Federal Court Decisions

     T-1903-96

     ACTION IN REM against The Ship DAWN LIGHT

BETWEEN:

     ROBERT GLEASON

     Plaintiff

     - and -

     The Ship DAWN LIGHT (in rem) and

     CAROL NANCY BAKER (in personam)

     Defendants

     - and -

     RAYMOND MICHAEL DAVIS

     Intervenor

     REASONS FOR JUDGMENT

LUTFY J.:

     The defendants and the intervenor have moved for summary judgment seeking: (a) the dismissal of the plaintiff's claim for specific performance of the agreement of purchase and sale of the vessel DAWN LIGHT ("the Ship"); and (b) an order setting aside the arrest warrant served on the Ship on August 22, 1996. The motions do not seek summary judgment with respect to the plaintiff's alternative claim in damages.

     On September 19, 1996, the Associate Senior Prothonotary granted the intervenor status in these proceedings. In his reasons, the Associate Senior Prothonotary set out the facts which are equally applicable to these motions for summary judgment and which I will repeat here.

     The plaintiff alleges that he entered into a binding agreement of purchase and sale of the Ship with the defendant Baker on July 31, 1996. The defendant Baker alleges that there was no acceptance of what she characterizes as her counter-offer of that date and that she was therefore free to sell and did agree to sell the Ship on August 15, 1996 to the intervenor. The evidence further discloses that a bill of sale in the amount of $82,000 was executed on August 20, 1996 by the defendant Baker in favour of the intervenor. The statement of claim was filed on August 21, 1996 and the warrant for the arrest of the Ship issued on that date.

     The statement of claim seeks specific performance or, in the alternative, damages. The warrant and the claim were served on the Ship in the late morning of August 22, 1996 and the intervenor was registered as owner of the Ship in the early afternoon of that day. A mortgage of the Ship from the intervenor to the defendant Baker was registered at the same time. The mortgage is in the amount of $42,000.

     The intervenor is a beneficial purchaser for value and without notice of the plaintiff's earlier transaction. His purchase price is approximately 40% more than the plaintiff's offer of three weeks earlier. The intervenor learned of the Ship's arrest shortly after the registration on August 22, 1996 of the bill of sale that had been signed in his favour by the defendant Baker two days earlier. Prior to the arrest of the Ship, neither the plaintiff nor the intervenor knew of each other or of their respective dealings with the defendant Baker.

The Issue of Jurisdiction

     This Court's principal statutory grant of maritime jurisdiction is in section 22 of the Federal Court Act, R.S.C. 1985, c. F-7 ("the Act"). More particularly, the Court's jurisdiction to entertain this action is based on paragraph 22(2)(a):

22. (2) Without limiting the generality of subsection (1), it is hereby declared for greater certainty that the Trial Division has jurisdiction with respect to any claim or question arising out of one or more of the following:

(a)      any claim as to title, possession or ownership of a ship or any part interest therein or with respect to the proceeds of sale of a ship or any part interest therein;

     In my view, this jurisdiction extends to any claim as to title, possession or ownership of a ship, regardless as to whether the remedy is for a specific performance or, in the alternative, damages. In this regard, I rely on the statement of Mr. Justice Ritchie in Antares Shipping Corporation v. The Capricorn et al., [1980] 1 S.C.R. 553 at 563:

In this regard it is pointed out in Roscoe's work on The Admiralty Jurisdiction and Practice of High Court of Justice, 5th ed. 1931 (at p. 39) that:

This jurisdiction is now, by the Supreme Court of Judicature (Consolidation) Act, 1925, vested in the High Court, and is assigned to the Probate Division. In pursuance of the authority thus conferred upon it, the Court of Admiralty acquired ample jurisdiction to adjudicate upon all questions of title, and wherever it became necessary it would inquire into the validity of an alleged sale, or concerning any other circumstances which affected the right of the property in the ship. (The italics are my own.).

This is the jurisdiction administered by the Federal Court under the provisions of the Federal Court Act to which I have referred.

