T-1743-98
North Shore Health Region (Plaintiff)
v.
Cosmos Shipping Lines S.A., and the Owners and all Others Interested in the Ships "Alpha Cosmos", "Stellar Glory", "Sky Moon", "Sky Run", "Sunfalcon"and "White Manta"(Defendants)
Indexed as: North Shore Health Regionv. Alpha Cosmos (The) (T.D.)
Trial Division, Hargrave P."Vancouver, October 26 and 28, 1998.
Maritime law — Practice — Service — Motion to declare statement of claim validly served upon defendant shipowner under r. 135 — Crew member seriously injured when boarding ship — Medical expenses paid by shipowner through law firm as business agent — Plaintiff suing shipowner by serving statement of claim upon agent — Service not accepted — R. 135 dealing with personal service on foreign entity with business roots in Canada — Securing care, hospitalization of crew member part of ordinary business of shipowner — R. 135 requiring entering into business in Canada — Shipowner foreign enterprise making use of Canadian entity in order to assist in business transaction — Properly served under r. 135.
Barristers and Solicitors — Law firm acting as business agent for foreign shipping company by paying hospital bills of injured seaman — Health Region purporting to serve shipping company by service upon law firm — Law firm, in absence of instructions, taking position service not accepted — Service valid under r. 135 — Law firm served not as lawyers but as business agent — Not opening floodgates to service on law firms acting for defendant but not having instructions to accept service, making mockery of necessity for personal service on defendant of statement of claim.
The plaintiff brought a motion seeking a declaration that its statement of claim had been validly served upon the defendant shipowner, Cosmos Shipping Lines S.A., under r. 135 of the Federal Court Rules, 1998. In May 1998, a crew member of the Alpha Cosmos was seriously injured when he fell into Vancouver harbour while boarding. He was taken to a hospital operated by the plaintiff for medical and surgical treatment. The medical expenses were paid by the shipowner through its agent, Campney & Murphy, up to July 28, 1998. In a letter dated August 7, 1998, the agent advised the hospital that it was acting on behalf of the owner of the Alpha Cosmos. As the shipowner denied any further responsibility for medical costs incurred after July 28, 1998, the plaintiff issued a statement of claim for reimbursement of those costs. As a result of some confusion concerning the address of Cosmos Shipping and on the basis of the representation made by its agent in its August 7 letter, the plaintiff decided to serve the statement of claim on the agent. The Campney & Murphy law firm said that it would not accept service without express instructions. The plaintiff took the position that service was made upon Campney & Murphy, not as counsel for Cosmos Shipping, but as persons resident in Canada of whom the shipping company has, in the ordinary course of business, made regular use of to render services, under rule 135.
Held, the motion should be allowed.
The argument made by counsel for Cosmos Shipping, that the statement of claim could be served only under rules 128 to 133, was unacceptable, for it would make superfluous all other rules dealing with personal service. Rule 135 contains a number of elements which are all present herein. First, rule 135 deals with persons resident outside of Canada, which seems to be the case of Cosmos Shipping. Second, for rule 135 to apply the party to be served must enter into contracts or business transactions in Canada. The action taken by Cosmos Shipping in paying a number of hospital accounts was a transaction being part of the ordinary business of a shipowner. "Business" is a broad and extensive word and has no legal meaning. The business of a shipowner goes beyond the trade of carrying goods. It includes all of the ancillary matters which must be undertaken in order to operate a ship, including care and maintenance of members of the crew. Third, rule 135 requires the entering into of a business transaction in Canada. The payment by Cosmos Shipping of its crew member's hospitalization fees was evidence of such a business transaction. Fourth, there must be some regular use of the service of the person resident in Canada. In the present case four similar transactions have been entered into since the time of the crew member's injury. Fifth, Cosmos Shipping in fact made use of the services in connection with a transaction related to its business. Finally, the legal proceeding must arise out of the transaction, which was the case here. The Federal Court test is not one of doing business, but rather of entering into business transactions in the ordinary course of business. That is precisely what Cosmos Shipping did. Looking after crew members is a business obligation, particularly so where it is a statutory obligation, as conceded by counsel for Cosmos Shipping. It was an unusual relationship for a law firm such as Campney & Murphy, a business one since it was acting as a business agent for Cosmos Shipping. Thus, holding that, in the circumstances of this case, service was valid would not open the floodgate allowing for service upon law firms lacking instructions to accept service and make a mockery of the requirement that a defendant be personally served with the statement of claim. This was a clear case where a foreign enterprise has made use of a Canadian entity in order to assist in a business transaction, on a regular basis, that spread over a number of months. Cosmos Shipping had been properly served under rule 135.
statutes and regulations judicially considered
Canada Shipping Act, R.S.C., 1985, c. S-9, s. 285.
Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, 15 November 1965, 658 U.N.T.S. 163.
Federal Court Rules, 1998, SOR/98-106, rr. 2 "person", 127(1), 128, 129, 130(1)(a )(i),(c), 131, 132, 133, 134, 135, 136, 137, 147.
Immigration Act, R.S.C., 1985, c. I-2, s. 91(4).
Immigration Regulations, 1978, SOR/78-172, s. 12.1 (as enacted by SOR/93-44, s. 12).
Interpretation Act, R.S.C., 1985, c. I-21, s. 35(1) "person".
Rules of Court, B.C. Reg. 221/90, R. 11(2)(b).
cases judicially considered
considered:
Central Trust Co. of China v. Dolphin SS. Co., [1950] 2 W.W.R. 516 (B.C.C.A.).
referred to:
Harris v. Amery (1865), L.R. 1 C.P. 148.
authors cited
Black's Law Dictionary, 4th ed. St. Paul, Minn.: West Publishing Co., 1951, "business".
MOTION by the plaintiff seeking a declaration that its statement of claim was validly served upon the defendant shipowner under rule 135 of the Federal Court Rules, 1998. Motion allowed.
appearances:
Doug G. Morrison for plaintiff.
H. P. Swanson for defendant Cosmos Shipping Lines S.A.
solicitors of record:
Bull, Housser & Tupper, Vancouver, for plaintiff.
Campney & Murphy, Vancouver, for defendant Cosmos Shipping Lines S.A.
The following are the reasons for order rendered in English by
Hargrave P.: These reasons deal with the plaintiff's motion, the relevant portion of which seeks a declaration that the statement of claim was validly served upon the defendant shipowner, Cosmos Shipping Lines S.A. (Cosmos Shipping), and with the motion of Cosmos Shipping for a declaration to the contrary.
In brief, the statement of claim was properly served upon Cosmos Shipping, which company would appear to have some connection with Singapore, by service upon Campney & Murphy, not as counsel for Cosmos Shipping, but as persons resident in Canada of whom Cosmos Shipping has, in this particular instance and in the ordinary course of business, made regular use of to render services, all pursuant to rule 135 [of the Federal Court Rules, 1998, SOR/98-106]. I will now consider this in more detail, beginning with some relevant facts.
RELEVANT FACTS
On 30 May 1998, Mr. Terrance Dalgado, Fourth Engineer of the Alpha Cosmos, was very seriously injured when he fell into Vancouver harbour. The gangway of the Alpha Cosmos by which Mr. Dalgado was boarding, together with Mrs. Dalgado, is said to have shifted, slipped and separated from the vessel and, in the absence of any effective safety net, both Mr. and Mrs. Dalgado fell into the water. All of this is set out in a companion action, commenced in August of 1998 against Cosmos Shipping, by another law firm, service of the statement of claim in that action being accepted by Campney & Murphy. Mr. Dalgado was taken to Lions Gate Hospital, which is operated by the plaintiff, North Shore Health Region, for medical and surgical treatment. He remains there in a coma.
Cosmos Shipping, who may well have a statutory obligation for Mr. Dalgado's medical expenses, under subsection 91(4) of the Immigration Act [R.S.C., 1985, c. I-2], section 285 of the Canada Shipping Act [R.S.C., 1985, c. S-9] and section 12.1 of the Immigration Regulations, 1978 [SOR/78-172 (as enacted by SOR/93-44, s.12)], was invoiced by the plaintiff, the invoices directed through Pacnord Agencies, a local shipping agent and through Mariners Medical Clinic, for medical care and treatment, the invoices being dated June 4, June 18, July 2 and July 30, for a total of some $185,000. The invoices were each paid by cheques, through Campney & Murphy, up to and including 28 July 1998. The final invoice was not paid in full. This brings us to a 7th of August letter of Campney & Murphy, to Lions Gate Hospital, which begins:
We are solicitors acting on behalf of the owner of the "Alpha Cosmos".
The letter then acknowledges that:
Our client has been paying the ongoing hospital costs, . . . .
