A-845-90
Banco do Brasil S.A. (Appellant) (Defendant)
v.
Pan American Steamship Lines Inc. and Europe-
Overseas Steamship Lines N.V. (Respondents)
(Plaintiffs)
INDEXED AS.' BANCO DO BRASIL SA. V. ALEXANDROS G.
TSA vwIRIS (THE) (CA.)
Court of Appeal, Isaac C.J., Heald and Marceau B.A.
—Vancouver, April 6; Ottawa, August 14, 1992.
Maritime law — Torts — Appeal from Trial Division judg
ment awarding damages for wrongful interference with con
tracts relating to chartering of vessel and carriage of cargo —
Owners failing to make mortgage payments when due — Ship
time chartered to respondents — Bank threatening to arrest
ship in Panama when informed of time charter and planned
destinations — Ship arrested in Canada and sold under Court
order — Respondents alleging refusal by Bank to permit voy
age through Panama Canal on reasonable terms — Whether
Bank's conduct negligence and wrongfully inducing breach of
charterparties and bill of lading contracts — Trial Judge rely
ing upon The Myrto case in concluding conduct actionable in
Canada as tort if engaged in here — Tort of intimidation
explained — Trial Judge erring in law in applying principles of
The Myrto — Bank's conduct not actionable in Canada if
engaged in here.
Conflict of laws — Appeal from Trial Division decision
awarding damages for breach of charterparties, bill of lading
contracts — Whether appellant's conduct amounting to tort of
negligence — Trial Judge applying hoice of law rule — Rule
generally applicable to foreign tort ac ns in Canada — Trial
Judge's conclusion appellant's conduct a tunable in Canada
as tort if engaged in here based on principles of The Myrto —
Facts in The Myrto different from those herein — Tort of intim
idation defined — Author, case law considered — Tort of
intimidation not to be determined solely on basis of principles
in The Myrto — Appellant having legal right to arrest ship in
default of mortgage payments — No intention of injuring
respondents — No actionable wrong in Canada.
This was an appeal from a judgment of the Trial Division
awarding respondents damages for wrongful interference with
contracts relating to the chartering of the vessel Alexandros G.
Tsavliris and the carriage of its cargo. The owners of the Alex-
andros and its sister ship, the Claire A. Tsavliris, having failed
to make payments due under a mortgage, the Bank to which it
had been assigned enforced its rights as mortgagee by arresting
the Claire and by threatening to do the same with respect to the
Alexandros. Meanwhile, the respondents chartered the Alexan-
dros on a time charter for a voyage from Europe to the west
coast of the United States and Canada. After long and unsuc
cessful negotiations between the charterers and the Bank's rep
resentatives as to whether the Bank should forego its right to
arrest the Alexandros in the Panama Canal, the respondents
instructed the Alexandros to proceed around Cape Horn to Los
Angeles. The day following her arrival in New Westminster,
British Columbia, the ship was arrested and subsequently sold
pursuant to a Court order. In the Trial Division, the respon
dents alleged, inter alia, that the Bank had refused to permit
the voyage of the Alexandros to proceed on reasonable terms
by transit through the Panama Canal and had, thereby, wrong
fully induced breach of their charterparties and of the bill of
lading contracts. The Trial Judge ruled in their favour. Upon
appeal, the main issue was whether the Trial Judge erred in
concluding that the Bank committed tort against the respon
dents by disclosing to the owners that solicitors had been
instructed to enforce the Bank's rights against the Alexandros
at the earliest opportunity and then preparing to do so in Pan-
ama.
Held, the appeal should be allowed.
Confronted with an allegation of a foreign tort, the Trial
Judge was required to decide first, the choice of law rule appli
cable and, secondly, whether the Bank's conduct rendered it
liable to the respondents. Strayer J. applied the choice of law
rule generally applicable to foreign tort actions in Canada. In
concluding that the Bank's conduct would have been actiona
ble in Canada as a tort, if engaged in here, he relied upon the
principles of law laid down in The Myrto, which, according to
His Lordship, reflected the maritime common law of both
England and Canada.
Counsel for the parties were bound by their admissions of
fact that the law of England is as stated in The Myrto. But as an
admission of the state of the maritime common law of Canada,
it is ineffective to bind the Federal Court which is free to deter
mine the principles of Canadian law that govern the present
case. None of the authorities cited in The Myrto supports the
conclusion that there exists in England a special maritime tort
of interference with contractual relations which differs in its
constituent elements from that which exists under the general
law of torts. Strayer J. found that the interference with contrac-
tual relations consisted of threatened arrest and preparations to
effect the arrest. In the law of torts, such conduct is best char
acterized as intimidation. The principles noted in The Myrto
could not, by themselves, determine this case under the domes
tic law of England since neither The Myrto nor the authorities
relied upon therein were concerned with facts similar to those
in the case at bar.
In determining the common law of Canada on the tort of
intimidation applicable to this case, the Federal Court must, in
admiralty matters, consider only "Canadian maritime law" as
defined in section 2 of the Federal Court Act and explained in
ITO—International Terminal Operators Ltd. v. Miida Electron
ics Inc. et al.
The Trial Judge erred in law in concluding that in Canada
the tort of intimidation based on the Bank's conduct fell to be
determined solely on the basis of the principles stated in The
Myrto. Although those principles helped him in appreciating
the limits on the Bank's rights as mortgagee if it chose to exer
cise its undoubted right to arrest the Alexandros, they were of
no assistance in resolving the dispute as between the Bank and
the respondents. There was no doubt that, by the law of the
mortgage, the Bank had a legal right to arrest the Alexandros.
