A-674-91
Ruhrkohle Handel Inter GMBH
and
National Steel Corp.
and
All those persons having an interest in the cargo
laden on board the vessel Federal Calumet
(Appellants) (Plaintiffs)
v.
Fednav Ltd.
and
Federal Pacific (Liberia) Ltd.
and
The owners and all others interested in the vessel
Federal Calumet and her bunkers
and
The vessel Federal Calumet and her bunkers
(Respondents) (Defendants)
INDEXED AS: RUHRKOHLE HANDEL INTER GMBH V. FEDERAL
CALUMET (THL) (C.A.)
Court of Appeal, Marceau, Desjardins and Décary,
JJ.A.—Montréal, May 15; Ottawa, May 29, 1992.
Practice — Stay of proceedings — Appeal from Trial Divi
sion decision affirming Senior Prothonotary's dismissal of
application for stay of proceedings — Interrelationship
between Federal Court Act, s. 50(1) and Commercial Arbitra
tion Code, arts. 8, 9 — Trial Judge correctly not dealing with
staying of counterclaim as stay thereof not asked for by appel
lants — Stay of proceedings of exceptional nature, must be
asked for explicitly — No formal request for arbitration in
statement of claim contrary to Code, s. 8(1) — Appellants'
request for stay of own proceedings out of time — Trial
Judge's discretion under Federal Court Act, s. 50 properly
exercised — Case law considered — "Strong reasons" for
refusing stay of proceedings — Failure to make request within
time prescribed by Code, s. 8(1) significant factor against
granting of stay.
Maritime law — Practice — Appeal from Trial Division
decision affirming dismissal by Senior Prothonotary of appli
cation for stay of proceedings — Arbitration clause in charter-
party — Cargo not discharged at agreed port of delivery —
Action in rem and in personam — No reference in statement of
claim to arbitration clause nor to appellants' intention to refer
matter to arbitration — Statement of defence and counterclaim
filed by respondents — Appellants failing to make request for
arbitration and in timely fashion — Essential requirements of
Commercial Arbitration Code, s. 8(1) not met — Trial Judge's
discretion properly exercised — No steps taken by appellants
to refer to arbitration — "Strong reasons" for not granting
stay of proceedings — Appeal dismissed.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Commercial Arbitration Act, R.S.C., 1985 (2nd Supp.), c.
17, ss. 2, 4, 5.
Commercial Arbitration Code, being Schedule to Com
mercial Arbitration Act, R.S.C., 1985 (2nd Supp.), c.
17, arts. 2(f), 8, 9.
Federal Court Act, R.S.C., 1985, c. F-7, s. 50(1).
Federal Court Rules, C.R.C., c. 663, RR. 1003 (as am. by
SOR/79-57, s. 18), 1025, 1717, 1718.
CASES JUDICIALLY CONSIDERED
CONSIDERED:
Seapearl (The Ship M/V) v. Seven Seas Dry Cargo Ship
ping Corporation of Santiago, Chile, [1983] 2 F.C. 161;
(1982), 139 D.L.R. (3d) 669; 43 N.R. 517 (CA.); Jala
Godavari (The) v. Canada, A-112-91, Hugessen J.A.,
judgment dated 18/10/91, F.C.A., not yet reported; Mun-
singwear, Inc. v. Prouvost SA., [1992] 2 F.C. 541 (C.A.).
REFERRED TO:
BC Navigation S.A. (Bankrupt) v. Canpotex Shipping Ser
vices Ltd. (1987), 16 F.T.R. 79 (F.C.T.D.); lberfreight
S.A. et al. v. Ocean Star Container Line A.G. et al. (1989),
104 N.R. 164 (F.C.A.); Vallorbe Shipping Co. S.A. v. The
Tropwave, [1975] F.C. 595 (T.D.).
AUTHORS CITED
Report of the United Nations Commission on Interna
tional Trade Law on the work of its eighteenth session
—3-21 June 1985. UN GAOR, 40th Sess., Supp. No.
17, UN Doc. A/40/17 (1985).
Report of the Secretary General to the eighteenth session
of the United Nations Commission on International
Trade Law, Vienna, 3-21 June 1985. UN Doc.
A/CN.9/264 (1985).
