T-4013-79
Great Northern Paper Company and Société pro-
fessionnelle des papiers de presse (Plaintiffs)
v.
The vessel Fleur and her owners Lundqvist Rede-
rierna and Price Shipping Ltd. (Defendants)
Trial Division, Walsh J.—Montreal, October 20;
Ottawa, October 23, 1980.
Practice — Motion to set aside default judgment because ex
parte motion was not supported by affidavits of personal
knowledge, and because defendant has substantial defences —
Motion to rescind order authorizing service ex juris because
action in contract is prescribed, and because Court lacks
jurisdiction to hear action in tort — Whether default judgment
and leave for service ex juris were properly granted — Motion
to quash default judgment is allowed and motion to rescind
service ex juris is dismissed — Federal Court Rules 307(1),
332(1), 432, 433.
Plaintiffs' application for leave to serve defendant Lundqvist
Rederierna ex juris was granted, and plaintiffs subsequently
obtained default judgment. Defendant moves for leave to file a
conditional appearance, to set aside default judgment and to
rescind order for service ex furls. Defendant contends that
default judgment should be set aside because motion was not
supported by affidavits of personal knowledge, and because
defendant has substantial defences. Defendant attacks the
order for service ex juris on the grounds that in so far as action
is based on breach of contract, it is prescribed, and in so far as
it is based on tort, the Court has no jurisdiction. The issues are
whether default judgment and the leave for service ex juris
were properly granted.
Held, the motion to quash default judgment is allowed, and
the motion to set aside order authorizing service ex juris is
dismissed. Rules 432 and 433 make it possible to obtain
judgment without making proof, merely on the default to file a
defence. Such a judgment should readily be set aside when it
appears that there might have been a valid defence. The issues
raised by defendant such as prescription of the action in
contract and lack of jurisdiction of the Court, can very properly
be raised by means of a preliminary issue in law or by pleadings
on the merits. As it is conceded that if the action was pre
scribed, this had already taken place before such service, the
consequences of refusing to set it aside do not prevent defend
ant from raising all defences at the proper time, while at the
same time preserving plaintiffs' rights of action. While service
ex juris should not be granted lightly or without some indica
tion of a good cause on the merits and of jurisdiction of the
Court over the defendant, the defences raised are not appropri-
ate issues to decide at this stage or on a simple routine
application for service ex juris.
May & Baker (Canada) Ltd. v. The "Oak" [1979] 1 F.C.
401, considered. Iwai & Co. Ltd. v. The "Panaghia"
[1962] Ex.C.R. 134, considered. G.A.F. Corp. v. Amchem
Products Inc. [1975] 1 Lloyd's Rep. 601, referred to.
Skoretz v. Skoretz (1963) 38 D.L.R. (2d) 510, referred to.
Republic of Peru v. Dreyfus Bros. & Co. (1886) 55 L.T.
802, referred to. R. v. The General Commissioners for the
purposes of the Income Tax Acts for the District of
Kensington [1917] 1 K.B. 486, referred to.
MOTION.
COUNSEL:
Laurent Fortier for plaintiffs.
Gerald P. Barry for defendants.
SOLICITORS:
Stikeman, Elliott, Tamaki, Mercier & Robb,
Montreal, for plaintiffs.
McMaster Meighen, Montreal, for defend
ants.
The following are the reasons for order ren
dered in English by
WALSH J.: This action concerns a shipment of
rolls of newsprint on November 7, 1975, from
Searsport, Maine, to Rouen, France which arrived
in a short and damaged condition resulting in a
claim for $34,260 in breach of contract and tort.
Plaintiffs first sued defendants in the Tribunal de
Commerce de Rouen within 12 months of arrival
of the vessel, but because of clause 21 of the bill of
lading which provided that "All actions under this
Bill of Lading shall be instituted in the Federal
Court of Canada at Montreal, Quebec, Canada"
the Court of Appeal of Rouen concluded on
August 16, 1979 that the Tribunal de Commerce
de Rouen was incompetent to hear the action.
Plaintiffs plead that the commencement of pro
ceedings before the "Tribunal de Commerce de
Rouen" on November 8, 1976, effectively inter
rupted prescription.
Proceedings were instituted in this Court on
August 17, 1979, and service was initially made on
Montreal Shipping Co. which later claimed not to
be agents for defendant Lundqvist Rederierna, so
on January 14, 1980, an application for leave to
serve the defendant Lundqvist Rederierna ex furls
was granted on the basis of an affidavit of one of
plaintiffs' solicitors setting forth that he is familiar
with the facts of the case, that plaintiffs have a
good cause of action, the shipping under clear bills
of lading, arrival in Rouen in a short and damaged
condition due to water damage as a result of
defendant's failure to safely load, stow, handle,
carry and take care of the shipment, that defend
ant Lundqvist Rederierna cannot be served in this
jurisdiction as it has no address, domicile, or resi
dence in Canada, nor does it have agents in the
jurisdiction, and finally that Lundqvist Rederierna
may be served at Norra Esplanadgatan 9, Marie-
hamn, Finland. Said defendant apparently did not
consider it necessary to forward the notice of
service to the attorneys here through its P & I
underwriters as Lundqvist Rederierna was not the
same as Lundqvist Rederierna A/B but a mere
holding company and not the owner of the vessel.