The communication by the Bank of its intention to exercise its
undoubted right of arrest and the taking of preparatory steps to
effect such arrest in a jurisdiction that favoured its interest
were not unlawful and an action based on those acts would not
be maintainable in Canada. There was no evidence that the
Bank intended to exercise its right of arrest with the intention
of injuring the respondents. A mere threat by the Bank to exer
cise those rights without more would not, by the law of
Canada, amount to an actionable wrong. Consequently, the
Trial Judge erred in law in concluding that the conduct of the
Bank would have been actionable in Canada, if engaged in
here. Even if the Bank's conduct could be characterized as
inducing a breach of contract, the principles laid down in The
Myrto do not reflect the common law of Canada in this regard.
While conduct which interferes with the performance of a con
tract, whether directly or indirectly, may be tortious if done
deliberately and with knowledge of the existence of the con
tract, it will not be so if the conduct which induced the breach
was `justified". The Bank's right to arrest the Alexandros hav
ing crystallized, it was justified in informing the respondents
of its intention to arrest the ship and in taking steps to do so.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Federal Court Act, R.S.C., 1985, c. F-7, s. 2.
CASES JUDICIALLY CONSIDERED
APPLIED:
Morgan v. Fry, [1968] 2 Q.B. 710 (C.A.); ITO—Interna-
tional Terminal Operators Ltd. v. Miida Electronics Inc.
et al., [1986] 1 S.C.R. 752; (1986), 28 D.L.R. (4th) 641;
34 B.L.R. 251; 68 N.R. 241; Roman Corporation Ltd. et
al. v. Hudson's Bay Oil and Gas Co. Ltd. et al., [1973]
S.C.R. 820; (1973), 36 D.L.R. (3d) 413; Central Canada
Potash Co. Ltd. et al. v. Government of Saskatchewan,
[1979] 1 S.C.R. 42; (1978), 88 D.L.R. (3d) 609; [1978] 6
W.W.R. 400; 6 C.C.L.T. 265; 23 N.R. 481.
DISTINGUISHED:
The Myrto, [1977] 2 Lloyd's Rep. 243 (Q.B.D. Adm. Ct.).
REFERRED TO:
De Mattos v. Gibson (1859), 4 De G. & J. 276; 45 E.R.
108 (Rolls Ct.); Collins v. Lamport (1964), 11 L.T. 497
(Ch. D.); The Innisfallen (1866), L.R. 1 A. & E. 72; John-
son v. Royal Mail Steam Packet Company (1867), L.R. 3
C. P. 38; Keith v. Burrows (1877), L.R. 2 App. Cas. 636
(H.L.); Cory, Brothers, and Co. v. Stewart (1886), 2
T.L.R. 508 (C.A.); The Blanche (1888), 58 L.T. 592 (P.D.
& Adm. Div.); The Fanchon (1880), 5 P. D. 173; The
Celtic King, [1894] P. 175; The Heather Bell, [1901] P.
272 (C.A.); Law Guarantee and Trust Society v. Russian
Bank for Foreign Trade, [1905] 1 K. B. 815 (CA.); The
Manor, [1907] P. 339 (C.A.); The Lord Strathcona,
[1925] P. 143; Rookes v. Barnard, [1964] A.C. 1129
(H.L.); Greig v Insole, [1978] 3 All E.R. 449 (Ch. D.);
Posluns v. Toronto Stock Exchange and Gardiner, [1964]
2 O.R. 547; (1964), 46 D.L.R. (2d) 210 (H. Ct.).
AUTHORS CITED
Castel, J.-G. Canadian Conflict of Laws, 2nd ed., Toronto:
Butterworths, 1986.
Clerk & Lindsell on Torts, 16th ed., London: Sweet &
Maxwell, 1989.
Fridman on Torts, London: Waterloo Publishers, 1990.
APPEAL from a judgment of the Trial Division
([1990] 3 F.C. 260) awarding damages for wrongful
interference with contracts relating to the chartering
of a vessel and the carriage of cargo. Appeal allowed.
COUNSEL:
David P. Roberts, Q.C. and R. M. Shore for
appellant (defendant).
Nils E. Daugulis and Daniel R. Bennett for
respondents (plaintiffs).
SOLICITORS:
Campney & Murphy, Vancouver, for appellant
(defendant).
Bull, Housser & Tupper, Vancouver, for respon
dents (plaintiffs).
The following are the reasons for judgment ren
dered in English by
ISAAC CJ.: This is an appeal from a judgment of
the Trial Division, [1990] 3 F.C. 260, in two actions,
T-1174-87 and T-1381-87 (tried together by order),
awarding to the respondents damages (to be deter
mined on a reference) against the appellant for
wrongful interference with contracts relating to the
chartering of the vessel, Alexandros G. Tsavliris and
the carriage of cargo on that vessel.
By agreement, the actions were tried on the plead-
ings filed in action T-1381-87, an agreed statement of
facts and evidence adduced at the trial.
The Facts
In 1974 Panalex Shipping Company ("Panalex")
contracted with a Brazilian shipbuilder to construct
the Alexandros G. Tsavliris (the "Alexandros") for a
price which was secured by promissory notes and a
first ship's preferred mortgage. The notes and mort
gage were assigned to the appellant. The mortgage
and assignment were registered in Greece and were
governed by the laws of Greece.
