T-3060-77
McCain Produce Co. Ltd. (Plaintiff)
v.
The Ship M.V. Rea and her owners and Atlanta
Handelsgesellschaft Harder & Co. (Defendants)
Trial Division, Walsh J.—St. John, August 15;
Ottawa, September 19, 1977.
Practice — Motion to strike pleadings — Vessel time char
tered, but aspects of demise charter — Charterers breached
sub-charter and plaintiff seeks damages — Ship alleged to be
beneficially owned by same persons at both arrest and time the
action arose — No allegation of fault or breach of contract
against ship or her owners — Federal Court Act, R.S.C. 1970
(2nd Supp.), c. 10, ss. 22(2)(i), 43(2),(3).
M.V. Rea and her owners apply under Rule 419 to strike
without leave to amend the statement of claim, as against them,
for not disclosing a reasonable cause of action, and alternative
ly, for constituting an abuse of the process of the Court.
Atlanta Handelsgesellschaft Harder & Co. chartered the vessel
for a limited time, and allegedly breached a sub-charter made
with plaintiff who now seeks damages for its increased costs.
The ship was seized by the present proceedings in rem, while in
St. John during-the charter period. The affidavit leading to the
warrant alleged the ship to be beneficially owned by the same
persons as when the cause of action arose. The statement of
claim did not allege fault or breach of contract against the Rea
or her owners.
Held, the application is allowed. The owners of the ship had
nothing to do with the contracts that defendant Atlanta Hand-
elsgesellschaft Harder & Co. made with the plaintiff and an
action in personam for the alleged breach of this contract could
not be maintained. Section 22(2)(i), read in conjunction with
section 42(2) and (3) would at most merely confer jurisdiction
over an action in rem against the ship for breach of sub-charter
without creating a right of action unless an action in personam
could also be maintained against the owners. Weight of juris
prudence indicates such a claim would not create a maritime
lien over the vessel; a different result would have occurred with
such a lien. Defendants also argued that this was not a demise
charter making Atlanta Handelsgesellschaft Harder & Co. in
effect owners of the vessel, and therefore in a position to affect
it by their sub-charter with the plaintiff. Although, on the
balance, it would seem to be a time charter, a definitive finding
is unnecessary in view of the first finding.
Westcan Stevedoring Ltd. v. The "Armar" [1973] F.C.
1232, applied; C. & C. J. Northcote v. The "Henrich
Bjorn" (1886) 11 App. Cas. 270, applied; The "Mogileff'
[1921] P. 236, applied; Italian State Railways v. May-
rogordatos [1919] 2 K.B. 305, applied. Waterside Ocean
Navigation Co., Inc. v. International Navigation Ltd.
[1977] 2 F.C. 257, distinguished.
APPLICATION.
COUNSEL:
D. Gillis, Q. C., and T. McGloan, Q. C., for
plaintiff.
K. B. McCullogh for defendants.
SOLICITORS:
Gilbert, McGloan, Gillis & Jones, St. John,
for plaintiff.
McKelvey, Macaulay, Machum & Fair-
weather, St. John, for defendants.
The following are the reasons for judgment
rendered in English by
WALSH J.: This is a motion by defendants, the
ship M.V. Rea and her owners made pursuant to
Rule 419 of the Rules of this Court to strike
without leave to amend as against the said defend
ants the statement of claim on the ground that it
discloses no reasonable cause of action against said
defendants and alternatively that it constitutes an
abuse of the process of the Court. The statement
of claim is based on a sub-charter by defendant,
Atlanta Handelsgesellschaft Harder & Co.,
described as the "time chartered owners" of the
ship Rea to plaintiff allegedly for three consecutive
voyages to carry potatoes from Summerside,
Prince Edward Island, Saint John, New Bruns-
wick, or Halifax, Nova Scotia, to a safe port in the
Holland-Bordeaux range, which charter was
entered into at Copenhagen on September 18,
1976. After the completion of one voyage on
November 9, 1976, the ship did not return to
Canada to complete two further voyages as a
result of which plaintiff was obliged to make other
and more costly arrangements for shipping the
subsequent cargoes of potatoes and claims dam
ages for these increased costs. The vessel Rea had
been time chartered by her owners to defendant,
Atlanta Handelsgesellschaft Harder & Co. by
charter entered into in Hamburg on August 12,
1976, for a period lasting until June 30, 1977,
twenty days more or less; hence this charter was in
effect at the time of the sub-charter by said
defendant to plaintiff and at the time the damage
that resulted from the alleged breach of contract
by defendant, Atlanta Handelsgesellschaft Harder
& Co. took place.
