[2001] 2 F.C. 551
A-924-97
Beston Chemical Corporation, Inc. (Appellant)
v.
Paramount Enterprises International, Inc. (Respondent)
A-929-97
China Ocean Shipping (Group) Co. (Cosco), Guangzhou Ocean Shipping Company (Cosco Guangzhou) and The Ship An Xin Jiang (Appellants) (Defendants)
v.
Paramount Enterprises International, Inc. (Respondent) (Plaintiff)
Indexed as: Paramount Enterprises International, Inc. v. An Xin Jiang (The) (C.A.)
Court of Appeal, Décary, Létourneau and Noël JJ.A. —Québec, October 18; Ottawa, December 15, 2000.
Federal Court Jurisdiction — Trial Division — Shipper agreeing with charterer under charter-party to load cargo on ship Len Speer, to transport it from China to Quebec — Shipper deciding to entrust transport to another shipowner, to load cargo on another ship, An Xin Jiang — Charterer filing statement of claim in rem, in personam for breach of charter-party — Warrant of arrest issued against cargo, ship An Xin Jiang — Action in rem not permitted against ship, cargo — In rem proceeding only applying to ship, cargo subject of action over which Court has jurisdiction — Under Federal Court Act, s. 43(2), action in rem only possible in field of jurisdiction covered by Act, s. 22, if “subject” of action ship, cargo — Ship An Xin Jiang not subject of contract relied on by charterer — No nexus, causal relationship between action, ship and cargo.
Maritime Law — Contracts — Charterer filing statement of claim in rem, in personam against shipper for breach of charter-party — Warrant of arrest issued against cargo, ship — Charterer relying on Court’s maritime jurisdiction in Federal Court Act, s. 22(2)(i) — Whether ship, cargo “subject”, “cause” of action — Ship arrested not subject of contract relied on by charterer — No nexus between action, ship and cargo arrested — Latter not “subject” of action.
These were two appeals and a cross-appeal from a Trial Division decision finding that the Federal Court could not entertain an action in rem in respect of the ship arrested but that it could in respect of the cargo which was also arrested. In March 1997, the shipper, Beston Chemical Corporation, Inc., agreed with the charterer, Paramount Enterprises International, Inc., under a charter-party in the Conlinebooking form, to load explosives on board the ship Len Speer and to transport them from China to the port of Grande-Anse in Quebec. Shortly after, Beston informed Paramount that the cargo would not be loaded on the Len Speer and that the carriage of the goods would be entrusted to another shipowner, Cosco, and another ship, the An Xin Jiang. Paramount filed a statement of claim in rem and in personam alleging a breach of the charter-party and wrongful interference by a third party with the charter-party. A warrant of arrest was accordingly issued against the cargo and the ship An Xin Jiang. To avoid arrest of the ship, Cosco gave a letter of undertaking replaced later by a bail issued by the Bank of Nova Scotia. Two months later, it filed a motion, under paragraphs 419(1)(a), (c) and (f) of the old Federal Court Rules, to strike out the statement of claim in rem against the ship and the cargo, to set aside the warrant of arrest and to return to Cosco for cancellation the letter of undertaking issued on June 6, 1997. The issue on appeal was whether the Federal Court, in exercising its maritime jurisdiction, could entertain an action in rem in respect of the ship and cargo which had been arrested.
Held, the appeals should be allowed, the cross-appeal should be dismissed.
