T-5141-79
The Ship C. F. Todd, The Canadian Fishing Com
pany Limited and John Katnic (Plaintiffs)
v.
The Ship Tanu Warrior, British Columbia Pack
ers Limited and Willis Crosby (Defendants)
Trial Division, Addy J.—Vancouver, January 18
and February 10, 1982.
Maritime law — Practice — Motion to add counterclaim to
statement of defence notwithstanding that limitation period
expired — B.C. Limitation Act provides that expiry of limita
tion period does not bar proceedings by counterclaim — S. 38
of Federal Court Act provides that laws relating to limitation
of actions in force in any province apply to proceedings in
Federal Court in respect of cause of action arising in such
province except as expressly provided in any other Act — S.
645 of Canada Shipping Act imposes two-year limitation
period on claims for damages to vessel by another vessel, but
gives Court discretion to extend such period — Collision
occurred in B.C. territorial waters — Prior to commencement
of action, defendants advised plaintiffs of intention to counter
claim for damages should action be instituted — Two months
after action was started statement of defence merely denying
negligence was filed — Full disclosure of damage to defendant
vessel was provided at examinations for discovery held several
months prior to expiry of limitation period — During settle
ment negotiations, defendants maintained position that both
parties were negligent — More than a year after expiry of
limitation period, plaintiffs indicated intention to rely on
two-year limitation period in s. 645 of Canada Shipping Act
— B.C. Limitation Act does not apply — Principles governing
exercise of discretion to extend time pursuant to s. 645 of
Canada Shipping Act — Court may consider general circum
stances of case — Motion allowed — Federal Court Act,
R.S.C. 1970 (2nd Supp.), c. 10, s. 38 — Canada Shipping Act,
R.S.C. 1970, c. S-9, s. 645(1),(2) — Limitation Act, R.S.B.C.
1979, c. 236, s. 4(1)(a).
Defendants apply to amend statement of defence by adding a
counterclaim. The two-year limitation period for instituting an
action has expired. The collision between the two ships
occurred in November 1978 within the territorial waters of
British Columbia. In August 1979 the solicitors for the defend
ants were advised that the plaintiffs intended to institute action,
and they replied that in such event the defendants would
counterclaim for their damages. Action was instituted in Octo-
ber 1979 and a statement of defence merely denying negligence
was filed in December 1979. Examinations for discovery were
held in April 1980, and the defendants disclosed full details of
damage to their ship. During settlement negotiations the
defendants indicated that there was negligence on the part of
both parties and that liability would be apportioned by any
Court hearing the matter. The limitation period expired in
November 1980. In December 1981, after continuing negotia
tions, the plaintiffs indicated that they intended to rely on the
two-year limitation period provided for in subsection 645(1) of
the Canada Shipping Act. The defendants submit that since the
accident occurred within the territorial waters of British
Columbia, section 4 of the Limitation Act of the Province
should apply. Section 4 provides that the expiration of the
limitation period does not apply to proceedings by counter
claim. Section 38 of the Federal Court Act provides that
"Except as expressly provided by any other Act" the laws
relating to limitation of actions in force in any province apply
to proceedings in the Federal Court in respect of any cause of
action arising in such province. Subsection 645(1) of the
Canada Shipping Act provides that no action for damages is
maintainable against a vessel unless proceedings are started
within two years from the date when the damage was caused.
However, subsection 645(2) provides that the Court may
extend such period to such extent and on such conditions as it
thinks fit.
