Federal Court Decisions

Date: 20041210

Docket: T-1843-02

Citation: 2004 FC 1732

                                                  ADMIRALTY ACTION IN REM

BETWEEN:

                                              DONGNAM OIL & FATS CO., LTD.

                                                                                                                                               Plaintiff

                                                                           and

                                CHEMEX LTD., THE OWNERS AND ALL OTHERS

                                          INTERESTED IN THE MOTOR VESSEL

                              (ALSO KNOWN AS THE MOTOR TANKER) TUAPSE,

                               THE OWNERS AND ALL OTHERS INTERESTED IN

                  THE MOTOR VESSEL (ALSO KNOWN AS THE MOTOR TANKER)

                  "CHEMBULK CLIPPER", NOVOROSSIYSK SHIPPING COMPANY

                   (ALSO KNOWN AS NOVOSHIP) and CHEMBULK HOLDING LTD.

                                                                                                                                         Defendants

                                                        REASONS FOR ORDER

HARGRAVE P.

[1]         These reasons reflect decisions given from the Bench at the conclusion of motions of the Defendant, Chemex Ltd. ("Chemex"), charterer of the Tuapse, and of the Defendant Novorossiysk Shipping Company ("Novoship"), owner of the Tuapse, resulting in a stay in favour of London arbitration, pursuant to the terms of a charterparty, together with bills of lading incorporating that charterparty and article 8 of the Commercial Arbitration Code, contained in the Commercial Arbitration Act R.S.C. 1985 c. 17, being Canada's adoption of the UNCITRAL code of 21 June 1985. This stay was sought against the Plaintiff, Dongnam Oil & Fats Co. Ltd. ("Dongnam"), the owner of a part cargo of edible oil carried on the Tuapse from New Jersey, U.S.A. and which was transshipped direct to the Chembulk Clipper at Nanaimo, British Columbia.

[2]         The Defendant Chemex also sought various alternatives, some of which did not need to be decided and two that were decided, the striking out of relief sought in section 1(g) of the Statement of Claim, which related to another action and sought section 1(h), a claim for wrongful arrest of cargo not owned by the present Plaintiff, Dongnam and which cargo was ordered released in another Federal Court action.

[3]         To complete the roster of those involved, the Defendant, Chembulk Holdings Ltd. ("Chembulk") was at material times the owner of the Chembulk Clipper. That vessel was on charter to Chembulk Trading Inc. ("Chembulk Trading") and was to provide onward carriage of the American edible oil to Korea by way of a charter to Chemex. Chembulk claims over against Novoship for contribution and indemnity. Also peripherally involved in these proceedings is an intended part cargo of edible oil for carriage from Vancouver to Korea. I now turn to some additional relevant background.

BACKGROUND

[4]         Novoship is the owner of the Tuapse, a tank fitted out to carry edible oils. By a head charterparty of 30 May 2001 the Tuapse was time chartered to Chemex. The head chartered party entitled Chemex to give orders and directions as to employment of the Tuapse and provided, at clause 68, for London arbitration:

Any and all differences and disputes of whatsoever nature arising out of this charter shall be put to arbitration in the city of London pursuant to the laws relating to arbitration there in force, ...

[5]         The head charterparty arbitration provision was reflected in a voyage charterparty of 24 May 2002, between Chemex and Dongnam for the carrying of 2,500 metric tons of yellow grease and 3,500 metric tons of bleachable tallow from Newark, New Jersey, to Inchon, Korea. The Vegoil voyage charter form, used between Chemex and Dongnam, in its standard form calls for New York arbitration (clause 31), however the recap fixture amended the provision to provide for settlement of disputes in London under English law:

Arbitration, if any, to be settled in London under English law, otherwise Vegoilvoy Charter Party terms ...

[6]         The voyage charterparty was for a part cargo, which was loaded 25 June 2002 at Newark. Two bills of lading, on identical forms and dated 25 June, 2002, were issued. The bills of lading incorporated the voyage charterparty between Chemex and Dongnam as follows:

This shipment is carried under and pursuant to the terms of the Charter dated May 24, 2002 at New York between Chemex Ltd. as disponent owners and Dongnam Oil and Fats as Charterer, and all the terms whatsoever of the said Charter except the rate and payment of freight specified therein apply to and govern the rights of the parties concerned in this shipment. Copy of the Charter may be obtained from the Shipper or Charterer.

