Date: 20010606
Docket: T-16-01
Neutral Citation: 2001 FCT 605
BETWEEN:
GLOBAL ENTERPRISES INTERNATIONAL INC.
Plaintiff
- and -
THE OWNERS AND ALL OTHERS
INTERESTED IN THE SHIPS "AQUARIUS",
"SAGRAN" and "ADMIRAL ARCISZEWSKI",
THE SAID SISTERSHIPS "AQUARIUS",
"SAGRAN" and "ADMIRAL ARCISZEWSKI"
and GRYF DEEP SEA FISHING COMPANY
Defendants
- and -
S.K. SHIPPING CO. LTD.
Intervenor
REASONS FOR ORDER
Mr. John A. Hargrave, Prothonotary
[1] These reasons arise out of a motion on behalf of a Polish trustee in bankruptcy to extend time to appeal a ship sale order and for a stay of the sale proceedings. The motion fails.
BACKGROUND
[2] On 5 January, 2001, the Polish factory fishing vessels Aquarius, Sagran and Admiral Arciszewski were arrested at Vancouver by the Plaintiff necessaries supplier. At that time the ships were each served with the in rem Statement of Claim. Many caveats against release then followed, including caveats filed by the crew, officers and masters.
[3] By March, 2001, it became apparent that the owner had abandoned the ships, for owners had neither appeared nor provided any essentials to the ships since the 5 January, 2001 arrests. The Plaintiff had therefore stepped in to provide fuel for heat and light, water, moorage and other basic necessities for the three crews, including food.
[4] On 23 April, 2001 the Plaintiff successfully moved for an order that the vessels, large Polish factory fishing vessels, be sold pendente lite.
[5] At about the same time a trustee in bankruptcy seems to have been appointed in Poland. I am a little hesitant on the point, for while someone styling himself as a trustee in bankruptcy seems to have appointed Vancouver counsel, there is little evidence on point. If one discounts the representations made by counsel and the exceedingly flimsy affidavit of Ms. Barbara Courville, a Polish Lawyer, who also acted as counsel, there was no evidence of the appointment of the trustee. It would have been simple to provide a copy of the Court Order appointing the trustee, but that was not done. In any event the trustee, who had been aware of the sale order since 26 April, 2001, moved by motion filed 1 June, 2001, for short leave, for an extension of time within which to appeal the sale order and for a stay of proceedings, the motion being heard on 4 June, 2001.
COUNSEL FOR THE TRUSTEE
[6] On the appearance of Ms. Courville as counsel I asked the other counsel present whether they had any objection to her appearing as counsel and to her speaking to her own affidavit. There being no objection I allowed Ms. Courville, who deposed that she was a member of the Polish Bar Association, held a Canadian law degree and worked as foreign legal consultant as to Polish law and was senior legal assistant to Mr. Paul Winn, a Burnaby lawyer, to present and argue the motion.
CONSIDERATION
Time Extension to Appeal the Sale Order
[7] From the evidence, both of that of Ms. Courville and as set out in the affidavit material in opposition to the motion, it is clear that the trustee in bankruptcy, through his counsel, became aware of the sale order, granted 23 April, on 26 April, 2001.
[8] Counsel for the trustee is taken to know that the Order by Prothonotary must be appealed within ten days. There is nothing in Ms. Courville's affidavit material to explain the delay in bringing the present application which, as I say, was filed 1 June, 2001, for hearing on the 4th of June. The affidavit does set out that the law firm who employs Ms. Courville, that of Mr. Winn, "is in the middle of negotiations with all creditors" and that those creditors "agree to negotiate with our client". These statements are clearly in error. I do not necessarily hold the statements against Ms. Courville, who appears to have been misinformed either by her principal or by the firm's client who, in this way, sought to mislead the Court. I will return to this aspect in due course.
[9] The main thrust of Ms. Courville's affidavit is that the trustee in bankruptcy wishes more time to negotiate settlements. These negotiations, to the extent that they have taken place, seem, to date, to have been fruitless. There is no evidence that the trustee in bunkruptcy has any intentions to defend on behalf of the owner of the arrested ships.