A motion to strike based on paragraph 419(1)(a) can be allowed only if it is plain and obvious that the pleading discloses no reasonable cause of action. It was argued that an action in rem is not permitted when the property arrested is not the “subject” of the action within the meaning of subsection 43(2) of the Federal Court Act. The Court’s maritime jurisdiction relied on by Paramount is found in paragraph 22(2)(i) of the Act, namely “any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise”. The words “in rem” describe not the “maritime jurisdiction” of the Court, but a means of exercising that jurisdiction. It is the proceeding rather than the cause of action which was at issue. An action in rem may be brought against a ship or a cargo, but it must still be determined in what circumstances it can be resorted to. The in rem proceeding in the case at bar could only apply to a ship or cargo which is the subject of an action over which the Court has jurisdiction. Subsection 43(2) of the Act does not permit an action in every case where the Court has jurisdiction under section 22, but only if the “subject” of the action is the ship or cargo. It must be possible to say that it is the use of this ship or the carriage of this cargo that justified the action in rem brought against the property arrested. The An Xin Jiang was not the subject of the contract relied on by Paramount. It did not as such cause any damage, receive any benefit nor was it involved in any incident relating to the action. The delict of interference allegedly caused by Cosco was in reality related to the breach of a charter-party. Allowing arrest of the ship, An Xin Jiang, would be to allow the arrest of any ship belonging to a defendant regardless of whether a ship was the subject of the action. There was no nexus or causal relationship between the action and the ship and cargo arrested such that it can be said that the ship or cargo is the “subject” of the action. If there was a nexus between the action and the ship and cargo arrested, it was merely incidental or fortuitous.
Paramount objected to the Court ruling on the validity of the bail, arguing that this guarantee is not a “pleading” which may be struck out under Rule 419. At trial, the Court may usually, in connection with a motion to strike, order the quashing of a warrant of arrest and bail without questioning whether these are “pleadings”. Although the bail originates from a third party and reflects contractual arrangements which are not part of the pleadings, it is nevertheless an integral part of an action in rem. Once the action against the ship collapses, the action against the bail must fail also and the latter must be returned to the person who gave it just as the ship would have been returned to its owner. Paramount’s claim that the bail prepared in accordance with the Rules of the Court could extend to the action in personam is inconsistent with the procedure laid down by those Rules.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Administration of Justice Act, 1956 (U.K.), 1956, c. 46.
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10.
Federal Court Act, R.S.C., 1985, c. F-7, ss. 2 “Canadian maritime law”, 22, 43 (as am. by S.C. 1990, c. 8, s. 12).
Federal Court Rules, C.R.C., c. 663, RR. 419, 1002 (as am. by SOR/79-57, s. 17), 1003 (as am. idem, s. 18; 92-726, s. 12; 94-41, s. 7), 1005 (as am. by SOR/94-41, s. 8), 1006 (as am. by SOR/79-57, s. 19), Form 35.
Federal Court Rules, 1998, SOR/98-106, rr. 477, 481, 486, 487, Form 486A.
Revised Regulation (1984) under the Insurance (Motor Vehicle) Act, B.C. Reg. 447/83, s. 79(1) (as am. by B.C. Reg. 335/84, Sch., item 19; 379/85, Sch., item 31).
Supreme Court Act, 1981 (U.K.), 1981, c. 54.
CASES JUDICIALLY CONSIDERED
APPLIED:
Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405; (1995), 127 D.L.R. (4th) 618; [1995] 9 W.W.R. 305; 10 B.C.L.R. (3d) 1; 31 C.C.L.I. (2d) 1; [1995] I.L.R. 1-3232; 13 M.V.R. (3d) 302; 186 N.R. 150.
CONSIDERED:
Margem Chartering Co. Inc. v. Bocsa (The), [1997] 2 F.C. 1001; (1997), 127 F.T.R. 161 (T.D.).
