Date: 19981019
Docket: T-2416-97
ACTION IN REM AGAINST THE SHIP "NEL"
AND IN PERSONAM
BETWEEN:
THE GOVERNOR AND COMPANY
OF THE BANK OF SCOTLAND,
Plaintiff,
- and -
THE OWNERS AND ALL OTHERS INTERESTED
IN THE SHIP "NEL" AND OCEAN PROFILE MARITIME LIMITED,
Defendants.
REASONS FOR ORDER
MR. JOHN A. HARGRAVE,
PROTHONOTARY
[1] This litigation involves the priority of various in rem claimants, including the mortgagee of the Nel, the Governor and Company of the Bank of Scotland (the "Bank of Scotland") to ship sale proceeds. These reasons deal with an application to strike out the affidavits of claim of Mr. James Myles, a Director of Project and Specialized Finance of the Bank of Scotland, or alternatively, for further documents and information arising out of the cross-examination of Mr. Myles on his affidavits of 23 December 1997 and 20 April 1998.
STRIKING OUT AFFIDAVITS
[2] I will deal briefly with the first relief sought by the Applicants on this motion, Aktina S.A., Alfa Bunkering Co. Ltd., Ashland Chemical Co. and HBI International.
[3] The present proceeding, a determination of in rem priorities by motion and on affidavit material, is summary in nature. To maintain the efficiency of such proceedings parties ought not, generally, to be permitted to strike out each other's affidavits. The exceptions to this generalization are where an affidavit is abusive or clearly irrelevant, or where a party has obtained leave to admit evidence which proves to be obviously inadmissible, or where the court is convinced that admissibility should be resolved at an early date so the eventual hearing may proceed in an orderly manner: see for example Home Juice Company v. Orange Maison Ltd., [1968] 1 Ex.C.R. 163 at 166 (President Jackette) and Unitel Communications Co. v. MCI Communications Corporation (1997), 119 F.T.R. 142. In the latter Mr. Justice Richard, as he then was, observed that the trial judge would be in a better position to assess the weight and admissibility of such affidavit material (pages 143 and 145). Of course, conjecture, speculation and legal opinion have no place in an affidavit, but that is not at issue here. Rather, as I understand it, the Applicants on this motion feel that the Bank of Scotland has not been as forthcoming as the Applicants would wish in providing information about its dealings with the fleet of ships to which the Nel belonged.
[4] At this point, I would touch on a dispute among counsel as to whether the Bank of Scotland had declared its purchase of a sister ship, the Blue L., sold by auction by a South African court and its resale by the Bank of Scotland who took a mortgage back from the purchaser. Counsel for the Bank of Scotland believed he had made such a declaration on a motion heard 25 June 1998. My bench book record of that hearing notes the purchase at a South African court sale by the Bank of Scotland, bidding against others, the Bank of Scotland using "Purpa Shipping" as its vehicle, at $3.3 million, a re-sale and a mortgage back to the Bank of Scotland.
[5] While the claimants may feel there may be other instances of less than full disclosure, I am not, in this instance, prepared to strike out the affidavits of Mr. Myles.
SCOPE OF CROSS-EXAMINATION ON AFFIDAVITS
[6] Turning to the scope of cross-examination on an affidavit, counsel for Aktina S.A. points out that cross-examination is not confined by the four corners of an affidavit, but includes any matter relevant to the determination of the issue in respect of which the affidavit is filed: Weight Watchers International Inc. v. Weight Watchers of Ontario Ltd. (No. 2), (1972), 6 C.P.R. (2d) 169 at 171 and 172, Mr. Justice Heald (as he then was) there referring to Superior Discount Ltd. v. N. Perlmutter & Co., [1951] O.W.N. 197 at 897 - 898 and to Thomson v. Thomson and Elliott, [1948] O.W.N. 137. In addition, there is a duty on a deponent to become informed of matters in issue that are within his or her knowledge or means of knowledge: Merck & Co. Inc. v. Apotex Inc. (1996), 67 C.P.R. (3d) 147 at 148 and 149.
