DEVELOPMENTS IN CANADIAN MARITIME LAW - 1994

MARINE INSURANCE

Non-Disclosure of Material Facts

In Neepawa Yacht Ltd. v Laurentian P & C Insurance Co. (December 28, 1994) Vancouver C936299, (B.C.S.C.), the issue was whether an insurer was entitled to deny coverage for a $250,000 fire loss on the grounds of non-disclosure of material facts by the assured. In response to a query in the application for insurance concerning the assured's losses over the previous five years, the answer given was that there had been a theft loss of $1,185. There had also been a grounding which gave rise to a loss of $4,840 and a theft of a dingy that gave rise to a loss of $800 but neither of these prior losses were disclosed on the application. The Court held that the assured's failure to disclose these prior losses, notwithstanding their small size, entitled the insurer to avoid the contract of insurance. Further, the Court held that the assured was required to repay a claim previously paid by the insurer before the non-disclosure became known.

Trading Warranty

In Anderson v Dale & Company Ltd. et.al. (June 8, 1994) Vancouver Registry C927692 (B.C.S.C.), a vessel was destroyed by fire while outside the geographical limits of the trading warranty contained in the policy. The Court, accordingly, ordered that the action against the underwriters be dismissed. A further issue in this case concerned the legal position of brokers and underwriting agents. The Court confirmed that there was no doubt that the broker was the agent of the plaintiff and not the underwriters. The Court further held that as the policy of insurance clearly showed that Oceanic Underwriters Ltd. and Harlock Williams Lemon Ltd. acted as agents for named underwriters, they were not personally liable under the policies.

Exclusions

Fox v Excel Insurance Management Ontario Inc. (July 18, 1994) Action 11266 (Ont. Ct. Gen. Div.) concerned the interpretation of a boat dealers policy. A high performance pleasure craft was stolen from the assured's outside compound which was not enclosed and had no security. The thieves merely drove off with the boat in tow. The policy insured against all risks but specifically excluded theft unless there had been felonious entry into the property by actual force or violence and visible marks of such felonious entry were made. The assured argued that the exclusion clause did not apply because his lot was an open, unsecured lot and it was, therefore, impossible for there to be visible marks of felonious entry. The Court, however, found the clause to be clear, plain and unambiguous and held that it accordingly applied to the circumstances. In result the denial by underwriters was successful.

Towers Legal Liability

In Burrard Towing Co. v Reed Stenhouse Limited et.al (November 10, 1994) Vancouver C944391, (B.C.S.C.), the British Columbia Supreme Court was called upon to interpret a towers' legal liability policy. The facts were that a barge under demise charter to the tower capsized and the cargo on board was lost. The barge was an insured vessel under the policy. The issue was whether there was liability coverage for the cargo on board the barge. Clause 8 of the policy indicated there was no coverage. It specifically excluded from coverage liability in respect of cargo on board insured vessels. However, the towers' legal liability endorsement created an ambiguity. It extended coverage to include the legal liability of the assured for damage to or loss of the tow or property thereon unless "such tow is the property of the Assured". The insured argued the towers' legal liability endorsement extended coverage to include the cargo on the barge. The insurer argued, however, that the barge, being under demise charter to the assured, was the property of the assured and was therefore excluded from coverage. The Court held that on a plain reading of the policy clause 8 excluded the cargo from coverage but that the endorsement overrode the exclusion and included the cargo. The Court said it would take a convoluted reading of the words "property of the Assured" to give them the meaning the insurer asked them to bear.

The Supreme Court of British Columbia was again called upon to interpret a towers' legal liability policy in Catherwood Towing Ltd. v Commercial Union Assurance Co. (January 30, 1995). The issue in this case was again whether there was legal liability coverage for cargo on board a barge being towed by one of the assured's tugs. The policy contained a clause which expressly excluded all liability in respect of cargo. However, the towers' liability endorsement extended coverage to "loss or damage to her tow or the freight thereof or to the property on board". The insurer argued that the words "freight" and "property on board" should be read so as not to include cargo. The Court, however, disagreed and held that such a limited interpretation was not supported by the plain language used. The Court applied the general principle that coverage provisions should be interpreted broadly and exclusions should be interpreted narrowly. The Court found there was an ambiguity in the policy and resolved the ambiguity against the insurer. In result, the Court held the words "freight" or "property on board" could reasonably include cargo.

