A-68-76
Antares Shipping Corporation (Appellant)
v.
The Ship Capricorn alias the Ship Alliance and
her owners (Respondents)
Court of Appeal, Ryan and Le Damn JJ. and Hyde
D.J. — Montreal, March 8 and 9; Ottawa, May
27, 1977.
Practice — Maritime law = Appeal from order increasing
security for costs by $140,777.76 — Costs to cover defendants'
expenses in obtaining bail for arrested ship — Whether secu
rity for such expenses available under Federal Court Rules
Whether proper exercise of discretion in awarding sum applied
for — Federal Court Rules 446, 1004 and 1005.
Appellant claims that the Federal Court Rules do not
authorize the Court to order security for expenses incurred in
obtaining bail and that even if they do, the Court exercised its
discretion improperly in granting the amount claimed since the
respondents had already seized $517,500 of the appellant's
money in proceedings in the Supreme Court of Quebec.
Held, the appeal is dismissed. Rule 446 of the Federal Court
empowers the Court to award security for such costs of the
action or other proceeding as may seem just, and although bail
is not calculated to advance the defence of an action it is a step
expressly provided for by Rules 1004 and 1005 and has proce
dural consequences. The amount seized in the Supreme Court
of Quebec is related to a different action and in no way secures
what the respondents might be entitled to recover in the
Federal Court.
APPEAL.
COUNSEL:
Guy Vaillancourt for appellant.
Gilles de Billy, Q.C., for respondents.
SOLICITORS:
Langlois, Drouin & Laflamme, Quebec, for
appellant.
Gagnon, de Billy, Cantin, Dionne, Martin,
Beaudoin & Lesage, Quebec, for respondents.
The following are the reasons for judgment
rendergd in English by
LE DAIN J.: This is an appeal from an order of
the Trial Division that the appellant furnish
increased security for costs in the amount of $140,-
776.76 to cover the cost to the owners of the
respondent ship of providing bail to obtain the
release of the ship following her arrest by the
appellant.
On June 7, 1973, the appellant commenced an
action in rem and caused the respondent ship to be
arrested. The action, which is still pending, is one
for a declaration that a sale of the ship by Delmar
Shipping Limited (hereinafter referred to as "Del-
mar") to Portland Shipping Company Inc. (here-
inafter referred to as "Portland") is null and void,
for specific performance of an alleged agreement
for the sale of the ship by Delmar to the appellant,
and for damages. On June 15, 1973, the appellant,
as a non-resident plaintiff, was ordered to furnish
security for costs which the parties agreed, on the
basis of the costs anticipated at that time, to fix at
$25,000.
Bail for the release of the ship was fixed at
$4,000,000 U.S. and was deposited by Portland on
June 22, 1973. At about the same time Portland
instituted proceedings against the appellant in the
Superior Court, District of Quebec, to recover
damages for the allegedly wrongful arrest of the
ship. Included in the damages claimed was a sum
of $80,000 described as the cost of the letter of
credit to secure the bail bond. In the proceedings
in the Superior Court Portland seized a sum of
$517,500 that had been sent - by the appellant to its
solicitors to be applied to the performance of the
appellant's obligations under the alleged agree
ment of sale with Delmar.
In January 1976, the owners of the ship applied
to the Trial Division for an order that increased
security for costs in the amount of $140,777.76 be
furnished by the appellant to cover premium and
commission paid by the owners to obtain bail for
the ship. The amount of $140,777.76 is made up of
$40,000 in premium (for the period June 22, 1973
to June 22, 1976) paid to Royal Insurance Com
pany Limited, which issued the bail bond, and
$100,777.76 in commission (at the rate of 1% per
annum on $4,000,000) paid to Irving Trust Com
pany, which issued the letter of credit in favour of
Royal Insurance Company Limited. The applica
tion was granted by the Trial Division.
The appellant appeals against the order of the
Trial Division on two grounds. It contends, first,
that the Federal Court Rules do not authorize
security for costs to cover the expense of providing
bail for the release of a ship, and, secondly, that if
they do, the Trial Division improperly exercised its
discretion in the present case, since the owners of
the vessel are sufficiently secured for such expense
as a result of the amount seized by them in the
proceedings in the Superior Court, District of
Quebec.
It appears to be a well-established practice in
the Trial Division of the Court to include the
expense of providing bail in security for costs. I
would be reluctant at this date to find that such a
practice has been without foundation. The ques
tion arises because the Rules do not make specific
provision that such expense forms part of taxable
costs, as is the case under the Rules of the
Supreme Court in England, and as was the case in
the Exchequer Court of Canada, to which the
English Rule on this point was made applicable.
Before the adoption of the Rule in England it was
held that such expense could not be recovered as
costs, although it might be recovered as damages
in a successful action for wrongful arrest. See The
Collingrove, The Numida (1885) 10 P.D. 158.
The same position was adopted in Scotland. See
Ellerman's Wilson Line, Limited v. The Commis
sioners of Northern Lighthouses [1921] S.C. 10.
Special provision was introduced into the English
Rules to permit such expense, up to a certain limit,
to be recovered as taxable costs. In its present
form', this provision reads as follows:
The commission or fee paid to a person becoming surety to a
bail bond or giving a guarantee or undertaking in lieu of bail,
not exceeding 11 per cent. of the amount for which the bond,
guarantee or undertaking is given, shall be allowed on taxation.
' RSC Ord. 62. App. 2, Part IX, Note to items 93 and 94.
English practice on this question was made ap
plicable in the Exchequer Court by section 35 of
the Exchequer Court Act 2 and by Rule 215 of the
Exchequer Court Rules in Admiralty 3 .