Held, the motion is granted. The British Columbia Limita
tion Act does not apply to the case at bar since there is another
Act, namely section 645 of the Canada Shipping Act which
provides for prescriptions and limitations of actions in the
present instance. The question arises as to what general princi
ple should govern the decision on whether time should be
extended pursuant to subsection 645(2). The Courts have not
followed a strict evidentiary rule of requiring a party seeking
relief from limitations, to first show a real reason other than
mistake, inadvertence or ignorance, before considering the
equities between the parties and all the circumstances of the
case. They have proceeded to take the general circumstances
into consideration and, where there appeared to be no real
prejudice to the party being sued (other than a loss of his right
to insist on the limitation) which could not be corrected by
special conditions in the order extending time, and where,
having regard to all the circumstances, it appeared to be in the
best interests of justice that time be extended, the order was
granted, notwithstanding the fact that the basic reason for
delay might have been inadvertence, mistake or ignorance of
the law. As to the general circumstances involved in the case at
bar, it was strictly by inadvertence that the statement of
defence did not contain a counterclaim. The plaintiffs, on the
other hand, have never knowingly induced the defendants to
allow time to run out. The plaintiffs would suffer no prejudice
which could not be compensated for by costs, other than their
right to insist on the two-year limitation. From the pleadings
pertaining to the proposed counterclaim, if some of the allega
tions are established, it would appear that the defendants would
have a valid counterclaim at law against the plaintiffs and
might well be seriously prejudiced if prevented from counter
claiming. The plaintiffs were, even before the action was
instituted, advised that the defendants, should they be faced
with a claim, intended to counterclaim for their own damages.
During the negotiations for settlement previous to the expiry of
the limitation period, the plaintiffs were advised that the
defendants were expecting a division of liability. The plaintiffs'
solicitors might not even have been aware that a counterclaim
had not been included in the pleadings. Examinations for
discovery as to the extent and details of the amount of the
damages of the defendants were held and surveyors' reports
covering same were produced several months before the limita
tion period expired.
A. G. Kelloway v. Engineering Consultants Limited
[1972] F.C. 932, applied. The Llandovery Castle [1920]
P. 119, considered. Sarnia Steamships Ltd. v. Dominion
Foundries and Steel Ltd. [1948] Ex.C.R. 253, referred to.
Heath v. Kane (No. 2), Hartikainen v. Kane (No. 2) (1976)
15 O.R. (2d) 262, referred to. The Arraiz (1924) 132 L.T.
715, referred to. Chemainus Towing Co. Ltd. v. The Ship
"Capetan Yiannis" [1966] Ex.C.R. 717, referred to. Phi-
lipp Brothers v. Torm, AIS, DMS, Cast Lines (1979) 105
D.L.R. (3d) 763 (F.C.T.D.), discussed. Hijos de Romulo
Torrents Albert S.A. v. The Ship "Star Blackford" [1979]
2 F.C. 109, discussed.
MOTION.
COUNSEL:
Michael J. Bird for plaintiffs.
J. J. L. Hunter for defendants.
SOLICITORS:
Owen, Bird, Vancouver, for plaintiffs.
Davis & Company, Vancouver, for defend
ants.
The following are the reasons for order ren
dered in English by
ADDY J.: In this action the two ships are fishing
vessels and were involved in a collision at sea.
The defendants are applying for leave to amend
their statement of defence by adding thereto a
counterclaim. The two-year limitation for institut
ing an action has expired. Relevant facts to the
issue are listed chronologically as follows:
(1) The collision occurred on the 2nd of Novem-
ber 1978 within the territorial waters of British
Columbia, namely Deep Water Bay.
(2) In August 1979 the solicitors for the defend
ants were advised that the plaintiffs intended to
institute action and, on the 8th of August 1979
they wrote to the solicitors for the plaintiffs
stating that if action was instituted, they had
received instructions to accept service of the
statement of claim and to counterclaim for their
clients' damages. They also stated that, if the
defendant vessel was arrested, they would in
turn be causing the plaintiff vessel to be
arrested.
(3) Action was instituted by the plaintiffs on the
24th of October 1979 and a statement of
defence was filed two months later on the 31st
of December 1979.
(4) There was no allegation of negligence on the
part of the plaintiffs in the statement of defence
but merely a denial of negligence on the part of
the defendants. The proposed amendment seeks
to add allegations of negligence against the
plaintiffs and, of course a claim for damages on
the counterclaim. It also includes an alternative
plea of contributory negligence in the main
action.
(5) Lists of documents were filed and exchanged
by the parties one month later.
