T-940-89
Canastrand Industries Ltd. (Plaintiff)
v.
The Ship "Lara S" and Freight and her owners
Armadaores Lara S.A., Lucky Star Shipping S.A.,
and Kimberly Navigation Company Limited
carrying on business as Kimberly Line, Byzantine
Maritime Corp. and all others interested in the
Ship "Lara S" and Kim-Sail Ltd. (Defendants)
INDEXED AS: CANASTRAND INDUSTRIES LTD. V. LARA S (THE)
Trial Division, Reed J.—Vancouver, May 11 and 14,
1992.
Maritime law — Practice — Appeal from order staying pro
ceedings pending plaintiff's decision whether to pursue claim
here or in Greek courts — Action commenced in Federal Court
for damages to cargo incurred during carriage by sea —
Plaintiff having ship arrested in Greece upon learning of own
er's intention to sell — Ship defendant's only asset — Not in
"interest of justice" (Federal Court Act, s. 50(1)(b)) to stay
proceedings — Need to secure claim by proceeding against
ship arising when sale contemplated — Defendants not estab
lishing (1) ship could not now be arrested in Canadian waters;
(2) Greek proceeding attempt to avoid Canadian maritime law
requirements; (3) plaintiff representing would not proceed
against ship — Stay causing injustice to plaintiff as would
mean loss of security — Allowing action to proceed without
requiring election not injustice to defendants — Proceeding in
Greek court not duplicative as taken only to ensure security for
payment of Federal Court judgment — Failure to arrest ship
earlier not causing injustice to defendants.
This was an appeal from a decision of the Senior Prothono-
tary staying proceedings pending the plaintiff's decision
whether to pursue its claim in this Court or in the courts of
Greece. The plaintiff was the owner of a shipment of bailer
twine, which was damaged during its carriage by sea from Bra-
zil to Toronto. Pleadings were filed, documents exchanged,
and examinations for discovery and other pre-trial proceedings
ensued. When the plaintiff learned that the defendant,
Armadaores Lara S.A., intended to sell the Lara S, its only
known asset, plaintiff had the ship arrested in Greece. The
plaintiff argued that the stay should be set aside because the
proceeding in the Greek courts was not duplicative of the pre-
sent proceedings and was intended only to ensure security for
the payment of any judgment issuing out of this Court; a stay
would result in substantial prejudice to the plaintiff; and
allowing the proceeding in this Court to go forward without
requiring an election would not result in an injustice to the
defendants. The defendants argued that the decision to stay
proceedings was not based on a possible duplication of pro
ceedings (Federal Court Act, paragraph 50(1)(a)), but on the
ground that in this case "it is in the interest of justice that the
proceedings be stayed" (paragraph 50(1)(b)). They argued that
it was in the interest of justice that the proceedings be stayed
because the plaintiff had not moved to arrest the ship when it
had been in Canadian ports and that it was now too late to
arrest it in Canadian waters because the one-year time limit
had expired. It was argued that the sale was being made in the
ordinary course of business and that it was abusive for the
plaintiff to now take proceedings which interfered with that
transaction when no attempt was made to arrest the vessel ear
lier.
Held, the appeal should be allowed.
The defendants' arguments did not support a decision that it
was in the interests of justice that the proceedings be stayed.
(1) As long as the ship was owned by the defendant
Armadaores Lara S.A. and that defendant was an active defen
dant in the present proceeding, plaintiff might not need to
ensure security for its claim by proceeding directly against the
ship. But once the plaintiff learned that Armadaores Lara S.A.
intended to sell its only asset, the situation changed. (2) There
was no authority for the proposition that if the ship were in
Canadian waters it could not now be arrested. (3) The proceed
ing in Greece was not an attempt to avoid the requirements of
Canadian maritime law. (4) Plaintiff's counsel had not made
representations that his client would not proceed against the
ship itself.
The test for determining when a stay should be granted was
set out in Plibrico (Canada) Ltd. v. Combustion Engineering
Canada Inc. (1990), 30 C.P.R. (3d) 312 (F.C.T.D.). A stay
should not be granted unless the continuation of the action
would cause prejudice or injustice to the defendant and the
stay would not work an injustice to the plaintiff. An order stay
ing the proceedings until an election is made would result in
substantial prejudice to the plaintiff. If an election is made to
proceed in Canada, the "conservative measures" obtained
through the Greek courts would have to be relinquished and
without such measures a judgment from this Court could be a
paper judgment only.