At the same time, Panclaire Shipping Ltd. ("Pan -
claire"), a company associated with Panalex through
the Tsavliris family, concluded a contract with the
same shipbuilder to construct a sister ship, the Claire
A. Tsavliris (the "Claire"). The appellant was also the
holder of a marine mortgage on the Claire.
When construction was completed, both vessels
were registered in Greece and sailed under the Greek
flag.
Panalex made payments under the mortgage on the
Alexandros up to and including May 18, 1981 and
went into default on November 18, 1981 by failing to
make payments then due. A rescheduling of that
mortgage debt was agreed to with the appellant on
November 16, 1984, but Panalex defaulted two days
later by failing to pay the amounts then due. The
mortgage on the Claire was also in default.
Panalex made no payments under the mortgage on
the Alexandros after November 18, 1984.
On January 10, 1986, Panalex proposed a further
rescheduling of the mortgage debt. The appellant
rejected this proposal on April 3, 1986, but did not
communicate the rejection to Panalex until December
29, 1986, when it required Panalex to pay forthwith
all amounts then outstanding.
From April 13, 1986 to January 13, 1987, the Alex-
andros was laid up in Greece. On December 8, 1986,
the appellant instructed its London solicitors to com
mence inquiries as to the whereabouts of the Alexan-
dros.
In January 1987, there was owing to the appellant
in respect of each vessel an amount exceeding
$12,000,000. Under the terms of the mortgages and
the law of Greece, the appellant's security became
immediately enforceable.
On January 23, 1987, the respondent Pan Ameri-
can Steamship Lines Inc. chartered the Alexandros
and sub-chartered it to the respondent Europe-Over
seas Steamship Lines N.V. (collectively, the "charter-
ers") on a time charter for one voyage from Europe to
the west coast of the United States and Canada, car
rying a cargo of steel products. The estimated date of
arrival at its eventual destination in British Columbia
was March 16, 1987. The value of the cargo was
approximately (U.S.) $12,000,000.
On January 26, 1987, the day after the charterers
took delivery of the Alexandros, the appellant learned
of the time charter and the planned destinations. The
appellant also learned of the whereabouts of the
Claire.
On February 12, 1987, the appellant directed that
its London solicitors should be instructed to take
action to seize both the Claire and the Alexandros,
indicating that care should be taken to arrest the Alex-
andros in a jurisdiction which "also considers the
interest of the Bank [appellant]".
The Alexandros sailed on February 17, 1987 bound
for the west coast discharge ports through the Pan-
ama Canal which was admitted to be the customary,
most efficient, and least costly route for the carriage
of goods by sea from Antwerp to Los Angeles.
On February 27, 1987, the Claire was arrested in
Durban, South Africa in an action instituted by the
appellant on its mortgage.
On the same day the London solicitors for the
owners of the Claire and the Alexandros asked the
appellant to release the Claire.
On March 2, the appellant's London solicitors
replied by telex which, with respect to the Alexan-
dros, stated:
You will no doubt appreciate that our clients may also seek to
enforce their rights against the "Alexandros G. Tsavliris". We
understand that this vessel is presently on a voyage carrying
cargo to the U.S. West Coast. Our instructions are to enforce
our client's rights against this vessel at the earliest opportunity.
It may, however, be the case that we can persuade our clients
to defer from acting against the vessel until completion of the
present employment. In order that we may take instructions on
this question, we shall be grateful if you will provide full
details of the present chartering arrangements for that vessel,
including confirmation as to the identity of the charterer and
advise as to the current obligations under bill of lading con
tracts and the order of rotation. [My emphasis.]
On March 3, 1987, a representative of the owners
of the two vessels met in London with representatives
of the appellant to discuss the release of the Claire
and the appellant's position vis-Ã -vis the Alexandros.
The appellant's representatives confirmed that the
Claire would not be released. At that meeting and in
a subsequent telephone conversation with the appel
lant's London solicitor, the representative of the own
ers of the two vessels stated that unless the Claire
was released, the appellant would not be allowed to
arrest the Alexandros and mentioned the possibility
that the Alexandros might be sent to Taiwan instead
to be broken up for scrap.
On March 5, 1987, the representative of the own
ers telephoned the appellant's London solicitor and
asked that the Claire be released. He was advised that
the vessel would not be released and that it would be
sold. He told the appellant's London solicitor that he
"could forget" about the Alexandros.
On the same day, the appellant's London solicitor
instructed lawyers in Panama to prepare documents
for the arrest of the Alexandros and on March 6,
1987, he instructed them to make the arrest. The war
rant for arrest was issued but never served, for rea
sons that will later appear.
On March 5, 1987, the owner of the Alexandros
instructed that the vessel be stopped in international
waters outside the Panama Canal.
On March 6, 1987, the owner sent a telex to the
appellant proposing rescheduling of the mortgage
debt. On the same day the owner also advised the
charterers that he had received information that the
appellant would arrest the Alexandros in the Panama
Canal and had therefore directed the master to delay
arrival at the Canal pending instructions from them.
The charterers' first instructions were that the
Alexandros should proceed into the Canal immedi
ately but the owners ignored those instructions.
By March 10, 1987, the charterers had reconsid
ered their position and instructed the Alexandros to
remain outside the Panama Canal.