REFERRED TO:
Paramount Enterprises International Inc. v. An Xin Jiang (The) (1997), 146 F.T.R. 161 (F.C.T.D.); Mount Royal/Walsh Inc. v. Jensen Star (The), [1990] 1 F.C. 199 (1989), 99 N.R. 42 (C.A.); Cormorant Bulk-Carriers Inc. v. Canficorp (Overseas Projects) Ltd. (1984), 54 N.R. 66 (F.C.A.); Armada Lines Ltd. v. Chaleur Fertilizers Ltd., [1997] 2 S.C.R. 617; (1997), 148 D.L.R. (4th) 217; 213 N.R. 228; Corostel Trading v. The Catalina (1986), 6 F.T.R. 233 (F.C.T.D.); Industrie Chimique Italia Centrale S.P.A. v. The Choko Star (1987), 10 F.T.R. 258 (F.C.T.D.); Domtar Inc. v. Lineas De Navigation Gema S.A., [1997] F.C.J. No. 447 (T.D.) (QL); Joint Stock Society “Oceangeotechnology” v. 1201 (The), [1994] 2 F.C. 265 (1994), 72 F.T.R. 211 (T.D.); Scandia Shipping Agencies Inc. v. The Alam Veracruz (1997), 148 F.T.R. 164 (F.C.T.D.); Westview Sable Fish Co. et al. v. The Ship “Neekis” (1986), 31 D.L.R. (4th) 709; 6 F.T.R. 235 (F.C.T.D.); Antares Shipping Corp. v. The Ship “Capricorn”, [1977] 2 S.C.R. 422; (1976), 65 D.L.R. (3d) 105; 7 N.R. 518; Freighters (Steamship Agents) Co. v. The Ship “Number Four”, [1983] 1 F.C. 852 (1982), 48 N.R. 321 (C.A.).
AUTHORS CITED
Oxford English Dictionary, Vol. X, Oxford: Clarendon Press, 1970. “subject”.
Oxford Hachette Dictionary, English-French, Oxford Superlex Three in One, CD-ROM (version 1.1), Oxford University Press, 1994-1996.
APPEALS and CROSS-APPEAL from a Trial Division decision ((1997), 147 F.T.R. 162) finding that the Federal Court, in exercising its maritime jurisdiction, could not entertain an action in rem in respect of the ship arrested, but that it could in respect of the cargo. Appeals allowed, cross-appeal dismissed.
A-924-97
APPEARANCES:
John G. O’Connor for appellant.
Louis Buteau for respondent.
SOLICITORS OF RECORD:
Langlois, Gaudreau, Québec, for appellant.
Sproule, Castonguay, Pollack, Montréal, for respondent.
A-929-97
APPEARANCES:
Guy Vaillancourt for appellants (defendants).
Louis Buteau for respondent (plaintiff).
SOLICITORS OF RECORD:
Guy Vaillancourt, Québec, for appellants (defendants).
Sproule, Castonguay, Pollack, Montréal, for respondent (plaintiff).
The following is the English version of the reasons for judgment rendered by
[1] Décary J.A.: The purpose of these appeals is to determine whether the Federal Court, in exercising its maritime jurisdiction, may entertain an action in rem in respect of the ship and cargo which were arrested. In a decision published at (1997), 146 F.T.R. 161 (F.C.T.D.), the Prothonotary Morneau concluded that it could not; in a decision published at (1997), 147 F.T.R. 162 (F.C.T.D.), Tremblay-Lamer J. found that it could not in respect of the ship but that it could in respect of the cargo. For the reasons that follow, I consider that the action in rem was not permitted against either the ship or the cargo.
FACTS
[2] The facts are particularly straightforward as we are at the stage of an application to strike made pursuant to the old Rule 419 of the Federal Court Rules, C.R.C., c. 663 (the Rules). They are as follows, reduced to the bare essentials.
[3] In March 1997 the charterer Paramount Enterprises International Inc. (Paramount) and the shipper Beston Chemical Corporation Inc., China North Chemical Industries Corporation and China Xinshidai Company, (all three hereinafter referred to as Beston) agreed on a charter-party in the Conlinebooking form. Under that charter-party, Beston was to load lots of explosives on board the ship Len Speer and transport them from the port of Tianjin-Xingang in China to the port of Grande-Anse in Quebec.
[4] Paramount made the necessary arrangements for its ship the Len Speer to arrive at the loading port between April 10 and 12, 1997. In the meantime, Beston informed Paramount on March 25, 1997 that the cargo would not be loaded on the Len Speer and that the transport would be entrusted instead to another shipowner China Ocean Shipping (Group) Co. (Cosco) and Guangzhou Ocean Shipping Company (Cosco Guangzhou), (both referred to hereinafter as Cosco) and made on a ship owned by that other shipowner, the An Xin Jiang.
