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T-940-89
Canastrand Industries Ltd. (Plaintiff) v.
The Ship "Lara S" and Freight and her owners Armadaores Lara S.A., Lucky Star Shipping S.A., and Kimberly Navigation Company Limited carrying on business as Kimberly Line, Byzantine Maritime Corp. and all others interested in the Ship "Lara S" and Kim-Sail Ltd. (Defendants)
INDEXED AS: CANASTRAND INDUSTRIES LTD. V. LARA S (THE)
Trial Division, Reed J.—Vancouver, May 11 and 14, 1992.
Maritime law — Practice — Appeal from order staying pro ceedings pending plaintiff's decision whether to pursue claim here or in Greek courts — Action commenced in Federal Court for damages to cargo incurred during carriage by sea — Plaintiff having ship arrested in Greece upon learning of own er's intention to sell — Ship defendant's only asset — Not in "interest of justice" (Federal Court Act, s. 50(1)(b)) to stay proceedings — Need to secure claim by proceeding against ship arising when sale contemplated — Defendants not estab lishing (1) ship could not now be arrested in Canadian waters; (2) Greek proceeding attempt to avoid Canadian maritime law requirements; (3) plaintiff representing would not proceed against ship — Stay causing injustice to plaintiff as would mean loss of security — Allowing action to proceed without requiring election not injustice to defendants — Proceeding in Greek court not duplicative as taken only to ensure security for payment of Federal Court judgment — Failure to arrest ship earlier not causing injustice to defendants.
This was an appeal from a decision of the Senior Prothono- tary staying proceedings pending the plaintiff's decision whether to pursue its claim in this Court or in the courts of Greece. The plaintiff was the owner of a shipment of bailer twine, which was damaged during its carriage by sea from Bra- zil to Toronto. Pleadings were filed, documents exchanged, and examinations for discovery and other pre-trial proceedings ensued. When the plaintiff learned that the defendant, Armadaores Lara S.A., intended to sell the Lara S, its only known asset, plaintiff had the ship arrested in Greece. The plaintiff argued that the stay should be set aside because the proceeding in the Greek courts was not duplicative of the pre-
sent proceedings and was intended only to ensure security for the payment of any judgment issuing out of this Court; a stay would result in substantial prejudice to the plaintiff; and allowing the proceeding in this Court to go forward without requiring an election would not result in an injustice to the defendants. The defendants argued that the decision to stay proceedings was not based on a possible duplication of pro ceedings (Federal Court Act, paragraph 50(1)(a)), but on the ground that in this case "it is in the interest of justice that the proceedings be stayed" (paragraph 50(1)(b)). They argued that it was in the interest of justice that the proceedings be stayed because the plaintiff had not moved to arrest the ship when it had been in Canadian ports and that it was now too late to arrest it in Canadian waters because the one-year time limit had expired. It was argued that the sale was being made in the ordinary course of business and that it was abusive for the plaintiff to now take proceedings which interfered with that transaction when no attempt was made to arrest the vessel ear lier.
Held, the appeal should be allowed.
The defendants' arguments did not support a decision that it was in the interests of justice that the proceedings be stayed. (1) As long as the ship was owned by the defendant Armadaores Lara S.A. and that defendant was an active defen dant in the present proceeding, plaintiff might not need to ensure security for its claim by proceeding directly against the ship. But once the plaintiff learned that Armadaores Lara S.A. intended to sell its only asset, the situation changed. (2) There was no authority for the proposition that if the ship were in Canadian waters it could not now be arrested. (3) The proceed ing in Greece was not an attempt to avoid the requirements of Canadian maritime law. (4) Plaintiff's counsel had not made representations that his client would not proceed against the ship itself.
The test for determining when a stay should be granted was set out in Plibrico (Canada) Ltd. v. Combustion Engineering Canada Inc. (1990), 30 C.P.R. (3d) 312 (F.C.T.D.). A stay should not be granted unless the continuation of the action would cause prejudice or injustice to the defendant and the stay would not work an injustice to the plaintiff. An order stay ing the proceedings until an election is made would result in substantial prejudice to the plaintiff. If an election is made to proceed in Canada, the "conservative measures" obtained through the Greek courts would have to be relinquished and without such measures a judgment from this Court could be a paper judgment only.
