[1995] 3 F.C. 527
T-1492-95
Valley Towing Limited (Plaintiff)
v.
Celtic Shipyards (1988) Ltd. and All Other Persons Having Claims Against the Plaintiff, the Ship Seacap XII or the Fund Hereby to be Created (Defendants)
Indexed as: Valley Towing Ltd. v. Celtic Shipyards (1988) Ltd. (T.D.)
Trial Division, Hargrave P.—Vancouver, July 24 and 31, 1995.
Maritime law — Practice — Application pursuant to Canada Shipping Act, s. 576(1) to constitute limitation fund, to stay, prohibit pending, future Court actions — Barge under tow by plaintiff’s tug striking, damaging defendant’s premises — S. 575 permitting shipowner, absent actual fault, to limit liability according to ship’s tonnage — Action claiming $300,000 damages, limitation fund $42,130 — Motions dealing with s. 576 may be brought ex parte notwithstanding no reference in current R. 1012(1) to ex parte proceedings — On facts, presumption of fault by tug — Admission of liability of little value — To avoid inequity, application granted, provided existing actions could proceed and actions could be commenced to obtain security, taxation, payment of costs.
This was an application pursuant to Canada Shipping Act, subsection 576(1) to: determine a limitation fund; upon payment into Court, to stay pending proceedings; to prohibit future proceedings, and to have advertising approved in order to require all of the claimants to come into this limitation proceeding.
A barge under tow by the plaintiff’s tug in a well-known channel of reasonable dimensions struck and damaged, inter alia, Celtic Shipyard’s premises. The plaintiff has admitted liability in order to be able to seek a stay. Celtic Shipyards and two others have commenced an action for damages estimated at $300,000. No security has been given. Section 575 permits a shipowner, in the absence of actual fault or privity, to limit liability for property loss or damage according to the ship’s tonnage. The limitation fund would be $42,130. Section 576 deals with establishing a limitation of liability pursuant to section 575 in a separate limitation proceeding rather than pleading limitation either as a defence or as a counterclaim.
The application was brought in part ex parte as there may be claimants as yet unknown to the plaintiff. Unlike its predecessor, the current Federal Court Rule 1012(1) does not refer to a stay of proceedings being obtained ex parte, but requires service on all claimants whose identity is known.
The issues were (1) whether the plaintiff must wait until all claimants to the fund have been identified before moving to obtain a stay; (2) whether terms should apply to the grant of a stay and restraining order.
Held, the application should be allowed on terms.
Unless it is possible to hear motions dealing with section 576 at least in part ex parte, many of the provisions, including that providing for a stay pending a limitation declaration, would be meaningless. The omission, in the current version of Rule 1012, of a provision for bringing an ex parte application was of no consequence.
A stay of proceedings on the constitution of a limitation fund is discretionary and there is no bar to requiring security to the full value of the claim, even where a limitation fund has been established. The procedure leading up to a limitation of liability determination under section 576 is in many ways a compromise. The tortfeasor avoids a large number of actions and the claimants avoid having to prove liability, although a claimant may feel hampered by not being able to conduct its own action, at its own speed and in its own way, including obtaining security and finding out through the discovery process, in its own proceeding, what happened.
The onus is on the shipowner to show that there was no serious question to be tried in relation to the absence of fault or privity on its part; it is not enough to merely show a prima facie or reasonably arguable case for limitation. Although the affidavit evidence was weak, the facts suggested that this may well have been a case of pure navigational error without fault or privity on the part of the shipowner and thus more than a prima facie or reasonably arguable case for limitation.
For the limitation procedure to work fairly, it must benefit both sides. As a moving tug and tow struck a stationary facility, there was a presumption of fault on the part of the tug which lifted the burden of proof. The admission of liability was of little value to the claimants. If proceedings claiming a substantial amount could be stayed by the constitution of a small limitation fund without the claimants receiving any benefit, there would be inequity. A stay and prohibition should therefore be granted provided that existing actions may proceed and actions may be commenced to obtain security, taxation and payment of costs.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Canada Shipping Act, R.S.C., 1985, c. S-9, ss. 575, 576, 579, 581.
