Judgments

[1996] 1 F.C. 404

T-2754-94

Trans-Continental Textile Recycling Ltd. (Plaintiff)

v.

Partenreederei m.s. Erato, Flairius Enterprises S.A., Mediterranean Shipping Co. S.A., Société Ivoirienne de Transport Maritime, The Owners and All Others Interested in the Ships Erato II and MSC Giovanna (Defendants)

Indexed as: Trans-Continental Textile Recycling Ltd. v. Erato (The) (T.D.)

Trial Division, Hargrave P. — Vancouver, November 6 and 9, 1995.

Practice — Stay of proceedings — Application to stay proceedings pursuant to Federal Court Act, s. 50 — Bill of lading providing disputes relating to cargo carried to or from U.S.A. subject to sole jurisdiction of U.S. District Court — Goods shipped overland from Vancouver to Baltimore, carried by sea to Antwerp, placed in new container for onward carriage to Ghana, where arriving short, damaged — (1) Jurisdiction clause applied — No ambiguity as to court nominated by owner — Contract with carrier for ocean carriage from U.S.A. and within jurisdiction clause — Jurisdiction clause not ambiguous — (2) Discretion to deny stay, given jurisdiction clause, should not be exercised unless strong cause for doing so — (3) Though substantial costs could be awarded in Federal Court, but not in New York District Court, issue merely going to balance of convenience; insufficient basis for exercise of discretion to deny stay — Balance of convenience favouring neither Vancouver nor New York — (4) Defendants submitting to jurisdiction by filing defence, providing draft list of documents, not objecting to jurisdiction until nine months later.

This was an application for a stay of proceedings pursuant to Federal Court Act, section 50, which permits the Court, in its discretion, to stay proceedings either where the claim is proceeding in another jurisdiction or where, for any reason, it is in the interest of justice. Goods were shipped overland from Vancouver to Baltimore, then carried by sea to Antwerp where they were placed in a new container for carriage to Ghana, arriving short and damaged. Clause 2 of the bill of lading provided that disputes relating to cargo carried to or from the United States would be subject to the sole jurisdiction of the U.S. District Court, Southern District of New York, and U.S. law would be applied. Clause 3 provided that the carrier would, acting as the shipper’s agent, arrange for transport of the cargo by other carriers from the place of origin to port of loading and/or from port of discharge to destination, and during such through transport, handling and storage of the goods would be subject to the freight contracts and tariffs of the other carriers. Clause 17 provided for the application of the American Carriage of Goods by Sea Act before loading and after discharge as long as the goods remained in the actual custody and control of the carrier. The paramount clause provided for the application of that Act when goods were shipped from the United States. The application for a stay was not made until nine months after the defence was filed.

The issues were (1) whether the jurisdiction clause applied; (2) whether the Court should exercise its discretion to grant a stay; (3) whether the balance of convenience favoured Canada; and (4) whether the defendants had submitted to the Court’s jurisdiction.

Held, the application should be dismissed.

The defendants established a prima facie case for a stay based on the contractual obligation in the bill of lading requiring litigation before the New York District Court. The onus shifted to the plaintiff to show that there were special circumstances by reason of which justice required that the trial should take place in the Federal Court of Canada.

(1) The jurisdiction clause applied. (i) There was no ambiguity as to the court nominated by the owner. (ii) Under clause 3, the land carriage portion of the transportation was arranged by the ocean carrier as agent for the shipper. Thus, the contract for land carriage was separate and was between the shipper and the land carrier. Transportation by the ocean carrier was from the American East Coast and fell within the jurisdiction clause, even though the cargo came from Vancouver. (iii) The jurisdiction clause was not ambiguous. The ocean carrier acted as the shipper’s agent in arranging other portions of the carriage to the port of loading. The face of the bill of lading was clearly for through transport, setting out an American port, Baltimore, as the port of loading. Finally, clause 17 made a clear reference, which was a reflection of the paramount clause, to the American Carriage of Goods by Sea Act.

(2) The discretion to deny a stay, given the jurisdiction clause, should not be exercised unless there is a strong cause for doing so.

(3) Even though the successful party could be awarded substantial costs in the Federal Court, but nothing in the New York District Court, this case fell into the category of “mere balance of convenience”. The Court was not prepared to exercise its discretion to deny a stay on this basis alone. Neither Vancouver nor New York was more convenient than the other to the extent of providing a strong reason to override the jurisdiction clause.

