T-4296-76
Waterside Ocean Navigation Company, Inc.
(Plaintiff)
v.
International Navigation Ltd., the Ship Lauren-
tian Forest and the Owners and Charterers of the
Ship Laurentian Forest (Defendants)
Trial Division, Thurlow A.C.J.—Halifax, January
19, 20 and 21; Ottawa, February 3, 1977.
Maritime law — Practice Application by owner of
defendant ship to strike out statement of claim — Whether
cause of action disclosed Whether claim abuse of process
— Further application by defendant to set aside warrant of
arrest of ship and cancel or return security posted by it —
Application by plaintiff to add owner "B", owner's parent
company "F" and charterer "S" as defendants Federal
Court Rules 2(1) (n), 324, 419, 421(1) and 422.
B, the owner of the ship being sued, on a motion to strike out
the statement of claim says that the statement of claim dis
closes no reasonable cause of action in rem and is vexatious
since the first-named defendant is neither the registered owner
not the beneficial owner of the ship. The plaintiff seeks leave to
amend its statement of claim so as to join B, F and S as
defendants.
Held, B's application is dismissed. In order to justify striking
out a statement of claim the Court must be satisfied either that
it discloses no reasonable cause of action (Rule 419(1)(a)) or
that it is abuse of the process of the Court (Rule 419(1)(c) or
(I)). The Court will only strike out a statement of claim under
Rule 419(1)(a) if it is clear that there is no way in which it can
be amended so as to disclose a reasonable cause of action. In
the present case, although it fails to allege any basis for
personal liability of anyone except the first-named defendant, it
does assert an arguable claim for breach of contract against the
owners and against the ship. The application to strike out under
Rule 419(1)(c) or (f) must be determined on the basis of
supporting or opposing evidence. B would be a proper party
defendant to the action and it follows that the claim against the
ship, which is essentially a claim against the owners, is not
vexatious.
The plaintiffs application to add B, F and S as defendants
and to further amend the statement of claim is allowed and the
words "The Owners and Charterers of the Ship Laurentian
Forest" will be struck out of the title of the action.
Westcan Stevedoring Ltd. v. The Ship "Armar" [1973]
F.C. 1232 and The St. Elefterio [1957] P. 179, applied.
The St. Merriel [1963] 1 Lloyd's Rep. 63, distinguished.
APPLICATION to strike out and APPLICATION to
amend statement of claim.
COUNSEL:
James E. Gould and W. Wylie Spicer for
plaintiff.
Arthur R. Donahoe for defendant Interna
tional Navigation Ltd.
Donald A. Kerr, Q.C., and John D. Murphy
for defendant Burnett Steamship Co. Ltd.
SOLICITORS:
McInnes, Cooper & Robertson, Halifax, for
plaintiff.
Pace, MacIntosh & Donahoe, Halifax, for
defendant International Navigation Ltd.
Stewart, MacKeen & Covert, Halifax, for
defendant Burnett Steamship Co. Ltd.
The following are the reasons for orders ren
dered in English by
THURLOW A.C.J.: This is an application by
Burnett Steamship Company Limited, (hereafter
Burnett), the registered owner of the ship Lauren-
tian Forest, for an order
(a) to dismiss the plaintiff's claim against the
defendant ship,
(b) to set aside the warrant dated October 29,
1976, under which the ship was arrested at
Halifax, Nova Scotia, and
(c) for cancellation or return of the security (in
the form of a bond of the Guarantee Company
of North America in the amount of $1,000,000)
posted by the defendant ship.
Notice of the motion was given by a solicitor
purporting to act on behalf of the ship itself, but
after some discussion at the hearing as to the
capacity of a ship to bring a motion in this Court
and the Court having indicated its view that the
ship could not bring a motion, counsel asked and
was granted leave to amend the notice so as to
make the application on behalf of Burnett.
The notice of motion also asked leave to file a
conditional appearance. At the conclusion of the
argument on this part of the application, I stated
that I did not think the case was one for a condi-
tional appearance and the application thereupon
proceeded on the basis that Burnett had appeared
unconditionally.
The application for an order dismissing the
claim against the ship is based on the applicant's
submission that there is no cause of action against
the ship. It is said that, except where the plaintiff
claims a maritime lien, the right to sue in rem is
dependant on the personal liability of the shipown-
er to the plaintiff and that this is not such a case.
The dismissal of an action at this stage on such a
ground, however, as I see it, can be justified only if
(1) the statement of claim discloses no reason
able cause of action, or
(2) the claim is so forlorn that the action is an
abuse of the process of the Court and should not
be permitted to proceed.
With respect to (1), the determination must be
made on the basis of the allegations of the state
ment of claim'. For the purpose of (2), whether
the application is made under Rule 419(1)(c) or
(f) or under the inherent jurisdiction of the Court,
evidence is admissible. In neither case, however, is
the onus on the applicant an easy one to discharge.
