. As it was put in paragraph 23 of the written argument:

Moreover, the Respondents' subsequent purported service of the Amended Statement of Claim was also defective, as the Warrant was not attached. The Appellant therefore states that the service of the Statement of Claim was defective and remained and that the arrest of the Vessel was invalid.

[19]      That form, authorized by Rule 304 and directed to "the owners and all others interested in the Ship..." as required by Rule 1002(4), begins with the words:

You are required to file in the Registry of the Federal Court of Canada, at the City of Ottawa or at a local office of the Court, your defence to the enclosed statement of claim within 30 days after the day of service hereof in accordance with the Federal Court Rules, if you are served within Canada.

As importantly, it ends with the words:

If you fail to defend this proceeding, you will be subject to have such judgment given against you as the Court thinks just on the plaintiff's own showing.

The form plays important roles in an action in rem. It places a defendant on notice that a defence is required to be filed within the time limit indicated and that the defendant may apply for leave to file a conditional appearance. Of equal importance is that in an action of this type, the notice in the indorsement is addressed as well to "all others interested in the Ship". Its service on a ship with the statement of claim gives notice to all such persons that the ship is being proceeded against and, in effect, that they should act accordingly.

[20]      There can be no doubt that the Statement of Claim was seriously defective by the omission of the Form 4 indorsement at the time it was served. It is the originating document under the current practice of the Federal Court of Canada. Under that practice, as Rule 1003(1) reveals, a warrant for arrest of property in an action in rem "may be issued at any time after the filing of the statement of claim...". If the action is against a ship, both the statement of claim and the warrant are to be served in accordance with Rule 1002(5)(a), "by attaching a certified copy...to the main mast or the single mast, or to some other conspicuous part of the ship, and leaving the same attached thereto". Where both documents are served at the same time, the defendant and others interested in the arrested property are furnished with vital information with respect to the nature and details of the claim asserted and of the remedy sought, thereby enabling the defendant to determine whether to defend the action and interested persons to decide whether to intervene for the purpose of protecting their interests.⁹

[21]      The practice in England is to commence an action in rem with the issuing of a writ of summons rather than on filing a statement of claim or declaration. In The Prins Bernhard, [1964] P. 117 (P. D.), a writ and service was set aside on the ground that, by merely showing the writ to the master and leaving a copy with him rather than nailing or affixing the original to one of the ship's masts and leaving a true copy nailed or affixed in its place, as required by Order 9, rule 12 of the English rules of practice, the writ had not been properly served. The decision is interesting for what it says with respect to the object sought to be achieved by requiring that the originating document be served in compliance with the rules of practice. At pages 131-32, Hewson J. stated:

The method of service prescribed by R.S.C., Ord. 9, r. 12, for giving notice to all interested parties is a rule of the court. It has been firmly established by many years of usage. It may not be a perfect way of informing all interested parties that an action in rem is laid against the ship; but no other method has yet been suggested or devised. This method is well-known throughout the maritime countries of the world. It is based upon experience for the protection of all interested parties.

...

I have great sympathy for the process server, but the courts must be vigilant towards the rights and interests of third parties who might conceivably be affected by the writ or the consequences of its service. I must do what I can to safeguard the interests of those who have had no proper notice of the existence of this writ, and, after seriously considering Mr. Willmer's powerful and persuasive argument, I am not disposed to save the service of this writ.

[22]      Hewson J. rested these views, in part, on the following passage in the decision of Sir Robert Phillimore in The Marie Constance (1877), 3 Asp. M.L.C. 505 (Adm. Div.), at page 506:

It is necessary that the rules should be strictly obeyed, and that has not been done in this case. Under the former practice of this court the warrant of arrest was in its form citatory, and therefore the nailing of it to the mast was a sufficient notice to all the world of the suit. That is no longer the case; the warrant of arrest contains no citation itself, that part of it is supplied by the writ of summons, which therefore is directed to be nailed to the mast in addition to the warrant of arrest. Service on the captain, even on board the ship, is not an alternative allowed by the rules of practice, nor sufficient notice to all parties who may have an interest in the ship; as, for example, mortgagors and others, between whom and the captain there is no privity, either real or implied. I shall not allow judgment to be entered until I am satisfied that the writ of summons has been served in the proper manner, and the proper times have elapsed for appearance and other proceedings subsequent to such service, but I will make the order as prayed, subject to the due service of the writ.