These bills of lading, numbered 1 and 2 covered slightly less than 2,500 metric tons of bleachable yellow tallow and slightly less than 2,500 metric tons of yellow grease, the exact amounts not being legible on the copies of the bills of lading provided to the Court.

[7]         Between 30 August and 4 September 2002 the cargo at issue was transshipped, from the Tuapse to the Chembulk Clipper, a vessel to vessel transfer at Nanaimo, British Columbia. This leads to the essence of the claim of Dongnam being both for breach of charterparty and for damage to cargo during transshipment, in the nature of steam and water damage and dilution.

[8]         Dongnam also claims for wrongful arrest of cargo which was to have been loaded at Vancouver. The warrant was issued 26 August 2002 and the action struck out on 27 August 2002, for want of a cause of action, there being at that point no connection between the intended Vancouver cargo and the ship controlled by Chemex. Moreover, in the present action, Dongnam says that the cargo which had been arrested was not owned by Dongnam, but was owned by Westcoast Reduction Ltd., which is not a party to the present proceeding. Thus the wrongful arrest aspect is not a factor. And indeed, section 1(h), of the statement of claim, a claim for wrongful arrest of the Vancouver cargo, was struck out, that order being issued from the Bench.

[9]         The final relevant background is that Chemex in fact commenced arbitration proceedings in London and was successful, being awarded, among other things, dead freight. Those awards are final, for they have not been appealed and time for the appeal has run. As of the time that this motion was heard Dongnam had refused to pay those arbitration awards.

ANALYSIS

[10]       This motion raises three issues:

1.         whether the proceeding should be stayed, as against Chemex and as against Novoship, in favour of the London arbitration, pursuant to the voyage charter;

2.         is the remedy, for a negative declaration as to dead freight, an abuse of process pursuant to Rule 221, thus subjecting that aspect of the Statement of Claim to being struck out, in that there has been a final arbitration award of dead freight in favour of Chemex; and

3.         is the claim for wrongful arrest of the cargo subject to being struck out because at the time of the arrest the cargo was not owned by the Plaintiff.

I now turn to the first issue.

Stay in Favour of London Arbitration

[11]       While the Plaintiff takes various approaches in arguing against the stay, the principal

argument, that the action ought not to be stayed in favour of London arbitration, involves the applicability of section 46 of the Marine Liability Act. Section 46 is legislation designed to facilitate Canadian participants in ocean carriage in the bringing of their claims in Canada, rather than being required to go into offshore jurisdictions, which may be less favourable to a Canadian claimant. Section 46 provides that:                

Section 46 goes on to contain a consensual provision, so that once a claim arises the parties may agree on a venue for judicial or arbitral proceedings, however that provision does not apply in this instance. In this instance none of the parties in this action, involving carriage of edible oil, have any connection with Canada. Nor was the contract made in Canada. However the Plaintiff submits that because the cargo being carried was pumped from one vessel to another, the vessels being tied together at Nanaimo, British Columbia, that trans-shipment between vessels, although it did not involve putting the cargo ashore, constitutes loading or discharging at a Canada port.

[12]       An initial issue is whether or not transshipment, through pumping the edible oil cargo between vessels tied together, with the cargo never touching the shore or going across a dock, at Nanaimo, British Columbia, constitutes Nanaimo as an "... actual port of loading ...", so as to bring the present operation within the ambit of section 46 of the Marine Liability Act.

