Date: 20010409
Docket: T-2282-99
Neutral Citation: 2001 FCT 306
BETWEEN:
INTER ATLANTIC CANADA LIMITED,
Plaintiff
(Appellant on Appeal)
- and -
THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP
"RIO CUYAGUATEJE" AND HER CARGO,
Defendants
(Respondents on Appeal).
REASONS FOR ORDER
MacKAY J.:
[1] This is an appeal from the decision of Prothonotary Morneau dated January 18, 2000, whereby he allowed a motion by Dragsea Fishing Company Ltd., brought in relation to the dispute between the parties, pursuant to Rules 208 and 221(1)(a), (e), and (f) of the Federal Court Rules, 1998. The prothonotary granted an order striking the Statement of Claim in this actionin rem and striking also the warrant of arrest for the defendant ship and declaring the arrest of the defendant ship and its cargo invalid because the claim underlying those proceedings was not within the jurisdiction of the Court.
Background
[2] The plaintiff, Inter Atlantic Canada Limited ("Inter Atlantic"), is a body corporate created pursuant to the laws of Newfoundland. It is the appellant in this motion to appeal the decision of the Prothonotary.
[3] The defendant ship, "Rio Cuyaguateje," is a Cuban ship registered at the port of Havana, Cuba, owned by Pesquera Cuyagua, S.A.
[4] Dragnets ("Dragnets") is a government agency incorporated pursuant to the laws of Cuba and is a subsidiary of Pesport Pesca & Puerto, a government agency responsible for the control of all fishing and ports in Cuba. Dragnets is the holder of an authorization for 100 fishing days, granted to the Cuban Ministry of the Fishing Industry, to harvest North Atlantic shrimp allocated to Cuba ("the allocation") by the North Atlantic Fishing Organization (NAFO) in NAFO's Division 3M (the Flemish Cap).
[5] Pesquera Cuyagua, SA ("Pesquera") is a sister corporation to Dragnets, and is incorporated under the laws of Cuba. It holds title to the defendant ship.
[6] Dragsea Fishing Company Ltd. ("Dragsea") is a body corporate existing pursuant to the laws of the British Virgin Islands. It carries on the business of catching, processing and marketing fish and sea products caught on the Flemish Cap under fish quota allocations granted to Cuba by NAFO. Dragsea brought the motion to strike that was heard by Prothonotary Morneau, and it is the respondent in this appeal from his Order.
[7] Inter Atlantic submits that this is not an action against Dragnets or Dragsea, but that it is an action in rem against the owners and all others interested in the defendant ship. Each of the parties introduced in the preceding paragraphs is affected by the contracting of the allocation among Cuban corporations and the defendant ship.
[8] On February 12, 1999, Inter Atlantic entered into an agreement ("the Agreement") with Dragnets for a term of one year. As consideration for the use of the allocation held by Dragnets, Inter Atlantic agreed to pay the sum of $5000(US) per month to Dragnets for each month a vessel operating under the direction of Inter Atlantic was fishing the shrimp allocation. In return, Dragnets agreed to prosecute the shrimp fishery in Division 3M under the direction of the plaintiff, under arrangements whereby the plaintiff would pay the costs of manning, operating, victualling, fuelling and supplying a vessel, contemplated as a bare boat charter with a third party Icelandic vessel owner, in addition to any and all other costs and expenses incurred.
[9] In the event of a dispute over the contents or performance of the Agreement, the parties included in it an arbitration clause whereby it was agreed the laws of Cuba should apply with regard to the resolution of any conflicts.
[10] Prior to the commencement of performance of the Agreement, Dragnets chartered the defendant ship from Pesquera, managed it on their behalf and contracted the allocation to the defendant ship rather than to the plaintiff. Dragnets subsequently sub-chartered the vessel to Dragsea to carry out the exploitation of the fishing allocation.
[11] Dragnets cancelled the Agreement with the plaintiff on August 8, 1999.
[12] The plaintiff then initiated this action. The plaintiff claims that it held the right of user in the allocation pursuant to the Agreement, and, that provision of it to another fishing vessel constitutes the supply of a necessary as the harvest of shrimp in accordance with NAFO fishing regulations could not be undertaken without it. In this case it is urged the fishing quota assigned to the defendant vessel was the supply of a necessary, wrongfully taken from the plaintiff for which the latter has a claim against the vessel. In the alternative, the plaintiff urges that providing the allocation to another vessel with the knowledge of the common owner of the defendant ship and of Dragnets (the Cuban government), constitutes a conversion of the plaintiff's right of user which is unlawful and fraudulent.