CARRIAGE OF GOODS

Damages

Canastrand Industries Ltd. v The "Lara S" (November 4, 1994) No.A-218-93, (F.C.A.) is a short decision by the Federal Court of Appeal but one which is of importance. The case involved damage to a cargo of baler twine carried from Brazil to Toronto. The Court of Appeal affirmed the holding of the Trial Judge that in a time charter situation both the charterer and the shipowner are liable as carriers. Another issue concerned damages. The damaged cargo was offered for salvage sale and various bids were received. However, the plaintiff elected to retain the damaged cargo and later sold it for a much higher price than was offered in the salvage bids. These later sales occurred one to two years after the cargo was discharged. The defendant argued on these facts that subsequent sales by the plaintiff should be taken into account in diminution of its damages. The Court of Appeal disagreed. It held that the mere passage of time resulting in price fluctuations cannot be used to increase or decrease the liability of the carrier. It reaffirmed the general rule that the appropriate measure of damages is the arrived sound market value less the arrived damaged market value, that is to say, the damaged market value of the goods at the time of their arrival.

Gulf Canada Resources Ltd. v Merlac Marine Inc. (February 16, 1994) Action 16950/87 (Ont. Ct. Gen. Div.) concerned a shipment of tar sands being shipped from Montreal to Lavera, France for experimental purposes. The cargo arrived in France contaminated with salt water which had to be removed. Neither the plaintiff nor the defendant were able to determine how the salt water contamination occurred. The cost of removing the salt was more than double the landed cost of the cargo but this had to be done as a replacement batch would not arrive in time. Nevertheless, the plaintiff claimed only for the cost of the cargo. The defendant took the position that the plaintiff Gulf did not have the right to make the claim for the full amount of the loss. It relied on the fact that Gulf was involved in a complex joint venture arrangement with various other parties and that as a consequence Gulf had not lost the sums being claimed. The Court held that Gulf was entitled to make the claim by virtue of its position as the shipper/contracting party and, if successful, was entitled to the full amount of the loss. The defendant also sought to rely on various excepted perils but the Court held that since the defendant could not establish the mechanics of the loss, it could not prove an excepted peril. Further, the Court held that the defendant's failure to establish the mechanics of the loss meant it could not prove it was not at fault or privity and, therefore, was not entitled to limit its liability.

Kishinchand & Sons (Hong Kong) Ltd. v Wellcorp Container Lines Ltd. (December 14, 1994) Action T-271-93 (F.C.T.D.) involved a claim by a shipper against a carrier for breach of contract. The carrier authorized the release of the cargo to the receiver without first obtaining the bills of lading. The receiver was not entitled to obtain possession of the cargo as it had not paid for the goods and, in fact, it went bankrupt and never paid. The carrier admitted liability but argued it was entitled to rely on the terms of the bill of lading which limited its liability to $50 per package for "loss or damage to the goods". The Court held, however, that the limitation clause should be strictly construed and that on a strict construction what happened in this case was not "loss or damage to the goods".

Inadequate Stowage

General Motors Corp. v Cast (1983) Ltd. (February 28, 1994) Action T-2536-87, (F.C.T.D.) involved a cargo of auto parts shipped in four containers from Strasbourg, France to Toledo, Ohio. The cargo arrived in a damaged condition. The defendants argued that the cause of the damage was inadequate stowing of the containers. Within each container there was a longitudinal space of one half a meter between the cargo and the door of the container. No blocking or bracing was used to occupy this space. The plaintiff argued that it had shipped identical goods identically stowed over ten years without mishap and that, therefore, the cause did not lie with the method of stowage but with some mishandling on the part of the defendants. The Trial Judge accepted that the plaintiff would have a powerful argument if, in fact, it could show that it had shipped identical goods identically stowed without mishap. However, the Judge found as a fact that the contents of the four containers in issue were different than on the previous occasions relied on by the plaintiff. In result, he held the cause of the damage was inadequate stowage of the containers by the plaintiffs.