The provision in the Supreme Court Rules in
England was the subject of the following commen
tary by Sidney Smith D.J.A. in Owners of "Chi-
nook" v. `Dagmar Salem" [1955] Ex.C.R. 210, in
which the owners of a vessel sought unsuccessfully
to recover as costs more than 1% of the amount of
the security given in lieu of bail:
Apart from statutory rules, none of these expenses could be
recovered even as costs, The Numida (supra); but there has
been a change in England since that decision. The change
affects this Court also because of the rule which now appears as
0.12, R21 A of the ordinary Supreme Court Rules (England).
This is as follows:
A commission or fee paid to a person becoming surety to a
bail bond or otherwise giving security may be recovered on
taxation; provided that the amount of such commission or fee
shall not in the aggregate exceed one pound per centum on
the amount in which bail is given.
Our Exchequer Court Act, section 35, makes the practice of
the English High Court as it stood on 1st January 1928 apply
to whatever our own rules do not cover; so the above-cited Rule
21 A applies here; see The Cape Breton [(1907) 11 Ex.C.R.
227]. I am afraid the Rule is intractable and that there is no
departing from it.
Neither the Federal Court Act nor the Federal
Court Rules contain a provision making the Eng-
lish Rules of practice applicable to matters not
2 35. The practice and procedure in suits, actions and mat
ters in the Exchequer Court, shall, so far as they are applicable,
and unless it is otherwise provided for by this Act, or by general
rules made in pursuance of this Act, be regulated by the
practice and procedure in similar suits, actions and matters in
Her Majesty's High Court of Justice in England on the 1st day
of January, 1928.
3 Rule 215. In all cases not provided for by these Rules the
general practice for the time being in force in respect to
proceedings in the Exchequer Court of Canada shall be fol
lowed and if not otherwise provided for in said general practice
nor otherwise provided for by any Act of the Parliament of
Canada, or by any general Rule or Order of the Exchequer
Court of Canada, then the practice and procedure shall con
form to and be regulated, as near as may be, by the practice
and procedure at the time in force in similar suits, actions and
matters in Her Majesty's Supreme Court of Judicature in
England.
otherwise provided for. Section 42 of the Act
provides that "Canadian maritime law as it was
immediately before the 1st day of June 1971 con
tinues subject to such changes therein as may be
made by this or any other Act", but "Canadian
maritime law", as defined by the Act 4 , would not
appear to contemplate matters of practice and
procedure provided for by Rules and orders 5 . It is
therefore clear, I think, that the special provision
in the English Rules respecting the question in
issue on this appeal no longer governs the practice
in the Federal Court. By Rule 446 the Court may
"order the plaintiff to give such security for the
defendant's costs of the action or other proceeding
as seems just." The taxation of party and party
costs is governed by Tariff B. If the expense of
providing bail for the release of a ship is recover
able as taxable costs and can, therefore, be proper
ly included in security for costs, it must be on the
basis of item 2(2)(b) of Tariff B, which reads as
follows:
(b) such other disbursements may be allowed as were essential
for the conduct of the action.
The issue, as I see it, is whether the provision of
bail is to be considered a step in the proceedings. I
do not think that undue emphasis should be placed
on the word "essential" in the above provision. It is
presumably there to assure that only disburse
ments reasonably related to the conduct of the
action are allowed. Bail is not calculated to
advance the defence to an action on the merits, but
it is a step expressly provided for by the Rules 6 ,
and it has procedural consequences. Whatever
may have been the view of the nature of bail
expressed or implied in the earlier decisions to
4 Section 2 of the Federal Court Act defines "Canadian
maritime law" as follows:
"Canadian maritime law" means the law that was adminis
tered by the Exchequer Court of Canada on its Admiralty
side by virtue of the Admiralty Act or any other statute, or
that would have been so administered if that Court had
had, on its Admiralty side, unlimited jurisdiction in rela
tion to maritime and admiralty matters, as that law has
been altered by this or any other Act of the Parliament of
Canada.
5 Cf. Oy Nokia Ab v. The 'Martha Russ" [1973] F.C. 394
at 401-2.
6 Rules 1004 and 1005.
which reference has been made, I think we should
be governed on this question by what was said by
Ritchie J., delivering the judgment of the majority
in the Supreme Court of Canada in Antares Ship
ping Corp. v. The Ship "Capricorn"':
It is true that the initial appearance in the present case was
made under protest as to the jurisdiction of the Court, but
under the circumstances of the case the bond now represents
the ship and the giving of it at Portland's instance was a step in
the cause and thereby a waiver of the protest: see Dunbar &
Sullivan Dredging Co. et al v. The Ship `Milwaukee" (1907)
11 Ex.C.R. 179.
On this view of the nature and effect of giving
bail, and on the view that I have suggested should
be taken of the terms of item 2(2)(b) of Tariff B,
it is my opinion that the expense of giving bail
forms part of the taxable costs for which security
may be ordered to be given under Rule 446.
As to the second ground of appeal, it is my view
that the amount seized in the proceedings in the
Quebec Superior Court would not be a valid
reason for refusing security for costs to cover the
expense of providing bail in the Federal Court.
The two actions are quite different. The respond
ents might succeed in their defence to the action in
this Court and yet be unable to establish what is
required to succeed in an action for wrongful
arrest. The amount seized in the proceedings in the
Quebec Superior Court in no way secures what the
respondents might be entitled to recover in the
Federal Court as the cost of providing bail.
For these reasons I am of the opinion that the
Trial Division properly exercised its discretion in
making the order appealed from and that the
appeal should accordingly be dismissed with costs.
* * *
RYAN J.: I concur.
* * *
HYDE D.J.: I concur.
7 (1976) 65 D.L.R. (3d) 105 at 126.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.