The defendants would not be prejudiced as a result of the
two proceedings as the evidence established that plaintiff does
not intend to make the defendants answer twice with respect to
the substantive issues. The plaintiff's failure to arrest the vessel
before now did not visit an injustice on the defendants.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Federal Court Act, R.S.C., 1985, c. F-7, s. 50(1).
CASES JUDICIALLY CONSIDERED
APPLIED:
Plibrico (Canada) Ltd. v. Combustion Engineering
Canada Inc. (1990), 30 C.P.R. (3d) 312; 32 F.T.R. 30
(F.C.T.D.).
CONSIDERED:
The Jala Godavari v. Canada, A-112-91, Hugessen J.A.,
judgment dated 18/10/91, F.C.A., not yet reported; Atlan-
tic Lines & Navigation Company Inc. v. The Ship
"Didymi", [1985] I F.C. 240 (T.D.); The Hartlepool
(1950), 84 LI.L.Rep. 145 (Adm. Div.); The Soya Mar-
gareta, [1960] 2 All E.R. 756 (P.D.A.); Aetna Financial
Services Ltd. v. Feigelman et al., [1985] 1 S.C.R. 2;
(1985), 15 D.L.R. (4th) 161; [1985] 2 W.W.R. 97; 32
Man.R. (2d) 241; 29 B.L.R. 5; 55 C.B.R. (N.S.) I; 4
C.P.R. (3d) 145; 56 N.R. 241; Nisshin Kisen Kaisha Ltd.
v. Canadian National Railway Co., [1981] 1 F.C. 293;
(1980), 111 D.L.R. (3d) 360 (T.D.).
DISTINGUISHED:
The Vasso (formerly Andria), [1984] 1 Lloyd's Rep. 235
(C.A.).
APPEAL from decision staying proceedings.
Appeal allowed.
COUNSEL:
Christopher J. Giaschi for plaintiff.
Richard L. Desgagnés for defendants.
SOLICITORS:
McEwen, Schmitt & Co., Vancouver, for plain
tiff.
Ogilvy Renault, Montréal, for defendants.
The following are the reasons for order rendered in
English by
REED J.: The plaintiff appeals a decision of the
Senior Prothonotary dated March 24, 1992 staying
the proceedings in this case pending a decision by the
plaintiff as to whether to pursue its claim in this
Court or in the courts of Greece.
It is first necessary to determine the status of an
affidavit dated May 11, 1992, signed by Pierre G.
Côté, which was filed on May 11, 1992 in support of
the defendants' position. Counsel for the plaintiff
argues that this affidavit should not be accepted in
these proceedings because: (1) the evidence con
tained therein is not new—it was available at the time
of the proceedings before the Senior Prothonotary—;
and (2) it was filed at such a late date that counsel for
the plaintiff has not had time to respond to it in a con
sidered fashion. Counsel for the defendants argue
that the new affidavit is intended to support in a fuller
fashion the information which was before the Senior
Prothonotary. He argues this is to put the Court in a
better position to exercise a review of the Prothono-
tary's decision according to the principle set out by
the Federal Court of Appeal in Jala Godavari (The)
v. Canada (A-112-91, decision dated October 18,
1991) [at pages 2-3]:
... contrary to a view that has sometimes been expressed in
the Trial Division ([1984] 1 F.C. 856), a judge who hears an
appeal from a prothonotary on a matter involving the exercise
of discretion is called upon to exercise his own discretion and
is not bound by the prothonotary's opinion. He may, of course,
choose to give great weight to the views expressed by the pro-
thonotary, but the parties are, in the final analysis, entitled to
the discretion of a judge and not that of a subordinate officer.
The situation is, of course, different where a referee (who may
be a prothonotary) has heard witnesses and made findings of
fact based on his assessment of credibility (see Algonquin Mer
cantile Corp. v. Dart Industries Canada Ltd., [1988] 2 F.C.
