Federal Court Decisions

Date: 20020410

Docket: T-104-02

Neutral citation: 2002 FCT 406

ADMIRALTY ACTION IN REM AND IN PERSONAM

BETWEEN:

                                                  C.P. SHIPS (BERMUDA) LIMITED

                                                                                                                                                          Plaintiff

AND:

                             THE OWNERS AND ALL OTHERS INTERESTED IN THE

                                    SHIP "PANTHER MAX EX CANMAR SUPREME"

                                                                                 and

                                      PANTHER MARINE ENTERPRISES LIMITED

                                                                                                                                                    Defendants

                                                            REASONS FOR ORDER

GIBSON J.:

INTRODUCTION

[1]                 By Notice of Motion dated the 22^nd of March, 2002, made pursuant to Rule 51 of the Federal Court Rules, 1998^[1], the defendants appeal an order of Prothonotary Morneau, dated the 21^st of March, 2002. They seek an order "...reversing, setting aside and/or varying..." Prothonotary Morneau's Order and "...such other relief as this case may require (including, if necessary, abridging delays)." I am satisfied that no abridgment of time delays is required.

[2]                 For ease of reference, Federal Court Rule 51(1) reads as follows:

51. (1) An order of a prothonotary may be appealed by a motion to a judge of the Trial Division.

51. (1) L'ordonnance du protonotaire peut être portée en appel par voie de requête présentée à un juge de la Section de première instance.

[3]                 The grounds of the appeal are set out in the motion in the following terms:

1.             The Prothonotary Morneau rendered an Order on March 21^st, 2002 whereby the Defendants have been ordered to give security for the Canadian equivalent amount of U.S. $780,500.01 plus 20% on that amount as provision for interest and costs to obtain the release of the Defendant vessel PANTHER MAX presently under arrest at the Port of Montreal;

2.             It is respectfully submitted that the Prothonotary Morneau erred in refusing to set aside the arrest of the PANTHER MAX on the basis that Plaintiff's Affidavit to Lead Warrant dated January 21^st, 2002 did not include a full and frank disclosure of material facts;

3.             Further or in the alternative, with respect to Plaintiff's alleged claim for overpaid hire (now reduced to U.S. $94,568.91), it is submitted that the learned Prothonotary Morneau erred in not making any ruling as to the merits of the purported conflict between clauses 6 and 8 of the governing charter party and in fixing security for the full amount on the basis of Plaintiff's sole affirmation;

4.             With respect to Plaintiff's alleged claim for potential liability toward Senator Lines (now reduced to U.S. $178,443.60), the learned Prothonotary Morneau erred in that:            

                i.              he refused to strike out that portion of the claim as alleged in Plaintiff's Statement of Claim;

                ii.             he refused to strike out that portion of the claim although this Court does not have jurisdiction in rem for such a claim as against the Defendant vessel PANTHER MAX; and, in the alternative,

             iii.            such a claim is too remote and Plaintiff did not furnish sufficient information at the material times for the purpose of fixing security for that part of the claim.

5.             With respect to Plaintiff's alleged claim for breach of an agreement as to settlement of disputed hire amount (U.S. $507,487.50), it is submitted that the learned Prothonotary erred in refusing to strike out that part of the claim as alleged in Plaintiff's Statement of Claim and/or in fixing security for its full amount although, inter alia:

                i.              the fact that the purported oral agreement arose at the occasion of a telephone conversation in the context of settlement discussions was not disclosed by Plaintiff in its Statement of Claim and Affidavit to Lead Warrant;

                ii.             Plaintiff's subsequent conduct contradicts the existence of the alleged oral agreement;

                iii.            this Court does not have jurisdiction toward the claim as alleged in Plaintiff's Statement of Claim and Affidavit to Lead Warrant; and

                iv.            without prejudice to the foregoing, the alleged claim results from Plaintiff's own election not to use the vessel until October 17^th 2001 even though the latter had been released from seizure before judgment since September 6^th, 2001;

6.             It is further submitted that the learned Prothonotary erred in fact and in law in awarding an increase in security of 20% as security for interest and cost in the absence of any evidence in that respect.

