Date: 20000317
Docket: T-231-99
BETWEEN:
PANTAINER LTD. AND PANALPINA INC.
Plaintiffs
-and-
996660 ONTARIO LTD. carrying on business as
MOLISANA IMPORTS
Defendant
REASONS FOR ORDER
TEITELBAUM, J:
INTRODUCTION
[1] This is a motion for summary judgment brought by the plaintiffs and a cross-motion by the defendants. The plaintiffs, Pantainer Ltd. and Panalpina Inc. (plaintiffs) bring this motion for summary judgment to recover amounts owing by the defendant for freight ($134, 513.40) and ancillary charges totalling $144,037.98 plus interest. The defendant claims that damage to cargos and financial losses attributed to alleged breaches of contract by the plaintiffs give it a right to set-off against the claim.
[2] The defendant brings a cross-motion for:
| (1) an order granting leave to amend the Statement of Defence and Counterclaim; |
| (2) an order staying the within action and the plaintiffs" motion for summary judgment pending the outcome of an action commenced by the defendant in the Superior Court of Ontario; |
| (3) an order that the main action and the counterclaim be tried together either in this Court or in the Ontario Superior Court; |
(4) costs of this motion on a solicitor client scale; and
(5) such further and other relief as this Honourable Court
may deem just.
FACTS
[3] Pantainer Ltd. is a company incorporated under the laws of Switzerland that acts as a carrier of goods by water and issues transport documents confirming the receipt and carriage of cargos to destinations as instructed by customers of Panalpina Inc.
[4] Panalpina Inc. is a company incorporated under the laws of Canada and carries on business as a forwarder throughout Canada with a head office in the City of Toronto and the Regional Municipality of York.
[5] Panalpina Inc. acts as agent of Pantainer Ltd. in making arrangements for the physical transport of the cargos by ocean carriers for which cargos Pantainer Ltd. issues its transport documents.
[6] The defendant is an incorporated company under the laws of Canada and carries on business as an importer of foodstuffs with its principal place of business in the City of Toronto.
[7] The plaintiffs filed a Statement of Claim against the defendant in February 1999 claiming the following:
| a) amounts owing on invoices for freight and ancillary transport and customs charges in the sum of $144, 037.98, which services and amounts are more particularly described in invoices delivered by the plaintiffs to the defendant; |
| b) interest on the said amount at the commercial rate of the Bank of Canada from the 1st day of February 1999 to the date of payment or judgment, whichever is earlier; |
| c) pre- and post-judgment interest in accordance with the provisions of the Federal Court Act, R.S.C. 1985, c. F-7; |
| d) the costs of this action on a solicitor-client basis; |
| e) such further and other relief as this Honourable Court may deem just. |
[8] The sum being claimed, according the plaintiffs, is evidenced by invoices delivered by the plaintiffs to the defendant.
[9] On September 10, 1999 the defendant served and filed an Amended Statement of Defence and Counterclaim against the plaintiffs and MG Transport Canada Inc. (MG Transport), a subsidiary of Panalpina Inc.
[10] Since 1997, the defendant and the plaintiffs entered into contracts whereby the plaintiffs would ship to and store in Canada food products ordered by the defendant from Italy and elsewhere.
[11] In each of these contracts, a fundamental term was that the plaintiffs and their employees, servants or agents, would use reasonable care in the transport, storage and handling of the defendant"s goods.
[12] According to the defendant, it was also a fundamental term that the plaintiffs would not terminate their relationship with the defendant, including credit arrangements in place between the two parties, without giving the defendant reasonable notice.
[13] The defendant alleges that on a number of occasions since 1997, the plaintiffs breached these fundamental terms causing the defendant to suffer damages, and thereby preventing them from now claiming the relief sought in the Statement of Claim.
November 1997 Shipment
[14] In or about November 1997, the defendant purchased four containers of premium pasta from sellers in Italy at a cost of approximately $130,000.00.
[15] The defendant engaged Panalpina Inc. to forward shipments of foodstuffs in containers from Italy to Ontario. Pantainer agreed to carry these shipments to Ontario.
[16] En route from Italy to Canada, the ship being used by the plaintiffs foundered and the plaintiffs initially advised the defendant that all four containers had been lost at sea.
[17] In February 1998, the plaintiffs advised the defendant that, contrary to their earlier advice to the defendant, three of the four containers of premium pasta had not been lost at sea but instead had been shipped to the Canary Islands, where they had been stored in an unknown location since November 1997.