Russell on the Law of Arbitration, 19th ed. by Anthony
Walton, London: Stevens & Sons, 1979.
APPEAL from a decision of the Trial Division,
(1991), 36 C.P.R. (3d) 521, affirming an order of the
Senior Prothonotary dismissing an application for a
stay of proceedings. Appeal dismissed.
COUNSEL:
George J. Pollack for appellants (plaintiffs).
Trevor H. Bishop for respondents (defendants).
SOLICITORS:
Martineau, Walker, Montréal, for appellants
(plaintiffs).
Brisset, Bishop, Montréal, for respondents
(defendants).
The following are the reasons for judgment ren
dered in English by
DÉCARY J.A.: This appeal raises the question of the
interrelationship between subsection 50(1) 1 of the
Federal Court Act [R.S.C., 1985, e. F-7] (the Act)
and articles 8 and 9 2 of the Commercial Arbitration
Code (the Code) enacted by the Commercial Arbitra -
I
S. 50(1) of the Federal Court Act reads as follows:
50. (1) The Court may, in its discretion, stay proceedings in
any cause or matter,
(a) on the ground that the claim is being proceeded with in
another court or jurisdiction; or
(b) where for any other reason it is in the interest of justice
that the proceedings be stayed.
2 Articles 8 and 9 of the Commercial Arbitration Code read
as follows:
Article 8
Arbitration Agreement and Substantive Claim
before Court
(1) A court before which an action is brought in a matter
which is the subject of an arbitration agreement shall, if a party
so requests not later than when submitting his first statement
on the substance of the dispute, refer the parties to arbitration
unless it finds that the agreement is null and void, inoperative
or incapable of being performed.
(Continued on next page)
tion Act, R.S.C., 1985 (2nd Supp.), c. 17 with respect
to an application for stay of proceedings made in
maritime matters.
The facts are not in dispute. The respondent Fed
eral Pacific (Liberia) Ltd. (Fedpac), a Liberian com
pany having a place of business in Belgium, is the
registered owner of the vessel Federal Calumet (the
vessel), a Liberian ship registered in Monrovia. The
respondent Fednav Ltd. (Fednav), a Canadian com
pany having a place of business in Montréal, Quebec,
is the time-charterer and operator of the vessel in vir
tue of a long-term charterparty. The appellants
Ruhrkohle Handel Inter GMBH, a German company,
and National Steel Corp., an American company, are
the owners, shippers and consignees under a bill of
lading of a shipment of blast furnace coke (the cargo)
loaded on board the vessel at Emden, Germany for
carriage aboard said vessel to Detroit, U.S.A.
The charterparty dated at Greenwich, Connecticut
on January 18, 1989 contains an arbitration clause
(the arbitration clause), which reads as follows:
5. If any dispute or difference should arise under this Charter,
same to be referred to three parties in the City of New York,
one to be appointed by each of the parties hereto, the third by
the two so chosen, and their decision, or that of any two of
them, shall be final and binding, and this agreement may, for
enforcing the same, be made a rule of court. Said three parties
to be commercial men. Should the two so chosen not be able to
agree who the third arbitrator shall be, then the Society of Mar
itime Arbitration, Inc., N.Y., is to appoint such arbitrator;
The bill of lading states, on its face, that it is "sub-
ject to all terms, conditions and exceptions of Charter
Party dated January 18, 1989 at Greenwich, including
Arbitration Clause".
(Continued from previous page)
(2) Where an action referred to in paragraph (1) of this arti
cle has been brought, arbitral proceedings may nevertheless be
commenced or continued, and an award may be made, while
the issue is pending before the court.
Article 9
Arbitration Agreement and Interim Measures
by Court
It is not incompatible with an arbitration agreement for a
party to request, before or during arbitral proceedings, from a
court an interim measure of protection and for a court to grant
such measure.
Early in the voyage, the vessel lost steering capac
ity and was towed to Brest for repair. She remained
at Brest for a period of three and a half months. As a
result of the delay and the intervening closure of the
St-Lawrence Seaway for the winter season, she could
not proceed to Detroit and proceeded, instead, to
New Orleans, where she arrived on January 31, 1990.
The cargo was barged to Illinois where the appellant
National Steel Corp. was to take delivery of same.
