[1994] 2 F.C. 265
T-2640-93
Joint Stock Society “Oceangeotechnology” (also called Ocean Geotechnologica Ltd., a body corporate) (Plaintiff)
v.
The Ship “1201” (ex “John A. MacDonald”), Global Marketing Systems, Inc., a body corporate, and the owners and all others interested in the Ship “1201” (ex “John A. MacDonald”) (Defendants)
Indexed as: Joint Stock Society “Oceangeotechnology” v. 1201 (The) (T.D.)
Trial Division, Teitelbaum J.—Halifax, January 11; Ottawa, January 17, 1994.
Maritime law — Practice — Application to strike action in rem for damages arising from cancellation of towage contract as against defendant Ship — Pursuant to verbal contract to tow defendant Ship from Halifax to India, and at defendants’ request, plaintiff immediately dispatching tug, then in Mediterranean, to Halifax — 12 1/2 days later defendants cancelling contract — In rem proceeding only if “connection” to vessel — By dispatching tug plaintiff taking initial step to fulfil obligations under contract — Establishing connection to Ship — Claim within Federal Court Act, s. 22(2)(k), permitting in rem action for “any claim for towage in respect of a ship” — Need not actually start towing by attaching line to vessel to have “any claim for towage”.
This was an application to strike out the pleadings as against the defendant Ship, to strike out the warrant and declare the arrest of the Ship invalid, and to return the monies posted as security. The defendant Global was at all times the owner of the Ship. In October 1993, its agent reached a verbal agreement with the plaintiff’s agents for a named ocean-going tug to tow the Ship from Halifax to India. All material and essential elements of the verbal agreement were agreed. At the request of Global and its agent, the tug, which was then in the Mediterranean, was immediately dispatched to Halifax. After 12 1/2 days, while the tug was on its way to Halifax and the defendant was continuously informed as to the tug’s position, the defendants cancelled the agreement. The plaintiff commenced an action against the Ship, the owners and all others interested in her for the cancellation fee and tug day rate prescribed in a standard written confirmation form, and interest. The Ship was arrested, but released upon payment of bail. Under Federal Court Act, subsections 43(2), (3), (7), and (8) a plaintiff can proceed with an action in rem if the subject matter of the action, in this case the contract between the plaintiff and defendants, is found in paragraphs 22(2)(a) to (s). The defendants submitted that the plaintiff’s claim related entirely to the actions of the personal defendant in repudiating its contractual obligations “prior to the contract being performed by either party”. The defendants also submitted that paragraph 22(2)(k) did not apply, as it referred to “towage”, meaning the act of towing ships. Furthermore, the Ship was not the cause of the plaintiff’s concern, as the complaint was based entirely on an alleged consensus ad idem. The plaintiff relied on the towage contract and the fact that the tug was on its way to Halifax to execute the contract. The issue was whether it was plain and obvious that, even if the above facts were taken as true, the plaintiff had only an action in personam, not an action in rem.
Held, the application should be dismissed.
An in rem proceeding will lie only if there is a “connection” to the defendant vessel.
It was not plain and obvious that the plaintiff could not proceed by means of an in rem action. A contract to tow the Ship was entered into. There would have been no connection to the Ship had nothing further been done and the defendant cancelled the contract, and the plaintiff would not have been able to proceed with an in rem action, as no steps would have been taken to fulfil the obligations under the contract. That the tug was 12 1/2 days into its voyage and the defendants were continuously apprised of its position, brought the claim within paragraph 22(2)(k).
A claim under paragraph 22(2)(k) should not be restricted to actual towing. “Towage”, by a line attached to the vessel, need not have begun in order to have “any claim for towage”. It is sufficient to have commenced to fulfil the terms of a contract of towage in order to have “any claim for towage” pursuant to paragraph 22(2)(k).
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Federal Court Act, R.S.C., 1985, c. F-7, ss. 22, 43(2),(3), (7),(8) (as am. by S.C. 1990, c. 8, s. 12).
Federal Court Rules, C.R.C., c. 663, R. 419.
