In Rem Actions and Arrest - Case Summaries
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Admiralty Practice - In Rem Actions - Arrest
Dragage Verreault Inc. v. The Atchafalaya, 2009 FC 273
This matter arose out of a contract for the dredging of a channel. The plaintiff was the head contractor under the dredging contract. The plaintiff subcontracted the job to a company known as B+B Dredging. The contract specified the work was to be done by the "Atchafalaya" which was owned by a company called Proteus and under bareboat charter to B+B. The plaintiff alleged there was delay on the part of the defendants in bringing the "Atchafalaya" on site as a consequence of which the plaintiff incurred liabilities under the head contract. The plaintiff commenced this in rem action and arrested the "Atchafalaya". The owner of the "Atchafalaya" brought this motion to set aside the arrest and strike the in rem action on the grounds that there was no in personam liability of the owner to support the action in rem. The motions Judge however found that there were some representations during the course of the contract negotiations that indicated the principal of B+B (who was also the principal of Proteus) had the authority to contract on the credit of the ship. Accordingly, the motion was refused. (See the associated action Keybank National Assoc. v The “Atchafalaya”, 2010 FC 406)
Admiralty Practice - Arrest of Cargo - Sufficiency of Affidavit to Lead Warrant - Pleading
Kremikovtzi Trade v. Phoenix Bulk Carriers Ltd., 2007 FCA 381
This was a claim in rem against the owners and all others interested in a particular cargo. This particular application was a re-hearing of various issues that had been referred back to the Court of Appeal after the Supreme Court of Canada overturned the Court of Appeal on the issue of in rem jurisdiction in Phoenix Bulk Carriers Ltd. v. Kremikovtzi Trade, 2007 SCC 13 (CanLII). The issues now considered were first, whether the affidavit to lead warrant was sufficient and second whether the Statement of Claim should be struck on the grounds that did not disclose a cause of action or was otherwise scandalous, frivolous or vexatious. Regarding the Affidavit to Lead Warrant, the Defendant argued that the affidavit did not disclose the basis for invoking the court’s in rem jurisdiction as required by the Rules. However, the affidavit specifically referred to the subsections of s.22 and 43 relied upon and the Court held that this was sufficient. With respect to the Statement of Claim, it was alleged the claim was deficient in that it did not contain an in personam claim to support the in rem claim. The Court agreed that there could be no in rem claim without an in personam claim however the Court noted the Statement of Claim contained an allegation that the owners of the cargo at the time of the breach of contract were the owners at the time of the commencement of the action and held that this supported an in personam claim. Finally the Court considered whether Kremikovtzi was the beneficial owner of the cargo at the time the cause of action arose and at the time of commencement of the action. The Court noted that the issue was a difficult one but ultimately concluded that it was at least arguable and hence the Statement of Claim was not frivolous and vexatious.
In Rem Proceedings - Arrest – Sistership
F.C. Yachts Ltd. v. Vessel Bearing Hull No. QFY10703E709 (Yacht), 2007 FC 1257
The Plaintiff builder was building two yachts for the Defendant. The first yacht was substantially completed and payments were up to date. The Defendant was, however, alleged to be in arrears on the payments in respect of the second yacht. The builder commenced proceedings in respect of the second yacht but arrested the first yacht as a sistership to the second yacht. The Defendant brought this application to set aside the in rem action and the arrest. The Defendant argued that it was not the “beneficial owner” of the first yacht or the owner of the second yacht. The recorded owner of both yachts was the Plaintiff but the construction contracts provided that title was to be transferred to the Defendant upon completion. Moreover, the Defendant was the mortgagee in respect of both yachts. On these facts, the Court held that the Defendant’s interest in the first yacht was exactly what the contract documents said, it was the mortgagee and not the beneficial owner. In result, the in rem actions were struck and the arrest was set aside.
