Appeals - Case Summaries
The database contains 23 case summaries relating to Appeals. The summaries are sorted in reverse date order with 20 summaries per page. If there are more than 20 summaries, use the navigation links at the bottom of the page.
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Maritime - Navigation - Shipping - Interjurisdictional immunity - Federal
Desgagnés Transport Inc. v. Wärtsilä Canada Inc., 2019 SCC 58
Précis: The Supreme Court of Canada held that provincial law, and not Canadian maritime law, applied to a contract of marine engine parts so that the supplier of the parts was liable for the full quantum of damage.
Summary not yet available.
Stay - Irreparable Harm - Vessel
Worldspan Marine Inc. v. Sargeant, 2019 FCA 207
Précis: The Federal Court of Appeal granted a motion for stay of the payment of vessel sale proceeds pending the determination of a creditor's claim to those proceeds.
Facts: Worldspan and Restaurant moved to request the stay of the order of the Federal Court (2019 FC 546) that permitted the proceeds of sale of the vessel to be paid to Sargeant. In the Court below, Worldspan, brought a motion seeking that Sargeant or Comerica Bank was in breach of the VCA for failure to pay claims certificates to Worldspan when due, and Offshore and Restaurant brought motions that their claims ranked in priority to that of Sargeant. The Federal Court dismissed those motions and it was that order directing payment to Sargeant which was appealed in this present motion. Sargeant argued the stay should not be granted as Worldspan and Offshore were in default of previous orders awarding costs to him, and Restaurant was in breach of the order for costs from the 2019 FC 546 action.
Decision: Restaurant motion granted, Worldspan motion dismissed.
Held: The failure of a person to comply with a court order may be a basis for denying a stay that is requested by that person. As such the Court only had to address the motion for stay of Restaurant as they were not in default of any outstanding costs orders prior to the order under appeal in this action, and in using its discretionary power under s. 50 of the FCA the Court held it would not be in the interest of justice to deny Restaurant’s request for stay because Worldspan and Offshore are in default of paying their outstanding cost awards. The Court applied the RJR-MacDonald test to determine if a stay should be granted. The Court held that Restaurant’s appeal was neither frivolous or vexatious, and that Restaurant established irreparable harm on the basis of Sargeant’s unwillingness to pay a judgment against him in Florida. The Court also held that the balance of convenience favours granting the stay as Sargeant had a history of avoiding payment of judgments against him and the difficulty in Restaurant to collect on a judgment (if successful) outweigh the inconvenience of Sargeant in waiting for his money if the stay was granted.
Restoration - Dissolution - Company - Without Prejudice - Wharf
British Columbia v. The Administrator of the Ship-source Oil Pollution Fund, 2019 BCCA 232
Précis: The B.C. Court of Appeal affirmed the decision of the lower Court to restore a company without prejudice to rights acquired in the interval between dissolution and restoration.
Facts:The Province of British Columbia (the “Province”) appealed against an order of the B.C. Supreme Court ( BCSC 793) that restored the registered corporate owner of the vessel Chilcotin Princess (the “Vessel”) on terms that the restoration of the company was without prejudice to the rights of acquired by persons, including the Administrator of the Ship Source Oil Pollution Fund (the “Administrator”), in the interval between dissolution of the company and restoration. The registered corporate owner was dissolved on 06 January 2014 and was restored on 14 May 2018. During that time the Vessel vested with the Province pursuant to s. 344 of the Business Corporations Act, S.B.C. 2002, c. 57, with the Administrator presenting its claim for reimbursement during that same time. The Province appealed to restore the company on terms of “with prejudice”, the effect of which would have the registered owner, rather than the Province, liable for reimbursement costs to the Administrator.
Decision: Appeal dismissed.
Held: Under the Business Corporations Act, the purpose of “without prejudice” was to preserve legitimate claims of third parties that arose during the interval between dissolution and restoration. The Court found that the claim for reimbursement by the Administrator was a legitimate claim that arose in the interval between dissolution of the company and restoration. The Administrator was not seeking a tactical claim that arose only because of the dissolution of the corporate owner. The Court of Appeal rejected the Province’s argument that the Marine Liability Act was intended to create a “polluter pays” regime and that the B.C. Supreme Court judge should have exercised his discretion to order the restoration with prejudice based on that “polluter pays” regime. In doing so, the Court of Appeal found the Marine Liability Act imposed liability for the expense of preventing or minimizing pollution damage as an incident of ownership, imposing that liability on the person who has the rights of the owner of the ship with respect its possession and use at the time clean up expenses are incurred. Acceptance of the Province’s argument, the Court held, would amount to a request to rewrite the Marine Liability Act so as to impose liability on another entity other than the person who has for the time being, either by law or by contract, the rights of the owner of the ship with respect to its possession and use.
