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Admiralty Practice
NOTE: The Rules of the Federal Court, including the Admiralty Rules were substantially amended in 1998. The new rules, now called the Federal Court Rules, 1998 came into effect for existing and future proceedings on April 25, 1998.The full text of the Admiralty Rules, may be found here. The text of the Federal Court Act can be found here. In Rem ActionsIn Rem Proceedings – Breach of Charter – Failure to Load Cargo – Appeals Kremikovtzi Trade v Phoenix Bulk Carriers Limited, 2006 FCA 1 By contract of affreightment between the Appellant and the Respondent, the Appellant agreed to ship a cargo of coal on the Respondent's vessel. In alleged breach of this contract, the Appellant entered into a second contract of carriage with another shipowner and loaded the coal on board that shipowner's vessel. The Respondent commenced an in rem proceeding against the cargo and caused the cargo to be arrested while on board the other ship. The Appellant then brought this application to strike the Statement of Claim in rem and set aside the arrest. At first instance the application was refused but, on appeal to the Federal Court of Appeal, the appeal was allowed and the Court ordered that the Statement of Claim in rem be struck and the arrest set aside. The Court of Appeal held that it was bound by its decision in Paramount Enterprises International Inc. v The “An Xin Jiang”, [2001] 2 F.C. 551, which was indistinguishable from the facts in the present case. However, and most interestingly, the Court of Appeal wrote that Paramount Enterprises International Inc. v The “An Xin Jiang” had been wrongly decided in that the words “subject of the action” in s. 43(2) of the Federal Court Act had been given too narrow a meaning. Nevertheless, the Court held that it could not overrule a prior decision of another panel of the court unless the decision was manifestly wrong in the sense that the other panel had overlooked a relevant statutory provision or a case that ought to have been followed. As this test had not been met, the Court was bound by its prior decision. (Note: In a subsequent application for leave to appeal to the Supreme Court of Canada (2006 FCA 240), the same panel (with one dissent) granted leave.) Arrest of Ships – Whether Sister Ships – Setting Bail Norcan Electrical Systems Inc. v. Feeding Systems A/S et al., 2003 FCT 702 These were two actions for necessaries. The first was for necessaries supplied to the vessels “FB XIX” and “FB XX” . The second action was for necessaries supplied to the vessels “FB XXII” and “FB XXIII”, which were alleged to be sister ships of “FB XIX” and “FB XX”. The vessels “FB XIX” and “FB XX” were arrested pursuant to warrants of arrest issued in both actions. An application was brought in the first action to have bail set and an application was brought in the second action to have the claims struck on the ground that the arrested vessels were not sister ships of the vessels to which the necessaries were supplied. Regarding the setting of bail, the Prothonotary applied the general rule that a Plaintiff is entitled to bail in an amount sufficient to cover his or her reasonably arguable best case, together with interest and costs, but limited by the value of the vessel. The Prothonotary noted, however, that in the event that security demanded and posted was excessive, there is a separate remedy for wrongful demand of excessive security. Regarding the sistership issue, the Prothonotary found as facts that the arrested vessels were owned by Feeding Systems A/S, that the wrongdoing vessels were owned by Feeding Systems Chile Ltda. and that all the shares in Feeding Systems Chile Ltda. were owned by Feeding Systems A/S. Moreover, the Prothonotary found that Feeding Systems Chile Ltda. was an agent of and fully controlled by Feeding Systems A/S and that Feeding Systems A/S had guaranteed the Chilean debts of Feeding Systems Chile Ltda. The Prothonotary reviewed the English and French versions of s. 43(8) of the Federal Court Act and concluded that the two versions were different and irreconcilable. Under the English version, which looked to registered ownership, the vessels arrested in the second action would not be sister ships of the wrongdoing vessels. However, under the French version, which looked at beneficial ownership, there was a substantial and reasonably arguable case that these vessels were sister ships. In the event, the Prothonotary concluded that it was not plain, obvious and beyond doubt that the Plaintiff’s case would not succeed and he was not prepared to strike the claim. (Note: See also Royal Bank of Scotland PLC v The “Golden Trinity” et al., 2004 FC 795, which is summarized below.) In Rem Proceedings – Striking – Arrest ICS Petroleum (Montreal) Ltd. v Les Dauphins du St. Laurent et al., 2005 FC 251 The Plaintiff in this action was a fuel supplier that had supplied fuel to a shore tank for use in three ships allegedly owned by the now bankrupt in personam Defendant. Two of the ships were in fact owned by the Defendant but the third ship, the “Corona Borealis”, was merely demise chartered to the Defendant. When the Defendant defaulted in its payments the Plaintiff arrested all three ships in this action to recover the price of fuel sold. The owner of the “Corona Borealis” brought this application to set aside the arrest and strike the in rem claim as against the “Corona Borealis”. The motion was successful. The Prothonotary found that the fuel was supplied by the Plaintiff pursuant to standard contractual terms that contained a clause creating an unspecified lien “over the vessel” and that acknowledged the Plaintiff/Seller was relying upon the credit of the vessel. The Prothonotary acknowledged that this clause created a lien of some description over the ships in fact owned by the Defendant, however, it was held not to create a lien over the “Corona Borealis” which was not owned by the Defendant. Moreover, the Prothonotary noted that the fuel was not supplied to “a ship” as required by section 22(2(m) of the Federal Court Act, but to a storage tank. Accordingly, the arrest was set aside and the in rem action against the “Corona Borealis” was struck. A further procedural point discussed in this matter concerned the use of affidavit evidence on a motion to strike. The Plaintiff argued that such evidence was not permitted. The Prothonotary, however, held that affidavit evidence is allowed on a motion going to jurisdiction. In Rem Actions – Service on Proceeds – Summary Judgment – Repairers/Necessaries Suppliers Northwest Delta Yacht Services Inc. v Sovereign Yachts et al., 2004 FC 304 The Plaintiff in this action had installed teak decking on the Defendant yacht pursuant to a contract with the builder. The Plaintiff was not paid by the builder and brought this proceeding in rem against the yacht and in personam against the builder and against the purchasers of the yacht. The statement of claim was served on one of the purchasers but was not served on the other purchaser or on the vessel. The purchaser that was served filed a defence and brought this application to dismiss the entire action. The court allowed the application in part. The in personam action against the purchaser that had been served was dismissed on the grounds that there was no contract between the Plaintiff and that purchaser. With respect to the in rem action a preliminary issue was whether the ship had been validly served. The Plaintiff admitted that the yacht itself had not been served but argued that pursuant to rule 479(1)(d) it could perfect the in rem claim by suing funds deposited into court in a separate action as bail. The court rejected this argument holding that the word “proceeds” used in rule 479(1)(d) referred to proceeds of sale and not money deposited to secure the release of property from arrest. The court, however, refused to dismiss the in rem action or the in personam action against the other purchaser. The court held that the summary judgment rules did not permit one Defendant to move to strike an action against other Defendants who had not been served and had not defended. In Rem Action – Striking – Arrest – Commission Contract Atlantic Yacht 7 Ship Inc. v Sovereign Yachts Inc. et al., 2003 FC 965 The Plaintiff in this matter alleged that it was owed commission by the Defendant yacht builder in respect of the Defendant yacht, the purchaser of which had been introduced by the Plaintiff to the Defendant. To secure its claim the Plaintiff effected an arrest of the Defendant yacht. The purchaser of that yacht brought this application to set aside the arrest and strike the in rem action. The Prothonotary granted the application holding that the brokerage services contract between the Plaintiff and Defendant did not give rise to a cause of action in rem. In Rem Actions – Striking – Fishing Licenses Roberts v Andrews, 2003 BCSC 1002 This was an application to set aside a warrant of arrest and strike an in rem action. The case concerned a joint venture fishing operation in which the Plaintiff provided fishing licenses and the Defendant provided, inter alia, a fish packing vessel. A dispute arose as to the distribution of profits and the Plaintiff commenced this proceeding and arrested the fish packer. The motions Judge held that the fishing licenses were privileges granted to persons and not vessels and the Plaintiff's supply of the licenses to the joint operation was neither a supply of necessaries nor services and, even if they were, they were not supplied to the fish packer. In the result the in rem action was struck and the arrest set aside. In Rem Actions - Arrest - Dispensing with Service Brooks Aviation Inc. v Wrecked and Abandoned Boeing Sb-17g Aircraft, 2002 FCT 503 This very interesting application was for an order dispensing with service of the Statement of Claim, Affidavit to Lead Warrant and Warrant. The res was a B-17 aircraft that had crash landed on a lake in Labrador during the winter of 1947. The following year the aircraft sank during the spring thaw and it remains submerged. The wreck was discovered by the Plaintiff in July 1998. The story of the discovery of the wreck was widely publicized in both print and by a television documentary. The Plaintiff in its statement of claim alleged salvage rights to the wreck and, because it was impossible to serve the res brought this application. Given the special circumstances of the case, the court allowed the Plaintiff’s application. In doing so the court noted that the Plaintiff had provided Federal and Provincial authorities with the court documents and that notice of the discovery and the salvage claim had been or would be given to all interested persons. In Rem Actions - Service - Default Judgment - Interest - Costs for Lay Litigants Coath v The “Bruno Gerussi”, 2002 FCT 385 This was an application for default judgment in personam and in rem. The Prothonotary granted the judgment in personam but refused the judgement in rem as the Statement of Claim had not been served on the vessel but instead had merely been given to the person in charge of the vessel. The Prothonotary noted that such service would only be effective if the affidavit material disclosed that access to the ship was not possible. The Plaintiff requested interest on the judgment at 12.5% per annum compounded semi-annually. The Prothonotary noted that interest is governed by the principle of restitution and that interest is normally awarded at prevailing commercial rates. In the absence of any evidence as to prevailing rates, the Prothonotary awarded interest at the rate paid on monies paid into the Federal Court ie. 3.6%. With respect to compound interest, the Prothonotary again noted that this is discretionary and allowed compound interest as the Plaintiff would have received compound interest if it had been paid and the monies were deposited in a bank account. Finally, the Plaintiff, who was self-represented, requested costs of $500.00. The Prothonotary held that a lay litigant may receive out of pocket expenses for time spent pursuing his legitimate interests and awarded the Plaintiff $300.00. In Rem Actions - Striking Trawlercat Marine Inc. v The “Amity”, 2002 FCT 1181 The Defendant obtained plans from the Plaintiff for a 55' catamaran which the Defendant intended to build. The Defendant decided not to proceed with the project and later retained a naval architect to design a 70' catamaran. The Plaintiff subsequently commenced this in personam and in rem action alleging breach of a contract to execute a purchase and construction agreement and breach of copyright. The Plaintiff arrested the 70' catamaran which was in the process of being built. The Defendant then brought this motion to strike the in rem portions of the Statement of Claim. The motion was allowed by the Prothonotary. The Prothonotary held that the copyright claim could not sound in rem and further held that the in rem contract claim against the 70' catamaran could not be supported by section 22(2) (m) (necessaries) or (n) (contracts relating the repair or building of a ship) of the Federal Court Act since the ship did not exist at the material time. Action In Rem - Necessaries Balcan ehf v The “Atlas”, 2001 FCT 1328 At issue in this case was the validity of the Plaintiff’s claim against the Defendant ship. The Plaintiff alleged it had a valid claim as a supplier of necessaries. The Court held, however, that the Plaintiff had neither supplied necessaries to the ship nor had it paid for the necessaries that were supplied by third parties. Consequently, the Plaintiff was not a necessaries claimant and the Statement of Claim and Warrant of Arrest were struck. Sister Ships - Action In Rem - Striking Out Adecon Ship Management Inc. v The "Calix" et al., (May 15, 2000) No. T-267-00 (F.C.T.D.) Roxford Enterprises S.A. v The "Calix" et al., (May 15, 2000) No. T-123-00 (F.C.T.D.), [2000] F.C.J. No. 671 These matters were applications to strike an action in rem and to set aside the arrest of an alleged sister ship. The underlying claims were for breach of contract of sale. The Plaintiff alleged that it had purchased the "Calix" free and clear of encumbrances but that after the sale it had to pay off liens and encumbrances. The Plaintiff arrested an alleged sister ship to secure its claim. The Court noted that in rem sister ship jurisdiction under s. 43(8) of the Federal Court Act required that the arrested sister ship be beneficially owned by the owner of the "Calix", the ship that is the subject of the action, at the time the action was commenced. The Court held that at the time the action was commenced the "Calix" was owned by the Plaintiff and, therefore, there was no right to sister ship arrest. In the result the Court ordered that the action in rem be struck and that the arrest be set aside. Action In Rem - Striking out Paramount Enterprises International Inc. v The "An Xin Jiang" et al., (December 15, 2000) No. A-924-97 & A-929-97 (F.C.A.), [2000] F.C.J. No. 2066 The issue on this appeal was whether the claims in rem against the Defendant ship and her cargo should be struck. The underlying action was for breach of contract against one Defendant and for wrongful interference with contractual relations against the other Defendant. The facts were that the Plaintiff had entered into a contract with the one Defendant for the carriage of that Defendant’s cargo on board the vessel "Len Speer". The Plaintiff positioned the "Len Speer" for the carriage but the Defendant did not supply the cargo. Instead the Defendant had the cargo carried on board the "An Xin Jiang". The Plaintiff then commenced this action and arrested the "An Xin Jiang" and the cargo. The issue before the Court was whether this was a proper exercise of the in rem procedure. The Court of Appeal held that in order to support an action in rem the property arrested must be the "subject" of the "cause" of the action. Applying this test to the facts of the case the Court of Appeal held that the actions in rem had to be struck. The "An Xin Jiang" was not the subject of the contract relied upon by the Plaintiff. Further, the Plaintiff never had possession of the cargo and had no lien on the cargo and therefore there was no basis for an in rem action against the cargo. Action In Rem - Arrest - Claim for Improvident Sale by Mortgagee Middleton v The "Ocean Tribune", (2000] B.C.J. No. 2271 (B.C.S.C.) This was a motion to strike out the action in rem. The Plaintiff’s action was to set aside a sale of the Defendant vessel by the mortgagee to a company controlled by the mortgagee at a price that was substantially less than the value of the vessel as appraised at the time the mortgagee took possession. The Plaintiff pleaded that the sale of the vessel was part of a plan to deprive the plaintiff of its equity in its vessel and was null and void. The Defendant argued that the Plaintiff’s claim was primarily a contractual dispute between a borrower and a lender and that the court did not have in rem jurisdiction. The Court held that the claim was properly one in rem and dismissed the Defendant’s motion. Sisterships North Star Ship Chandler Inc. v The "Giuseppe Di Vittorio", (June 3, 1998) No.T-1057-98 (F.C.T.D.) This was a motion to dismiss the action in rem and set aside the arrest of a sistership. The Defendant maintained that the alleged sistership, the "Lynx", had a different owner from the "Giuseppe Di Vittorio", the ship was the subject of the action. The Defendant relied on the Lloyd's List of Shipowners and Monthly Supplement which showed Black Sea Shipping Co. as the owner of the "Giuseppe Di Vittorio" and Stockwell as the owner of the "Lynx". The Plaintiff presented evidence in the form of an invoice which mentioned Black Sea Shipping Co. and also presented an excerpt from Lloyd's Maritime Directory 1998 listing the "Lynx" under the name Black Sea Shipping Co., albeit with the name "Stockwell" in parenthesis. The Prothonotary held that there was sufficient evidence for the Plaintiff to conclude the "Lynx" had the same beneficial ownership as the "Giuseppe Di Vittorio" and dismissed the motion. Quashing Warrants to Arrest - In Rem Claims Cold Ocean Inc. v The "Gornostaevka" et al., (1999), 168 F.T.R. 269, (F.C.T.D.) This action concerned a claim by the Plaintiff for breach of a fishing agreement by the Defendant who was the demise charterer of the two Defendant ships. The Plaintiff arrested the ships and the cargo on board one of the vessels. The moving party, the sub-charterer of the ships and the owner of the cargo that had been arrested, brought the present motion for orders setting aside the warrants of arrest and striking out the Statement of Claim. The court reviewed the evidence and noted that it was clear that the Defendant was not the owner of the ships or cargo. Accordingly, the court held there was no in personam claim against the owner and an in rem action could therefore not be supported. The court set aside the arrest warrants and struck out the statement of claim. Stay of Proceedings - In Rem Proceedings - Change of Ownership
Fibreco Pulp Inc. et.al v Star Shipping A/S
et.al., This case involved damage to two shipments of pulp. The significant issue in this case was whether the action should be stayed against not only parties to an arbitration agreement but also against Defendants not parties to the agreement. The Court held that the action could be stayed against all Defendants. A secondary issue in this case was whether the in rem action against one of the Defendant ships ought to be set aside and the security given by the shipowner returned. The grounds were that there had been a change in the beneficial ownership of the ship after the voyage in question but before the action was commenced. (For certain specified claims, including cargo claims, section 43(3) of the Federal Court Act requires that the ship's beneficial ownership be the same at the time of commencement of the action as it was when the cause of action arose.) The Court granted the motion and ordered that the in rem proceeding be struck and that the security be returned. Breach of Agency Contract Scandia Shipping Agencies Inc. v. The "Alam Veracruz" (December 23, 1997) No. T-2472-97 (F.C.T.D.) The issue in this case was whether an action In Rem is available against all property of a Defendant or only against the property that is the subject of the action. The underlying action involved a claim by the Plaintiff agent alleging that the Defendant shipping line had wrongfully terminated the brokerage agreement between them. The agent commenced In Rem proceedings and arrested the bunkers and freight of the "Alam Veracruz". Before the Prothonotary and on appeal, the Court struk out the In Rem action and set aside the arrest. The Court held that an In Rem action was available only against property that is the subject of the action. The Court further held that since the action was merely for breach of a brokerage contract there was no In Rem action and no right of arrest. Renewal of Writ and Sisterships Belgo Nineira Commercial Exportadora S.A. et. al. v. Hadley Shipping Co. Ltd. et.al., (May 12, 1997), No. T-2161-94 (F.C.T.D.) In this matter the Plaintiff had commenced action against the wrong-doing vessel and three sister ships. One of the sister ships had been in the jurisdiction but it had not been served by the Plaintiff who subsequently obtained an order extending the time for service of the Statement of Claim. The same sister ship later returned to the jurisdiction. The Defendant brought a motion to set aside the time extension and strike the Statement of Claim as against that sister ship. Counsel agreed that the time extension should be set aside but could not agree on whether the Statement of Claim should be struck as against that sister ship. The Prothonotary noted that a Plaintiff could renew a Statement of Claim as against only those ships that had not come in the jurisdiction. The Prothonotary ordered that the Plaintiff file an amended Statement of Claim deleting the sister ship from the style of cause. Charterparty Margem Chartering Co. Inc. v Cosena SRL and The "Bocsa", (March 5, 1997) T-2418-96 (F.C.T.D.) This was a motion by the shipowner to strike out the In Rem Statement of Claim and set aside the arrest . The Plaintiff had entered into a charter party agreement with the "disponent owner" of the ship for the carriage of coal. Upon arrival at the port of loading the vessel was detained by Coast Guard and was unable to load her cargo. The Plaintiff then commenced the action against the owners and arrested the ship for the breach of charter party. The main issue in the case was whether the charterparty was with the shipowner or with the "disponent owner". Upon reviewing the evidence the Prothonotary held that the charterparty was with the "disponent owner" and struck out those portions of the Statement of Claim alleging breach of contract by the shipowner. The Prothonotary, however, did not set aside the warrant for arrest as the Plaintiff had a possible cause of action against the shipowner in tort and such a claim was enforceable In Rem pursuant to section 22(2)(i) of the Federal Court Act. Booking Note Domtar Inc. v. Lineas De Navigation Gema S.A. et.al., (April 11, 1997), No. T-2873-96 (F.C.T.D.) This was a motion by the Defendant shipowner to set aside an arrest and strike the in rem portions of the claim. The Plaintiff's action was for breach of a booking note contract. The Defendant shipowner argued that the vessel could not be arrested as it was not a party to the booking note contract. The shipowner argued the booking note was between the Plaintiff and the other Defendant. The Court, however, noted that there was some evidence suggesting a close relationship between the shipowner and the other Defendant. The Court held that it was not obvious on the evidence that the shipowners were not liable in contract to the Plaintiff and refused to set aside the warrant or dismiss the in rem claim. Sisterships Elecnor S.A. v The "Soren Tourbo" et.al.,(May 30, 1996) T-152-95 (F.C.T.D.) This case addresses the issue of whether the Plaintiff must name all sisterships in a Statement of Claim. The action was originally commenced on January 25, 1995, against the ship "Soren Turbo". The Statement of Claim was renewed on January 15, 1996 for a further twelve months. This renewal was, however, subject to the proviso