Digests

NHM International Inc. v. All Risks (The)

T-1865-02

2003 FCT 53, Hargrave P.

21/1/03

25 pp.

Motion to set bail for release of vessel All Risks, presently under arrest for procedural reasons--Vessel also held by caveat of F.C. Yachts (defendant), builder and intended beneficiary of security--On December 2000, NHM International Inc. and F.C. Yachts Ltd. entered into letter agreement to execute building contract for construction and delivery of 76- by 20-foot yacht for US$2,372,000-- Inexplicably, while building contract signed on behalf of F.C. Yachts Ltd., plaintiff did not sign building contract--F.C. Yachts., as builder and owner of vessel, gave builder's mortgage to NHM International Inc., buyer and intended ultimate owner of vessel, to secure equity of NHM International Inc. in vessel--Plaintiff considered progress on vessel unsatisfactory--Work on vessel had apparently come to a standstill--Thus, on November 6, 2002, over one year after vessel ought to have been delivered, plaintiff went into possession of vessel as mortgagee in possession and plaintiff had sheriff arrest vessel--Plaintiff's final statement of account amounted to C$5,030,846 including some US$805,000 over price as set out in building contract plus extras--Bail defined as substitution of personal, in sense of cash or guarantee security, for in rem asset security--In rem claimant arresting vessel entitled to security for principal, interest and costs, to represent claimant's reasonably best arguable case--Court setting bail must be satisfied as to sufficiency of bail and must not pre-judge case--In present case, party seeking security in position of strength and must not abuse position--General rule that amount of bail to be provided in order to release properly arrested vessel should be equal to claimant's reasonably best arguable case, together with interest and costs, with upper limit being value of arrested vessel--First, reasonably arguable case expressing notion or concept of measure of security that ought to be provided, not absolute figure or importation of absolute figure--Second, while Court has jurisdiction and discretion to determine value of reasonably arguable best case, in setting bail Court ought not to pre-judge case--NHM International Inc. offered security in amount of US$71,100 as contractual holdback and bail bond of about US$122,000--Thus, total security sought by F.C. Yachts in order of US$1,980,000--Regarding price of vessel, in absence of formally executed contract, contract may be found in actions of parties--In present case, one party signed and delivered contract to other--Actions of other party showed acceptance of contractual terms--Enforceable contract between parties, although one of parties did not formally execute contract--F.C. Yachts Ltd. clearly accepted progress payments specified under December 14 contract and also accepted payment for billings for extras--Unreasonable, inconceivable, extravagant to argue bail ought to reflect contract to construct vessel on cost plus basis--Whether claim in quantum valebant or in quantum meruit, same test for application of principle: contract must have been rescinded or discharged, with mutual obligations ceasing to exist, in order to claim on that basis--Claim in quantum valebant involving goods sold and delivered; claim in quantum meruit involving services--Just as full performance of contract excluding quantum meruit claims, in present case completion by and or final statement of account from F.C. Yachts Ltd. excluding claim for quantum valebant--No evidence suggesting defendant comes within elements of test set out in Morrison-Knudsen Co., Inc. et al.. v. British Columbia Hydro and Power Authority (1978), 85 D.L.R. (3d) 186 (B.C.C.A.)-- Defendant made no election to bring contract to end, but decided to continue to carry on with contract even in absence of execution by plaintiff--Actual quantum valebant claim only advanced after defendant said all work completed, and after introduction of present litigation and after vessel delivered by Court order to plaintiff--To allow matter to proceed, with security on basis of cost plus construction of vessel, ignoring conduct of parties over many months and documents generated, would be to allow abuse--Defendant believing issue of security to be potential tax liability-- Contract of December 14, 2002 providing for offshore delivery--Common provision in case of exported Canadian-built vessel --Legitimate technique to avoid payment of Provincial Sales Tax (PST) and Federal Goods and Services Tax (GST)-- Defendant submitting plaintiff having gone into possession as mortgagee in possession and having arrested vessel has somehow taken delivery--Neither going into possession as mortgagee in possession, nor arresting vessel, constitute delivery of vessel--Uncontradicted affidavit evidence of US Virgin Islands' lawyer instructed by plaintiff to represent company in registration of vessel in Virgin Islands that registration process commenced but incomplete-- According to material presented, inconceivable, extravagant, unreasonable position to argue for substantial additional bail on basis vessel transferred while still within Canada and in ownership of defendant--No reasonably arguable case for securing of defendant for PST, GST liability--Court satisfied claim of defendant for price of vessel on cost plus basis will not succeed to extent of $1,980,000 security sought--To require security for claim of defendant would be clearly unreasonable, indeed excessive, oppressive, abusive--F.C. Yachts Ltd. will have sufficient security if order set at US$125,000, being bailbond for C$190,552 and additional security of US$3,000, together with sum of US$71,000 paid into Court to constitute holdback on price of All Risks.