(6) Examinations for discovery of both parties
were held in April 1980. On the discovery of the
defendants full details of damages to the defend
ant ship were requested and obtained and the
surveyors' reports were examined. The plaintiffs
claim however that these details were requested
solely in order to determine the nature and
location of the damage to the defendant ship
with a view to establishing precisely the point of
impact and the relative positions of the vessels at
moment of impact and not in order to examine
the amounts of any possible claim for damages
by the defendants.
(7) Previous to the expiry of the limitation
period on the 1st of November 1980, several
letters were exchanged between the parties with
the view to possible settlement. In that corre
spondence the solicitors for the defendants on
the 30th of July 1980 indicated that there was
negligence on the part of both parties and that
liability would be apportioned by any Court
hearing the matter. The letter also contained the
following statement "I am prepared to recom
mend that we settle the case on a % [percentage
blanked out for purposes of this motion] distri
bution of liability upon the damage amounts
that have been approved by our respective sur
veyors." After acknowledging receipt of that
letter on the 19th of August 1980 the solicitors
for the plaintiffs replied that they would be
submitting the matter to their clients.
(8) The two-year limitation period expired on
the 1st of November 1980.
(9) On the 24th of February, 1981 the plaintiffs
finally replied that they did not agree that the
liability would be apportioned by any Court but,
in order to avoid further litigation offered to
settle on the basis of a certain percentage of
liability. That letter however only mentioned the
damages claimed by the plaintiffs and made no
mention of the damages claimed by the
defendants.
(10) After acknowledging the last-mentioned
letter the solicitors for the defendants wrote on
the 5th of June 1981, offering to settle both
claims on the basis of a certain apportionment
of liability. The damages of both parties were
specifically mentioned therein. No answer
having been received, a request was sent out on
the 9th of September 1981 and on the 14th of
September the solicitors for the plaintiffs replied
that they were seeking instructions from their
clients before replying.
(11) A further request by the defendants for
reply was sent on the 16th of November 1981
and a further reply that they were still awaiting
instructions was sent by the solicitors for the
plaintiffs on the 18th of November 1981. Final
ly, on the 22nd of December 1981 they wrote
refusing the offer of the 5th of June 1981 and
for the first time indicated to the defendants
that no separate action or counterclaim had
been instituted and that they intended to rely on
the two-year limitation period provided for in
subsection 645(1) of the Canada Shipping Act,
R.S.C. 1970, c. S-9, to contest any claim for
damages on the part of the defendants.
In the first place the defendants argued that, as
the accident occurred within the territorial waters
of British Columbia section 4 of the Limitation
Act of that Province would apply (R.S.B.C. 1979,
c. 236). Paragraph 4(1)(a) of that Act reads as
follows:
4. (1) Where an action to which this or any other Act applies
has been commenced, the lapse of time limited for bringing an
action is no bar to
(a) proceedings by counterclaim, including the adding of a
new party as a defendant by counterclaim;
Subsection 38(1) of the Federal Court Act, R.S.C.
1970 (2nd Supp.), c. 10, provides:
38. (1) Except as expressly provided by any other Act, the
laws relating to prescription and the limitation of actions in
force in any province between subject and subject apply to any
proceedings in the Court in respect of any cause of action
arising in such province ....
The opening words of the above enactment are
unequivocal and must be given effect to. There is
"any other Act" namely section 645 of the Canada
Shipping Act which provides for prescriptions and
limitations of actions in the present instance and
therefore the British Columbia Limitation Act
does not apply to the case at bar. The relevant
parts of section 645 of the Canada Shipping Act
read as follows:
645. (1) No action is maintainable to enforce any claim ...
against a vessel or its owners in respect of any damage or loss to
another vessel, ... caused by the fault of the former vessel,
whether such vessel is wholly or partly in fault, unless proceed
ings therein are commenced within two years from the date
when the damage or loss or injury was caused ....
(2) Any court having jurisdiction to deal with an action to
which this section relates may, in accordance with the rules of
court, extend any such period, to such extent and on such
conditions as it thinks fit.....