[13]       Loading is defined, in the Oxford English Dictionary as "To put on board as cargo". This is rather general, however the courts have elaborated on just what is involved in loading, being a joint act of the cargo shipper, or in some instances of a charterer and of the shipowner. By way of example of a definition of loading is the following view of Lord Esher:

Loading is a joint act of the shipper or charterer and of the shipowner; neither of them is to do it alone, but it is to be the joint act of both. What is the obligation on each of them in that matter? Each is to do his own part of the work, and to do whatever is reasonable to enable the other to do his part. This puts upon the shipper the obligation of bringing the cargo alongside the ship, and of doing a certain part of the loading. What is that part of the loading? By universal practice the shipper has to bring the cargo alongside so as to enable the shipowner to load the ship within the time stipulated by the charterparty, and to lift that cargo to the rail of the ship. It is then the duty of the shipowner to be ready to take such cargo on board and to stow it in the vessel. The stowage of the cargo is the sole act of the shipowner.

                                               [Lord Esher, M.R. in Harris v. Best (1892) 68 L.T. 76 at 77]

Loading is thus a joint obligation and process involving both the cargo interest and the shipowner.

[14]       In contrast, transshipment describes a different process, although it may involve a discharge and reloading:

Transfer of goods from one ship to another. This transfer may be direct or it may be necessary to discharge the good onto the quay prior to loading them onto the second ship, or onto vehicles should the second ship be loaded at a different berth.

[Brodie's Dictionary of Shipping Terms, 4^th edition, Lloyd's of London Press, London, 2003]                                           

To move, movement of, a cargo or consignment from one ship to another, or from one mode of transportation to another, either direct or via an intermediate quay, warehouse, terminal depot, etc., for onward carriage.

[Sullivan's Marine Encyclopedic Dictionary, 4^th edition, Lloyd's of London Press, 1995]

One concept of transhipment does involve a landing and reloading of goods, although it may not be loading in the strict sense for it usually does not involve a joint exercise undertaken by cargo and carrier. The other concept is a direct movement of cargo from one ship to another, without either landing and reloading, or mutuality of enterprise between cargo interests and the carrier.

[15]       In the present instance, what occurred was a pure transshipment between adjacent vessels, without any of the usual mutual aspects of loading, that is without the cargo interests bringing the cargo alongside for delivery to the ship and without the ship accepting cargo, from the cargo interest and stowing it aboard. On the basis that no loading took place section 46 of the Marine Liability Act does not come into play.

[16]       I would also note, as I will consider fully below, that there should be a narrow interpretation of legislation where there is encroachment or impingement upon commercial activity of the contractual rights of strangers, who do not clearly and manifestly fall within the legislation in question. It was surely not the intent of Parliament to interfere with a legitimate operation taking place only between ships, merely because they happen to be in Canadian waters: that is too much of an interference with the rights of business people to justify a broad interpretation and application of section 46 of the Marine Liability Act. To further bolster this concept that it cannot have been the intent of Parliament to infringe upon mere transshipment and that Parliament certainly knows the difference between transshipment and loading, one need only look at other Canadian legislation dealing with loading and transshipment. In the Coastal Fisheries Protection Act, R.S. 1985, c.33, section 4(1)(b) unloading and transshipment are treated as two different concepts. Similarly in the Coastal Fisheries Protection Regulations, C.R.C. c. 413, section 5(1)(a) there are a number of separate concepts including transshipment, taking on board, loading and unloading.

[17]       In considering the effect of London arbitration I have also kept in mind that section 46 of the Marine Liability Act is a restriction on freedom to contract and thus it should be interpreted strictly. As put by Côté on the Interpretation of Legislation in Canada, Third Edition (2000), Carwell, at page 472, dealing with general principles which favour individual rights and freedoms:

Individual freedom has consistently been the basis for strict interpretation of enactments controlling commercial, industrial and professional activities. The principle of contractual freedom has also been used to justify strict interpretation of statutes which encroach upon it.

However Côté goes on, at page 474, to make the point and here I paraphrase, that concerns with rights and freedoms should not entice a court to overly restrict the scope of a statute, or to smother it, or to completely deprive it of effect simply because it departs from the general concept of contractual freedom.