On January 11, 1991, the appellants, through their
New York attorneys, wrote to the respondents,
requesting "an extension of time ... in which to com
mence suit and/or arbitration under the applicable
transit documents from February 1, 1991 to May 1,
1991".
On January 15, 1991, Fednav responded on behalf
of the respondents, by granting "an extension of time
up to and including 1st May, 1991 to commence arbi
tration in New York as stipulated in charter-
party ... ". As can be seen, no extension was granted
to commence suit.
On January 30, 1991, the appellants filed an action
both in rem and in personam against the respondents
in the Federal Court of Canada, claiming a sum of
$551,000 which represents the damages allegedly
suffered by the appellants as a result of the vessel
having discharged the cargo at New Orleans instead
of at the agreed port of delivery, Detroit. No refer
ence is made in the statement of claim to the arbitra
tion clause nor to the appellants' intention to refer the
matter to arbitration.
That same day, the appellants filed an affidavit to
lead warrant for the arrest of the vessel and a warrant
for the arrest was issued by the Montréal Registry of
the Court.
On February 27, 1991, the vessel was arrested at
the port of Bécancour, Province of Quebec.
On March 1, 1991, the vessel was released from
arrest.
On March 5, 1991, the respondents filed a state
ment of defence and a counterclaim, pursuant to
which they seek payment of a sum of $132,191.50
against the appellants in respect of general average
contributions.
On March 6, 1991, the appellants applied for an
order, pursuant to section 50 of the Act and to article
8 of the Code, "that this action be stayed". No refer
ence is made to the counterclaim in the application
nor in the affidavit filed in support.
By an order dated April 30, 1991, the Senior Pro-
thonotary dismissed the application for a stay of pro
ceedings. That order was affirmed by Pinard J. on
July 3, 1991 [(1991), 36 C.P.R. (3d) 521].
I shall first dispose of the appellants' contention
that the prothonotary and the Trial Judge erred in not
dealing with the staying of the counterclaim. This
contention is without foundation. The stay of the
counterclaim proceedings was simply not asked for
by the appellants, who were satisfied with asking for
a stay of the "action". A counterclaim is essentially
an independent action that is grafted procedurally
onto the existing action (see Rule 1717 of the Federal
Court Rules [C.R.C., c. 663] and article 2(f) of the
Code), so much that a stay of the action does not
entail a stay of the counterclaim (see Rule 1718). A
stay of proceedings is of such an exceptional nature
that it must be asked for explicitly. Furthermore, an
oral request to amend the application at the hearing
of the appeal, as was suggested by counsel for the
appellants, comes too late.
The Commercial Arbitration Code
The appellants' main contention is that under arti
cle 8 of the Code, they are entitled to a stay of the
proceedings as a matter of right, the Court having no
discretion to refuse to refer the parties to arbitration.
In order to succeed, the appellants must demon
strate that they did make a request for arbitration and
that such request was made in a timely fashion, i.e.
not later than when submitting their first statement on
the substance of the dispute (see BC Navigation S.A.
(Bankrupt) v. Canpotex Shipping Services Ltd (1987),
16 F.T.R. 79 (F.C.T.D.)) The appellants have failed
on both counts.
In their view, the request for arbitration mentioned
in article 8(1) need not necessarily be made to the
Court and it is sufficient for a party to have made
such request out of court to the other party before
bringing the action. This contention has no merit. On
a plain reading of article 8(1), the request therein
contemplated is a request to the Court before which
the action is brought asking that Court to refer the
parties to arbitration. It may well be that a party has
already requested arbitration at the time the action is
brought, but unless that party formally requests the
Court to refer the matter to arbitration, article 8(1)
does not come into play (see Iberfreight S.A. et al. v.
Ocean Star Container Line A.G. et al. (1989), 104
N.R. 164 (F.C.A.)). In the instant case, there is no
request for arbitration in the statement of claim.
Even if I had held that the request contemplated in
article 8(1) could be made out of Court, I would have
had difficulty in the case at bar in finding such a
request in the letter sent by appellants' counsel on
January 11, 1991. That request was for extension of
time, not for arbitration, and that request for exten
sion of time was sought for the purpose of commenc
ing "suit and/or arbitration", the appellants obviously
not having made up their mind at that time.