Thereafter, the owners and the charterers
threatened the Bank with "multi-million dollar penal
claims", "claims of catastrophic proportions" and the
"beginning of an adventure, the consequences of
which could not be grasped with any stretch of the
[appellant's] imagination", if the appellant did not
forego its right to arrest the Alexandros in the Pan-
ama Canal (Appeal Book, Vols. II and III of Common
Appendix I, pages 365, 422, 436, 448).
Between March 10 and April 3, 1987 representa
tives of the charterers and the appellant attempted to
negotiate the conditions under which the appellant
would forego its right to arrest the Alexandros in the
Panama Canal. Those negotiations broke down in
early April 1987, over the following term of a draft
agreement:
7. The Charterer undertakes for the Bank's benefit not to bring
any claim against the Bank in any jurisdiction in respect of
any alleged interference by the Bank with the performance
of the Charterparty and the Bill of Lading contracts.
The appellant had insisted upon the inclusion of
this term in the agreement, but the respondents
refused to agree to it.
In the meantime, the owners' insurance on the
Alexandros was cancelled as they refused to pay the
premiums due. The appellant was obliged to purchase
new insurance for the vessel. The appellant gave the
respondents notice of assignment of earnings which it
held, but the respondents ignored the notice and con
tinued to pay hire to the owners.
On April 4, 1987, the respondents instructed the
Alexandros to proceed around Cape Horn to Los
Angeles. Pursuant to these instructions, the Alexan-
dros circumnavigated South America and arrived in
Los Angeles on May 15, 1987 where it completed
discharging a consignment of cargo on May 19,
1987.
The Alexandros was arrested in Los Angeles at the
instance of the appellant but was released pursuant to
an agreement between the appellant and the respon
dents.
Thereafter the Alexandros proceeded to Oakland,
Portland and Seattle, in the United States of America
and to New Westminster, British Columbia, discharg
ing cargo in each port.
The vessel arrived in New Westminster on June 2,
1987, some two and one-half months after the origi
nal estimated day of arrival. On June 3, 1987, it was
arrested and was subsequently sold pursuant to an
order of this Court for (Canadian) $3,722,100.
The respondents then commenced an action
against the appellant alleging, inter alia, that the
appellant had refused to permit the voyage of the
Alexandros to be prosecuted on reasonable terms by
transit through the Panama Canal, and had, thereby,
wrongfully induced breach of their charterparties and
of the bill of lading contracts.
The respondents claimed damages in respect of
additional expenses to which they were put by reason
of the delay and extra distance travelled in the voyage
and by the settlement of claims against them by con-
signees or receivers because of the delay in delivery
of cargo.
As already mentioned, the learned Trial Judge dis
posed of both actions by granting judgment for the
charterers for damages suffered by them resulting
from the breach of the charterparties and, in respect
of the respondent, Europe-Overseas Steamship Lines
N.V., resulting from the breach of its bill of lading
contracts. He ordered, as the parties had agreed, that
there should be a reference to ascertain damages.
Objections of the Appellant to the Judgment
Appealed from
In his memorandum of fact and law, counsel for
the appellant has stated his objections to the judg
ment appealed from as follows:
The learned trial judge erred in concluding that:
1. The Bank committed a tort against the charterers, in
England, by disclosing to the owners that solicitors were
instructed to enforce the Bank's rights against the vessel at
the earliest opportunity and then preparing to do so in Pan-
ama.
2. The Bank's security was in no way impaired if the Claire
was not released.
3. All of the costs incurred by the charterers in consequence of
the delay and the vessel's circumnavigation of South
America to avoid the jurisdiction of the Courts of Panama
are recoverable from the Bank.
I turn now to consider the first ground of objection.
Whether the learned Trial Judge erred in concluding
that the appellant committed a tort against the respon
dents, by disclosing to the owners that solicitors were
instructed to enforce the appellant's rights against the
Alexandros at the earliest opportunity and then pre
paring to do so in Panama.
The Tort
The case pleaded against the appellant in
paragraphs 25 to 27 of the statement of claim (Appeal
Book, pages 10 and 11) was that the appellant had
engaged in conduct outside Canada which amounted
to the torts of negligence and wrongfully inducing
breach of the charterparty and the bills of lading con
tracts.
In his reasons, the learned Trial Judge made no ref
erence to the tort of negligence. He referred only to
the tort of wrongfully inducing breach of contract,
which he described as wrongful interference with
contractual relations. The conduct of the appellant
which he characterized as tortious is described in the
following passage of his reasons [at pages 272-273]
(Appeal Book, page 31):
I am satisfied that if the acts of the Bank had been committed
in Canada they would have amounted to a tort. The essential
fact is that the Bank, knowing that the vessel was under charter
and bound for the west coast of North America, made it impos
sible for the owner to perform the contract in a reasonable time
and by the route that was commonly understood to be the
intended route, by threatening, and preparing for, the arrest of
the vessel in Panama. No doubt, vis-Ã -vis the owners, it had
every right to enforce its mortgage by arrest at any time, the
mortgage being badly in arrears. But the common law as
expressed in The "Myrto" provides that if a mortgagee elects
to exercise those mortgage rights at a time when the vessel is
under contract, it will be answerable in tort to the other parties
to such contract; this will be the case unless the mortgagee's
intervention is justified because that contract impairs its secur
ity or because the owner is unwilling or unable to complete the
contract. I am unable to conclude that either of those condi
tions applied here.