     In Beauchamp v. Coastal Corporation, [1984] 1 F.C. 833 (T.D.), Mr. Justice Strayer, after concluding that the purchaser had chosen to treat his contract as repudiated by a fundamental breach of the seller and thereby had elected to claim in damages, nevertheless asserted the Federal Court's jurisdiction to adjudicate the purchaser's outstanding claim for damages at page 838:

I have concluded that the plaintiff can, however, proceed with his action in this Court for damages. It was contended that by virtue of the Federal Court Act ... and the Constitution this Court has no jurisdiction to deal with such a claim for breach of contract for the sale of a ship. Unfortunately this aspect of the matter was not argued at length or exhaustively. I have concluded that such a claim comes within paragraph 22(2)(a) of the Federal Court Act which says that the Trial Division has jurisdiction

     22. ...

(2) ... with respect to any claim or question arising out of one or more of the following:

(a) any claim as to title, possession or ownership of a ship ... or with respect to the proceeds of sale of a ship ...

When this Court can order the arrest of a ship because of a dispute over a contract for purchase of the ship, and can order specific performance of such a contract ..., it surely can give an alternative or additional remedy with respect to the same parties, the same ship, the same contract, and the same breach. In the words of paragraph 22(2)(a) of the Act, this must be a "claim or question arising out of " a "claim as to title, possession, or ownership". In general, it is settled law that any matter described in section 22 of the Federal Court Act involves maritime law which is a law of Canada and thus a basis for the exercise of jurisdiction of this Court. ... This is also a matter necessarily incidental to the exercise of Parliament's jurisdiction over navigation and shipping and is thus a proper subject of a "law of Canada". Any other conclusion would lead to great inconvenience which, if not unknown in our constitutional jurisprudence, should nevertheless be avoided if possible.

     In my view, therefore, this Court has jurisdiction with respect to the relief sought for both specific performance and, in the alternative, damages.

The Issue of Specific Performance

     Specific performance is an exceptional remedy. The circumstances in which this remedy may be available with respect to the sale of a ship was considered in Specific Performance, G. Jones & W. Goodheart (London: Butterworths, 1986) at page 122:

The factors which the courts appear to take into account include: the 3peculiar and practically unique value3 of the ship to the plaintiff; whether the plaintiff wants the ship 3for immediate use3, whether the plaintiff would be in great difficulty, if he did not get the ship, in establishing 3what the purchase price should be3; whether the plaintiff has made contingency plans involving the use of other vessels, whether the defendant would be able to satisfy any damages award. [References omitted.]

     In Semelhago v. Paramadevan, [1996] 2 S.C.R. 415, Mr. Justice Sopinka confirmed the exceptional nature of this remedy at page 429: "[s]pecific performance should, therefore, not be granted as a matter of course absent evidence that the property is unique to the extent that its substitute would not be readily available".

     Even if I were to assume, as I do only for the purposes of this motion, that the plaintiff has a binding contract with the defendant Baker for the sale of the Ship, the evidence does not warrant the discretionary remedy of specific performance. There is no evidence before me that the Ship is unique, irreplaceable or in any way not adequately compensated for in damages. The Ship has since been sold to the intervenor, a purchaser for value and without notice. The injustice which would be visited on the intervenor should specific performance be ordered in this action provides a further strong discretionary reason for refusing to grant this remedy. (See Island Properties Ltd. v. Entertainment Enterprises Ltd. (1986), 26 D.L.R. (4th) 347 (Nfld. C.A.))

     In a motion for summary judgment, the parties must "put their best foot forward". This phrase was adopted by Mr. Justice Stone in Feoso Oil Ltd. v. Sarla (The), [1995] 3 F.C. 68 (F.C.A.) at 82. In the present case, the plaintiff has failed in his responding material to establish the factual basis in support of the remedy of specific performance. I conclude, therefore, that the record discloses no genuine issue for trial concerning the availability of the remedy of specific performance in this action.

     For these reasons, summary judgment will be granted in part and the plaintiff's claim for specific performance of the agreement for purchase and sale of the Ship will be dismissed.

The Warrant for Arrest

     The moving parties also seek an order setting aside the warrant of arrest.

     As was stated earlier in these reasons, the jurisdiction of this Court extends to the plaintiff's claim both with respect to the remedy of specific performance and, in the alternative, damages. As a result of this motion for summary judgment, the remedy of specific performance will be denied to the plaintiff. However, his claim in damages against the defendant remains outstanding and, in the normal course of events, will be resolved at trial.