There is no allegation of fault or of breach of
contract in the statement of claim against defend
ants, the ship M.V. Rea and her owners. The ship
was seized by the present proceedings in rem when
in port in Saint John, New Brunswick, on January
28, 1977, there being an allegation in the affidavit
to lead the warrant to the effect that "the said ship
is now beneficially owned by the same persons who
were the beneficial owners thereof at the time the
cause of action herein arose". It was released on
February 4, 1977, on the strength of a letter of
undertaking guaranteeing the claim in the amount
of $85,000 furnished by the solicitors for the
defendants, the M.V. Rea and her owners.
In support of the motion said defendants con
tend that there is no allegation in the statement of
claim against them, that the charter from them to
Atlanta Handelsgesellschaft Harder & Co. was
not a demise charter, although they had no control
over the use of the ship or the contracts made for
her by sub-charterers during the term of their time
charter, and that in any event an action such as
the present based on alleged breach of contract
does not create a maritime lien for which the
vessel can be held liable.
Plaintiff relies on sections 22(2)(i) and 43(2)
and (3) of the Federal Court Act, R.S.C. 1970
(2nd Supp.), c. 10, which read respectively as
follows
22....
(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 claim or question arising out of
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....
(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 con
ferred on the Court by section 22 shall not be exercised in rem
with respect to a claim mentioned in paragraph 22(2)(e), (/),
(g), (h), (i), (k), (m), (n), (p) or (r) unless, at the time of the
commencement of the action, the ship, aircraft or other prop
erty 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.
maintaining that since the ship is beneficially
owned by the person who was the beneficial owner
at the time when the cause of action arose, the
excepting of section 22(2)(i) from section 43(2)
does not apply and that the Court therefore has
jurisdiction in rem against the ship for claims
arising out of section 22(2)(i). This argument was
well dealt with by Collier J. in Westcan Stevedor-
ing Ltd. v. The "Armor"' in which, although on
the facts the action was dismissed at trial after
proof on the ground that personal liability of the
vessel or owner had not been proved, his remarks
at page 1236 are apt. He there stated:
I turn now to the plaintiff's contention that subsection 43(2)
and par. 22(2)(m) when read together impose, on the facts
here, a liability in rem on the vessel or her owners. I understand
the submission to be as follows: Prior to the passing of the
Federal Court Act, liability in this case was (for the purposes of
this argument) on the charterer alone. The intent of the
provisions of the Act referred to is to create a liability in rem on
the vessel or her owners, regardless of what the liability in
personam might be.
In my view, Parliament did not intend to enlarge the liability
of a vessel or her owners in the factual situation which exists
here, or to create a liability on the vessel or her owners which
did not in law exist prior to the passing of the Federal Court
Act.
After discussing analogous arguments advanced in
some English decisions dealing with the same
issue, which in that case was a claim for necessar
ies supplied to a vessel he stated at page 1237:
1 [1473] F.C. 1232.
It was held that the statutory provisions providing that a suit
for necessaries or master's disbursements could be enforced by
an action in rem did not per se impose a liability on the vessel
or her owners. There first must be a personal liability at law
which by virtue of the legislation became enforceable in rem.
To my mind, the same reasoning applies in this case. Prior to
the coming into force of the Federal Court Act, the Exchequer
Court on its admiralty side by statute had jurisdiction in
respect of claims for necessaries. Legislation enabled the claim
ant to enforce his rights in rem but was dependent on his
establishing a liability on owners, apart from statute.
This is in line with the dictum of Lord Watson in
the case of C. & C. J. Northcote v. The Owners of
the "Henrich Bjorn" 2 where in reference to the
Act 3 & 4 Vict. c. 65 he stated at page 278:
The whole provisions of the Act 3 & 4 Vict. c. 65 appear to
me to relate to the remedies and not to the rights of suitors.
Sect. 6 merely confers "jurisdiction to decide" certain claims
which the Court of Admiralty had previously no power to
entertain. That enactment enables every person having a claim
of the nature of one or other of those specified in sect. 6 to
bring an action for its recovery in the Admiralty Court, but it
cannot in my opinion have the effect of altering the nature and
legal incidents of the claim.
This judgment was referred to by Hill J. in The
"Mogileff '3 where he stated in a passage referred
to in Collier J.'s judgment:
Before any one can sue in rem for necessaries, there must be a
debt presently due to the plaintiff in respect of the necessaries
which are the subject of the claim. One who supplies to a ship,
upon the order of the master, necessaries which it is not within
the actual or apparent authority of the master to order on the
credit of the owner, has no right to recover against the owner
by any proceedings whether in personam or in rein.
In the present case it is clear that the owners of the
ship M.V. Rea had nothing whatsoever to do with
the contracts made by defendant, Atlanta Hand-
elsgesellschaft Harder & Co. with plaintiff and
that an action in personam for alleged breach of
same by them could not be maintained. Whether
or not this Court has jurisdiction at all over such a
claim in view of recent Supreme Court jurispru-
2 (1886) 11 App. Cas. 270.