Arrest – Contempt
Labrador Sea Products Incorporated v. Northern Auk (Ship), 2007 FC 679
In this matter the Defendants had apparently removed fishing gear and other equipment from a vessel that was under arrest. The Court found the Defendants guilty of contempt, fined them $5,000 each and ordered that they pay costs fixed at $15,000. The Court noted that the requirements for contempt are: 1. the party alleging contempt has the burden of proving it; 2. the elements must be proved beyond a reasonable doubt; 3. what must be established is knowledge of the existence of the Order and knowing disobedience; and 4. mens rea or good faith is relevant only as to mitigation.
Admiralty Practice - In Rem Actions – Stay
Maritima de Ecologia, S.A. de C.V. v. Maersk Defender (Ship), 2007 FCA 194
In this matter Secunda discussed with the Appellant an arrangement whereby Secunda, or a company controlled by it, would purchase the Maersk Defender, modify the vessel to meet the requirements of the Appellant and then charter the vessel to the Appellant. Subsequently Atlantic, a company controlled by Secunda, entered into an agreement with Maersk to purchase the vessel and entered into a charter party with the Appellant. However, before the purchase could take effect, Secunda and Atlantic learned that Mexican authorities would not issue the required permits for longer than two years. As a result, Atlantic advised the Appellant that the charter party had been frustrated and in response the Appellant commenced arbitration proceedings. On 4 December 2006 the Appellant commenced an action in the Federal Court against the Maersk Defender in rem and against Secunda and Atlantic in personam. On 12 December the Maersk Defender was sold by Maersk to a company called Pacific. Also, on 12 December 2006 a second action was commenced in the Federal Court against the Maersk Defender in rem and against Secunda, Atlantic and Pacific in personam. Both actions were said to be “for the sole purpose of obtaining interim protective orders”. The Maersk Defender was arrested in the second action; however title had already been transferred to Pacific by the time of the arrest. The Respondents brought an application to strike the in rem and the in personam proceedings against Secunda and Pacific. At first instance, the motions Judge struck the in rem proceeding and stayed the in personam proceedings. On appeal, the Court of Appeal held that the in rem proceedings should be struck on two grounds. First, at the time of the commencement of the second action the vessel had been sold and therefore the requirement of s.43(2) that there be the same beneficial owner at the time of commencement of the action as at the time the cause of action arose had not been met. Second, and in any event, there was no personal liability on the part of the owner of the vessel to support the in rem jurisdiction. The Appellants claim in the arbitration was only against Atlantic and Atlantic was never the owner of the vessel. With respect to the in personam claims, the Court of Appeal held that because the actions were commenced solely for the purpose of obtaining security for the arbitration proceeding against Atlantic, there was no remedy sought against Secunda and Atlantic and the in personam claims against them must be struck.
In Rem Proceedings - Arrest - Breach of Charter - Failure to Load Cargo - Appeals
Phoenix Bulk Carriers Ltd. v. Kremikovtzi Trade, 2007 SCC 13
By contract of affreightment between the Appellant and the Respondent, the Respondent agreed to ship a cargo of coal on the Appellant's vessel. In alleged breach of this contract, the Respondent entered into a second contract of carriage with another shipowner and loaded the coal on board that shipowner's vessel. The Appellant commenced an in rem proceeding against the cargo and caused the cargo to be arrested while on board the other ship. The Respondent then brought an 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”,  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. The issue in both cases was the interpretation of s. 43(2) of the Federal Court Act which permits in rem jurisdiciton against “the property that is the subject of the action”. In the Paramount case it was held that the cargo was not “the subject of the action” because the Plaintiff never had physical possession, referred to as the “physicial nexus” test. This was considered to be too narrow an interpretation. The Court said it preferred a broader “identifiability” test, meaning the action in rem must relate to the specific property contemplated in the contract at issue. However, the Court of Appeal 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 of Appeal said it was bound by its prior decision.
The Appellant appealed to the Supreme Court of Canada. The Supreme Court in very short reasons said that they agreed that the words in s. 43(2) “subject of the action” should not be given a narrow interpretation. The “physical nexus” test of Paramount Enterprises International Inc. v The “An Xin Jiang” should be rejected in favour of an “identifiability” test that asks whether the cargo is the cargo designated in the contract of affreightment alleged to be breached. Applying this approach s.43(2) was satisfied.