The Court is always slow to strike out a statement
of claim and dismiss an action under Rule
419(1)(a) and will do so only when it is clear that
by no proper amendment can the statement of
claim be revised so as to disclose a reasonable
cause of action. The test is just as stringent, if not
more so, when dismissal is sought on the ground
that the proceeding is frivolous or vexatious or an
abuse of the process of the Court. The Court will
not stop a proceeding and deny a plaintiff the right
to have a case heard unless it is clear that the
action is frivolous or vexatious or that the plaintiff
has no reasonable cause of action and that to
permit the action to proceed is an abuse of its
process 2 .
' Rules 419(1)(a) and 419(2).
2 See the notes to 0. 18, r. 19, in the English Supreme Court
Practice /973, Vol. I, Part I, pp. 302-307 and 919.
I turn now to the facts.
The action, which is a combined proceeding in
rem and in personam, was commenced on October
29, 1976, by the filing of a statement of claim. On
the same day, a warrant was obtained and the ship
was arrested. On November 1, the ship was
released, the security referred to in the notice of
motion having been arranged between solicitors for
the plaintiff and for parties interested in the ship.
The notice of this application was served and filed
the following day, November 2, 1976. On
November 3, the plaintiff filed an amended state
ment of claim.
The original statement of claim asserted that the
defendant, International Navigation Ltd., (hereaf-
ter International), a Bahamian corporation, was at
all material times and still was
... the owner, disponent owner, demise or bareboat charterer,
or long-term time charterer of the Defendant, The Ship "LAU-
RENTIAN FOREST", and in any event, at all times material
hereto, the said Defendant, The Ship "LAURENTIAN FOR
EST" (together with any and all shares therein), was and
remains owned or beneficially owned by International.
It was then alleged that by a time charterparty in
New York Produce Exchange form dated October
3, 1975, International time-chartered the ship to
the plaintiff, that International without justifica
tion or cause withdrew the ship from the charter
on or about October 28, 1976, that International
"and all defendants" were in breach of the charter
in respect of
(a) disallowance of credits for off-hire periods,
(b) the inability of the ship to measure up to the
speed and consumption warranty, and
(c) the inability of the ship to carry cargo on
the weather deck without loss of her
classification,
and that the plaintiff had suffered damages, totall
ing $1,760,000, all of which the plaintiff claimed
"against the defendants or any of them".
On the basis of the allegation of ownership of
the ship by International, this statement of claim
appears to me to disclose a cause of action enforce
able by an action in rem against the ship. The
claim against the ship could not, therefore, be
struck out under Rule 419(1)(a).
Noticeably absent, however, is any reference to
Burnett or any allegation disclosing a basis for
personal liability of Burnett or any other unnamed
owner for the alleged breaches or damage. This is
the basis, as I understand it, for the present
application. For it was on this statement of the
plaintiff's claim and the affidavit of its solicitor
that the plaintiff sought and obtained a warrant
and had the ship arrested.
The affidavit carried the matter no further. The
only part of it material to this point is paragraph
2(c) which reads:
(c) That by Charterparty dated London, England, the 3rd
day of October, 1975, the Defendant International Naviga
tion Ltd. time-chartered the Defendant, The Ship "LAU-
RENTIAN FOREST", to the Plaintiff, and a dispute has
arisen thereunder between the Plaintiff and the Defendant
International Navigation Ltd., generally in three areas under
the Charterparty, as follows:—
(i) The Defendant International Navigation Ltd. did not
provide credit or deduction of hire with respect to certain
periods of time during which the vessel was not capable of
full working which would result in a cessation of hire
under Clause 15 of the Charter.
(ii) The vessel was represented in the Charter to be capa
ble of steaming fully laden under good weather conditions
about 18 knots on a consumption of about 50 Tons of
best-grade fuel oil, but the vessel could not steam at or
about 18 knots under good weather conditions on a con
sistent or even reasonably consistent basis.
(iii) The vessel was represented and described in the
Charter by the Defendant International Navigation Ltd.
as being capable of carrying cargo on her weather deck up
to 716 pounds per square foot, but the vessel was not
capable of carrying any cargo whatsoever on its weather
deck, and indeed would have had its Classification Certifi
cate withdrawn had cargo been carried in that position.
The Plaintiff's total claim in this regard is $1,760,000.00.
Had the matter rested there I should have
thought Burnett's application a hard one to resist
upon it being made to appear, as I think it has,
that International is neither the registered owner
nor the beneficial owner of the ship 3 .