Canada Shipping Act Gold Franc Conversion Regulations, SOR/78-73.
Federal Court Rules, C.R.C., c. 663, RR. 336(1)(g), 1012(1) (as am. by SOR/94-41, s. 10).
International Conventions on Maritime Law. Convention on Limitation of Liability for Maritime Claims, London, 19 November, 1976, Article 13.
CASES JUDICIALLY CONSIDERED
APPLIED:
The Merchant Prince, [1892] P. 179 (C.A.); The Wladyslaw Lokietek, [1978] 2 Lloyd’s Rep. 520 (Q.B.).
REFERRED TO:
Margrande Compania Naviera v. The Leecliffe Hall’s Owners, [1970] Ex. C.R. 870; Belcan, M.V. v. The Beograd, [1985] F.C.J. No. 314 (T.D.) (QL); Fednav Ltd. v. Porto Seguro Companhia de Seguros Gerais, [1985] A.C.F. no 1106 (T.D.) (QL); Saint John Tugboat Co. Ltd. v. Flipper Draggers Ltd., [1969] 1 Ex. C.R. 392; Nisshin Kisen Kaisha Ltd. v. Canadian National Railway Co., [1982] 1 F.C. 530 (1981), 122 D.L.R. (3d) 599; 36 N.R. 181 (C.A.); The Rhône v. The Peter A.B. Widener, [1993] 1 S.C.R. 497; (1993), 101 D.L.R. (4th) 188; [1993] 1 Lloyd’s Rep. 600; 148 N.R. 349; The Bowbelle, [1990] 1 Lloyd’s Rep. 532 (Q.B.); The Lisboa, [1980] 2 Lloyd’s Rep. 546.
APPLICATION to constitute a limitation fund, to stay present and prohibit future proceedings, and to have advertising approved in order to require all of the claimants to come into the limitation proceeding. Application allowed on terms.
COUNSEL:
John W. Bromley for plaintiff.
Douglas G. Schmitt for defendants.
Gregory J. Arbour for 361536 B.C. Ltd.
SOLICITORS:
Connell, Lightbody, Vancouver, for plaintiff.
McEwen, Schmitt & Co., Vancouver, for defendants.
The following are the reasons for order rendered in English by
Hargrave P.: The plaintiff, the owner of the tug Seacap XII, brings this application, pursuant to subsection 576(1) of the Canada Shipping Act, R.S.C., 1985, c. S-9 to institute and to set in motion various procedural matters leading, the plaintiff hopes, to a declaration that the plaintiff is entitled to limit its liability under section 575 of the Canada Shipping Act for damage at Celtic Shipyards, in the north arm of the Fraser River when, on May 11, 1995, the barge Seaspan 619, in tow of the Seacap XII struck and damaged, among other things, the premises of Celtic Shipyards (1988) Ltd., the named defendant in this action.
THE PLAINTIFF’S MOTION
More specifically, the plaintiff asks in its motion, draft order and appendix to the draft order that:
1. A limitation fund, based on the deemed tonnage of the Seacap XII be determined;
2. On payment of the limitation fund, together with interest, into court the fund shall constitute satisfaction of the liability of those who have liability with respect to the accident;
3. Upon payment of the limitation fund into court both pending proceedings in any court be stayed pursuant to paragraph 576(1)(b) of the Canada Shipping Act (except for the purpose of taxation and payment of costs) and the defendants, being all persons having claims against the plaintiff, the Seacap XII, or any others who may be liable, be restrained from bringing actions in any court, again pursuant to section 576 of the Canada Shipping Act; and that advertisement be made for parties with claims requiring any defences to this limitation action and any claims be filed by September 15, 1995;
4. In the absence of any defences to the limitation action, the fund be distributed on the application of any interested party after September 15, 1995;
5. In the event defences are filed, the Court give directions for proceedings leading to a trial of the limitation issue; and
6. Applications to vary the terms of the order resulting from this motion may be made between now and September 15, 1995.
