Federal Court Decisions

Date: 19971223

Docket: T-2472-97

BETWEEN:

     SCANDIA SHIPPING AGENCIES INC.,

     Plaintiff,

     - and -

     THE OWNERS AND ALL OTHER INTERESTED

     IN THE BUNKERS AND FREIGHT OF THE

     SHIP "ALAM VERACRUZ"

     -and-

     PACNAV S.A.,

     Defendants.

     REASONS FOR ORDER

DUBÉ J:

[1]      The plaintiff ("Scandia") seeks an order setting aside the order or the Prothonotary, rendered December 5, 1997, striking out his action in rem and quashing the arrest of the bunkers and freight of the ship "Alam Veracruz", the vessel of the defendants ("Pacnav").

[2]      The grounds for the appeal are that the Prothonotary erred in law in holding that the jurisdiction in rem of the Court cannot be exercised against the assets of Pacnav (such as the bunkers and freight) when these assets are not directly related to the cause of action. Scandia also claims that the Prothonotary erred in law in failing to suspend the operation of his order, thus rendering any appeal illusory. That second ground of appeal was dropped by Scandia at the hearing as being no longer purposeful.

[3]      The action in question, launched by Scandia on November 14, 1997, claims an amount of $493,000 on the ground that Pacnav advised Scandia that it was terminating its business relationship with Scandia. Pacnav operates a shipping service in North and South America and Scandia acted as agent and broker for Pacnav. Scandia estimates that over the twelve month period from August 25, 1997, its commission income from the Pacnav account would have amounted to no less than U.S. $300,000. The property arrested by Scandia is the bunkers on board the ship "Alam Veracruz" as well as the freight to be earned by Pacnav in relation to that ship from James Richardson International Limited.

[4]      It is common ground that the action is not based on any claim by Scandia related to bunkers or freight with reference to any particular maritime voyage. It is based exclusively on an alleged breach of a maritime brokerage contract.

[5]      In his analysis of the matter, the Prothonotary confirmed that the agreement between the parties was of a maritime nature, thus under the jurisdiction ratione materiae of this Court under subsection 22(1) of the Federal Court Act ("the Act"). However, he held that the action discloses no reasonable cause of action in rem under subsection 43(2) of the Act. Both provisions read as follows:

22. (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.

...

43. (2) Subject to subsection (3), the jurisdiction conferred on the Court by section 22 may be exercised in rem against the ship, aircraft or other property that is the subject of the action, or against any proceeds of sale thereof that have been paid into court.

(my emphasis)

[6]      The Prothonotary concluded that both provisions must be read together and therefore that an action in rem may not be launched against a property of Pacnav that is not the subject of the action. The two key paragraphs of his analysis read as follows:

[14] Il m'appert que les paragraphes 22(1) et 43(2) de la Loi doivent se lire en corrélation l'un avec l'autre et que conséquemment, aux fins du paragraphe 43(2), une action réelle ne peut être dirigée contre tout bien d'un défendeur mais doit se limiter à tel bien sur lequel se fonde l'action. Ce sont, incidemment, les seuls articles de la Loi qui importe, selon moi, de considérer pour répondre à l'attaque de la défenderesse.

[15] Pour conclure qu'une action se fonde sur un bien, il doit apparaître dans les faits une connexité certaine entre le bien saisi et la cause d'action (voir, entre autres, sur ce point les arrêts Industrie Chimique Italia Centrale SÉP.A. v. Ship "Choko Star" et al. (1987), 10 F.T.R. 258 et Joint Stock Society Oceangeotechnology v. Ship 1201 et al. (1994), 72 F.T.R. 211).

[7]      Counsel for Scandia refers the Court to the Heinrich Bjorn, a 1885 decision of the English Court of Appeal¹, wherein it was held that any personal property of the defendant within the realm, whether the ship in question or any other chattel of the defendant could be arrested and that "the arrest need not be of the ship in question, but may be of any property of the defendant within the realm". However, even if that was the law of England at the time, it is not Canadian maritime law today. Subsection 43(2) of the Act clearly stipulates that an action in rem may be exercised against property "that is the subject of the action". Otherwise, all actions in rem could lead to Mareva injunctions.

[8]      The contemporary Canadian jurisprudence is explicit in the matter. In Joint Stock Society "Oceangeotechnology" v. The Ship "1201" et al.², Teitelbaum J. said as follows, at p. 9:

I do not disagree with counsel for Defendants with this submission. I too agree that an in rem proceeding will only lie if there is a "connection" to the Defendant vessel.

[9]      In Westview Sable Fish v. Ship "Neekis"³, Rouleau J. held that there was no basis for an in rem proceeding against fishing traps that had been lost as a result of negligent actions on the part of those on board the defendant ship. He found that there was no damage to the ship, no damage arising out of a collision, nor any damage related to navigation which could sustain an action in rem.

[10]      It should also be noted that the Bjorn⁴ decision of the English Court of Appeal dating back to 1885 was reversed by that Court in 1936 in the Beldis⁵ decision. It was held therein that the dictum in Bjorn was obiter and that the procedure in rem in the Admiralty Court does not permit the arrest of a ship or other property of a defendant unconnected with the cause of action. It is true that the Beldis decision, pronounced in 1935, came after the Canadian maritime law imported the English maritime law in 1934. However, it does not follow that the 1885 obiter in question which was bad law is still Canadian maritime law in the face of subjection 43(2) of the Act.

[11]      Consequently, the appeal against the order of the Prothonotary rendered December 5, 1997, is dismissed with costs.

    

     Judge

OTTAWA, ONTARIO

December 23, 1997

__________________

¹      The Heinrich Bjorn, (1885) 10 P. 44 (C.A.).

²      [1994] 72 F.T.R. 211 (F.C.T.D.).

³      (1996) 31 D.L.R. (4th) 709 (T.D.).

⁴      supra, note 1.

⁵      (1936) P. 51.