The defendants would not be prejudiced as a result of the two proceedings as the evidence established that plaintiff does not intend to make the defendants answer twice with respect to
the substantive issues. The plaintiff's failure to arrest the vessel before now did not visit an injustice on the defendants.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Federal Court Act, R.S.C., 1985, c. F-7, s. 50(1).
CASES JUDICIALLY CONSIDERED
APPLIED:
Plibrico (Canada) Ltd. v. Combustion Engineering Canada Inc. (1990), 30 C.P.R. (3d) 312; 32 F.T.R. 30 (F.C.T.D.).
CONSIDERED:
The Jala Godavari v. Canada, A-112-91, Hugessen J.A., judgment dated 18/10/91, F.C.A., not yet reported; Atlan- tic Lines & Navigation Company Inc. v. The Ship "Didymi", [1985] I F.C. 240 (T.D.); The Hartlepool (1950), 84 LI.L.Rep. 145 (Adm. Div.); The Soya Mar- gareta, [1960] 2 All E.R. 756 (P.D.A.); Aetna Financial Services Ltd. v. Feigelman et al., [1985] 1 S.C.R. 2; (1985), 15 D.L.R. (4th) 161; [1985] 2 W.W.R. 97; 32 Man.R. (2d) 241; 29 B.L.R. 5; 55 C.B.R. (N.S.) I; 4 C.P.R. (3d) 145; 56 N.R. 241; Nisshin Kisen Kaisha Ltd. v. Canadian National Railway Co., [1981] 1 F.C. 293; (1980), 111 D.L.R. (3d) 360 (T.D.).
DISTINGUISHED:
The Vasso (formerly Andria), [1984] 1 Lloyd's Rep. 235 (C.A.).
APPEAL from decision staying proceedings. Appeal allowed.
COUNSEL:
Christopher J. Giaschi for plaintiff. Richard L. Desgagnés for defendants.
SOLICITORS:
McEwen, Schmitt & Co., Vancouver, for plain
tiff.
Ogilvy Renault, Montréal, for defendants.
The following are the reasons for order rendered in English by
REED J.: The plaintiff appeals a decision of the Senior Prothonotary dated March 24, 1992 staying the proceedings in this case pending a decision by the
plaintiff as to whether to pursue its claim in this Court or in the courts of Greece.
It is first necessary to determine the status of an affidavit dated May 11, 1992, signed by Pierre G. Côté, which was filed on May 11, 1992 in support of the defendants' position. Counsel for the plaintiff argues that this affidavit should not be accepted in these proceedings because: (1) the evidence con tained therein is not new—it was available at the time of the proceedings before the Senior Prothonotary—; and (2) it was filed at such a late date that counsel for the plaintiff has not had time to respond to it in a con sidered fashion. Counsel for the defendants argue that the new affidavit is intended to support in a fuller fashion the information which was before the Senior Prothonotary. He argues this is to put the Court in a better position to exercise a review of the Prothono- tary's decision according to the principle set out by the Federal Court of Appeal in Jala Godavari (The) v. Canada (A-112-91, decision dated October 18, 1991) [at pages 2-3]:
... contrary to a view that has sometimes been expressed in the Trial Division ([1984] 1 F.C. 856), a judge who hears an appeal from a prothonotary on a matter involving the exercise of discretion is called upon to exercise his own discretion and is not bound by the prothonotary's opinion. He may, of course, choose to give great weight to the views expressed by the pro- thonotary, but the parties are, in the final analysis, entitled to the discretion of a judge and not that of a subordinate officer. The situation is, of course, different where a referee (who may be a prothonotary) has heard witnesses and made findings of fact based on his assessment of credibility (see Algonquin Mer cantile Corp. v. Dart Industries Canada Ltd., [1988] 2 F.C. 305 (C.A.)).