[18]       Sullivan and Driedger, on the Construction of Statutes, Fourth Edition (2002) Carswell, at page 399 and following consider legislation which takes away rights, including rights of action. While Driedger and Sullivan discuss this area in the context of the rights of subjects. In the present instance no subjects, citizens or residents are involved, but rather the principles are offshore companies who find themselves, at the suit of the Plaintiff, in a Canadian Federal Court action which is dependent upon by a Canadian statute, designed to facilitate the activities of those who have a connection with Canada. Therefore it is all the more the case that Parliament did not intend to abolish or to limit or to interfere with the rights of those companies unless they clearly come within the bounds of the legislation. In the case of citizens, Sullivan and Driedger approach interference with rights of action in the following way:

Rights of action. The presumption against interfering with rights applies to the right to bring an action or an appeal; it also applies to defences, privileges and immunities. In Berardinelli v. Ontario Housing Corp., for example, Estey J. wrote:

Section 11 [of the Public Authorities Protection Act], being a restrictive provision wherein the rights of action of the citizen are necessarily circumscribed by its terms, attracts a strict interpretation and any ambiguity found upon the application of the proper principles of statutory interpretation should be resolved in favour of the person whose right of action is being truncated.

                      [Pages 399-400]

As I have already observed Sullivan and Drieger write in the context of statutes impinging upon the rights of subjects, be they citizens or residents, but that is all the more reason not to impinge upon the contractual rights of strangers unless they manifestly fall within the legislation in question, on a strict interpretation of that legislation.

[19]       This view is born out in some ultimate comments by the B.C. Court of Appeal in H.B. Contracting Ltd. Northland Shipping (1962) Co. (1971) 24 D.L.R. (3d) 209, the court there considering the exception from the category of goods of cargo carried on deck:

The words of the exception ought to be given a reasonable meaning which accords with practical affairs and business efficacy.

In arriving at the conclusion that this crane falls within the exception from the definition of "goods" in art. I, I have regard as a general guide to the fact that the Rules constitute a statutory restriction on freedom of contract and thus, should be so interpreted as to avoid a more extensive restriction than the language used reasonably requires.

                                                                                                                      [Pages 214-215]

Interestingly, H.B. Contracting involved carriage within Canada, but that does not take away from the fact that the court placed a fairly extensive restriction on the language used in the Canadian Water Carriage and Goods Act, which is appropriate in this instance, notwithstanding the submissions of the Plaintiff.

[20]       The Plaintiff does refer to The Ships Castor and Katsuragi (2002) 297 N.R. 151 (F.C.A.) and to an unreported 14 January 2003 decision of Mr. Justice Pinard in Nestlé Canada Inc. v. The Viljandi, 2003 FCT 28. These decisions, while they involve section 46 of the Marine Liability Act, in the former, carriage into Nova Scotia and British Columbia and in the latter carriage from Canada, with the real issue in each case was the timing of the application of the Marine Liability Act, then recently come into force. Neither case assists the Plaintiff.

[21]       The Plaintiff also relies upon section 46(2) of the Marine Liability Act, which I have referred to earlier and will now set out:

The submission here, on the part of the Plaintiff, is that Chemex had commenced an initial action in Federal Court, which the parties called the August 2002 action: that action was still existing when the Plaintiff commenced the present action on 26 August 2002, thus in the view of Dongnam giving rise to an operating or de facto agreement designating a jurisdiction as is allowed by section 46(2).

[22]       The approach, of an agreement to jurisdiction based on section 46(2) of the Marine Liability Act, requires designation, by agreement, of a venue where a claimant may institute proceedings once a claim arises out of a contract. The approach of Dongnam pursuant to section 46(2) of the Marine Liability Act is based on a misappreciation of the August 2002 action, an action to secure dead freight, in which Dongnam, although a named Defendant, was never served. The in rem aspect of the August 2002 action, as against cargo, was struck out 27 August 2002 at the behest of West Coast Reduction Ltd., there being no nexus between the cargo and the vessel belonging to Chemex, or indeed any nexus with any vessel. Leaving aside the difference in substance between the August 2002 action for dead freight and the present action alleging a breach of charter party, an ex parte motion, in the August 2002 action, for injunctive relief, sought by Chemex against the present Plaintiff, Dongnam, was denied a day later, 28 August 2002. The action was discontinued as against Dongnam on 5 September 2002 and as against the remaining entity, West Coast Reduction Ltd., 25 September 2002. Without more I cannot find any indication of an agreement pursuant to section 46(2) as to a venue for proceedings and indeed, I doubt that section 46(2) applies at all, for an agreement under section 46(2) of the Act presupposes jurisdiction in Canada under section 46(1) and an agreed departure from that jurisdiction.