that if the "Soren Tourbo" had been within the jurisdiction, the Order could be set aside. The owner subsequently moved to set aside the Order on the grounds that a sistership of the "Soren Tourbo" had been within the jurisdiction during the initial currency of the Statement of Claim. The owner argued that the Plaintiff's failure to include the sistership in the Statement of Claim and to serve her while she was in the jurisdiction disentitled it to a renewal of the pleading. The Prothonotary held, however, that the sistership provisions in the Federal Court Act and Rules were permissive and not mandatory. The fact that a sistership not named in the Statement of Claim had been in the jurisdiction did not disentitle the Plaintiff to a renewal of the pleading. Summary Judgement - Sale of Bunkers Feoso Oil Limited v The "Sarla", [1995] F.C. 68, (F.C.A.) This was a motion for summary judgment involving a claim by the Plaintiff for non-payment of an invoice relating to bunkers supplied to the Defendant ship. The ship had been under a time charter although it was not clear whether the charter had come to an end before the bunkers were ordered. The Defendant owners resisted the claim and the motion for summary judgment on the grounds that the bunkers were not ordered by or on behalf of the owners. The Court of Appeal re-affirmed the general principle that an action in rem cannot be sustained unless the bunkers (or other necessaries) were supplied to the ship at the request of owners or by someone acting on their behalf and with authority to bind them. The Court held, however, that the evidence as to who ordered the bunkers was contradictory and that there was an issue of credibility that could not be resolved on a motion for summary judgment. In result, the Court held that there was a genuine issue for trial. Effect of Service on Ship Key Marine Industries Ltd. v The "Glen Coe",(1995), 92 F.T.R. 313, (F.C.T.D.) The Plaintiff in this matter applied for default judgment against the Defendants. The Plaintiff had effected service of the Statement of Claim on the ship but had not served the owners and no Statement of Defence had been filed. The filing of a defence would have amounted to an appearance in the action by the owners and would have converted the In Rem action into an In Personam action. The Court held that because the owners had not been served and had not filed a defence the Plaintiff was not entitled to judgment against them. Bail – Amount – Proof Canadian Sub Sea Hydraulics Limited v The “Cormorant”, 2006 FC 1051 This was an application by the Defendant to set bail for the release of its ship from arrest. The underlying claim of the Plaintiff was for unpaid invoices relating to the provision of goods and services to the ship. There was also a counterclaim by the Defendant. The Court noted that bail was to be determined based on the Plaintiff's reasonably arguable best case and further noted that ordinarily this would be the amount of the Plaintiff's claim. However, the Court further noted that it could set bail at a lesser amount where the circumstances warranted. The Court was particularly troubled by a detailed affidavit filed by the Defendant containing serious allegations against the Plaintiff and which was not challenged or contradicted by any evidence from the Plaintiff. In light of this affidavit, the Court set bail at an amount equal to approximately one-half of the Plaintiff's claim. Bail – Amount – Standard of Proof – Caveat Warrants Calogeras & Master Supplies Inc. v. Ceres Hellenic Shipping Enterprises Ltd., 2006 FC 764 This was an application to set the amount of bail. The Court noted that the general rule was that bail should be sufficient to cover the Plaintiff's reasonably arguable best case including interest and costs but limited by the value of the arrested vessel. An apparently novel point raised in the motion was the standard that should be applied by the court when weighing the evidence. The Defendant argued that the standard should be similar to that applied in summary judgment motions, namely, that the Plaintiff is prima facie entitled to the amount claimed but once the Defendant files a motion to set bail the Plaintiff must put its best case forward to show that the amount claimed constitutes a genuine issue for trial. The Court questioned whether that standard was too high but concluded that even applying that standard the bail should not be reduced. A further novel point was raised in the motion in relation to the costs. Specifically, even though unsuccessful in the motion, the Defendant took the position that the Plaintiff should pay the costs since the Plaintiff had obtained a warrant of arrest notwithstanding the existence of a Caveat warrant. The Court reviewed Rule 494 relating to Caveat warrants and recognized that a Plaintiff was entitled to obtain the issuance of a valid warrant when a Caveat warrant had been filed but would be liable for all resulting costs and damages. The Court found, however, that there were no damages as the parties had agreed to security prior to the arrival of the vessel and the vessel was not, in fact, arrested. Arrest – Release without Bail – Security – Security for Costs Fish Maker LLC v The “Zodiak” et al., 2004 FC 6700 The Defendants brought this application to release the Defendant vessel from arrest without bail or, alternatively, to set bail. The Prothonotary refused to release the ship without bail noting that this will only be done in rare instances where the circumstances are quite extraordinary or where the case is beyond doubt hopeless. Accordingly, the Prothonotary set security at an amount determined by the Plaintiff's reasonably arguable best case plus three years interest at 5% and costs. The Prothonotary also granted the Defendant security for costs on the basis that the Plaintiff was an American company not ordinarily resident in Canada. Arrest – Bail Norgate Marine Management v. Genfreight Limited (The “Conti Will”), 2003 FCT 444 This was an application, inter alia, to reduce the amount of security posted to release the vessel from arrest. The Court reduced the amount of security by 20% on the basis that the Court was satisfied that the claim would not succeed in full. The Court noted that the right of a Plaintiff to full security must be balanced so as not to be oppressive. Arrest – Bail – Mitigation Zhoushan Zhongchang Shipping Co. v The “Otello Manship” et al., 2004 FC 1181 affirming 2004 FC 1135 This was an application to set bail. The underlying action was for breach of contract for the sale and delivery of a bulk carrier. By the contract of sale the Defendant was required to deliver the vessel in China by 20 January 2004 which was later extended to 12 February 2004. The Defendants did not deliver the vessel as required but tendered a one day notice of delivery on 28 April 2004. The vessel was not delivered within the one day time period and the contract was repudiated on 7 May 2004. The vessel was later arrested in Vancouver at which time the parties apparently again entered into discussions for the sale of the vessel at that time. Those discussions were not successful. The main issue in the application was whether the amount of bail should be reduced by the Plaintiff's failure to mitigate its loss. Specifically, the Defendant argued that the Plaintiff should have accepted a sale and delivery of the vessel at Vancouver which would reduce the Plaintiff's damages to a loss of use claim. At first instance, the Prothonotary accepted that mitigation was a special circumstance that should be taken into account when setting bail at a Plaintiff's reasonably arguable best case. However, on the conflicting and incomplete evidence before him the Prothonotary considered it was not advisable to moderate the bail based on the alleged failure to mitigate. Accordingly, bail was set at the difference between the agreed purchase price and the value of the vessel on the last date the vessel was to have been delivered plus costs of $300,000 and interest for one year at 6%. On appeal, the appeal Judge held that the obligation on a Plaintiff to mitigate its loss and accept a lesser security was not applicable in the circumstances given the conduct of the Defendant. The appeal Judge confirmed the order of the Prothonotary and dismissed the appeal. Arrest – Bail – Delivery – Solicitor Client Costs NHM Internatinal Inc. v F.C. Yachts Ltd. et al., 2003 FCT 53, 2003 FCT 373 This matter concerned a dispute over the construction of a vessel. The Defendant had agreed to construct the vessel for a fixed price and progress payments were made by the Plaintiff during the course of construction. The vessel was, however, not completed on time and the Plaintiff went into possession as mortgagee under a builder's mortgage. The Plaintiff also arrested the vessel and brought this motion to set bail. The Plaintiff proposed that bail be set at the amount owing under the fixed price contract plus the hold back amount. The Defendant argued that the fixed price contract was not valid as it had not been signed and that bail should be set on the basis of a cost plus contract. The Court noted that bail was to be set at an amount equal to the claimants best arguable case plus interest and costs but also noted that a proper balance must be struck and the power to arrest must not be exercised oppressively. The Court held that the Defendant's argument that the fixed price contract was invalid was unreasonable, inconceivable and extravagant and refused to set bail on the basis of a cost plus arrangement. The Court also considered an argument advanced by the Defendant that the taking of possession of the vessel by the Plaintiff as mortgagee was a delivery of the vessel in Canada which attracted a liability for the payment of provincial sales tax and goods and services tax. The Court rejected this argument holding that neither going into possession as mortgagee nor arresting the vessel constituted delivery. In later Reasons (2003 FCT 373) the Court dealt with a request by the Plaintiff for an award of costs of the motion in the amount of $14,000. The Court reviewed the case law as to when solicitor client costs might be awarded and noted that it is only done in exceptional cases or where there has been misconduct. The Court declined to order solicitor client costs in the requested amount of $14,000 but did consider that the extreme positions taken by the Defendant justified a “deterrent element” and ordered lump sum costs in the amount of $9,000. Arrest – Abuse of Process – Security North King Lodge v The “Gowlland Chief” et al., 2003 BCSC 947 This was an application to set aside the arrest of the Defendant vessel or alternatively for setting the form and amount of security. The underlying action concerned the sinking of the Plaintiff's vessel due to the alleged negligence of the Defendants. The motions Judge considered first whether the arrest should be set aside due to abuse of process and noted in this regard that an abuse of process would be an arrest done for some purpose other than a legitimate desire to secure the claim, for example, to leverage a defendant into an improvident settlement. The motions Judge found there was no evidence of abuse of process. With respect to the form of security required, the motions Judge noted that the Rules contemplated security in the form of a payment into court, a surety bond, letter of credit or letter of undertaking and held that these forms of security should not be departed from absent a very good reason. He specifically declined to order posting of security by way of a mortgage on the Defendant vessel. Turning to the maximum amount of security, the motions Judge found that the parties were in agreement that the Defendant vessel had a market value of between $350,000 and $360,000. He next considered the amount of security that should actually be posted and found that the Plaintiff's best arguable case was the value of its vessel at $700,000. However, applying a contingency of 50% , he reduced this amount to $350,000. He also refused to apply a mark-up to take into account interest and costs. (Note: Rule 55(26) of the British Columbia Supreme Court Rules does not permit security to be given by way of a letter of undertaking as this judgment suggests. Also, the reduction in the amount of security from the Plaintiff's best arguable case by taking into account contingencies is questionable given the existing authorities. Similarly, the refusal to take into account interest and costs in setting security would seem to be contrary to the weight of authority. Nevertheless, the result arrived at is justifiable given the value of the Defendant vessel, and therefore the upper limit on security, was approximately $350,000) Arrest - Ship’s Equipment - Contempt Whyte v The “Sandpiper VI”, 2002 FCT 271
