Précis: The Federal Court refused to set aside an arrest where the underlying claim was by a charterer for demurrage. The court also held that time limited security to obtain the release of an arrest was not acceptable.
Facts: The plaintiff and defendant entered into a voyage charter on the Gencon form with the plaintiff as owner (in fact it was a time charterer) and the defendant as the charterer. The defendant was also the shipper of the cargo covered by bills of lading which were subject to the charter party. The charter party contained a lien clause that gave the plaintiff a lien on cargo for freight, dead-freight, demurrage and claims for damages. The plaintiff commenced these proceedings claiming demurrage and other expenses at discharge and arrested the cargo. The defendant then brought this motion to set aside the arrest on the basis there was no jurisdiction in rem. The plaintiff also brought a motion to enforce an agreement to provide security.
Decision: The defendant’s motion is dismissed. The plaintiff’s motion is granted.
Held: The defendant argues that the arrest should be set aside and the in rem action struck because the lien created by the charter party is a possessory lien and, since the plaintiff gave up possession, it no longer has a lien. The difficulty with this argument is the lien clause includes demurrage at discharge which implies that possession would be given up. At this stage of the proceeding it is arguable that the plaintiff has, at least, an equitable charge on the cargo. Consequently, the motion to set aside the arrest is dismissed. With respect to the security motion, the dispute arises because the security offered by the plaintiff is a bank guarantee with a two year time limit. This is not satisfactory. Security which lapses is no security at all. The cargo will not be released unless there is a guarantee by a Canadian chartered bank. If the guarantee has an expiration date, it must also have an evergreen clause stipulating it is to be automatically renewed. If the bank decides not to renew, the guarantee must provide that the agreed amount of security will be deposited with the court.