[18] The plaintiffs, without consultation with the defendant, then shipped the three containers from the Canary Islands to Toronto.
[19] Panalpina cleared the shipments through customs into Canada and held them in a Toronto warehouse owned and operated by MG Transport.
[20] The defendant alleges that in the course of their transport and during their storage, these three containers and their contents were damaged so that much of the pasta contained therein was broken, crushed and rendered unusable.
[21] Further, the defendant alleges that while in the Canary Islands, the containers were stored in hot and humid conditions which caused the pasta to deteriorate. Insects had infested some of the pasta rendering it unfit for consumption.
[22] Panalpina invoiced the defendant for freight and ancillary charges contemporaneously with the completion of the transport and delivery of the containers to the MG Transport warehouse. The unpaid amount of $144,037.98 for shipping and ancillary charges is not in dispute.
[23] The defendant alleges that its agreement to pay freight charges was made under duress and coercion. The duress and coercion relied on is the plaintiffs" refusal to release certain containers of Christmas goods without an undertaking to pay amounts owing without deduction.
[24] The terms and conditions in the transportation documents, and in the Canadian International Freight Forwarders Association in its Standard Terms and Conditions, govern the obligations of the parties. Under these conditions, freight and charges ancillary to the transport were to be paid without deduction when due.
[25] The plaintiffs initially refused to pay the defendant more than a nominal amount for the damaged pasta. They ultimately offered to pay the defendant $56,913.96 in connection with the three containers while representing to the defendant that most of the pasta was edible and could be sold for salvage with the proceeds being retained by the defendant.
[26] The defendant accepted this payment on June 11, 1998 in reliance on representations made by the plaintiffs and their agents. Those representations were found by the defendant to be false and negligent.
[27] On June 18, 1998, the pasta was condemned by Agriculture Canada as inedible. None of the pasta could be sold or otherwise salvaged and, as a result, the defendant incurred damages in excess of $50,000.00.
April 1998 Shipment
[28] In April 1998, the plaintiffs shipped over 4,500 cases of premium pasta to Canada for the defendant. Upon arrival in Canada, these cases were loaded onto approximately 80 pallets in the plaintiffs" warehouse.
[29] The defendant gave the plaintiffs instructions to store the pallets on specially designed racks in the plaintiffs" warehouses and paid the plaintiffs a premium of $1.00 per pallet for this service.
[30] This had been the defendant"s habitual practice for all shipments of pasta arranged through the plaintiffs from the inception of their business relationship.
[31] The defendant alleges that the plaintiffs breached their agreement with the defendant by not storing the pallets on their specially designed racks and instead simply stacked the pallets of pasta atop of one another.
[32] Due to the weight of the product, many boxes of pasta were broken or crushed as a result of being stored in this configuration and much of the pasta was damaged and rendered unsaleable.
[33] As a result of this damage, the defendant alleges that it was forced to reduce its price by an average of $11.00 per case, thereby resulting in damage in excess of $50,000.00.
[34] In addition, the defendant alleges that the plaintiffs damaged another 457 cases of the defendant"s pasta in the course of loading, unloading, storing and transporting, causing the defendant to suffer further damages of $9,000.00.
Insufficient Storage Space
[35] In September 1998, the defendant ordered fifty containers of pasta from Italy and engaged the plaintiffs for the shipping and storage of same.
[36] The defendant alleges that this contract was based on representations and assurances from the plaintiffs that they would allocate sufficient warehouse space in Toronto to store the pasta upon its arrival.
[37] In November 1998, two months after the contract was agreed upon by the parties, 25 of the 50 containers had either arrived in Toronto or were on ships bound for Canada when the plaintiffs allegedly advised the defendant that they did not have sufficient storage space to store the containers.
[38] The defendant alleges that the plaintiffs did, in fact, have storage space available and that their representation to the contrary was in retribution for the manner in which the defendant reacted to the plaintiffs" conduct relating to the November 1997 and April 1998 shipments.
[39] As a result of this representation, the defendant states that it was obliged to secure alternative storage arrangements on short notice and at an increased cost.
Shipping of Christmas Products
[40] In November 1998, the defendant purchased various food products from Italy which it alleges are typically marketed during the Christmas season only. These products included panettone, anchovies, dried breads, and specific cuts of pasta.
[41] The defendant entered into a contract with the plaintiffs to ship these products to Canada. It is alleged by the defendant that the plaintiffs knew that the prompt receipt of these products in Toronto was of utmost importance and therefore the timely delivery of the products was a fundamental term of the defendant"s contract with the plaintiffs.