Decision of the Prothonotary
[13] On January 18, 2000, Prothonotary Morneau allowed a motion brought by Dragsea whereby the jurisdiction of the Court in this matter was contested in accordance with Rule 221. Having regard for the evidence brought in support of the motion, the affidavit of Mr. Geoff Christopherson, director/secretary of Dragsea, dated January 7, 2000, and, in particular, the disputed Agreement, the prothonotary determined that the subject matter of the action was the Agreement, not maritime or navigation and shipping issues. The prothonotary held:
... this Court is of the view that the plaintiff does not benefit of any cause of action or right outside the Agreement which the plaintiff alleges has been breached;
Considering the subject matter of this action is the alleged breach of the Agreement which pertains to the commercialization or access to for the purpose of utilization of a NAFO allocation of North Atlantic shrimp to Cuba;
...
Therefore, under subsection 21(1)[sic s. 22(1)] of the Federal Court Act, ... it is clear and obvious that this Court lacks jurisdiction over the plaintiff's claim.
[14] In addressing the in rem actions, Prothonotary Morneau held that "this Court is of the clear and obvious view that the defendant ship and its cargo are not the subject of the action within the meaning of subsection 43(2)" of the Federal Court Act, R.S.C. 1985, c. F-7, as amended (the "Act"). It is on this basis that the Statement of Claim and the warrant of arrest for the defendant ship and its cargo, were struck out for lack of jurisdiction.
Positions of the Parties
[15] The plaintiff contends that, by virtue of the Agreement, for a term of one year it held the right of user in the shrimp fishing allocation. Moreover, the failure to provide the shrimp fishing allocation for which the plaintiff had the right of user, and providing the said allocation to the defendant ship without the consent of the plaintiff violated the latter's rights. Thus, it is urged that all shrimp harvested pursuant to the allocation during the term of the Agreement are subject to the ownership of Inter Atlantic in accordance with the Agreement.
[16] Inter Atlantic further submits that the provision of the shrimp fishing allocation to the defendant ship is the supply of a necessary or, in the alternative, that it is the supply of goods, materials or services to the defendant ship as the vessel could not have operated as a shrimp fishing vessel without it. It is also the position of the plaintiff that the supply of the allocation to the defendant ship with the knowledge and consent of the ship's beneficial owner constituted a conversion of the plaintiff's right of user and that supply is unlawful and fraudulent, and the plaintiff's claim to the allocation may be raised in an action against the defendant ship to which the allocation has been wrongfully assigned.
[17] It is the position of the defendant parties that the determination of Prothonotary Morneau is correct, and that the Federal Court lacks jurisdiction to adjudicate this action. The defendants urge that, pursuant to s. 22 of theAct, the right to utilize the shrimp allocation does not constitute the supply of a necessary, nor is it the supply of goods, materials or services to a ship.
[18] It is further urged that, absent the jurisdiction conferred in s. 22, jurisdiction may not be exercised in rem under s-s. 43(2) of the Act, as the ship and cargo must be found to be the subject matter of the action for that provision to be applicable. The defendants submit that jurisdiction is the threshold question in this appeal, and, absent a finding contrary to that of Prothonotary Morneau, no further arguments are required.
Analysis
[19] When making a determination regarding jurisdiction a prothonotary is held to the standard of correctness. An incorrect determination requires that a motions judge, on appeal, set aside the earlier decision and exercise his own discretion de novo. However, if the judgment of the prothonotary is correct, the motions judge has no choice but to uphold the determination and to dismiss any appeal brought from it.
[20] In his decision, Prothonotary Morneau held that the subject matter of the action is the "alleged breach of the Agreement which pertains to the commercialization or access to for the purpose of utilization of a NAFO allocation of North Atlantic shrimp to Cuba." That subject matter he found falls outside the confines of "Canadian maritime law or any other Canadian law relating to any matter coming within the class of navigation and shipping," contrary to the assertions of the plaintiff.
[21] In determining whether the Federal Court has the jurisdiction to hear this matter, the Court applies the test set out in ITO-International Terminal Operators Ltd. v. Miida Electronics, [1986] 1 S.C.R. 752, which requires that: "[the] subject matter must be so integrally connected to maritime matters as to be legitimate Canadian maritime law within Federal legislative competence." Although the plaintiff urges that torts committed at sea involve maritime law, I do not agree that in this instance interference with contractual relations constitutes a tort "committed on water" (Domestic Converters Corp. v. Arctic Steamship Line, [1984] 1 F.C. 211, (C.A.), at para. 66 per Le Dain J.).