(4) The defendants have given every indication of attornment to the jurisdiction. They did not explain why they had waited nine months after filing their defence before invoking the jurisdiction clause. In filing a defence and providing a draft list of documents without objecting to jurisdiction and only advising the plaintiff that they would be challenging jurisdiction nine months after filing the defence, the defendants left it too late to seek a stay on that ground.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Carriage of Goods by Sea Act, 46 U.S.C. App. § 1300 (1988).

Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 50.

Federal Court Act, R.S.C., 1985, c. F-7, s. 50.

Federal Court Rules, C.R.C., c. 663, Tariff B (as am. by SOR/95-282, s. 5).

CASES JUDICIALLY CONSIDERED

APPLIED:

Burrard-Yarrows Corp. v. The Hoegh Merchant, [1982] 1 F.C. 248(T.D.); Seapearl (The ship M/V) v. Seven Seas Dry Cargo Shipping Corporation of Santiago, Chile, [1983] 2 F.C. 161 (1982), 139 D.L.R. (3d) 669; 43 N.R. 517 (C.A.); Eleftheria, The, [1969] 1 LLoyd’s Rep. 237 (Adm.); Ultramar Canada v. Lineas Asmar S.A., [1989] F.C.J. No. 242 (C.A.) (QL); Oulton v. Radcliffe (1874), L.R. 9 C.P. 189 (C.A.); Fry v. Moore (1889), 23 Q.B.D. 395 (C.A.); May (A.S.) & Co. Ltd. v. Robert Reford Co. Ltd., [1969] 2 O.R. 611; (1969), 6 D.L.R. (3d) 288 (H.C.); Catalyst Research Corp. v. Medtronic, Inc., [1981] 2 F.C. 620 (1981), 120 D.L.R. (3d) 159; 55 C.P.R. (2d) 85 (T.D.); affd [1982] 2 F.C. 657 (1982), 131 D.L.R. (3d) 767; 61 C.P.R. (2d) 91 (C.A.); Vallorbe Shipping Co. S.A. v. The M.V. Tropwave, [1975] F.C. 595 (T.D.).

CONSIDERED:

Ardennes, The (1950), 84 Ll.L.Rep. 340 (K.B.); Vishva Ajay, The, [1989] 2 Lloyd’s Rep. 558 (Q.B.).

REFERRED TO:

Mountainbell Co. Ltd. et al. v. W.T.C. Air Freight (H.K.) Ltd. et al. (1988), 20 F.T.R. 57 (F.C.T.D.); El Amria, The, [1981] 2 Lloyd’s Rep. 119 (C.A.); Spiliada, The, [1987] 1 Rep. Lloyd’s 1 (H.L.); Nile Rhapsody, The, [1992] 2 Lloyd’s Rep. 399 (Q.B.).

AUTHORS CITED

Tetley, William. Marine Cargo Claims, 3rd ed. Montréal: Y. Blais, 1988.

APPLICATION to stay proceedings pursuant to Federal Court Act, section 50 based on a clause in the bill of lading which required that disputes relating to cargo carried to or from the U.S.A. be heard by the U.S. District Court. Application dismissed.

COUNSEL:

Christopher Giaschi for plaintiff.

Peter G. Bernard for defendants.

SOLICITORS:

McEwen, Schmitt, Vancouver, for plaintiff.

Campney & Murphy, Vancouver, for defendants.

The following are the reasons for order rendered in English by

Hargrave P.: This motion, by the defendants Flairius Enterprises S.A. and Mediterranean Shipping Co. S.A., for a stay of these proceedings which they submit ought to be heard by the U.S. District Court, Southern District of New York (the New York District Court), arises out of a jurisdiction clause in a bill of lading, dated November 30, 1993, at Vancouver, for a container of used clothing. The goods were shipped overland from Vancouver to Baltimore, then carried by the MSC Giovanna to Antwerp, where the goods were placed in a new container for onward carriage to Ghana, arriving there short and damaged.

PERTINENT BILL OF LADING PROVISIONS

The parties have dealt with each other in the past and thus the plaintiff would be taken to be familiar with the bill of lading. Clause 2 on the reverse of the bill of lading sets out, in part:

LAW AND JURISDICTION. Claims and disputes arising under or in connection with this B/L shall be referred to the High Court of Justice in London or such other place as the Carrier in his sole discretion shall designate. English law to be applied, unless some other law is compulsorily applicable, except that claims and disputes relating to cargo carried to or from the United States shall be subject to the sole jurisdiction of the U.S. in the U.S. District Court, Southern District of New York and U.S. law shall be applied. [Emphasis added.]