     It is likely that a principal purpose in the moving parties having sought summary judgment with respect to the issue of specific performance was to have the arrest of the Ship set aside. In my view, the denial of the remedy of specific performance does not of itself end the arrest of the Ship.

     Arrest is a powerful weapon.¹ A warrant for the arrest of property may be issued in an action in rem pursuant to Rule 1003 of the Federal Court Rules. Subsections 43(2) and (3) of the Act provide that this Court's jurisdiction pursuant to paragraph 22(2)(a) may be exercised in rem against the ship that is the subject of the action. No distinction is made in this regard as between the different remedies that might be sought in the action. For the reasons mentioned in Beauchamp, supra, the arrest against the Ship continues notwithstanding the plaintiff's failure with respect to the remedy sought in specific performance. This action continues to be one in rem even though it is now limited to damages. It is not open to this Court to set aside the arrest merely because the remedy for specific performance is not available to the plaintiff.

     In this case, the arrest was executed less than two hours prior to the registration of the intervenor's title in the Ship. While I need not decide the issue, it is my view that the arrest would have been equally effective even if executed subsequent to the registration of the intervenor's interest as owner.² There are instances where persons with an interest in the ship under arrest have no connection with the claim. The plaintiff's claim for damages is one with respect to the ownership of the Ship pursuant to paragraph 22(2)(a) of the Act. Subsection 43(2) provides for an action in rem in this circumstance "against the ship ... that is the subject of the action", regardless of its owner. The action in rem under subsection 43(2) does not depend on who is the beneficial owner of the ship when the claim arises or when the action is brought as is the case under subsections 43(3) and (8).³

     In the present action, the Associate Senior Prothonotary acknowledged that an action in rem and an arrest may be directed against a ship owned by a person other than the defendant in personam. It was for this reason that he granted status to the intervenor. In his words:

The possibility that the Ship might have been arrested after its sale to Davis and the possibility that Davis may have a very substantial claim for damages, in my view makes it imperative that Davis who was allowed to intervene to seek the release from arrest, should be allowed to intervene in such a manner that he has a right to assert his claim to title to the ship by resisting the plaintiff's claim and to counterclaim, claim over or make an admiralty claim without counterclaim for damages for the losses he may have suffered before judgment.

The intervenor's remedy against any judgment that might be executed against the Ship will presumably form part of his claim against the defendant Baker with whom he has an outstanding mortgage of the Ship.

     Accordingly, the arrest will continue against the Ship unless the parties make such arrangements as they can agree upon or seek alternate relief pursuant to the Rules. The parties may return to this Court for such additional relief that may be required concerning the warrant of arrest. In response to the plaintiff's oral request for an expedited trial, I am prepared to receive written submissions from the parties pursuant to Rule 432.3(5).

     The moving parties were successful on the issue of specific performance and the plaintiff succeeded on the question of the warrant of arrest. The issue concerning the arrest is, at this stage of the proceedings, at least as important as the issue of specific performance. In the circumstances, there will be no order as to costs.

                         "Allan Lutfy"

                         Judge

Ottawa, Ontario

May 9, 1997

__________________

¹      This is the opening statement of a useful analysis on arrest in chapter 15 of Enforcement of Maritime Claims, D.C. Jackson (London: LLP Limited, 1996).

²      Ibid. at 336 and 378-385. See also C. Hill, Maritime Law, 4th ed. (London: Lloyd's of London Press Ltd., 1995) at 130 and 137-145.

³      Subsections 43(2), (3) and (8) of the Act state:
     43. (2) Subject to subsection (3), the jurisdiction conferred on the Court by section 22 may be exercised in rem against the ship, aircraft or other property that is the subject of the action, or against any proceeds of sale thereof that have been paid into court.
     (3) Notwithstanding subsection (2), the jurisdiction conferred on the Court by section 22 shall not be exercised in rem with respect to a claim mentioned in paragraph 22(2)(e), (f), (g), (h), (i), (k), (m), (n), (p) or (r) unless, at the time of the commencement of the action, the ship, aircraft or other property that is the subject of the action is beneficially owned by the person who was the beneficial owner at the time when the cause of action arose.      ...
     (8) The jurisdiction conferred on the Court by section 22 may be exercised in rem against any ship that, at the time the action is brought, is beneficially owned by the person who is the owner of the ship that is the subject of the action.