[42] The plaintiffs failed to deliver the foregoing products to the defendant in time for the defendant to sell them during the Christmas season. As a result, the defendant alleges that he was forced to sell these products at a discount which resulted in damages in excess of $10,000.00.
[43] On November 25, 1998 the plaintiffs and the defendant terminated their business relationship. It is not disputed that the defendant agreed that its claims would not be applied against the freight and ancillary charges owing.
[44] The defendant alleges that the plaintiffs terminated the relationship arbitrarily and without justification.
[45] As a result of this unexpected termination, the defendant incurred additional expenses of over $20,000.00 in connection with transferring its products from the plaintiffs" warehouses to alternate locations for storage and purchasing additional pallets at premium prices.
[46] The defendant states that the plaintiffs continue to wrongfully retain goods belonging to the defendant worth approximately $1,000.00.
[47] By letter dated November 26, 1998, the plaintiffs advised the defendant that the credit arrangements which had been revoked the previous day would only be reinstated upon receipt of the defendant"s written assurances that:
| Molisana Import [sic] will honour and pay all Panalpina and M.G. Transport invoices billed in accordance with present quoted rate structures... This guarantee also has to state that any claim you may have against Panalpina according to your own interpretation of the present warehouse situation, will have no Impact [sic] on your honouring and paying all our invoices within the agreed terms. |
[48] By letter dated November 18, 1998 and sent by facsimile on November 27, 1998 the defendant wrote the plaintiffs to make a "without prejudice" offer to address the warehouse situation and the current items in dispute between the parties as a separate issue from that of the invoices rendered by the plaintiffs.
[49] Rather than accepting this offer, the plaintiffs prepared a different agreement which was faxed to the defendant on November 30, 1998 proposing, inter alia, that the defendant would agree not to withhold payment of the plaintiffs" invoices due to "a dispute regarding warehousing in Toronto" and that the defendant would not "file any claim" regarding the condition of his products.
[50] The defendant alleges that it did not accept this agreement.
[51] The defendant now brings a cross-motion to set-off the damages it has suffered against any liability to which it might be exposed.
[52] The defendant has also brought a separate motion for counterclaim against the plaintiffs. By counterclaim, the defendant claims the following from the plaintiff:
| (1) damages for negligence, breach of contract and negligent misrepresentation in the amount of $150,000.00; |
| (2) punitive, aggravated and exemplary damages in the amount of $100,000.00; |
| (3) pre-judgment and post-judgment interest on the above amounts pursuant to the Federal Court Act, R.S.C. 1985, c. F-7; |
| (4) Costs of this action and of this counterclaim on a solicitor-client scale, and such further and other relief as this Honourable Court may deem just. |
RELEVANT STATUTORY PROVISIONS
Federal Court Act, R.S.C. 1985, c. F-7
Section 22 Navigation and shipping
(1) The Trial Division has concurrent original jurisdiction, between subject and subject as well as otherwise, in all cases in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, except to the extent that jurisdiction has been otherwise specially assigned.
(2) Maritime jurisdiction"Without limiting the generality of subsection (1), it is hereby declared for greater certainty that the Trial Division has jurisdiction with respect to any one or more of the following:
Article 22 Navigation et marine marchande
(1) La Section de première instance a compétence concurrente, en première instance, dans les cas " opposant notamment des administrés " où une demande de réparation ou un recours est présenté en vertu du droit maritime canadien ou d"une loi fédérale concernant la navigation ou la marine marchande, sauf attribution expresse contraire de cette compétence.
