Federal Court Decisions

 

 

 

 

Date: 20061222

Docket: T-2185-06 and T-2142-06

Ottawa, Ontario, December 22, 2006

PRESENT:     The Honourable Mr. Justice Shore

 

ADMIRALTY ACTION IN REM against THE SHIP MAERSK DEFENDER also

known as the SHIP VOYAGER SEA and IN PERSONAM

BETWEEN:

MARITIMA DE ECOLOGIA, S.A. de C.V.

Plaintiff

and

 

THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP MAERSK

DEFENDER ALSO KNOWN AS THE VOYAGER SEA, I.S. ATLANTIC

CORPORATION INC., and SECUNDA MARINE SERVICES LTD.

Defendants

 

ORDER

 

 

The Defendants’ Motions

            WHEREAS the requests for relief in these Motions can be summarized as follows:

• I.S. Pacific requests that both the First and Second Actions in rem be struck out;
• I.S. Pacific requests that the Vessel be released from arrest without bail;
• Secunda Marine requests that the First and Second Actions in personam be struck out as against it;
• I.S. Pacific requests that the Second Action in personam  be struck out as against it;
• I.S. Atlantic requests that the First and Second Actions be struck out as against it or in the alternative, stayed in favour of the London Arbitration.

 

Background of Federal Court Proceedings:

            WHEREAS, the following is a history of the Federal Court Proceedings:

• Action T-2142 was issued on December 4, 2006. This purports to be an action in rem and in personam against I.S. Atlantic and Secunda Marine Services Ltd. and the Vessel which, on December 14, 2006 was owned by Maersk. This will be referred to as the First Action.
• The Plaintiff issued the First Action three days after; it appointed an arbitrator, initiating the London Arbitration.
• Paragraph 13 of the First Action states that the action is brought solely for the purpose of obtaining interim protective orders, including injunctions and security, in connection with a London Arbitration; however, the Statement of Claim in the Fist Action at paragraph 1 states that the Plaintiff is claiming: 1) interim and interlocutory injunctions requiring specific performance of the Charterparty; or alternatively damages in lieu of specific performance; 2) damages; 3) interest; 4) condemnation of the Vessel and 5) costs.
• On December 8, 2006, the Plaintiff brought an ex parte motion in the First Action, without any notice to any of the Defendants, seeking specific performance of the Charterparty and a range of other injunctive and mandatory orders, all of which were denied.
• Action T-2185 was issued on December 12, 2006 (“Second Action”). The Second Action seeks the same relief as the First Action, however, I.S. Pacific, the current owner of the Vessel, is named as an additional Defendant.
• As with the First Action, the Second Action states at paragraph 14 that the action is brought solely for the purpose of obtaining interim protective orders including injunctions and security in connection with the London arbitration.
• As with the First Action, the Statement of Claim states that the Plaintiff is claiming: 1) interim and interlocutory injunctions requiring specific performance of the Charterparty; or alternatively damages in lieu of specific performance; 2) damages; 3) interest; 4) condemnation of the Vessel and 5) costs.
• On December 12, 2006, the Plaintiff obtained a Warrant to arrest the Vessel in the Second Action. In the Affidavit to Lead Warrant, counsel for the Plaintiff swears that the claims sought to be satisfied by the Arrest of the Vessel are: 1) an order of specific performance; 2) damages for breach of the Charterparty; and 3) an order for possession of the Vessel. The Affidavit to Lead Warrant does not mention the London Arbitration.
• When the Vessel was arrested, it was owned by I.S. Pacific, who had purchased it from Maersk that day.

 

The Actions In Rem

            WHEREAS, the only party before the Court that appears to have or ever had any ownership interest in the Vessel is I.S. Pacific, a Defendant in the Second Action. I.S. Pacific purchased the Vessel on December 12, 2006 from Maersk, an entity which is not a party to either the First Action or the Second Action.

 

            The First Action and the Second Action, to the extent that they are purported to be in rem, are to be struck out and the Vessel be released from arrest.

 

Is the Vessel itself subject of the Action?

            WHEREAS, in order for this Court to exercise jurisdiction in rem against a ship, the ship itself must be the subject of the action. Section 43(2) of the Federal Courts Act, R.S.C., 1985, c. F-7 states:

 

            Even though the Actions name a number of parties, both the Fist and the Second Actions relate to an alleged anticipatory breach of the Charterparty by I.S. Atlantic, an entity that appears to have never owned the Vessel.