I do not find it necessary to decide whether and in what circumstances it is appropriate to file new evi dence on an appeal from a prothonotary's decision. It is sufficient for present purposes to say that I think the plaintiff should not be faced with a new affidavit in this fashion on the very morning of the appeal.
I would indicate, in addition, in case I am wrong with respect to the filing of the new affidavit, that I do not interpret the letter of August 13, 1990, attached thereto, in the same way as counsel for the
defendants. In my view the characterization which counsel for the defendants seeks to place on counsel for the plaintiffs' I letter of August 13, 1990 is overly broad. Counsel for the defendants seeks to character ize that letter as a representation by the plaintiffs that they did not intend to proceed against the ship the Lara S. While there is some ambiguity in the phras ing of the letter I would not read it in that fashion. It seems clear to me that the owners of the Lara S hav ing been served and the plaintiffs having proceeded against them, the other defendants, referred to in the letter against whom proceedings were not going to be pursued, were Lucky Star Shipping S.A. and Byzan- tine Maritime Corp. I would not read the letter as expressing an intention not to proceed against the Lara S.
The plaintiff argues that the decision staying these proceedings should be set aside because: (1) the pro ceeding in the Greek courts is not duplicative of the present proceeding and is intended only to ensure security for the payment of any judgment that may issue out of this Court; (2) a stay of the present pro ceedings pending an election by the plaintiff as between the two courts will result in substantial prejudice to the plaintiff; (3) allowing the proceeding in this Court to proceed without requiring such elec tion will not result in an injustice to the defendants.
The well-known test for determining when a stay should be granted is set out by Mr. Justice Strayer in Plibrico (Canada) Ltd. v. Combustion Engineering Canada Inc. (1990), 30 C.P.R. (3d) 312 (F.C.T.D.),
at page 315:
It is well established in the jurisprudence that a stay should not be granted under s. 50 of the Federal Court Act, R.S.C. 1985, c. F-7, unless it can be shown that (1) the continuation of the action would cause prejudice or injustice (not merely inconvenience or extra expense) to the defendant; and (2) that the stay would not work an injustice to the plaintiff .... The onus is on the defendant who seeks a stay to establish that these conditions exist and the grant or refusal of a stay is within the discretionary power of the judge.
1 Prior to April 30, 1992, there were two plaintiffs in this action. As of that date the second plaintiff filed a disconti nuance.
The substantive claim in this case concerns dam age to a shipment of bailer twine carried by sea from Brazil to Toronto, Canada. The plaintiff, Canastrand Industries Ltd. was the purchaser and receiver of the cargo. The damaged goods were allegedly delivered to the plaintiff in May of 1988. The plaintiff's state ment of claim was filed on April 28, 1989. The own ers of the Lara S, Armadaores Lara S.A., and the defendant the Kimberly Navigation Company Lim ited were served with the statement of claim. They filed a defence on September 9, 1990. The exchange of documents, examinations for discovery and other pre-trial proceedings ensued. A pre-trial conference to discuss a potential date, time and place for the hearing of the trial was held by the Associate Chief Justice on February 14, 1992.
On January 15, 1992 counsel for the plaintiff became aware that the defendant Armadaores Lara S.A. intended to sell the Ship the Lara S. In so far as the material on file is concerned it appears that the Lam S is the only known asset of the defendant Armadaores Lara S.A. Counsel for the plaintiff accordingly obtained advice from and instructed solicitors in Greece to effect an arrest of the Lara S. The vessel was in Greece at the time. Counsel for the plaintiff attests that the only purpose of that action was and is to ensure that security will exist for any judgment that might be given with respect to the cargo claim being litigated in this Court. Counsel for the plaintiff's affidavit which was filed in response to the defendants' application before the Prothonotary for a stay of these proceedings reads in part:
Instructions to arrest the "LARA S" were given in response to advise [sic] received from Mr. Voutsinos that the "LARA S" was in Piraeus and was about to be sold to a company called Ilios Shipping of Piraeus, Greece. As the "LARA S" is the only known asset of the defendant Armadaores Lara S.A., its sale might cause serious prejudice to the plaintiff in the event it is successful in this action.