Clause 3 of the bill of lading deals, in part, with the filling in of through transport boxes on the face of the bill of lading and with arranging for other than the ocean carriage offered by the carrier:

If boxes 5 and/or 6 are filled out the Carrier will, acting as the shipper’s agent, only arrange for transport of the cargo by other Carriers from the place of origin to Port of Loading and/or from Port of Discharge to destination, and during such segments of Through Transport, handling and storage of goods shall be subject to the freight contracts and tariffs of the other Carriers.

In the context of jurisdiction a portion of clause 17 is also relevant:

If goods are shipped from the U.S.A., U.S. COGSA shall apply before loading and after discharge as long as the goods remain in the actual custody and control of the Carrier.

as is the paramount clause which provides for the application of the American Carriage of Goods by Sea Act [46 U.S.C. App. § 1300 (1988)] when goods are shipped from the United States. All of this is typical of a combined transport bill of lading.

PRESENT STATUS OF THE PROCEEDINGS

By this motion the defendants Flairius Enterprises S.A. and Mediterranean Shipping Co. S.A. apply for a stay pursuant to section 50 of the Federal Court Act [R.S.C., 1985, c. F-7]. No other defendants have been served, although a P & I Club letter of undertaking was given to prevent the arrest of the MSC Giovanna. The letter of undertaking, in favour of cargo owners, is not specific as to any court. It is valid for amounts “adjudged due or awarded to you by a Court/Arbitral Tribunal of competent jurisdiction from the owners/demise charterers of the vessel MSC Giovanna”.

Also relevant is the timing of the present motion. The action was begun, in an apparently timely manner, in November of 1994, with the defence of these two defendants following a month later. Draft affidavits of documents were exchanged during the first part of 1995 and the letter of undertaking, referred to above, issued at the end of March 1995. In June of 1995, plaintiff’s solicitor requested the name of a candidate for examination for discovery. It was not until October 1, 1995, that the solicitors for Flairius Enterprises S.A. and Mediterranean Shipping Co. S.A. advised that they had been instructed to apply for a stay on the basis of the jurisdiction clause, in the bill of lading, which is set out above.

CONSIDERATION

Section 50 of the Federal Court Act provides that the Court may, in its discretion, stay proceedings either where the claim is proceeding in another jurisdiction or where, for any reason, it is in the interest of justice.

Exercise of Discretion

In the present instance, the application for the stay is on the basis of a contractual agreement to litigate in the New York District Court. There is a substantial body of law as to how a court should exercise its discretion, including Burrard-Yarrows Corp. v. The Hoegh Merchant, [1982] 1 F.C. 248(T.D.); Seapearl (The ship M/V) v. Seven Seas Dry Cargo Shipping Corporation of Santiago, Chile, [1983] 2 F.C. 161(C.A.); and Mountainbell Co. Ltd. et al. v. W.T.C. Air Freight (H.K.) Ltd. et al. (1988), 20 F.T.R. 57 (F.C.T.D.).

In the Seapearl (supra) Mr. Justice Pratte, speaking for the Court of Appeal, [at pages 176-177] pointed out that, “Prima facie, an application to stay proceedings commenced in the Federal Court in defiance of an undertaking to submit a dispute to arbitration or to a foreign court must succeed because, as a rule, contractual undertakings must be honoured.” He went on to point out that to depart from the prima facie rule there must be strong reasons to enable a court to conclude that it would not be just or reasonable, in the circumstances, to enforce the contractual obligation.