Arrest - Full Disclosure
Hansen v. The Trinity (Ship), 2007 BCSC 225
This was an application to set aside a warrant of arrest on the grounds of material non-disclosure by the Plaintiffs. The material non-disclosure was an earlier action for the same damages in which the Plaintiffs had applied for and been refused a mareva injunction. The Court held, for the first time, that full and frank disclosure is required when an application for arrest is made under the Rules of the British Columbia Supreme Court and further held that the Plaintiffs had failed to make such disclosure. In result, the arrest was set aside. (Note: This decision stands on its own, and is arguably incorrect, in requiring full disclosure to support an arrest. The Federal Court decisions on this issue suggest that such disclosure is not required. [See for example: Streibel v The “Chairman” 2002 FC 545, Magnolia Ocean Shipping v The “Soledad Maria”,  1 FC 205, and Kiku Fisheries Ltd. v. Canadian North Pacific Ocean Corporation, (1998) 137 F.T.R. 192.] )
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.
In Rem Proceedings – Striking – Arrest
ICS Petroleum (Montreal) Ltd. v. es 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.
Stay of Proceedings – Arbitration Clause – MLA s. 46 – Charterparties – Bills of Lading and Incorporation of Charter Terms – Striking Claims
Dongnam Oil & Fats Co. v. Chemex Ltd. et al., 2004 FC 1732
This matter concerned damage to a cargo of bleached tallow to be carried from Newark, New Jersey to Inchon, Korea. The cargo was to be carried on board the ship “Tuapse”. The “Tuapse” was owned by Novoship but chartered under a head charter to Chemex. The head charter provided for London arbitration. The Plaintiff and Chemex entered into a voyage charter party which again called for London arbitration. The cargo was loaded at Newark and two bills of lading were issued which incorporated the voyage charter party. The cargo was carried on board the “Tuapse” to Nanaimo, British Columbia where it was transhipped to another vessel for carriage to Korea. The cargo was allegedly damaged during the transhipment. The Plaintiff subsequently commenced this proceeding and the Defendants Novoship and Chemex brought applications to stay the proceedings in favour of London arbitration. The Plaintiff argued that s. 46 of the Marine Liability Act applied making the arbitration provisions inapplicable. The Prothonotary disagreed ruling that a transhipment from one vessel to another was not loading or discharging at a Canadian port within the meaning of s. 46(1)(a). The Prothonotary further noted that section 46 should be interpreted strictly since it was a restriction on freedom to contract. The Prothonotary then considered whether the arbitration provisions were incorporated. With respect to the dispute between the Plaintiff and Chemex he found that there was clearly an arbitration provision in the voyage charter and therefore concluded that he had no alternative but to allow the stay. With respect to the dispute between the Plaintiff and Novoship, however, there was no direct contractual relationship between these two and therefore he had to consider the effect of the bills of lading. In this regard he noted that if the bills of lading had specifically referred to the arbitration provision, Novoship would be entitled to a stay. In addition, if the bills of lading incorporated the charter party terms and those terms provided that the arbitration provision applied to disputes under the bill of lading, then Novoship would be entitled to a stay. However, in this case the terms of the voyage charter party did not provide that the arbitration provision applied to disputes under the bill of lading and the bills of lading did not specifically refer to arbitration. Accordingly, Novoship was not entitled to a stay. Two subsidiary issues dealt with in these reasons concerned applications to strike out a claim for a declaration the Plaintiff did not owe dead freight and a claim for wrongful arrest. The claim for a declaration on the dead freight issue was struck on the grounds that the issue had been decided in an arbitration. The claim for wrongful arrest was struck on the grounds the Plaintiff was not the owner or in possession of the cargo at the time it was arrested.
Arrest – Bail – Mitigation
Zhoushan Zhongchang Shipping Co. v. The “Otello Manship” et al., 2004 FC 1181
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 – 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.
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.
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 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.)
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 – Delivery – Solicitor Client Costs
NHM Internatinal Inc. v. F.C. Yachts Ltd. et al., 2003 FCT 373 (CanLII)
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.