[23]      A warrant issued by the Federal Court of Canada under the current practice is not "in its form citatory". It commands nothing of the defendant, either to appear or to do anything else. It is addressed to "the Marshall...or Sheriff", who is directed "to arrest the ship..., ...and keep the same under arrest until you are otherwise ordered". As we have seen, it is the Form 4 indorsement that is "citatory" in the sense understood by Sir Robert Phillimore.¹⁰ A requirement that a citation be issued and served in an action in rem is of long standing in Canadian Admiralty practice, beginning with the practice in the courts of vice-admiralty¹¹, continuing with the form of writ of summons utilized in the Exchequer Court of Canada until 1971 and with Form 4 of the current practice.

[24]      The Statement of Claim was defective at the time it was served upon the ship because it lacked the Form 4 indorsement required by the Federal Court Rules. It thus gave no notice whatsoever to the appellant of the consequence of failing to file a defence within the time provided by those rules. Nor did it give the notice required by Rule 1002(4) to "all others interested in the Ship". Effectively, then, the only complete document that was served on the ship on May 28, 1996, was the warrant for its arrest. In my view, however, the absence of the Form 4 indorsement did not render the action a nullity - much less render the arrest invalid. Rule 304, as we have seen, lays down no requirement that the indorsement appear on the Statement of Claim at the time it is filed; only that it be on the document "when served". The defect in the pleading could be rectified by filing and serving an amended statement of claim in compliance with the rules, which was done in August 1996. Owners and all others interested in the ship were thereby given the notice to which they were entitled under the rules of the Court.

Motion Judge's discretion

[25]      The order attacked was, of course, made in exercise of a discretion. Put broadly, this Court is not warranted in interfering with a discretionary order in the absence of an error of law: Canderel Ltd v. Canada, [1994] 1 F.C. 3 (C.A.), at pages 9-10, and the cases cited. If, therefore, the appellant is to succeed, the Court must be satisfied that the Motions Judge committed an error of that kind.

[26]      The appellant repeated in this Court an argument that was addressed to the Motions Judge, viz, that its failure to file a defence was caused by a lack of understanding the nature of the proceedings and that this was compounded by language difficulties. I have carefully reviewed the record. It includes copies of the respondents' solicitors faxed messages addressed to Owners in Peru informing them of the May 28, 1996, proceedings and the filing and serving of the Amended Statement of Claim in August 1996. The record also includes copies of the respondents' reply messages in some instances. Moreover, at least from May 29, 1996, until they retained solicitors on December 16, 1996, Owners communicated to some extent with the respondents through a St. John's agent, who was authorized by their Peruvian representative to "act on his behalf to try to resolve the matter at hand".¹² I fully agree with the reasons of the Motions Judge for rejecting the appellant's submissions that Owners were not dilatory in filing a defence to the action. In my view, therefore, the respondents were entitled to move as they did on October 23, 1996, for a default judgment.

[27]      I also agree with the Motions Judge that the appellant unreasonably delayed filing the motion to set aside the default judgment on March 27, 1997. What is obvious from the record is that while the respondents were prepared to allow some delay in the sale of the ship after Owners had retained solicitors at St. John's, this was only with respect to the payment of the judgment. At that juncture it became evident that the respondents Reano and Sanchez may have "settled" their claims directly with Owners in Peru. However, until a satisfaction piece could be filed with the Court, counsel for those two respondents was obliged to defend the judgment that had been won on their behalf. Finally, there is nothing in the record to suggest that the respondents are not at all entitled to maritime liens for unpaid wages and expenses and, therefore, that the "JENNIE W" cannot be sold by the Court in satisfaction of the judgment.

Classification and proof of the claims

[28]      Despite the foregoing, I do have a serious difficulty with one aspect of the default judgment, i.e. that the amounts claimed consist of "liquidated demands" within the meaning of Rule 432. That rule operates, as its opening words state:

Where the plaintiff's claim against the defendant is for a liquidated demand only... .

Rule 432 is to be contrasted with Rule 433(1), the opening words of which read:

Where the plaintiff's claim against a defendant is for unliquidated damages only... .