7.             Such further and other grounds as Counsel may advance.

FACTUAL BACKGROUND

[4]                 Much of the factual background to this action and more particularly to the motion before Prothonotary Morneau is not in dispute. It may be summarized as follows:

           -           the PANTHER MAX EX CANMAR SUPREME is a large container ship built to carry a maximum of 2,062 twenty-foot equivalent container units and 70 forty- foot equivalent container units, thus making it as large a container ship as is capable of navigating to, and being accommodated at, the Port of Montreal. It was built in Taiwan in 1999 and is presently registered at the Port of Nassau, Bahamas;

           -           on the 26^th of March, 2001, the owners of the PANTHER MAX, Panther Marine Enterprises Limited of Monrovia, Liberia chartered the PANTHER MAX to Canada Maritime Ltd., a predecessor to the plaintiff C.P. Ships (Bermuda) Limited. The Charter Party was for an initial period of twelve (12) months commencing on or about the 2^nd of May, 2001 with an additional charter period of twelve (12) months at the charterer's option;

           -           on or about the 26^th of August, 2001, the PANTHER MAX was seized in Fos, France, by certain bond holders. In the result, it was off-hire for a period of time under the terms of the Charter Party. The length of time for which it was off-hire is a matter of substantial dispute between the parties to this litigation but the plaintiff alleges that an oral settlement was reached between the parties in relation to the appropriate hire amount for the period of time when the defendants allege the PANTHER MAX ceased to be off-hire and before it was re-employed by the plaintiff;

           -           the PANTHER MAX arrived at the Port of Montreal on the 31^st of October, 2001 and discharged her cargo despite service upon her, on or about the 1^st of November, 2001, of a writ of seizure before judgment issued out of the Registry of the Quebec Superior Court, once again at the instance of certain bond holders;

           -           C.P. Ships (Bermuda) Limited was responsible under the Charter Party for effecting certain repairs to the PANTHER MAX at the occasion of the ship's call at the Port of Montreal and those repairs were completed on or about the 6^th of November, 2001;

           -           on or about the 4^th of December, 2001, C.P. Ships (Bermuda) Limited purported to exercise a right to cancel the Charter Party on the basis that the PANTHER MAX had been off-hire for more than thirty (30) consecutive days;

           -           by Affidavit to Lead Warrant dated the 21^st of January, 2002, C.P. Ships (Bermuda) Limited's representative alleges that Panther Marine Enterprises Limited, as owner of the PANTHER MAX, was indebted to the plaintiff in an amount of not less than U.S. $1,075,537.73 arising out of the Charter Party. C.P. Ships (Bermuda) Limited invoked the in rem jurisdiction of this Court pursuant to paragraph 22(2)i) and section 43 of the Federal Court Act^[2]. The PANTHER MAX was arrested; and

           -           the PANTHER MAX remains under arrest at the Port of Montreal.

THE ISSUES BEFORE PROTHONOTARY MORNEAU   

[5]                 In his reasons for order, at paragraphs 1 to 3, Prothonotary Morneau described the issues before him in the following terms:

Il s'agit en l'espèce d'une requête des propriétaires du navire « Panther Max » ainsi que du navire lui-même... en vertu de la règle 221 des Règles de la Cour fédérale (1998)... aux fins d'obtenir essentiellement que parties de la déclaration d'action in personam et in rem ... prise par l'affréteur du navire le 21 janvier 2002, soit la demanderesse, soient radiées au motif que la déclaration ne révèle aucune cause raisonnable d'action relevant de la juridiction rationae materiae de cette Cour prévue aux paragraphes 22(1) et 43(2) de la Loi sur la Cour fédérale, ... .        

Alternativement, les défendeurs demandent que l'affidavit portant demande de saisie... soit cassé au motif que ce dernier présente des lacunes majeures qui doivent amener à conclure que cet affidavit ne contient pas une divulgation franche et complète de la situation pertinente.

Ces deux principales attaques sont logées dans le but ultime que le navire soit relâché de la saisie qui l'étreint en cette Cour depuis le 21 janvier 2002, et ce, en retour d'une garantie d'exécution qui soit la moins élevée possible.

THE DECISION UNDER REVIEW

[6]                 Prothonotary Morneau rejected outright the claims of the defendants in the first two paragraphs quoted above and reduced the security required in order to obtain the release from arrest of the PANTHER MAX only to the Canadian equivalent of $780,500.01 U.S., together with a further 20% of that amount to cover interest and expenses.

[7]                 With respect to the first claim issue described by Prothonotary Morneau, in his reasons for order, the learned Prothonotary quoted paragraph 10) of the plaintiff's Affidavit to Lead Warrant to the following effect:

This claim divides down into:

a)             overpaid hire, the value of bunkers on re-delivery and owners' expenses paid by charterers of $307,937.23;

b)             charterers' potential liability to its slot charterers Senator Lines for under provision of slots due to the two seizures, the one in Fos and the one in Montreal in the amount of $260,113.00;

c)             breach of an agreement as to settlement of disputed hire amounts following the first arrest in Fos in the amount of $507,487.50 which is calculated at a overpayment of hire of 30 days at $16,916.25 per day.

