T-2416-97
The Governor and Company of the Bank of Scotland (Plaintiff)
v.
The Owners and All Others Interested in the Ship Nel and Ocean Profile Maritime Limited (Defendants)
Indexed as: Governor and Company of the Bank of Scotlandv. Nel (The) (T.D.)
Trial Division, Hargrave P."Vancouver, December 18 and 30, 1998.
Evidence — Motion to allow plaintiff to rely, as evidence, on documents, not appended to affidavits, it has produced at request of various claimants to sale proceeds of ship at or following cross-examination of plaintiff's witness — Documents merely produced to and examined by counsel do not form part of evidence of case, but should counsel for claimants who cross-examined plaintiff's deponent wish to rely upon any document in package or set, then necessarily related documents in package or set may be relied upon by plaintiff.
Practice — Variation of time — Motion to file supplemental affidavit of claim to update balance owing on claim in matter of priorities to sale proceeds of ship — To extend time for filing more affidavit material contrary to Federal Court r. 492(2) and F.C.A. view stated in National Bank of Greece S.A. v. Macoil Inc. — R. 55 ought not to be used to amend r. 492(2), remove time bar — Furthermore, present proceeding not extraordinary case presenting special circumstances bringing it within r. 55 — Considering all circumstances, including need to move to prompt determination of entitlement to sale proceeds of ship and to bring end to legal expenses of all claimants, factors outweigh any injustice to plaintiff resulting from rejection of supplemental affidavit.
The main proceeding concerned the determination, by motion, of priorities to the sale proceeds of the Nel. The plaintiff filed a motion to allow it to rely upon, as evidence, documents which it has produced, at the request of various claimants, at or following the cross-examination of one of the plaintiff's witnesses. The plaintiff also wished to file a supplemental affidavit of claim.
Held, the motion should be denied.
Difficulties arose with respect to the production of documents for two reasons. First, not all of the documents produced were put to the witness, yet the plaintiff now wished to rely upon some of them. Second, if the cross-examining claimants wished to rely upon certain specific documents from a package or set of documents requested from and produced by the plaintiff, then the plaintiff had a valid case that it was only just and proper that related documents in the bundle or set ought to be available as evidence in order that the Court might properly assess the document used by the claimant.
There is a line of cases to the effect that where a party calls for a document held by another party and then inspects that document, he or she is required to put it in as evidence if asked to do so: Senat v. Senat, [1965] P. 172. However, there is another line of cases to the effect that under the Federal Court Rules, past and present, documents to be relied upon, on a motion, must be introduced by way of an affidavit, subject to other documents coming in by way of cross-examination: Mountainbell Co. Ltd. et al. v. W.T.C. Air Freight (H.K.) Ltd. et al. (1991), 128 N.R. 75 (F.C.A.). The first solution ought to apply only if a document is placed before a trier of fact. Thus, documents merely produced to and examined by counsel do not form part of the evidence of the case, but should cross-examining counsel wish to rely upon a document that is part of a package or set, then necessarily related or explanatory documents in that package or set may be relied upon by counsel for the plaintiff.
The supplemental affidavit of claim to update the balance owing on the claim should not be allowed. Subsection 492(2) of the Federal Court Rules, 1998, like former subsection 1008(2), specifically provides that claims not filed within the time set by the Court are barred. The Federal Court of Appeal was quite adamant on this point in National Bank of Greece S.A. v. Macoil Inc. A basic principle in summary judgment procedure " that no party may hold back, but rather each must put his best foot forward by producing such evidence as is reasonably available " is applicable to summary procedure for determining priorities by motion. And subsection 492(2) ought to apply to supplements to a claim, for at least one purpose of the rule is to bring to an end the making of or adding to a claim so that the business of dividing up the sale proceeds may be concluded within a reasonable time.
Rule 55 ought not to be applied to remove the subsection 492(2) time bar. First, because it ought not to be used to amend the Rules. Second, this was not an extraordinary case such that it presented special circumstances bringing it within the ambit of rule 55.
