T-1357-97
MONTRÉAL, QUEBEC, THIS 19th DAY OF AUGUST 1997
PRESENT: RICHARD MORNEAU, ESQ., PROTHONOTARY
| ACTION IN REM AGAINST THE VESSEL NECAT A AND IN PERSONAM AGAINST THE OWNERS AND CHARTERERS OF THE VESSEL NECAT A AND DENSAN SHIPPING CO. INC. |
BETWEEN:
AMICAN NAVIGATION INC.,
Plaintiff,
AND
DENSAN SHIPPING CO. INC.
-and-
THE OWNERS AND ALL OTHERS INTERESTED
IN THE VESSEL NECAT A
-and-
THE VESSEL NECAT A,
Defendants
ORDER
The defendants' motion is allowed in part and the bail is established at $114,387.46 plus $10,000 for costs and interest, for a total of $124,387.46.
The balance of the amount paid in by the defendants, $480,612.54, with accumulated interest, shall be returned to counsel for the defendants.
Costs in the cause.
Richard Morneau
Prothonotary
Certified true translation
C. Delon, LL.L.
T-1357-97
| ACTION IN REM AGAINST THE VESSEL NECAT A AND IN PERSONAM AGAINST THE OWNERS AND CHARTERERS OF THE VESSEL NECAT A AND DENSAN SHIPPING CO. INC. |
BETWEEN:
AMICAN NAVIGATION INC.,
Plaintiff,
AND
DENSAN SHIPPING CO. INC.
-and-
THE OWNERS AND ALL OTHERS INTERESTED
IN THE VESSEL NECAT A
-and-
THE VESSEL NECAT A,
Defendants
REASONS FOR ORDER
RICHARD MORNEAU, ESQ.,
PROTHONOTARY:
Introduction
In the course of an action in maritime law, a motion was made to the Court by the owners of the vessel, in their capacity as defendants in the action, to have the proper amount of the bail that the owners should maintain in the record of this Court established.
In support of their motion, the defendants rely primarily on the scheme and intent of Rule 1004 of the Federal Court Rules (the "Rules").
The facts
In December 1996, pursuant to a charter-party, the defendants chartered their vessel, the "NECAT A", to the plaintiff for a period of time.
It appears that in about May 1997, contrary to what should have happened, the NECAT A did not arrive at the port of Eilat in Israel to take on a cargo of phosphate and then continue on its route to its final destination, the port of Visakhapanam in India.
The plaintiff contends that this impasse was caused by the defendants, since they allegedly refused to give the vessel instructions to do that.
Given the situation, the plaintiff then took the position that the defendants had violated the charter-party agreement by which they were bound, and accordingly it terminated the agreement. As provided in the charter-party, the plaintiff then took the NECAT A back to the defendants in Sicily.
Based on this breach of contract, the plaintiff commenced an action in this Court on June 23, 1997, and on the same date it placed the NECAT A under arrest in the port of Saint John, New Brunswick.
On June 27, 1997, the defendants paid $605,000 into the record of this Court, representing the amount claimed by the plaintiff in its action, $590,261.92, plus an additional amount in accordance with established practice. In their notice of payment into court under Rule 1006, the defendants were careful to state that the payment in was being made subject to their right to challenge the amount they were paying in at a later date.
At the same time as the payment in was made, release of the seizure of the NECAT A was given.
On July 18, 1997, the defendants acted on the reservation referred to supra by filing the motion described at the beginning of these reasons.
On the 25th of that month, the plaintiff filed an affidavit (the affidavit of J. Karathanos) in reply to the affidavit that the defendants had attached to their motion (the affidavit of L. Fortier).
On August 11, 1997, by interlocutory order made in the course of the hearing of this motion, I gave the defendants leave to file an affidavit "in reply" to the affidavit of J. Karathanos (the affidavit of A. Fakhry).
Analysis
Counsel for the plaintiff has raised a number of objections to the defendants' motion, some of which should be addressed first.
Arbitration clause
In accordance with an arbitration clause set out in the existing charter-party, the parties have to date submitted the dispute that is the subject of this action to arbitration in London. According to the plaintiff, this fact should place considerable limits on the jurisdiction of this Court over the instant motion. In fact, the Court should regard this motion as a motion to strike out under Rule 419(1)(a). I do not share this point of view, even though, as we shall see later, in establishing the amount of the bail the Court must directly avoid acting as if it were hearing the case on the merits.