305 (C.A.)).
I do not find it necessary to decide whether and in
what circumstances it is appropriate to file new evi
dence on an appeal from a prothonotary's decision. It
is sufficient for present purposes to say that I think
the plaintiff should not be faced with a new affidavit
in this fashion on the very morning of the appeal.
I would indicate, in addition, in case I am wrong
with respect to the filing of the new affidavit, that I
do not interpret the letter of August 13, 1990,
attached thereto, in the same way as counsel for the
defendants. In my view the characterization which
counsel for the defendants seeks to place on counsel
for the plaintiffs' I letter of August 13, 1990 is overly
broad. Counsel for the defendants seeks to character
ize that letter as a representation by the plaintiffs that
they did not intend to proceed against the ship the
Lara S. While there is some ambiguity in the phras
ing of the letter I would not read it in that fashion. It
seems clear to me that the owners of the Lara S hav
ing been served and the plaintiffs having proceeded
against them, the other defendants, referred to in the
letter against whom proceedings were not going to be
pursued, were Lucky Star Shipping S.A. and Byzan-
tine Maritime Corp. I would not read the letter as
expressing an intention not to proceed against the
Lara S.
The plaintiff argues that the decision staying these
proceedings should be set aside because: (1) the pro
ceeding in the Greek courts is not duplicative of the
present proceeding and is intended only to ensure
security for the payment of any judgment that may
issue out of this Court; (2) a stay of the present pro
ceedings pending an election by the plaintiff as
between the two courts will result in substantial
prejudice to the plaintiff; (3) allowing the proceeding
in this Court to proceed without requiring such elec
tion will not result in an injustice to the defendants.
The well-known test for determining when a stay
should be granted is set out by Mr. Justice Strayer in
Plibrico (Canada) Ltd. v. Combustion Engineering
Canada Inc. (1990), 30 C.P.R. (3d) 312 (F.C.T.D.),
at page 315:
It is well established in the jurisprudence that a stay should
not be granted under s. 50 of the Federal Court Act, R.S.C.
1985, c. F-7, unless it can be shown that (1) the continuation
of the action would cause prejudice or injustice (not merely
inconvenience or extra expense) to the defendant; and (2) that
the stay would not work an injustice to the plaintiff .... The
onus is on the defendant who seeks a stay to establish that
these conditions exist and the grant or refusal of a stay is
within the discretionary power of the judge.
1 Prior to April 30, 1992, there were two plaintiffs in this
action. As of that date the second plaintiff filed a disconti
nuance.
The substantive claim in this case concerns dam
age to a shipment of bailer twine carried by sea from
Brazil to Toronto, Canada. The plaintiff, Canastrand
Industries Ltd. was the purchaser and receiver of the
cargo. The damaged goods were allegedly delivered
to the plaintiff in May of 1988. The plaintiff's state
ment of claim was filed on April 28, 1989. The own
ers of the Lara S, Armadaores Lara S.A., and the
defendant the Kimberly Navigation Company Lim
ited were served with the statement of claim. They
filed a defence on September 9, 1990. The exchange
of documents, examinations for discovery and other
pre-trial proceedings ensued. A pre-trial conference
to discuss a potential date, time and place for the
hearing of the trial was held by the Associate Chief
Justice on February 14, 1992.
On January 15, 1992 counsel for the plaintiff
became aware that the defendant Armadaores Lara
S.A. intended to sell the Ship the Lara S. In so far as
the material on file is concerned it appears that the
Lam S is the only known asset of the defendant
Armadaores Lara S.A. Counsel for the plaintiff
accordingly obtained advice from and instructed
solicitors in Greece to effect an arrest of the Lara S.
The vessel was in Greece at the time. Counsel for the
plaintiff attests that the only purpose of that action
was and is to ensure that security will exist for any
judgment that might be given with respect to the
cargo claim being litigated in this Court. Counsel for
the plaintiff's affidavit which was filed in response to
the defendants' application before the Prothonotary
for a stay of these proceedings reads in part:
Instructions to arrest the "LARA S" were given in response to
advise [sic] received from Mr. Voutsinos that the "LARA S"
was in Piraeus and was about to be sold to a company called
Ilios Shipping of Piraeus, Greece. As the "LARA S" is the
only known asset of the defendant Armadaores Lara S.A., its
sale might cause serious prejudice to the plaintiff in the event it
is successful in this action.
