T-251-79
Suomen Hoyrylaiva Osakeyhtio Finska Angfartigs
Aktiobolaget (Plaintiff)
v.
Chase International (Holdings) Ltd., the cargo of
the ship Chase Two, the freight and subfreight of
the ship Chase Two, the freight and subfreight of
the ship Chase One (Defendants)
Trial Division, Marceau J.—Montreal, September
3; Ottawa, September 26, 1980.
Maritime law — Charterparty — Contract of carriage —
Chase Ltd. hired vessel from plaintiff-shipowner for carriage
of goods — Seizure by plaintiff of cargo, freight and sub-
freight on ship with respect to its claim against Chase Ltd. —
Cargo arrested covered by freight prepaid bills of lading and
freight collect bills of lading — Whether defendant in rem
indebted to plaintiff — Plaintiff's right either contractual or
strictly legal — Canada Shipping Act, R.S.C. 1970, c. S-9, s.
667.
The plaintiff, the owner of the Chase Two, let its vessel by a
time charterparty to the defendant Chase Ltd. for the carriage
of containerized cargo from Europe to Canada. In January
1979, when the ship arrived in Montreal, the plaintiff who held
a claim against Chase Ltd. proceeded to arrest the cargo,
freight and subfreight on the ship. The cargo arrested was of
two categories: some was covered by freight prepaid bills of
lading, others by freight collect bills of lading. The question is
whether the in rem defendant, the cargo covered by freight
prepaid bills of lading, is indebted to the plaintiff. In order to
succeed, plaintiff has to rely on a right that is either contractu-
al—created by the charterparty and the contract of carriage—
or strictly legal flowing from the law of bailment which, as
plaintiff asserts, is included in Canadian maritime law and
which entitles plaintiff, as sub-bailee, to sue the owner of the
goods for the increase in value its services brought to those
goods.
Held, the question for determination must be answered in the
negative. Firstly, the plaintiff cannot rely on a right of a
contractual nature since it never had any direct or indirect
dealings with the owners of the cargo. The charterparty was to
be kept "strictly private and confidential": it was the clear
intention of the shipowner and the charterer that the eventual
shippers would be left outside and in the dark as to the business
relations existing between them. As for the contract of carriage,
it was exceptional in that it was not made with the shipowner—
as is usual in a charterparty which does not amount to a demise
of the ship—but with the charterer itself and it alone; the bill of
lading leaves no doubt about that. Secondly, plaintiff's claim to
a right which flows from the strict operation of the law cannot
be upheld. Counsel did not explain the contents of the so-called
"common law of bailment" nor did he explain how it could
become an integral part of the maritime law of Canada.
Furthermore, there is no need to introduce a concept of sub-
bailment. If the shipowner was in legal possession of the goods,
it was not in possession as a bailee, but as the agent of the
charterer. As for the increase in value of the goods, it is only in
special well established cases that a custodian has, in the
absence of some special agreement, a lien for his charges upon
the chattel entrusted to him for safe custody alone.
The "Mihalios Xilas" [1976] 2 Lloyd's Rep. (Com. Ct.)
697, referred to. Aris Steamship Co. Inc. v. Associated
Metals & Minerals Corp. [1980] 2 S.C.R. 322, referred
to. Paterson Zochonis and Co. Ltd. v. Elder Dempster, and
Co. Ltd. 16 Asp. Mar. Law Cas. 68, referred to.
APPLICATION.
COUNSEL:
Sean J. Harrington for plaintiff.
Marc de Man for Logistec Corporation.
Marc Nadon for S.B.C. Financial Ltd.
SOLICITORS:
McMaster Meighen, Montreal, for plaintiff.
Stikeman, Elliott, Tamaki, Mercier & Robb,
Montreal, for Logistec Corp.
Martineau Walker, Montreal, for S.B.C.
Financial Ltd.
Ogilvy, Renault, Montreal, for Maritime
Employees Assoc.
Lette Marcotte Biron Sutto & Associates,
Montreal, for Mobay Chemical Corp. and
Bayer (Canada) Inc.
Sergio Tucci, Montreal, for Avandero
Canada Ltd.
Wood & Aaron, Montreal, for Interpool Ltd.
and Steadman Containers Ltd.
Langlois, Drouin & Associates, Montreal, for
International Logistec Transportation Ltd.
and Melvin Zwaig.
The following are the reasons for determination
and the determination rendered in English by
MARCEAU J.: Pursuant to a joint application of
all the interested parties, the Court has consented
by its order of May 12, 1980, to predetermine a
question of law raised by the proceedings herein.
The question was formulated thus:
Is the in rem defendant, the cargo covered by freight pre-paid
Bills of Lading, indebted to the Plaintiff?
For the purposes of the determination, the par
ties submitted an agreed statement of facts, from
which I extract the following summary.
The plaintiff is the owner of the Finnish flag
ship, known, at relevant times, as the Chase Two.
By a time charterparty in the Baltime, 1939 Form,
dated October 6, 1977, the plaintiff let its vessel
(then still under construction) to the defendant
Chase International (Holdings) Ltd. ("Chase
Ltd."). The vessel became ready to be used on
March 26, 1978 and went on hire immediately; it
was to be employed by Chase Ltd., in a liner
service between Europe and Canada to carry, inter
alia, containerized cargo from various European
ports to Montreal.