Subrogation

Porto Seguro Companhia de Seguros Gerais v Belcan S.A. (June 19, 1994) Action T-2057-85 (F.C.T.D.) concerned damage to a cargo of pinto beans as a result of a collision in the St. Lawrence Seaway near Montreal. The action was brought by the insurer of the cargo who had paid the cargo owner for the damage. One of the issues in the case was whether the cargo insurer had the right to bring action. The Court held that subrogation was not a matter of Canadian Maritime Law but was rather a matter of provincial jurisdiction and that under Quebec law an insurer was entitled to bring a subrogated action in its own name.

Jurisdiction Clause

In Maersk Inc. v Coldmatic Refrigeration of Canada Ltd. (March 3, 1994) Action T-1419-93 (F.C.T.D.), the issue was whether in an action by a carrier for unpaid freight charges the defendant could assert a counterclaim for damage to the goods during transit. The bill of lading specifically provided the Southern District Court of New York was to have exclusive jurisdiction. In a motion by the plaintiff/carrier to stay the counterclaim, the court held that the jurisdiction clause had been amended by the actions of the plaintiff in selecting the Federal Court of Canada to sue for freight. Accordingly, the motion for a stay was refused.

Time Extensions

In Marley Co. Cast North America (1983) Inc. (July 29, 1994) Action T-2718-93 (F.C.T.D.), the carrier granted six successive extensions of suit time to the plaintiffs "on behalf of owners and charterers". Two of the extensions granted specifically referred to the plaintiff's claim as being "in personam" . The other four extensions omitted these words. After the one year suit time had expired, the carrier argued that the time extensions did not include the vessel and that the plaintiffs no longer had a right to arrest the vessel or commence an in rem action against it. The Court held the extensions did include the vessel and that the vessel was therefore subject to arrest.

Freight Forwarders

Crompton Saage Enterprises Inc. v LEP International Inc. (February 16, 1994) Vancouver Registry C895350 (B.C.S.C.) concerned the liability of a freight forwarder for damage to twenty-five band saws shipped from England to Vancouver. The band saws had been improperly packaged and, as a result, arrived in a badly rusted condition. The Court found as a fact that the freight forwarder had contracted to package the cargo and was therefore liable. However, the forwarder was entitled to limit its liability pursuant to the terms and conditions of the Canadian International Freight Forwarders Association (CIFFA). The Court found these terms were not ambiguous, unclear or unconscionable and that the failure to properly pack did not constitute a fundamental breach. The plaintiff in this case further argued that the forwarder was in breach of its contractual obligation to obtain adequate cargo insurance. The forwarder had obtained "all risks" cargo insurance. Unfortunately, this insurance contained an exclusion for damage caused by insufficient packaging. The Court held that such an exclusion was standard in "all risks" policies and that the forwarder was, therefore, not in breach of its obligations in this respect.

GENERAL AVERAGE

Ultramar Canada Inc. v Mutual Marine Office Inc. et.al. (June 30, 1994) Action T-2535-88 (F.C.T.D.) concerned the grounding of the oil barge "Pointe Levy" off Matane Quebec on December 3,1985. The total cost of the casualty was approximately $7 million. At issue in the action, however, was the responsibility for $2 million incurred to salvage the "Pointe Levy" and her cargo. The cargo underwriters argued their contribution in general average was limited to the contributory value of the cargo of $30,518 (the value of the recovered cargo less the special charges incurred for the purpose of discharging the cargo). The hull underwriters argued that no value should be given to the hull when calculating their proportion of excess general average as the "Pointe Levy" was a constructive total loss when the salvage expenses were incurred. The P & I insurer argued that the contract was for the salvage of the hull and cargo and that its coverage did not insure general average expenses. The Trial Judge agreed with the cargo underwriters and held that their contribution was limited to the contributory value of the cargo and that any excess general average expenses, after the contributory values were exhausted, fell on the shipowner. With respect to the hull underwriters who had paid the insured value of the hull in the amount of $3 million, the Trial Judge agreed that the "Pointe Levy" was a constructive total loss with a value of zero and that this was the value to be used in calculating hull underwriters' contribution to excess general average. The Judge further held, however, that $8,000 worth of diesel oil on the barge was used in its salvage and therefore "made good". This amount had to be taken into account in determining the hull underwriters' proportion of excess general average expenses. Finally, with respect to the P & I insurer the Trial Judge held that this insurer could be liable for the salvage expenses only if they were incurred solely for pollution prevention or if there was a compulsory wreck removal order. As there was no wreck removal order and pollution was not the sole reason for retaining the salvor, the P & I Club was not liable. In result, the majority of the excess general average expenses had to be incurred by the plaintiff.