[5] On May 9, 1997 Paramount filed a statement of claim in rem and in personam with the Registry of this Court. This statement of claim alleged two causes of action, one contractual in nature—a breach of the charter-party, hence the action in personam against Beston and in rem against the cargo allegedly belonging to it—and the other delictual in nature—the delict of wrongful interference by a third party with the charter-party, hence the delictual action in personam against Cosco and in rem against its ship An Xin Jiang. A warrant of arrest was accordingly issued the same day against the cargo and against the ship An Xin Jiang.
[6] To avoid arrest of the ship, Cosco on June 6, 1997 gave a letter of undertaking issued by the United Kingdom Mutual Steamship Assurance Association (Bermuda) Limited and replaced two days later by a bail issued by the Bank of Nova Scotia.
[7] On August 20, 1997 Cosco filed a motion pursuant to paragraphs 419(1)(a), (c) and (f) of the old Rules. The conclusions sought by that motion are as follows: to strike out the statement of claim in rem against the ship and against the cargo, set aside the warrant of arrest and return to Cosco for cancellation the letter of undertaking issued on June 6, 1997 or any other guarantee which may have been substituted therefor. As I have already said, the Prothonotary allowed the application in its entirety; the Judge refused to strike the action in rem against the cargo and to cancel the letter of guarantee. Beston and Cosco appealed the Judge’s decision to authorize continuance of the action in rem against the cargo (appeals A-924-97 and A-929-97). Paramount filed a cross-appeal in A-924-97 against the Judge’s decision to terminate the action in rem against the ship. These reasons will dispose of both appeals and of the cross-appeal.
THE APPLICATION TO STRIKE
[8] The debate before the Prothonotary and before the Judge appears to have focussed on paragraph 419(1)(a) of the Rules, namely the absence of a reasonable cause of action, although Cosco’s motion was also based on paragraph 419(1)(c), namely the fact that the action in rem was “scandalous, frivolous or vexatious”, and on paragraph 419(1)(f), namely the fact that the action in rem was “otherwise an abuse of the process of the Court”. Paramount argued that the allegations involving paragraphs 419(1)(c) and (f) were discontinued before the Prothonotary and not argued before the Judge. Reading the reasons for judgment of each one indicates to me that the discussion in fact turned on paragraph 419(1)(a). In any event, in view of the conclusion at which I have arrived, it would not have been necessary for me to rule on paragraphs 419(1)(c) and (f).
[9] It is well established that a motion to strike based on paragraph 419(1)(a) can only be allowed if it is plain and obvious that the pleading in question discloses no reasonable cause of action. What is alleged here is that the action in rem is not permitted when the property arrested, in the circumstances described in the statement of claim and assumed to be true, is not the “subject” of the action within the meaning of subsection 43(2) of the Federal Court Act, R.S.C., 1985, c. F-7, as amended (the Act). That is a question to which the Court must give a positive or negative answer. Depending on the answer given, it will be “plain and obvious” that an action in rem is, or is not, permitted in the circumstances.
[10] The respondent Paramount argued at the hearing that the Court should assume that U.S. law applies in the case at bar since there was an allegation to this effect in the statement of claim. In my opinion, that is an undue extension of the rule that the facts alleged are assumed to be true in a motion to strike based on paragraph 419(1)(a) of the Rules. It is true that in evidentiary terms foreign law is a “fact” which the party alleging it must prove, but I do not see how the Court could decide the application at bar on the basis of U.S. law which it is not deemed to know ex officio and the specific content of which for the purposes of this case was not even defined in the motion. For the purposes of applying paragraph 419(1)(a), the allegation that foreign law applies is in my view comparable to an allegation of law that is not proven and which the Court does not have to take into account.
APPLICABLE LEGISLATION
[11] This appeal turns primarily on section 22 of the Act, which defines the Court’s maritime jurisdiction, and section 43 [as am. by S.C. 1990, c. 8, s. 12], which defines how that jurisdiction will be exercised. I reproduce only the most relevant portions of those sections.
22. (1) The Trial Division has concurrent original jurisdiction, between subject and subject as well as otherwise, in all cases in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, except to the extent that jurisdiction has been otherwise specially assigned.