Some of these items have been agreed upon by counsel.
At this point it would be useful to set out some of the relevant presently disclosed details of the accident, which in the affidavit material are sparse, and then the legislation and rules prescribing the procedure by which the plaintiff seeks limitation of liability.
FACTS
On May 11, 1995, the Seacap XII, a tug of 45 feet in registered length and of 51.51 tons gross, owned by the plaintiff, Valley Towing Limited, was proceeding up the north arm of the Fraser River with the Seaspan 619, a barge of 134 feet in length and 513.74 tons gross, in tow. The barge struck and damaged the premises of the defendant, Celtic Shipyards (1988) Ltd. Others, including Hodder Tugboat Co. Ltd., 361536 B.C. Ltd., Joe’s Salmon Lodge Enterprises Ltd. and Mr. Sam Matsumoto, who were served with this motion and material, also suffered damage to equipment and facilities.
The plaintiff has admitted liability, in the declaration by which it initiated this action, in order to be able to seek a stay of any proceedings by the claimants in this Court or in any other court.
Celtic Shipyards, Hodder Tugboat and Joe’s Salmon Lodge have commenced an action in this Court against Valley Towing Limited, the Seacap XII and sisterships. Counsel for these three claimants advises that their best present estimate of damage is $300,000. No security has been given by the plaintiff to any claimant.
LIMITATION LEGISLATION
Section 575 of the Canada Shipping Act provides that a shipowner, assuming the absence of actual fault or privity on the shipowner’s part, may limit liability for damages in respect of any loss or damage to property to the Canadian dollar equivalent of 1,000 gold francs for each ton of the ship’s limitation tonnage.
Limitation tonnage is defined in section 581 of the Canada Shipping Act as the vessel’s registered tonnage, together with engine room space, but excluding space occupied by seamen. Tonnage, in the sense of registered and gross tonnage of a vessel, is not an actual weight measurement, but rather is a cubic measurement.
Section 579 of the Canada Shipping Act provides that for limitation purposes there shall be a deemed minimum tonnage of 300 tons. Assuming the appropriate limitation tonnage is not that of tug and tow, but rather that of the tug alone, the deemed tonnage of the Seacap XII, for limitation purposes, would be 300 tons: as to the limitation tonnage being that of the wrongdoing vessel and the demise of the flotilla theory of aggregate tonnage, see The Rhône v. The Peter A.B. Widener, [1993] 1 S.C.R. 497, at pages 540-541 and the reasons of Madam Justice McLachlin, of the Supreme Court of Canada, at pages 542 et seq.
The calculation of the limitation fund itself has been substantially simplified by the Canada Shipping Act Gold Franc Conversion Regulations of 1978 [SOR/78-73]. The Gold Franc Conversion Regulations avoid the determination of the price of gold of 900/1,000 millesimal fineness, as was once the case, but rather define gold francs in terms of special drawing rights, in Canadian dollars, under the International Monetary Fund. The exchange rate is 15.075 gold francs for each special drawing right (SDR).
It may be useful to set out one of the methods for calculating the limitation fund, in this instance being the calculation for a 300-ton property damage limitation fund, as set out in one of the plaintiff’s affidavits:
Assuming the tonnage of the ship “SEACAP XII” to be 300 tons as set out in Section 579 of the Canada Shipping Act, R.S.C. 1985, C. S-9 and referring to the Canada Shipping Act Gold Franc Conversion Regulations promulgated the 24th day of January, 1978, I calculate the aggregate amount equivalent to one thousand gold francs for each ton of the said ship’s tonnage as follows:
(a) 1 SDR = 15.075 gold francs
(b) 1 SDR = 2.11372 CDN dollars
THEREFORE:
15.075 gold francs = 2.11372 CDN dollars
1000 gold francs = 1,000 x 2.11372 CDN dollars
15.075
1000 gold francs
for each
of 300 tons = 1000 x 300 x 2.11372 CDN dollars
= 42,064.08 CDN dollars
The limitation calculation provided by the plaintiff, based on an SDR value of $2.11372, is correct as of July 21, 1995. The value of an SDR fluctuates. As of the 27th day of July, 1995, an SDR stood at $2.1170. However, the fluctuation, over a short period of time, is usually inconsequential and thus, the limitation fund, for the purposes of payment into court, is $42,130.