[10] The motion itself is not particularly clearly set out, however in addition to short leave Ms. Courville seeks an extension of time within which the trustee in bankruptcy might appeal the sale order obtained 23 April 2001 and for a stay of the sale of the ships, the sale presently being advertised and scheduled to take place on the 28th of June. Here I would note that Mr. Bernard J. Jones, of Seaspan Shipbrokers Ltd., who holds the Commission for the Sale of the three ships, had, as of the 1st of June, five buyers seriously interested in acquiring the vessels.
[11] An applicant for an extension of time within which to appeal must establish at least some of a number of well known elements. I say some, for the list is open ended, with the basic premise, as set out by the Court of Appeal in Grewal v. MEI [1985] 2 F.C. 263 that the court must consider the circumstances and do justice between the parties: see the decision of Chief Justice Thurlow at page 272 and that of Mr. Justice Appeal Marceau at page 280. Mr. Justice Marceau sums up at page 282 as follows:
The imposition of time limits to dispute the validity of a legal decision is of course meant to give effect to a basic idea of our legal thinking that, in the interest of society as a whole, litigation must come to an end...and the general principle adopted by the courts in dealing with the applications to extend those time limits were developed with that in mind. Only if the ultimate search for justice, in the circumstances of the case, appears to prevail over the necessity of setting the parties' rights to rest will leave to appeal out of time be granted. ...It seems to me that in order to properly evaluate the situation and draw a valid conclusion, a balancing of the various factors involved is essential. For example, a compelling explanation for the delay may lead to a positive response even if the case against the judgment appears weak, and equally a strong case may counterbalance a less satisfactory justification for the delay.
To paraphrase, I must look at all the circumstances and consider and balance those which the Court has held to be relevant, or those circumstances which, in the particular circumstances, are relevant, for the list of factors is, as I have said, open ended.
[12] In Sim v. Canada, an unreported decision of 27 February, 1996, I consider factors used by Madam Justice Simpson in Karon Resources v. MNR (1993) 71 F.T.R. 232, being:
1. Whether the appeal has merit; there must be arguable issues to put before the Court of Appeal;
2. The special circumstances showing or explaining why the appeal was not brought within the required time;
3. The intention of the Plaintiff to appeal existed before the time for appeal ran out;
4. Whether the delay has been excessive;
5. Whether the Crown will be prejudiced by an extension of time within which to appeal; and
6. Whether it is in the interest of justice to grant the time extension.
[13] In Tom Pac Inc. v. Kem-A-Trix (Lubricants) Inc. [1997] 75 C.P.R. 3rd 326 at page 329, Mr. Justice Dubé applied three criteria, being first, that the applicant must show a bona fide intention to appeal when he had the right to appeal; second, whether the failure to appeal within the period of delay was a result of special circumstances which served to excuse or justify the failure; and third, that there must be at least an arguable case that the judgment appealed from is wrong. Mr. Justice Dubé touched on a fourth criteria, being that the other side would not suffer injustice.
[14] More recently the Court of Appeal, in Canada v. Hennelly, an unreported decision of 2 June 1999 in Court file A-617-95, set out what it considered the proper test for an extension of time within which to appeal in somewhat more dogmatic terms:
The proper test is whether the Applicant has demonstrated
1. A continuing intention to pursue his or her application;
2. That the application has some merits;
3. That no prejudice to the Respondent arises from the delay; and
4. A reasonable explanation for the delay exists. (Pages 399-400)
The Court of Appeal in Hennelly noted that inadvertence, as an excuse for missing a date, was not an acceptable excuse. I will deal with each of these in turn. Here I note that the trustee in bankruptcy has neither dealt with any of these elements, nor shown any special circumstances to be considered in doing justice among those interested.
Bona Fide Intention to Appeal When the Right to Appeal First Arose
[15] An Applicant for an extension of time within which to appeal must put forward facts showing a continuing intention to appeal from when the right of appeal first arose. Here the trustee in bankruptcy became aware of the order on the 26th of April, when counsel for the Plaintiff sent a facsimile copy of the order to counsel for the trustee in bankruptcy. At that point time for the appeal still had a week to run.