The letter sets out that the owner of the Alpha Cosmos, after obtaining medical clearance, arranged to transfer Mr. Dalgado to Bombay, India on 28 July 1998, but that Mrs. Dalgado, on advice from American counsel, refused to permit the discharge and transfer. This leads to the notice in the August letter which has resulted in the present litigation:
Accordingly, our client puts Lions Gate Hospital on notice that it takes no responsibility for medical costs incurred after July 28, 1998 and that Lions Gate Hospital should look to Sheryl Dalgado and her lawyers for payment of ongoing medical costs.
All of this put Lions Gate Hospital in the difficult position of having to maintain Mr. Dalgado's medical care at some $1,100 per day. In effect, Lions Gate Hospital and the North Shore Health Region are caught, on the one hand, between Mrs. Dalgado and her counsel who apparently maintain that Cosmos Shipping has a statutory obligation to look after Mr. Dalgado, and Cosmos Shipping who, on the other hand, deny any further responsibility.
The statement of claim was issued 3 September 1998. It refers to Cosmos Shipping as being represented in British Columbia by Campney & Murphy. Counsel for the plaintiff had some difficulty in discovering any address for Cosmos Shipping. Counsel learned that the Alpha Cosmos was at one time managed by Sanko Steamship Co. Ltd., of Tokyo and subsequently, in September of 1998, managed by United Oceans Ship Management Pte. Ltd. of Singapore, but were not able to obtain an address for Cosmos Shipping from the usual sources, either Lloyd's Register of Ships, or the current Register Book Alterations and Additions, or Lloyd's List of Shipowners. The address used in the statement of claim for Cosmos Shipping thus appears to be the address of the ship's most recent manager.
Perhaps as a result of this confusion as to an address for Cosmos Shipping, the plaintiff decided to take what appeared then to be a practical and inexpensive approach to service based upon the holding out by Campney & Murphy, in their 7 August 1998 letter, that they acted for Cosmos Shipping.
On 4 September 1998, counsel for the plaintiff, North Shore Health Region, telephoned Mr. Wharton of Campney & Murphy to advise that a law student would be attending to serve the statement of claim and to this received no objection. Here I would note that counsel for the plaintiff makes the point that Mr. Wharton and Campney & Murphy were not served as counsel or lawyers for Cosmos Shipping, but rather as some form of business agent, that characterization arising out of Campney & Murphy's paying of accounts on behalf of Cosmos Shipping, as set out in their letter of 7 August 1998.
Counsel for the plaintiff also wrote to Mr. Wharton on September 4 to confirm that the North Shore Health Region looked for an early commitment from Cosmos Shipping as to payment of its account and referred to the possibility of a summary judgment, there being, in the view of counsel for the plaintiff, no defence. Receiving no response, counsel for the plaintiff again wrote to Mr. Wharton on October 6 to inquire further and to warn of the possibility of a default judgment. On October 9, faced with the possibility of default proceedings, Mr. Wharton took the position in writing that Campney & Murphy had neither accepted service nor, without express instructions, would they accept service.
Given that Federal Court statements of claim must now be served within 60 days and given the generally short time lines set out in the Federal Court Rules, 1998, when counsel believes there has been improper service then counsel ought to immediately put that on record, for litigation today is an expensive exercise which ought not to be delayed by ignoring letters and playing games. Instead, counsel ignored letters and waited for over a month before taking any position.
CONSIDERATION
At first glance, while the cost of service in Singapore at 300" is substantial, it might be that the plaintiff should have served the statement of claim on the apparent managers for Cosmos Shipping in Singapore, trusting that might also be the address of Cosmos Shipping. However, given that Cosmos Shipping, unlike most shipowners, does not have any published address in the Lloyd's system and has changed managers recently, one can understand the approach to service taken by plaintiff's counsel.
Counsel for the plaintiff argued a number of approaches, under both the Federal Court Rules, 1998 and under the B.C. Rules of Court [B.C. Reg. 221/90], the latter imported into our procedure by paragraph 130(1)(c), by which the plaintiff had obtained valid service on Cosmos Shipping.
I am not prepared to accept that service on Campney & Murphy, who are lawyers for Cosmos Shipping, is service within subparagraph 130(1)(a)(i) of the Rules which allows service by leaving a copy of a document "with an officer or a director of the corporation or a person employed by the corporation as legal counsel". In the context of the subparagraph, which refers to an officer or a director of the corporation, it is clear that the legal counsel referred to is corporate in-house counsel.