[23]       That the Marine Liability Act does not apply, so as to mandate jurisdiction in Canada, does not conclude the issue as to a stay. The Federal Court of Appeal, in Thyssen Canada Ltd. v. The Mariana [2000] 3 F.C. 398 referred to the Commercial Arbitration Act and the provision in article 8 of the Commercial Arbitration Code, requiring arbitration, subject to two provisos. Here I would observe that by section 5 of the Commercial Arbitration Act, the Commercial Arbitration Code has the force of law in Canada. In Thyssen the Court referred to two fundamental determinations to be made when arbitration is requested, pursuant to an arbitration agreement in a charterparty that is incorporated into a bill of lading:

The provisions of the Commercial Arbitration Code render it clear that this Court must make two fundamental determinations. First, in accordance with article 7(2), it must determine whether the arbitration clause was effectively incorporated into the bills of lading. The second determination is whether the arbitration agreement clause is, according to article 8(1), "null and void, inoperative or incapable of being performed".

                                                                                                                               [Page 414]

These requirements tie into articles 7 and 8 of the Commercial Arbitration Code which provide that:

[24]       Clearly there is agreement, in the 24 May 2002 charterparty between Chemex and Dongnam, for London arbitration, thus effectively calling for a stay between those parties in favour of London arbitration. However there is also the question of whether Novoship, as owner of the Tuapse, may call for London arbitration on the strength of the bills of lading, for Novoship has no other direct connection with Dongnam. The effect of these legislative provisions is also that if the arbitration agreement, which is in both the head charterparty, of 30 May 2001 and the voyage charterparty of 24 May 2002 between Chemex and Dongnam, to which I have already referred, was effectively incorporated into the bills of lading of 25 June 2002, then I must also grant a stay in favour of Novoship, notwithstanding the discretionary nature of section 50(1) of the Federal Court Act.

[25]       I will first deal with the request of Chemex for a stay. The plain wording applicable to the 24 May 2002 charterparty, between Chemex and Dongnam, is that there be London arbitration. I am therefore required to grant a stay. Here I rely upon The Mariana (supra) at page 414. In The Mariana the Federal Court of Appeal upheld the stay granted by the Trial Division for it found a valid incorporation of the arbitration clause into the bills of lading, a clause which was not for any reason void, inoperative or incapable of performance. I recognize that in The Mariana the Federal Court of Appeal dealt with bills of lading. However the operative provision of the Commercial Arbitration Act, article 7, does not differentiate between bills of lading and charterparties, merely requiring that the agreement be in writing, including in a contract, which would include the present charterparty which Chemex relies upon for London arbitration.

[26]       Taking into account the clear agreement to arbitrate and that the agreement covers the issues in dispute, there is, as the Court of Appeal concluded in Nanisivik Mines Ltd. v. FCRS Shipping Ltd. (1994) 2 F.C. 662, at pages 674-675, no residual discretion to review the stay and this is so even though there may be particular issues which may not be subject to arbitration. Yet I would also emphasize that the arbitration provision is broad, extending to "any dispute arising from the making, performance or termination of this Charter Party", as set out in clause 31 of the 24 May 2002 charterparty. Thus a stay, as between Chemex and Dongnam, is appropriate and indeed mandatory. However the situation as between Novoship and Dongnam, as to a stay, involves different considerations, for to obtain a stay Novoship must look to the bills of lading, there being no direct connection, by way of a charterparty.

[27]       The test as to a stay in favour of Novoship is not dependent upon whether or not Novoship was a party to the 24 May 2002 charterparty, but rather whether Novoship is entitled to rely on an arbitration clause from that charterparty incorporated, by reference, into the bills of lading:

The issue is not whether the respondent is a party to the charter party, but whether it is entitled to rely on an arbitration clause which has been incorporated, by reference, into a bill of lading. If, as between the shipper and the shipowner, there is a contract represented by a bill of lading, then the only question is whether that contract has effectively incorporated by reference an arbitration clause set out in another document. Once incorporated into the bill of lading, the consignee is bound by this provision as is the consignor and the shipowner.