[16] There is no evidence to show the required continuing intention to appeal. Rather, the emphasis and indeed the whole substance of the affidavit in support of this motion, is that the trustee wishes to obtain time to try to settle claims against the ships.
That the Application Has Some Merit
[17] There is nothing in the material of the trustee in bankruptcy to show an arguable case for the time extension.
[18] The trustee in bankruptcy says that he was not served with the application for sale, yet the material filed does not set out that the trustee was unaware of the application. I would note that in admiralty actions there was no requirement that an owner, having abandoned a ship which has been served with the statement of claim and who has failed to file a defence, be served that application for the sale of the ship. Rule 145 also makes it clear that where neither a Notice of Appearance nor a defence has been served in a timely manner, no further documents in the proceeding need be served on that person prior to final judgment, unless the Court orders otherwise.
[19] The order for sale itself was granted for a number of reasons, including the abandonment of the ships and their crews and the continuing expense of moorage, fuel, supplies and food for the crew, a substantial daily expense. The trustee in bankruptcy has set out no evidence to indicate that the sale was unwarranted. Moreover, if one were to give a brief consideration to the merits of the trustee's position as a whole and here I would refer to The Brussel [1997] 3 F.C. 187 (T.D.), as upheld by the Federal Court of Appeal 12 March, 1999, the trustee in bankruptcy would seem not to have a case for taking over this matter, by reason of the secured nature of maritime liens, separate and apart from bankruptcy proceedings.
Lack of Prejudice
[20] It is for the Applicant to show that no prejudice arises. Prejudice may be assumed from the mere fact of delay, with the onus being on the Applicant to show that there is no prejudice: See for example Valyenegro v. Canada [1995] 88 F.T.R. 196 at pages 199-250. Here there is no material from the trustee in bankruptcy bearing on prejudice.
[21] To the contrary, those opposing the sale have pointed out that there will be serious prejudice if the trustee in bankruptcy is granted an extension of time within which to file an appeal of the sale order. This is because the vessels have incurred and continue to incur substantial expense relating to safety and upkeep, including providing safe moorage, fuel, water and sustenance for the master, officers and crew members, even though the number of crew aboard the ships has been reduced. As delay mounts there will be prejudice to the claimants, for there will be a smaller fund which they may claim against.
[22] I would also note that counsel for a prospective purchaser has advised that his client's offer, which he believes is above market price, is time sensitive and that the delay in putting the vessels up for sale may result in a lost offer. Given all of these factors the delay that will result from any appeal of the sale order may be fatal to the best interest of the creditors as a whole and thus be prejudicial to the creditors.
Reasonable Explanation for the Delay
[23] The only excuse offered for the delay is that the trustee in bankruptcy says he has been negotiating with all of the other claimants. Even were this true it is not a sufficient explanation for a delay from the 26th of April, when the trustee first became aware of the sale order, to the present. Time extensions should be sought at the earliest possible time and this is particularly so where there is ongoing and cumulative prejudice as is the case here.
Summary as to Time Extension Application
[24] In summary, the Applicant, the trustee in bankruptcy, has failed to deal either adequately or at all with any of the requirements to be established for a time extension.
Stay of Proceedings
[25] The elements which an applicant for a stay must satisfy was clearly set out a number of years ago in RJR-MacDonald v. Canada [1994] 1 S.C.R. 311, the Court there referring to the three-stage test set out in Manitoba v. Metropolitan Stores (MTS) Ltd. [1987] 1 S.C.R. 110, that for a stay there must be:
First, a preliminary assessment must be made of the merits of the case to ensure that there is serious questions to be tried. Secondly, it must be determined whether the applicants would suffer irreparable harm if the application were refused. Finally, an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits. (Page 334 of RJR-MacDonald).
In essence, there must be a serious question, there must be irreparable harm if the application is refused and the balance of convenience or harm must be considered. There is nothing in the affidavit presented on behalf of the trustee in bankruptcy to deal with any of these issues.