COLLISIONS

Overtaking

Algoma Central Corp. v The "Prestigious" (March 25, 1994) Action T-2287-88 (F.C.T.D.) involved a near collision in the St. Lawrence Seaway at Lake St. Francis between the "Algosoo" and the "Prestigious". The "Prestigious" was overtaking the "Algosoo" and, as a consequence, the "Algosoo" temporarily went aground and suffered hull damage that cost in excess of $1.2 million to repair. The "Prestigious" was held 80% to blame for the collision. Its faults included: failing to maintain a proper lookout; overtaking too close to a narrow channel; passing too close to the "Algosoo"; excessive speed; failing to obtain an agreement before overtaking; and failing to keep out of the way of the "Algosoo". The "Algosoo" was found 20% at fault for not maintaining a proper lookout and not responding to radio calls from the "Prestigious".

Ship at Anchor

Porto Seguro Companhia de Seguros Gerais v Belcan S.A. (June 19, 1994) Action T-2057-85 (F.C.T.D.) involved a collision between the "Federal Danube" and the "Beograd" in the St. Lawrence Seaway at the Lower Beauharnois Lock. The "Federal Danube" was located in a designated anchorage area and was in the process of raising her anchor when the collision occurred. The "Beograd" had just exited the lock and was proceeding at full speed through the anchorage area. The act of the "Federal Danube" in weighing its anchor caused it to swing and, in doing so, it collided with the "Beograd". The Court held the "Beograd" solely responsible for the collision. The faults found against it were: proceeding through a designated anchorage area at full speed; passing close ahead of an anchored vessel; failing to undertake sufficient course corrections to compensate for the current; and interfering with a vessel at anchor.

Docks

Ultramar Canada Inc. v The "Czantoria" (October 14, 1994) Action T-868-88 (F.C.T.D.) concerned a collision between the "Czantoria" and a dock owned by Ultramar. As a consequence the "Czantoria" was holed and a large oil spill occurred. Clean up costs amounted to some $1.7 million. At issue in the case was the responsibility for these costs. The plaintiff, dock owner, relied on the presumption of negligence that arises when a moving ship hits a stationary object. The vessel argued that the dock had inadequate fendering and that this is what caused the vessel to be holed and the consequent oil spill. The Court found that the dock owner was partly responsible in that additional fenders would have, at least, reduced the size of the hole and the amount of the spillage. The Court held the vessel 80% responsible and the dock 20% responsible.

Small Vessels

Liznick v Hamelin (March 23, 1994) (Ont. Ct., Gen. Div.) concerned a collision between two small vessels in the Abitibi River. The defendant was held solely to blame for the collision. The defendant was on the wrong side of the channel, was operating his vessel at night without lights, did not see the other vessel until 30 or 40 feet away and when he did see the other vessel steered to port, into the other vessel, rather than to starboard as required by the Collision Regulations. Further, the Court found he was not paying proper attention and that that failure was due to a combination of fatigue and alcohol. The Court further rejected the defendant's argument that the plaintiff had the last clear chance to avoid the accident. The Court found that the plaintiff correctly attempted to avoid the collision by steering to starboard.

Conrad et.al v Snair et.al (September 20, 1994) Action 73913 (N.S.S.C.) involved a collision at night between a Boston Whaler and an unlit anchored 32' sloop. As a result of the collision the plaintiff, who was a passenger in the Boston Whaler, was seriously injured. The driver of the Boston Whaler was found wholly at fault for the collision and the resulting injury to the plaintiff. The Court found he was traveling at an excessive rate of speed and was not keeping a proper lookout and further found that alcohol consumption may have contributed to the accident. The Court held that the sloop was in no way responsible for the accident notwithstanding that it was in breach of the Canada Shipping Act by not having an anchor light. Such a breach the Court held did not give rise to a statutory presumption of negligence.