                  [Thyssen Canada Ltd. v. The Mariana, supra, at page 409]

[28]       Turning to incorporation of a charterparty into a bill of lading, the leading authority is The Rena K [1978] 1 Lloyd's 545, a decision of Mr. Justice Brandon of the Court of Queen's Bench. The Federal Court of Appeal followed the Rena K in Nanisivik Mines Ltd. v. F.C.R.S. Shipping Ltd. (supra) at 676 and following, observing, at pages 667 and 678:      

In summary, three different situations were considered in Rena K, The: (1) an arbitration clause in a charterparty that makes no reference to disputes under bills of lading issued pursuant to it together with a provision of the bill of lading incorporating generally the terms of the charterparty without specific reference to the arbitration clause, (2) an arbitration clause in a charterparty which expressly provides that it applies to disputes under bills of lading issued pursuant to it together with a provision of the bill of lading incorporating generally the terms of the charterparty without specific reference to the arbitration clause and (3) a provision of the bill of lading incorporating terms of the charterparty including, by specific reference, its arbitration clause.

In the first situation, the arbitration clause does not bind the parties to the bill of lading because, incorporated in it, the arbitration clause does not, on a plain construction of its verbiage, apply to disputes under the bill of lading; the clause refers only to disputes arising under the charterparty. In the other two, it does bind the parties to the bill of lading: in the second because when incorporated, on a plain construction, it says it binds them and, in the third, because the intention to apply it to disputes under the bill of lading as well as incorporate it is sufficiently clear that the words of the clause will be manipulated to give effect to that intention.

In Nanisivik the Federal Court of Appeal was concerned that the relevant words of incorporation, being general words, might be insufficient to incorporate into bills of lading the charterparty term as to arbitration. This conclusion by the Federal Court of Appeal is reflected in an authoritative passage from The Rena K:

A long series of authorities has established that, where a charter-party contains an arbitration clause providing for arbitration of disputes arising under it, general words in a bill of lading incorporating into it all the terms and conditions, or all the terms, conditions and clauses, of such charter-party, are not sufficient to bring such arbitration clause into the bill of lading so as to make its provisions applicable to disputes arising under that document. Hamilton v. Mackie & Sons Ltd., (1889) 5 T.L.R. 677; Thomas (T.W.) & Co. Ltd. v. Portsea S.S. Co. 53 Ll.L. Rep. 286; [1936] P. 90; The Phonizien, [1966] 1 Lloyd's Rep. 150; The Annefield, [1971] 1 Lloyd's Rep. 1; [1971] P. 168.

                                                                                                                               [Page 550]

In the present instance the bill of lading incorporation wording is general, does not refer to arbitration and is thus insufficient to import the arbitration clause from the charterparty into the bill of lading. However there is an exception to this concept, being where the arbitration clause in a charterparty specifically provides for arbitration under relevant bills of lading: in that instance general words of incorporation in the bill of lading are sufficient to import the arbitration clause:

By contrast it has been held that, where an arbitration clause in a charter-party provides for arbitration of disputes arising not only under the charter-party itself but also under any bill of lading issued pursuant to it, general words of incorporation in such a bill of lading of the kind referred to above, are sufficient to bring in the arbitration clause so as to make it applicable to disputes arising under that bill of lading: The Merak, [1964] 2 Lloyd's Rep. 527; [1965] P. 223.

                                                                                                                                   [loc cit.]

In the present instance there is no reference in the 24 May 2002 charterparty, in the arbitration clause, to arbitration under bills of lading.

[29]       Given the views of Mr. Justice Brandon in The Rena K (supra) and of the Federal Court of Appeal in Nanisivik Mines (supra), Novoship does not have the benefit of London arbitration and thus the Novoship motion for a stay must be denied.