Prothonotary Morneau briefly examined in his reasons each of the elements of the plaintiff's claim as described in paragraph 10) of the Affidavit to Lead Warrant. In relation to the first element, he wrote at paragraph [13]:

Sous cette rubrique il n'y a pas d'argument de radiation à considérer. Il s'agit simplement de déterminer le montant à retenir pour les fins de la fixation de la garantie d'exécution, soit la valeur la plus favorable de la cause de la demanderesse ( « plaintiff's reasonably arguable best case » (le principe applicable). Dans l'arrêt Atlantic Shipping (London) Ltd. v. Ship Captain Forever et al. (1995), 97 F.T.R. 32 (l'affaire Captain Forever), cette Cour a rappelé ainsi, en page 34, ledit principe:

The general principle, that a plaintiff, having arrested a vessel, is entitled to security in an amount sufficient to cover the reasonably arguable best case, together with interests and costs, capped at the value of the wrongdoing vessel, ...

[8]                 With regard to the second element of the plaintiff's claim, Prothonotary Morneau continued at paragraphs [17] and [18] of his reasons:

Je ne puis dans le cadre d'une demande de radiation de cette rubrique me convaincre qu'il soit clair et évident que ladite entente ne cadre pas, du moins en partie, dans l'alinéa 22(2)i) de la Loi. ...

...

Je pense qu'à ce stade-ci il n'est pas clair et évident que cette entente ne peut être vue comme impliquant l'usage du navire au sens de l'alinéa 22(2)i) de la Loi. Certes cette entente implique une relation contractuelle linéaire entre la demanderesse et Senator Lines mais elle renvoit également forcément à l'utilisation, entre autres, du navire. En conséquence, je ne saurais ici procéder à la radiation de cette rubrique au motif qu'elle ne cadre pas dans la juridiction rationae materiae de cette Cour aux termes de l'alinéa 22(2)i) et du paragraphe 43(2) de la Loi.

[9]                 With regard to the third element of the plaintiff's claim, Prothonotary Morneau wrote at paragraphs [33] to [37] of his reasons:

De plus, le fait que cette entente a été conclue oralement n'est point pertinent dans les circonstances présentes sous aucun chef.

Enfin, peut-on soutenir comme le font les défendeurs que la cause d'action quant à tout bris allégué de cette entente de règlement n'est pas de la juridiction rationae materiae de cette Cour au sens de l'article 22 de la Loi au motif que cette entente de règlement n'aurait pas de lien, de ramification avec le droit maritime? (Pour des exemples où les tribunaux ont reconnu à des contrats de tel liens, voir: [Here Prothonotary Morneau cites two reported decisions and a further three decisions as examples where "...de tels liens ont été reconnus,...].)

Les défendeurs ont particulièrement insisté sur l'arrêt de la Cour d'appel fédérale dans l'affaire Ondine, .... Dans cet arrêt toutefois, tout comme dans la décision de cette Cour dans l'arrêt Ordina Shipmanagement Co. Ltd v. The "Sheringham", ..., le contrat en litige avait été conclu par une des parties au litige, l'autre partie au contrat étant un tiers. Ici, l'entente en litige aurait été conclue directement entre les parties qui sont les mêmes que celles ayant entériné la charte-partie. De plus, il est loisible pour les fins du présent exercice de retenir que le contenu de cette entente, tel que relaté par la demanderesse au paragraphe 20 de ses représentations écrites, serait le suivant:

(...) the Plaintiff agreed to pay hire from the 6^th to the 19^th of September, clause 8 of the charterparty was to be amended to permit charterers to terminate the charter if the ship was offhire for 15 days, rather than the 30 days previously provided, and with respect to the other 28 days in dispute, from 19^th September to 17^th October, the charterparty which was to expire 15^th May, 2002 would be extended for 30 days;

On voit donc que cette entente modifierait la charte-partie initiale. Partant, il n'est pas clair et évident que la cause d'action sous cette entente ne puisse tomber sous le coup de l'alinéa 22(2)i) de la Loi.