(2) Without limiting the generality of subsection (1), it is hereby declared for greater certainty that the Trial Division has jurisdiction with respect to any one or more of the following:
…
(i) any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise;
…
43. (1) Subject to subsection (4), the jurisdiction conferred on the Court by section 22 may in all cases be exercised in personam.
(2) Subject to subsection (3), the jurisdiction conferred on the Court by section 22 may be exercised in rem against the ship, aircraft or other property that is the subject of the action, or against any proceeds of sale thereof that have been paid into court.
(3) Notwithstanding subsection (2), the jurisdiction conferred on the Court by section 22 shall not be exercised in rem with respect to a claim mentioned in paragraph 22(2)(e), (f), (g), (h), (i), (k), (m), (n), (p), or (r), unless, at the time of the commencement of the action, the ship, aircraft or other property that is the subject of the action is beneficially owned by the person who was the beneficial owner at the time when the cause of action arose.
…
(8) The jurisdiction conferred on the Court by section 22 may be exercised in rem against any ship that, at the time the action is brought, is beneficially owned by the person who is the owner of the ship that is the subject of the action.
PRELIMINARY OBSERVATIONS
[12] The Court’s maritime jurisdiction in the case at bar is not in question. Whatever the outcome of the motion to strike, the proceeding will continue on a personal basis.
[13] Paramount admitted at trial and in its memorandum that the Court’s maritime jurisdiction, on which it was relying in the case at bar, both as to the contractual cause of action and as to the delictual cause of action, was that described in paragraph 22(2)(i), namely: “any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise”. I note in passing that Paramount did not allege that it had a maritime lien on the cargo.
[14] The use of the words “compétence en matière réelle” (“jurisdiction … in rem” in the English text) in section 43 is open to question. Strictly speaking there is no “compétence en matière réelle” or “compétence in rem”. As is made clear by the English wording of subsection 43(2) and the French and English versions of subsection 43(3), the phrase “in rem” describes not the jurisdiction of the Court, which is the “maritime jurisdiction” described in section 22, but a means of exercising that jurisdiction. Rule 1002 [as am. by SOR/79-57, s. 17] (now rule 477 [Federal Court Rules, 1998, SOR/98-106]) also states that “Actions shall be of two kinds, actions in rem and actions in personam”. I will accordingly use the phrase “action in rem” (action in rem) to describe the procedure used, an expression which in any case I prefer to “action en matière réelle” or “action réelle”, which does not convey all the background and scope of this proceeding in maritime law.
[15] When Cosco alleged that the statement of claim “disclosed no reasonable cause of action” within the meaning of paragraph 419(1)(a), it essentially alleged that the proceeding used, namely the action in rem, could not be used in the circumstances and that accordingly that proceeding should be struck out forthwith. It is the proceeding rather than the cause of action which is at issue here, and it has always been possible to use paragraph 419(1)(a) to dispose of an action or a part of an action that is doomed to failure, whatever its merits may be, simply because the proceeding used is not authorized by the statute.
[16] It is well settled that in using the words “other property” (“autres biens”) in subsection 43(2) Parliament intended to refer among other things to a cargo. An action in rem may therefore be brought against a ship or against a cargo. It must still be determined, and that is the subject of the dispute, in what circumstances such an action may be brought against a ship or against a cargo.
“SUBJECT” OR “CAUSE” OF ACTION
[17] The application to strike will be allowed if it is established that the ship and cargo are not the subject of the action within the meaning of subsection 43(2), in the context of an action “arising out of any agreement relating to the carriage of goods in or on a ship … whether by charter party or otherwise” (paragraph 22(2)(i) of the Act). It is not possible to separate procedure from jurisdiction and increase by the procedure used the jurisdiction that would otherwise devolve on the Court. The in rem proceeding in the case at bar can only apply to a ship or a cargo which is the subject of an action over which the Court has jurisdiction. Thus, although the words “action portant sur” in subsection 43(2) of the Act, and still more in the English wording, “the subject of the action”, are the key words which the Court must interpret, we have to examine them in terms of the field of jurisdiction applicable in a specific case.