(2) Compétence maritime"Il demeure entendu que, sans préjudice de la portée générale du paragraphe (1), la Section de première instance a compétence dans les cas suivants:(a) any claim with respect to title, possession or ownership of a ship or any part interest therein or with respect to the proceeds of sale of a ship or any part interest therein;
a) une demande portant sur les titres de propriété ou la possession, en tout ou en partie, d"un navire ou sur le produit, en tout ou en partie, de la vente d"un navire;
| (b) any question arising between co-owners of a ship with respect to possession, employment or earnings of a ship; (c) any claim in respect of a mortgage or hypothecation of, or charge on, a ship or any part interest therein or any charge in the nature of bottomry or respondentia for which a ship or part interest therein or cargo was made security; (d) any claim for damage or for loss of life or personal injury caused by a ship either in collision or otherwise; (e) any claim for damage sustained by, or for loss of, a ship including, without restricting the generality of the foregoing, damage to or loss of the cargo or equipment of, or any property in or on or being loaded on or off, a ship; (f) any claim arising out of an agreement relating to the carriage of goods on a ship under a through bill of lading, or in respect of which a through bill of lading is intended to be issued, for loss or damage to goods occurring at any time or place during transit; (g) any claim for loss of life or personal injury occurring in connection with the operation of a ship including, without restricting the generality of the foregoing, any claim for loss of life or personal injury sustained in consequence of any defect in a ship or in her apparel or equipment, or of the wrongful act, neglect or default of the owners, charterers or persons in possession or control of a ship or of the master or crew thereof or of any other person for whose wrongful acts, neglects or defaults the owners, charterers or persons in possession or control of the ship are responsible, being an act, neglect or default in the management of the ship, in the loading, carriage or discharge of goods on, in or from the ship or in the embarkation, carriage or disembarkation of persons on, in or from the ship; (h) any claim for loss of or damage to goods carried in or on a ship including, without restricting the generality of the foregoing, loss of or damage to passengers" baggage or personal effects; (i) any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise; (j) any claim for salvage including, without restricting the generality of the foregoing, claims for salvage of life, cargo, equipment or other property of, from or by an aircraft to the same extent and in the same manner as if the aircraft were a ship; (k) any claim for towage in respect of a ship or of an aircraft while the aircraft is water-borne; (l) any claim for pilotage in respect of a ship or of an aircraft while the aircraft is water-borne; (m) any claim in respect of goods, materials or services wherever supplied to a ship for the operation or maintenance of the ship, including, without restricting the generality of the foregoing, claims in respect of stevedoring and lighterage; (n) any claim arising out of a contract relating to the construction, repair or equipping of a ship; (o) any claim by a master, officer or member of the crew of a ship for wages, money, property or other remuneration or benefits arising out of his employment; (p) any claim by a master, charterer or agent of a ship or shipowner in respect of disbursements, or by a shipper in respect of advances, made on account of a ship; |
| b) un litige entre les copropriétaires d"un navire quant à la possession ou à l"affectation d"un navire ou aux recettes en provenant; c) une demande relative à un prêt à la grosse ou à une hypothèque, un privilège ou une sûreté maritimes grevant tout ou partie d"un navire ou sa cargaison; d) une demande d"indemnisation pour décès, dommages corporels ou matériels causés par un navire, notamment par collision; e) une demande d"indemnisation pour l"avarie ou la perte d"un navire, notamment de sa cargaison ou de son équipement ou de tout bien à son bord ou en cours de transbordement; f) une demande d"indemnisation, fondée sur une convention relative au transport par navire de marchandises couvertes par un connaissement direct ou devant en faire l"objet, pour la perte ou l"avarie de marchandises en cours de route; g) une demande d"indemnisation pour décès ou lésions corporelles survenus dans le cadre de l"exploitation d"un navire, notamment par suite d"un vice de construction dans celui-ci ou son équipement ou par la faute ou la négligence des propriétaires ou des affréteurs du navire ou des personnes qui en disposent, ou de son capitaine ou de son équipage, ou de quiconque engageant la responsabilité d"une de ces personnes par une faute ou négligence commise dans la manoeuvre du navire, le transport et le transbordement de personnes ou de marchandises; |
h) une demande d"indemnisation pour la perte ou l"avarie de marchandises transportées à bord d"un navire, notamment dans le cas des bagages ou effets personnels des passagers; i) une demande fondée sur une convention relative au transport de marchandises à bord d"un navire, à l"usage ou au louage d"un navire, notamment par charte-partie; j) une demande d"indemnisation pour sauvetage, notamment pour le sauvetage des personnes, de la cargaison, de l"équipement ou des autres biens d"un aéronef, ou au moyen d"un aéronef, assimilé en l"occurrence à un navire; k) une demande d"indemnisation pour remorquage d"un navire, ou d"un aéronef à flot; l) une demande d"indemnisation pour pilotage d"un navire, ou d"un aéronef à flot; m) une demande relative à des marchandises, matériels ou services fournis à un navire pour son fonctionnement ou son entretien, notamment en ce qui concerne l"acconage et le gabarage; n) une demande fondée sur un contrat de construction, de réparation ou d"équipement d"un navire; o) une demande formulée par un capitaine, un officier ou un autre membre de l"équipage d"un navire relativement au salaire, à l"argent, aux biens ou à toute autre forme de rémunération ou de prestations découlant de son engagement; p) une demande d"un capitaine, affréteur, mandataire ou propriétaire de navire relative aux débours faits pour un navire, et d"un expéditeur concernant des avances faites pour un navire; |
(q) any claim in respect of general average contribution;
(r) any claim arising out of or in connection with a contract of marine insurance; and
(s) any claim for dock charges, harbour dues or canal tolls including, without restricting the generality of the foregoing, charges for the use of facilities supplied in connection therewith.