As I have noted paragraph 130(1)(c) of the Rules imports B.C. Supreme Court procedure as to service, specifically in this instance a portion of Rule 11(2)(b), which allows service on a foreign corporation by deeming any person, in British Columbia, who "transacts or carries on any of the business of, or any business for, that (foreign) corporation" the agent of that foreign corporation. This Rule is narrower and more specific in its phrasing than Federal Court rule 135. I have not applied the B.C. Rule as the Federal Court Rules, 1998 provide a perfectly good equivalent in rule 135. I will consider rule 135 after disposing of argument made on behalf of the plaintiff.
Counsel for the plaintiff also submits that there was service under rule 147 of the Federal Court Rules, 1998. Rule 147 is a remedial rule to validate irregular service:
147. Where a document has been served in a manner not authorized by these Rules or by an order of the Court, the Court may consider the document to have been validly served if it is satisfied that the document came to the notice of the person to be served or that it would have come to that person's notice except for the person's avoidance of service.
In the present instance, the affidavit sworn by one of counsel for Cosmos Shipping is to the effect that Cosmos Shipping has not been sent a copy of the statement of claim. One would be surprised if Cosmos Shipping were not aware of the statement of claim. However, by reason of the approach I have taken, using rule 135 of the Federal Court Rules, 1998, I do not need to decide whether rule 147 is applicable in the present instance.
In order to utilize rule 135 for the service of an originating document, one must first consider that rule in the context of all of the Federal Court Rules, 1998 dealing with service. To begin, subsection 127(1) provides that except in certain circumstances, which do not apply in this instance, an originating document, for example a statement of claim, "shall be served personally in a manner set out in rules 128 to 133". Counsel for Cosmos Shipping says that the statement of claim may only be served as set out in rules 128 through 133, which deal with personal service on an individual, personal service on a corporation either by leaving the document with an officer, director or counsel, service as provided by Act of Parliament, or service as provided for by superior provincial court rules. Rules 128 through 133 also deal with service on a municipal corporation, on a partnership, on an unincorporated association and on the Crown.
Contrary to the argument made by counsel for Cosmos Shipping, rule 134 specifically provides for personal service through acceptance of service by a party's solicitor. Rule 136 provides for substitutional service in place of personal service and that clearly includes service of an originating document. Rule 137, dealing with service outside Canada, brings in Hague Convention on service [Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, 15 November 1965, 658 U.N.T.S. 163] and notes, generally, that personal service outside Canada may be effected in the manner set out in rules 127 through 136. Rule 135 is bracketed by all of this. Rule 135 clearly deals with personal service on a foreign entity with business roots in Canada. Some meaning must be ascribed to rule 135, particularly given its marginal note "Deemed personal service on a person outside Canada". As a result, I do not accept the argument made by counsel for Cosmos Shipping that the statement of claim may only be served as set out in rules 128 through 133, for to accept that argument would make superfluous all of the balance of the Rules dealing with personal service.
Rule 135 provides as follows:
135. Where a person
(a) is resident outside Canada and, in the ordinary course of business, enters into contracts or business transactions in Canada in connection with which the person regularly makes use of the services of a person resident in Canada, and
(b) made use of such services in connection with a contract or business transaction,
in a proceeding arising out of the contract or transaction, personal service of a document on the person resident outside Canada is effected by personally serving the person resident in Canada.
Rule 135 contains a number of elements.
First, rule 135 deals with persons resident outside of Canada. A "person" is defined, by Federal Court rule 2, to include a tribunal, an unincorporated association and a partnership. However, subsection 35(1) of the Interpretation Act , R.S.C., 1985 c. I-21, also defines a "person" to include a corporation. In the present instance there is some doubt as to the actual location of Cosmos Shipping, but it is a corporation which does not seem to be resident in Canada.
Second, for rule 135 to apply the party to be served must enter into contracts or business transactions in Canada. I do not see that there is a contract between Cosmos Shipping and the Lions Gate Hospital, however the action taken by Cosmos Shipping, in looking after its Fourth Engineer, through payment of a number of hospital accounts, is a transaction which is a part of the ordinary business of a shipowner. To elaborate on this, business is not a term with a legal meaning: see for example the 1951 edition of Black's Law Dictionary, at page 248. Moreover, it is a broad and extensive word. Indeed, it is more extensive than the concept of trade: see for example Harris v. Amery (1865), L.R. 1 C.P. 148, at page 154. The business of a shipowner goes beyond merely the trade of carrying goods. It includes all of the ancillary matters which must be undertaken in order to operate a ship, including care and maintenance of members of the crew. Securing the care and hospitalization of a crew member is clearly part of the ordinary business of a shipowner.
