Margem Chartering Co. Inc. v. Bocsa (The) (T.D.) [1997] 2 F.C. 1001
T-2418-96
Between:
| MARGEM CHARTERING CO. INC. |
a body politic and corporate having a place of
business at Kilic Ali Pasa Mahallesi,
Simsircl Sokak No. 10, Kat: 1,
Chihan Palas Apt. 80060 Cihangir,
Istanbul, Turkey,
Plaintiff,
- and -
COSENA, S.R.L., a body politic
and corporate having a place of
business Villa 27, Bulevardul
Mamaia 8741, Constanza, Romania
- and -
THE OWNERS AND ALL OTHERS
INTERESTED IN THE VESSEL "BOCSA",
- and -
THE VESSEL "BOCSA",
Defendants.
REASONS FOR ORDER
JOHN A. HARGRAVE
PROTHONOTARY
These Reasons deal with the test to be applied when a party fails to comply with the provisions of a peremptory, or as it is often called an "unless" order. In this instance the peremptory order is as to security for costs. To better understand the situation one must go back to the arrest of the Defendant's vessel.
BACKGROUND
Following the arrest of the Bocsa in November of 1996 the Defendant provided a bank guarantee in the amount of $450,000 in order to secure a claim of some $324,000, thus obtaining the release of its ship.
On 28 February, 1997, a substantial portion of the statement of claim was struck out, with the Defendant to have 30 days within which to file its defence.
The Defendant subsequently requested that the Plaintiff amend its statement of claim to conform to the February Order and also sought particulars, both of which the Plaintiff agreed to by letter of 2 April, 1997, but by that letter also required the Defendant to file its defence, notwithstanding the two outstanding requests. The Defendant filed its defence 2 April, 1997.
By reason of talk in the shipping industry and articles appearing in Turkish newspapers the Defendant came to believe that the Plaintiff, a Turkish company, was in financial difficulties. The Defendant successfully applied on 8 May, 1997, for security for costs in the amount of $57,000, that security to cover proceedings through examinations for discovery. The Defendant also requested a stay of proceedings until security was posted. Counsel for the Defendant indicated that the Plaintiff had agreed to provide both an amended statement of claim and particulars: counsel for the Plaintiff made no comment on this clear statement. However, counsel for the Plaintiff believed his client would have no difficulty in providing security and wished to get on with the action.
Given that little positive activity, to move the action to a conclusion, had taken place to the time of the motion for security for costs and representations that the Plaintiff wished to move the action along, I decided that there would be no stay. Rather, because of the Defendant's clear concern as to the Plaintiff's financial situation and for other reasons, including the amount of security posted by the Defendant to release the ship from arrest and the expense of that security, I decided the Order would be a peremptory one. Counsel for the Plaintiff seemed satisfied that 30 days was a reasonable time within which to provide the security.
Security was to have been provided by 8 June. However on 10 June the Plaintiff filed a motion requesting an extension of time within which to provide security. That extension was provided by Mr. Prothonotary Morneau by an Order of 16 June, extending the time for providing security until 23 June. At the time, according to the affidavit material filed, the Plaintiff had made some sort of arrangement to provide security in the form of a bank guarantee from a Turkish bank. Plaintiff's counsel had then explained that such security would not be appropriate. The Plaintiff indicated that it would endeavour to provide funds by close of business on 20 June 1997.
On 25 June, 1997, security still not having been posted, the Defendant brought the present motion to have the Plaintiff's action dismissed for failing to provide the required security for costs. The Plaintiff countered that it ought to have a further extension of time within which to provide security.
EVIDENCE RELEVANT TO THE MOTION
The Defendant, in its affidavit material in support of the motion, sets out that no only has no security for costs been provided, but further, the Plaintiff has taken no steps to move the action along since the Defendant filed its defence on 2 April, 1997. This is a valid concern
The Plaintiff, by affidavit in response, acknowledges security ought to have been provided by 23 June, pursuant to the extension and that the Plaintiff "...intended to quickly advance the action after the filing of security...". The security is now to be provided mainly from freight proceeds out of Brazil, due the 6th of July, 1997, together with a small cash balance directly from the Plaintiff to its lawyers on 27 June. The Plaintiff explains the freight payment had been expected earlier. While the small cash balance had not been received by the law firm acting for the Plaintiff, counsel did have a letter from Swiss bankers indicating payment would be made 30 June, 1997, the day this motion came on for hearing. All of this being the case, the Plaintiff feels it ought to have until 11 July, 1997, to provide security.