(3) Jurisdiction applicable"For greater certainty, it is hereby declared that the jurisdiction conferred on the Court by this section is applicable
(a) in relation to all ships, whether Canadian or not and wherever the residence or domicile of the owners may be;
(b) in relation to all aircraft where the cause of action arises out of paragraphs (2)(j) to (l), whether those aircraft are Canadian or not and wherever the residence or domicile of the owners may be;
(c) in relation to all claims, whether arising on the high seas, in Canadian waters or elsewhere and whether those waters are naturally navigable or artificially made so, including, without restricting the generality of the foregoing, in the case of salvage, claims in respect of cargo or wreck found on the shores of those waters; and
(d) in relation to all mortgages or hypothecations of, or charges by way of security on, a ship, whether registered or not, or whether legal or equitable, and whether created under foreign law or not.
q) une demande relative à la contribution à l"avarie commune;
r) une demande fondée sur un contrat d"assurance maritime ou y afférente;
s) une demande de remboursement des droits de bassin, de port ou de canaux, notamment des droits perçus pour l"utilisation des installations fournies à cet égard.
(3) Étendue de la compétence"Il est entendu que la compétence conférée à la Cour par le présent article s"étend:
a) à tous les navires, canadiens ou non, quel que soit le lieu de résidence ou le domicile des propriétaires;
b) à tous les aéronefs, canadiens ou non, quel que soit le lieu de résidence ou le domicile des propriétaires, lorsque le droit d"action découle des alinéas (2)j) à l);
c) à toutes les demandes, que les faits y donnant lieu se soient produits en haute mer ou dans les eaux canadiennes ou ailleurs et que ces eaux soient naturellement ou artificiellement navigables, et notamment, dans le cas de sauvetage, aux demandes relatives aux cargaisons ou épaves trouvées sur les rives de ces eaux;
d) à toutes les hypothèques ou tous les privilèges donnés en garantie sur un navire " enregistrés ou non et reconnus en droit ou en equity ", qu"ils relèvent du droit canadien ou du droit étranger.
ISSUES
[53] The motions before the Court raise the following two issues:
| (1) Is the defendant entitled to a right of set-off, and if not, should the judgment be stayed until determination of the counterclaim? |
| (2) Are the claims relating to the warehousing of goods within the jurisdiction of this Court? |
SUBMISSIONS OF THE PARTIES
Plaintiffs"Submissions
[54] The plaintiffs submit that the purpose of the summary judgment provisions is to allow the Court to dispense of cases which should not proceed to trial because there is no genuine issue to be tried.
[55] It is the plaintiffs" position that upon considering the questions of fact and law which underlie this case, this Court must conclude that there is no genuine issue to be tried.
The Right to Set-off
[56] The plaintiffs argue that it is well established in English admiralty law that a claim in respect of cargo cannot be asserted by way of deduction from freight. This rule, that set-off for damages cannot be raised as a defence in an action for freight, has been adopted as part of Canadian maritime law.
[57] The freight and ancillary charges owing, it is submitted by the plaintiffs, are not directly connected with the shipment from which the set-off and counterclaim arise. Therefore, the defendant is not entitled to a right of set-off on this basis.
[58] Alternatively, the plaintiffs submit that the law in Canada is that set-off for damages is not a defence in an action for freight and thus, it would be improper to allow the defendant to claim this right.
Jurisdiction of the Court
[59] The plaintiffs argue that the jurisdiction of the Court to hear the claims relating to storage of goods must come within subsection 22(1) of the Federal Court Act which leads to the definition of Canadian maritime law as articulated in section 2 of the Act.
[60] It is the submission of the plaintiffs that the defendant"s warehousing claims against MG Transport are not within the parameters of "maritime law" for three reasons. Firstly, the warehouse is located in Toronto not anywhere near the port of discharge. Secondly, there is no connection between the activities of MG Transport and those within the port area. Thirdly, the storage occurred after delivery and was not short-term.
