T-2148-77
Ernesto G. Galano, Elio B. Bongon, Abraham R.
Radovan, Rosario C. Del William, Jacinto S.
Rapada, Ernesto F. De Mesa, Cesar G. Pangili-
nam, Glicerio C. Salvador Jr., Venancio P.
Leabres, George A. Remetilla, Edilberto P. Floro,
Sergio R. Dedel, Ismael M. Encarnacion, Vergilio
S. Esguerra, Pedro A. Bartolo, Pedro P. De
Guzman, Francisco B. Marcelo, Romeo R.
Esconde (Plaintiffs)
v.
The Vessel S/S Lowell Thomas Explorer, its
cargo and freight (Defendant)
Trial Division, Dubé J.—Montreal, September 26;
Ottawa, September 30, 1977.
Practice — Motion to strike counterclaim — Whether or not
owners, not being parties to the action, can be heard in
counterclaim — Whether or not owners, because of bankrupt
cy, have status — Whether or not counterclaim for loss of
business (bookings) can be entertained in Federal Court —
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, ss. 22(1),
22(2)(o) — Federal Court Rule 1724.
The plaintiffs apply to strike out owners' counterclaim. It is
argued, firstly, that there is no law under which the Federal
Court can entertain an action for loss of business (bookings), a
civil matter. Also, plaintiffs argue that the owners cannot be
heard in counterclaim as they are not a party to this action, and
that they have no standing to counterclaim because of their
assignment in bankruptcy.
Held, the application is dismissed. The owners, although not
a party to the action, may be heard in counterclaim. The
Camosun case, relied on by plaintiffs, merely holds that no
counterclaim can be pleaded in respect of any matter not within
the jurisdiction of the Court. The bankrupt owners have stand
ing to counterclaim: not only does Rule 1724, providing that no
proceeding shall abate by reason of bankruptcy, apply, but also,
the counterclaim was launched before the assignment was
made. Further, the counterclaim is not merely for loss of
bookings; it is really an action in damages against the seamen
for breach of maritime contract and wrongful arrest of this ship
in Court. Whatever the damages might be can hardly be
anticipated and determined in a motion to strike out. It would
not be in the interest of justice to strike out the pleadings at this
stage.
Brown v. The "Alliance No. 2" (1914) 21 Ex.C.R. 176,
referred to; Gilmore v. The "Marjorie" (1908) 12 O.W.R.
749, referred to; The "Sparrows Point" v. Greater Van-
couver Water District [1951] S.C.R. 396, referred to.
Dome Petroleum Ltd. v. Hunt [1978] 1 F.C. 11, distin
guished; Bow. McLachlan & Co., Ltd. v. The "Camosun"
[1909] A.C. 597, distinguished; Wolfe v. S.S. "Clearpool"
(1920) 20 Ex.C.R. 153, distinguished.
APPLICATION.
COUNSEL:
Joseph Nuss, Q.C., and G. H. Waxman for
plaintiffs.
E. Baudry for Mid Ship Repairs.
Marc de Man for plaintiffs in T-2742-77.
B. Courtois for intervenant Pickwood.
SOLICITORS:
Ahern, Nuss & Drymer, Montreal, for
plaintiffs.
Chauvin, Marler & Baudry, Montreal, for
Mid Ship Repairs.
Stikeman, Elliott, Tamaki, Mercier & Robb,
Montreal, for plaintiffs in T-2742-77.
O'Brien, Hall & Saunders, Montreal, for
intervenant Pickwood.
The following are the reasons for order ren
dered in English by-
Dust J.: This is an application by plaintiffs to
strike out defendant's counterclaim on several
grounds, summarized for convenience as follows:
1. The action in rem is launched by members of
the defendant vessel's crew for unpaid wages,
whereas the counterclaim is from the vessel's
owners for loss in bookings. There is no federal law
under which the Federal Court can entertain an
action for loss of business, a civil matter;
2. The owners, not a party to this action, may
not be heard in counterclaim;
3. As stated in the amended defence and coun
terclaim, the defendant owners are Midwest
Cruises Panama S.A. who made an assignment for
the general benefit of creditors on August 15, 1977
to a licensed trustee. The bankrupt owners, there
fore, have no standing to counterclaim.
Firstly, as to jurisdiction: counsel for plaintiffs
referred to a recent decision, Dome Petroleum
Limited v. Hunt' wherein I held that the Federal
Court has no jurisdiction to entertain an action in
debt between two subjects based on an agreement
for the drilling of wells in the Beaufort Sea. He
read the last paragraph at page 13:
It has now been clearly established from two recent Supreme
Court of Canada decisions 2 that a prerequisite to the exercise
of jurisdiction by the Federal Court is that there be existing
and applicable federal law which can be invoked to support any
proceedings before it. It is not sufficient that there be federal
jurisdiction; there must be an Act of Parliament on which to
base the action. The Federal Court cannot grant relief in
contract, even if the enterprise contemplated by the agreement
falls within federal jurisdiction, unless there is a specific federal
Act under which the relief sought may be claimed.
Learned counsel relies also on a 1909 Privy
Council decision, Bow, McLachlan & Co., Limited
v. The "Camosun" 3 , where an action in rem was
instituted in the Exchequer Court of Canada to
enforce payment of the balance due on the mort
gage of a ship. The registered transferees of the
ship pleaded in their defence that they were en
titled to set off a sum expended by them. It was
held that the set-off really involved a cross-claim
under a contract distinct from the mortgage and,
as the Court had no general common law jurisdic
tion and the respondents had no right under admi
ralty jurisdiction to proceed either against the ship
or the appellant, that they could not enforce their
counterclaim in the Exchequer Court. Referring to
the set-off, Lord Gorell concluded [at page 613]
that "This contest should be left to be settled by a
cross-action in a Court having jurisdiction to
entertain it."