Damages

Miller Dredging Ltd. et.al. v The "Dorothy MacKenzie" (October 20, 1994) Vancouver Registry CA016818 (B.C.C.A.) concerned a collision between a log tow and a dredge working in the Fraser River. At trial the tug in control of the log tow was found to be wholly responsible for the collision and the resulting damage. Salvage work was undertaken by the plaintiff using its own labour and equipment. No appeal was taken from the finding of liability but an appeal was taken on the matter of damages. Specifically, the defendant objected to the awarding of overhead costs to the plaintiff. On appeal the Court affirmed that fixed overhead costs are a proper head of damage and recoverable. (NOTE: Overhead costs were also allowed in Canadian National Railway Company v Norsk Pacific Steamship Co. Ltd. et. al. (December 10, 1993) Action T-552-88 (F.C.T.D.))

LIMITATION OF LIABILITY

Owner/Operator

Conrad et.al v Snair et. al., supra, also concerned an issue of limitation of liability. The owner/operator of the Boston Whaler argued he was entitled to limit his liability. The Court held that as operator he would be entitled to limit, but not as owner. The Court held that as owner he was in fault or privity in the following particulars: he should have known the sloop was anchored in the Bay and, as owner, should have advised himself as Master of its presence; he knew that as operator he would operate his vessel at an excessive speed; and he knew that he had consumed alcohol and that that could create a risk.

Procedure

In Oak Bay Marine Group v Jackson (March 25, 1994) Action T-448-94 (F.C.T.D.), the Court ordered that a statement of claim in a limitation action be struck out. The action arose out of a shipboard injury that occurred four years and nine months earlier. The injured party commenced a personal injury action in the Federal Court and this action was ultimately successful at trial. Judgment was rendered in the personal injury action on February 4, 1994. The shipowner did not raise limitation of liability in the personal injury action but commenced a separate limitation action on March 2, 1994 after judgment was rendered in the personal injury action. The Court held that the statement of claim in the limitation action was an abuse of the process of the Court. The Court reasoned that the limitation issue could and should have been litigated in the damage action. A separate limitation action would involve a new trial with respect to essentially the same facts.

Calculation of the Fund

In Meeker Log and Timber Ltd. et. al. v The "Sea Imp VIII" et. al, (December 21,1994) Vancouver Registry C931756 (B.C.S.C.), the Court allowed a tug owner to limit liability where the damage to the barge and cargo was caused solely as a result of a navigational error by the Master. In Supplementary Reasons issued March 28, 1995, the Court held that for the purpose of calculating the limitation fund the conversion from SDRs to Canadian dollars should be made using the exchange rate prevailing on the date the fund is established, whether by judgment or payment into court. In so holding, the Court refused to follow Chamberland et.al. v Fleming et.al. (1984) 12 D.L.R. (4th) 688, which had held that the date of the accident was the appropriate conversion date.

CANADIAN MARITIME LAW

In Bow Valley Husky (Bermuda) Ltd. v Saint John Shipbuilding Limited (March 8, 1994) Action 2429 (Nfld. S.C.), Mr. Justice Riche of the Supreme Court of Newfoundland held that the Newfoundland Contributory Negligence Act could not be applied to a matter governed by Canadian Maritime Law. He therefore applied the common law rule and held that the plaintiff, who had been contributorily negligent, was prevented from recovering against the defendant. This case is under appeal.

In Conrad v Snair, supra, Mr. Justice Nunn of the Supreme Court of Nova Scotia came to a different conclusion. He wrote that if he had found the plaintiff contributorily negligent, he would have adopted the reasoning of the British Columbia Court of Appeal in Shulman v McCallum (1993) 79 B.C.L.R. (2d) 393 and applied the provincial Contributory Negligence Act.

In Porto Seguro Companhia de Seguros Gerais v Belcan S.A., supra, the Court found that the plaintiff dock owner was 20% liable for the costs of clean up of an oil spill consequent upon a collision between a vessel and the dock. The vessel was held 80% liable. The issue of whether the contributory negligence by the dock owner disentitled it to liability appears to have been argued before the Court, but the Trial Judge declined to decide the point. In light "of the controversy as to whether the arcane common law of tort applies to marine casualties", he held that the matter should not be regarded as a case of contributory negligence and awarded the plaintiff 80% of its damages. No further reasons were given for this unusual disposition of the case.