[22] The plaintiff asserts a tort claim in that a director of the plaintiff, Mr. Gueorgi Skhirtladze, is also a director of Dragsea. It is urged that in contracting with this director through Dragsea rather than Inter Atlantic, Dragnets' actions are wrongful and tortious. That action, however, is not connected with maritime or navigation and shipping matters, nor was it committed "on water." Therefore, it cannot be defined as a maritime tort within the jurisdiction of the Federal Court.
[23] Section 22(2)(m) of the Federal Court Act states:
| (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 one or more of the following: (m)any claim in respect of goods, materials or services wherever supplied to a ship for the operation or maintenance of the ship, including, without restricting the generality of the foregoing, claims in respect of stevedoring and lighterage;
|
22. (2) Il demeure entendu que, sans préjudice de la portée générale du paragraphe (1), la Section de première instance a compétence dans les cas suivants : m) une demande relative à des marchandises, matériels ou services fournis à un navire pour son fonctionnement ou son entretien, notamment en ce qui concerne l'acconage et le gabarage; |
Thus, jurisdiction is conferred in relation to the supply of a necessary or goods, materials or services to a ship only when the supplier remains unpaid. Here the plaintiff has not supplied anything to the ship for its operation or maintenance, and thus it does not remain unpaid.
[24] Throughout the Statement of Claim and its arguments, the plaintiff relies on the Agreement to establish its entitlement to rights in relation to the shrimp fishing allocation. For example, paragraph six of the Statement of Claim asserts: "[b]y virtue of the agreement the Plaintiff had the right of user of the shrimp fishing license for the term of one year," and paragraph seven begins: "Dragnets is in breach of the said agreement ... ." Such terminology is a clear indication that the plaintiff itself views the Agreement as the central issue in this action. Without it, there would be no basis for asserting that it had been wronged.
[25] Bornstein Seafoods Canada Ltd. v. Hutcheon (1997), 140 F.T.R. 241 (T.D.), is a case where the facts resemble those in this matter. There, Justice Gibson found that the claim did not constitute a "maritime tort" within the ambit of Canadian maritime law. He stated:
... quota interpretation turns substantially on the interpretation of the contract ... between the plaintiff and the ... defendant as well as on laws, practices and procedures related to Canada's ... fishery.
The Court determined that the subject matter of the action was an agreement that related to the utilization of fisheries resources, and did not constitute a matter of maritime law.
[26] In this case, the main purpose of the Agreement was the commercialization of a NAFO shrimp fishing allocation. That purpose had nothing directly to do with shipping, navigation or activity on navigable waters. The Agreement was created to grant access to a fishing quota, and any effects upon ships or shipping arising therefrom were incidental. In my opinion, as found by Justice Gibson in Bornstein, supra, the subject matter of this action deals with an agreement to exploit a fishing quota, a matter that does not fall within the jurisdiction of the Federal Court as a matter of navigation and shipping or Canadian maritime law within s. 22 of theAct.
[27] Although a finding of jurisdiction in s. 22 is ordinarily essential to confer in rem jurisdiction under s-s. 43(2) of the Act, the Statement of Claim identifies the defendant ship as the sole defending party. It is urged by the plaintiff that the in rem action forms the central claim of this matter.
[28] Subsections 43(2) and (3) of the Federal Court Act provide for actions in rem in the following terms:
| (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. |
(2) Sous réserve du paragraphe (3), la Cour peut, aux termes de l'article 22, avoir compétence en matière réelle dans toute action portant sur un navire, un aéronef ou d'autres biens, ou sur le produit de leur vente consigné au tribunal.
(3) Malgré le paragraphe (2), la Cour ne peut exercer la compétence en matière réelle prévue à l'article 22, dans le cas des demandes visées aux alinéas 22(2)e), f), g), h), i), k), m), n), p) ou r), que si, au moment où l'action est intentée, le véritable propriétaire du navire, de l'aéronef ou des autres biens en cause est le même qu'au moment du fait générateur. |
[29] In considering the "in rem" issues in relation to the defendant ship, I note that the Agreement contemplated the use of an unnamed third party vessel of Icelandic registry to exploit the shrimp fishing allocation. At no time was the defendant ship considered. The defendant ship was not subject to the Agreement and it was ultimately chartered by Dragsea, from Dragnets, independently of the Agreement. The defendant ship only became involved as a result of a separate contract between Dragnets and Pesquera, to which the plaintiff is not privy, following the cancellation of the original Agreement with the plaintiff by Dragnets on August 8, 1999.