To allow in an affidavit of claim at this time, after two earlier adjournments of the priorities motion, would result in just the opposite of a most expeditious and least expensive solution. In the present instance, taking all the circumstances together, including the need to move to a prompt determination of entitlement to the sale proceeds to the Nel and to bring an end to the legal expenses of all of the claimants, those factors outweigh any injustice to the plaintiff. Rejection of the Bank of Scotland's proposed supplemental affidavit does not bar an updating of the Bank's claim for interest on the shortfall it is able to establish.
statutes and regulations judicially considered
Evidence Act, 1938 (U.K.), 1 & 2 Geo. 6, c. 28.
Federal Court Rules, C.R.C., c. 663, RR. 6 (as enacted by SOR/90-846, s. 2), 319(2), 1008(2).
Federal Court Rules, 1998, SOR/98-106, rr. 3, 55, 363, 371, 492(2).
cases judicially considered
applied:
Mountainbell Co. Ltd. et al. v. W.T.C. Air Freight (H.K.) Ltd. et al. (1990), 128 N.R. 75 (F.C.A.); Kukan v. Minister of Manpower & Immigration, [1974] 1 F.C. 12; (1974), 1 N.R. 445 (C.A.); Calvert v. Flower, [1836] 7 Car. & P. 386; (1836), 173 E.R. 172; National Bank of Greece S.A. v. Macoil Inc., [1986] F.C.J. No. 234 (C.A.) (QL); Feoso Oil Ltd. v. Sarla (The), [1995] 3 F.C. 68; (1995), 184 N.R. 307 (C.A.); Fritz (T.) v. M.N.R., [1993] 1 C.T.C. 370; (1993), 93 DTC 5132; 63 F.T.R. 110 (T.D.).
distinguished:
Senat v. Senat, [1965] P. 172 (Eng.); Morrison-Knudsen Co. v. British Columbia Hydro & Power Authority (1972), 31 D.L.R. (3d) 633; [1972] 6 W.W.R. 254 (B.C.S.C.).
considered:
Wharam v. Routledge, [1805] 5 Esp. 235; (1805), 170 E.R. 797.
authors cited
Wigmore, John Henry. Evidence in Trials at Common Law, revised by James H. Chadbourn, Vol. 7, Boston: Little, Brown & Co., 1978.
MOTION to allow the plaintiff to rely upon, as evidence, documents which it has produced, at the request of various claimants to the sale proceeds of a ship, at or following the cross-examination of one of the plaintiff's witnesses; and to file a supplemental affidavit. Motion denied.
appearances:
Peter G. Bernard for plaintiff.
Louis Buteau for claimant Alpha Bunkering Co. Ltd.
David F. McEwen for claimant Marine et al.
Jonathan S. McLean for claimant Aktina S.A.
solicitors of record:
Campney & Murphy, Vancouver, for plaintiff.
Sproule, Castonguay, Pollack, Montréal, for claimant Alpha Bunkering Co. Ltd.
McEwen, Schmitt & Co., Vancouver, for claimant Marine et al.
Edwards, Kenny & Bray, Vancouver, for claimant Aktina S.A.
The following are the reasons for order rendered in English by
Hargrave P.: In January 1999, there will be a hearing to determine priorities to the sale proceeds of the Nel. These reasons arise out of a motion to allow the plaintiff to rely upon, as evidence, documents which it has produced, at the request of various claimants, at or following the cross-examination of the plaintiff's witness, Mr. James Myles. The plaintiff also wishes to file a supplemental affidavit of claim.
The usual procedure for the determination of priorities to sale proceeds, by motion is, in most instances, relatively straight forward. However, in this instance, there are not only many competing claims, but also a number of related ship sales in various jurisdictions, for the security for the plaintiff's loan consists of account current or running mortgages over a fleet of ships which includes the Nel. This has hampered the participants, for there are no pleadings, as such, leaving some counsel in quandary as to the cases they must meet.