The appellants contend that in any event, their
application for stay of the action made on March 6,
1991 was a timely application to the Court within the
meaning of article 8(1). Their statement of claim
filed on January 30, 1991 was not, they argue, their
"first statement on the substance of the dispute",
because they were then seeking only the arrest of the
ship as an interim measure of protection under article
9 of the Code.
Again, I have difficulty in accepting that proposi
tion, even more so where the action filed on January
30, 1991, was both an action in rem and in personam.
It is true that in proceedings before the Federal Court
of Canada, the arrest of a ship, which in another
forum might be achieved as an interim measure, can
not he authorized unless an action in rem against the
ship is properly instituted, which presupposes the fil
ing of a statement of claim (Rule 1003 [as am. by
SOR/79-57, s. 18]) and therefore a statement on the
substance of the dispute, but that in my view has no
impact on the interpretation of the Code.
The Code is an international document, based on
the model law adopted by the United Nations Com
mission on International Trade Law on June 21, 1985
(see section 2 of the Commercial Arbitration Act),
which has the force of law in Canada (see section 5)
and which may be interpreted in the light of the
Report of the United Nations Commission on Interna
tional Trade Law on the work of its eighteenth ses
sion, held from June 3 to 21, 1985, and the Analytical
Commentary contained in the Report of the Secretary
General to the eighteenth session of the United
Nations Commission on International Trade Law (see
section 4).
The Code, as a matter of law and convenience for
the international community, has established in arti
cle 8(1) a time frame which is beyond and above the
procedural subtleties of the courts of the participating
states. For the Code to he effective, parties must
know that in whatever court they make a request for
reference to arbitration, such request shall be made,
in order to deprive that court of any discretion, before
or at the very precise moment they submit in that
court their first statement on the substance of the dis
pute. That very precise moment may vary from one
jurisdiction to another but it constitutes the very
objective standard that must be met in any given
jurisdiction. I am comforted in this interpretation
with the following passage found at page 24 of the
Analytical Commentary previously referred to:
A time element has been added that the request be made at the
latest with or in the first statement on the substance of the dis
pute. It is submitted that this point of time should be taken lit
erally and applied uniformly in all legal systems, including
those which normally regard such a request as a procedural
plea to be raised at an earlier stage than any pleadings on sub
stance.
In the instant case, the appellants, which were the
plaintiffs, took the very unusual step of seeking a stay
of the proceedings they had themselves instituted
only after the defendants had filed their statement of
defence. By no stretch of the imagination can such
request be considered as having been made in a
timely fashion. I also note that the application, which
should have been made under Rules 1025 ff of the
Federal Court Rules, is asking that the action be
stayed and not, as required by article 8(1) of the
Code, that the parties be referred to arbitration. This,
in my view, is more than a mere procedural slip and
it may well be that the Court in any event would not
have been in a position to make the order contem
plated by that article.
I therefore fully agree with the view expressed
below by Pinard J. in the following words [at pages
523-524]:
Indeed, the plaintiffs, who have chosen to institute proceed
ings in the Federal Court of Canada in respect of a matter
which they had agreed to refer to arbitration in New York
City, made no mention of arbitration in their statement of
claim and waited until after the defendants had filed their
statement of defence and counterclaim before moving for a
stay of proceedings. By thus delaying their application for a
stay of proceedings, the plaintiffs have failed to meet an
essential requirement of art. 8(1) of the Commercial Arbitra
tion Code; accordingly, at such a late date, this court no
longer had the imperative duty to refer the matter to arbitra
tion at their request. [Footnote omitted.]
Section 50 of the Federal Court Act
Notwithstanding the comment found at page 24 of
the Analytical Commentary to the effect that:
As regards the effect of a party's failure to invoke the arbi
tration agreement by way of such a timely request, it seems
clear that article 8(1) prevents that party from invoking the
agreement during the subsequent phases of the court pro
ceedings.
one may see in the decision of the Working Group
...not to incorporate a provision on such general effect
because it would be impossible to devise a simple rule which
would satisfactorily deal with all the aspects of this complex
issue. [idem.]
an invitation not to adopt such a large construction of
article 8(1) and not to set aside the discretion "to stay
proceedings in any cause or matter" given to the
Court by section 50 of the Act. I need not however
decide this issue because, as we shall see, I am of the
view that the Trial Judge did in any event properly
exercise his discretion.