CASES JUDICIALLY CONSIDERED
APPLIED:
Ludco Enterprises Ltd. v. Canada, T-742-93, Dubé J., order dated 3/12/93, F.C.T.D., not yet reported; Blackfoot Indian Band, No. 146 (Members) v. Canada and Blackfoot Indian Band, No. 146 (Chief and Councillors) (1986), 7 F.T.R. 133 (F.C.T.D.); Creaghan Estate v. The Queen, [1972] F.C. 732; (1972), 72 D.T.C. 6215 (T.D.); Leoborg, The, [1962] 2 Lloyd’s Rep. 146 (Adm.).
CONSIDERED:
Westview Sable Fish Co. et al. v. The Ship “Neekis” (1986), 31 D.L.R. (4th) 709; 6 F.T.R. 235 (F.C.T.D.); Corostel Trading v. Ship “Catalina” (1986), 6 F.T.R. 233 (F.C.T.D.).
REFERRED TO:
Operation Dismantle Inc. et al. v. The Queen et al., [1985] 1 S.C.R. 441; (1985), 18 D.L.R. (4th) 481; 12 Admin. L.R. 16; 13 C.R.R. 287; 59 N.R. 1; Cormorant Bulk-Carriers Inc. v. Canficorp (Overseas Projects) Ltd. (1984), 54 N.R. 66 (F.C.A.).
AUTHORS CITED
Black’s Law Dictionary, rev. 4th ed. St. Paul, Minn.: West Publishing Co., 1968, “towage”.
APPLICATION to strike an action for damages arising from the cancellation of a towage contract as against the defendant Ship. Application dismissed.
COUNSEL:
James E. Gould, Q.C. for plaintiff.
Peter D. Darling for defendants.
SOLICITORS:
McInnes Cooper & Robertson, Halifax, for plaintiff.
Huestis Holm, Halifax, for defendants.
The following are the reasons for order rendered in English by
Teitelbaum J: On November 10, 1993, the plaintiff, Joint Stock Society “Oceangeotechnology”, filed into the Federal Court Registry a statement of claim in which the plaintiff requests against the defendants the ship 1201 (ex John A. MacDonald), hereinafter referred to as the Ship, Global Marketing Systems, Inc. (Global) and the owners and all others interested in the Ship 1201 (ex John A. MacDonald) the following relief:
| (a) Cancellation fee (liquidated damages) |
U.S. $ 72,500 |
| (b) Tug day rate (12.5 days at U.S. ($3,500) |
43,750 |
| TOTAL |
U.S. $116,250 |
(c) Interest on the foregoing sums at commercial borrowing rates from November 1, 1993, until the date of judgment, and thereafter at commercial rates until the date of payment, or at such other rate or rates and for such other periods of time as this Honourable Court may allow;
(d) Its costs of action;
(e) An Order for the Appraisement and Sale of the Ship; and
(f) Such further and other relief as this Honourable Court may allow.
As the statement of claim states, the action against the defendant Ship is an action in rem.
As well, on November 10, 1993, an affidavit to lead warrant was filed into the Court Registry as a result of which a warrant issued causing the Ship to be arrested. On November 23, 1993, a bail decision was handed down wherein bail was set at the sum of $140,000 U.S. The bail was deposited and the Ship is now released.
On January 6, 1994, the defendants served and filed a notice of motion requesting:
(a) An Order pursuant to Rule 401, granting to the Defendant, Global Marketing Systems Inc., insofar as is necessary to make the motion referred to in paragraph (b) hereof, leave to make a conditional appearance in its personal capacity and/or in its capacity as owner of the Defendant vessel herein, in the within proceedings; and
(b) An Order pursuant to Rule 419, striking out the within proceedings as against the Ship “1201” (ex “JOHN A. MACDONALD”), and further striking out the warrant dated November 10, 1993, and on file herein, declaring the arrest of the Defendant ship invalid, and returning to the solicitor for the applicant the monies posted as security for the release of the said ship on November 19, 1993.
The grounds for the said motion, as therein stated, are:
THE GROUNDS FOR THE MOTION are that the in rem proceedings are improperly constituted, in that the Defendant ship is not the proper subject matter of these proceedings.
At the commencement of the hearing and upon an understanding between counsel, counsel for the defendants withdrew his request to file a conditional appearance.