 

            Simply because the Vessel is named in the Charterparty, does not make the Vessel the “subject of the action” even if it was currently owned by I.S. Atlantic. In Paramount Enterprises International, Inc. v. An Xin Jiang (The), [2000] F.C.J. No. 2066 (C.A.) (QL), the plaintiff attempted to bring an action, in rem, against cargo that it alleged it had a contract to transport. The Court of Appeal held that the cargo could not be said to be the “subject of the action” and therefore the Court did not have jurisdiction to entertain an action in rem. At paragraph 28 of the decision, the Court of Appeal explained:

Paramount's action in rem against the Beston cargo is based on an allegation of a contractual nature that Beston did not perform the charter-party. It is true that this contract related to that cargo, but the only nexus existing between the action and the cargo is the fact that it was this cargo which would have been transported if the contract had been carried out. The contract was not carried out, the carriage never began, the cargo was not subject to a maritime lien and Paramount was never in possession of the cargo. The cargo as such did not cause any damage, it did not receive any benefit and it was not involved in any incident relating to the action. The action for breach of contract, if it is to succeed, will succeed regardless of whether the cargo was carried or not and, if it was carried, regardless of the ship carrying it. Allowing seizure of the cargo in the case at bar would be to allow the seizure of any property owned by a defendant even where no property is the subject of the action.

 

 

            Both of these Actions are for breach of the Charterparty by I.S. Atlantic. The Charterparty has not been carried out, no maritime lien exists and I.S. Atlantic has never owned the Vessel. If the Actions for breach of the Charterparty are to succeed, they will succeed regardless of who owns or operates the Vessel. Accordingly, it cannot be said that the Vessel is the “subject of the action” within the meaning of section 43(2) of the Federal Courts Act. Further, even if I.S. Atlantic did own the Vessel, it could not be said that the Vessel is the “subject of the action”.

 

            More recently, in Kremikovtzi Trade v. Phoenix Bulk Carriers Ltd., 2006 FCA 1, [2006] F.C.J. No. 9 (C.A.) (QL), the Court of Appeal questioned the ruling in Paramount, however, it applied the reasoning as binding authority on this Court. Leave to Appeal to the Supreme Court of Canada has been granted but has not yet been heard. Accordingly, the decision in Paramount is binding on this Court and the facts of these Actions cannot be distinguished.

 

            The Federal Courts Act also provides that an action in rem cannot be brought unless the owner of the vessel at the time the action is brought is the same party that owned the vessel when the cause of action arose. Section 43(3) of the Federal Courts Act provides:

 

 

            The Plaintiff initiated the London Arbitration against I.S. Atlantic on December 1, 2006. Accordingly, the cause of action arose on that date, at the latest. On December 1, 2006 and when the First Action was started on December 4, 2006, Maersk owned the Vessel. Finally, when the Second Action was started on December 12, 2006, it appears that I.S. Pacific owned the Vessel.

 

            The Plaintiff’s claims all arise out of allegations that I.S. Atlantic breached the Charterparty. I.S. Atlantic did not appear to own the Vessel when that cause of action arose and did not appear to own the Vessel when either the First Action or the Second Action was brought. As the Court of Appeal explained in Mount Royal/Walsh Inc. v. Jensen Star (The), [1990] 1 F.C. 199, [1989] F.C.J. No. 450 (C.A.) (QL), the term “beneficial owners” can only mean a party who has title to the Vessel. Accordingly, this Court does not have jurisdiction over an in rem action against the Vessel.

 

            In respect of I.S. Pacific and Vessel, both the First Action and the Second Action, to the extent that they purport to be in rem, are struck out.

            Subsequent to the Second Action in rem (the Action under which the Vessel was arrested) is struck out, the Court orders the release of the Vessel without bail pursuant to the Federal Courts Rules, SOR/98-106, subsection 488(1) which provides:

 

 

 

 

            THIS COURT ORDERS that

      The Vessel is not the subject of a proper in rem action and therefore, the Vessel is to be released from arrest without bail.

 

Cause of Action in Personam

      WHEREAS, the First Action is one in personam against I.S. Atlantic and Secunda Marine. The Second Action is in personam against I.S. Atlantic, I.S. Pacific and Secunda Marine. Both Actions are identical and seek identical relief with the exception that the Second Action names I.S. Pacific.

 

      There may be a cause of action in regard to the Charterparty but that is another matter.

 

Stay of Proceedings

      WHEREAS, subsequent to consideration in respect of a stay of proceedings, the First and Second in personam Actions are not struck out, they should both be stayed in favour of the London Arbitration.[1]

 

      Section 50 of the Federal Courts Act, provides that the Court may stay proceedings in any matter on the ground that the claim is being proceeded with in another jurisdiction. (Fibreco Pulp Inc. v. Star Shipping A/S (2000) 251 N.R. 291 2000 CarswellNat 1231 (Fed.C.A.). Prothonotary John Hargrave exercised his discretion in favour of arbitration in London where the alternative would split the case among the multiple jurisdictions.)

 

      The Supreme Court of Canada in Z.I. Pompey Industrie v. ECU-Line N.V., [2003] 1 S.C.R. 450 (QL) stated that courts must give effect to contractual arbitration clauses and decline to exercise jurisdiction where one is present.

 

      The Plaintiff invoked the arbitration procedure under the Charterparty and both parties have appointed arbitrators. The Plaintiff has clearly stated that it is seeking to have the issue of whether I.S. Atlantic has breached the Charterparty determined in the London Arbitration and not in this Court.

 

      THIS COURT ORDERS that both of the Personam Actions be stayed.

 

 

“Michel M.J. Shore”