On January 12, 1979, the Chase Two arrived at
Montreal on her liner voyage No. 78255. She had
on board various cargo contained in approximately
236 twenty-foot containers and 125 forty-foot con
tainers, which had been delivered to Chase Ltd. by
several shippers, at different inland points in
Europe. At the time, the plaintiff held a claim
against Chase Ltd. for an amount exceeding
$3,000,000 made out in part by the daily charter
hire long overdue and various expenses incurred
(fuel, port charges, harbour dues, stevedoring) for
the voyage the vessel was then completing. The
plaintiff decided that the situation could not be
tolerated any longer: it retained a stevedoring com
pany to discharge the cargo, gave the latter a
notice of lien in accordance with section 667 of the
Canada Shipping Act', R.S.C. 1970, c. S-9, and
obtained a warrant to arrest the cargo, freight and
subfreight on the ship. Already burdened with
difficult financial problems, Chase Ltd. caved in:
shortly thereafter a receiving order against it was
issued by the bankruptcy Court in Montreal.
The cargo arrested pursuant to the warrant
secured by the plaintiff was of two categories:
some was covered by freight prepaid bills of
lading, others by freight collect bills of lading.
Those interested in the freight prepaid cargo natu
rally objected to the seizure, but the plaintiff
refused to release their goods unless security of
$1,000 for the contents of each twenty-foot con
tainer and $2,000 for the contents of each forty-
foot container, was paid. The requested security
was placed under protest and without prejudice to
any right to recover the amounts so paid. The
plaintiff and the cargo owners then reached an
agreement to move the Court for a preliminary
determination of the question of law on which
rested their controversy.
It is, of course, through a correct analysis of the
legal relationship of the parties that the answer to
the question raised must be found. That legal
relationship between the parties depends in turn
upon the effects of any contract validly passed
between them or those resulting from the strict
operation of the law governing the situation in
which they were. The right asserted by the plain
tiff must either be contractual, or strictly legal.
Which provides as follows:
667. Where at the time when any goods are landed from
any ship, and placed in the custody of any person as a
wharfinger or warehouseman, the shipowner gives to the
wharfinger or warehouseman notice in writing that the goods
are to remain subject to a lien for freight or other charges
payable to the shipowner to an amount mentioned in the
notice, the goods so landed shall, in the hands of the wharfin-
ger or warehouseman, continue subject to the same lien, if
any, for such charges as they were subject to before the
landing thereof; and the wharfinger or warehouseman receiv
ing those goods shall retain them until the lien is discharged
as hereinafter mentioned, and shall, if he fails to do so, make
good to the shipowner any loss thereby occasioned to him.
If there were any contractual relationship be
tween the shipowner and the cargo owners giving
the former a claim against the latter and a lien on
the goods to secure the debt, it must necessarily
have been created by the only two contracts by
virtue of which the goods were on board the ship,
i.e. the charterparty and the contract of carriage.
It seems obvious to me that the charterparty
entered into between the plaintiff and Chase Ltd.
could have no effect whatever, contractually
speaking, on the shippers that could eventually use
the services of the Chase Two. It was the clear
intention of the shipowner and the charterer that
the eventual shippers would be left outside and in
the dark as to the business relations existing be
tween them. "This Charterparty is to be kept
strictly private and confidential", provided one of
the clauses of the contract, clause 26, which was in
fact strictly respected since it is common ground
that, in dealing with the shippers, the charterer
never referred to the charterparty and never even
mentioned not being the owner of the ship it was
operating. No wonder that no provision can be
found in that time charter that may have been
meant to reach somehow the eventual shippers. As
in all charterparties in the Baltime, 1939 Form,
there is a lien clause, clause 18, which reads: "The
owners to have a lien upon all cargoes and sub-
freights belonging to the time charterers and any
bill of lading freight for all claims under this
charter, and the charterers to have a lien on the
vessel for all monies paid in advance and not
earned"; but, as it has long ago been decided, the
cargo referred to therein is that "belonging to the
Time Charterers" and no other (see Tagart,
Beaton & Co. v. James Fisher & Sons [1903] 1
K.B. 391; The "Mihalios Xilas" [1976] 2 Lloyd's
Rep. (Corn. Ct.) 697; see also the remarks of Lord
Fraser of Tullybelton in the recent case of Federal
Commerce and Navigation Ltd. v. Molena Alpha
Inc. [1979] 1 All E.R. 307 at page 316).
It is clear to me as well that the contract of
carriage entered into by the shippers, as evidenced
by the bills of lading, could not have the effect of
creating a contractual relationship of some sort
between them and the plaintiff shipowner. Indeed
this contract of carriage was exceptional in that it
was not made with the shipowner—as it is normal
ly the case when there is a charterparty which does
not amount to a demise of the ship (see on this
point The `Mihalios Xilas" case (supra) and Aris
Steamship Co. Inc. v. Associated Metals & Min
erals Corp., dated April 22, 1980 ([1980] 2 S.C.R.