[30] The decision of Madam Justice Tremblay-Lamer in Paramount Enterprises International, Inc. v. "An Xin Jiang" (The) (1997), 147 F.T.R. 162 (T.D.) is useful in considering the issues in this case. In a situation much the same as the current one, the Court stated:
Subsection 43(2) provides that a party may bring an action in rem against a ship provided that the ship is the subject matter of the action. The courts have held that a ship is the subject matter of an action where there is a sufficient connection between the ship and the action ...
The Court went on to find that the prothonotary was correct in deciding to strike out the in rem action because the claim was founded on an agreement between the parties, and no connection between the agreement and the arrested ship could be shown. "The plaintiff's cause of action is independent of that ... agreement, and accordingly it is plain and obvious that the Court cannot exercise its jurisdiction in rem."
[31] Furthermore, a claim for necessaries cannot succeed in rem without a claim in personam against the owner. In Mount Royal/Walsh Inc. v. Ship "Jensen Star" et al., [1990] 1 F.C. 199, 99 N.R. 42 (F.C.A.) at para. [29], the Court of Appeal stated, "...the involvement of the owner in the supplying of the necessaries has to be complete and direct enough to entail...personal liability". Without evidence to show that a right of action exists against the owner personally, noin rem claim may proceed.
[32] With regard to the claims in rem against the cargo of the defendant ship, the prothonotary held that no in rem jurisdiction existed to be exercised and I am in agreement. In Joint Stock Society "Oceangeotechnology," v. "1201" (The), [1995] 2 F.C. 265 (T.D.), Justice Teitelbaum held that in order for in rem jurisdiction to be exercised against cargo, steps must be taken to commence the fulfilment of the obligations under the contract.
... I am satisfied that the plaintiff would not have been able to proceed with an in rem action as no steps would have been taken to fulfil the obligations under the contract and one would be unable to say that there existed any connection ...
[33] To conclude that an action is based on property as permitted in s. 22(2)(m) of the Act, some connection between the property seized, ie. the cargo, and the cause of action must be apparent from the facts. In this case the basis for such a claim is not set out in the Statement of Claim.
[34] That Statement fails to assert that performance of the Agreement was commenced or that any consideration passed between the parties. Moreover, the Agreement was subject to the approval of Dragnets, but none of the conditions precedent were met, nor was the plaintiff to assume any role other than to act as a broker in effecting the commercialization of the shrimp harvest for which a cash remuneration was established. At no time was ownership of the shrimp harvest granted to the plaintiff by way of the Agreement, and no profits from the shrimp harvest were payable to the plaintiff in its capacity as broker of the Agreement or otherwise.
Conclusion
[35] The test for striking pleadings is clearly outlined in Operation Dismantle Inc. et al. v. The Queen et al., [1985] 1 S.C.R. 441 at 475, where it was held that an applicant must show that it is clear and obvious that the pleading shows no reasonable cause of action, that is, that the plaintiff could not succeed in its action or its claim for relief. If the Court finds that it has no jurisdiction to hear a matter, the proceeding must be struck. There can be no reasonable cause of action if the claim fails to satisfy the threshold issue of jurisdiction.
[36] In finding that the central issue in the claim of Inter Atlantic is the Agreement of February 12, 1999, and not matters of Canadian maritime law or law relating to shipping and navigation, Prothonotary Morneau did not err. In my opinion, he properly considered the facts before him and applied suitable legal principles in ascertaining that this action arises out of an alleged breach of contract that addresses fishing issues, but fails to connect the defendant ship, or its cargo, with the Agreement.
[37] In the absence of a connection between the plaintiff and the defendant ship, a claim in rem for necessaries cannot succeed as goods must be supplied to a ship by the claimant, not to some other party [Joint Stock Society "Oceangeotechnology," supra]. This same principle holds true for the plaintiff's claim against the arrested cargo. To quote Bornstein, supra:
In summary then ... since the subject-matter of this action does not fall within the jurisdiction of this Court as Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, the in rem action is unfounded.
[38] The subject matter of this action is the Agreement, the substance of which is not a matter within maritime law, and the alleged breach thereof is not so integrally connected to maritime matters as to constitute legitimate Canadian maritime law or matters falling within the class of navigation or shipping. Since the action does not fall within the jurisdiction conferred in s. 22 of the Federal Court Act, the claims in rem here made pursuant to s-s. 43(2) are not founded as required by that section
[39] The Order of Prothonotary Morneau was correct. An Order goes providing that the appeal is dismissed, with costs to the respondents as the parties may agree, or failing agreement as may be assessed in accord with Tariff B, Column III of the Court's Rules.
(signed) W. Andrew MacKay
JUDGE
OTTAWA, Ontario
April 9, 2001