[18] I said that I prefer the English wording, “the subject of the action”, to the French one, “action portant sur”, because in subsection 43(3) the same English phrase is rendered in French by “navire […] en cause”. The common feature of the variants in the French versions is, it seems to me, that this provision applies to the ship or cargo which is the subject or cause of the action. I note that according to the Oxford Hachette Dictionary, English-French, Oxford Superlex Three in One, CD-ROM (version 1.1), Oxford University Press, 1994-1996, the word “subject” in this context is translated by “objet”. While I am dealing with dictionaries, I should say at once that the word “subject” is defined inter alia in The Oxford English Dictionary, Vol. X, Oxford, Clarendon Press, 1970, as “9. A thing or person giving rise to specified feeling, action, etc.; a ground, a motive, a cause”.
[19] Counsel for the appellants dwelt at length on the concept of “Canadian maritime law” as defined in section 2, on the background to the action in rem, on the relationship between an action in rem against the cargo and a maritime lien and on the Supreme Court Act, 1981 (U.K.), 1981, c. 54 (hereinafter “Supreme Court Act, 1981”).
[20] In view of the conclusions at which I have arrived it will not be really necessary, in order to resolve this matter, to go beyond the limits of sections 22 and 43 of the Act. The right to proceed in rem was codified in the Federal Court Act, and although the history of the in rem proceeding is useful in that it provides a better understanding of the nature and consequences of the proceeding, it is not conclusive in interpreting legislation—subsection 43(2) of the Act—which is new law and which uses an original expression, “action portant sur”, “the subject of the action”. Further, the Federal Court Act of 1970 [R.S.C. 1970 (2nd Supp.), c. 10] contains such differences in the provisions now in question when compared with the Administration of Justice Act, 1956 (U.K.), 1956, c. 46, and its successor the Supreme Court Act, 1981, that as Marceau J.A. noted in Mount Royal/Walsh Inc. v. Jensen Star (The), [1990] 1 F.C. 199(C.A.), at pages 208-209, it would be rash to rely blindly on English law.
[21] As I have already said, section 43 of the Act defines how this Court may exercise its maritime jurisdiction.
[22] Subsection 43(2) does not permit an action in rem in every case where the Court has jurisdiction under section 22. If that had been the case, Parliament, in referring to the action in rem, would have used the general terms it used in subsection 43(1) in respect of the action in personam. The very wording of subsection 43(2) indicates that the action in rem is only possible, by definition, in a field of jurisdiction covered by section 22, if the “subject” of the action is the ship or cargo (to simplify matters, I exclude aircraft or property other than cargo).
[23] In the case at bar the jurisdiction of the Court relied on by Paramount is that described in paragraph 22(2)(i), that is “any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise”. The parties here agreed that Paramount’s claim was based on such an agreement and that the Court accordingly has jurisdiction which it may exercise by an action in personam under subsection 43(1). Can it be said of this claim, which “arises out of” a charter-party, that its “subject” is the ship and the cargo, so as to permit an action in rem? Put otherwise, are the ship and cargo the “subject” or the “cause” of the action?
[24] The words “fondée”/”arising out of” in paragraph 22(1)(i) are broad in scope (see Cormorant Bulk-Carriers Inc. v. Canficorp (Overseas Projects) Ltd. (1984), 54 N.R. 66 (F.C.A.), at page 78). The words “portant sur”/“subject of” in subsection 43(2) have a more limited meaning. They imply that the property arrested is “the cause of” the action (as subsection 43(3) puts it so clearly), and thus that there is some connection between the property arrested and the cause of action. In my opinion, it must be possible to say that it is the use of this ship or the carriage of this cargo that justifies the action in rem brought against the property arrested.