Therefore, the only issue to be decided by me is to determine whether plaintiff’s action in rem should be struck pursuant to Rule 419 [Federal Court Rules, C.R.C., c. 663] and more particularly, as stated by counsel for defendants, pursuant to Rule 419(1)(a), there being no reasonable cause for an in rem action or 419(1)(c), the claim is scandalous, frivolous or vexatious or 419(1)(f), it is otherwise an abuse of the process of the Court.
The defendants filed, with their application to strike the plaintiff’s in rem claim, the affidavit of Dr. Anil Sharma sworn to on the 24th day of December 1993. The affidavit of Dr. Sharma is of no significance to the present proceedings.
Pursuant to Rule 419(2) no evidence is admissible on an application under Rule 419(1)(a) but evidence is permitted if the application to strike is made under Rules 419(1)(b), (c), (d), (e) and (f).
The general principle to be applied in an application to strike a statement of claim was recently stated by Mr. Justice Dubé of this Court in the case of Enterprises Ludco Ltd. v. Canada, T-742-93, not yet reported, December 3, 1993, at page 3:
It is well known in motions to strike that the Court must take the allegations of fact set out in the pleading or pleadings in question as proven. Moreover, the applicant must establish that it is plain and obvious that the pleading in question does not disclose any reasonable cause of action.
Therefore, in determining the issue of whether or not to strike a statement of claim, the facts alleged in the relevant pleadings are to be considered as true and the applicant (defendants in this case) must show that it is clear and obvious that the pleading shows no reasonable cause of action, that is, that it is clear and obvious that the plaintiff could not succeed in its action (see also Operation Dismantle Inc. et al. v. The Queen et al., [1985] 1 S.C.R. 441).
In so far as an application to strike pursuant to Rules 419(1)(c) and (f), in the case of Blackfoot Indian Band, No. 146 (Members) v. Canada and Blackfoot Indian Band, No. 146 (Chief and Councillors) (1986), 7 F.T.R. 133 (F.C.T.D.) at page 139, I quote and agree with Mr. Justice Pratte (as he then was) in the case of Creaghan Estate v. The Queen, [1972] F.C. 732 (T.D.) where he best described the Rule’s application [at pages 735-736]:
(1) On a motion to strike out a statement of claim made under Rule 419, the Court may not, in order to determine whether or not the statement discloses a reasonable cause of action, take into consideration the evidence adduced in support of the motion. The Court, however, must take this evidence into consideration in deciding whether the statement of claim is frivolous, vexatious or otherwise an abuse of the process of the Court (Rule 419(2)).
(2) Inasmuch as a motion to strike out a statement of claim is made under Rule 419(1)(a), the Court is not called upon to decide whether the allegations of the statement of claim, assuming them to be true, disclose a cause of action, but whether they disclose a reasonable cause of action….
When a motion is made before this Court under Rule 419(1)(a), the Court merely has to decide whether the plaintiff, assuming all the facts alleged in the statement of claim to be true, has an arguable case.
(3) Finally, in my view, a statement of claim should not be ordered to be struck out on the ground that it is vexatious, frivolous or an abuse of the process of the Court, for the sole reason that in the opinion of the presiding judge, plaintiff’s action should be dismissed. In my opinion, a presiding judge should not make such an order unless it be obvious that the plaintiff’s action is so clearly futile that it has not the slightest chance of succeeding, whoever the judge may be before whom the case could be tried. It is only in such a situation that the plaintiff should be deprived of the opportunity of having “his day in Court”. [Underlining is mine.]
What are the facts, which are, and as I have said, must be accepted as true, alleged in the statement of claim?