A copy of a communication attached to the affida vit of Johanne Gauthier dated February 26, 1992 which was filed by the defendants in support of their
application before the Prothonotary for a stay of pro ceeding states:
... spoke with our lawyer in Greece who explained as follows:
a) claimants [do] not intend starting out a new trial here for the case.
b) claimants through their lawyer's [sic] requested only "conservative measurements [measures]" in order secured the consequence of Canadian court.
means:
1. - prohibition to own[er]s sale [of] the vsl [vessel] prior [to] Canadian Court resolution, or
2. - own[er]s bank guarantee for the amnt [amount] claimed.
It is clear that there is nothing innately vexatious or untoward in a plaintiff in a maritime case com mencing an action in one jurisdiction in order to ensure security for a claim which is being litigated in another. Counsel for the plaintiff argues that the fact situation in this case is the mirror image of that in Atlantic Lines & Navigation Company Inc. v. The Ship "Didymi", [ 1985] 1 F.C. 240 (T.D.). Support is also found in the decisions in The Hartlepool (1950), 84 L1.L.Rep. 145 (Adm. Div.) and The Soya Mar- gareta, [1960] 2 All E.R. 756 (P.D.A.).
Counsel for the defendants seeks to distinguish these cases on the ground that the Atlantic Lines & Navigation case dealt with whether or not the action was one in which an arrest of a vessel properly lay and that both the Hartlepool and Soya Margareta cases dealt with situations in which there was in the companion action no in rem claim. He also relies on Aetna Financial Services Ltd. v. Feigelman et al., [1985] 1 S.C.R. 2 for the proposition that seizing the assets of a defendant before judgment has been ren dered is a rare and unusual proceeding. I do not think the distinctions which it is sought to draw from the maritime cases withstand scrutiny. The Atlantic Lines & Navigation case dealt with an application for a stay of proceedings and as in this case the stay was sought by the defendants in order to avoid providing security for any damages that might eventually be awarded upon determination of the substantive issue underly ing the plaintiff's claim. While the Hartlepool and Soya Margareta (and the Atlantic Lines & Naviga tion) cases may deal with situations in which in rem proceedings in the initial proceedings were either not
possible or not included, I do not think this is the only circumstance in which a companion action to obtain security may be taken. Those cases are based on a broader principle. In so far as reliance on the Aetna decision is concerned, it has long been a prin ciple of maritime law that vessels which by their nature move continually from jurisdiction to jurisdic tion may be seized before judgment to answer for obligations potentially owed with respect to them.
Counsel for the defendants argues that in any event the decision of the Senior Prothonotary was not based on a possible duplication of proceedings in this Court and in the Greek court but rather on the ground that in this case "it is in the interest of justice that the pro ceedings be stayed". That is, he argues that the Prothonotary's decision was based on paragraph 50(1)(b) of the Federal Court Act [R.S.C., 1985, c. F-7], not on paragraph 50(1)(a). Subsection 50(1) of the Federal Court Act provides:
50. (1) The Court may, in its discretion, stay proceedings in any cause or matter,
(a) on the ground that the claim is being proceeded with in another court or jurisdiction; or
(b) where for any other reason it is in the interest of justice that the proceedings be stayed. [Underlining added.]
It is argued that it is in the interest of justice in this case that the proceedings be stayed because the plain tiff did not move to assert its in rem rights against the Lara S at an earlier time. It is argued that the vessel was in Canadian ports several times since the com mencement of the action and no move was made to arrest it. It is argued that it could not now be arrested if it came within Canadian waters because the one- year time limit has expired and in any event the letter referred to above, sent by counsel for the plaintiff, expressly states that the plaintiff did not intend to proceed against the ship. It is argued that the sale of the ship is to an arms-length third party purchaser, there being no intention on the part of the defendants to defraud creditors or evade judgment, and that it is
a sale being made in the ordinary course of business. It is argued that it is abusive of the plaintiff to now take proceedings which interfere with that transaction when no attempt was made to arrest the vessel at an earlier date.