[61] For these reasons, the plaintiffs argue that the claims relating to storage are not within the jurisdiction of this Court to hear as they are not integrally connected with maritime matters.
Defendant"s Submissions
[62] The defendant submits that it is entitled to set-off the damages it has suffered against the plaintiffs" claims in this action.
[63] The defendant argues that at no time did it release any of its claims against the plaintiffs. If this Court should find that the defendant did release its claims, the defendant argues that no consideration was given to the defendant by the plaintiffs for any such release.
[64] In the further alternative, any release made by the defendant was made under duress or coercion from the plaintiffs, in that:
| (1) the plaintiffs had purported to revoke their credit arrangements with the defendant effective immediately rather than on reasonable notice, and were demanding various concessions from the defendant prior to the reinstatement of the same; |
| (2) the plaintiffs were refusing to release inventory, including items of a seasonal nature, belonging to the defendant which would have caused the defendant to incur substantial damages; |
| (3) in November 1998, the defendant was not aware of the nature and extent of the damages caused to its goods by the actions and omissions of the plaintiffs. |
[65] It is the defendant"s position that this Court has the jurisdiction to consider the claims relating to storage as they are integrally connected to maritime law.
ANALYSIS
Issue I: Jurisdiction for warehousing claims
[66] Before embarking on an analysis of the Canadian law on set-off in the maritime context, I will first deal with the issue of whether this Court has the jurisdiction to hear the claims relating to the warehousing of the defendant"s goods.
[67] At the hearing on September 10, 1999, counsel for the defendant indicated that the other portions of their cross-motion were dependent on the Court"s determination on whether it had jurisdiction to hear and decide all issues involved in these proceedings.
[68] Counsel for the defendant described the nature of the business relationship between the two parties, at page 13 of the transcript, in the following terms:
| ...the contractual relationship between the parties in this case, and my friend I believe described it accurately, given the relationship between Panalpina and MG Transport, the warehousing and storage is an integral part, in my respectful submission, of the carriage of goods in this case... |
[69] Counsel then referred the Court to the invoices which support the statements of account which were filed by the plaintiffs for this motion. The invoices are relevant to the extent that there is an item for storage on each one, although there is no amount next to it, the amount is factored into the total amount.
[70] The defendant then explained the nature of the services which the plaintiffs provided to the defendant and the reason why they secured the freight contracts. It was explained that the plaintiffs were offering much more than brokerage services to arrange for the carriage of goods from Italy to Canada, but in fact, they were selling themselves as distributors of goods to the customers of the defendant.
[71] Equally important to this motion, was the evidence that the defendant dealt only with Panalpina in setting the terms of the contracts, not also with MG Transport. In effect, the plaintiffs were providing the defendant with the distinct advantage of being one carrier who could carry, store, and distribute their goods. It was, as the defendant"s counsel stated, one stop shopping.
[72] Therefore, the defendant submits that it is within the jurisdiction of the Court to entertain the entire matter because the warehousing and storage of the goods was an integral part of the freight contracts.
[73] In support of this argument, the defendant referred the Court to the decision of Mr. Justice Rothstein in Expeditors International Freight Forwarding v. Propak Systems Ltd., [1995] F.C.J. No 376 where he stated the following at paragraph 16 of his reasons:
| In view of the stage of the proceedings, that is that summary judgment proceedings on the defendant"s set-off and counterclaim are pending, I do not think the plaintiff"s claim for freight need be paid forthwith. The plaintiff has not produced any evidence that it will be seriously prejudiced by a stay. The set-off and counter-claim arise out of the same transaction as the claim for freight and they are not obviously unmeritorious. Indeed, if the plaintiff has admitted the shipment arrived in a damaged condition, a stay would be in order... |
[74] Relying on these comments, the defendant argues that the November 1998 invoices which are the subject of the motion for summary judgment, are also determinative of whether the contract provided for warehousing and storage, and whether there were misrepresentations made to the defendant.
[75] With respect to the prejudice the defendant would suffer if a stay were not granted, counsel stated that to require the defendant to pay $144,000. plus interest and costs would cause them a serious disadvantage considering that the time frame for litigating the matter is likely to be more than 18 months.
[76] For these reasons, the defendant submits that the Court should stay the judgment until the counterclaim is resolved.
[77] In response to the defendant"s submissions on the Expeditors case, supra, the plaintiffs argue that the claims with a jurisdictional basis don"t raise a triable issue and the claims that do raise a triable issue have no jurisdictional basis.