In this matter the Plaintiff had arrested the Defendant dredge and afterwards learned that the
“spoils pipeline” had been rented to a third party and moved. The Plaintiff thereafter brought this
motion which was treated as an application to show cause order. The Defendant argued that the
rented pipeline was not caught by the arrest warrant. However, the Prothonotary held that an
arrest warrant catches all of a ship’s equipment including equipment not on board the ship. The
Prothonotary further held that the Plaintiff had made a prima facie case for contempt and a show
cause order was issued. Arrest- Sheriff in Possession - Movement of Arrested Vessel - Building Contracts Striebel v The “Chairman”, 2002 FCT 545 This case concerned a ship building contract that went awry. The Plaintiffs, the mortgagees and intended owners of the defendant ship, commenced this action against the shipbuilder for damages. The Defendant shipbuilder counterclaimed for lost opportunity to complete the construction of the vessel. These reasons deal with three interlocutory motions. The first was an ex parte motion brought by the Plaintiffs for an order that the sheriff go into possession of the defendant vessel. The second motion was by the Defendant to set aside the ex parte Order. The third motion was by the Plaintiff for an order to move the Defendant vessel to the premises of another shipyard for completion. The Prothonotary allowed the motions by the Plaintiffs and dismissed the motion by the Defendant. With respect to the motion to put the sheriff into possession the Prothonotary noted that there was no authority setting a test to be met to put a sheriff or marshal into possession. The Prothonotary thought that the test should be set at a very low threshold and held that an appropriate test should be “reasonably plausible evidence that the vessel should have the protection afforded by a sheriff in possession”. The Prothonotary found this test was met in the this case as there was evidence of petty vandalism and obstructionism by the Defendant’s employees. With respect to the motion to set aside the ex parte Order, the Defendant argued, inter alia, that the Order should be set aside because the Plaintiffs did not give full disclosure. The Prothonotary held that the facts relied upon by the Defendant were not material and further noted that the setting aside of an ex parte order putting a sheriff into possession should be upheld if there is any possibility that possession in the sheriff may be of reasonable value. Finally, with respect to the motion to move the vessel to another shipyard for completion, the Prothonotary allowed the motion noting that the Plaintiffs had exercised their right to take possession of the vessel as mortgagees which they were entitled to do and further that any damages the Defendant might suffer would be secured by a bond to be supplied by the Plaintiffs. Arrest - Bail Striebel v The “Chairman”, 2002 FCT 925 The issue in this motion concerned the amount of security to be provided to a shipbuilder who had failed to complete construction of a yacht within the time frame required by the building contract. The purchasers took possession of the yacht as mortgagees and moved it to the yard of another builder for completion. The shipbuilder counterclaimed for lost profits in the amount of $1.8 million and sought security in the amount $2 million. The Prothonotary reviewed the evidence of the shipbuilder’s counterclaim and found it contradictory and incomplete and concluded that the claim would not succeed in the amount presented. The Prothonotary therefore set the security required at $1 million. Arrest - Letter of Guarantee - Interpretation Richardson International Ltd. v The “MYS CHIKHACHEVA” et al., 2002 FCT 482 The issue in this motion was the interpretation of a letter of guarantee given by the Royal Bank of Canada to secure the release of the defendant vessel from arrest. By the letter of guarantee the bank agreed that if the owners did not pay a judgment against them execution could issue against the bank. The Plaintiff in due course obtained a judgment against the owners which was not paid and, consequently, made demand under the guarantee. The bank refused payment because the beneficiary of the guarantee was stated as being the Federal Court of Canada. Notwithstanding this wording, the Prothonotary held that the bank was liable under the guarantee. The Prothonotary stated that given the factual background it ought to have been clear to the bank that the guarantee was to secure the Plaintiff and not the Federal Court and he interpreted the guarantee accordingly. With respect to costs, the Prothonotary declined to award costs against the bank, a non-party. Arrest - Release - Security - Arbitration Cyber Sea Technologies Inc. v Underwater Harvester, 2002 FCT 794 In this matter a submersible was arrested and the Defendant brought an application, inter alia, to release the submersible without bail or, in the alternative, to post security. The grounds for the Defendant’s application were that the action was without merit and that the dispute was subject to arbitration. The Prothonotary held that it is only in exceptional circumstances that a vessel will be released from arrest without bail. Moreover, the fact that the dispute was subject to arbitration did not disentitle the Plaintiff to security. The fact of arbitration was, however, relevant to the amount of security. In setting the amount of the security the Prothonotary took into account that each party was required to pay its own costs of the arbitration. Arrest - Security C.P. Ships (Bermuda) Ltd. v The “Panther Max”, 2002 FCT 406 This was an appeal from an order of a Prothonotary requiring the Defendants to pay $780,500.00 as security to obtain the release from arrest of the Defendant vessel and an additional 20% as a provision for interest and costs. The appeal Judge affirmed the award of the Prothonotary holding that he had properly understood and applied the correct test, namely, that the Plaintiff was entitled to security in an amount sufficient to cover its reasonably arguable best case. Release from Arrest Ed Wahl Boat Builders and Repairs Ltd. v Holm, (August 28, 2000) No. T-627-00 (F.C.T.D.), [2000] F.C.J. No. 1381 In this matter the Plaintiff boat builder commenced proceedings for an amount said to be owing by the Defendants in respect of a boat under construction and had the boat arrested. The Defendants counterclaimed for defective construction. During the course of the proceedings the Plaintiff ran into various difficulties with creditors, its counsel and its sole officer and director. As a result, the Plaintiff was unrepresented and the Defendants had no way of dealing with the matter. As a consequence the Defendants brought a motion for the release of the ship from arrest without posting security. The Release was granted. Arrest of Freight Third Ocean Marine Navigation LLC v The "GTS Katie", (October 23, 2000) No. T-1383-00 (F.C.T.D.), [2000] F.C.J. No. 1704 This matter arose out of the much publicized events surrounding the return of Canadian military equipment on board the "GTS Katie" from overseas peacekeeping operations. During the course of that voyage a dispute arose concerning payment of freight and, as a consequence, the "GTS Katie" refused to sail to the delivery port to deliver the military equipment on board. The impasse was resolved when the Canadian military boarded the vessel on the high seas and forced her to sail to port. The owners of the "GTS Katie" commenced this action for payment of freight and obtained a Warrant of Arrest of the freights and sub-freights and served the Warrant on the solicitors acting for the Crown and other Defendants. The Defendants brought the present application to set aside that Warrant of Arrest. The Court set aside the warrant on various grounds. First, the Court held that Crown immunity applied. Secondly, the Court held that although the time charter contained a clause giving the owner a lien on freight and sub-freight the contracts of affreightment contained no such clause. Finally, the Court held that the clause in the bill of lading giving the carrier a lien for any amounts due was a lien on cargo and not on freight. Arrest of Cargo - Setting Aside Campbell’s Meat Market Ltd. v The "Merak", (July 21, 2000) No. T-926-00 (F.C.T.D.), [2000] F.C.J. No. 1224 The issue in this case was whether an arrest of a cargo of shrimp should be set aside on the grounds that the cargo had been sold prior to the service of the Statement of Claim and Warrant of Arrest. The Court reviewed the evidence and found as a fact that the cargo had been sold prior to the arrest and, therefore, set aside the arrest. Arrest of Cargo - Costs Trade Arbed Inc. v Toles Ltd., (November 7, 2000) No. T-636-99 (F.C.T.D.), [2000] F.C.J. No. 1934 This was an appeal from an order of a Prothonotary in which the Prothonotary refused to award solicitor-client costs payable by the solicitor personally after the Statement of Claim in rem was ordered struck and an arrest of cargo set aside. On appeal, the Motions Judge held that the seizure of cargo is an extraordinary procedure that constitutes an interference with someone else’s property and agreed that solicitor-client costs were appropriate. The Motions Judge, however, refused to order that the costs be paid personally by the solicitor. Quashing Warrants to Arrest - In Rem Claims Trade Arbed Inc. v Toles Limited et al., (October 20, 1999) No. T-636-99 (F.C.T.D.) This was an application to set aside the arrest of certain cargo belonging to the second Defendant. The underlying action was for breach of charter party. The Plaintiff had entered into a Gencon charter party with the first Defendant, the owner of the ship "Ideal", for the carriage of used axles to Newark on board the "Ideal". The second Defendant guaranteed the performance of the charter party by the owner and was also the shipper of a second cargo on the "Ideal". During the course of the voyage to Newark, the "Ideal" broke down and the Plaintiff was required to charter a second vessel to complete the voyage. The Plaintiff commenced arbitration against the Defendants in New York pursuant to the charter party and then brought this action against the Defendants in personam and against the cargo belonging to the second Defendant in rem to obtain security for the arbitration. The Plaintiff arrested the cargo belonging to the second Defendant. The court noted that the only claim against the second Defendant was that it had guaranteed the performance of the charter party by the vessel owner. The court held that this did not make the second Defendant's cargo "the subject of the action" within the meaning of section 43(2) of the Federal Court Act. Accordingly, the court set aside the arrest and struck out the in rem portions of the Statement of Claim. Arrest Warrants - Setting Aside - Extension of Time for Service Abitibi-Price Sales v C.V. The "Bontegracht",(October 14, 1998) No.T-1270-97(F.C.T.D.) This was an appeal from a decision of a Prothonotary. The Statement of Claim had been issued on July 11, 1997. On August 14, 1998, after the Statement of Claim had expired, the Plaintiff obtained a Warrant of Arrest and threatened to arrest the "Bontegracht" at Baie Comeau, Quebec. The Defendants provided a letter of undertaking to prevent the arrest. The Defendants subsequently brought this motion to set aside the Warrant and the Plaintiffs brought a motion for an extension of time to serve the vessel. Both the Prothonotary at first instance and the appeal judge held that the