In all three of the cases, the Hoegh Merchant, the Seapearl and Mountainbell Co. Ltd., the courts either considered or quoted from the leading case in the area of an application for a stay grounded upon a jurisdiction clause in a bill of lading, Eleftheria, The, [1969] 1 Lloyd’s Rep. 237 (Adm.), a decision of Mr. Justice Brandon (as he then was).[1] The much quoted passage is at page 242:

The principles established by the authorities can, I think, be summarized as follows: (1) Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign Court, and the defendants apply for a stay, the English Court, assuming the claim to be otherwise within the jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not. (2) The discretion should be exercised by granting a stay unless strong cause for not doing so is shown. (3) The burden of proving such strong cause is on the plaintiffs. (4) In exercising its discretion the Court should take into account all the circumstances of the particular case. (5) In particular, but without prejudice to (4), the following matters, where they arise, may be properly regarded: (a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign Courts. (b) Whether the law of the foreign Court applies and, if so, whether it differs from English law in any material respects. (c) With what country either party is connected, and how closely. (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages. (e) Whether the plaintiffs would be prejudiced by having to sue in the foreign Court because they would (i) be deprived of security for that claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in England; or (iv) for political, racial, religious or other reasons be unlikely to get a fair trial.

The Eleftheria involved a Greek jurisdiction clause in a bill of lading for carriage of plywood from Galatz in Romania to the United Kingdom. Mr. Justice Brandon began his consideration of the arguments by the parties by pointing out [at page 245]:

First, as to the prima facie case for a stay arising from the Greek jurisdiction clause. I think that it is essential that the Court should give full weight to the prima facie desirability of holding the plaintiffs to their agreement. In this connection I think that the Court must be careful not just to pay lip service to the principle involved, and then fail to give effect to it because of a mere balance of convenience.

These cautions, against only paying lip service to the principle, and against the granting of a stay, where there is a contractual obligation as to jurisdiction, on the basis of a “mere balance of convenience” is the corollary to the general proposition that there must be a strong reason to deny a contractual jurisdiction clause.

Burden of Proof

It is for the defendant to persuade the Court of the prima facie case, that is, that there is a more suitable or a proper forum elsewhere: once that is accomplished the burden then shifts to the plaintiff to show that there are special circumstances by reason of which justice requires that the trial should nevertheless take place where the present action has been commenced. For discussion of the concept of this shifting burden of proof, see Spiliada, The, [1987] 1 Lloyd’s Rep. 1 (H.L.), at page 10 and a discussion of the Spiliada test in Nile Rhapsody, The, [1992] 2 Lloyd’s Rep. 399 (Q.B.) at pages 409 et seq.

Prima Facie Case

In the present instance, the applicant defendants established the prima facie case for a stay on the contractual obligation in the bill of lading requiring litigation before the New York District Court. Counsel also emphasized that strong reasons are necessary to overcome the contractual jurisdiction clause.

The defendants’ material goes on to point out both advantages and disadvantages in litigating in the New York District Court including that cargo actions such as this can normally be concluded within nine months to a year; that there is discovery of documents between the parties in that jurisdiction; and that there are rules for the taking of deposition evidence and for discovery by interrogatories; but, to be fair, no costs are awarded for attorney’s fees.

The defendants also submit that, contrary to some of the plaintiff’s affidavit material, New York would be a convenient place to which to bring witnesses, for there is no preponderance of witnesses in either Vancouver or on the American East Coast and that offshore witnesses might be brought to New York as easily as to Vancouver. These latter points, of course, go to convenience. However, that is part of the onus that is on the defendants to show that the New York District Court is a more suitable forum.

Plaintiff’s Position

The plaintiff gives three reasons, each of which stands on its own, to deny the stay so that the proceedings and trial, if necessary, will take place in Vancouver. The reasons are as follows:

1.   The jurisdiction clause in favour of the New York District Court does not apply to this shipment of goods;

2.   If the jurisdiction clause does apply in relation to this cargo, the Court still retains a discretion to reject the clause and ought to do so where, as here, there is no connection with New York and the balance of convenience overwhelmingly favours Canada; and

3.   Again, if the jurisdiction clause does apply, the Defendants who have brought this motion have, in any event, attorned to the jurisdiction of the Federal Court.

Applicability of Jurisdiction Clause

The plaintiff submits that the jurisdiction clause, which provides in part that:

... claims and disputes relating to cargo carried to or from the United States shall be subject to the sole jurisdiction of the U.S. in the U.S. District Court, Southern District of New York, and U.S. law shall be applied .... [Emphasis added.]

must be precisely interpreted for, as pointed out in the third edition (1988) of Tetley on Marine Cargo Claims, at page 816:

Unless the jurisdiction clause is clear and precise, it should not be honoured because it will not allow the parties to know with certainty before which court they are to proceed. In some countries a jurisdiction clause is not valid unless the name of the actual court is spelled out.