Section 576 of the Canada Shipping Act deals, among other things, with establishing limitation of liability pursuant to section 575 of the Canada Shipping Act, in a separate limitation proceeding such as the present, rather than pleading limitation either as a defence or as a counterclaim. The section also deals with a stay of any other proceedings, with determination of priorities and with distribution of the limitation fund. The section is as follows:
576. (1) Where any liability is alleged to have been incurred by the owner of a ship in respect of any loss of life or personal injury, any loss of or damage to property or any infringement of any right in respect of which his liability is limited by section 575 and several claims are made or apprehended in respect of that liability, the Admiralty Court may,
(a) on the application of that owner, determine the amount of his liability and distribute that amount rateably among the several claimants;
(b) stay any proceedings pending in any other court in relation to the same matter; and
(c) proceed in such manner and subject to such regulations as to making persons interested parties to the proceedings, excluding any claimants who do not come in within a certain time, requiring security from the owner and the payment of any costs, as the court thinks just.
(2) A judge of the Admiralty Court in making a distribution under subsection (1) where there are claims in respect of loss of life or personal injury, and of loss of or damage to property or the infringement of any right, shall distribute rateably among the several claimants the amount at which the liability has been determined, as follows:
(a) twenty-one thirty-firsts of the amount shall be applied in payment of claims in respect of loss of life and personal injury; and
(b) ten thirty-firsts of the amount shall be applied in payment of claims in respect of loss of or damage to property or infringement of any right, and to the satisfaction of the balance of any claims in respect of loss of life and personal injury remaining unpaid after distribution of the amount applied pursuant to paragraph (a).
(3) In making a distribution under this section of the amount determined to be the liability of the owner of a ship, the Court may, having regard to any claim that may subsequently be established before a court outside Canada in respect of that liability, postpone the distribution of such part of the amount as it deems appropriate.
(4) No lien or other right in respect of any ship or property shall affect the proportions in which any amount is distributed by the Court under this section among the several claimants.
The instant proceeding, pursuant to section 576 of the Canada Shipping Act, is an interlocutory one (Margrande Compania Naviera v. The Leecliffe Hall’s Owners, [1970] Ex. C.R. 870, at page 874) which I have been authorized to hear by the Associate Chief Justice pursuant to paragraph 336(1)(g) of the Federal Court Rules [C.R.C., c. 663]. The limitation decree, which is a final judgment, would be granted to a successful plaintiff by a judge either in default of defences or following a trial on limitation of liability: see The Leecliffe Hall, supra, at page 930 et seq. for additional comment on the procedure.
At this point, Celtic Shipyards (1988) Ltd., Hodder Tugboat Co. Ltd. and Joe’s Salmon Lodge Enterprises Ltd. have filed a defence in this limitation action. Thus, unless the defendants were to consent to a limitation decree, the matter will go to trial, rather than being resolved by a decree by default.
If the plaintiff is successful in limiting liability, the limitation fund will then stand to be divided, on application to a judge, among the claimants, as is provided in section 576 of the Canada Shipping Act. Alternately, if the plaintiff is not successful in establishing limitation of liability pursuant to the Canada Shipping Act then, the plaintiff already having admitted liability, the claimants need only establish damages and costs.
AT ISSUE IN THE MOTION
We now turn to the present motion. The plaintiff wishes to constitute a limitation fund and then, on the strength of the limitation fund and the admission of liability in the declaration by which the action was begun, seek a stay and an order of prohibition, so as to obtain respite from liability proceedings and to have advertising approved, in order to require all of the claimants to come into this limitation proceeding.