There is no doubt that, at law, a counterclaim is
in essence a separate action and, generally speak
ing, is subject to the same rules regarding limita
tions as any ordinary action. There are however
some exceptions such as where the main action is
instituted at the very last minute and the defend
ant who had instituted no counterclaim under a
mistaken and justifiable belief that the plaintiff
was not intending to sue, is by reason of the last
minute action of the plaintiff unable to sue within
the statutory limitation period. Courts in such a
case will normally not enforce limitations where
the defendant acts promptly after receiving a
notice of the plaintiff's claim, even where the
limitation statute is very strict and does not, as in
the case of subsection 645(2) of the Canada Ship
ping Act, expressly give the Court the power to
extend the limitation.
The question therefore arises as to what general
principle should govern my decision on whether
time should be extended pursuant to subsection
645(2).
The English cases under a similar provision in
their statute originally seemed to have proceeded
on the principle that the person seeking the relief
was obliged first of all to show a very good reason
why the statute should not apply and, once that
had been established, the Court would only then
consider the equities between the parties and all
the other circumstances of the case before deciding
whether time should be extended.
However a somewhat more lenient and equitable
rule was expressed in the case of The Llandovery
Castle [1920] P. 119 as follows [at page 125]:
... the discretion can only be used in favour of a plaintiff it
there are special circumstances which create a real reason why
the statutory limitation should not take effect.
It is to be noted that the consideration of a real or
a justifiable reason does not attach solely to the
reason for lack of action on the part of the party
entitled to sue, but to special circumstances gener
ally. The rule in the Llandovery case was approved
by Barlow D.J.A. in Sarnia Steamships Ltd. v.
Dominion Foundries and Steel Ltd. [1948]
Ex.C.R. 253, and expressly applied by Estey
C.J.H.C. [as he then was] in the case of Heath v.
Kane (No. 2), Hartikainen v. Kane (No. 2) (1976)
15 O.R. (2d) 262.
In the case of Philipp Brothers v. Torm, AIS,
DIS, Cast Lines (1979) 105 D.L.R. (3d) 763
(F.C.T.D.), my brother Walsh J. allowed the addi
tion of an entirely new plaintiff after the limitation
period and relied on a decision of the Federal
Court of Appeal in the case of Hijos de Romulo
Torrents Albert S.A. v. The Ship "Star Black-
ford" [1979] 2 F.C. 109, (1979) 26 N.R. 85 where
three new plaintiffs were added after the prescrip
tion period had expired. Both those cases were
purportedly decided pursuant to Rule 425 which
specifically deals with the correcting of the name
of a party, even where such correction entails the
substitution of a new party. However, in neither of
these cases do the facts seem to me to meet the
provisions of that Rule, if interpreted literally, for
it is difficult to understand how the adding of a
completely new party, never in any way described,
alluded to or mistakenly described by another
party's name, can be considered as a correction of
a misnomer. The amendments were granted on the
basis that the party being sued (the defendants in
those cases) would not suffer any prejudice other
than the loss of the limitations defence, and was
not misled in any way as to the damages for which
a claim is being made. As Walsh J. stated at page
766 of the above-mentioned report of the Philipp
Brothers v. Torm case:
On the basis of this jurisprudence which goes far to decide on
an equitable basis claims which might otherwise be defeated
due to an error made by the plaintiff which does not really
prejudice defendant who is fully aware of all the facts giving
rise to the action, I grant plaintiff's motion to amend the style
of cause by adding B.S. Livingstone & Co. Inc. as a plaintiff
herein; costs against plaintiff in any event of the cause.
In the previous case of A. G. Kelloway v. Engi
neering Consultants Limited [ 1972] F.C. 932 he
granted relief from the limitation imposed by sub
section 536(1) of the Canada Shipping Act for
salvage services, pursuant to the power granted to
the Court to extend time under subsection 536(2).
The reason why the action was not instituted in
time was "pressure of other work" on the plain
tiffs' solicitor.