Counsel for the Plaintiff, in his affidavit material, goes on to say he was of the view, notwithstanding his letter of 2 April, 1997, agreeing to provide an amended statement of claim and particulars, and his associate's silence when counsel for the Defendant stated, on the hearing of the motion for security for costs, that the Plaintiff had agreed to provide those two items, that both had been waived when the Defendant filed its defence. One must keep in mind that the Defendant filed its defence, while these two items were outstanding, in the face of a written threat by the Plaintiff that it would take action if the defence were not filed.
The Plaintiff makes the point, through its counsel, that it had no intent to ignore the court's order for security, but has been thwarted through the delay of its shippers in paying freight, an extraneous circumstance beyond its control and that such ought not to deprive it of a day in court on a serious and substantial claim. This may be, but I do not take seriously counsel's further submission that any real delay is on the part of the Defendant. After all, the Defendant provided a substantial and expensive security quickly in order to obtain the release of its vessel, brought its motion to deal with some over-reaching in the statement of claim promptly and filed its defence within the time required. Counsel for the Plaintiff conceded the Plaintiff could very quickly provide an amended statement of claim and particulars: both of these items are now a precondition for the providing of security.
CONSIDERATION
Delay is a factor, possibly the major factor, in making litigation an expensive dispute resolution process to be avoided whenever possible. The House of Lords recently pointed out, in Grovit v. Doctor [1997] 1 W.L.R. 640 that the two-part test for want of prosecution, originating in Birkett v. James (1978) A.C. 297, is unsatisfactory and inadequate for it does not deal effectively with excessive delay and results in further delays and costs. As a result the House of Lords felt that courts should more readily make "unless orders" so that a court and the parties might have more control over delay pending future regimens of case management to prevent delay in the first place:
| In the meantime both the court and defendants have the means to achieve greater control over delay. Defendants do not need to wait until there has been inordinate delay before applying for peremptory orders (although they are under no obligation to do this). The courts should more readily make "unless orders," that is, orders that an action should be struck out unless certain steps are taken at certain times. The advantage of such an order is that it places the onus on the plaintiff to justify the action being allowed to continue whereas in the case of an application to strike out the onus is on the defendant to show the action should be struck out. (Grovit v. Doctor, supra at page 644). |
In the present instance I made the peremptory Order for security for costs against the Plaintiff, Margem Chartering, and refused the Defendant, Cosena, a stay for the very reason of delay: the Plaintiff seemed content, once it had substantial security in place, to let the matter rest. Because of the Plaintiff's assertions that it wished to get on with the action and by reason of its representations that security within a reasonable time might easily be provided, I saw no sense in delaying matters further by granting Cosena a stay until security was provided.
It is now clearly established that once time has run on an unless order, the court's jurisdiction is not at an end: Samuels v. Linzi Dresses Ltd. (1981) 1 Q.B. 115 (C.A.).
There are two differing principles of law at issue when a party seeks an extension of an unless order. First, a litigant ought not to be deprived of a right to have its case heard, so long as any damage to other parties is compensable, a point to which I will return. Second, a litigant who fails to comply with a peremptory order will not normally be permitted to continue the action: see for example In re Jokai Tea Holdings (1992) 1 W.L.R. 1196 at 1202 (C.A.). Indeed, as the Court of Appeal pointed out in Jokai Tea, disobedience to a peremptory order is generally considered to be contumelious conduct: Tolley v. Morris (1979) 1 W.L.R. 592 at 603 (H.L.). This second principle brings us to the test by which a party may overturn the presumption that it ought not to be allowed to proceed following breach of a peremptory order. The relevant issue is whether, in fact, the failure in compliance is intentional and contumelious1: Jokai Tea, supra, at 1203.