However, deficient as the statement of claim is
in alleging any basis for personal liability of
anyone but International, it does assert a claim
against the owners whoever they may be and
against the ship for damages in respect of the
alleged breaches of the charter and by the amend
ed statement of claim a basis for such a claim, as it
seems to me, has been raised. By it, it is asserted,
in the alternative inter alia, that the beneficial
owner of the ship was at all material times Federal
Commerce and Navigation Limited, a Canadian
company, (hereafter Federal) of which Burnett is
a subsidiary and agent, that the charter was nego
tiated by Federal and that International acted as
its agent. As a pleading, the statement of claim has
a scatter gun effect in alleging, with respect to four
corporations in the alternative, matters that may
or may not raise a cause of action against some or
any of them, but this is not an application to strike
it out for that reason or to compel the plaintiff to
amend it or to give better particulars.
I should mention at this point that counsel for
Burnett took the position that his notice of motion
was a pleading within the meaning of the defini
tion of that word in Rule 2(1)(n) and since it had
been filed on November 2, it was not open to the
plaintiff on November 3 to amend without leave
under Rule 421(1). The Rule provides that:
Rule 421. (1) A party may, without leave, amend any of his
pleadings at any time before any other party has pleaded
thereto.
The definition referred to is:
Rule 2. (1) .. .
(n) "pleading" means any document whereby an action in
the Trial Division was initiated or a claim in such an action
was defined, and any document, whereby a claim was
defended or answered, and includes a confession of judgment
and a discontinuance;
3 See Westcan Stevedoring Ltd. v. The Ship "Armar" [1973]
F.C. 1232, a decision of Collier J., with whose view of the law I
agree. The decision was, however, one given after determina
tion of the relevant facts at trial.
The submission was that the notice of motion
was an answer to the statement of claim. Such a
notice, however, is not a pleading in the ordinary
sense and, in my view, it is not an answer to a
pleading. Whether filed or not, it has no effect
until the application of which it gives notice is
made to the Court. Even if the application itself
might conceivably be looked upon as a sort of
answer to the claim, it is not a document and this,
in my view, holds true whether or not the Court is
requested to deal with the application without
personal appearance under Rule 324. Accordingly,
I am of the opinion that the plaintiff was entitled
to amend under Rule 421(1) on November 3,
1976, and as no application has been made under
Rule 422 to disallow the amendment, the amended
statement of claim filed on that day stands as the
statement of claim in the action.
The following facts appear from the affidavits
filed by the parties:
(1) that Burnett is the registered owner of the
ship and is a subsidiary of Federal,
(2) that by a time charter made in 1971 when
the ship was under construction, Burnett char
tered her for eight years (extended in 1975 to
about twelve years) to Seatrade Limited, a Ber-
mudan company (hereafter Seatrade), which is
also a subsidiary of Federal,
(3) that by what is referred to as a Ro/Ro
Charterparty, Seatrade, in 1971 chartered the
ship for twelve years to International for trans
atlantic voyages on which she would carry
cargo on eastbound voyages for International
and on westbound voyages for Seatrade,
(4) that the performance of the obligations of
Seatrade under the charter were guaranteed by
Federal, and those of International were guaran
teed by International Paper Company Limited
of which International is a subsidiary,
(5) that in 1975, as a result of the ship having
become surplus to the requirements of Interna
tional, Federal engaged in the arrangements and
negotiations for a charter for the ship which
resulted in the charter by International, as dis-
ponent owner, to the plaintiff, on which the
plaintiff's claim arises,
(6) that the involvement of Federal personnel in
these negotiations may have given the appear
ance that Seatrade or Federal were arranging
the charter for their own benefit or account,
(7) that in the course of or as part of the
arrangements for that charter, the Ro/Ro chart
er was altered for the period involved so as to be
on the same terms and at the same hire as the
charter in question,
(8) that under the charter from International to
the plaintiff, the hire was made payable to
Seatrade and was secured by a letter of credit
for $500,000 in favor of Seatrade and by an
escrow deposit of $157,500 which Seatrade
could and did withdraw,
(9) that the ship has funnel markings character
istic of Federal,
(10) that in negotiations with regard to the
dispute between the plaintiff and International
on the alleged breaches of the charter, Federal
has taken an active if not the dominant role,
International taking the position that it is
merely a middleman,
(11) that much of the information on which
statements of belief contained in the affidavits
filed on behalf of the applicant is based came
from Bash Shetty, a person described as being
an official of Federal who has been engaged in
the negotiations referred to in the preceding
paragraph.
On these facts, notwithstanding the registry of
the ship in the name of Burnett as owner, it
appears to me that an arguable case exists for the
position taken by the plaintiff that effective control
of the ship was and is exercised by Federal which
uses its subsidiaries Burnett and Seatrade as owner
and charterer respectively and that Federal is the
beneficial owner of the ship and, as an undisclosed
principal, is a party to the charterparty on which
the plaintiff's claim arises. On such material as is
presently before the Court, I do not think an
action in personam by the plaintiff against Federal
could properly be regarded as frivolous or vexa
tious or as an abuse of the process of the Court.