He found that the tortious conduct had occurred in
England [at pages 277-278] (Appeal Book, page 37):
Without attempting to define for all purposes the locus of such
a tort, it appears to me that in this case it can be regarded as
having been committed in London. It was in London on March
2, March 3, and March 5, that the Bank's London solicitors
conveyed the threats to the owner's solicitors and to its repre
sentative, Mr. Tsavliris, that the Bank would arrest the Alexan-
dros when it reached Panama. This was followed up by the
London solicitors for the Bank issuing instructions to Panama-
nian lawyers on March 5 and 6 to prepare and then to file
arrest documents in that country. The evidence indicates the
probability, and this was not refuted, that the resulting decision
on behalf of the owner to interrupt the voyage was taken by
Mr. Tsavliris in London. The evidence also indicates that
throughout this time the day-to-day decisions were being taken
on behalf of the Bank by Coward Chance, their London solici
tors, pursuant to very general instructions given on February
12th to take enforcement action against both the "Claire" and
the "Alexandros". I believe these circumstances are sufficient
to fix the locus of the tort as England. There are many other
factors suggesting England as the dominant jurisdiction, were
one to apply the test of the "proper law of the tort". Among
these is the fact that the charterparties both provided for arbi
tration in London. I am not however adopting that approach.
Confronted with an allegation of a foreign tort, the
learned Trial Judge was required to decide first, the
choice of law rule applicable and, secondly, whether,
applying the relevant law, the appellant's conduct
rendered it liable to the respondents.
To answer the first question, the learned Trial
Judge applied the choice of law rule generally appli
cable to foreign tort actions in Canada. 1 He stated,
correctly, in my respectful view, that in order to
maintain an action in Canada for a tort committed
abroad, the respondents must prove to the requisite
degree that the conduct of the appellant which was
complained of
(a) would have been actionable as a tort in Canada
according to Canadian law, if engaged in here,
and
(b) was not justifiable by the law of the place where
it was engaged in.
1 See J.-G. Castel, Canadian Conflict of Laws (2nd ed.),
Butterworths, 1986.
As I have indicated by reference to the passage
quoted from his reasons (Appeal Book, page 31), he
concluded that the conduct of the appellant which the
respondents complained of would have been actiona
ble in Canada as a tort, if engaged in here.
In reaching that conclusion, the learned Trial Judge
relied upon and applied principles of law laid down
in The Myrto, 2 which, he said, represented both the
maritime common law of England and of Canada.
His conclusion in this respect appears, from the fol
lowing passage in his reasons, to have been influ
enced by the positions taken by counsel at trial. He
stated [at page 270] (Appeal Book, page 29):
Counsel were unable to cite any Canadian cases on this sub
ject. Instead, they agreed that the law of Canada and the law of
England are the same, it being assumed that Canadian courts
would follow maritime common law as it has developed in
England. It was also common ground that the common law lia
bility of a ship's mortgagee for interference in the performance
of a contract made by a ship's owner for the employment of
that ship, is defined in The "Myrto" case ....
In argument before us Mr. Roberts for the appel
lant (who was not counsel at trial) denied that there
was common ground at trial or that the principles laid
down in The Myrto governed this case. Mr. Daugulis
for the respondent (also not counsel at trial) con
tended that there was common ground. Indeed, in his
memorandum of fact and law (Argument, paragraph
4, page 12) Mr. Daugulis states that "It was undis
puted that The Myrto ... is the modern, accurate
statement of the law". He supported this assertion by
reference to the testimony of two witnesses.
Absent a transcript of the argument at trial which
would settle the dispute between counsel, I must
accept the facts stated in the passage just quoted at
face value. To the extent that it contains an admission
by counsel for the parties that the principles stated in
The Myrto represent the law of England, it is my
opinion that counsel are bound by those admissions,
2 [1977] 2 Lloyd's Rep. 243 (Q.B.D. Adm. Ct.), at pp. 253-
254.
the law of England being a fact in issue like any
other, the proof of which could be dispensed with by
admission of the parties or their counsel. To the
extent that it contains an admission respecting the
state of the maritime common law of Canada, differ
ent considerations arise. The law of Canada was not a
fact in issue in the case. It was an element in the case
which the learned Trial Judge had sole responsibility
to determine. It is true that counsel, by their research
and submissions, could have assisted him in the dis
charge of that responsibility; but they could not, by
their admission, relieve him of it. Consequently, I
consider the admission contained in the passage just
quoted as being an admission of fact that the law of
England is as stated in The Myrto. Indeed that was
the conclusion which the learned Trial Judge reached
on conflicting expert evidence. As an admission of
the state of the maritime common law of Canada, it is
ineffective to bind this Court. In my opinion we are
free, as the learned Trial Judge was, to determine the
principles of Canadian law that govern this case, if
we should determine that they differ from what was
admitted or from the conclusion of the learned Trial
Judge on the point.
Since the learned Trial Judge proceeded on the
basis that the principles summarized in The Myrto
represented the law of Canada, it might be helpful to
consider that case at this point.
In The Myrto, the plaintiffs were merchant bank
ers. They held first and second mortgages on a vessel
as security for loans made to the owners to pay the
purchase price. The owners having defaulted on both
mortgages, the plaintiffs commenced an action in rem
for repayment of capital and interest thereunder. The
plaintiffs arrested the vessel and, in the action,
brought an interlocutory application for an order for
appraisement and sale of the ship pendente lite. The
charterers of the vessel intervened in the action and
brought an interlocutory application for the release of
the vessel from arrest, alleging that the "arrest of the
vessel by the bank was and continues to be an unlaw
ful interference with their contractual rights".