The argument proceeds that not all disputes under the bill of lading are under the jurisdiction of the New York District Court, but only claims “relating to cargo carried to or from the U.S.”. The plaintiff correctly points out that the cargo was transported from Vancouver to Ghana and the fact that the cargo was loaded onto an ocean vessel at Baltimore, U.S.A., does not alter the origin of the cargo: the cargo is still “from” Vancouver and not from the United States. Thus, on the facts and on a plain reading of the bill of lading, the jurisdiction clause in favour of the New York District Court does not apply.

In my mind there are several answers to this submission. First, in the authorities on which Professor Tetley bases this observation, there was clearly some ambiguity as to the court or even the location of the court and while a bill of lading is probably best described as a standard form of contract, not a contract of adhesion, an ambiguity is going to be construed against a carrier who printed up the bill of lading. However, in the present instance there is certainly not an ambiguity as to the court nominated by the owner.

A second approach to this issue involves the nature of a multimodal bill of lading, of which the present is an example. In clause 3 of the bill of lading, set out in part above, it is clear that the land carriage portion of the transportation was arranged for by the ocean carrier as agent for the shipper. Thus the contract for land carriage is separate and is between the shipper and the land carrier. On this analysis it is clear that transportation, by the ocean carrier, as defendant, was from the American East Coast and thus it falls within the jurisdiction clause. This is so even though box 5 on the face of the bill of lading, styled “From: (Through Transport)”, shows the cargo as coming from Vancouver. Box 5 having been filled in, the situation comes within clause 3 on the reverse of the bill of lading which reads in part “If boxes 5 and/or 6 are filled out, the Carrier will, acting as the shipper’s agent, only arrange for transportation of the cargo by other Carriers from the place of origin to Port of Loading… .” Thus, as I say, the contract with the defendant carrier is for ocean carriage from Baltimore, U.S.A. and clearly within the jurisdiction clause.

A third, and to my mind perhaps better analysis, leading to the same conclusion, is based on looking at the bill of lading as a whole, much as would a knowledgeable shipper who might, if unhappy about the arrangement, to borrow from the dictum of Lord Goddard in Ardennes, The (1950), 84 Ll.L. Rep. 340 (K.B.), at page 344, if there were time, demand his goods back from the carrier.

I do not think that a knowledgeable shipper, considering the ocean transportation portion of the carriage, would feel there was anything ambiguous about the jurisdiction clause, taking into consideration all of the circumstances in the case and the whole of the contract contained in the bill of lading. Clause 2, the jurisdiction clause, is not ambiguous. Clause 3 makes clear that in a through carriage situation the ocean carrier acts as the shipper’s agent in arranging other portions of the carriage, to the port of loading. The face of the bill of lading is clearly for through transport, setting out an American port, Baltimore, as the port of loading. Finally, clause 17 makes a clear reference, which is a reflection of the paramount clause, clause 1 on the back of the bill of lading, to the American Carriage of Goods by Sea Act.

For all of these reasons the first argument, that the jurisdiction clause in favour of the New York District Court does not apply, is not convincing.

Balance of Convenience

The plaintiff submits that even if the jurisdiction clause does apply, the Court still has the discretion to reject the clause should there be no connection with New York and the balance of convenience be overwhelmingly in favour of jurisdiction here in Canada. However, I would point out Mr. Justice Hugessen’s view in Ultramar Canada v. Lineas Asmar S.A., [[1989] F.C.J. No. 242 (C.A.) (QL)] that [at page 2] “mere questions of convenience in the marshalling of evidence are not enough to overcome a contractual undertaking to submit a dispute to arbitration or to a foreign court.”.

The plaintiff’s affidavit material, at first glance, appears to cover off many of the matters referred to in Eleftheria (supra) which may properly be regarded in making the assessment as to convenience.

The plaintiff notes that the shipper is a British Columbia company and that the container was stuffed at the plaintiff’s place of business in Surrey, British Columbia, and submits that most of the witnesses are located in Vancouver, except those in Ghana, where the goods were allegedly delivered with shortage and damage. The defendants Flairius Enterprises and Mediterranean Shipping are Swiss companies. None of the parties to the action are in the United States, or more particularly in New York State: the plaintiff says it has no reason to believe that there should be witnesses from that area. Finally, the plaintiff does concede that as the goods were transferred from the original Vancouver container to a new container in Antwerp, there might be witnesses from Antwerp to be called. However, whether those witnesses are brought to New York or to Vancouver matters little from a convenience point of view.