Moreover, in my opinion, Burnett, as registered
owner of the ship, would be a proper party defend
ant to such an action as, if the action succeeded,
the judgment would involve an adjudication as to
the beneficial ownership of the ship. It follows, in
my opinion, that the claim of the plaintiff against
the ship in this action, which is essentially a claim
against its owners, whoever they may be, is not
shown to be frivolous or vexatious or an abuse of
the process of the Court.
In support of the application counsel relied on
The St. Merriel 4 in which a writ in rem was set
aside on a summary application in a situation
where the ship was arrested on a claim for repairs
which had been ordered by a charterer and for
which the shipowner was not personally liable. The
case, however, in my opinion, turned on the inter
pretation of the particular wording of a statute
relating to when an action in rem might be
brought as applied to undisputed facts. It has no
application in a situation such as this where the
wording of sections 22 and 43 of the Federal
Court Act 5 are markedly different and where the
material facts are anything but undisputed. A case
that is closer in principle is The St. Elefterio 6 in
which a motion to set aside the writ was dismissed.
Willmer J. put the matter thus at page 185:
I need hardly say that none of these contentions advanced on
behalf of the defendants was accepted as correct by the plain
tiffs; but I do not propose to go into the merits of these various
contentions now, or to decide whether the defendants are right
or whether the plaintiffs are right. It seems to me, having
regard to the view I take of the construction of section 3(4) of
the Act, that this is not the moment to decide whether the
defendants are right or whether they are wrong in their submis
sions on the points of law raised. If they are right on all or any
of these various points advanced, it may well be that in the end
they will show a good defence to the action. But that, in my
judgment, furnishes no good reason for setting these proceed
ings aside in limine, and thereby depriving the plaintiffs of the
right to have these issues tried.
It has not been suggested that the proceedings are frivolous
or vexatious, so as to call for the exercise of the court's inherent
jurisdiction to halt such proceedings in limine.
The Court will not try the merits of an action on
a summary motion and, in my opinion, no basis
has been established for dismissing the claim
against the ship at this stage. Moreover, while the
affidavit on which the warrant was issued says
nothing as to the basis on which liability of the
4 [1963] 1 Lloyd's Rep. 63.
5 R.S.C. 1970, (2nd Supp.), c. 10.
6 [1957] P. 179.
shipowner is asserted, it does appear to me to state
the nature of the claim, that is to say, damages for
breach of a charterparty and that is all that Rule
1003(2) appears, perhaps unfortunately', to
require on the subject. If it turns out that the facts
did not warrant the plaintiff in arresting the ship,
the owner has his remedy in respect of the arrest
on the principles referred to in Roscoe's Admiralty
Practice, 5th Edition, at page 267 and the cases
there cited, and in respect of the cost of maintain
ing the security provided, on the principles
referred to by Willmer J. in The St. Elefterio at
page 187, as part of their costs of defence.
An alternative position taken by the applicant
was that the action should be stayed pending the
result of an arbitration which has been initiated
and is in progress in London under the terms of
the charterparty between the plaintiff and Interna
tional. In taking this position, counsel for Burnett
supported an application by International for a
stay which has, however, been granted only in
respect of proceedings against that defendant. The
considerations which led to that stay would apply
to Burnett and Federal only if they are to be
bound by the result of the arbitration and, without
an adequate undertaking on their part to become
parties to the arbitration and to be so bound, I do
not think proceedings against them or the ship
should be stayed.
The application therefore fails and it will be
dismissed. The plaintiff will have its costs against
Burnett.
On the application of the plaintiff for an order
adding Burnett, Seatrade and Federal as defend
ants and granting leave to further amend the
statement of claim, I am of the opinion that on the
basis of what I have said a sufficient case has been
disclosed to warrant joining Federal as a defend
ant. Seatrade, in my opinion, is also a proper
defendant, and should be joined as well since it
was the recipient of the alleged overpayment of
hire and the party who withdrew the escrow depos-
' I say "perhaps unfortunately" because, while historically
nothing more appears ever to have been required, modern
conditions suggest to me that something more ought to be
required in the affidavit to show a proper case of circumstances
justifying the arrest of a vessel or property.
it. Burnett, as I see it, is already a party. Without
passing on the propriety of the particular amended
statement of claim as proposed by the plaintiff, the
plaintiff should have leave to amend so as to plead
that Federal was and is the beneficial owner of the
ship and was a party to the charterparty and to
plead as well the claim I have mentioned against
Seatrade.. The title of the action will be amended
by striking out the words
The Owners and Charterers of the Ship "LAURENTIAN
FOREST"
and adding the names of Burnett, Seatrade and
Federal as defendants. There will be no costs on
the application to any party.
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.