Both applications came on for hearing before
Brandon J. (as he then was) who decided to hear and
dispose of the charterers' application first because, in
his view, the disposition of that application could
render the bank's application moot.
In their application, the charterers contended that
they were entitled in their own right and quite apart
from any defences to the plaintiff's action that the
owners might have, to prevent unlawful interference
with their charterparty. In deciding that application
Brandon J. cited a number of authorities 3 and pur
ported to lay down the following principles of law
which were said to have been established by them [at
pages 253-2541:
(1) The owner is entitled, subject to one exception, to deal
with the ship (and that includes employing her under a contract
with a third party) in the same way as he would be entitled to
do if the ship were not mortgaged.
(2) The one exception is that the owner is not entitled to deal
with the ship in such a way as to impair the security of the
mortgagee.
(3) Where the owner makes a contract with a third party for
the employment of the ship, of such a kind and made or per-
formable in such circumstances, that the security of the mort
gagee is not impaired, and the owner is both willing and able
to perform such contract, the mortgagee is not entitled, by
exercising his rights under the mortgage, whether by taking
possession, or selling, or arresting the ship in a mortgage
3 De Mattos v. Gibson (1859), 4 De G. & J. 276 [45 E.R.
108 (Rolls Ct.)]; Collins v. Lamport (1964), 11 L.T. 497 (Ch.
D); The Innisfallen (1866), L.R. 1 A. & E. 72; Johnson v.
Royal Mail Steam Packet Company (1867), L.R. 3 C. P. 38;
Keith v. Burrows (1877), L.R. 2 App. Cas. 636 (H.L.); Cory,
Brothers, and Co. v. Stewart (1886), 2 T.L.R. 508 (C.A.); The
Blanche (1888), 58 L.T. 592 (P.D. & Adm. Div.); The Fan-
chon (1880), 5 P. D. 173; The Celtic King, [1894] P. 175; The
Heather Bell, [1901] P. 272 (C.A.); Law Guarantee and Trust
Society v. Russian Bank for Foreign Trade, [1905] 1 K. B. 815
(C.A.); The Manor, [1907] P. 339 (C.A.); and The Lord Strath-
cona, [1925] P. 143.
action in rem, to interfere with the performance of such con
tract.
(4) The mortgagee is, however, entitled to exercise his rights
under the mortgage without regard to any such contract made
by the owner with a third party for the employment of the ship
in two cases:
(a) where the contract is of such a kind, and/or is made or
performable in such circumstances, that the security of the
mortgage is impaired;
(b) where, whether this is so or not, the owner is unwilling
and/or unable to perform the contract.
(5) Where the mortgagee, by exercising his rights under the
mortgage, interferes with a contract made by the owner with a
third party for the employment of the ship in circumstances
where he is not, in accordance with (3) and (4) above, entitled
to do so, he commits a tort (or actionable wrong in the nature
of a tort) against the third party.
(6) The remedies available to the third party against the
mortgagee in respect of such tort or actionable wrong are as
follows:
(a) where the mortgagee interferes by taking possession or
seeking to sell, an injunction restraining him from doing so;
(b) where the mortgagee interferes by arresting the ship in a
mortgage action in rem, an order for the release of the ship
from arrest in such action;
(c) further or alternatively to (a) or (b) above, damages.
(7) The question whether a particular contract made by the
owner with a third party for the employment of the ship is of
such a kind, and/or is made or performable in such circum
stances, as to impair the security of the mortgagee, is a ques
tion of fact.
(8) It is open to a Court as a matter of law to find as a fact
that a particular contract is made or performable in such cir
cumstances as to impair the security of the mortgagee, if the
evidence shows that the owner is impecunious, that he can
only perform the voyage to which the contract relates, if at all,
on credit, and that the ship is already subject to pressing liabili
ties and charges.
(9) The further question, whether the owner is willing and/or
able to perform a particular contract, is also a question of fact.
Brandon J. dismissed the charterers' application,
having found on the evidence before him, that the
owners had dealt with the ship so as to impair the
bank's security; that the owners, because of their
overall financial condition, had become disabled
from completing the voyage; and in any case, that it
was inappropriate to exercise the court's discretion in
their favour in the circumstances of that case.
In concluding that the conduct of the appellant in
this case would have been actionable in Canada, if
engaged in here, the learned Trial Judge purported to
apply the third, fifth and sixth principles summarized
in The Myrto, assuming that they represented the law
of Canada on the subject.
Counsel for the appellant contends, both in his
memorandum of fact and law and in oral argument
before us, that the learned Trial Judge erred both in
his assumption and in his conclusion. He says that the
fifth principle stated in The Myrto stands alone in
English and Canadian jurisprudence and is not sup
ported by the authorities.
Counsel for the respondents both in his memoran
dum of fact and law and in oral argument assumed,
as the learned Trial Judge did, that The Myrto stated
the common law of Canada on the subject.
Having examined The Myrto and the authorities
cited in it, I make the following observations. First,
the facts of all those cases, including The Myrto, are
different from those of the case before us. Secondly,
none of the authorities cited in The Myrto supports
the conclusion that there exists in England a special
maritime tort of interference with contractual rela- 2
tions which differs in its constituent elements from
that which exists under the general law of torts.
In this case, the learned Trial Judge found that the
interference with contractual relations consisted of
threatened arrest and preparations to effect the arrest.
In the law of torts such conduct is best characterized
as intimidation.