[29]      The decision of the Nova Scotia Court of Appeal in Pick O'Sea Fisheries Limited v. National Utility (Canada) Ltd. (1995), 130 D.L.R. (4th) 472, contains a helpful discussion of the distinction between a "liquidated" and an "unliquidated" claim. At pages 480-481, Flynn J.A. stated:

The present English rule, with respect to entering judgment in default of defence (Order 19, Rule 2), is similar to our Rule in that it refers to the case where the plaintiff's claim "is for a liquidated demand only". The words "liquidated demand", as they are used in that English rule, are defined in Precedents of Pleadings, Bullen & Leake, 12th ed. (1975) at p. 153, as follows:

A liquidated demand is a debt or other liquidated sum. It must be a specific sum of money due and payable, and its amount must be already ascertained or capable of being ascertained as a mere matter of arithmetic. Otherwise even though it be specified, or quantified, or named as a definite figure that requires investigation beyond mere calculation, it is not a "liquidated demand" but constitutes "damages".

Similarly, these words are defined in The Supreme Court Practice (1988), vol. 1 at p. 35, as follows:

A liquidated demand is in the nature of a debt, i.e., a specific sum of money due and payable under or by virtue of a contract. Its amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic. If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation beyond mere calculation, then the sum is not a "debt or liquidated demand," but constitutes "damages".

In Odgers, Principles of Pleadings and Practice, supra, at p. 46 the author says the following:

When the amount to which the plaintiff is entitled can be ascertained by calculation, or fixed by any scale of charges or other positive data, it is said to be "liquidated" or made clear...But when the amount to be recovered depends upon the circumstances of the case and is fixed by opinion or by assessment or by what might be judged reasonable, the claim is generally unliquidated...But if the claim is in its nature a claim for damages at large, it is not in law treated as a "liquidated demand" even if the plaintiff puts a figure on the damages which he is claiming.

See also Logistique et Transport Internationaux Ltée v. Amada Lines Ltd., [1991] 50 F.T.R. 21.

[30]      A review of the Amended Statement of Claim satisfies me that none of the claims consisted of a "liquidated demand" as that term is understood at common law. It is true that the claims are stated as definite figures, but that by itself does not render them "liquidated demands". The claims for wages are well in excess of Owners' May 28, 1996 "pay offering". None of them arose under any of the written contracts that came to an end on March 8, 1996.

[31]      The claims pleaded on behalf of the respondent Vela are typical of the way in which all claims were pleaded. Paragraph 16 of the Amended Statement of Claim reads:

The Plaintiff Luis Arce Vela is the Electrical Engineering Officer and had a Contract with the owner for a period of two months plus one month owners option ending March 8th, 1996. The owner of the Defendant Ship is indebted to the Plaintiff Luis Arce Vela for wages and other expenses after March 8th as follows:

U.S.      Canadian

(a) Basic wages, leave pay, overtime and

subsistence March 8-April 8, 1996              $ 3,670.20      $ 5,064.87

Basic wages, leave pay, overtime and

subsistence April 8-May 8, 1996              $ 3,670.20      $ 5,064.87

May 8-June 8, 1996                  $ 3,670.20      $ 5,064.87

Termination Pay - two months basic

salary at $1,491.00 per month              $ 2,982.00      $ 4,115.16

(b) Further basic wages, leave pay, overtime

and subsistence from June 8th, 1996 until

repatriation on June 23rd, 1996 at $3,670.20

per month, as follows:

June 8-June 23, 1996 (15 days @ $122.34 per day)      $ 1,835.10      $ 2,532.43

(c) Telephone charges - 6 months      $ 600.00

(d) Medical Expenses                  $ 480.00      $ 662.40

Total - (Canadian Dollars)      $23,104.60

[32]      No evidence was adduced on the motion to support the default judgment for "Wages, Expenses and Repatriation Expenses" that were allowed. These claims were not made under Vela's seamen's contract of December 10, 1995. Indeed, as this respondent acknowledged in paragraph 7 of an affidavit filed in opposition to the motion to set aside the default judgment:

For the period beyond March 8th, 1996, there were no contracts in force, and it was made clear to owners that the crewmembers were not agreeable to the wages set forth in the contracts for the period following the end of the contracts on March 8th. For the period commencing March 8th, the crewmembers wanted international rates set by the International Transport Workers' Federation. Owners did not want us to leave the vessel and wished us to stay until arrangements could be made for the vessel to sail. We agreed to stay for a period of time to allow owners to make the necessary arrangements so that the vessel could sail, but our agreement to stay was conditional upon payment of ITF wages and owners knew that and we would not agree to the wages that had been provided for the contract period.13

This respondent referred to Owners' "pay offering" of May 28, 1996 as having been based upon "the ITF basic rate". However, because he did not receive payment by June 8, 1996, he continued "to claim the amount set forth in the Statement of Claim".