On April 14, 1980, default judgment with dam
ages to be assessed was rendered on the basis of an
affidavit of one of plaintiffs' solicitors stating that
on February 8, 1980, notice in lieu of service out of
the jurisdiction was served on Lundqvist Rederier-
na, care of Mr. Stig Lundqvist with 45 days after
service to file a defence, pursuant to the terms of
the order authorizing service ex juris.
On April 28, 1980, counsel appearing for said
defendant presented a motion for leave to file a
conditional appearance, to rescind the order for
service ex juris on the grounds that the affidavit
supporting same failed to disclose the source of
affiant's information or to affirm a belief in same,
that with respect to the cause of action in tort
there is no connection with Canada, and the Court
has no jurisdiction over applicant, and that the
action under the bill of lading was extinguished by
prescription. It is further alleged in the motion
that the affidavit was misleading and failed to
make a true and frank disclosure of the fact that in
the proceedings in France, Great Northern Paper
Company was not a plaintiff at all, that the action
in France was dismissed subject to a referral to
this Court on October 6, 1978, and the appeal
judgment merely dismissed the appeal with costs,
that plaintiff Société professionnelle des papiers de
presse did not sue applicants on the bill of lading,
and that its action against applicant was a fraudu
lent attempt on its part to evade its contractual
obligations under the bills of lading.
Applicant further states that the documents
served lacked any valid endorsement and proof of
service was not made in the manner required by
law.
Finally, applicant asks that the ex parte judg
ment be varied or set aside in that the motion (not
being an interlocutory motion) was not supported
by affidavits of personal knowledge and that appli
cant has substantial defences to the action.
Applicant in contending that the ex parte judg
ment should be set aside relies on Rule 332(1)
which reads:
Rule 332. (1) Affidavits shall be confined to such facts as the
witness is able of his own knowledge to prove, except on
interlocutory motions on which statements as to his belief with
the grounds thereof may be admitted.
Counsel contends that a motion for default judg
ment pursuant to Rules 432 and 433 is not an
interlocutory motion as it seeks a final judgment
and hence must be confined to such facts as the
witness is able of his own knowledge to prove. The
problem arises from Rules 432 and 433, which
unlike civil law rules make it possible to obtain
judgment without making proof merely on the
default to file a defence, evidently on the basis that
this implies an admission. As a corollary it must
follow that such a judgment should readily be set
aside when it appears that there might have been a
valid defence to raise, although defendant will
have to bear the costs of his failure to plead within
the proper delays. Rule 439(3) gives the Court the
right to vary or set aside any such judgment. Here
the question is academic since plaintiff does not
object to its being set aside, but in any event I
would have exercised my discretion to do so, with
out in any way deciding the issue raised as to
whether the affidavit used to obtain it, which was
a normal form of affidavit, was sufficient or not,
since justice requires that the various defences to
be raised by defendant should be dealt with.
A more difficult question arises however as to
whether leave to serve ex juris was properly grant
ed. Applicant claims and the claim may very well
be well-founded that the action in so far as it is
based on contract is prescribed and that in so far
as it is based on tort this Court has no jurisdiction.
Applicant argues that if an action is clearly pre
scribed then the Court should not grant leave to
serve it ex juris. Plaintiffs raise the doubtful issue
that the proceedings in France interrupted pre
scription and that in any event it would only begin
from the decision of the Court of Appeal of Rouen
and not from that of the initial decision of the
Tribunal de Commerce de Rouen. Moreover the
parties were not the same, Great Northern Paper
Company being a defendant. Reference was made
by applicant to the case of May & Baker (Canada)
Ltd. v. The "Oak" [1979] 1 F.C. 401 in which at
page 403 former Chief Justice Jackett stated:
It is not irrelevant to note that, notwithstanding a statutory
requirement that an action of the kind here involved be
launched within 12 months of the cause of action arising, if the
judgment a quo is correct, the defendant is faced with an action
in which the originating document was served almost four years
after the alleged cause of action arose.
That was not the "ratio decidendi" however, as
the case merely decided that an ex parte order to
extend delays for service beyond a year could be
reviewed by the Trial Division and did not require
an appeal, and is not as I understand it, authority
for the proposition that the Court in making an
order granting service ex juris must at that stage
of the proceedings reach a conclusion that the
action is not time-barred and that the Court has
jurisdiction.