Clerk & Lindsell on Torts, 16th ed. (London:
Sweet & Maxwell, 1989), defines the tort of intimi
dation in the law of England as follows at page 828:
A commits a tort if he delivers a threat to B that he will com
mit an act, or use means, unlawful as against B, as a result of
which B does or refrains from doing some act which he is enti
tled to do, thereby causing damage either to himself or to
C .... The tort, like the tort of procuring a breach of contract,
is one of intention and the plaintiff, whether it be B or C, must
be a person whom A intended to injure. [My emphasis.] [Foot-
notes omitted.]
The elements of the tort, first given recognition by
the House of Lords in Rookes v. Barnard, [1964]
A.C. 1129, were explained in Morgan v. Fry, [1968]
2 Q.B. 710 (C.A.), where Lord Denning M.R. stated
at page 724:
According to the decision in Rookes v. Barnard the tort of
intimidation exists, not only in threats of violence, but also in
threats to commit a tort or a breach of contract. The essential
ingredients are these: there must be a threat by one person to
use unlawful means (such as violence or a tort or a breach of
contract) so as to compel another to obey his wishes: and the
person so threatened must comply with the demand rather than
risk the threat being carried into execution. In such circum
stance the person damnified by the compliance can sue for
intimidation.
In my opinion, it is clear from the foregoing that
the principles noted in The Myrto, could not, by
themselves, determine this case under the domestic
law of England, since, as I have already indicated,
neither The Myrto nor the authorities upon which it
relies were concerned with facts such as those that
confront us in this case. However, what is critical at
this stage of the inquiry is not the state of the law of
England, but the state of the law of Canada, since we
are required to decide whether the learned Trial Judge
was correct in his statement of the law of Canada. It
would therefore be instructive to consider the com
mon law of Canada on the law of the tort of intimida
tion.
The Common Law of Canada on the Tort of Intimida
tion
In determining the common law of Canada on the
tort of intimidation applicable to this case I am not
unmindful of the fact that in admiralty matters this
Court must consider only "Canadian maritime law"
as defined in section 2 of the Federal Court Act
[R.S.C., 1985, c. F-7], as amended and explained in
ITO International Terminal Operators Ltd. v. Miida
Electronics Inc. et al., [1986] 1 S.C.R. 752.
The learned Trial Judge found that the appellant
made it impossible for the owner to perform the con
tract in a reasonable time and by the route commonly
understood to be the intended route, by threatening,
and preparing for, the arrest of the Alexandros in
Panama. He also found that the appellant's conduct
was not justified since the appellant's security had
not been impaired by the charterparty or its perform
ance and that the owner was neither unwilling nor
unable to complete the contract.
As I have already said, the conduct which the
learned Trial Judge characterized as the tort of inter
ference with contractual relations is, on the facts of
this case, in reality, the tort of intimidation. The ele
ments of that tort in Canadian law were described by
Martland J., for the Court, in Roman Corporation
Ltd. et al. v. Hudson's Bay Oil and Gas Co. Ltd. et
al., [1973] S.C.R. 820, at pages 829-830 as follows:
The appellants also make a claim in tort for intimidation. In
order to succeed under this head, the facts relied upon by the
appellants would have to disclose that they had sustained dam
age by reason of a threat, made by the respondents, of an
unlawful act. [My emphasis.]
In that case, the Court held that a declaration of
government policy made in good faith by a Minister
of the Crown as part of his duty was not an unlawful
act, even if a threat.
Five years later, in Central Canada Potash Co.
Ltd. et al. v. Government of Saskatchewan, [1979] 1
S.C.R. 42, the Court again confronted the tort of
intimidation. There it was alleged that a letter written
by a public servant threatening the cancellation of a
mining licence and a mineral lease unless the plain
tiff observed production quotas set by provisions in a
statute and regulations later declared ultra vires
amounted to intimidation and entitled the plaintiff to
damages as a result of reduction in production in con
formance with the letter.
The Court concluded that the public servant was
not liable on the basis that the public servant had not
used unlawful means and, in any event, an intent to
injure had not been shown.
Martland J. writing for the Court expressed the
conclusion at page 90 as follows:
This brings me to the latter portion of the definition of intimi
dation from Clerk & Lindsell [the definition quoted earlier in
these reasons] which I have adopted. 'The tort is one of inten
tion and the plaintiff, whether it be B or C, must be a person
whom A intended to injure.' The authority for this statement is
found by the authors in the judgments of Lord Devlin and Lord
Evershed in the Rookes case, and I am in agreement with it.
There is no evidence that the Deputy Minister intended to
injure the appellant. The correspondence, and particularly the
letter of September 20, 1972, make it clear that his purpose
was to induce compliance with an existing legislative scheme.
Martland J. then considered the earlier decision of
the Court in Roman Corporation Ltd. et al. v. Hud-
son's Bay Oil and Gas Co. Ltd. et al., supra, and
expressly reaffirmed it.