Arrest Warrant had been issued out of time. The arrest was set aside and the Plaintiff was ordered to return the letter of undertaking. The Plaintiff was, however, allowed an additional six months in which to properly serve the Statement of Claim on the vessel. The fact that the vessel had been in Canadian waters on two prior occasions was not sufficient to disentitle the Plaintiff to the relief sought as the Plaintiff had taken reasonable measures to track the vessel. Breach of Contract of Sale - Specific Performance - Setting Aside Arrest Gleason v. The "Dawn Light" et.al., (January 29, 1998), No. A-438-97 (F.C.A.) This was a summary judgment application to dismiss the Plaintiff's claim for specific performance of an agreement of purchase and sale of the Defendant vessel and an application to set aside the arrest of the vessel. The Plaintiff alleged that the Defendant had agreed to sell the Defendant vessel to him but then sold it to the intervenor. The motions Judge held the evidence did not show the vessel was unique or irreplaceable and further held that the fact the vessel had been sold to a bona fide purchaser for value without notice was a strong discretionary reason not to grant specific performance. With respect to the application to set aside the arrest of the vessel, the Motions Judge held that the arrest could not be set aside as the Plaintiff still had a claim in damages for breach of contract. On appeal, the Court of Appeal held that the arrest ought to be set aside because the effect of the sale to a bona fide purchaser for value was that the vessel could not be used to satisfy any potential award of damages. Arrest - Application to Set Aside Viktor Overseas Ltd. v The "Filomena Lembo" et.al., (November 7, 1997) No. T-2241-97 (F.C.T.D.) This was an application to set aside a Warrant for arrest in a claim for unpaid repairs to the vessel. The shipowner argued that the Plaintiff had no right to arrest because the repairs were ordered by the bareboat charterer who had no authority to contract on behalf of the owner. However, the Court noted that the Statement of Claim alleged that the repairs were ordered on behalf of the owner and that the repair contract itself stated that the repairs were ordered on behalf of the owner. In the result, the Court dismissed the application. Bail Amican Navigation Inc. v The "Necat A et.al., (October 21, 1997) No. T-1357-97 (F.C.T.D.) This was an appeal from the Prothonotary. The original motion was by the shipowner to reduce the amount of bail that had been posted to secure the release of the ship from arrest. The underlying action was for breach of charterparty. The Plaintiff alleged the Defendant failed to provide a ship to load a cargo the Plaintiff had undertaken to transport. The Plaintiff claimed damages of $337,000.00 for loss of profit, $130,000.00 for Suez Canal fees and $114,000.0 for the balance owing on the hire statement. Bail was initially given in the amount of $605,000.00. The Prothonotary reduced this bail to $124,000.00 holding that the Plaintiff was not entitled to bail in respect of the loss of profits claim or in respect of the canal fees. On appeal, the Court reinstated bail for the loss of profits claim holding that the Plaintiff was entitled to bail based on its best arguable case and that speculative calculations should not be used to determine this. The Court did, however, find that the best arguable case on the loss of profits claim was 30% of revenues rather than the 60% the Plaintiff claimed. With respect to the canal fees, the Court held that the fact that the Plaintiff had not paid these fees was not relevant as the Plaintiff was obliged to pay them and, in fact, was being sued for them. The Plaintiff was held to also be entitled to bail in respect of these fees. Wrongful Arrest Armada Lines Ltd. v. Chaleur Fertilizers Ltd., (June 26, 1997) No. 24351 (S.C.C.) This important case concerns when an arresting party is liable for wrongful arrest. In a ground breaking decision reported at [1995] 1 F.C. 3, the Federal Court of Appeal held that an arresting party could be liable for wrongful arrest merely upon a finding that the arrest was "illegal" or "without legal justification". The Supreme Court of Canada, however, reversed this ruling and re-established the rule from The "Evangelismos"(1858) 14 E.R. 945, that damages for wrongful arrest may only be awarded where the arresting party acts with either bad faith or gross negligence. The Supreme Court noted that a change in such a long standing rule should only be made by the legislature. Arrest and Equipment Pacific Tractor Rentals (V.I.)Ltd. v The "Palaquin", (June 14, 1996) No. T-2616-95 (F.C.T.D.) The issues in this case were whether an arrest warrant extends to property taken off a vessel prior to arrest and whether repairs to a vessel under arrest paid for by the vessel's owner form part of the arresting party's security. The case concerned machinery owned by the Plaintiff that had been lost overboard from the "Palaquin" during alleged heavy weather. The heavy weather also damaged the engine of the "Palaquin". Subsequent to the accident, but before action had been commenced, the engine was removed from the "Palaquin" for repair and the electronics were removed for safekeeping. A Warrant for Arrest was served on the vessel after the removal of these items. The Plaintiff brought a motion before the Prothonotary for an order that the arrest warrant extended to the engine and electronics removed from the vessel. The Court held that the arrest warrant extended to items that had been removed from the ship before the arrest. A second aspect of the case concerned whether the increase in the value of the ship as a consequence of the engine repairs would benefit the Plaintiff. The Court held that repairs done and paid for by the owner subsequent to the accident, but before arrest, increased the value of the res to the benefit of the arresting party. However, the value of repairs done and paid for by the owner after the arrest did not form part of the arresting party's security. Right to Re-Arrest Atlantic Shipping (London) Ltd. v The "Captain Forever", (June 12, 1995), No. T-1165-95, (F.C.T.D.)
In this matter the Plaintiff had commenced arbitration proceedings in England for reimbursement of moneys paid for bunkers under a charter party, and had negotiated security for the bunkers claim. The Plaintiff later commenced action for breach of charter party and for the bunkers claim. The Plaintiff sought a much higher sum as security. The issue in the case was
whether the Plaintiff was entitled to re-arrest the ship and to claim a higher sum as security. The Court held that there was nothing preventing the Plaintiff from doing so in respect of the claims not included in the arbitration.
Judicial SalesExtension of time for Service and Arrest – Order for Sale Pendente Lite Franklin Lumber Ltd. v. The “Essington II” et al., 2005 FC 95 This was an application by a mortgagee for a substantial extension of time (more than six years) within which to serve and arrest the vessel and a further application for Court approval of a private sale pendente lite. In deciding to grant the time extension, the Prothonotary applied the three-part test from Registered Public Accountants Association of Alberta v. Society of Professional Accountants of Canada, (2000) 5 C.P.R. (4th) 527 that the applicant must demonstrate a continuing intention to pursue the claim, that there is an arguable case and that there is no prejudice to the defendant by granting the extension. This test was to be applied within the context of the “overarching” principle of ensuring justice is done between the parties. In this case, the Prothonotary considered the fact that the dispute was essentially between family members to be particularly significant. In view of the fact that the vessel owner had not found a buyer in seven or eight years, but had at one time agreed to sell the vessel to the present buyer at the same price, the Prothonotary also made an Order for the private sale of the vessel pendente lite without appraisal and on the terms that a down payment of just under 8% of the sale price would be paid into Court immediately with closing approximately four months thereafter. The elements to be considered in deciding whether to order a sale pendente lite are open-ended, but the Prothonotary noted that they include: 1) the value of the vessel compared to the amount of the claim; 2) whether there is an arguable defence; 3) whether the owner can carry on, that is, whether there must be a sale at some point; 4) whether there will be any diminution in the value of the vessel or of the sale price by the delay; 5) whether the vessel with depreciate by further delay; and 6) whether there is any good reason for a sale before trial. Extension of time - Stay Global Enterprises International v The “Aquarius”, “Sagran” and “Admiral Arciszewski”, 2001 FCT 605 This was an application by the Polish trustee in bankruptcy of the Defendant shipowner for an extension of time in which to file an appeal of an order authorizing the sale of the Defendant ships and for a stay of the sale proceedings. The Prothonotary reviewed the case authorities on time extensions and noted that an applicant must generally show an intention to appeal before the time ran out, that the appeal has merit, a reasonable explanation for the delay and that the other parties are not prejudiced. The Prothonotary held that the applicant had failed to address these issues in its affidavit evidence and further found that there was prejudice to the other parties given that the vessels were incurring substantial expenses and a delay might frustrate a sale. The Prothonotary next considered the stay application. The proper test on such an application is that there must be a serious question to be tried, there must be irreparable harm if the application is refused and the balance of convenience must be considered. The Prothonotary noted that the applicant’s material did not suggest the sale order was in error and was silent as to irreparable harm. On the matter of balance of convenience, the Prothonotary was of the view that the balance of convenience favoured an early sale of the ships. Sale - Delay in Payment - Forfeiture Nedship Bank N.V. v The "Zoodotis", (March 24, 1999) No. T-186-99 (F.C.T.D.) This was an application by the second highest bidder for the Defendant vessel to set aside an ex parte order that extended by two days the deadline by which the successful bidder was to pay the purchase price. The ex parte order was granted because there had been a transfer error by bankers. The court refused the application holding that forfeiture is a drastic event and should not be ordered "to penalize a bona fide buyer who has run afoul of a bank clerk who cannot cope with a bank transfer". Reconsideration of Sale Order Annacis Auto Terminals (1997) Ltd. v The "Cali", (1999) 163 F.T.R. 139, (F.C.T.D.) This was a motion by the mortgagee to vary an order of sale. The motion arose because one of the terms of the sale order was that any moorage charges from the date of the sale order to the time the ship left the berth were to be given priority as sheriff's costs. At the time it was contemplated that the ship would leave the berth within 45 days of the sale. However, the ship remained at the berth 75 days after the sale and it was not apparent that she would be leaving any time soon. This resulted in ever increasing moorage charges which, as each day passed, meant a smaller recovery for the mortgagee. Although the court clearly had sympathy for the mortgagee, it held that the words "liberty to apply" in the sale order did not confer a right to vary the order. The court held that the order was final and binding. The court did, however, suggest that if a motion was brought pursuant to Rule 399(2) that the mortgagee might obtain some relief by way of an assignment of the claim of the dock owner against the purchaser of the ship. Court Ordered Sale Annacis Auto Terminals v The "Cali",(August 26, 1998) No.T-1261-98 (F.C.T.D.) This was an application for reconsideration of an Order in which the court gave the owners until October 31, 1998 to complete a