3 [1921] P. 236 at pages 242-243.
dence and jurisprudence of this Court is an issue
which was not raised before me on the present
motion and I do not propose to deal with it. I do
find, however, that section 22(2)(i) of the Act
when read in conjunction with sections 43(2) and
(3) would at most merely confer jurisdiction over
an action in rem against the ship for breach of the
sub-charter without creating such a right of action
unless an action in personam could also be main
tained against the owners.
It would be different if such a claim created a
maritime lien over the vessel but the weight of
jurisprudence indicates that it did not. Maritime
liens are dealt with in Halsbury's Laws of Eng-
land, Third Edition, Volume 35 which states at
pages 782-783:
Maritime liens recognised by English law.
The maritime liens recognised by English law are those in
respect of bottomry and respondentia bonds, salvage of prop
erty, seamen's wages and damage. A maritime lien has been
held not to exist in respect of towage or necessaries. It is
doubtful whether or not a maritime lien exists in respect of
pilotage dues.
Rights and remedies, similar to those enjoyed by the holder
of a maritime lien and enforced in similar manner, have been
created by statutory provision. These include a right to life
salvage in certain circumstances though the salvors of life have
not themselves salved any property; certain claims in respect of
matters which though not wages may be recovered in the same
manner in which seamen's wages may be recovered; claims in
respect of the wages, disbursements and liabilities of the master
of a ship; claims in respect of damage to land caused by persons
rendering services to a vessel wrecked, stranded or in distress;
claims in respect of the fees and expenses of a receiver of
wreck; and claims in respect of the expenses of a local au
thority incurred on account of the burial or destruction of the
carcase of any animal or carcase thrown or washed from any
vessel.
In the next section he deals with the lien for
damage done by a ship and it is clear that this
refers to physical damage. For such claims he
states at page 784 that "charterers who have the
control, or any persons who are allowed to have
possession, of a ship for the purpose of using or
employing her in the ordinary manner are deemed
to have authority to subject her to liens, and so to
make her liable for their negligence...."
This is quite a different matter from a claim for
alleged breach of charterparty and it would appear
that no lien exists for such a claim.
With respect to the second argument of the
defendants, the ship M.V. Rea and her owners,
that this was not a demise charter making Atlanta
Handelsgesellschaft Harder & Co. in effect "own-
ers" for the time of the charter and perhaps there
fore in a position to affect the vessel by the charter
they entered into with plaintiff, the situation is
somewhat more doubtful. The charter uses the
terms "let" and "hire" and states that the owners
will provide and pay for all provisions and wages,
insurance and deck and engine room stores. The
charterers "whilst on hire" shall pay for the fuel
and diesel oil for the main engine and auxiliaries.
It provides further that the master is to be under
the orders of the charterers who are to give him all
instructions and sailing directions. Charterers
agree to "indemnify the owners against all conse
quences or liabilities arising from the master, offi
cers or agents signing bills of lading or other
documents or otherwise complying with such
orders". Salvage or assistance to other vessels is to
be for the owners' and charterers' equal benefit
after deducting the master's and crew's proportion.
Charterers are given the option of subletting the
vessel giving due notice to the owners. Charterers
are to have the option of appointing a supercargo
and a refrigeration engineer on board, paying U.S.
$3.50 per day for each. The vessel may fly the
charterers' house flag and the charterers at their
own expense may paint the vessel's funnel or hull
with their colours or trade mark.
Scrutton 4 distinguishes between demise and
ordinary time charters at page 45 saying:
4 Scrutton on Charterparties, 18th ed.
A charter by demise operates as a lease of the ship itself, to
which the services of the master and crew may or may not be
superadded. The charterer becomes for the time the owner of
the vessel; the master and crew become to all intents his
servants, and through them the possession of the ship is in him.
Under a charier not by demise, on the other hand, the
shipowner agrees with the charterer to render services by his
master and crew to carry the goods which are put on board his
ship by or on behalf of the charterer. In this case, notwithstand
ing the temporary right of the charterer to have his goods
loaded and conveyed in the vessel, the ownership and also the
possession of the ship remain in the original owner through the
master and crew, who continue to be his servants.
At pages 47 to 50 in dealing with the characteris
tics of charterparties by demise and not by demise
he states that in a charter by demise the possession
of the ship is in the charterer not the owner, the
master of the demised ship being the servant of the
charterer and that as a consequence the owner is
not liable to shippers, even if they did not know of
the charter, for acts of the master and crew, and if
the chartered ship earns salvage the reward goes to
the charterer and not to the owner. On the other
hand he points out that in a charter not by demise
in the form of a time charter the shipowner agrees
with the time charterer to render services for a
named period by the master and crew to carry
goods put on board the ship by or on behalf of the
time charterer and that the remuneration is usual
ly termed as "hire".