A copy of a communication attached to the affida
vit of Johanne Gauthier dated February 26, 1992
which was filed by the defendants in support of their
application before the Prothonotary for a stay of pro
ceeding states:
... spoke with our lawyer in Greece who explained as follows:
a) claimants [do] not intend starting out a new trial here for
the case.
b) claimants through their lawyer's [sic] requested only
"conservative measurements [measures]" in order secured
the consequence of Canadian court.
means:
1. - prohibition to own[er]s sale [of] the vsl [vessel] prior [to]
Canadian Court resolution, or
2. - own[er]s bank guarantee for the amnt [amount] claimed.
It is clear that there is nothing innately vexatious
or untoward in a plaintiff in a maritime case com
mencing an action in one jurisdiction in order to
ensure security for a claim which is being litigated in
another. Counsel for the plaintiff argues that the fact
situation in this case is the mirror image of that in
Atlantic Lines & Navigation Company Inc. v. The
Ship "Didymi", [ 1985] 1 F.C. 240 (T.D.). Support is
also found in the decisions in The Hartlepool (1950),
84 L1.L.Rep. 145 (Adm. Div.) and The Soya Mar-
gareta, [1960] 2 All E.R. 756 (P.D.A.).
Counsel for the defendants seeks to distinguish
these cases on the ground that the Atlantic Lines &
Navigation case dealt with whether or not the action
was one in which an arrest of a vessel properly lay
and that both the Hartlepool and Soya Margareta
cases dealt with situations in which there was in the
companion action no in rem claim. He also relies on
Aetna Financial Services Ltd. v. Feigelman et al.,
[1985] 1 S.C.R. 2 for the proposition that seizing the
assets of a defendant before judgment has been ren
dered is a rare and unusual proceeding. I do not think
the distinctions which it is sought to draw from the
maritime cases withstand scrutiny. The Atlantic Lines
& Navigation case dealt with an application for a stay
of proceedings and as in this case the stay was sought
by the defendants in order to avoid providing security
for any damages that might eventually be awarded
upon determination of the substantive issue underly
ing the plaintiff's claim. While the Hartlepool and
Soya Margareta (and the Atlantic Lines & Naviga
tion) cases may deal with situations in which in rem
proceedings in the initial proceedings were either not
possible or not included, I do not think this is the
only circumstance in which a companion action to
obtain security may be taken. Those cases are based
on a broader principle. In so far as reliance on the
Aetna decision is concerned, it has long been a prin
ciple of maritime law that vessels which by their
nature move continually from jurisdiction to jurisdic
tion may be seized before judgment to answer for
obligations potentially owed with respect to them.
Counsel for the defendants argues that in any event
the decision of the Senior Prothonotary was not based
on a possible duplication of proceedings in this Court
and in the Greek court but rather on the ground that
in this case "it is in the interest of justice that the pro
ceedings be stayed". That is, he argues that the
Prothonotary's decision was based on paragraph
50(1)(b) of the Federal Court Act [R.S.C., 1985, c.
F-7], not on paragraph 50(1)(a). Subsection 50(1) of
the Federal Court Act provides:
50. (1) The Court may, in its discretion, stay proceedings in
any cause or matter,
(a) on the ground that the claim is being proceeded with in
another court or jurisdiction; or
(b) where for any other reason it is in the interest of justice
that the proceedings be stayed. [Underlining added.]
It is argued that it is in the interest of justice in this
case that the proceedings be stayed because the plain
tiff did not move to assert its in rem rights against the
Lara S at an earlier time. It is argued that the vessel
was in Canadian ports several times since the com
mencement of the action and no move was made to
arrest it. It is argued that it could not now be arrested
if it came within Canadian waters because the one-
year time limit has expired and in any event the letter
referred to above, sent by counsel for the plaintiff,
expressly states that the plaintiff did not intend to
proceed against the ship. It is argued that the sale of
the ship is to an arms-length third party purchaser,
there being no intention on the part of the defendants
to defraud creditors or evade judgment, and that it is
a sale being made in the ordinary course of business.