Il n'y a donc pas de raison de radier cette rubrique pour absence de juridiction rationae materiae.                                                                             [citations omitted]

[10]            With regard to the defendants' second claim issue as quoted in paragraph [5] of these reasons, Prothonotary Morneau wrote at paragraphs [7] and [8] of his reasons:

Bien que les défendeurs se font fort dans leurs représentations écrites soumises à l'appui de leur présente requête de dénoncer en détail l'approche et le libellé pris par la demanderesse dans l'affidavit, je ne puis après avoir considéré chacune des attaques, une à une et de façon collective, me convaincre que la demanderesse par cet affidavit a procédé à un exercice déficient devant nous amener à conclure qu'elle n'a pas procédé à une divulgation franche et complète.

Certes les défendeurs auraient souhaité que la demanderesse à l'affidavit emploie une optique des faits différente et que celle-ci fournisse à même cet affidavit plus de détails quant aux différentes situations qu'elle dénonce. Je ne crois toutefois pas que l'affidavit ici mérite d'être cassé au nom du principe soulevé par les défendeurs.

[11]            Finally, relating to the quantum of the security requested to achieve release from arrest, Prothonotary Morneau wrote at paragraph [14] of his reasons:

De plus, suivant la décision de cette Cour dans l'arrêt Amican Navigation v. Densan Shipping Co. et al. (1997), 137 F.T.R. 132, c'est avec circonspection que la Cour doit réduire ou diminuer la valeur attribuée par un demandeur à ses causes d'action.

Against the foregoing principle, Prothonotary Morneau maintained the modified quantum claimed for overpaid hire, the value of bunkers on re-delivery and owners' expenses paid by charterers, maintained the quantum claimed in respect of the alleged breach of an agreement as to settlement of disputed hire amounts, and reduced the quantum claimed for charterers' potential liability to its slot charterers, Senator Lines, by 30% from the modified quantum claimed. Prothonotary Morneau reduced the plaintiff's claim for an additional amount in respect of interest and expenses from 25% of the aggregate of the above amounts to 20%.

ANALYSIS

[12]            While certain of the issues raised on this appeal are, I am satisfied, reviewable on the basis of a de novo hearing^[3], I am satisfied that the exercise of the learned Prothonotary's discretion, where questions of principle or questions vital to the final issue of the case were raised, was neither based on a wrong principle nor on a misapprehension of the facts. In short, on such issues, I would reach conclusions the same as those of the learned Prothonotary. Further, I am satisfied that, in respect of his determination of an appropriate reduction of the quantum of security claimed, and in the determination of an appropriate additional sum for interest and expenses, the learned Prothonotary was not dealing with questions of principle or questions vital to the final issue of the case. In this regard, none of the determinations of the learned Prothonotary was based on any misapprehension of the facts and therefore those determinations should not be disturbed.

[13]            I turn then to specific allegations that the learned Prothonotary based his exercise of discretion on a wrong principle.

[14]            Counsel for the defendants urged that the learned Prothonotary erred in a manner justifying my intervention when he wrote at paragraph [13] of his reasons, as earlier quoted:

Il s'agit simplement de déterminer le montant à retenir pour les fins de la fixation de la garantie d'exécution, soit la valeur la plus favorable de la cause de la demanderesse ( « plaintiff's reasonably arguable best case » )(le principe applicable).                                                                                                                 [emphasis added]

Counsel urged that while the correct test is accurately reflected in the English language in the foregoing brief quotation, the interpretation of that test in the French language, the primary language of the Prothonotary's reasons, overstates the test in favour of the plaintiff. Linguistically, I am satisfied that counsel for the defendant is in fact correct. But counsel is inviting me to dissect the reasons in what I consider to be an inappropriate manner.^[4] When the sum total of paragraph [13], including the quotation from Atlantic Shipping (London) Ltd. v. Ship Captain Forever et al. is read, particularly in circumstances where counsel for the defendants is urging the Court to respond to the application very quickly, and that was certainly the case on the application before the learned Prothonotary and again before me, I find no reviewable error. I am satisfied that Prothonotary Morneau understood and applied the correct test.

[15]            Counsel for the defendants further urged that the use by Prothonotary Morneau of the concept "clair et évident" on two occasions in his reasons evidences a placing on the defendants of an onus that should properly lie on the plaintiff. The first such usage is in paragraph [17] where Prothonotary Morneau writes:

Je ne puis dans le cadre d'une demande de radiation de cette rubrique me convaincre qu'il soit clair et évident que ladite entente ne cadre pas, du moins en partie, dans l'alinéa 22(2)i) de la Loi.                                             [emphasis added]

The second usage is in paragraph [36] where Prothonotary Morneau writes:

On voit donc que cette entente modifierait la charte-partie initiale. Partant, il n'est pas clair et évident que la cause d'action sous cette entente ne puisse tomber sous le coup de l'alinéa 22(2)i) de la Loi.                                                       [emphasis added]

Once again, counsel for the defendants urged that these usages demonstrate an exercise of discretion based on a wrong principle on the part of Prothonotary Morneau. Counsel urged that the onus lies on the plaintiff to present its reasonably arguable best case rather than on the defendants to demonstrate that it is "clear and obvious" that C.P. Ships (Bermuda) Limited simply does not have a "reasonably arguable best case".