The author of Fridman on Torts, London: Waterloo
Publishers, 1990 notes that in Canada, the possibility
of defending an action for intimidation by pleading
justification has been accepted although the likeli
hood of it occurring is remote. He expressed the view
as follows at pages 552-553:
What has happened in some, Canadian not English, cases is
that the court has accepted the argument that the conduct of the
defendant was not aimed at the plaintiff, nor designed to cause
him injury per se. It was perpetuated, or proposed, for other,
legitimate purposes, such as the promotion of Government pol
icy, or the effectuation of legislation. It might be argued that
this is a form of justification, in that conduct that injures, or
might injure a plaintiff, to the knowledge of the defendant,
may not be actionable if there is a valid reason why such con
duct takes place. If this is correct, the situation with respect to
intimidation may be analogous to that which obtains in cases
of conspiracy. The main purpose or object of the combination
is the test of liability in conspiracy. So, too, the main purpose
of the alleged intimidation may be the test of whether the tort
has been committed. A similarity would also exist between the
tort of intimidation and that of procuring or inducing a breach
of contract. In such instances, also, it may be possible for the
defendant to justify what he has done, even if prima facie it is
actionable. Such an attitude would make the law relating to
these three distinct, but interrelated torts consistent. [Footnotes
omitted.]
Based upon the analysis in ITO—International Ter
minal Operators Ltd v. Miida Electronics Inc. et al.,
supra, I conclude that the foregoing represent the
maritime common law of Canada to be considered
and applied in deciding whether the appellant's con
duct of which the respondents have complained in
this case is actionable in Canada.
That the learned Trial Judge knew of the existence
of this body of law is clear from the reference in his
reasons to Roman Corporation Ltd. et al. v. Hudson's
Bay Oil and Gas Co. Ltd. et al., supra, and from the
statement [at page 276] (Appeal Book, page 35):
Normally a threat is lawful or unlawful depending on whether
the act threatened would itself be lawful or unlawful.
However, he was deflected from considering this
body of law by the agreement of counsel "that The
Myrto represents the law of Canada" [at page 277]
(Appeal Book, page 36).
Based on his acceptance of that proposition, the
learned Trial Judge felt constrained to decide the
issue on that basis. He articulated the matter as fol
lows [at page 277] (Appeal Book, pages 35-36):
Accepting, as counsel agree, that The Myrto represents the law
of Canada and determining, as I must, whether if all the acts
had been committed in Canada there would be liability in tort
under the principles of The Myrto, I am unable to see why
there would not. What The Myrto means is that in such circum
stances the mortgagee is not entitled to enforce its security
through arrest, at least not without incurring the risk of liability
in tort to the charterers or others having contracts with the
owner for the employment of the ship.
I am therefore satisfied that, had all the acts complained of
occurred in Canada, there would have been liability in tort to
the charterers for the increased costs flowing to them as a
result of the interference with the normal course of the voyage
which interference appears to have commenced, at the latest,
on March 6. [Emphasis in original.]
In my respectful view, the learned Trial Judge
erred in law in concluding that in Canada the tort of
intimidation based on the appellant's conduct fell to
be determined solely on the basis of the principles
stated in The Myrto.
Although those principles were of assistance to
him in appreciating the limits on the appellant's
rights as mortgagee if it chose to exercise its
undoubted right to arrest the Alexandros, in my opin
ion, they were of no assistance in resolving the dis
pute in this case as between the appellant and the
respondents.
There was no doubt that the appellant's mortgage
was in default in substantial amounts and over an
extended period. There was equally no doubt that, by
the law of the mortgage, the appellant had a legal
right to arrest the Alexandros. Can the communica
tion by the appellant of its intention to exercise its
undoubted right of arrest and the taking of prepara
tory steps to effect such arrest in a jurisdiction that
favoured its interest be unlawful such that an action
based on those acts be maintainable in Canada? In
my respectful view, the law of Canada as I have
explained it, mandates a negative response to the
question.
It is not disputed that the appellant's right to arrest
the Alexandros had crystallized at the time its solici
tors indicated that it would exercise those rights. It is
equally beyond dispute that in exercising those rights
the appellant may be obliged in law to respect the
contractual rights of the respondents. The record is
bereft of any evidence that the appellant intended to
exercise its right of arrest with the intention of injur
ing the respondents. In those circumstances, a mere
threat by the appellant to exercise those rights with
out more would not, by the law of Canada, amount to
an actionable wrong. Consequently, I conclude that
the learned Trial Judge erred in law in concluding
that the conduct of the appellant would have been
actionable in Canada, if engaged in here.
But, even if the appellant's conduct could be char
acterized as inducing breach of contract, as it was by
the learned Trial Judge, the principles laid down in
The Myrto do not reflect the common law of Canada
in this regard. While conduct which interferes with
performance of a contract, whether directly or indi
rectly, may be tortious if done deliberately and with
knowledge of the existence of the contract, it will not
be so if the conduct which induced the breach was
"justified": Greig y Insole, [1978] 3 All E.R. 449 (Ch.
D.), at page 491; Posluns v. Toronto Stock Exchange
and Gardiner, [1964] 2 O.R. 547 (H. Ct.). Here, the
appellant' s right to arrest the Alexandros having crys
tallized, there can be no doubt, in my respectful view,
that it was justified in informing the respondents of
its intention to arrest the ship and in taking the steps
necessary to effect such an arrest in Panama.
In view of this conclusion, I do not consider it nec
essary to deal with the other issues raised in this
appeal.
Conclusion
Since I have decided that the learned Trial Judge
was wrong in concluding that the conduct of the
appellant constituted a tort actionable in Canada, if
engaged in here, it follows that the respondents have
not satisfied the first branch of the choice of law test,
and that there was no actionable wrong in Canada for
which the appellant could be found liable. As a result,
the appeal is allowed with costs and the action is dis
missed with costs.
HEALD J.A.: I agree.
MARCEAU J.A.: I agree.
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.