[26] To be more specific, as to a serious question, there is no suggestion in the material why the sale order was in error and therefore ought to be stayed. All the more so given the view of the Trial Judge and of the Court of Appeal in The Brussel (supra) that secured maritime claims, for example maritime liens, may be dealt with by the Court outside of the bankruptcy framework.
[27] The trustee's material is silent as to irreparable harm. It may be that any harm could be satisfied by payments, yet the ship owner is bankrupt and the trustee in bankruptcy has not volunteered to pick up any of the ongoing expenses of keeping the ships and their crews safe and properly provided for at Vancouver during the stay, apparently preferring to leave those obligations to be met by the Plaintiff, Global Enterprises International Inc. Were the sale stayed it could well result in the Plaintiff having to spend many thousands of dollars more in providing for the vessels and the crews here in Vancouver, money which it might never be able to recoup either from the sale of the ships or from the apparent trustee in Poland.
[28] Finally, as to the balance of convenience, there are a number of unpaid claimants who have claimed in rem against the ships here in Vancouver. I am not convinced that there is any real negotiation going forward with any of those claimants and certainly some of them have not even been approached by the trustee in bankruptcy, notwithstanding the affidavit evidence on behalf of the trustee to the contrary.
[29] Dealing further with the balance of convenience, there is no material to show how the various claimants would be dealt with in Poland. The Court of Appeal looked for such material in The Brussel (supra) at paragraph 7.
[30] From the point of view of the trustee, he has some three weeks to work towards settling the claims. Given that he has been of a mind to settle the claims for several months now I do not see how the trustee is prejudiced by only having another three weeks or so to resolve the claims.
[31] In summary, the balance of convenience favours an early sale of the ships in Vancouver, a sale which is scheduled to take place the 28th of June, 2001. I now turn to the subject of costs.
Costs
[32] The motion of the trustee in bankruptcy, for either a time extension or a stay, being refused, the issue of costs arose.
[33] The Plaintiff and the various claimants who wish to uphold the sale order submitted that they ought to be awarded costs for preparing material and attending on the motion which lasted for a substantial portion of the morning. Counsel for the trustee in bankruptcy submitted that no costs should be awarded.
[34] In this instance costs ought to be awarded for not only has the trustee in bankruptcy failed on his motion, but also the parties were put to the effort of replying to a motion based on very flimsy affidavit material. Moreover, someone sought to mislead the Court on behalf of the trustee in bankruptcy, counsel for the trustee swearing an affidavit setting out that:
12. Presently our law firm is in middle of negotiation with all creditors and we would like to stay the proceeding against the estate of Gryf and get settlement regarding the payment of all creditors.
13. The creditors who are respondents and intervenors in this action agreed to negotiate with our client.
Counsel for several of the claimants and counsel for the plaintiffs acknowledged that they had been approached, however I think not seriously, as to settlement. However counsel for the crew, officers and masters of the three ships advised she had not been approached either by the trustee or by anyone on behalf of the trustee. She then provided the 4 June, 2001 affidavit of Captain Luczynski, master of the Sagran, who advised that he had spoken with the masters of the Aquarius and of the Admiral Arciszewski, which vessels are moored alongside. Neither Captain Luczynski nor the masters of the other vessels have been approached by the trustee in bankruptcy to discuss settlement. He is unaware that anyone, including the trustee in bankruptcy, has attempted to negotiated the wage claims of the crew members, which total $804, 900 (US).
[35] This misleading affidavit information is a prime example of why counsel ought
to be both wary of swearing controversial affidavits on behalf of their clients and of speaking to their own affidavits. It is also an instance demonstrating the importance of senior lawyers in a firm supervising the work of their in-house senior legal assistants, notwithstanding the offshore qualifications of that assistant.
[36] In order to emphasize all of this each party and lien claimant whose counsel attended and participated in the motion are entitled to their costs in the lump sum amount of $500 each payable by the trustee. These costs, which are based on a consideration of Tariff B and the plea of the trustee's counsel that costs should be moderate, must be paid before the trustee in bankruptcy takes any further steps in the Federal Court, other than the filing of any notice of appeal.
(Sgd.) "John A. Hargrave"
Prothonotary
Vancouver, British Columbia
6 June 2001