Declaratory Relief as to Deadfreight

[30]       I will deal briefly, as I did from the Bench, with the striking out of paragraph 1(g) of the relief sought by the Plaintiff in the Statement of Claim for a negative declaration as to payment of deadfreight, the Plaintiff seeking:

a declaration that the Plaintiff has no liability or subsisting liability, including any obligation to pay for deadfreight, to the Defendant Chemex Ltd. in respect of the cargo at issue in this action, or otherwise claimed by Chemex Ltd. in Federal Court (Trial Division) action No. T-1392-02

[31]       The Court of Appeal struck out a pleading that had already been dealt with in an earlier proceeding, in Beattie et al. v. Canada (2001) 278 N.R. 158, upholding the Trial judge who had earlier struck out the action, as scandalous, frivolous and vexatious, because it was the re-litigation of a matter which had already been determined. More concisely, Mr. Justice of Appeal Sexton analysed the matter in the context of action estoppel, the criteria being:

The criteria for the application of the cause of action estoppel are as follows:

(a) there must be a final decision of a court of competent jurisdiction in the prior action;

(b) the parties to the subsequent litigation must have been parties to or privy with the parties to the prior action;

(c) the cause of action in the prior action must not be separate and distinct; and

(d) the basis of the cause of action in the subsequent action was argued or could have been argued in the prior action if the parties had exercised reasonable diligence.

                                                                                                                  [Pages 162-163]

[32]       I have examined the arbitration award of Mr. Bruce McKenzie issued 16 December 2002. Pursuant to the Canada-United Kingdom Civil and Commercial Judgments Convention Act, R.S.C. 1985, c. C-30, the Federal Court must recognize judgments coming out of the United Kingdom and that, by definition in Article 1, includes recognition of an arbitration award. Article VIII requires this recognition, whether or not the arbitration award has been registered. The issue of entitlement to deadfreight, raised in paragraph 1(g) of the Statement of Claim, has been dealt with in that arbitration. The award satisfies the criteria set out in Beattie. Moreover, one should keep in mind that the initial action by Chemex against some intended cargo, which had a brief life before it was struck out in part and the balance discontinued, involved proposed Vancouver cargo and a later charterparty of 30 May 2002, as opposed to the present proceedings, which involve the earlier charter out of the United States. The earlier action of Chemex has all the earmarks of an interim measure, as allowed by Article 9 of the Commercial Arbitration Act, and had nothing to do with this present action. Thus all the more reason to strike out paragraph 1(g) of the Statement of Claim.

[33]       I would also add that the wrongful arrest claim, to which I will now turn, is also the subject of a final arbitration award. It could and should have been referred by a plaintiff to London arbitration. I now turn to the third point on the motion of Chemex, damages for wrongful arrest.

Relief in the Nature of Damages for Wrongful Arrest

[34]       The Plaintiff, in paragraph 1(h) of the Statement of Claim, seeks declaratory relief as to wrongful arrest and later in the prayer for relief seeks damages for the arrest of cargo in which the Plaintiff claims some sort of an interest:

a declaration that the Defendant Chemex Ltd. did wrongfully cause the arrest of certain cargo intended to be owned or beneficially owned by the Plaintiff, such cargo referred to in this proceeding as the "Second Vancouver Cargo", arrested at Vancouver on August 26, 2002

Chemex is successful in having this plea struck out.

[35]       In this instance the Plaintiff, as I say, seeks a declaration as to wrongful arrest. The Plaintiff submits that this present action, involving the carriage of the American cargo to Vancouver, is an appropriate vehicle from which to explore the proposed carriage of Vancouver cargo to Korea, carriage which never took place. Here I would note that the Plaintiff seeks condemnation of not only the Tuapse, the ship that carried the cargo from Newark to Nanaimo, but also of the Chembulk Clipper, the vessel proposed for onward carriage from Nanaimo to Korea, together with any bail posted and exemplary damages.

[36]       On the face of the Statement of Claim the plea for declaratory relief and damages as to the onward carriage from Vancouver, of the Vancouver cargo, is an improper plea, for by paragraph 16 of the Statement of Claim the Plaintiff says that the cargo in question was not only in the possession of, but was also owned by West Coast Reduction Ltd., an entity which is not involved in the present action.