Documents Not Attached to Affidavits
On hearing the motion, I ruled on the first point, essentially being the ability of the plaintiff to rely upon documents, not appended to affidavits, but which had appeared during the cross-examination process by way of request and production. Difficulty arises for two reasons. First, not all of those documents produced were put to the witness, yet the plaintiff now wishes to rely upon some of them. Second, the cross-examining claimants may wish to rely upon certain specific documents from a package or set of documents requested from and produced by the plaintiff: here the plaintiff has a valid case that it is only just and proper that related documents in the bundle or set ought also to be available as evidence in order that the Court might properly assess the document used by a claimant, by also referring to supporting or explanatory material which may throw an entirely different light.
Initially I felt I might be bound to apply the proposition that where a party calls for a document held by another party and then inspects that document, he or she is required to put it in as evidence if asked to do so. This is set out in a passage from Senat v. Senat, [1965] P. 172. The issue there was whether one of the petitioners might rely upon entries in an address book as corroborative evidence of adultery, for a statement admissible under the Evidence Act, 1938 [1 & 2 Geo. 6, c. 28] could not be used as such. Counsel for the other petitioner, to whom the address book had been shown, did not object to it being entered under the Evidence Act, 1938, but did not call for or inspect it. He did, however, cross-examine upon the address book. The question was whether the address book was admissible, outside of the Evidence Act, 1938, as evidence. Sir Jocelyn Simon, President of the Probate, Divorce and Admiralty Division, sets out the law at page 177:
But Mr. Law submits that it was admissible, and indeed was admitted, under another head which did not render it inadmissible as corroboration by the statutory provision which I have just read. He says that where a document is inspected by opposing counsel in the conduct of the suit, it becomes evidence which that counsel must put in. He cited to me a decision of Wrangham J. in Stroud v. Stroud (No. 1) ([1963] 1 W.L.R. 1080; [1963] 3 All E.R. 539), where he himself was counsel. In my view the mere inspection of a document does not render it evidence which counsel inspecting it is bound to put in. I think that the true rules are as follows: Where a document is used to refresh a witness's memory, cross-examining counsel may inspect that document in order to check it, without making it evidence. Moreover he may cross-examine upon it without making it evidence provided that his cross-examination does not go further than the parts which are used for refreshing the memory of the witness: Gregory v. Tavernor ((1833) 6 C. & P. 280). But if a party calls for and inspects a document held by the other party, he is bound to put it in evidence if he is required to do so: Wharam v. Routledge ((1805) 5 Esp. 235). The distinction is shown clearly in the ruling of Sir Cresswell, who had, of course, great experience both in the courts of common law and in the divorce court, in Palmer v. Maclear and M'Grath ((1858) 1 Sw. & Tr. 149, 151). [Emphasis added.]
The concept that a party calling for and inspecting a document is bound to put it into evidence, if required to do so, was approved by the B.C. Supreme Court in Morrison-Knudsen Co. v. British Columbia Hydro & Power Authority (1972), 31 D.L.R. (3d) 633, at page 635. This concept, which applies in some jurisdictions to documents produced at trial, must be distinguished in the instance of cross-examination on an affidavit related to a motion, for the Federal Court of Appeal pointed out in Mountainbell Co. Ltd. et al. v. W.T.C. Air Freight (H.K.) Ltd. et al. (1990), 128 N.R. 75, at page 76, that "[u]nder the Federal Court Rules it is necessary for an applicant to file an affidavit in support of an application if he wishes to establish facts that do not appear in the record of the court". There is a similar passage in Kukan v. Minister of Manpower & Immigration , [1974] 1 F.C. 12, a decision of C.J. Jackett, at page 16:
Statements of fact made in a notice of motion or in written argument must be established by an affidavit or affidavits filed in support of the motion as required by Rule 319(2).
Subsection 319(2) [Federal Court Rules, C.R.C., c. 663] has its present equivalent in rule 363 [Federal Court Rules, 1998, SOR/98-106] which requires that:
363. A party to a motion shall set out in an affidavit any facts to be relied on by that party in the motion that do not appear on the Court file.
Clearly, under the Federal Court Rules, past and present, documents to be relied upon, on a motion, must be introduced by way of an affidavit, of course subject to other documents coming in by way of cross-examination.