Some agreement as to the terms of the order has been reached, between Mr. Bromley, counsel for the plaintiff, and Mr. Schmitt, counsel for those defendants who have filed a defence, Celtic Shipyards, Hodder Tugboat and Joe’s Salmon Lodge. There remains the terms on which a stay and restraining order might be granted, together with several preliminary points.
Nature of Proceedings and Affidavit Evidence
Mr. Arbour, counsel for 361536 B.C. Ltd., who are foreshore owners and who have an interest in a dock that was damaged, adopts Mr. Schmitt’s submissions as to a stay and restraining order, although he does make two additional points.
Counsel for the numbered British Columbia company contends that the proceedings are not interlocutory, however, I have already dealt with that aspect in referring to The Leecliffe Hall. Counsel also submits that the plaintiff should have provided better affidavit evidence in order to make a stronger showing for their case on limitation of liability. That is a valid point, and one to which I will return later.
Ex Parte Proceedings
Counsel for the three defendants, who have filed a defence, contends that the plaintiff must wait until all claimants to the fund have been identified through advertising and claims filing procedure before the plaintiff can move to obtain a stay. He makes this submission because the current version of Rule 1012 does not refer to a stay of proceedings being obtained ex parte.
The plaintiff’s application is brought, in part, ex parte, for there may be claimants as yet unknown to the plaintiff. This procedure was clear in subsection 1012(1) of the Federal Court Rules as it stood before amendment in 1994:
Rule 1012. (1) An application under section 648 of the Canada Shipping Act for a stay of proceedings, for a direction as to the manner of proceeding, for regulations as to making persons interested parties to the proceedings and as to the exclusion of claimants who do not come in within a certain time, and as to requiring security from the owner, may be made ex parte.
There is now no similar provision. Rule 1012 [as am. by SOR/94-41, s. 10], as it presently stands, provides the first two subsections:
Rule 1012. (1) In making an application pursuant to subsection 576(1) of the Canada Shipping Act the applicant shall serve those claimants whose identity is known to the applicant.
(2) The applicant may apply to the Court ex parte for an order with respect to service on the possible claimants where the number of possible claimants is large or the identity of all of the possible claimants is unknown to the applicant, and the Court may make such an order as it deems just.
Unless it were possible to hear motions dealing with section 576 of the Canada Shipping Act at least in part ex parte, many of the provisions, including providing for a stay pending a limitation declaration, would be meaningless.
I would also note in passing that the present English procedure in a limitation action does not specifically provide that it may be in part ex parte. However, that is the effect of the English procedure, which requires that there must be one named defendant, but leaves it open to the plaintiff whether to name others: this is similar to the present subsection 1012(1) of the Federal Court Rules which only requires the plaintiff, in a limitation proceeding, to serve those claimants whose identity is known.
I have concluded that the omission of the ex parte permission, in the current version of Rule 1012, is of no consequence.
Stay of Other Proceedings
The remaining issue is that of the stay of proceedings and restraint of claimants from bringing actions in any other court. In that Canada is not a signatory to the 1976 Convention on Limitation of Liability for Maritime Claims (the “1976 London Limitation Convention”), a stay of proceedings, on the constitution of a limitation fund in court, is discretionary. Further, the question of security, in addition to the limitation fund, to secure the full amount of a claim, is still open.
While a stay is a discretionary remedy, it is granted by Canadian courts so long as the limitation proceedings are not premature (for example see Belcan, M.V. v. The Beograd, [1985] F.C.J. No. 314 (T.D.) (QL), and reasons in a companion action, Fednav Ltd. v. Porto Seguro Companhia de Seguros Gerais, [1985] A.C.F. no. 1106 (T.D.) (QL) and other procedural matters are properly dealt with (for example see The Leecliffe Hall, supra, and Saint John Tugboat Co. Ltd. v. Flipper Draggers Ltd., [1969] 1 Ex. C.R. 392). A vessel owner seeking a declaration of limitation of liability and a stay of all other actions must admit liability for all purposes, thus divesting itself of the opportunity to defend the liability aspect of claims by injured persons: see for example Nisshin Kisen Kaisha Ltd. v. Canadian National Railway Co., [1982] 1 F.C. 530(C.A.) (hereinafter the Japan Erica), a limitation proceeding arising out of the 1979 collision by the Japan Erica with the Second Narrows Bridge in Vancouver Harbour.