It must be noted at the outset that it was the plaintiff that chose to commence proceedings in this Court in addition to seeking arbitration in London. This dual approach is justified as follows in paragraph 12 of the plaintiff's statement of claim: "... The present proceedings are filed as an interim measure of protection pursuant to the provisions of article 9 of the Commercial Arbitration Act." Article 9 reads as follows:
| Article 9 |
| It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure. |
The motion having been made to this Court, I do not believe that for the purposes of the motion - and not of hearing the case on the merits - the Court is restricted by the fact that the case has been submitted to London.
In addition, by letter dated July 15, 1997, written on behalf of the plaintiff, inter alia, the defendants were informed that any referral to arbitration "... is without prejudice to your right to demand a reduction in the security posted in the said proceedings to secure the release from arrest of the vessel NECAT A."
I therefore do not believe that the arbitration must be seen as a limitation on the defendants' motion.
Scope of the motion
On this point, according to counsel for the plaintiff, the defendants' motion falls under Rule 1005(1.1).1 According to that rule and the rule preceding it, any application to have the amount of bail determined must, in his view, be made while the vessel is still under arrest.
Counsel for the defendants argued that the money paid in unilaterally by his clients on June 27, 1997, was paid in for the purpose of having the NECAT A returned to service as quickly as possible, and it would be legally inconceivable for his clients to be unable in this situation to ask the Court to rule as to the proper amount to be applied.
I agree with the position taken by counsel for the defendants. It seems to me that under Rules 1004 et seq. there is a fundamental right for any party to apply to the Court when no agreement can be or has been reached between the parties as to bail. That is the right that they are seeking to have recognized. Accordingly, based on Rules 2(2) and 302, I believe that it is sufficient for the defendants to rely on Rule 1004 in support of their motion, and their motion may be allowed even though it was made after the NECAT A had been released.
Merits of the motion
This brings us to a consideration of the merits of the defendants' motion.
The merits of a motion of this nature will, in theory, be assessed in accordance with a principle on which the parties are in agreement. In Atlantic Shipping (London) Ltd. v. Ship Captain Forever et al. (1995), 97 F.T.R. 32 (Captain Forever), this Court stated that principle (the applicable principle) as follows, at page 34:
| The general principle, that a plaintiff, having arrested a vessel, is entitled to security in an amount sufficient to cover the reasonably arguable best case, together with interests and costs, capped at the value of the wrongdoing vessel, ... |
The point on which the parties' opinions diverge is with respect to the procedure to be followed for determining the "plaintiff's reasonably arguable best case".
For that purpose, both parties are prepared to adopt the guidelines laid down as follows in Captain Forever, at page 37, as the first step in the analysis:
| The three representative cases, The "Manitou III", The "Moschanthy" and The "Tribels" stand for the proposition that a court, in an interlocutory proceeding to set bail, ought not to try the case in order to determine the value of the plaintiff's reasonably arguable best case, in setting security, unless there are special circumstances. These special circumstances might include claims in which there are major uncertainties, such as in The "Manitou III", or where the security demanded is exorbitant, but not a situation, such as the present, where the plaintiff's damages figures seem fairly firm and the security requested reflects those figures. |
Counsel for the plaintiff argued vigorously that there is nothing in the evidence in the record that would bring his client's case within the exceptional circumstances referred to in Captain Forever and that, accordingly, this Court should not take it upon itself to examine the merits of the case; those merits are within the prerogative of the arbitrators in London.
According to counsel for the defendants, the Court should not hesitate to deal with the amount to be maintained if it is satisfied, on the evidence submitted by each of the parties, in the context and at the stage of the motion, that there are special circumstances, that is, uncertainties, exaggerations or a lack of confidence in the way the claims are presented.
He pointed out that it is wrong to believe or to argue that if the Court takes action, what it is doing in the course of that exercise is deciding the outcome of the case, in whole or in part. According to him, the parties before the arbitrators will be able to submit any additional evidence that they are allowed to file, for the purpose of having the merits of the case decided. As well, the arbitrators could not feel that they were bound, in terms of their decision on the merits, by the decision that this Court may make on the instant motion.
I share the views stated by the defendants. Moreover, I reject the plaintiff's argument that the defendants should be limited to a claim for excessive bail if, after hearing the merits, that appeared to be the case. In the circumstances, since the amount paid in on June 27, 1997, was paid in unilaterally by the defendants, the plaintiff cannot, in my view, be accused at any time of having demanded excessive bail.