Rule 307(1) respecting ex juris service merely
requires an affidavit or other evidence showing
that "in the belief of the deponent, the plaintiff has
a good cause of action, and showing in what place
or country such defendant is or probably may be
found ...". The affidavit on the basis of which the
ex juris service was ordered complies with this. I It
was argued that the affidavit did not comply with
Rule 332(1) (supra) but this is clearly an inter
locutory affidavit made ex parte and the affidavit
contained sufficient detail to justify a reasonable
belief as to plaintiff having a good cause of action,
referring to the delivery of the goods in good order
and condition and arrival short and damaged by
water.
The case of Iwai & Co. Ltd. v. The "Panaghia"
[1962] Ex.C.R. 134 is of little help to applicants as
Thurlow J., as he then was, stated at page 142
"Nowhere in [the affidavit] is there any statement
of what cause of action the plaintiffs have against
the defendant ...". That is not the situation here.
Later he states at page 143:
The other reason why it does not follow from the mere
insufficiency of the affidavit that the order for service ex juris
should be set aside is that the question before the Court on an
application to discharge an order for service ex juris is not
merely whether the affidavit used to lead the order was suffi
cient for that purpose but whether on the whole of the material
before the Court, when the motion is made to set the order
aside the case is a proper one for service ex juris under the
rules.
Applicant argues that a full and frank disclosure
of all the circumstances was not made in the
affidavit. Counsel contends that Lloyd's Register
of Shipping shows that Lundqvist Rederierna did
not own the vessel Fleur but rather a subsidiary
Angfartygs A/B Alfa and that this information
was equally readily available to plaintiffs. It is true
that the name Angfartygs A/B Alfa appears in the
register under Lundqvist Rederierna but all the
proceedings in France were carried out and con
tested without protest in the name "Société Lun-
dovist Rederierma, or La Societe Lundovist Rede-
rierma SF" 2 , so that it is very belated for
defendant to raise the issue that it is improperly
designated as owner of the vessel, if indeed this is
the case, in order to defeat service ex furls of the
1 Applicant's contentions, if adopted, would require a great
deal of detail as to the reasons for contending there is a good
cause of action which is not prescribed and that the Court has
jurisdiction.
2 Evidently spelling errors.
present proceedings on it.
Good and conclusive authority as to the necessi
ty of making full and fair disclosure in affidavits
supporting ex parte applications (for example
G.A.F. Corporation v. Amchem Products Inc.
[1975] 1 Lloyd's Rep. 601 at 608 per Justice
Megarry, Skoretz v. Skoretz (1963) 38 D.L.R.
(2d) 510 at ' 513 quoting Republic of Peru v.
Dreyfus Bros. & Co. (1886) 55 L.T. 802 at p. 803,
The King v. The General Commissioners for the
purposes of the Income Tax Acts for the District
of Kensington [1917] 1 K.B. 486 at p. 514,) was
cited, but in the present case it is difficult to see
where there was in the affidavit any withholding of
a full disclosure of facts which were not within the
knowledge of defendant Lundqvist Rederierna, or
how it suffers any prejudice by being served ex
furls with the said proceedings.
Applicants further contend that the motion of
service ex juris indicates that service was made on
Stig Lundqvist in his capacity as a member of the
Board of Directors of Lundqvist Rederierna A/B.
The significance of the letters "A/B" after the
name of the defendant served is not explained, but
it appears from the affidavit accompanying this
application that Lundqvist Rederierna, after 4
years of litigation in France without raising any
issue as to ownership of the vessel (although coun
sel indicates that since the Captain was sued in the
French proceedings, the exact name of the owner
of the vessel was not significant), now proposes to
raise a technical defence as to whether it in fact
owns the vessel.
It would appear that this is an issue which can
very properly be raised, as can the issue of pre
scription of the action in contract and lack of
jurisdiction of this Court over the action in tort,
whether by means of a preliminary issue in law or
by pleadings on the merits. Said defendant how
ever has chosen to raise them by attempting to set
aside the service ex juris. Were there any question
of prescription arising between the time of service
and this date the issue would have more serious
consequences for plaintiff but as it is conceded
that if the action was prescribed this had already
taken place before such service the consequences
of refusing to set it aside do not prevent defendant
from raising all defences at the proper time, while
at the same time preserving plaintiffs' rights of
action.
While there is certainly good authority to the
effect that service ex juris should not be granted
lightly or without there being some indication of a
good cause on the merits and of jurisdiction of this
Court over the defendant so served, I do not
consider that applicant's serious defences are
appropriate issues to decide at this stage, or that
the Court should have reached a definitive conclu
sion on them on a simple routine application for
service ex furls before granting such an order.
ORDER
The motion to set aside the order authorizing
service ex juris and the service ex juris as a result
thereof is therefore dismissed.
The motion to quash the ex parte judgment by
default rendered herein on April 14, 1980, is
granted, with costs against defendant Lundqvist
Rederierna in any event of the cause.
Defendant Lundqvist Rederierna shall have 30
days to answer the statement of claim.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.