There is a concept which may be used to distinguish the two lines of cases, Senat v. Senat, on the one hand and the cases providing a gloss on what is now rule 363, on the other hand, which concept I adopt from the submissions of Mr. McEwan. It is that only if a document is placed before a trier of fact ought the rule in Senat v. Senat to apply. This is consistent with a passage from a decision of Lord Denman, C.J. in Calvert v. Flower, [1836] 7 Car. & P. 386; (1836), 173 E.R. 172, in which Lord Denman C.J. points out that it is for the judge at trial to rule upon whether the use of material by counsel will make that material evidence [at page 172 E.R.]:
In the course of the examination of one of the plaintiff's witnesses"Kelly, for the defendant, called for the ledger of the intestate under a notice to produce.
Campbell, A. G., for the plaintiff"I will produce it if it is called for as your evidence.
Kelly"I call for it, but subscribe to no condition.
Lord Denman, C. J.,"If the intestate's ledger is called for under a notice to produce, and it is not produced, Mr. Kelly may cross-examine as to its contents; but if it is produced and given to Mr. Kelly, it will be for me to decide whether Mr. Kelly makes such use of it as will compel him to use it as his evidence.
The book was produced, and Kelly turned over several pages of it, so as to look at the contents of them.
Lord Denman, C. J."I ought now to say, that if Mr. Kelly looks at the book he will be bound to put it in as his evidence.
Kelly,"Certainly, I am fully aware that I must do so.
Lord Denman, C. J."I have mentioned this because it has been supposed by some, that an opposite counsel may look at papers or books called for under a notice to produce, and then not use them. [Emphasis added.]
Wigmore [Evidence in Trials at Common Law] (1978 Edition, Volume 7, " 2125, page 688) refers to this principle, invented by Lord Ellenborough in Wharam v. Routledge , [1805] 5 Esp. 235; (1805), 170 E.R. 797, as an illogical rule in light of the present principle of complete production, a rule designed to keep a party entirely in the dark as to his opponent's evidence by obliging him to take the risk of putting in all of a document if he even peruses it on production, for such a rule would prevent counsel from looking at a document unless very certain as to its content. Thus, while approved by the B.C. Supreme Court in Morrison-Knudsen, the rule ought to be strictly limited to a trial situation. Indeed, it is a rule that has been repudiated in some jurisdictions which have a common law based legal system. The approach taken, in the context of a motion, in Mountainbell and in Kukan, supra, is more sensible. Thus the present order that documents merely produced to and examined by counsel do not form part of the evidence of the case, but that should cross-examining counsel wish to rely upon a document that is part of a package or set, then necessarily related or explanatory documents in that package or set may be relied upon by counsel for the plaintiff.
Supplemental Affidavit of Claim
I now turn to the matter of the supplemental affidavit of claim. By way of some relevant background, the Nel was sold pursuant to a sale order of December 3, 1997, which provided, in part, that all claims against the proceeds of the sale, including the claim of the plaintiff, be made by affidavit filed in the Registry by December 31, 1997.
Subsequently, January 30, 1998, the plaintiff, in the absence of any defence, took default judgment in the amount of $17,602,057.32 and, following the sale, received a partial payment of the sale proceeds that were in excess of the amount reasonably required to secure the balance of the claimants.
The question of additional affidavits of fact then arose: by order of March 25, 1998, the Court required that all affidavits of fact be delivered and filed by April 15, 1998. The Court set aside time in August and September to hear the motion to determine priorities. The plaintiff was unable to comply with the order and, on April 20, 1998, obtained an extension of time until April 28, 1998. The Bank of Scotland's affidavit was filed April 22, 1998, showing a balance, an "approximate minimum outstanding to the Bank following payment out of sale proceeds of all four vessels" of US$965,348. This was apparently a gross approximate figure, for the affidavit went on to note that there would thus be a shortfall in repayment of the loan even if no claims in Canada, South Africa or Singapore were given priority over the Bank of Scotland's claim as mortgagee.