In the case of Italian State Railways v.
Mavrogordatos 5 the charterparty was somewhat
similar to the present charter in that the owners
were to provide for all the provisions and wages of
the captain, officers and crew, the charterers
paying for the coal, fuel, port charges and so forth.
The charterers were to pay for the hire of the
vessel so much per month, as in the present case,
and the captain although appointed by the owner
was to follow the instructions of the charterers who
were to furnish him from time to time with sailing
5 [1919] 2 K.B. 305.
directions. In his judgment, Bankes L.J. stated at
page 311-312:
... under a charter like the present by which the owner places
the ship with her captain, officers, seamen, engineers, firemen,
and crew at the disposal of the charterer for a certain period on
certain terms, the only redelivery possible is to make such
arrangements as will enable the owner to resume control on the
expiration of the charter and, it may be, if necessary, to inform
the master that he is no longer under the charterer's orders but
must consider himself under the orders of the owner.
Duke L.J. states categorically at page 313:
There had never been a demise of this ship; she remained from
first to last in the possession of the owner.
The case of Sir John Jackson, Limited v.
Owners of the Steamship "Blanche" 6 referred to
by plaintiff gave a broad interpretation to the word
"owner" as used in the British Merchant Shipping
Act, 1894, (Imp.), 57 & 58 Vict., c. 60 holding
that in certain circumstances it could be interpret
ed as also including charterers. In that case the
ship was being navigated by master and crew in
the charterers' service and the charterers were
permitted to avail themselves of the limitation of
liability provided in the statute when a claim was
made against the vessel arising out of damages
caused to another vessel. I do not find the case to
be persuasive authority, however, for plaintiffs
contention that even if the vessel is operated by a
master and crew in the owner's employ the fact
that they are under orders of the charterer has the
effect of making the charter a demise charter.
While the engagement and payment of the
master and crew by the owner may not by itself be
a decisive factor in finding that a charter is not a
demise charter it is certainly a very important
consideration. The time charter we are dealing
with from the owners to Atlanta Handelsgesell-
schaft Harder & Co. has certain clauses pointing
both ways but I am inclined to the view that the
better opinion would be that the charter did not
6 [1908] A.C. 126.
constitute a demise charter. It is not, however,
necessary to make a definitive finding on this point
in view of the conclusion I have reached on the
first argument that there is no maritime nor statu
tory lien permitting the seizure of the vessel for a
claim of this sort either in British maritime law,
the sections of the Federal Court Act relating to
navigation and shipping or any other statute, nor
have I been referred to any jurisprudence uphold
ing such a claim against the vessel when no claim
in personam would lie against her owner./Since the
conclusion of the hearing I have been referred to a
judgment of Associate Chief Justice Thurlow in
the case of Waterside Ocean Navigation Com
pany, Inc. v. International Navigation Ltd.' in
which a similar motion to strike the owners and
ship from the proceedings was refused. The facts
are entirely different, however, in that, as appears
from a summary of facts on pages 263-264 of the
report there existed a complicated series of agree
ments whereby the owners actually negotiated the
contract on behalf of the charterers which led to
the actions, and the proceedings could by proper
amendments clearly bring in the owners and the
ship, unlike the present case where it is clear that
the owners had no dealings with plaintiff and no
amendment could be made to involve them in any
way with the sub-charter agreement with plaintiff.
At page 259 the learned Associate Chief Justice
states:
The application for an order dismissing the claim against the
ship is based on the applicant's submission that there is no
cause of action against the ship. It is said that, except where the
plaintiff claims a maritime lien, the right to sue in rem is
dependant on the personal liability of the shipowner to the
plaintiff and that this is not such a case. The dismissal of an
action at this stage on such a ground, however, as I see it, can
be justified only if
(1) the statement of claim discloses no reasonable cause of
action, or
(2) the claim is so forlorn that the action is an abuse of the
process of the Court and should not be permitted to proceed.
[1977] 2 F.C. 257.
With respect to (1), the determination must be made on the
basis of the allegations of the statement of claim.... The Court'
is always slow to strike out a statement of claim and dismiss an
action under Rule 419(1)(a) and will do so only when it is clear
that by no proper amendment can the statement of claim be
revised so as to disclose a reasonable cause of action.
This is precisely the situation here.
I find that the motion on behalf of defendants,
the ship M.V. Rea and her owners is well-founded,
and direct that they be struck out as defendants
without leave to amend, with costs.
ORDER
Defendants, the ship M.V. Rea and her owners
are struck from the cause as defendants without
leave to amend, with costs, and the style of cause
shall be amended accordingly.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.