It is argued that it is abusive of the plaintiff to now
take proceedings which interfere with that transaction
when no attempt was made to arrest the vessel at an
earlier date.
I am not persuaded that these arguments support a
decision that it is in the interests of justice that the
proceedings in this Court be stayed. In the first place,
as long as the ship was owned by the defendant
Armadaores Lara S.A. and that defendant was an
active defendant in the present proceeding, the plain
tiff might not contemplate the need to ensure security
for its claim by proceeding directly against the ship.
One can understand that this situation would change
once the plaintiff learned that Armadaores Lara S.A.
was intending to sell its only asset, the ship. Sec
ondly, I am not persuaded that if the ship were in
Canadian waters that it could not now be arrested. I
have been referred to no authority for that proposi
tion. Accordingly, I have not been persuaded that the
proceeding in Greece is an attempt to do an end run
around requirements of Canadian maritime law. Also,
as I have already indicated, I am not persuaded that
counsel for the plaintiff made representations that his
client had no intention of proceeding against the ship
itself.
In so far as the respective prejudice which the par
ties may suffer is concerned, I accept counsel for the
plaintiff's argument that an order staying these pro
ceedings until an election is made will result in sub
stantial prejudice to the plaintiff. If an election is
made to proceed in Canada this would necessitate
relinquishment of the "conservative measures" which
have been obtained through the Greek court. Without
such measures there is reason to fear that a judgment
from this Court would be a paper judgment only. I
note that if the defendants wished to assure the plain
tiff that this would not be the case it is always open to
them to file security by way of a bond or other instru
ment in this Court on condition that the Greek pro
ceeding be abandoned. If the plaintiff were to elect to
pursue proceedings in Greece, the time and money
spent on pre-trial proceedings and preparation in this
Court would be wasted. Whether an action on the
merits could in fact, at this point, proceed in Greece
is a matter I will not address since it is an issue
involving Greek law on which I do not have expert
evidence.
In so far as potential prejudice to the defendants is
concerned, in the face of firm and unequivocable evi
dence that there is no intention on the part of the
plaintiff to pursue duplicative actions and make the
defendants answer twice with respect to the substan
tive issues involved, it is difficult to see how
prejudice would arise as a result of the two proceed
ings. In so far as the Greek proceeding operating as a
block to the sale of the ship is concerned, counsel for
the plaintiff argues that his client's claim would in
any event attach as a maritime lien to the vessel and
thus at some point become a bone of contention
between the vendor and purchaser regardless of
whether the vessel was subject to the Greek con
servative measures or not. He argues that this is a
general principle of maritime law. Regardless of
whether or not this is so I am simply not convinced
that the plaintiff's failure to arrest the vessel before
now is a circumstance which can be said to visit an
injustice on the defendants. This is not a decision
such as that in The Vasso (formerly Andria), [1984] 1
Lloyd's Rep. 235 (C.A.) which counsel for the
defendants cited. That was a case in which the plain
tiffs obtained a warrant for arrest without full disclo
sure and where the fact of such a warrant being
issued was not disclosed to the ship owners who were
engaged in bona fide negotiations respecting the
claim and where the writs were not served until the
vessel was in the hands of a third party.
The Senior Prothonotary quoted from the decision
in Nisshin Kisen Kaisha Ltd. v. Canadian National
Railway Co., [1981] 1 F.C. 293 (T.D.), at page 301.
The principle he referred to in that quotation relates
to the Court's authority to impose on a person litigat
ing in this Court the condition that that person not
litigate the same cause of action or matter in another
court. There is no doubt that this is an accurate state
ment of the law. I am not convinced, however, that in
applying that principle the appropriate tests were
considered by the Prothonotary for determining
whether such an order should be given in this case.
I cannot conclude that the facts in the present case
justify the granting of a stay. The two actions will not
place the defendants in the position of having to
answer twice in two different courts with respect to
the same evidence and proceedings. The plaintiff will
suffer considerable prejudice in having to elect to
forgo one or other of the proceedings. The result for
the defendants of allowing the plaintiff to maintain
both proceedings cannot be characterized as an injus
tice.
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.