The plaintiff (respondent) was incorporated in the Ukraine with its head office at Sevastopol, Ukraine. At all material times Global was the owner of the Ship. Global’s agent entered into negotiations for the services of an ocean-going tug Muzhestvenniy (The “Tug”). The defendant Ship had been “sold foreign” to the defendant (applicant) Global. In the month of October 1993, Global, having its head office and principal place of business at Cumberland, Maryland, through its agent and broker, sought the services of an ocean-going tug to tow the Ship from Halifax, Nova Scotia “where it lay” to Alang, India. At all material times, Global was the owner of the Ship. Global’s agent entered into negotiations for the services of an ocean-going tug with World Marine Transport & Salvage Inc. of Houston, Texas, who acted as North American agents for the plaintiff and for the plaintiff’s general agents. On October 22, 1993, a verbal agreement was reached between World Marine, plaintiff’s North American agents, and the agent acting on behalf of defendants for towage of the Ship by the tug at which time all material and essential elements of the verbal agreement were agreed “including designation of the Tug as a named tug to perform the towage service and the cost and timing of the towing service.” At the conclusion of the verbal agreement and at the request of Global and its agent, World Marine, plaintiff’s agent advised plaintiff that the tug be mobilized immediately and promptly dispatched for Halifax. Plaintiff did, in fact, mobilize and dispatch the tug to Halifax. The tug was then in the Mediterranean. Plaintiff alleges that as the verbal agreement was concluded on a Friday, October 22, 1993, it was agreed that negotiations of the final details of the towage contract would be dealt with on Monday, October 25, 1993. Plaintiff’s North American agent, World Marine, prepared a written confirmation in a standard form between plaintiff and Global. In the said confirmation contract was specified a cancellation fee of US $72,500 in the event that the towage contract was cancelled by Global and the rates for the tug at US $2,500 and US $3,500 per day or pro rata as its port day rate and sea day rate respectively. After the tug was dispatched and heading to Halifax, Global is alleged to have cancelled the towage contract having made a new agreement with other tug owners. Global also advised plaintiff and its agents that it does not consider the verbal agreement as final and that it takes the position that there was no agreement between the parties and thus nothing is due to the plaintiff.
Issue
Assuming, for the purposes of this application, that the above facts alleged in the statement of claim are taken as true, is the plaintiff able to commence proceedings by an in rem action or is it plain and obvious that even if the above facts are taken as true, the plaintiff may only have an action in personam but no in rem action?
Analysis
For the purposes of the present proceedings, the parties are in agreement that the subject matter is one of admiralty and that the Federal Court of Canada has the necessary jurisdiction.
Section 22 of the Federal Court Act [R.S.C., 1985, c. F-7] gives jurisdiction to the Federal Court of Canada in matters of navigation and shipping. Subsection 22(1) states:
22. (1) The Trial Division has concurrent original jurisdiction, between subject and subject as well as otherwise, in all cases in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, except to the extent that jurisdiction has been otherwise specially assigned.
Subsection 22(2) lists, “for greater certainty” and “without limiting the generality of subsection (1)” specific maritime matters in which the Federal Court has jurisdiction.
Subsections 43(2), (3), (7) and (8) [as am. by S.C. 1990, c. 8, s. 12] of the Federal Court Act speak of when action in rem lies.
43….
(2) Subject to subsection (3), the jurisdiction conferred on the Court by section 22 may be exercised in rem against the ship, aircraft or other property that is the subject of the action, or against any proceeds of sale thereof that have been paid into court.
(3) Notwithstanding subsection (2), the jurisdiction conferred on the Court by section 22 shall be exercised in rem with respect to a claim mentioned in paragraph 22(2)(e), (f), (g), (h), (i), (k), (m), (n), (p) or (r) unless, at the time of the commencement of the action, the ship, aircraft or other property that is the subject of the action is beneficially owned by the person who was the beneficial owner at the time when the cause of action arose.
…
(7) No action in rem may be commenced in Canada against
(a) any warship, coast-guard ship or police vessel;
(b) any ship owned or operated by Canada or a province, or any cargo laden thereon, where such ship is engaged on government service; or
(c) any ship owned or operated by a sovereign power other than Canada, or any cargo laden thereon, with respect to any claim where, at the time the claim arises or the action is commenced, the ship is being used exclusively for non-commercial governmental purposes.
(8) The jurisdiction conferred on the Court by section 22 may be exercised in rem against any ship that, at the time the action is brought, is beneficially owned by the person who is the owner of the ship that is the subject of the action.
For the purposes of these proceedings, the Ship in issue is beneficially owned by the defendant Global who was (and still is) the beneficial owner at the time when the cause of action arose (see allegation in statement of claim).
Therefore, the plaintiff would be permitted to proceed with an action in rem if the subject matter of plaintiff’s action, the contract between plaintiff and defendants, would be a matter found in paragraphs 22(2)(a) to (s).