[7] Counsel for Aktina S. A. also points out that a deponent may be required to produce documents, on cross-examination, that are in addition to those referred to in an affidavit and here refers to Bally - Midway Manufacturing Co. v. M.J.Z. Electronics Ltd. (1984), 75 C.P.R. (2d) 160. The case does stand for that proposition, however it also places limits:
| In my view, the cross-examination upon an affidavit in support of a motion for an interlocutory injunction ought not to be as wide-ranging as an examination for discovery. In the latter proceeding the witness must inform himself, provide answers and produce documents relevant to all the issues raised in the pleadings. The cross-examination upon an affidavit, however, must be confined to the issues relevant to the interlocutory injunction and/or all the allegations contained in the affidavit. In other words, the affiant must answer questions and produce documents relating to all the issues relevant to the interlocutory motion, plus questions on all the other statements he may have volunteered within the four corners of his affidavit. The cross-examiner cannot use the affidavit as a vehicle to obtain all the information and all the documents that might be useful at trial. |
In Bally - Midway Mr. Justice Dubé makes it clear that cross-examination upon an affidavit ought not to be as free ranging as an examination for discovery and cannot be used in order to obtain all the information and all of the documents which might be useful at a full trial. On this point see also Apotex Inc. v. Attorney General of Canada (1992), 41 C.P.R. (3d) 390 at 391 (F.C.T.D.) and Hoffmann - La Roche Ltd. v. Canada (1997), 126 F.T.R. 21. In Hoffmann - La Roche Mr. Justice Richard, as he then was, observes at page 23 that cross-examination on an affidavit "... is far more limited in scope than examination for discovery and, apart from questions going to a witness' credibility, is limited to relevant matters arising from the affidavit itself.": see also Merck Frosst Canada Inc. v. Minister of National Health and Welfare (1994), 55 C.P.R. (3d) 302 at 320 for a similar statement by the Federal Court of Appeal.
[8] Counsel acknowledges some limitation on production pursuant to cross-examination, as compared with examination for discovery, but also points out that the issue of priorities is sometimes dealt with in a trial setting as opposed to being dealt with by motion and that this should influence production of documents, requiring all claimants to make full and frank disclosure. I have, to some degree, kept this in mind, both on this present motion and on past motions in this matter, requiring slightly fuller production of individual documents or a series of documents than would normally be the case. But I am not prepared to vest a summary procedure with full discovery of documents, as though it were a proceeding leading to a trial, particularly where the request is not for individual items, or for groups of individual items, but rather for complete files: a fishing expedition, on cross-examination on an affidavit, is not proper.
CONSIDERATION
[9] Turning specifically to the present motion, the Applicants initially sought 41 items, which are set out in a 28 September 1998 letter from counsel for Aktina S.A. to counsel for the Bank of Scotland. Counsel for the Bank of Scotland has, over the past several weeks, had some difficulty in obtaining documents from Scotland, for Mr. Myles has been away. However, subject to availability, counsel for the Bank of Scotland takes issue with only 8 of the items set out in the 28 September 1998 letter. Item 29, a request for copies of correspondence from the Bank's lawyers Adams and Adams, dealing with South African priorities and the Admiralty Jurisdiction Regulation Act was abandoned by the Applicants during the course of the motion. I have allowed two items, which will be produced as documents and as written answers.
Monthly Loan Status Reports
[10] The Bank of Scotland's Monthly Loan Status Reports are brief summaries which came into being once the loan to the owner of the Nel went into default. Certainly they are not documents referred to directly in the affidavits of Mr. Myles. However, several of the counsel for the various Applicants pointed out that Mr. Myles noted that he wished to consult the monthly reports before providing further information. Thus, the Monthly Reports, which arise in the context of a volunteered statement, are relevant to the determination of issues upon which the Myles affidavits were filed. The Monthly Reports, from May 1997 to the end of September 1998, are to be produced, with the proviso that counsel for the Bank of Scotland may remove items referring to inquiries of lawyers, legal advice from lawyers and any responses to lawyers by the Bank of Scotland, much as if those items were subject to solicitor/client privilege.
Loan Commitment Letter
[11] The Bank of Scotland prepared but has not produced a Commitment Letter, apparently addressed to the Leond Maritime Group. The Commitment Letter was superseded by the Loan Agreement, a document which has been produced.
[12] Were the present an exercise in a discovery procedure, the Commitment Letter could form some relevant background leading up to the issue to be dealt with at trial. In the present instance, the issue is a narrow one of priorities. One might speculate as to any changes in the transaction which took place between the issuance of the Commitment Letter and arriving at the ultimate agreement governing the conduct of the Bank of Scotland and his customer, the owner of the Nel. However, the Commitment Letter has no relevance in the present proceeding. It need not be produced.
Vessel Files
[13] Items 28, 33 and 36 of the 28 September 1998 letter requesting production refer to complete files on three sister ships. Specifically the requests are for the Bank of Scotland's file as to the sale of the Anna L. to Square Limited or Square Lines Limited, the sale of the Blue L to Perca Shipping Company Limited and to the sale of the Angelina L to Edinburgh Maritime S.A.
[14] Now it is one thing to obtain specific relevant documents from a file, which could be proper on cross-examination, but something entirely different to go on a fishing expedition on cross-examination in order to try to obtain a whole file, in effect to obtain discovery of documents. As Madame Justice Reed pointed out in Castlemore Marketing Inc. v. Intercontinental Trade and Finance Corporation, an unreported 16 February 1996 decision in action T-2498-95, dealing with cross-examination on affidavits, "... the Court will exercise its discretion and disallow any question which it considers in the nature of 'fishing expedition'.". None of the three files need be produced. However, counsel for the Bank of Scotland has agreed to produce the Angelina L Commitment Letter.