322)—it was made with the charterer itself and it
alone. The bill of lading, whose terms and condi
tions incidentally were well known to the plaintiff,
leaves no doubt about that. It provides right at the
outset as follows:
Bill of Lading
Definitions. In the Bill of Lading the term "Merchant" means
and includes the Shipper, the consignor, the consignee, the
receiver, the holder of this Bill of Lading and the Owner of the
Goods, the term "goods" means the cargo received from the
Merchant and in the absence of contrary indication includes
the contents of containers themselves if not supplied by or on
behalf of Chase International (Holdings) Limited; the term
"container" means and includes container transportable tank,
flat, pallet, trailer and any other vehicle; the term "freight"
includes advance freight, and all charges payable to the Carrier
under the terms of the tariff applicable. The contract contained
in or evidence by the bill of lading is between the Merchant and
Chase International (Holdings) Limited thereinafter called
"the Carrier" whom it is agreed shall alone be liable as carrier
under this contract. The Merchant agrees to be bound by all
the terms and conditions of the Bill of Lading on his own behalf
and of all other persons who are or may become interested in
the goods, and warrants that he has authority so to agree on
their behalf. (My underlining.)
The plaintiff, whose very existence was not even
alluded to in the bills of lading, was certainly not a
party to the contract of carriage.
In order to claim that those interested in the
cargo carried on board the Chase Two were
indebted to it, the plaintiff cannot therefore rely on
any right of a contractual nature, since it never
had any direct or indirect dealings with them.
If not of a contractual nature, the right asserted
by the plaintiff would have to be flowing from the
strict operation of the law. This was in fact the
proposition on which counsel for the plaintiff
insisted. His submissions, so far as I understood
them correctly, can be summarized as follows.
Counsel starts with a general proposition: Canadi-
an maritime law, irrespective of whether it is
uniform throughout the country, or varies from
province to province, includes the law of bailment,
that is the English common law of bailment in case
of uniformity, or the Quebec civil law governing
deposit if provincial law is applicable. He then
goes on to suggest: it is as a sub-bailee or as a
sub-depository that the plaintiff carried the goods
from Europe to Canada, since there was no con
tract of affreightment between it and the owners
of the goods. The possibility of such sub-bailment
or sub-depository was indeed foreseen by the con
tract of carriage, since the bills of lading, when
used as through bills of lading, contemplated inter-
model pre-carriage and on carriage by road, rail,
air or water, and in any event such sub-bailment or
depository was a necessary result of the situation
of fact. And from there, counsel purports to con
clude: as sub-bailee or sub-depository, the plaintiff
is entitled to sue directly the owners of the goods
for the increase in value its services brought to
those goods, and it has a lien of a possessory
nature to secure its claim.
I have difficulty in following the logic of the
reasoning taken as a whole but in any event I am
unable to agree with the propositions put forward
therein. As to the first of these propositions, coun
sel did not explain the contents of this so-called
"common law of bailment" he was referring to and
the cases he cited were all concerned with defining
the duties of a custodian of a thing belonging to
another and were of quite limited assistance in
that regard. Besides, counsel did not explain how
this so-called "law of bailment" could become an
integral part of the maritime law of Canada, so as
to affect and even supersede and override the
normal effects of well known and perfectly legal
maritime contracts. In the Quebec Civil Code,
deposit is viewed as the result of a contract, wheth
er express or implied, and is not regulated other
wise. As to the second proposition, there was
indeed no contract of affreightment between the
shipowner and the shippers, but the ship had been
put at the exclusive and complete disposal of the
charterer for it to act as a carrier. I do not see the
need to go any further and introduce a concept of
sub-bailment, be it the result of an implied con
tract or of the mere situation of fact, to explain the
presence of the goods aboard the ship. If the
shipowner was in legal possession of the goods,
which is not at all certain, it was not in possession
as a bailee, but as the agent of the charterer.
(Compare the analysis of Scrutton L.J. in Pater-
son Zochonis and Co. Ltd. v. Elder Dempster and
Co. Ltd. 16 Asp. Mar. Law Cas. 68.) As to the
third proposition, if it may be said that the car
riage of the goods could have enhanced their value,
the mere custody thereof could not have done so;
besides it is only in special well established cases
(the wharfingers, the packers, the warehousemen
are examples) that a custodian has, in the absence
of some special agreement, a lien for his charges
upon the chattel entrusted to him for safe custody
alone (see Halsbury's Laws of England, 4th ed.,
Vol. 2, p. 719, par. 1549).
In my view, the plaintiff can no more rely on a
principle or rule of law to support his claim against
the freight prepaid cargo and/or its owners than
he can rely on any provision of the contracts
pursuant to which the goods were put on board the
Chase Two and carried over to Montreal. It fol
lows that the question as formulated must be
answered in the negative.
The parties asked the Court not to deal with the
consequences of this determination in regard of the
action. I accept their request.
DETERMINATION
To the question:
Is the in rem defendant, the cargo covered by freight pre-paid
Bills of Lading, indebted to the Plaintiff?
The answer of the Court is: No.
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.