private sale of the ship failing which the ship would then be sold by the Court. The applicant was of the view that the order was deficient in that it ought to name the Sheriff who would conduct the court ordered sale and provide the Sheriff's address as the place where the Sheriff would receive bids. The Prothonotary held, however, that given the circumstances it was premature to include such particulars in the Order and Commission for Sale. Sale Pendente Lite The Governor and Company of the Bank of Scotland v The "Nel", (December 9, 1997) No. T-2416-97 (F.C.T.D.) This was an application by the mortgagee of the Defendant vessel for Court approval of a private sale. The mortgage covered four vessels and was outstanding in the amount of US$12 million. All of the vessels were in various stages of sale proceedings and it appeared likely that there would be a deficiency under the mortgage even after all the vessels were sold. The Court noted that a sale pendente lite could be ordered "for good reason". The Court found good reason in the fact that the "Nel" was loaded with sulfur, a cargo that is notorious for causing corrosion damage. The Court therefore approved the sale. Sale Pendente Lite Mario Neves et.al. v. The "Kristina Logos" et.al.,(January 16, 1997) No.T-1041-95 (F.C.T.D.) This was an application by the Crown for leave to sell the Defendant vessel pendente lite. The application was granted on the grounds that the costs of maintaining the vessel amounted to over $500,000.00 and the ongoing cost was $60,000.00 per year. Further, there was evidence the vessel was deteriorating in value and its classification certificate would soon expire. Sale Pendente Lite The Queen v The "Western Horizon" et.al.,(November 19, 1996) No.T-1620-96 (F.C.T.D.) This was a motion by the Plaintiff to sell the "Western Horizon" pendente lite and a motion by the Defendant to stay any such sale. The Plaintiff was the holder of a registered mortgage against the vessel in the amount of $200,000.00. The vessel, however, was only valued at approximately $60,000.00. The Plaintiff's motion was allowed by the Court on the grounds that: there was a large discrepancy between the value of the ship and the mortgage; the ongoing cost of moorage could exceed the value of the vessel by the conclusion of a trial; the vessel was deteriorating; and, the Defendant had not come forward to offer to share the moorage or maintain the vessel or put up security of $60,000.00. The Court also declined to order a stay of the sale finding that there was no serious issue to be determined and that the balance of convenience did not favour a stay. Pleadings – Reasonable Cause of Action – Security for Costs – Solicitor's Affidavits Addo v OT Africa Line et al., 2006 FC 1099 The Plaintiff was the owner of goods that were damaged when the container in which the goods were stowed was dropped at the Port of Antwerp. The Plaintiff commenced proceedings against various parties including the operator of the port where the container was dropped. That Defendant brought this motion to strike the Plaintiff's claim on the basis that it disclosed no reasonable cause of action and, in the alternative, for security for costs. The Court held that the fact that the container was dropped in a foreign location did not deprive it of jurisdiction and that there were a number of significant factors tying the claim to Canada. The Court concluded that it was not “plain and obvious” that it was without jurisdiction and dismissed that part of the motion. With respect to the application for security for costs, the Court ordered that the Plaintiff post security of $5,000 because the Court was “concerned as to the plaintiff's credibility”. A final matter that was considered in the course of the Reasons was the admissibility of an affidavit prepared by one of the plaintiffs' solicitors. The Court reviewed Rule 82 of the Federal Court Rules noting that it was quite explicit and that case law had held that it was a violation of this rule for a lawyer to submit an affidavit when another lawyer in the same firm will argue the motion. Pleadings – Striking Statement of Claim Canada Steamship Lines Inc. v Elliott, 2006 FC 609 This was a motion to strike a counterclaim on the grounds that it failed to disclose a reasonable cause of action. The counterclaim alleged an intentional interference with contractual relations relating to the use of a ship. The motion was denied by the Prothonotary who reviewed the relevant authorities and concluded that the impugned pleading contained allegations of the essential elements of the tort of interference with economic relations, namely: an intention to injure; interference by illegal means; and economic loss as a consequence. Unlike the tort of inducing breach of contract, there was no requirement to plead or prove knowledge of a specific contract or that the actions of the defendants resulted in a breach of a specific contract. Pleading – Striking – Jurisdiction Kona Concept Inc. v Guimond Boats Limited, 2005 FC 214 In this matter the Plaintiff commenced proceedings against the Defendant in Hawaii in relation to a contract for the design, manufacture and sale of a tuna fishing boat. The Defendant initially contested the jurisdiction of the Hawaiian courts but after having lost its jurisdiction motion withdrew from that action. The Plaintiff subsequently obtained a default judgment against the Defendant and commenced these proceedings for breach of contract and for enforcement of the U.S. default judgment. The Defendant brought this motion to strike the entire Statement of Claim on the grounds that the Plaintiff was a dissolved company when the Statement of Claim was issued and on the grounds that the Federal Court lacked jurisdiction. On the first issue the Court found that the Defendant had dealt with and was paid by the principal of the Plaintiff and held that fairness dictated that the Plaintiff be permitted to substitute the correct party. On the second issue the Court held that pursuant to s. 22(2)(n) of the Federal Court Act it had jurisdiction over claims for the construction of a ship and that the Plaintiff had pleaded sufficient facts to bring it within that jurisdiction. The Court declined to rule on the claim for the enforcement of the U.S. judgment as its status was in some doubt and this issue was better dealt with in a motion for summary judgment. (Note: The comments of the Court on jurisdiction were approved and adopted in a later motion for summary judgment summarized below under “Miscellaneous”.) Pleadings – Striking – Economic Loss 1340232 Ontario Inc. v St. Lawrence Seaway Management Corp., 2004 FC 209 This was an application to strike the claim of the Plaintiff. The Plaintiff's claim was for damages for business losses incurred as a result of the closure of a bridge over the Welland Canal, which closure it was alleged was due to the negligence of the Defendant. The Plaintiff had no proprietary interest in the bridge and none of the Plaintiff's own property was damaged. The Prothonotary allowed the application and struck the claim noting that similar claims to recover pure economic loss because of negligent damage to a bridge have been consistently rejected by the courts. Motion to Strike Statement of Claim Berhad v The Queen, 2003 FC 992 This was an application to strike out the Statement of Claim. The underlying action was a claim by the owner of the vessel “Lantau Peak” against the Federal government and two steamship inspectors. The two inspectors detained the vessel and would not allow it to be moved until repairs were completed. The Plaintiff wanted to move the vessel to another jurisdiction where the repairs could be done more economically than in Canada. The application to strike was dismissed for two reasons. It was an important and complex case involving the overlap and interplay of the Canada Shipping Act, two international Memorandums of Understanding, and the SOLAS Convention and therefore ought not to be decided on a motion to strike out. Secondly, it was far from plain and obvious that the Plaintiff would certainly fail at trial. (Note: In fact, the action was successful. The trial judgment is summarized below.) Parties – Addition – Amendment of Pleadings – After Limitation Period Budget Steel Ltd. v FMW Towing Ltd., 2004 FC 1140 This matter concerned the capsizing of a barge and the consequential loss of her cargo. The Plaintiff, the owner of the cargo, originally commenced these proceedings against the owners of the barge and the tugs towing her. More than two years after the capsize the Plaintiff brought this application to add the owners of a passing ship and to amend the Statement of Claim to allege that the wake of the passing ship caused the capsize. The proposed Defendants contested the application arguing that the limitation period had expired and that they had been prejudiced by the lapse of time in that they did not have the opportunity to properly investigate the incident. With respect to the limitation period issue the Prothonotary held that the running of the limitation period did not prevent the addition of the Defendants as they would be entitled to plead and argue the limitation defence. The Prothonotary had more difficulty with the prejudice issue since the Plaintiff had written to the proposed Defendants advising them that they considered the cause of the capsize to be the unseaworthiness of the barge. However, the proposed Defendants had been aware of the incident from the time of the capsize and had been added as Third Party Defendants. The Prothonotary ultimately held that although there had been some prejudice this prejudice was self inflicted in that it was due to an oversight or lack of initial assessment and investigation on the part of the proposed Defendants. In result, the proposed Defendants were added as parties. Joinder of Parties – Owners of Salved Property Early Recovered Resources Ltd. v. Gulf Log Salvage Co-operative Association et al., 2003 FCT 549 This was a motion to add two associations of forestry companies who were owners of logs as either interveners or defendants in the Plaintiff’s action for salvage in respect of 17 unidentified logs from the BC coast. In the original action, the Province had been named as a Defendant but had a limited interest to stumpage fees which had likely already been paid prior to salvage. After noting that the style of cause should have been in rem to name the 17 unidentified logs, the Prothonotary held that the owners of the salved property, who would be liable for the salvage claim, should be defendants as they should have notice and be afforded the chance to protect their position. The two associations had an interest in rem in the logs (although ownership was unidentified) and an interest in protecting the existing log recovery system. The motion was granted adding the associations as defendants. Simplified Action Procedures – Pleadings – Amendment – Evidence Valentino Gennarini SRL v. Andromeda Navigation Inc., 2003 FCT 567 This was a simplified action for disbursements incurred and for ship agency services rendered by the Plaintiff at the port of Taranto, Italy. The case is of interest because of the way a number of procedural matters were decided. The Defendant sought to adduce affidavit evidence that it was acting as agent for a third party. The Plaintiff applied to strike this evidence on the basis that the agency relationship the Defendant sought to prove was never pleaded. The Court agreed and struck the evidence, holding that “the Court should not consider any evidence which is irrelevant to the pleadings as they are formulated or which contradicts the pleadings”. The Defendant also applied for short leave to bring a motion to amend its pleadings. The Court reiterated the general rule that an amendment should be allowed for the purpose of determining the real question in controversy between the parties provided that the allowance would not result in an injustice to the other party not capable of being compensated by an award of costs and that it would serve the interests of justice. The Court denied the Defendant’s motion to amend its Statement of Defence because the motion was presented one day