The Vice Chancellor of the Court of Appeal, who wrote the principal Judgment, having posed the test, then elaborated on its application:
| The court should not be astute to find excuses for such failure since obedience to orders of the court is the foundation on which its authority is founded. But if a party can clearly demonstrate that there was no intention to ignore or flout the order and that the failure to obey was due to extraneous circumstances, such failure to obey is not to be treated as contumelious and therefore does not disentitle the litigant to rights which he would otherwise have enjoyed. (Jokai Tea, loc.cit.). |
The Court of Appeal reinforced the idea, that a court ought not to be astute to find excuses for a failure to obey a court's order, in Caribbean General Insurance Ltd. v. Frizzell Insurance Brokers Ltd. [1992] 2 Lloyds 34 at 40 by pointing out "...it is important that the breach of such orders should not be incautiously condoned or overlooked.". Thus I must consider, without either stretching the bounds of reasonableness, or undermining the authority of the court to make orders, whether there was an intentional flouting of the Order and whether the breach was due to extraneous circumstances: the onus is on the Plaintiff to convince me of this.
The Defendant submits there is some doubt, based on past advice from management of Margem Chartering, whether I ought to believe any further advice received from Margem Chartering. However, another view may be that Margem Chartering's apparent present financial situation, a shortage of cash or of offshore credit sufficient to provide security for costs promptly, is the result of delays in carriage which are not the fault of Margem Chartering, resulting in delays in receiving freight revenue.
I accept that Margem Chartering believes it has a substantial case, one worth pursuing. Thus it is not reasonable to think Margem Chartering would jeopardize its possible recovery by taking an intentionally contemptuous view of the Order for security.
Margem Chartering says it is due freight, from a customer in Brazil, by 6 July, 1997. It provides a letter from the Belgian agents for the Brazilian principals agreeing to forward $39,169.31 (U.S.) to the Plaintiff's Montreal lawyers, being demurrage scheduled for payment on 3 July. This indicates a circumstance beyond the reasonable control of the Plaintiff, a delay to a ship it operates. The delay, by reason of the payment of demurrage, is apparently not the fault of Margem Chartering. Thus we have a reason for the delay, which I feel is a convincing explanation, that outside circumstances account for the failure to comply with the Court's Order.
The amount to come from Brazil, in American dollars, is the equivalent of about $53,000 Canadian. It bothers me a little that Margem Chartering itself has been slow to put its Montreal lawyers in funds for the balance. There is no excuse for that delay. However, as it is only a matter of some $4,000, which by all accounts is somewhere in the ether, in the form of a bank transfer from Switzerland to Canada, the first of the conflicting principles to which I referred comes into play. A delay of $4,000, presently on its way, is not a circumstance which should deprive the Plaintiff of its day in court, for the Defendant may be adequately compensated.
In the result the provision of full security, by a final date of 11 July, 1997, shall be subject to three preconditions: the statement of claim shall be amended and the particulars provided by 4 July and the Plaintiff shall pay the costs of this motion, set at $600, by 11 July, 1997.
(Sgd.) "John A. Hargrave"
Prothonotary
July 4, 1997
Vancouver, British Columbia
NAMES OF COUNSEL AND SOLICITORS OF RECORD
STYLE OF CAUSE: MARGEM CHARTERING CO. INC.
- and -
COSENA, S.R.L.
- and -
THE OWNERS AND ALL OTHERS INTERESTED IN THE VESSEL "BOSCA"
COURT NO.: T-2418-96
PLACE OF HEARING: Vancouver, B.C.
DATE OF HEARING: June 30, 1997
REASONS FOR ORDER OF JOHN A. HARGRAVE, PROTHONOTARY, dated July 4, 1997
APPEARANCES:
Mr. Jean-François Bilodeau for Plaintiff
Mr. Peter Swanson for Defendants
SOLICITORS OF RECORD:
Sproule, Castonguay, Pollack
Montreal, QC for Plaintiff
Campney & Murphy
Vancouver, BC for Defendants
__________________
1Sir John Megaw, who wrote short concurring Reasons in Jokai Tea, questioned whether the test is one of contumelious behaviour, for he felt that contumacious was a more apt description, the former being a matter of insolence and the latter connoting perverse and obstinate behaviour vis à vis authority. However, the Compact Oxford also defines contumely to include contemptuous treatment. This latter is, I believe, consistent with the approach taken by the House of Lords in Birkett v. James (1978) A.C. 297 at 318 where Lord Diplock refers to disobedience to a peremptory order as an example of an "intentional and contumelious" default.