Date: 20040827
Docket: T-738-04
Citation: 2004 FC 1181
Vancouver, British Columbia, Friday, the 27th day of August, 2004
Present: THE HONOURABLE MR. JUSTICE ROULEAU
BETWEEN:
ADMIRALTY ACTION IN REM AGAINST THE VESSEL "OTELLO MANSHIP"
ZHOUSHAN ZHONGCHANG SHIPPING CO. LTD.
Plaintiff
- and -
HANDYBULK SHIPPING LTD.,
THE SHIP "OTELLO MANSHIP",
HER OWNERS AND ALL OTHERS
INTERESTED IN HER
Defendants
[1] This matter was heard on an urgent basis on August 26, 2004, at Vancouver, British Columbia.
[2] The applicant Defendants brought a motion in an appeal to set aside a decision of the Order of Prothonotary Hargrave dated August 24, 2004, in which he had set security at US$9,100,000.00 in order to release the vessel "Otello Manship" from arrest. In the alternative, that security for the Plaintiff's loss of use claim against the vessel be determined and that bail or security be reduced in order to release the vessel from arrest.
[3] The Defendants suggest that the prothonotary was in error in his approach to determining the security that should be posted and that he misinterpreted the issues in dispute between the parties: that arguably the best case of the Plaintiff was to accept delivery of the ship in Vancouver; that the remaining dispute was only to determine the loss of use that would be suffered by the Plaintiff since it would be unable to pursue commercial activities with its vessel until certain permits were obtained from the People's Republic of China (the "PRC") as well as the matter of arranging for a crew to man the vessel.
[4] A brief history of this dispute was summarized by the prothonotary in his order of August 26. By contract dated September 1, 2003, the Plaintiff agreed to purchase the vessel from the Defendants. The price of the vessel, which was to be delivered to the port of Zhoushan in China between 15 November 2003 and 20 January 2004, was set at US$7,171,500.00. The Defendants continued to use the vessel. On November 7, 2003, delivery was extended to April 30, 2004. In Feburary 2004, the Plaintiff paid the balance of monies owing to conclude the purchase of the vessel. The vessel was to be delivered on February 12, 2004. There was no delivery.
[5] On March 3, 2004, the Defendants tendered a 30-day notice of delivery. On April 28, 2004, they tendered a one-day notice of delivery: the vessel did not arrive on April 30, 2004.
[6] The Plaintiff obtained an injunction in Malta, the place of registry of the vessel, in order to prohibit any further dealings with the vessel by the Defendants and to commence arbitration proceedings in London. The Defendants to this date have not appointed an arbitrator and the matter is proceeding before a sole arbitrator.
[7] On May 7, 2004, the Defendants repudiated the sale and purchase agreement and subsequently chartered the vessel to Cargill International S.A. to load grain at Tacoma, Washington, for Asian ports.
[8] The vessel was ordered to Vancouver to bunker, where it was arrested. The valuation of the vessel as of April 30, 2004, is approximately US$15,500.00. Discussions in Vancouver between the parties were fruitless. The Defendants offer delivery to the Plaintiff while the vessel is under arrest.
[9] The applicant is a coastal shipping company operating in China's coastal central waters. They have no permits to engage in ocean freight forwarding nor do they have the proper insurance.
[10] The applicant suggests it would take at least two weeks to obtain permits in the PRC. As well, they must arrange for a crew to handle the vessel. There is also the problem that the Defendants have chartered the vessel to Cargill. There is evidence that the Defendants are earning approximately US$15,000.00 a day net. The Plaintiff suggests it may accept delivery upon payment of US$2,000,000.00 which closely represents the 15 days loss of use required to put matters in order in the PRC.
[11] Bail was set by the prothonotary as follows:
Difference between agreed selling price and value @ Apr. 30/04: $ 8,328,500.00
Interest at 6% for one year: $ 499,720.00
Costs of London arbitration: $ 300,000.00
Total: $ 9,128,210.00
[12] Considering the conduct of the Defendants: failure to deliver on two occasions when the vessel was at or near the port of delivery; their extending the date even though the purchase price was paid in full; considering that the Defendants repudiated the contract; considering the problems to be resolved by the Plaintiff associated with taking possession of the vessel in Vancouver, I am satisfied that the bail as fixed by the prothonotary was just and equitable.
[13] The obligation on the part of the Plaintiff to mitigate his loss and be prepared to accept a lesser security is not applicable in the case at bar considering the conduct of the Defendants and the risks that could once again give rise to the Plaintiff's interest.
[14] I have not been persuaded that the prothonotary was wrong in that the exercise of his discretion was based upon a wrong principle or misapprehension of the facts. The application is dismissed. Costs to the Respondent plaintiff which I fix at $2000.00.
(Sgd.) "Paul Rouleau"
Judge
| I HEREBY CERTIFY that the above document |
| is a true copy of the original filed of record in the Registry of the Federal Court on the _______ day of ___________ A.D. 20 ____
Dated this _______ day of ____________ 20 ____
Iris Hill, Registry Officer |
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-738-04
STYLE OF CAUSE: ZHOUSHAN ZHONGCHANG SHIPPING CO. LTD.
v.
HANDYBULK SHIPPING LTD.,
THE SHIP "OTELLO MANSHIP" et al.
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: August 26, 2004
REASONS FOR ORDER AND ORDER: ROULEAU J.
DATED: August 27, 2004
APPEARANCES:
Barry Oland FOR PLAINTIFF
Thomas S. Hawkins FOR DEFENDANTS
SOLICITORS OF RECORD:
Oland & Co. FOR PLAINTIFF
Vancouver, BC
Bernard & Partners FOR DEFENDANTS
Vancouver, BC