before trial when it could have been brought many months earlier, the amendment was not being made to refocus and particularize points in controversy but rather sought to introduce a distinct and entirely new cause of defence, and the proposed amendments would inevitably delay an expeditious trial. At the hearing on the merits the Plaintiff sought to introduce documents by way of an affidavit which effectively incorporated by reference every document listed in the Plaintiff’s Affidavit of Documents which the Plaintiff wished to introduce as evidence in chief. Despite the objections of the Defendant the Court accepted as filed the original documents incorporated by reference in the affidavit since they had been listed in the Plaintiff’s Affidavit of Documents and served on the Defendant over one year earlier together with copies of the documents themselves. As a final procedural point, the Court permitted the Plaintiff to read in excerpts from the transcript of an oral examination for discovery conducted before the action was converted to a simplified action. While the rules on simplified procedures do not provide for read-ins of oral discovery because there can be no oral examination for discovery, they do not preclude such read-ins when the oral examination was conducted before the action was converted to a simplified action. Pleadings - Amendment - Striking Out - Length of Written Argument In this matter the Defendant brought a motion to strike the Statement of Claim on various grounds including that it failed to disclose a reasonable cause of action and was frivolous and vexatious. The Defendant additionally brought a motion for leave to amend its Statement of Defence to plead that the Statement of Claim failed to disclose a reasonable cause of action and was frivolous and vexatious. The amendments to the Statement of Defence were necessary as the case law establishes that a motion to strike out a Statement of Claim on any basis other than for failure to disclose a reasonable cause of action must be brought before the Defendant has pleaded and may only be brought subsequently if the Statement of Defence contained a reservation. The Statement of Defence in this matter contained no such reservation and hence the need for the amendment. The Prothonotary held that the Defendant did not need to amend its Statement of Defence to plead want of a reasonable cause of action in the Statement of Claim since this went to jurisdiction which could always be challenged regardless of whether the Defendant had filed a Statement of Defence. With respect to the amendment to plead that the Statement of Claim was frivolous and vexatious, the Prothonotary noted that such an amendment was of a merely procedural or technical nature and disallowed the amendment. Alternatively, the Prothonotary held that the Defendant ought to have applied for the amendment much earlier. A secondary issue in this case concerned the written argument filed by the Defendant for use on the later motion to strike which comprised 145 pages in length. The Prothonotary noted that such written arguments should generally not exceed 30 pages in length and ordered the Defendant to redraft the argument so that it did not exceed 45 pages. Pleadings - Striking Out - Unjust Enrichment Ed Wahl Boat Builders and Repairs Ltd. v Holm, (July 12, 2000) No. T-627-00 (F.C.T.D.), [2000] F.C.J. No. 1184 This was an application to strike out a paragraph of the Statement of Claim pleading a claim for unjust enrichment in the alternative to a main claim for breach of contract for the building of a boat. The Court allowed the application and struck out the offending paragraph on the basis that facts in support of the claim for unjust enrichment had not been pleaded and, more importantly, because the building contract which was specifically pleaded by the Plaintiff provided a juristic reason for any alleged unjust enrichment. Limitation Proceedings - Pleadings Bayside Towing Ltd. v Canadian Pacific Railway Company, (February 2, 2000) No. T-1692-99 (F.C.T.D.) This was a limitation action by the owner of the tug "Sheena M" in relation to a collision between the barge "Rivtow 101" in tow of the "Sheena M" and a railway bridge owned by the Defendant. The Defendant challenged the right of the Plaintiff to limit liability pursuant to the 1976 Convention. The Plaintiff brought this application to strike out portions of the Statement of Defence. The court ordered that those portions of the Statement of Defence referring to faults allegedly committed by the owners of the tow be struck on the grounds that they were not relevant to whether the tug owner could limit liability. The court also struck out those portions of the Statement of Defence alleging mere negligence on the grounds that negligence has nothing to do with the test set out in Article 4 of the Convention for breaking limitation (i.e. personal act or omission committed with intent to cause loss, or recklessly, with the knowledge that loss would probably result). The court also struck out pleas of res ipsa loquitur, on the grounds that it was no longer applicable in Canada, and breach of statutory duty, on the grounds that it was not a recognized tort and was to be considered in the context of the general law of negligence. The court refused to strike out allegations of "wilful defaults", noting that concepts of wilfulness may be close to the test under the Convention. The court further refused to strike out an allegation that the tonnage for limitation purposes should be calculated on the combined tonnage of the tug and tow. The court doubted that the plea could succeed in the absence of common ownership of the tug and tow but it was not something that plainly and obviously would fail. Adding Plaintiffs State of Alaska v. John Doe et.al,(November 3, 1997) No. T-1552-97 (F.C.T.D.) This is the second volley in the litigation surrounding the blockade of the Alaskan ferry "Malaspina" by B.C. fishermen in July of 1997. The motion was brought by various fishermen for an order that the action was not properly commenced as against them. The Statement of Claim initially named 17 vessels, John Doe, Jane Doe, and other persons and ships unknown. In a subsequent amendment pursuant to Rule 421 and without a Court order, the Plaintiff purported to add 94 ships and their owners. The added Defendants argued that this was the addition of parties and could only be done with a Court order pursuant to rule 1716. The Plaintiff argued that they were not adding new parties but were merely correcting a misnomer. The Court held that for the Plaintiff to prevail the burden was on it to lead evidence showing the new ships were in the path of the "Malaspina". As the Plaintiff led no such evidence, the application was allowed and the Court ordered the action against these additional Defendants had not been properly commenced. Addition of Defendant by Defendant Ferguson v Arctic Transportation Ltd., (December 7, 1995), No. T-1941-93, (F.C.T.D.) This was an action by the Plaintiff against the Defendant shipowner for personal injuries suffered by the Plaintiff while the Defendant ship was transiting the Panama Canal. At the time of the accident the Plaintiff was employed as a Pilot by the Panama Canal Commission. The Defendant in the case had previously joined the Panama Canal Commission as a Third Party and now sought leave, against the wishes of the Plaintiff, to have it added as a Defendant. The Court refused the Defendant's motion. In doing so, the Court held that the Plaintiff has the prima facie right to choose the Defendants against whom it wishes to proceed and that this right should only be departed from in exceptional circumstances. Discovery – Non-Parties The Administrator of the Ship-Source Oil Pollution Fund v The “Anangel Splendour”, 2006 FCA 212 affg. 2005 FC 942 This was an action by the Administrator of the Ship-Source Oil Pollution Fund to recover pollution clean-up costs it had paid to two claimants, QCM and the Department of Fisheries and Oceans (DFO), pursuant to the statutory scheme in the Marine Liability Act. The Defendant brought this motion for an order that the Administrator put forward as its discovery representatives individuals from QCM and DFO. The motion was denied by the Prothonotary on the grounds that QCM and DFO were not parties to the proceeding. However, the Prothonotary did allow for the possibility of an examination of QCM and DFO in the future as non-parties pursuant to Rule 238 if the Defendants were able to satisfy the Court that were not able to obtain the information informally from these entities. Appeals from the Prothonotary's order to a Judge and then to the Court of Appeal were dismissed. Discovery – Examination of Non-Parties Thyssenkrupp Materials NA Inc. v The “Stewart Island”, 2005 FC 23 The Plaintiff brought this application for leave to examine the Chief Engineer of the Defendant vessel under Rule 238 of the Federal Court Rules, 1998. The Prothonotary at first instance accepted that the Chief Engineer had relevant information and that his examination would not cause undue delay, inconvenience or expense but nevertheless denied the application on the grounds that the information could be obtained from other sources such as production of documents or examination for discovery. On appeal, the appeal Judge dismissed the appeal holding that the Plaintiff had failed to demonstrate that the Prothonotary's order was clearly wrong in the sense that it was made upon an incorrect principle of law or misapprehension of the facts. Discovery – Implied Undertaking Rule – Contempt N.M. Patterson & Sons Limited v The St. Lawrence Seaway Mgt. Corp., 2004 FCA 210 This was an appeal from a motion in which a solicitor was found in contempt of court for disclosing to the media information obtained on examination for discovery. The appeal was dismissed. This important case reminds practitioners that documents and information received through the discovery process are subject to an implied obligation of confidentiality. Such documents and information may not be disclosed to any third parties or used for any purpose other than the litigation in which it is produced or given. The implied undertaking is only released if and when the document or information becomes publicly available by being tendered as evidence at trial. The Court of Appeal judgment clarifies that the public availability of the information is a defence to the charge of contempt and not an element of the offence. Therefore, the onus is on the accused to prove the information is publicly available. Examination for Discovery – Production of Documents – Scope Seaspan International Ltd. et al. v The Ship “Ewa”, 2004 FC 124 This was a motion by the Defendant to compel the re-attendance of various discovery witnesses to answer questions which had been refused at examinations for discovery. The questions related generally to claims and settlement agreements as between the Plaintiffs and sought the production of any settlement agreements. As a preliminary point the Prothonotary considered whether the scope of production of documents under the Federal Court Rules, 1998 was narrower than under the previous rules. Relying on Smithkline Beecham Animal Health Inc. v The Queen [2002] 4 C.T.C. 93, he held that the “train of inquiry” test under the old rules was substantially the same as the current test requiring production of documents that a party intends to rely on or that tends to adversely affect the party's case or support another party's case. With respect to the substance of the motion the Prothonotary referred to various authorities and concluded that settlement agreements are, for the most part, privileged. However, provisions as to release or not to sue or reservation of rights ought to be disclosed and evidentiary arrangements in those agreements might also be required to be disclosed at or shortly before trial. Discovery – Written and Oral Examination Haylock et al. v. Norwegian Cruise Lines et al., 2003 FC 932 This was an application by the Defendant shipowner in two actions for an Order that examinations for discovery of the 16 Plaintiffs, all cruise ship medical officers claiming wages for overtime, take place