Applicants’ Submission (Defendants)
As I have stated, counsel for the defendants agrees, for the purposes of these proceedings, that pursuant to subsection 22(1) of the Federal Court Act, the Federal Court has jurisdiction in this matter. He submits that although the issue involves a maritime matter, the plaintiff’s claim relates entirely to the actions of the personal defendant in repudiating its contractual obligations “prior to the contract being performed by either party.” Defendants submit “the subject matter of plaintiff’s complaint (the cancellation of the agreement to tow the Ship by the tug) is not the action of the defendant Ship, or an attempt to recover for services rendered to it.” Defendants submit that the requirements of subsection 43(2) of the Act are not satisfied and thus no in rem action lies.
Defendants submit that some of the relevant provisions of the Federal Court Act are paragraphs 22(2)(d), (e), (i) and (k). Paragraph 22(2)(k) deals with “any claim for towage in respect of a ship or”. Defendants submit that paragraph 22(2)(k) does not apply as that paragraph refers to towage freight and that “towage” is defined in Black’s Law Dictionary, rev. 4th ed., as follows:
TOWAGE. The act or service of towing ships and vessels, usually by means of a small steamer called a “tug”. That which is given for towing ships in rivers.
The drawing of a ship or barge along the water by another ship or boat, fastened to her, or by men or horses, etc., on land. It is also money which is given by bargemen to the owner of the ground next a river, where they tow a barge or other vessel. Jacob. And see Ryan v. Hook, 34 Hun (N.Y.) 191; The Kingaloch, 26 Eng. Law & Eq. 597; The Egypt, D.C.Va., 17 F. 359, 370.
I agree with counsel for defendants that paragraphs 22(2)(d), (e) and (i) are not applicable in this case.
Counsel further submits that neither the statement of claim nor the affidavit to lead warrant disclose facts which show the defendant Ship to be the cause of plaintiff’s concern, in that, plaintiff’s complaint is based entirely on an alleged consensus ad idem and a subsequent retraction from that by the personal defendant. It is the defendants’ contention that the defendant Ship had nothing to do with the cancellation of the alleged agreement.
Defendants submit that on a certain number of occasions, the Court has insisted on the existence of a sufficient connection between the defendant Ship and the plaintiff’s claim before approving the exercise of its in rem jurisdiction. He gives, as an example, the case of Westview Sable Fish Co. et al. v. The Ship “Neekis” (1986), 31 D.L.R. (4th) 709 (F.C.T.D.) where plaintiff’s ship the Nootka Mariner had deployed cod traps, and then suffered mechanical difficulties and had to go to port. It was alleged that the crew of the Neekis had stolen those traps, and loaded them on board the defendant ship. It was sought to sustain the Court’s in rem jurisdiction on the basis of paragraph 22(2)(e) of the Act. Mr. Justice Rouleau, at pages 711 and 712 states:
It is obvious to me that in this particular action there is no damage to the ship, no damage arising out of collision, nor can I perceive of any damage related to navigation which could in some way sustain the action in rem. The plaintiff argues that Professor Tetley seems to extend the interpretation of Currie v. M’Knight, [1897] A.C. 97, in his most recent text on Maritime Liens and Claims at p. 167 where he wrote:
… the definition of navigation in Currie v. M’Knight seems excessively narrow. One suspects, for example that black smoke damage caused by a ship secured alongside a quay is damage by a ship. Nor should as much emphasis be put on the ship being strictly “the instrument which causes the damage”.
Rather it seems clear that the crew is the inseparable means by which the ship (the instrument) usually acts. Damage is therefore done by a ship when the crew acts on the ship’s behalf with the ship as only the ancillary instrument.
I should point out that Professor Tetley also wrote at p. 173 when discussing the topic “What constitutes An act of the ship ?” referring to Maclennan L.J.A. in the case of St. Lawrence Transportation Co. Ltd. v. Schooner “Amédée T”, [1924] Ex. C.R. 204 he submits that the judge’s reasoning seems irrefutable and quotes:
It is an artificial distinction to separate the act of the ship’s crew from the act of the ship, when both are concerned with the ultimate goal of navigating the ship. Liens are a means for promoting safe and legal navigation and securing the rights of persons harmed.
The decision of Maclennan L.J.A. is sound law.