[78] In that case, Expeditors, supra, the counterclaim which was being considered by the Court, and which led to the Court granting a stay, was clearly within the jurisdiction of the Court. It was submitted by counsel for the plaintiffs that this is a ground of distinction which the Court ought to consider in assessing whether to follow the reasoning of Mr. Justice Rothstein in the Expeditors case, supra.
[79] Given the obvious parallels between that case and the case at bar, it is helpful to review the facts upon which Mr. Justice Rothstein based his decision. The plaintiff, a freight carrier, was claiming unpaid freight and the defendant was claiming, by way of set-off and counterclaim, for late delivery. Gas equipment had been delivered damaged by the plaintiff and took 139 days to restore into working condition. The contract between the parties included a Transit Time Guarantee which specified that the penalty for late delivery was $100. a day and thus the defendant was seeking to have this amount deducted from the freight charges. Each party was seeking summary judgment.
[80] The parties in that case agreed that the issue was whether the plaintiff was entitled to summary judgment for the total amount of unpaid freight or whether the defendant"s claims of set-off and counterclaim must first be determined.
[81] Mr. Justice Rothstein held that the plaintiff was entitled to summary judgment for the total amount of the freight charges owing, $210,900.49, based on the rule that unless the parties had agreed otherwise there could not be a deduction from the freight payable for an amount claimed by way of set-off or counterclaim.
[82] The contract which had been signed by the parties in that case did include a penalty provision but it did not stipulate that the parties had agreed to deduct the amount calculated under the Transit Time Guarantee from the freight otherwise payable.
[83] The judgment of Mr. Justice Rothstein was stayed pending the outcome of the defendant"s set-off and counterclaim on the grounds that the set-off and counterclaim arose out of the same transaction and the plaintiff had not demonstrated that it would suffer any serious prejudice by the stay.
[84] The general rule that freight must be paid without deduction, unless the parties have agreed otherwise, is derived from the 1977 case of Aries Tanker Corporation v. Total Transport Ltd., [1977] 1 Lloyd"s Rep. 334 (H.L.) often referred to as "The Aries" where Lord Simon of Glaisdale articulated the following at page 340:
| Freight, representing the original rule, stands uneroded, like an outcrop of pre-Cambrian amid the detritus of sedimentary deposits. That freight must, in the absence of stipulation to the contrary, be paid without deduction has been stated in successive editions of Scrutton and Carver. Charters have always been negotiated in light of this rule. |
[85] In the case at bar, the defendant claims that damage to the cargo and financial losses attributed to alleged breaches of contract by the plaintiffs give it a right to set-off against the freight claim. However, under the terms and conditions of the transport documents, the parties did not agree to contract out of the general rule that the freight charges must be paid without deduction and no penalty clause is to be found in any agreement.
[86] Counsel for the plaintiffs argued at the hearing on September 10, 1999 that this case is distinguishable from Expeditors, supra, on the basis that the defendant has presented a "smorgasbord" of claims which have never been asserted before except in conjunction with this counterclaim. In contrast, the defendant"s claim in Expeditors, supra , was the very shipment which generated the freight which led to the damages and the quantification of those damages.
[87] The defendant has submitted that the quantum of the counterclaim is $150,000.00, however, the plaintiffs have disputed this amount and argue that the damages are unproven, unaccepted, and on unmeritorious claims.
[88] In addition, the plaintiffs submit that the circumstances surrounding the termination of the business relationship between the two parties must be taken into consideration in the Court"s assessment of whether the defendant is entitled to a right of set-off.
[89] In essence, the basis of the plaintiffs" argument is that they attempted to terminate the business relationship in as professional and reputable manner as possible while ensuring that they would be paid the amounts owing when the period of credit expired. It is their position that the defendant misrepresented their intentions by committing to pay the outstanding amounts regardless of any claims against the plaintiffs, and should not be allowed to now use a counterclaim as a reason not to pay what they owe.
[90] To summarize, the plaintiffs are asking this Court not to grant a stay of execution of the judgment for three reasons: (1) both parties contracted on the basis that the freight would be paid without deduction, (2) the plaintiffs are out of pocket for the freight to the actual carrier, as well as for the taxes and duties paid to Customs, and (3) the defendant specifically agreed in the insurance settlement not to raise these counterclaims as a reason to refuse payment if credit was re-instated.