In Liznick v Hamelin, supra, the Ontario Court General Division again confirmed the earlier ruling in Ordon Estate v Grail that Family Law Act claims for loss of guidance care and companionship cannot be asserted in actions involving negligent operation of a vessel. The Court noted that such actions are governed by Canadian Maritime Law .

TUG AND TOW

In a very recent decision, Fraser River Pile & Dredge v Empire Tug Boats Ltd. et.al. (March 21, 1995) Action T-1631-93 (F.C.T.D.), the Federal Court Trial Division held a tug owner liable for damage caused when a crane on board the barge "T.L.Sharpe" hit the Cambie Street bridge. The defendant tug owner contested liability on the ground that it was the responsibility of the barge/crane owner to set the crane boom at a height sufficiently low to clear all overhead obstructions at any tide. The Trial Judge held, however, that in the circumstances of the case there was a contractual obligation on the tug owner, and that, in any event, there was a common law obligation on the tug owner, to inspect the tow to ensure that it was in a suitable condition for the intended voyage. This duty she held included a duty to ascertain the height of tow if that information is necessary to accomplish a safe tow. In result, the tug owner was found solely liable for the accident.

In Meeker Log and Timber Ltd. et. al. v The "Sea Imp VIII" et. al. (December 21, 1994) Vancouver Registry C931756 (B.C.S.C.), a barge struck a rock and was holed while transitting Gillard Passage. As a consequence, the barge was damaged and had to be beached and there was loss and damage to the cargo aboard her. At issue in the case was whether the tug owner was relieved from liability by reason of an exclusion clause in the contract and, whether the owner was entitled to limit liability. The exclusion clause upon which the owner relied was one which had been in use for many years on the West Coast and was composed of four parts. The plaintiffs in the case argued that each part imposed a different standard of care and a different exclusion and that, therefore, the clause when read as a whole was inconsistent and ambiguous. The Trial Judge agreed and held the clause was of no effect. On the limitation aspect of the case, the Trial Judge held that the tug owner was entitled to limit its liability as the error which caused the barge to strike the rock was an error in navigation on the part of the Master of the tug which the owner could not have guarded against.

MARITIME LIENS/PRIORITIES

Spittlehouse v North Shore Marine Inc. (April 21, 1994) Action C8551 (Ont. C.A.) concerned competing claims to a vessel between the purchaser and the general security holder of the vendor. The plaintiff had entered into a contract with the vendor for the purchase of a 46' pleasure craft for $550,000. The contract provided that the plaintiff was not to obtain title to the boat until payment in full of the purchase price. The plaintiff had paid 90% of the purchase price but had not received delivery when the vendor defaulted under its security agreement with the defendant. As a result, a receiver was appointed and all the assets, including the boat, were seized. The Court of Appeal held that the competing claims of the plaintiff and the defendant to the boat were resolved by the Ontario Personal Property Security Act which provided that a buyer of goods from a seller who sells those goods in the ordinary course takes them free of any security interest.

Ostgota Enskilda Bank v The "Sea Star" (May 20, 1994) Action T-2425-92 (F.C.T.D.) involved competing claimants to a fund created from a sale of the vessel "Sea Star". The charterer claimed it was entitled to priority over the mortgagee for pilotage fees which it had paid and which entitled it to a maritime lien. The Court held that there was no maritime lien for pilotage services. A supplier of bunkers put on board the ship before its arrest argued that the bunkers remained its property. The Court, however, held that it was a supplier of necessaries and not entitled to any priority over the mortgage.

ARBITRATION

In Nanisivik Mines Ltd. v Canarctic Shipping Co. (February 10, 1994) Action A-68-93 (F.C.A.), the Federal Court of Appeal was given the opportunity to consider the effect of Article 8 of the Commercial Arbitration Code as incorporated into Canadian law by the Commercial Arbitration Act. Article 8 provides that a Court before which an action that is subject to arbitration is brought shall refer the dispute to arbitration if so asked. Prior to the judgment of the Court of Appeal, the various trial judgments that had considered Article 8 were unanimous in the view that Article 8 left no discretion in the Court with respect to referring the dispute to arbitration but the trial judgments were divided as to whether or not there was still a discretion with respect to granting a stay of proceedings. The Court of Appeal held that Article 8 was mandatory in both respects. The Court held that if the dispute was the subject of an arbitration agreement, it must be referred to arbitration and a stay of proceedings must be granted.