by way of written examination and then by such oral examination as the Defendant may reasonably require. The Prothonotary acknowledged that this was not a usual approach in the Federal Court but granted the Order because it had the substantial promise of saving both time and money. The Prothonotary considered, in particular, the use of both written and oral examinations in the Supreme Court of British Columbia and the “general move to encourage written discovery “ in the Federal Court. Examination for Discovery – Prior Practices – Opinions Seatech Construction Ltd. v “Inlet Challenger”, 2003 FC 1186 This was an application by the Defendant for an order that the Plaintiff's representative re-attend to answer questions objected to at the examination for discovery. The case involved a claim by the Plaintiff for damage to a barge towed from Campbell River to Mimmo Bay. The Plaintiff was not required to answer questions related to its prior practices or that asked for the opinions of witnesses who were not experts. Discovery - Failure to Provide Documents - Contempt of Court Island Tug & Barge Ltd. v The “99 Haedong Star”, 2002 FCT 432 This case once again illustrates the dangers of failing to comply with court orders. The Prothonotary had ordered that the Defendants provide the Plaintiff with originals of various documents and that the Plaintiff’s surveyor be allowed to inspect the defendant vessel. The Defendants failed to provide all of the documents required and failed to allow the Plaintiff’s surveyor to conduct the required inspection. As a consequence, the Defendants were found in contempt. The corporate Defendants were fined $25,000.00 and the Master of the defendant ship was fined $5,000.00. Discovery Witness Travel Expenses - Business Class Goodman Yachts Llc. v The “Gertrude Oldendorff”, 2002 FCT1168 The sole issue in this matter was whether discovery witnesses travelling from India and Singapore to Vancouver were entitled to Business Class air travel. The Prothonotary held that in the circumstances of the case Business Class was appropriate. The Prothonotary cautioned, however, that such a premium mode of travel would not be appropriate in all instances. Documents - Production - Average Adjusters Reports Fiddler Enterprises Ltd. et al. v Allied Shipbuilders Ltd., 2002 FCT 44 This was an application by the Defendant shipyard for production of a Statement of Particular Average. The underlying case was for fire damage caused to the Plaintiffs’ vessel. The Defendant sought production of the adjuster’s report as it would disclose owner’s work from fire damage work. The Prothonotary ordered that the report be produced. In so doing he noted that although reports of average adjusters have no legal effect they are rarely questioned by the courts and are often looked upon as prima facie evidence of the matters disclosed. Dismissal for Failure to Produce Documents Finora Canada Ltd. v Clipper Spirit Shipping Ltd., 2001 BCSC 862, [2001] B.C.J. No. 1266 This was an application by the Defendant carrier to dismiss the claims of three Plaintiffs for failure to produce documents which had previously been ordered to be produced. Two of the Plaintiffs had produced the required documents but did so after the deadline imposed by the order requiring production. The other Plaintiff had failed to produce the invoices but advised that the documents had been destroyed. The Court dismissed the claim of the Plaintiff that had failed to produce the documents but declined to mete out this “drastic remedy” for the other two Plaintiffs. Examinations for Discovery - Second Examination Ghadban v The "Cleo D", (April 5, 2000) No. T-1288-95 (F.C.T.D.), [2000] F.C.J. No. 420 This was an application by the Defendant for leave to continue the examination for discovery of the Plaintiff. The ground advanced in support of the application was that the Defendant’s former solicitors had not dealt properly with the various issues relevant to the case. The Court declined the application holding that there must be special reasons to order a further discovery and that the reason given by the Defendant was not sufficient. Discovery - Examination of a Non-Party Bayside Towing Ltd. v Canadian Pacific Railway, (August 22, 2000) No. T-1692-99 (F.C.T.D.), [2000] F.C.J. No. 1534 This was an application to examine a non-party for discovery pursuant to Rule 238 of the Federal Court Rules. The underlying action was a limitation action brought by the tug owner to limit its liability for damage done to a bridge owned by the Defendant. The Defendant brought this motion to examine an experienced tug boat operator who had transited the bridge on various occasions. The Defendant wished to have this evidence to show the general practice of tug boat operators in transiting the bridge. The application was refused on the basis that the Defendant had not shown that it could not obtain the required information from other sources. Dismissal for Failure to Produce Documents Pioneer Grain Company Ltd. v Far Eastern Shipping Co. et al., (December 15, 1999)No.T-891-94 (F.C.T.D.), affirmed (February 23, 2000) This was an application to dismiss the Plaintiff's action on the grounds that the Plaintiff failed to comply with four successive orders of the court requiring production of specified documents. The court granted the order holding that the actions of the Plaintiff in ignoring the court orders amounted to an abuse of process. Discovery - Production of Report -Privilege B.C. Hydro & Power Authority v The "CSL Cabo" et al., (December 31, 1999) No.T-1194-98 (F.C.T.D.) This was a motion to compel production of a report prepared by the Plaintiff. The evidence established that the Plaintiff was requested to prepare the report by its counsel. Plaintiff's counsel requested the report "for use in litigation". A later memo of the Plaintiff recorded that the report was required "for file and legal purposes". The Plaintiff claimed the report was protected from production by litigation privilege. The major issue on the motion was whose intention was relevant in determining whether the dominant purpose for the preparation of the report was for use in contemplated litigation. The court held that it was Plaintiff's counsel that procured the genesis of the report and that his intention ought to govern. Accordingly, the report was held to be privileged. Production of Documents Galehead Inc. v The "Trinity", (November 3, 1998) No. T-1074-97 (F.C.T.D.) This was a motion for production of documents. The significant issue in the motion was whether production of documents under the Federal Court Rules, 1998 was wider than under the old rules. The Prothonotary reviewed Rules 223(1) and 222(2) and determined that the definition of relevancy under the new rules was, if anything, narrower than under the old rules. Nevertheless, under either set of rules, the Prothonotary held that a party seeking additional production must produce persuasive evidence that additional documents are available or relevant information has been suppressed. A mere suspicion is not enough. Duty to Inform Shinwa Kaiun K.K.. v "The Queen of Alberni" et.al., (August 27, 1997) No. T-659-92 (F.C.T.D.) The issue in this motion was whether the representative of a party on examination for discovery could be required to locate and inform himself from former employees. The Court ordered the party to use best efforts to locate the former employees and obtain the requested information. Survey Reports Pusan Pipe America Inc. v The "Nicole" et.al., (September 6, 1996) No. T-205-95(F.C.T.D.) This application before the Prothonotary at Vancouver concerned production of documents. The Court upheld a claim for privilege over various survey reports which the Court found were prepared on the instructions of counsel in anticipation of litigation and not as a matter of routine. Adjuster's Reports Jordan v Towns Marine Electronics Ltd. et.al.,(April 30, 1996) No. T-1577-95 (F.C.T.D.) This was an appeal from a decision of the Prothonotary in which the Defendant was ordered to produce three adjuster's reports. The Defendant had claimed privilege over the reports arguing they were made in contemplation of litigation. On appeal, the Defendant argued that as the adjusters were appointed by the liability insurer of the Defendant, the only possible purpose for the preparation of the reports could be litigation. The Court disagreed. The appeal was dismissed and the Defendant was ordered to produce the reports. Both the Prothonotary's decision and that of the Justice on appeal contain some useful discussion concerning whose intention is relevant in determining claims for privilege (the author or the person who commissions the report). Extension of Time – Service – Substitutional Service Arrow Corporation Inc. v The “Sea Tiger” et al., 2004 FC 1502 This was an application to extend time for service of a Statement of Claim on one of the Defendants. The facts were that the Plaintiff had provided the Defendant with a copy of the Statement of Claim shortly after it was issued and later asked the Defendant to acknowledge service. The Defendant did not acknowledge service so the Plaintiff arranged to have it served but the service occurred out of time. The Plaintiff then indicated it would bring a motion to extend the time for service but delayed some six months in bringing the application. The Prothonotary noted that the test to apply was whether there was a continuing intent to pursue the claim, whether there is an arguable case and whether there would be prejudice to the proposed defendant should the extension be granted. The underlying consideration or general principal is to do justice between the parties. Applying this test the Prothonotary found that the explanation for the delay and the demonstration of a continuing intent were weak. He further found there was an arguable case and no prejudice. The important factor, however, was that the Defendant had acknowledged receipt of the Statement of Claim the day after it was issued. The Prothonotary suggested that this might have been sufficient to support a motion under Rule 147 validating the service noting that good service merely required proof that a legible copy of the document came into the hands of the Defendant. Under these circumstances the Prothonotary considered it would be an injustice to not allow the extension of time. Service ex juris - In Rem action McCain Produce Inc. v Visser Potato Ltd., 2001 FCT 994 This was an ex parte motion by the Plaintiff for judgment in default of defence against the Defendant ship and her owners. The Defendants, including the ship, were apparently served in the Netherlands and a certificate of the Government of the Netherlands was offered in proof of service. Although the certificate did not indicate what was served or where the Prothonotary was prepared to assume the document served was the Statement of Claim. Nevertheless, the Prothonotary denied the motion on the grounds that there is no authority for the service on a ship outside of Canada nor for the service on a ship other than in an action in rem and the action was not styled in rem. Personal Service on Solicitors as Business Agents North Shore Health Region v Cosmos Shipping Lines,(November 17, 1998) No. T-1743-98 (F.C.T.D.) This was an appeal of a decision by the Prothonotary in which the Prothonotary upheld personal service of a Statement of Claim on solicitors as business agents for the Defendant. The facts were that a crew member of one of the Defendant's vessels was seriously injured at Vancouver. The crew member was hospitalized. His medical bills were sent to the offices of the solicitors for the vessel's P&I Club. The solicitors paid four of the bills. Thereafter, no payments were made and the hospital commenced proceedings against the shipowner for payment of the ongoing medical costs pursuant to section 285 of the Canada Shipping Act. The hospital served the Defendant by delivering a copy of the Statement of Claim to the solicitors who had paid the bills. The Hospital argued that the service was valid pursuant to Rule 135 which authorizes personal service on an agent where the Defendant "in the ordinary course of business, enters into contracts or |