' [1978] 1 F.C. 11.
2 McNamara Construction (Western) Ltd. v. The Queen
[1977] 2 S.C.R. 654; Quebec North Shore Paper Co. v.
Canadian Pacific Ltd. [1977] 2 S.C.R. 1054.
3 [1909] A.C. 597.
This Court, of course, has concurrent original
jurisdiction under subsection 22(1) of the Federal
Court Act, in cases relating to any matter coming
within the class of subject of navigation and ship
ping, and more specifically under paragraph
22(2)(o) with respect to any claim by a crew of a
ship for wages. Defendant alleges that the same
contracts supporting the claim for wages also sus
tain the disputed counterclaim, the key paragraphs
of which read:
19. During the period the vessel was in the port of Montreal,
representatives of the International Transport Workers' Feder
ation endeavored to convince Plaintiffs to set aside their con
tractual undertakings and attempt to apply the simulated ITF
agreements;
20. With full knowledge of the effect this would have on the
financial and operational situation of Defendant, the Plaintiffs,
on May 26, 1977, walked off the Defendant ship in an illegal
work stoppage and instituted the proceedings herein and arrest
ed said ship;
21. The amounts owing to the Plaintiffs by Defendant as of the
end of May 1977, had the Plaintiffs worked until the end of
May, 1977, would have been $10,444.45;
22. Notwithstanding the fact that the Plaintiffs were offered
more than the said sum of $10,444.45 on more than one
occasion, they refused to release the ship on the basis of such
payment, thus preventing the ship from sailing;
23. As a result of the illegal and unjustified action of Plaintiffs,
the Defendant was unable to commence its summer cruising
season and to date, has lost at least $360,000.00 in bookings.
These contracts, or agreements between the
employer, Philcan Personnel Consultants Limited,
and individual crewmen, citizens of the Philip-
pines, as employees, deal with assignment of work,
salaries, duties, accommodation, benefits and ter
mination of contract including repatriation, shore
leaves and certification. There are no references to
loss of bookings by the vessel or the owners
thereof.
But this counterclaim is not merely for loss of
bookings. It is really an action in damages against
the seamen for breach of contract, a maritime
contract, and wrongful arrest of the ship in this
Court. If a vessel is arrested by reason of bad faith
or gross negligence on the part of plaintiffs, the
owners of the ship are entitled to recover damages
for such arrest (vide The "Evangelismos" (1858)
Swab. 378). Whatever these damages might be
can hardly be anticipated and determined in a
motion to strike out. Although, at first blush, a
claim for loss of bookings against seamen might
appear to be unusual and far-fetched, it is not
plain and obvious that the owners might not have a
valid claim for damages against the seamen for
either breach of maritime contract, or wrongful
arrest of the vessel, and it would not be in the
interest of justice to strike out the pleadings at this
stage.
Secondly, as to the right of owners to counter
claim in an action against the vessel: plaintiffs rely
on Wolfe v. S.S. "Clearpool" 4 , an action in rem by
stevedores to recover damages alleged to have
arisen out of a breach of their contract to load the
defendant ship. Maclennan D.L.J.A. concluded
thus at page 157:
The owner is not a party to this action and, in my opinion, this
Court had no jurisdiction to hear a claim of this kind whether
against the ship or against the owner and the matter should be
left to be settled in a Court having jurisdiction to entertain the
claim.
It appears however from the decision that the
stevedores' action was dismissed because the
Admiralty Court has no jurisdiction to enforce a
claim for a breach of contract between the steve
dores and the owners of the ship, not because the
owners had not been included as defendants.
In Brown v. The `Alliance No. 2" 5 , an action by
seamen for wages against a fishing vessel, the
owners of the vessel were given judgment in a
counterclaim against the plaintiffs for missing
gear.
(1920) 20 Ex.C.R. 153.
5 (1914) 21 Ex.C.R. 176.
The effect of the decision in the Camosun case
(supra) is merely that no counterclaim can be
pleaded in respect of any matter not within the
jurisdiction of the Court; it is not to be inferred
that a counterclaim within the jurisdiction would
be struck out merely because the names of the
owners do not appear as defendants.
In Gilmore v. The "Marjorie" 6 it was held that
proceedings in rem and in personam may be united
in the same suit for the purpose of more complete
justice. In The `Sparrows Point" v. Greater Van-
couver Water District' the vessel was allowed to
add the National Harbours Board as a co-defend
ant.
Thirdly, as to the bankrupt owners having no
status to counterclaim: it was underlined by
learned counsel for the trustees that the original
defence and counterclaim, dated August 12, 1977,
was launched before the assignment, dated August
15, 1977. Also that Rule 1724 of the Federal
Court provides that no proceeding shall abate by
reason of bankruptcy. Moreover by order of
Decary J., dated September 20, 1977, leave was
granted to Christopher H. Pickwood in his capaci
ty as trustee to the estate of Midwest Cruises
Panama S.A. to intervene in this action.
ORDER
It is hereby ordered as follows:
1. That plaintiffs' motion to strike out defend
ant's counterclaim be denied;
2. That plaintiffs' motion to dismiss all plead-
ings of, and to strike out all reference to, Midwest
Cruises Panama S.A., be denied;
3. That costs of this application go to defendant
in any event of the cause.
6 (1908) 12 O.W.R. 749.
7 [1951] S.C.R. 396.
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.