The appellants submit that the Trial Juge refused to
exercise his own discretion pursuant to section 50 of
the Act in holding that the appellants had not estab
lished that the Senior Prothonotary's discretion "was
based on an incorrect principle, a mistaken applica
tion of the law or a complete misapprehension of the
facts" [at page 523]. Taken out of context, these
words, which reflect an approach that was at the time
generally adopted by the Trial Division, would not
resist the later pronouncements of this Court in Jala
Godavari (The) v. Canada, (A-112-91, Hugessen
J.A., October 18, 1991, not yet reported) and Mun-
singwear, Inc. v. Prouvost S.A., [1992] 2 F.C. 541
(C.A.), where it was held that a judge who hears an
appeal from a prothonotary on a matter involving the
exercise of discretion is called upon to exercise his
own discretion and is not bound by the prothono-
tary's opinion. But I am satisfied that in the instant
case the Trial Judge, after using these improper
words, nevertheless went on to form his own opinion
and the appellants have not persuaded me that this is
a case where the Court of Appeal should interfere
with the discretion exercised by the Trial Judge.
There is no doubt in my mind that Pinard J.
reached the right conclusion when one looks at all the
facts of this case. The appellants request from the
Federal Court of Canada the stay of proceedings they
themselves have instituted in that Court (see Vallorbe
Shipping Co. S.A. v. The Tropwave, [ 1975] F.C. 595
(T.D.)). They have taken no steps whatsoever, from
the date of the alleged loss, i.e. January 31, 1990 to
the letter seeking an extension of time sent on Janu-
ary 11, 1991, to refer to arbitration. At no time from
February, 1990, up to and including January 10, 1991
did they ever inform the respondents that they were
considering the possibility of presenting a claim.
They waited until the last possible moment, and even
then they were unable to make up their minds as to
whether they would go to courts or to arbitration.
They chose to institute both their proceedings in rem
and in personam in Canada. They did not mention in
those proceedings the arbitration clause nor did they
reserve their right to arbitration in the statement of
claim. They waited until the respondents filed their
statement of defence before asking the Court to stay
the proceedings. They did not ask to stay the pro
ceedings with respect to the counterclaim, with the
result that through their own volition the same matter
would have given rise to court proceedings in Canada
and to arbitration in the United States (see Russell on
the Law of Arbitration, 19th ed. (London: Stevens &
Sons, 1979), at page 202). In their application to stay
their own action, they failed to indicate that they
were now ready and willing to do all things necessary
to the proper conduct of the arbitration. There is no
"natural" location for the settling of the dispute:
respondent Fednav, the actual disponent owner of the
ship and the contracting defendant in the action has
its head office in Montréal and operates from Mon-
tréal; one of the appellants is an American company,
another is a German company. No evidence was led
by the appellants with respect to the respective
advantages and disadvantages of court proceedings in
Canada and arbitration proceedings in New York.
There is no allegation in the application that all the
appellants and respondents were parties to or bound
by the terms and conditions of the bill of lading and
charterparty.
In refusing to intervene and to grant the stay
requested, I have not ignored the decision of this
Court in Seapearl (The Ship MN) v. Seven Seas Dry
Cargo Shipping Corporation of Santiago, Chile,
[1983] 2 F.C. 161, where Pratte J.A. has stated, at
page 176, that "As a rule, it is certainly in the interest
of justice that contractual undertakings be honoured".
In my view, the factors I have enumerated above con
stitute "strong reasons", to use the words of Pratte
J.A., at page 177, that invite the Court to depart from
the prima facie rule and that support the conclusion
that it would not be reasonable or just, in the circum
stances, to stay the proceedings. I wish to add in
passing that The Seapearl was decided before the
coming into force of the Commercial Arbitration Act
and that the prima facie rule expressed by Pratte J.A.
might well have been reversed (assuming, again, that
the Court has discretion under section 50 of the Act)
where the party seeking the stay has failed to make
its request to the Court within the time prescribed by
article 8(1) of the Code. In other words, that failure
might well constitute, absent strong reasons to the
contrary, a significant factor weighing against the
granting of a stay.
I would therefore dismiss the appeal with costs.
MARCEAU J.A.: I agree.
DESJARDINS J.A.: I concur.
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.