[25] This interpretation is strengthened by that recently given by the Supreme Court of Canada of the expression “arises out of the ownership, use or operation of a vehicule” in section 79 of the Revised Regulation (1984) under the Insurance (Motor Vehicle) Act [B.C. Reg. 447/83, as am. by B.C. Reg. 335/84, Sch., item 19; 379/85, Sch., item 31] of British Columbia, in Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405. In the opinion of Major J. the expression “arising out of” “is broader than ‘caused by’, and must be interpreted in a more liberal manner” (in paragraph 21). The test proposed by him in paragraph 17 of his reasons seems to me to be applicable, mutatis mutandis of course, to actions based on the carriage of goods on board a ship:
Is there some nexus or causal relationship (not necessarily a direct or proximate causal relationship) between the appellant’s injuries and the ownership, use or operation of his vehicle, or is the connection between the injuries and the ownership, use or operation of the vehicle merely incidental or fortuitous?
[26] Let us now apply this principle to the circumstances of the case at bar.
[27] Paramount’s action in rem against the An Xin Jiang is based on an allegation in the nature of a delict of wrongful interference by the owner of this ship (Cosco) in a charter-party affecting another ship, the Len Speer, concluded between Beston and Paramount. The An Xin Jiang is not the subject of the contract relied on by Paramount. The An Xin Jiang did not as such cause any damage, receive any benefit nor was it involved in any incident relating to the action. It was arrested solely because it was owned by Cosco, the alleged perpetrator of the delict of interference, and was carrying the cargo belonging to the shipper Beston, the alleged perpetrator of the breach of contract. The delict of interference is in reality related to the breach of a charter-party and Paramount’s action against Cosco, if it is to succeed, will do so regardless of whether the carriage agreed on between Paramount and Beston took place, and if it takes place, regardless of the ship in which the carriage was carried out. When Parliament provided that an “innocent” ship could be arrested, it specified that this was to be done only when the ship belonged to the owner of the ship “that is the subject of the action” (subsection 43(8) of the Act). Allowing arrest of the ship An Xin Jiang in the case at bar would be to allow the arrest of any ship belonging to a defendant regardless of whether a ship was the subject of the action.
[28] Paramount’s action in rem against the Beston cargo is based on an allegation of a contractual nature that Beston did not perform the charter-party. It is true that this contract related to that cargo, but the only nexus existing between the action and the cargo is the fact that it was this cargo which would have been transported if the contract had been carried out. The contract was not carried out, the carriage never began, the cargo was not subject to a maritime lien and Paramount was never in possession of the cargo. The cargo as such did not cause any damage, it did not receive any benefit and it was not involved in any incident relating to the action. The action for breach of contract, if it is to succeed, will succeed regardless of whether the cargo was carried or not and, if it was carried, regardless of the ship carrying it. Allowing seizure of the cargo in the case at bar would be to allow the seizure of any property owned by a defendant even where no property is the subject of the action.
[29] In short, I have come to the conclusion that there is no “nexus or causal relationship” between the action and the ship and cargo arrested such that it can be said that the ship or cargo is the “subject” of the action. The subject of the action is the charter-party and the personal actions of the defendants. If there is a nexus between the action and the ship and cargo arrested, it is “merely incidental or fortuitous”, to use the words of Major J.
WARRANT OF ARREST AND BAIL
[30] In its motion to strike Cosco asked that the Court set aside the warrant of arrest of the ship and cargo and order that the letter of undertaking issued by the United Kingdom Mutual Steamship Assurance Association (Bermuda) Limited be returned for cancellation. As we know, this letter was replaced by a bail issued by the Bank of Nova Scotia.
[31] Paramount objected to the Court ruling on the validity of the bail. This guarantee, it argued, is not a “pleading” which may be struck out under Rule 419 and, as in the case at bar it extends beyond the action in rem to the action in personam, it would not be appropriate to deal with it in disposing of a motion to strike the action in rem only.