The procedure leading up to a limitation of liability determination, under section 576 of the Canada Shipping Act, is in many ways a compromise. The alleged tortfeasor admits liability in order to avoid a large number of actions and to obtain consolidation of the claims into the limitation action. The claimants, in turn, avoid having to prove liability, although liability is not always a real issue. Sometimes, however, claimants may feel hampered by the idea of not being able to conduct their own action, at their own speed and in their own way, including obtaining security and finding out, through the discovery process, in their own proceeding, what happened and what chance they have of breaking the tortfeasor’s claim to limitation. As I say, these proceedings are often a compromise: see for example Japan Erica, supra, at page 533 in which the stay provision allowed parties to institute actions, although not to prosecute them.
Security, a concern in the present instance, was not something which the Federal Court of Appeal had to deal with in Japan Erica limitation proceedings, for a substantial portion of the claims, some 20 million dollars’ worth, had been secured, at an early stage when the owners of the Japan Erica posted 20 million dollars to avoid having the Japan Erica immobilized by arrests.
In The Wladyslaw Lokietek, [1978] 2 Lloyd’s Rep. 520 (Q.B.), which was decided before the 1976 London Limitation Convention was adopted by Britain and stays became mandatory for all practical purposes, the Admiralty Court of the Queen’s Bench Division refused to grant a stay of an action in England in the face of a limitation action in Poland, one of the arguments against a stay being that in England the claimant could obtain security for the whole of the claim, a useful hedge in the event that the shipowner was unsuccessful in the limitation action before the Polish Court. In addition, Mr. Justice Brandon held that on a limitation application the shipowner had to show that there was no serious question to be tried in relation to the absence of fault or privity on the shipowner’s part; it was not enough merely to show a prima facie or reasonably arguable case for limitation: The Wladyslaw Lokietek, supra, at page 531.
Dealing first with the last point, that of the onus on the shipowner, the affidavit material is weak. However, the limitation action procedure is very useful in that it can force a wrongdoing shipowner to come to grips with the situation and place all of the parties within what may be an expedited time frame. In this instance, I am also prepared to take note of what happened, a collision between a barge of not more than medium size of its type, towed by a tug of substantial horse power, in a well-known channel of reasonable dimensions, past a long established shipyard facility: this may well be a case of pure error in navigation without fault or privity on the part of the shipowner and thus more than a prima facie or reasonably arguable case for limitation.
I turn now to the issue of security, which was of major concern to the claimants who are represented on this motion.
For the limitation action procedure to work fairly, there must be something in it for both sides: the party seeking limitation ought not to be able merely to post a limitation fund with the court, say, as in the present case, that the accident did not occur with the actual fault or privity on the part of the plaintiff shipowner and, on information and belief, assert that the accident occurred through the act or omission of someone on board the Seacap XII, at that point preventing the injured claimants from proceeding in any respect. Now the plaintiff may say that it has admitted liability and that admission is the quid pro quo for the stay. And that may sometimes be so, however, in this instance, a moving tug and tow has struck a shipyard facility, a dock, moored vessels and equipment, so there is not only a presumption in favour of the claimants, but also a presumption of fault on the part of the Seacap XII, which shifts the burden of proof. As Lord Esher pointed out in The Merchant Prince, [1892] P. 179 (C.A.), at page 187, such facts constitute negligence proved against you, which can usually only be gotten rid of by showing inevitable accident. Thus the admission of liability, in the present instance, is of little practical value to the claimants.