[33]      That the wages claimed did not consist of "liquidated demands" is acknowledged in paragraph 15 of the Vela affidavit:

Owners have no defence to the within action. Owners knew that the contract rates would not be agreed to for the period following the termination of the contract, and rates set forth in the Statement of Claim are reasonable, bearing in mind that the crewmembers were stranded in Canada for periods of time exceeding six months. If Owners wished to take issue with the claim, they could have done so.14

[Emphasis added]

[34]      Likewise, claims for "leave pay", "overtime", "subsistence", "termination" and "future claims for basic wages, leave pay, overtime and subsistence" are not liquidated demands. Like the wage claims, they are, in reality, claims for "unliquidated damages". So too are the claims for the "telephone charge" of $600 made by each of the respondents except the master. These are entirely unsupported by receipts or any other evidence, as are other expense claims that were allowed. A claim for "security and other expenses" allowed, in the amount of $7,354.59, nowhere appears as such in the Amended Statement of Claim.

[35]      The respondents are of course entitled to receive all that is owing to them for wages and expenses - no more and no less. The appellant is likewise required to pay all that is owing - no more and no less. No party is to be unjustly enriched. The respondents cannot recover the damages they seek without proving their respective claims on evidence. It seems to me that the only fair way of ascertaining the amounts truly owing is by way of a reference pursuant to Rules 433(2)¹⁵ and 500. The applicable procedure under these rules was aptly described by Giles, A.S.P. in Sanden Machine Ltd. v. Companhia de Navegacao Maritima Netumar et al. (1996), 107 F.T.R. 170, at page 171:

Counsel should understand that the provision in the Federal Court Rules for judgment in default of defence, when the relief claim is unliquidated damages, is, as it customarily has been for over a century in common law courts, a two stage procedure, the first stage decides that the plaintiff is entitled to damages, and goes on to direct the second stage which determines the amount of damages.

In this court the applicable rule is 433(1) which indicates a plaintiff may apply for judgment against the defaulting defendant for damages to be assessed and costs. Sub-rule 433(2) deems a reference directed and engages rule 500 for the purposes of the reference. The procedure for a reference under 500 et seq, contemplates notice to the defaulting defendant after an appointment has been taken out. A defaulting defendant may appear at the reference to dispute the quantum, but not the fact of judgment. Rule 433(3) provides for short cut to be used where the court deems it appropriate if notice has been given to the defendant of the plaintiff intention to do so.

In my view, Rule 437, which was also invoked by the respondents on their motion for default judgment, has no application in the circumstances.¹⁶

[36]      Given the time that these claims have been outstanding, they should be assessed without delay - unless, of course, the parties are able to reach agreement on the amounts owing and unpaid. The referee will be in a position to investigate to what extent, if any, the respondents Reano and Sanchez have "settled" the judgment rendered in their favour through direct negotiations with Owners.

[37]      In my view, the Motions Judge did not err in law in concluding that the default judgment should not be set aside. On the other hand, as he acknowledged, there is a "serious defence concerning the amounts owing" which, as I have indicated, are claims for unliquidated damages. This called for the Court's intervention. In my respectful view, the failure to do so by varying the judgment pursuant to Rule 439(3)¹⁷ constituted an error of law justifying the Court's interference with the judgment below.

[38]      I would therefore allow the appeal, set aside the order of May 6, 1997, and vary the order for default judgment of November 26, 1996, by deleting the first paragraph and substituting the following:

Judgment is hereby pronounced against the Defendant in favour of each of the plaintiffs for wages, other employment benefits and expenses including repatriation expenses claimed, in such amounts as shall be assessed without delay upon a reference pursuant to Rules 433(2) and 500.

I would confirm the order in all other respects.

[39]      Success being divided, I would make no order as to costs.

     "A.J. STONE"

     J.A.

"I agree

A.M. Linden J.A.:

"I agree

W. Gibson Gray, D.J."

     FEDERAL COURT OF APPEAL

    

Date: 19971211

Docket: A-362-97

BETWEEN:

CESAR REANO, JOSE SANCHEZ, LUIS ARCE VELA, HELMANN PALMA, DAVID LOAYZA, PABLO MEZA AGUILAR and BENITO HUANGAL

     - AND -

THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP "JENNIE W"

    

     REASONS FOR JUDGMENT

    

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     ¹      Rule 304(2) reads:      ...      (2) The originating document shall, when served, have an indorsement thereon in the terms of Form 4.