It now remains to be seen whether the evidence presented is such as would persuade this Court to reduce the amount initially paid in by the defendants.
The plaintiff's statement of claim contains three paragraphs setting out the heads of the claim. They read as follows:
| 9. As a result of Densan's breach of contract, Plaintiff sustained damages on account of lost profit in the amount of US $242,552.88 equivalent to CAN $336,954.46; |
| 10. Plaintiff sustained further damages in the amount of US $100,000.00 equivalent to CAN $138,920.00 representing additional costs incurred in re-delivering the vessel to Densan; |
| 11. In addition to all of the foregoing, pursuant to the hire statement prepared by Plaintiff following re-delivery of the vessel NECAT A, Densan owes to Plaintiff the sum of US $82,340.53 equivalent to CAN $114,387.46; |
Those paragraphs are reiterated in the affidavit of J. Karathanos, who is the president of the plaintiff, as follows:
| 7. Without prejudice to Amican's contention that its claim is sufficiently itemized in the Statement of Claim and subject to its rights to amend the Statement of Claim to add any other claim it may have against the Defendants, further particulars of the amounts claimed at paragraphs 9, 10 and 11 of the Statement of Claim (corresponding paragraphs 11, 12 and 13 of the Affidavit to Lead Warrant) are given as follows: |
| i) With respect to Amican's claim on account of loss of profit for CAN $336,954.46 (US $242,552.88) stated at paragraph 9 of the Statement of Claim, this amount corresponds to the Canadian equivalent of Amican's loss of revenue for the Israel phosphate cargo contract for an amount of US $444,552.88 less port expenses estimated at US $200,000.00. A copy of Amican's breakdown of the said loss of revenue is produced herewith as Exhibit "A" to this my Affidavit; |
| ii) With respect to Amican's claim for CAN $138,920.00 (US $100,000.00) stated at paragraph 10 as additional costs to redeliver the vessel to the Defendants, Amican has in fact sustained damages and/or incurred liabilities for an amount in excess of US $205,738.49 as appears from the breakdown produced herewith as Exhibit "B" to this my Affidavit and Amican reserves all its rights to increase its claim under this head of damages; |
| iii) With respect to the claim for CAN $114,387.46 stated at paragraph 11, Amican's hire statement showing a balance in its favour of US $82,340.53 (the U.S. currency equivalent of CAN $114,3987 (sic)) is produced herewith as Exhibit "C" to this my Affidavit; |
It will be noted that the defendants would have had to wait and refer to Exhibits "A" to "C" (the "Exhibits") to the affidavit of J. Karathanos for more details as to the bases of the plaintiff's three broad claims. The simple assertions in the statement of claim and in the affidavit to lead warrant (which correspond to those in the statement of claim), and in the affidavit of J. Karathanos, offer few particulars to provide a firm basis for the plaintiff's three claims.
In the affidavit of A. Fakhry, the defendants rely on the three exhibits filed by the plaintiff and attempt, by filing an expert report (paragraph 4(a) of the affidavit of A. Fakhry) or pleadings in cases connected with the instant case (paragraph 4(b) of that affidavit), to raise uncertainties or exaggerations, in short, special circumstances such as would weaken the basis of the plaintiff's claims.
After considering the matter, I must say that in my view the defendants have achieved their purpose with respect to the plaintiff's first two claims, but not with respect to the third.
With respect to the plaintiff's first claim, that is, $336,954.46 for loss of revenue because of the fact that the trip from Israel to India did not take place, I must admit that after examining Exhibit "A", filed by the plaintiff, and the Furtado report, filed by the defendants, the only conclusion I can reach is the one reached by the deponent, A. Fakhry, in his summary of the conclusions in that report, in respect of which he states, on behalf of the defendants:
| with respect to paragraph 7(i) of Mr. Karathanos's Reply, the attached report dated August 7, 1997 of Captain Nelson Furtado, an independent expert retained by Defendant, which raises some serious doubts as to whether Plaintiff could have performed the Israel phosphate cargo shipment and confirms that had it been performed, it would have been at a loss, not a profit. |
Counsel for the plaintiff pointed out that since J. Karathanos had not been cross-examined on his affidavit, the Court could not question what it says. On this point, the plaintiff also has not attempted to cross-examine A. Fakhry. I therefore take each affidavit for what it tells me, even though no testimony was heard before me in respect of the expert opinions stated. The fact is that motions are heard in this Court on the basis of affidavits.