I am not persuaded that these arguments support a decision that it is in the interests of justice that the proceedings in this Court be stayed. In the first place, as long as the ship was owned by the defendant Armadaores Lara S.A. and that defendant was an active defendant in the present proceeding, the plain tiff might not contemplate the need to ensure security for its claim by proceeding directly against the ship. One can understand that this situation would change once the plaintiff learned that Armadaores Lara S.A. was intending to sell its only asset, the ship. Sec ondly, I am not persuaded that if the ship were in Canadian waters that it could not now be arrested. I have been referred to no authority for that proposi tion. Accordingly, I have not been persuaded that the proceeding in Greece is an attempt to do an end run around requirements of Canadian maritime law. Also, as I have already indicated, I am not persuaded that counsel for the plaintiff made representations that his client had no intention of proceeding against the ship itself.
In so far as the respective prejudice which the par ties may suffer is concerned, I accept counsel for the plaintiff's argument that an order staying these pro ceedings until an election is made will result in sub stantial prejudice to the plaintiff. If an election is made to proceed in Canada this would necessitate relinquishment of the "conservative measures" which have been obtained through the Greek court. Without such measures there is reason to fear that a judgment from this Court would be a paper judgment only. I note that if the defendants wished to assure the plain tiff that this would not be the case it is always open to them to file security by way of a bond or other instru ment in this Court on condition that the Greek pro ceeding be abandoned. If the plaintiff were to elect to pursue proceedings in Greece, the time and money
spent on pre-trial proceedings and preparation in this Court would be wasted. Whether an action on the merits could in fact, at this point, proceed in Greece is a matter I will not address since it is an issue involving Greek law on which I do not have expert evidence.
In so far as potential prejudice to the defendants is concerned, in the face of firm and unequivocable evi dence that there is no intention on the part of the plaintiff to pursue duplicative actions and make the defendants answer twice with respect to the substan tive issues involved, it is difficult to see how prejudice would arise as a result of the two proceed ings. In so far as the Greek proceeding operating as a block to the sale of the ship is concerned, counsel for the plaintiff argues that his client's claim would in any event attach as a maritime lien to the vessel and thus at some point become a bone of contention between the vendor and purchaser regardless of whether the vessel was subject to the Greek con servative measures or not. He argues that this is a general principle of maritime law. Regardless of whether or not this is so I am simply not convinced that the plaintiff's failure to arrest the vessel before now is a circumstance which can be said to visit an injustice on the defendants. This is not a decision such as that in The Vasso (formerly Andria), [1984] 1 Lloyd's Rep. 235 (C.A.) which counsel for the defendants cited. That was a case in which the plain tiffs obtained a warrant for arrest without full disclo sure and where the fact of such a warrant being issued was not disclosed to the ship owners who were engaged in bona fide negotiations respecting the claim and where the writs were not served until the vessel was in the hands of a third party.
The Senior Prothonotary quoted from the decision in Nisshin Kisen Kaisha Ltd. v. Canadian National Railway Co., [1981] 1 F.C. 293 (T.D.), at page 301. The principle he referred to in that quotation relates to the Court's authority to impose on a person litigat ing in this Court the condition that that person not
litigate the same cause of action or matter in another court. There is no doubt that this is an accurate state ment of the law. I am not convinced, however, that in applying that principle the appropriate tests were considered by the Prothonotary for determining whether such an order should be given in this case.
I cannot conclude that the facts in the present case justify the granting of a stay. The two actions will not place the defendants in the position of having to answer twice in two different courts with respect to the same evidence and proceedings. The plaintiff will suffer considerable prejudice in having to elect to forgo one or other of the proceedings. The result for the defendants of allowing the plaintiff to maintain both proceedings cannot be characterized as an injus tice.
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