[37]       There is thus the question of how a litigant, with no apparent interest in the intended cargo which was arrested, can maintain an action arising out of interference with that cargo when, according to paragraph 16 of the Statement of Claim, that intended cargo was "... in the possession of and owned by West Coast Reduction Ltd.". While I do not completely agree with the position of Chemex, that ownership is a precondition to a claim of tortious interference with property, a Plaintiff, in order to maintain such an action, must, if not the owner, be at least in actual possession of the goods at the time of the interference: see for example Salmond on Torts, 14^th edition, 1965, Sweet and Maxwell, London, at page 189.

[38]       Finally, in an earlier action, in which Chemex was Plaintiff and West Coast Reduction Ltd. was among the Defendants, action T-1392-02, the in rem aspect of the claim, against the intended Vancouver cargo, was struck out for want of a cause of action, without leave to amend. Costs were in the cause, a good indication that the arrest of the cargo was not wrongful, as alleged by the Plaintiff, Dongnam, in the present proceeding. Indeed, Dongnam was no more than a bystander when it came to the arrest of the cargo. Moreover, as I have already pointed out, there has already been an arbitration in London involving the charterparty for the carriage of the Vancouver cargo to Korea, with Chemex succeeding. Thus, under the Beattie case (supra) and the Canada-United Kingdom Civil and Commercial Judgments Convention Act (supra) Dongnam is estopped from now complaining of any wrongful arrest. It is therefore appropriate that paragraph 1(h) of the relief be struck out.

[39]       In summary, the Plaintiff's pleas as to deadfreight and as to wrongful arrest are such that they clearly, obviously and beyond doubt cannot succeed and for that reason they are struck out.

CONCLUSION

[40]       Chemex, essentially supported by Novoship, has succeeded, while Novoship has not.

[41]       There is also the position of Chembulk Holding, the owner of the Chembulk Clipper. Chembulk Holding claims over against Novoship. Chembulk Holding's position is that if not permitted to pursue its third party claim against Novoship, it may well be prejudiced in its defence of a claim of Dongnam. This produces the awkward situation, encountered from time to time, for example in Fibreco Pulp Inc. v. Star Shipping A/S (1998) 145 F.T.R. 125, affirmed 156 F.T.R. 127 (F.C.T.D.) and 257 N.R. 291 (F.C.A.), where one or more parties is entitled to a stay by reason of an arbitration provision, but other defendants are not. In the Fibreco case, following the Nanisivik case (supra) the entire litigation was stayed until the arbitration aspect had been completely disposed of. That will be the outcome here, for to carry on with the present litigation would not only be expensive, but could well result in conflicting results.

[42]       The present action is stayed pending a complete resolution of all aspects of the claims between the Plaintiff, Dongnam and the Defendant, Chemex.

[43]       Costs payable by Dongnam to Chemex. All other claims for costs to be costs in the cause should the present action resume.

(Sgd.) "John A. Hargrave"

    Prothonotary

                                     FEDERAL COURT

    NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                  T-1843-02

STYLE OF CAUSE: Dongnam Oil & Fats Co. Ltd. v. Chemex Ltd. et al

PLACE OF HEARING:                                 Vancouver, British Columbia

DATE OF HEARING:                                   March 18, 2003

REASONS FOR Order :                               Mr. John A. Hargrave, Prothonotary

DATED:                     December 10, 2004

APPEARANCES:     

Mr. Jeffrey Smith         FOR PLAINTIFF

Mr. Shane Nossal       

Mr. J.D.L. Morrision    FOR DEFENDANT Novorossiysk Shipping Company

Mr. P.G. Bernard, Q.C

Mr. H. Peter Swanson                                       FOR DEFENDANT Chemex Ltd.

Mr. G. Tucker             FOR DEFENDANT Chembulk Holding Inc.

SOLICITORS OF RECORD:

Lindsay, Kenny

Vancouver, BC            FOR PLAINTIFF

Bull, Housser & Tupper                                     FOR DEFENDANT Novorossiysk Shipping Company

Vancouver, BC

Bernard & Partners      FOR DEFENDANT Chemex Ltd.

Vancouver, BC

Owen Bird                   FOR DEFENDANT Chembulk Holding Ltd.

Vancouver, BC