The Court of Appeal also considered the circumstances under which an arbitration agreement in a charterparty could be binding on a bill of lading holder. Following English jurisprudence the Court held that if the arbitration agreement in the charterparty did not specifically refer to disputes under the bill of lading and if the incorporating provision in the bill of lading did not make specific reference to the arbitration clause in the charterparty, then the holder of the bill of lading was not bound by the arbitration provision. On the other hand, if the arbitration clause specifically provided it applied to disputes under the bill of lading and if there was a general incorporating provision in the bill of lading, or if the incorporating provision in the bill of lading specifically referred to the arbitration provision, the bill of lading holder would be bound by the arbitration clause.

In Afton Operating Corp. v C.N.R. (January 13, 1994) Vancouver Registry No.C921353 (B.C.S.C.), the British Columbia Supreme Court considered whether section 15 of the Commercial Arbitration Act left it with a discretion to refuse a stay of proceedings in a dispute that was subject to an arbitration agreement. The Motions Judge held that he had such discretion and exercised it. He refused the stay on the basis that there were other defendants to the action, one of which had third partied the defendant who had brought the stay application. Under those circumstances, the Court held a stay should not be granted. The defendant in this case subsequently brought an application for leave to appeal this decision which was granted; Afton Operating Corp. V C.N.R. (February 21, 1994) Vancouver Registry CA018322 (B.C.C.A.). The judgment granting leave to appeal casts doubt on the correctness of the decision reached by the Motions Judge.

In Trade Fortune Inc. et. al. v Amalgamated Mill Supplies Ltd. (February 25, 1994) Vancouver Registry C940730 (B.C.S.C.), the issue was whether a party could obtain a pre-judgment garnishment order in an action commenced in British Columbia to secure a dispute under arbitration in England. The Court held that section 9 of the International Commercial Arbitration Act, which allows the Court to grant an "interim measure of protection" to a party to an arbitration, gave an arbitrating party the right to obtain a garnishing order before judgment in order to secure funds for the eventual payment of the arbitration award.

ADMIRALTY PRACTICE

The availability of sistership arrest was the issue in Ssangyong Australia Pty. Ltd. et. al. v The "Looiersgraacht" (October 19, 1994) Action T-2166-94 (F.C.T.D.). In this case the plaintiffs sought to arrest the "Looiersgraacht" for cargo claims they had against other ships alleged to be sisterships. Each vessel was owned by a separate limited partnership but had the same managing company and this managing company also had an ownership interest in most of the vessels. The Court held that this fractional common ownership was not sufficient to justify sistership arrest. There must be common complete ownership of both vessels.

Joint Stock Society Oceangeotechnology v The "1201" (January 17, 1994) Action T-2640-93 (F.C.T.D.) concerned the right of the plaintiff tug owner to commence an in rem action for breach of a towage contract before the tow had actually commenced. The parties had entered into a contract for the towage of the "1201" and pursuant to this contract the tug had actually been dispatched from the Mediterranean to Halifax to pick up the "1201". When the tug was half way across the Atlantic the defendant cancelled the contract having made a new contract with other owners. The defendant argued that as there was no actual towage an in rem action could not lie against the "1201". The Court disagreed and held that it was sufficient to have commenced to fulfill the terms of a contract of towage to support an in rem action under section 22 (2)(k) of the Federal Court Act.

Textainer Equipment Management B.V. v Baltic Shipping Co. (August 29, 1994) Action T-1995-94 (F.C.T.D.) also concerned the right to bring an in rem action. The plaintiff in this case leased to the defendant in excess of 3,800 containers for use on its ships. The defendant defaulted on the leases and owed the plaintiff in excess of US$3 million. The plaintiff commenced in rem proceedings and arrested one of the defendants vessels. The defendant moved to strike out the statement of claim and set aside the arrest. The Court refused to do so relying on the terms of the lease agreements which provided that in the event of default the plaintiff would have a maritime lien against the vessels owned by the defendant and could exercise that lien by "appropriate process in any court of any country having general Admiralty and Maritime Jurisdiction".