Third, rule 135 requires the entering into of a business transaction in Canada. There is clear evidence of such a business transaction in the payment, by Cosmos Shipping, of a number of accounts for the hospitalization of Mr. Dalgado. Here counsel for Cosmos Shipping argues that the accounts were not paid by Cosmos Shipping, but rather by the underwriters for Cosmos Shipping. However, the Campney & Murphy letter of 7 August 1998 is clear on the point. Campney & Murphy say they are acting on behalf of the owner of the Alpha Cosmos. This is a holding out, clearly relied upon and acted upon by the plaintiff. When others act on the assumption that the person is what he allows himself to be represented to be, that person is estopped from denying the truth of such a representation.
Fourth, there must be some regular use of the service of the person resident in Canada. In the present instance there were four similar transactions spread over the months between the time of the injury of Mr. Dalgado and the present.
Fifth, Cosmos Shipping in fact made use of the services in connection with a transaction related to its business.
Finally, the legal proceeding must arise out of the transaction and that is the case here. Thus, in the wording of rule 135, "personal service of a document on a person resident outside of Canada is effected by personally serving the person resident in Canada".
In reaching this conclusion, I have not overlooked the oral and written argument made by counsel for Cosmos Shipping, that "the payment of hospital accounts pursuant to a statutory obligation by a law firm does not constitute `contracts' or `business transactions' in Canada" there referring to the B.C. Court of Appeal decision in Central Trust Co. of China v. Dolphin SS. Co. , [1950] 2 W.W.R. 516. Now one must keep in mind that, procedurally, litigation was a more leisurely affair in 1950, when a writ's validity for service was for a year, not just 60 days as in our Court at present. However, even leaving that aside, there is a difference in the wording of the B.C. rule in 1950 and the Federal Court rule today. In the B.C. rule the emphasis is on the carrying on of a business, whereas under rule 135 of the Federal Court Rules, 1998 it is a matter of entering into business transactions, not carrying on a business as a whole, which one must consider. This emphasis by the Court of Appeal, in Dolphin SS., on doing business is evident, for example, in the reasons of Mr. Justice Sidney Smith, at page 526. He points out that if he were to drive to Seattle and buy provisions, lodging and a suit of clothes in Seattle, that would not be doing business. Alternately, if he were a dealer in clothing and bought 100 suits, that would be doing business. However, the Federal Court test is not one of doing business, but rather of entering into business transactions in the ordinary course of business. That is precisely what Cosmos Shipping is doing. Looking after crew members is a business obligation and, all the more so, where it is a statutory obligation, as conceded by counsel for Cosmos Shipping.
Counsel for Cosmos Shipping does express a valid concern: if service on a lawyer or on a law firm, who or which acts for a defendant, but does not have instructions to accept service is good service, under rule 135, then the flood gates would open and make a mockery of the procedure of tracking down and personally serving a defendant with a statement of claim. However, the conclusions reached in these reasons do not depend in any way upon a common and usual solicitor and client relationship between Campney & Murphy, as lawyers and Cosmos Shipping as client. Rather the relationship is an unusual one for a law firm. It is a business one, with Campney & Murphy acting as a business agent for Cosmos Shipping, doing what is usually done either by the shipowner itself, directly, or by the shipowner indirectly, utilizing a ship's agent, in order to facilitate a not uncommon ordinary business transaction required in order to operate a ship. As I say, it would be entirely different if the services of Campney & Murphy had been in the nature of legal services related to one or more matters, as opposed to the present engagement as agents for Cosmos Shipping on a number of related transactions.
CONCLUSION
This is a clear instance in which an offshore enterprise has made use of a Canadian entity in order to assist in a business transaction, on a regular basis, here spread over a number of months. Rule 135 therefore applies. Cosmos Shipping was properly served on September 4, 1998.
As an adjunct to its motion, the plaintiff would like default judgment. However, default judgment is always discretionary. In the present instance Cosmos Shipping had substantial argument to make as to validity of service. As hospital costs continue to accrue at some $1,100 per day, it is important that there be no further delay. Cosmos Shipping will have 14 days within which to file a defence.