[32] It appears to be standard practice at trial to ask the Court for, and to obtain, in connection with a motion to strike, the quashing of the warrant of arrest and bail without questioning whether these are “pleadings” (see Armada Lines Ltd. v. Chaleur Fertilizers Ltd., [1997] 2 S.C.R. 617, at page 620; Corostel Trading v. The Catalina (1986), 6 F.T.R. 233 (F.C.T.D.); Industrie Chimique Italia Centrale S.P.A. v. The Choko Star (1987), 10 F.T.R. 258 (F.C.T.D.); Domtar Inc. v. Lineas De Navigation Gema S.A., [1997] F.C.J. No. 447 (T.D.) (QL); Joint Stock Society “Oceangeotechnology” v. 1201 (The), [1994] 2 F.C. 265 (T.D.); Scandia Shipping Agencies Inc. v. The Alam Veracruz (1997), 148 F.T.R. 164 (F.C.T.D.); Westview Sable Fish Co. et al. v. The Ship “Neekis” (1986), 31 D.L.R. (4th) 701 (F.C.T.D.)).
[33] According to the case law to which the Court was referred, the question was only raised once, by Prothonotary Hargrave in Margem Chartering Co. Inc. v. Bocsa (The), [1997] 2 F.C. 1001 (T.D.). That case concerned a motion to strike a statement of claim in rem and quash the warrant of arrest. The Prothonotary said that in his opinion the warrant of arrest was not a “pleading” and Rule 419 could not be used as the basis for an application to quash. However, at paragraph 20 he added the following:
Thus, the Court having the statutory jurisdiction to issue a warrant, it must also have an inherent procedural or implied jurisdiction to set aside a warrant that is an abuse of process.
[34] I do not think it is really necessary to plead this Court’s inherent jurisdiction, at least as regards the warrant of arrest. The latter is a document of the Court issued pursuant to Rule 1003 [as am. by SOR/79-57, s. 18; 92-726, s. 12; 94-41, s. 7] (now rule 481) in the exercise of its maritime jurisdiction. Once it has been decided that the action in rem was not permitted, it follows that the warrant could not have been issued and was void ab initio. At the stage of a motion to strike the proceeding in rem, the Court is merely observing that the warrant of arrest must suffer the fate of the proceeding in rem to which it is attached.
[35] The position is different with the bail, which does not originate from the Court but from a third party and reflects contractual arrangements which are not part of the pleadings. Having said that, the fact remains that this guarantee is an integral part of an action in rem in this Court. The warrant of arrest, as indicated in Rule 1003 (now rule 481), can only issue in an action in rem. The bail is given under the conditions laid down in Rule 1005 [as am. by SOR/94-41, s. 8] (now rule 486) and in accordance with a form prescribed by that Rule, Form 35 (now Form 486A). It is the bail which authorizes the Court, in Rule 1006 [as am. by SOR/79-57, s. 19] (now rule 487), to issue a release from arrest.
[36] Bail is a procedure imposed by the Rules of the Court for obtaining release of a ship (or cargo) in an action in rem. The courts have held that this bail “represents” or “replaces” the property seized (see Antares Shipping Corp. v. The Ship “Capricorn”, [1977] 2 S.C.R. 422, at page 454; Freighters (Steamship Agents) Co. v. The Ship “Number Four”, [1983] 1 F.C. 852 (C.A.), at page 859). Once the action against the ship collapses, the action against the bail must fail also and the bail must be returned to the person who gave it just as the ship would have been returned to its owner. The bail has become pointless and the court must be able to order that it be returned in the same way as it could, pursuant to paragraph 1006(2)(e) of the Rules (now paragraph 487(1)(d)), order that property be released from arrest “on … dismissal of the action in which the property was arrested”. Otherwise, property would be allowed to remain under arrest despite the release and the nullity of the arrest.
[37] Paramount’s claim that the bail prepared in accordance with the Rules of the Court could extend to the action in personam is simply inconsistent with the procedure laid down by the Rules. For Paramount to be right, it would have to argue that, in the course of an action in rem which it did not have the right to institute, it extracted from the owner of the property arrested a bail greater than what was prescribed by law. I do not think that this is what Paramount is arguing, as it would amount to suggesting that the Rules of the Court be used for improper or wrongful purposes.
DISPOSITION
[38] I would allow the two appeals with costs, dismiss the cross-appeal with costs, reverse the trial judgment in part, award the appellants their costs at trial and restore the order by Prothonotary Morneau dated September 30, 1997.
Létourneau J.A.: I concur.
Noël J.A.: I concur.