     ²      Rule 1002(5)(a) reads:      In an action "in rem", the statement of claim or declaration shall be served          (a) upon a ship, or upon cargo, freight or other property, if the cargo or other property is on board a ship, by attaching a certified copy of the statement of claim or declaration to the main mast or the single mast, or to some other conspicuous part of the ship, and leaving the same attached thereto;

     ³      Letter, 21 October 1996, Messrs. Lewis & Sinnott to the Federal Court of Canada at St. John's.

     ⁴      Affidavit of H.G. Reyes, 11 April 1997, Case on Appeal , Vol. 2, p. 370, at paragraph 7.

     ⁵      Ibid., p. 371, at paragraph 16.

     ⁶      Ibid., p. 373, at paragraph 22.

     ⁷      Ibid., p. 373, at paragraph 26.

     ⁸      Ibid., p. 374, at paragraph 29.

     ⁹      It is noteworthy that the "customary modern practice" in England is to serve the warrant and the writ of summons simultaneously: F.W. Wiswall, The Development of Admiralty Jurisdiction and Practice Since 1800 (Cambridge: University Press, 1970), at p. 121.

     ¹⁰      The practice in the old High Court of Admiralty in England immediately prior to its abolition in 1875, commanded the Marshal by the warrant itself,          "...to cite all persons who have or claim to have any right, title or interest in the said [ship] to enter, within six days from the service hereof...in the registry of our said Court an appearance in the said cause", and "to warn all the said persons that, if they do not enter an appearance as aforesaid, the judge of our said Court shall proceed to determine the said cause, or make such order therein as to him shall seem right".
     See H.C. Coote,The New Practice of the High Court of Admiralty of England (London: Butterworths, 1860), at p. 194. This, indeed, had been part of the ancient practice of that Court well before rules of practice were formally adopted. See A. Browne, Compendious View of the Civil Law, and of the Law of the Admiralty, vol. 2 (New York: Halsted and Voorhies, 1840), at pp. 397-98. The former practice in the High Court of Admiralty was itself abolished in 1875, when the citation was removed "from the warrant and placed in a new writ of summons in rem which was a separate instrument". Wiswall, supra, note 9. The modern form of warrant is traceable to the English form that was adopted in 1875 and that was part of the revision of English Admiralty practice. See E.S. Roscoe, A Treaties on the Jurisdiction and Practice of the Admiralty Division of the High Court of Justice (London: Stevens and Sons, 1878), Appendix, clxxv-clxxvi; T.E. Smith, A Summary of the Law and Practice in Admiralty (London: Stevens and Haynes, 1885), at p. 204.

     ¹¹      See A.A. Stockton, The Rules and Regulations of the Courts of Vice-Admiralty in the British Dependencies (St. John: G.W. Day, 1876), at p.p. 5, 31.

     ¹²      Letter, 29 May 1996, Michael Shawyer to John Sinnott, Case on Appeal , vol. 2, at p. 386.

     ¹³      Affidavit of Luis Arce Vela, April, 1997, Case on Appeal , vol. 2, p. 378, at paragraph 7.

     ¹⁴      Ibid., p. 380.

     ¹⁵      Rule 433(2) reads:          Where a judgment for damages to be assessed has been given on an application under this Rule, there shall be deemed to have been a reference under Rule 500 to determine such damages; and such reference shall be deemed to be to a judge to be nominated by the Associate Chief Justice, a prothonotary, or any other person deemed by the Court (by such judgment or by a subsequent order) to be qualified for the purpose.

     ¹⁶      Rule 437 is patterned on the corresponding English Order 13, rule 5, which applies to claims of a kind that would fall outside of Rules 432-435. See The Supreme Court Practice, 1997 , vol. 1, Part 1 (London: Sweet & Maxwell, 1996), at pp. 124 ff.; Halsbury's Laws of England, 4th ed., vol. 37 (London: Butterworth, 1982), at pp. 291-195. Indeed, all of Rules 433-437 appear to be derived from the English practice.

     ¹⁷      Rule 439(3) reads:          The Court may, on such terms as seem just, set aside or vary any judgment given under Rules 432-438.