The wording of subsection 536(2) under which
Mr. Justice Walsh was proceeding is absolutely
identical to subsection 645(2) under which the
present application is brought. At page 934 of the
above-mentioned report he states:
... but that the first part of section 536(2) gives the widest
possible discretion to the court permitting it to extend the two
year period within which section 536(1) requires the proceed
ings to be commenced "to such extent and on such conditions
as it thinks fit" ....
He was adopting the language of Pollock M.R. in
the case of The Arraiz (1924) 132 L.T. 715 at
716, which was also quoted with approval by
Sheppard D.J. in Chemainus Towing Co. Ltd. v.
The Ship "Capetan Yiannis" [1966] Ex.C.R. 717.
At page 937 of that report Mr. Justice Walsh
also states that he does not find "sufficient reason"
as outlined in the English cases but feels that he is
not bound to so find and that the Court's discre
tion is unfettered in each individual case. He does
however go on to state three reasons on which he
clearly bases his decision to grant the extension
requested and it is evident that he does consider
the combination of those circumstances to be suffi
cient reason or sufficient justification for extend
ing the time. The three reasons were: the fact that
a prima facie case of entitlement would appear to
follow from the pleadings, the fact that the defend
ants were at all times aware that a claim could be
made and would in fact be suffering no prejudice
while the plaintiffs, on the other hand would, if the
motion were denied, and, finally the fact that the
proposed defendants had not appeared on the
hearing of the application.
In deciding whether there exists a real reason,
the Courts in the above cases have not followed a
strict evidentiary rule of requiring a party seeking
relief from limitations, to first of all show a real
reason other than mistake, inadvertence or igno
rance, before considering the equities between the
parties and all the circumstances of the case. They
have proceeded to take the general circumstances
into consideration and, where there appeared to be
no real prejudice to the party being sued (other
than a loss of his right to insist on the limitation)
which could not be corrected by special conditions
in the order extending time, and where, having
regard to all the circumstances, it appeared to be
in the best interests of justice that time be extend
ed, the order was granted, notwithstanding the fact
that the basic reason for delay might have been
inadvertence, mistake or ignorance of the law.
As to the general circumstances involved in the
case at bar, it is common ground that it was
strictly by inadvertence that the statement of
defence did not contain a counterclaim. The plain
tiffs on the other hand have never knowingly
induced the defendants to allow time to run out.
The plaintiffs would suffer no prejudice which
could not be compensated for by costs, other than
their right to insist on the two-year limitation.
From the pleadings pertaining to the proposed
counterclaim, if the allegations or at least some of
them are established, it would appear that the
defendants would have a valid counterclaim at law
against the plaintiffs and might well be seriously
prejudiced if prevented from counterclaiming. The
plaintiffs were, even before the action was institut
ed, advised that the defendants, should they be
faced with a claim, intended to counterclaim for
their own damages.
During the negotiations for settlement previous
to the expiry of the limitation period, the plaintiffs
were advised that the defendants were expecting a
division of liability and an apportionment of the
respective damages of the parties. On reading the
specific detailed offer of settlement after expira
tion of the limitation, it appears from the repeated
replies of the plaintiffs' solicitors to the effect that
they were awaiting instructions from their clients
as to the offer of settlement, that they themselves
might not have even been aware or at least were no
longer aware at that time, that a counterclaim had
not been included in the pleadings. Examinations
for discovery as to the extent and details of the
amount of the damages of the defendants were
held and surveyors' reports covering same were
produced several months before the limitation
period expired. Had the action been instituted in
the Supreme Court of British Columbia there
would have been no obstacle at all to instituting
the counterclaim.
Having regard to the above circumstances the
motion will be granted under the following
conditions:
1) that the proposed amended statement of defence and coun
terclaim be filed and served within 10 days from the date of
this order;
2) that the defendants pay the costs of this motion in any event
of the cause;
3) that should the plaintiffs require further examinations for
discovery of the defendants, then the defendants shall conform
to the request if the same is justified, and all costs of such
examinations, including counsel fee thereon shall be at the
expense of the defendants in any event of the cause.
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.