[16]            Once again, I reject this argument based upon a reading of Prothonotary Morneau's reasons as a whole and without dissecting those reasons in an inappropriate manner. Put another way, once again I am satisfied that Prothonotary Morneau understood and applied the correct test.

[17]            Finally, at the level of detailed review of Prothonotary Morneau's reasons, counsel for the defendants urged that the reasons disclosed reviewable error in paragraph [14] where the learned Prothonotary writes:

De plus, suivant la décision de cette Cour dans l'arrêt Amican Navigation v. Densan Shipping Co. et al...., c'est avec circonspection que la Cour doit réduire ou diminuer la valeur attribuée par un demandeur à ses causes d'action.                                                                                                                       [citation omitted, emphasis added]

[18]            Immediately before the foregoing quoted paragraph, Prothonotary Morneau cites Atlantic Shipping (London) Ltd. v. Ship Captain Forever et al.^[5], where Prothonotary Hargrave wrote at paragraph [7]:

The general principle, that a plaintiff, having arrested a vessel, is entitled to security in an amount sufficient to cover the reasonably arguable best case, together with interests and costs, capped at the value of the wrongdoing vessel, is not in dispute.

Counsel for the defendants urged that Prothonotary Morneau erred in not taking into account what he described as a qualification on the foregoing general principle set out in paragraphs [24] and [25] of the Prothonotary Hargrave's reasons in the following terms:

There are, however, instances in which the security requested has been held exorbitant and reduced: see for example The "Tribels", ... in which salvors sought security in [a specified amount], on a salved value of [a specified amount] the services being the re-floating of a grounded vessel, which took about an hour. The judge remarked: "Plainly that demand is exorbitant." and reduced the security.

These three representatives [sic] cases, The "Manitou III", The "Moschanthy" and The "Tribels" stand for the proposition that a court, in an interlocutory proceeding to set bail, ought not to try the case in order to determine the value of the plaintiff's reasonably arguable best case, in setting security, unless there are special circumstances. These special circumstances might include claims in which there are major uncertainties, such as in The "Manitou III", or where the security demanded is exorbitant, but not a situation, such as the present, where the plaintiff's damages figures seem fairly firm and the security requested reflects those figures.                                                                                     [citation omitted, emphasis added]

Counsel did not cite Prothonotary Hargrave's brief paragraph [26] to the following effect:

If , at the end of the day, security proves excessive, the defendants have their remedy for wrongful demand of excessive security ... .             [citation omitted]

[19]            Counsel urged that there are here "special circumstances" which should have influenced Prothonotary Morneau to reduce the security requested, if not to zero than to a very substantially lesser amount than was ordered. Counsel urged that the special circumstances included uncertainty as to this Court's jurisdiction in respect of aspects of this action, exorbitant claims and damages figures that could not be said to be "fairly firm". In failing to acknowledge the exception to the general principle on which he relied in setting security, counsel for the defendants urged that Prothonotary Morneau exercised his discretion on a wrong principle.

[20]            Once again, I reject this argument. Prothonotary Morneau dealt directly with the issue of this Court's jurisdiction. While he did not directly refer to "exorbitant" claims, he was clearly cognizant that in two areas of the plaintiff's claim, the claim had been reduced and in one area of the plaintiff's claim, he in fact reduced the basis of security from the amount claimed. I am satisfied that, implicitly, Prothonotary Morneau acknowledged the substance of paragraphs [24] to [26] of the Prothonotary Hargrave's reasons, quoted above.

CONCLUSION

[21]            In the result, this motion in appeal of the Order of Prothonotary Morneau in this action, dated the 21^st of March, 2002, was dismissed.

COSTS

[22]            The plaintiff is entitled to its costs of this motion, payable forthwith. The plaintiff's costs, inclusive of disbursements, were fixed by Order at $2,500.00.

_______________________________

                      J. F.C.C.

Ottawa, Ontario

April 10, 2002

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