Here I would note that the April 22, 1998 affidavit relied upon approximations and that is fair enough, for the Bank of Scotland could not forecast what priority the various courts might give to other claimants. The deponent of the affidavit sworn on behalf of the Bank of Scotland was cross-examined in August of 1998. The August and September hearing dates were adjourned. The Court set aside five days, two in Montréal and three in Vancouver, in November and December, to hear the priorities motion, however the parties were again not prepared to proceed: the motion has been reset for early January 1999. This brings us to the supplemental affidavit of claim in question.
On December 14, 1998, the Bank of Scotland produced a supplemental affidavit, that of Douglas Newton, showing an estimated balance owing on its loan, after anticipated recoveries, of $3,525,669.85. It is this affidavit to which the claimants object.
As to the affidavit itself, it shows payments made and balances received relating to the Nel, the Angelina L, the Blue L and the Anna L, although in the case of the latter the gross proceeds were recovered by the Bank of Scotland. The claimants are disappointed that the Newton affidavit makes no mention of what they submit was a bonus to the Bank of Scotland of US$1,700,000 on the purchase by the Bank of the Blue L and her resale.
Now in the case of the Nel and the Angelina L the various payments to creditors are set out by date: relevant is the fact that of the 44 payments set out, 33 of them predate the April 22, 1998 claim affidavit of Mr. Myles, sworn on behalf of the Bank of Scotland. In the case of the Blue L there is no indication as to when the payments to claimants were made, although the claims against the Blue L were, by the order of a South African Court, to be filed by March 27, 1998. The referee, taxed by that Court to receive the claims against the Blue L, reported on March 31, 1998, again well before the April 22, 1998 claim affidavit of the Bank of Scotland. There is no indication as to when the Court ultimately allowed payment of the claims recommended by the referee, claims which totalled some $2,000,000. Here I would note that the supplemental affidavit which the Bank of Scotland now seeks to file does not show a final figure for recovery on the Blue L, but rather an anticipated maximum recovery figure of just over $2,000,000 on a sale price of $3,334,750. I now turn to the rule governing timely filing of claims.
Subsection 492(2) of the Rules, like former subsection 1008(2), is quite specific as to timely filing of claims: claims not filed within the time set by the Court are barred. The Federal Court of Appeal was quite adamant on this point in National Bank of Greece S.A. v. Macoil Inc., [1986] F.C.J. No. 234 (QL) [hereinafter the Polar Paraguay].
The summary procedure for determining priorities by a motion may, by analogy, be likened to summary judgment procedure. A basic principle, in summary judgment procedure, is that no party may hold back, but rather each must put a best foot forward by producing such evidence as is reasonably available to them: see for example Feoso Oil Ltd. v. The Sarla, [1995] 3 F.C. 68 (C.A.), at page 82.
In the present the initial sale order of December 3, 1997, is quite specific, requiring all claims, including that of the plaintiff, to be made by affidavit by the December 31, 1997 date. Similarly, the March 25, 1998 order is specific in requiring affidavits of fact by April 15, 1998. Here I would note that it was the plaintiff who brought a motion, in March of 1998, supported by material indicating that the plaintiff wished a March 30, 1998 cut-off date for affidavits, a date which the Court rejected in favour of April 15, 1998. As I noted earlier the plaintiff then had to obtain an extension on that date in order to file its affidavit of fact on April 22, 1998.
The plaintiff's affidavit of April 22, 1998, does contain suggestions that it is not a final claim, for it indicates that some figures are provisional, being based upon then current information. However, it is unfortunate that the plaintiff did not make it clear in that affidavit both that the affidavit was not current as of April 22, 1998, and that it had overlooked many thousands of dollars of adjustments which had occurred before the affidavit was sworn, indeed, some expenditures were made a number of months before the affidavit was sworn.
Counsel for the Bank of Scotland submits that this is an extraordinary case and given that there is no prescribed procedure for updating the balance owing, on a claim that was clearly defined in two previous claim affidavits by the Bank of Scotland, it is only just to allow the Bank to file additional affidavit material.