Moreover, the approach to be followed in the instant motions appears to be to do a comparative assessment of reports or other information (see Brotchie v. Ship Karie T (1994), 77 F.T.R. 71).
I therefore award the plaintiff nothing in respect of that claim, in the context and for the purposes of the instant motion. As mentioned earlier, for the purposes of the merits of the case, the situation could be quite different.
With respect to the plaintiff's second claim, $138,920 for the costs of passage through the Suez Canal to return the vessel to the defendants in Sicily, unless we can clearly say that the claim is exorbitant, the changing wording used by the plaintiff in its evidence prevents me from concluding that, for the purposes of this motion, it has established its claim on a solid basis.
In paragraph 10 of its statement of claim and paragraph 12 of its affidavit to lead warrant, the plaintiff establishes that it paid that amount as the costs of passage through the Suez Canal. In fact, it appears that to date it has not paid out that amount. In the affidavit of J. Karathanos, dealing with that same amount, there is reference to damages sustained or liabilities incurred. This wording may be explained not by information supplied by the plaintiff, but by documents filed by the defendants: proceedings commenced against the plaintiff precisely for payment of those costs. In the circumstances, I can find no sufficiently solid basis for that claim. Like the first, it will not be considered for the purposes of establishing bail.
The plaintiff's third claim, for $114,387.46, represents the total of the various amounts owing by the defendants, and resulting from their hire of the vessel. There is a letter in the record from the plaintiff written on May 22, 1997, before the instant proceedings were commenced, in which that claim is set out. The plaintiff indicates therein that it is in the process of assembling the invoices relating thereto and that the invoices will be sent to the defendants. The defendants challenge that claim, primarily because the invoices have still not been produced.
The defendants' challenge on this point seems to me to carry insufficient weight to create a special circumstance within the meaning of Captain Forever. It may be that the plaintiff is waiting for further steps to come in the arbitration to produce its invoices. The defendants' suspicion in respect of the present absence of the invoices is not sufficient, in my view.
For these reasons, the defendants' motion will be allowed in part and the bail will be established at $114,387.46 plus $10,000 for costs and interest, for a total of $124,387.46.
The balance of the amount paid in by the defendants, $480,612.54 plus accumulated interest, will be returned to counsel for the defendants.
The costs of this motion will follow the cause.
Richard Morneau
Prothonotary
Montréal, Quebec
August 19, 1997
Certified true translation
C. Delon, LL.L.
Federal Court of Canada
Court file No. T-1357-97
| ACTION IN REM AGAINST THE VESSEL NECAT A AND IN PERSONAM AGAINST THE OWNERS AND CHARTERERS OF THE VESSEL NECAT A AND DENSAN SHIPPING CO. INC. |
BETWEEN:
AMICAN NAVIGATION INC.,
Plaintiff,
" and "
DENSAN SHIPPING CO. INC.
-and-
| THE OWNERS AND ALL OTHERS INTERESTED IN THE VESSEL NECAT A |
-and-
THE VESSEL NECAT A,
Defendants.
REASONS FOR ORDER
FEDERAL COURT OF CANADA
NAMES OF COUNSEL AND SOLICITORS OF RECORD
COURT FILE NO: T-1357-97
| STYLE OF CAUSE: ACTION IN REM AGAINST THE VESSEL NECAT A AND IN PERSONAM AGAINST THE OWNERS AND CHARTERERS OF THE VESSEL NECAT A AND DENSAN SHIPPING CO. INC. |
BETWEEN:
AMICAN NAVIGATION INC.,
Plaintiff,
AND
DENSAN SHIPPING CO. INC.
-and-
| THE OWNERS AND ALL OTHERS INTERESTED IN THE VESSEL NECAT A |
-and-
THE VESSEL NECAT A,
Defendants.
PLACE OF HEARING: Montréal, Quebec
DATE OF HEARING: August 11, 1997
REASONS FOR ORDER BY: Richard Morneau, Esq., Prothonotary
DATE OF REASONS FOR ORDER: August 19, 1997
APPEARANCES:
Louis Buteau for the plaintiff
Peter J. Cullen for the defendants
SOLICITORS OF RECORD:
Louis Buteau for the plaintiff
Sproule, Castonguay, Pollack
Montréal, Quebec
Peter J. Cullen for the defendants
Stikeman, Elliot
Montréal, Quebec
__________________1 That Rule reads as follows:
Upon application, any question as to the amount of proposed bail under the Rules in this Division shall be decided by a judge or a prothonotary.