On a closer reading, some of the plaintiff’s affidavit material is conjecture and generalization, however, some of the points are, notwithstanding the submissions to this effect by the defendants, perfectly valid.

For their part, the defendants say that the plaintiff has failed to show by a strong reason or reasons that the New York District Court is inconvenient and that the assumption that there will be no Baltimore witnesses is only that. As to witnesses elsewhere they may be brought to New York, as easily as to Vancouver. Thus, as to Vancouver being a convenient forum, it is only such in the eyes of Vancouver witnesses.

The defendants also point out that the New York District Court is an experienced Court and that their management is such that the case might well be transferred to New York and completed in nine to twelve months, well before the case could be completed here in Vancouver were it to remain here. The plaintiff’s security is still good in New York. The defendants are prepared to waive any time bar. The plaintiff acknowledges that no other defendants have been served and therefore it would seem that waiver of a time bar, by any other of the defendants, is not a factor. Finally, the New York District Court has discovery procedure analogous to ours, although the defendants, who bring this motion, admit that the New York District Court does not award attorney’s fees.

It concerns me that in the New York District Court the successful plaintiff will not be awarded attorney’s fees in order to help defray costs. The amount at stake, for short and damaged cargo, is only some $45,000. Under the new Tariff B of Federal Court [Federal Court Rules, C.R.C., c. 663 (as am. by SOR/95-282, s. 5)] costs, the plaintiff might obtain substantial reimbursement if the matter remains in the Federal Court, but nothing if it goes to the New York District Court.

Mr. Justice Sheen considered a similar cost issue in Vishva Ajay, The, [1989] 2 Lloyd’s Rep. 558 (Q.B.). In that case he noted that a successful litigant in India would not be awarded costs on a realistic basis and if that were so there was an advantage to both parties in litigating in England, where the successful party, either plaintiff or defendant, would recover a higher proportion of their costs. This analysis, at page 560 of Vishva Ajay, covers various aspects of the question and concludes that the advantage of litigating in England, where costs are more realistic, accrues to both parties.

Were the present instance a case merely of deciding jurisdiction on the basis of appropriateness or convenience, the absence of costs in the New York District Court might well be persuasive. However in this instance, the discretion to deny a stay, given the jurisdiction clause, should not be exercised unless there is a strong cause for doing so. Therefore, notwithstanding substantial Federal Court costs on the one hand and an absence for reimbursement of attorney’s fees on the other, this issue falls into the category of “mere balance of convenience” referred to by Mr. Justice Brandon in Eleftheria (supra). I am not prepared to exercise my discretion and deny a stay on this basis alone.

As Mr. Justice Collier pointed out in The Hoegh Merchant (supra) at page 250, a mathematical count of the pros and cons of a forum is not conclusive. In looking at the conveniences of either Vancouver or of New York, I am not able to say that one is more convenient than the other to the extent of there being a strong reason, overriding the jurisdiction clause and pointing to a stay as a proper outcome.

Attornment to Jurisdiction

The plaintiff’s position is that if the defendant wishes to challenge the jurisdiction of the Federal Court, that must be done before filing an appearance or otherwise taking a step in the proceeding. By taking steps in this proceeding, including filing a defence and exchanging draft affidavits of documents and also allowing some nine months to go by since filing a defence, the defendants have waived any right to challenge the jurisdiction of the Federal Court.

Certainly the older cases take a very hard line. In Oulton v. Radcliffe (1874), L.R. 9 C.P. 189 (C.A.), an undertaking to appear, given by counsel, followed by an appearance was enough to cure an irregularity in service and establish jurisdiction, despite subsequent objections by the defendant.

In Fry v. Moore (1889), 23 Q.B.D. 395, the Court of Appeal pointed out that the defendant had taken at least two steps in the action and thereby had waived any irregularity and could not then object to jurisdiction. This hard line has been carried forward into the modern cases, including in this Court.