To extend time so that the Bank of Scotland might file more affidavit material is contrary to subsection 492(2) of the Rules and flies in the face of the Court of Appeal's view in the Polar Paraguay, supra. But I have considered whether I might properly rely on rule 55 by finding special circumstances by which to dispense with compliance with subsection 492(2), a rule which clearly bars a claim made out of time. As I read subsection 492(2) it ought to apply to supplements to a claim, for at least one purpose of the rule is to bring to an end the making of or the adding to a claim so that the business of dividing up the sale proceeds may be concluded within a reasonable time. There are three reasons why I ought not to apply rule 55 to remove the subsection 492(2) time bar. First, rule 55 ought not to be used to amend the Rules: Fritz (T.) v. M.N.R., [1993] 1 C.T.C. 370 (F.C.T.D.), at page 373 [Then Rule 6 (as enacted by SOR/90-846, s. 2)]. To ignore a specific and necessary time provision would be tantamount to amending subsection 492(2). Second, if I am wrong on this first point, I am not convinced that this is an extraordinary case such that it presents special circumstances in order to bring it within the ambit of rule 55. Third, rule 55 ought to be read in conjunction with rule 3:
3. These Rules shall be interpreted and applied so as to secure the just, most expeditious and least expensive determination of every proceeding on its merits.
To allow in an affidavit of claim at this time, after two earlier adjournments of the priorities motion, adjournments which, as I understand it, came about, at least in part, by reason of cross-examination on the Bank of Scotland's affidavit and delays both in making the deponent available and in producing material, would result in just the opposite of a most expeditious and least expensive solution. Yet, would the refusal of leave to file the affidavit result in an unreasonable injustice to the Bank of Scotland?
Granted, the Bank of Scotland's mortgage is said to be an account current or running mortgage. However it cannot go on running indefinitely, with fresh supporting affidavit material, renewed cross-examination and further adjourned hearing dates. At least to some degree the Bank of Scotland's present difficulties would seem to arise out of the Bank of Scotland, itself, not taking this proceeding as seriously as it ought. Here I specifically separate counsel and the Bank. The Bank has pressed for a quick resolution, yet not been able to meet its self-inflicted timetable. The Bank's previous affidavit material seems to have been prepared without regard for items which, had there been timely book-keeping, ought to have appeared in the April 22, 1998 claim affidavit: here I refer back to 33 of the 44 payments relating to the Nel and to the Angelina L which were made at a date which should have enabled them to be included in the April 22, 1998 claim affidavit.
Perhaps the parties ought, in hindsight, to have opted for a full blown trial, with a complete discovery procedure (a costly exercise) to determine priorities. But they did not. They elected to proceed by motion. Therefore it became incumbent upon all of those claiming against the sale proceeds not only to put forward their best cases, as of a given date, the date set by the Court in consultation with the parties for filing affidavits of fact to support their claims, but also to complete cross-examination promptly and, failing agreement, to have the priorities motion heard expeditiously. In the present instance, taking all of the circumstances together, including the need to move to a prompt determination of entitlement to the sale proceeds of the Nel and to bring an end to the legal expenses of all of the claimants, those factors outweigh any injustice to the Bank of Scotland.
Counsel for the Bank of Scotland submits I ought to apply rule 371, a rule which allows the Court, on motion and in special circumstances, to hear viva voce factual evidence from a witness. Special circumstances depend upon the facts in the particular instance. I do not look upon a refusal to order a waiver of a time bar as a special circumstance which might allow viva voce evidence in this matter, for in essence it is an attempt to bring in evidence that was rejected as out of time, evidence in part to patch up an earlier affidavit.
Conclusion
The plaintiff's motion is denied, subject to the proviso that should counsel for the claimants who cross-examined the Bank of Scotland's deponent wish to rely upon a document that is part of a package or set, then necessarily related documents in that package or set may be relied upon by the plaintiff. Of course, rejection of the Bank of Scotland's proposed supplemental affidavit does not bar an updating of the Bank's claim for interest on the shortfall it is able to establish.
The costs of this motion may be dealt with at a future date convenient to the parties.