Blue L Survey Report
[15] At issue here is a survey report obtained by the buyer of the Blue L, Seagull Maritime, of which the Bank of Scotland received a copy and probably still has on file. The survey deals with repairs to be made to the Blue L following its purchase from the Bank by Seagull Maritime and the cost of those repairs, $500,000.
[16] It seems that counsel for Aktina S.A. wishes to determine that the $500,000, which would appear to form part of the Bank of Scotland's present mortgage against the Blue L, was actually drawn upon by the new owner and to this question Mr. Myles gave a clear affirmative answer. The thrust by Aktina S.A. seems to be that there might have been some sort of an undisclosed transaction by which the buyer of the Blue L, Seagull Maritime, might not have drawn down that part of the loan, allowing the Bank of Scotland, a secret profit. As I say, the question was clearly answered: Seagull Maritime drew from the Bank of Scotland the full $500,000. To go further is a fishing expedition. The survey need not be produced.
Payment of Due Debts by Leond Maritime Group
[17] The in rem creditors of the Nel, who do not have maritime liens and who thus would come behind the Bank of Scotland as a mortgagee, say that the Bank of Scotland allowed the Leond Maritime Group fleet to continue to trade with its fleet, all the while knowing that their customer was insolvent and thus, goes the contention, negligently allowed debts to be run up. The claimants would like, in addition to the monthly reports which date back to the time the loan was perceived to be in difficulty, any material showing the Bank's efforts to determine whether Leond Maritime Group was paying its debts.
[18] To make such a search could well prove a never ending task. Such is not in keeping with the summary procedure of determining priorities on a motion. However, Mr. Myles did offer to make inquiries. On that basis and because counsel for the claimants intend to make equitable arguments to the effect that the Bank of Scotland ought to be deprived of its priority, Mr. Myles, who says the Bank of Scotland likely made inquiries, will inform himself and provide a brief summary of the inquiries.
Production of Mr. Myles for Further Cross-examination
[19] Counsel for the claimants had two days during which to cross-examine Mr. Myles on his affidavits. They now ask for further cross-examination.
[20] At this point, I make no determination as to whether Mr. Myles ought to be produced again. That portion of the motion is adjourned.
[21] Counsel for the claimants may certainly apply for further cross-examination, once they have the material and written answers. However, counsel should also bear in mind that exploration such as this, on a matter to be determined by a motion, must come to an end at some time and further that the hearing to determine priorities has already been adjourned from time to time.
(Sgd.) "John A. Hargrave"
Prothonotary
Vancouver, British Columbia
19 October 1998
FEDERAL COURT TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
HEARING DATED: October 16, 1998
COURT NO.: T-2416-97
STYLE OF CAUSE: The Governor and Company of the Bank of Scotland
v.
The Ship "Nel" and others
PLACE OF HEARING: Vancouver, BC
REASONS FOR ORDER OF
JOHN A. HARGRAVE, PROTHONOTARY
dated October 19, 1998
APPEARANCES:
| Mr. Peter Bernard for Plaintiff |
| Campney & Murphy |
| Mr. Jonathan McLean for Claimants Aktina S.A., Bureau Veritas |
| Edwards, Kenny & Bray and Mariner's Medical Clinic |
Mr. Gregory Blue for Claimants Petro Marine Products and
McEwen, Schmitt & Co. Ashland Chemical Inc.
Ms. Andrea J. Sterling for Claimants HBI Internaitonal
Gottlieb & Pearson
| Mr. Louis Buteau for Claimants Alfa Bunkering Co. Ltd. |
Sproule, Castonguay
SOLICITORS OF RECORD:
Mr. Peter Bernard for Plaintiff
Campney & Murphy
Vancouver, BC
| Mr. Jonathan McLean for Claimants Aktina S.A., Bureau Veritas |
| Edwards, Kenny & Bray and Mariner's Medical Clinic |
Vancouver, BC
Mr. Louis Buteau for Alfa Bunkering Co. Ltd
Sproule, Castonguay
Montreal, PQ
Ms. Andrea J. Sterling for Claimant HBI International
Gottlieb & Pearson
Montreal, PQ
Mr. David McEwen for Claimant Petro Marine Products
McEwen, Schmitt & Co. and Ashland Chemical Inc.
Vancouver, BC
| Mr. John Bromley for Claimant Campotex Shipping |
Bromley, Chapelski Services Ltd.
| Vancouver, BC |
Mr. Chris Giaschi for Claimant Legend Marine
Giaschi, Margolis Singapore Pte Ltd.
Vancouver, BC
| Mr. Doug Morrison for Claimant Shell Canada Limited |
| Bull, Housser & Tupper |
| Vancouver, BC |
| Mr. Michael J. Bird for Claimant Sait Communications S.A. |
| Owen, Bird |
Vancouver, BC
| Mr. A. Barry Oland for Claimant Pacific Pilotage Authority |
| A.B. Oland Law Corporation |
Vancouver, BC