The first case to which counsel for the plaintiff referred, dealing with attornment, is May (A.S.) & Co. Ltd. v. Robert Reford Co. Ltd., [1969] 2 O.R. 611 (H.C.), which involved a Yugoslavian jurisdiction clause in a bill of lading for goods shipped from Yugoslavia to Ontario. The Yugoslavian jurisdiction clause provided [at page 612] that “Any dispute arising under this bill of lading to be decided in Yugoslavia according to Yugoslavian law”. The Court felt that the balance of convenience lay in the jurisdiction of the Ontario Court, although this finding is perhaps suspect in that Eleftheria (supra), which had only been decided two months previously, was not referred to, and thus there is no reference for the need for strong reasons to show an operative balance of convenience in favour of a stay. However, the important determination in the Robert Reford case, at page 615 was that of attornment to the jurisdiction of the Ontario Court when the foreign defendant entered an unconditional appearance:

There is another matter which in my view operates as a bar to the present application, namely, the entrance of an unconditional appearance on behalf of this applicant as above stated. If the case was one to which the Arbitrations Act, already quoted, applied then, of course, the entry of appearance would have no effect because of the language of the statute. Holding as I do that the Arbitrations Act does not apply the entry of appearance must be viewed as an attornment to the jurisdiction of the Court and that it is now too late for the applicant to seek a stay: see Raymond v. Adrema Ltd. and Farrington-Bradma Ltd., [1962] O.R. 677, 33 D.L.R. (2d) 469.

Turning from the Ontario High Court to the Federal Court, Mr. Justice Mahoney (as he then was) in Catalyst Research Corp. v. Medtronic, Inc., [1981] 2 F.C. 620(T.D.) (affirmed by the Court of Appeal [1982] 2 F.C. 657 dealt quite decisively with attornment. The defendant, Medtronic, had applied for leave to file a conditional appearance, to set aside service, but it also, one month later, had joined in an application for security for costs. Having applied for security for costs the Court found that Medtronic could not thereafter object to the jurisdiction of the Court for, “Having approbated, it has waived its right to reprobate” (page 623). The interesting point here is that Medtronic had not filed any unconditional appearance and indeed had applied for leave to file a conditional appearance, but having relied on the Court’s jurisdiction for another purpose, could not then successfully argue that it had not attorned to the jurisdiction.

The Court of Appeal in Medtronic (supra), in very short reasons, pointed out that not every application for security for costs by a foreign defendant would necessarily amount to an attornment to the jurisdiction, but where more than a month had gone by, between the challenge to jurisdiction (the leave to enter a conditional appearance) and the request for security for costs, a waiver of objection to jurisdiction was properly inferred. Indeed, the Court of Appeal felt so certain on this point that after hearing from the appellant, they did not call upon the respondent.

In Vallorbe Shipping Co. S.A. v. The M.V. Tropwave, [1975] F.C. 595 (T.D.), Mr. Justice Heald (as he then was) dealt with an application for a stay under section 50 of the Federal Court Act [R.S.C. 1970 (2nd Supp.), c. 10], the defendant relying upon a jurisdiction clause providing for arbitration in New York. There were two interesting aspects to Tropwave. First, it was the plaintiff who brought the motion to stay its own action. Second, the parties were also in the midst of arbitration proceedings in New York. However, the plaintiff commenced the Canadian court action and the defendant, disponent owners of the Tropwave, filed a defence and a counterclaim. Mr. Justice Heald analyzed the situation by saying that the plaintiff, in bringing the court proceedings, clearly expressed an intention to revoke the arbitration clause and the defendant, by filing a defence and counterclaim, clearly expressed a similar intention (page 600).

CONCLUSION

The defendants do not explain why they waited some nine months from when they filed their defence, until October 1, 1995, before relying on the jurisdiction clause. They do not say they were unaware or had overlooked the jurisdiction clause in the bill of lading. Indeed, they must be taken to have been aware of the jurisdiction clause at all times.

There was some discussion, at the hearing of the motion, as to whether the plaintiff, who had spent substantial money on lawyers in this jurisdiction, would in fact be prejudiced by a stay and the movement of the case to the New York District Court. I do not believe that prejudice enters into the attornment equation, for in some of the reported cases dealing with attornment, the objection to jurisdiction was at a very early stage. Rather, it is a matter of submission to the jurisdiction of the Court which, even with fairly substantial reasons, cannot be undone.

In filing a defence and providing a draft list of documents, without objecting to jurisdiction and only advising the plaintiff of the jurisdiction some nine months after filing the defence, the defendants have left it too late to now object to jurisdiction. The defendants have given every indication of attornment to the jurisdiction. The defendants’ motion for a stay is dismissed.

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