It is interesting to touch on the 1976 London Limitation Convention as it presently applies to limitation actions in England. In return for much larger limitation funds, the right to limit has become close to absolute. Thus, a stay, while seeking a limitation decree, is a right in the sense that the 1976 London Limitation Convention provides that any person having a claim against the fund is barred from exercising any rights against other assets of the party seeking to limit and further, subject to several fairly inconsequential procedural provisions, any arrested vessels and security must be released (see Article 13 and also The Bowbelle, [1990] 1 Lloyd’s Rep. 532 (Q.B.)). In contrast, under the British system before the 1976 London Limitation Convention and under the present Canadian system, a stay is discretionary and there is no requirement barring requiring security to the full value of the claim, even where a limitation fund has been established.
In the British system, prior to the adoption of the 1976 London Limitation Convention in 1979, as is the present case in Canada, the inequities of a stay, following the offer of or the constitution of a limitation fund by the wrongdoing shipowner, are allayed by the fact that a stay is discretionary and may be granted on terms (Japan Erica, supra). Further, under the British system, the wrongdoing shipowner, as a matter of practice, and usually voluntarily, provides discovery at an early stage so that the claimants may know whether to contest the limitation decree. This is a sensible procedure not only because it avoids waste of time during the interim period while the claimants must decide whether to file defences to contest limitation, but also because it offers a practical possibility of avoiding a full trial on limitation: notwithstanding the rejuvenation of limitation of liability by the Supreme Court of Canada in The Rhône v. The Peter A.B. Widener, [1993] 1 S.C.R. 497, it would be a forlorn hope, on the part of a plaintiff, in a limitation proceeding, to think that a claimant, with only a bare assertion in the plaintiff’s affidavit as to entitlement to limit liability, will let the plaintiff have limitation by default.
In summary, if a plaintiff were able to obtain a stay of proceedings claiming a very substantial amount, by the constitution of a small limitation fund, without giving some benefit to the claimants (and as I have pointed out in this instance, admission of liability is an illusory benefit) that would work an inequity. Therefore the stay and prohibition against further actions, which I have decided to grant, will be on terms.
During the hearing I suggested to counsel that his client might voluntarily give discovery during the period before September 15, 1995, so that the claimants might know either whether to contest the limitation proceedings or, if defences are filed, whether to consent to a limitation decree. To me the approach seems sensible both as a time and expense saving measure, for it might not only avoid a trial on limitation, but also be an equitable gesture from the plaintiff in return for the breathing space of a stay. The claimants were in favour, but the plaintiff was not.
If the plaintiff were allowed an unconditional stay in the present circumstances, in return for admission of liability and a relatively small limitation fund, it could well result in an injustice to the claimants who would not be able to arrest and obtain security. As Lord Denning, M.R. remarked, when an “arrest is made in good faith—for the purpose of obtaining security for a just demand—then I am of opinion that the English Courts should not restrain it”: The Lisboa, [1980] 2 Lloyd’s Rep. 546, at page 549.
The plaintiff, in response to the question of security for the full amount of the claims, says that Valley Towing Limited is a substantial company, with a number of vessels, and should the claimants be found, at the end of the day, entitled to full recovery on their claims, there ought not to be a problem. That is not good enough, particulary where the claimants are forced to challenge the limitation proceedings without presently knowing any of the reasons why the plaintiff feels entitled to limitation. Further, many things could happen to the assets of the plaintiff between now and the outcome of the trial on limitation which, even without any appeal, would probably not take place until well into 1996.
Section 5 of the order shall therefore provide that on the constitution of the limitation fund by payment into court of $42,130 and interest, present proceedings in any court with relation to the accident of May 11, 1995, shall be stayed pursuant to paragraph 576(1)(b) of the Canada Shipping Act and further, the defendants, which includes all persons having claims by reason of the accident, are restrained from bringing any action in any court against Valley Towing Limited, the Seacap XII and any other persons who might have liability that is subject to limitation under the Canada Shipping Act, provided that existing actions may proceed and actions may be begun, in both instances, for the purposes of obtaining security, of taxation and of payment of costs.