As I view the principles in Currie v. M’Knight, Professor Tetley seems to suggest that the definition relating to navigation is excessively narrow, though he does find Maclennan L.J.A. to be sound reasoning, I agree with him. “The ultimate goal of the navigating of the ship is the principle upon which the extraordinary remedy of the action in rem must find its basis.” In these particular circumstances I am not satisfied that the allegations contained in the statement of claim can sustain this approach. Based on all the authorities there is no basis for a maritime lien and an action in rem arising from the entanglement of nets, cutting of lines or the conversion of gear. The plaintiff undoubtedly has an action against those who stole his fishing nets but the actions can only proceed in personam against those who committed the acts.
Defendants also cite the case of Corostel Trading v. Ship “Catalina” (1986), 6 F.T.R. 233 (F.C.T.D.) where the claim was for unspecified “services rendered to the purchaser in relation to the purchase of the said [defendant] vessel”. This was found by Mr. Justice Joyal to be insufficient to support an in rem action. As I have stated, the defendants cite the above two cases to show that there must be a “sufficient connection” to the defendant Ship in order to commence proceedings with an in rem action.
I do not disagree with counsel for defendants with this submission. I too agree that an in rem proceeding will only lie if there is a “connection” to the defendant vessel.
Plaintiff’s Submission
Plaintiff submits that there is in existence a towage contract with the defendant Global, the owner of a named vessel, whereby a named tug would tow a named vessel from Halifax to India. That this contract provided, amongst its conditions, a provision whereby, in the event of cancellation, there would be a fixed cancellation fee plus a day rate for the tug while it was at sea and at port. The named tug, because of the existence of the contract, was on its way to Halifax to execute the contract.
Plaintiff submits that the jurisdiction for an in rem proceeding is not to be limited in any way and submits as authority for this principle the case of Cormorant Bulk-Carriers Inc. v. Canficorp (Overseas Projects) Ltd. (1984), 54 N.R. 66 (F.C.A.), at page 78.
Counsel for plaintiff also submits that the principle that the ship must be a beneficiary is incorrect and he cites subsection 43(2) of the Act as his authority.
Discussion
As I have stated, in an application pursuant to Rule 419, with few exceptions, not applicable here, all the facts as alleged in a statement of claim are deemed to be true and that it is only in plain and obvious cases that an action will be dismissed under this Rule.
I am satisfied that in the circumstances of the present case, it is not plain and obvious that the plaintiff could not proceed by means of an in rem action. A contract to tow the Ship was entered into by the plaintiff and the defendant Global. Had nothing further been done and the defendant Global then cancelled the contract, I am satisfied that the plaintiff would not have been able to proceed with an in rem action as no steps would have been taken to fulfil the obligations under the contract and one would be unable to say that there existed a connection to the Ship. In the case before me, the facts are that a contract was entered into to have a named tug tow a named ship from Halifax to India. Furthermore, according to the statement of claim, the parties had allegedly agreed that the named tug would be immediately dispatched to Halifax (it was in the Mediterranean). The tug was so dispatched. After 12 days, while the tug was on its way to Halifax and plaintiff continuously informing defendants as to the position of the tug, the defendants cancelled the agreement.
Do these facts cause this claim to come within the meaning of paragraph 22(2)(k) wherein “any claim for towage in respect of a ship” may be commenced by an in rem action?
Counsel for defendants states that in order for there to be a claim for towage there must, of necessity, have been a tow. That is, the tug would have had to at least tie a line to the vessel before a claim for towage could be advanced and thus an in rem claim.
With all due respect, I do not agree. To restrict a claim under paragraph 22(2)(k) of the Act to actual towing is much too restrictive. I am satisfied that one need not actually start the “towing”, a line actually attached to the vessel, in order to have “any claim for towage”. It is sufficient, as in this case, to have commenced to fulfil the terms of a contract of towage in order to have “any claim for towage” pursuant to paragraph 22(2)(k).
In the case of Leoborg, The, [1962] 2 Lloyd’s Rep. 146, it was held that escorting services by a tug are services in the nature of towage. Surely, if a named tug is dispatched to commence towing a named vessel, one can, for the purposes of a Rule 419 application conclude that it is not plain and obvious that the plaintiff does not have a reasonable cause for an in rem action nor can it be said that such a claim is scandalous, frivolous or vexatious.
The application to strike is denied with costs.