[91] In reply to these reasons for not granting a stay, the defendant states that the insurance settlement was arrived at on the basis of misrepresentations by the plaintiffs as to the quality of the pasta and therefore the defendant has reason to recant from this settlement. Secondly, on the issue of the termination of the business relationship between the parties, the defendant argues that the plaintiffs did not take a reasonable or reputable approach but in fact did quite the contrary.
[92] The plaintiffs, in the defendant"s view, used heavy-handed tactics to coerce the
defendant into signing the agreement in order to get his goods in time for the Christmas season. Moreover, the defendant submits that this amounted to breach of contract because the contract was to pick up, deliver, store and distribute the goods to Loblaws.
[93] Therefore, the Court is tasked with deciding whether this is a legitimate basis upon which to deny a stay of execution on a judgment in favour of the plaintiffs on the outstanding invoices.
[94] I am of the view that there is nothing in the terms and conditions set out by the parties to suggest that the old English rule that freight must be paid without deduction is not applicable, and therefore, I find that the defendant is owing the amount of $144,037.98 to the plaintiffs.
[95] But that is not the issue raised by this motion. The main issue in contention here is whether the execution of the judgment in favour of the plaintiffs should be stayed pending the outcome of the counterclaim. This leads me to the second question before the Court - are the claims relating to warehousing and storage within the jurisdiction of this Court?
Issue II: Jurisdiction on warehousing claims
[96] The defendant has submitted that the warehousing, storage and distribution components of the contract with the plaintiffs were integral to them obtaining the contract for the carriage of goods by sea. Therefore, it is submitted that these claims come within the jurisdiction of the Court in matters of shipping and navigation.
[97] The plaintiffs submit that the defendant"s claims relating to storage and warehousing are not integrally connected with maritime matters and thus cannot come within the parameters of subsection 22(2) of the Act.
[98] I refer to the passage quoted by the plaintiffs at paragraph 23 of their memorandum of fact and law which cites the following passage from ITO Ltd. v. Milda Electronics Inc. (1986), 28 D.L.R. (4th) 641 at 657 (S.C.C.):
| "The maritime nature of this case depends upon three significant factors. The first is the proximity of the terminal operation to the sea, that is, it is within the area which constitutes the port of Montreal. The second is the connection between the terminal operator"s activities within the port area and the contract of carriage by sea. The third is the fact that the storage at issue was short-term pending delivery to the consignee...[I]t is these factors, taken together, which characterize this case as one involving Canadian maritime law." |
[99] In the 1997 case of Pakistan National Shipping Corp. v. Canada et al. (1997), 212 N.R. 304 this Court held that it had jurisdiction on the grounds that the claim advanced was integrally connected to a maritime contract in that it was an action in tort where the cause of action arose out of the carriage of goods by sea.
[100] In my view, subsection 22(1), and in particular paragraph 22(2)(i), must be given a broad and purposeful interpretation so as to include all claims which stem from a contract relating to the carriage of goods by sea.
[101] Paragraph 22(2)(i) states " a claim arising out of any agreement relating... to the use or hire of a ship...by charter party...". The claims for warehousing and storage in the present case arose out of contracts for the carriage of goods by sea and as such they are within the jurisdiction of this Court.
Issue III: Stay of Execution of Judgment
[102] I am satisfied that the defendant is not entitled to a right of set-off and that the claims of the defendant relating to warehousing and storage are within the jurisdiction of this Court. I turn now to the issue of whether the judgment should be stayed.
[103] The facts of the present case, as can be seen from what I have said hereinabove, are different from those before Mr. Justice Rothstein in the Expeditors case, supra..
[104] As I said in paragraph 84, the general rule is that freight must be paid without deduction unless the parties have agreed otherwise.
[105] The parties in this case have not agreed otherwise.
[106] I see no reason why the defendant should not pay what is owing for the freight costs.
CONCLUSION
[107] On the motion for summary judgment by the plaintiffs, the Court grants summary judgment and orders the defendant to pay the plaintiffs the sum of $144,037.98 with interest on the said amount at the commercial rate of the Bank of Canada from the 1st day of February 1999 to the date of payment together with the pre and post judgment interest in accordance with the provisions of the Federal Court Act with costs.
[108] With regard to the cross-motion by the defendant, same is denied as the counterclaim by the defendant cannot be decided without a full hearing before this Court, which as I have said, has full jurisdiction to hear the counterclaim.
[109] The defendant"s request for a stay of my decision on the plaintiffs" summary judgment motion is denied.
"Max M. Teitelbaum"
| J.F.C.C. |
Ottawa, Ontario
March 17, 2000