Mooring Line - Houseboats - Beaching stake - Standard of Care - Mooring Rope
Oddy v. Waterway Partnership Equities Inc., 2019 BCCA 185
Précis: The British Columbia Court of Appeal dismissed an appeal against a finding by the trial judge that the owner of a houseboat met the standard of care in connection with injuries caused by a snapped mooring stake and rope.
Facts: The appellant appealed a decision dismissing her negligence action against the respondents’ houseboat company after she suffered injuries caused by a snapped mooring rope and stake which anchored the houseboat she was on. The issue was whether the respondents were negligent in the selection of the mooring rope for use to moor houseboats. The appellant argued that under Article 3 of the Athens Convention the respondents were presumed negligent, that the trial judge did not apply the test for remoteness of damage, and that the judge made palpable and overriding errors of fact.
Decision: Appeal dismissed.
Held: The Court of Appeal agreed with the trial judge’s finding as a fact that the respondents satisfied the standard of care. The respondents’ reliance on a reputable, third-party supplier of the mooring rope was reasonable. The Court of Appeal also held that there was no evidence to show the respondents knew or ought to have known the rope was unsuitable for its purpose. The Court of Appeal further agreed with the trial judge that there was no duty on the respondents to consult an engineer or other marine specialist with respect to the rope before using it to moor houseboats. On those holdings, the Court of Appeal did not find it necessary to comment on the application of the Marine Liability Act or the remoteness of damage arguments.
Directed Verdict of Acquittal - Undertaking - Summary Conviction - Accept Service
R. v. M/V The Marathassa, 2019 BCSC 386
Précis: The B.C. Supreme Court held that a second notice of appeal could be served on counsel for the defendant ship as personal service on the defendant ship was not realistically available to the Crown.
Facts: The Crown made an ex-parte application in B.C. Supreme Court to effect service of a notice of appeal of the lower Court’s decision to acquit the m/v Marathassa of all summary conviction charges in relation to a discharge of oil in Canadian waters in 2015. The Crown also sought an order to extend the time for service of the notice. As the vessel was not in Canadian waters at the time when Crown sought to serve the notice, personal service could not be effected as required by the Criminal Code rule governing summary conviction appeals. The B.C. Supreme Court Criminal Rules did allow for the Court to order for service on the defendant in the manner that the Court directs.
Decision: Orders granted.
Held Under the B.C. Supreme Court Criminal Rules, if personal service of a notice of appeal cannot be perfected then an ex-parte application can be made to a judge of the appeal court for an order to serve the defendant in a manner that the appeal court directs. In finding that the ship attorned to the lower Court’s jurisdiction and was represented by the solicitor, who had also accepted service of an earlier notice of appeal relating to a directed verdict of acquittal, the alternative to personal service was justified as personal service could not be achieved through no fault of the Crown. Despite an undertaking by the vessel’s solicitor to accept the originating summons in respect of the charges tried in the lower Court and to pay after final appeal the administrative monetary penalties, the B.C. Supreme Court held that an appeal from a summary conviction was not a new originating process but rather an extension of the trial process. In granting the order extending time to serve, the Court found that the Crown acted diligently in filing the notice of appeal, that the delay in service arose since the vessel was outside of the jurisdiction, the delay had been minimal, and the extension of time to serve would not prejudice the vessel as service of the notice of appeal in relation to the directed verdict of acquittal was already known and would not catch the vessel “by surprise”.
TSB Report - Request for Information - Passenger Eyewitnesses - Refusal to Comply with Notice
Mackenzie v. Canada (Transportation Safety Board), 2019 FCA 39
Précis: The Federal Court of Appeal held a notice requesting information of passengers on board a vessel that touched bottom was a reasonable use of the TSB's statutory powers.
Facts: The appellant sought to challenge the respondent’s request for information via notice (the “Notice”) relating to passengers on board a vessel when that vessel touched bottom in 2017. The respondent made this request under statutory authourity to investigate a marine occurrence under the Canadian Transportation Accident and Safety Board Act, 1989, c. 3. The appellant contended that the Federal Court erred in finding the information requested was relevant to the investigation, that the Court below failed to find the Notice was authorized by the investigating officer, and that the Court below failed to find the respondent had the relevant information as requested by the Notice.
Decision: appeal dismissed.
Held: The Federal Court of Appeal saw no merit in the case before it. The respondent issued the Notice in accordance with its mandate to advance transportation safety. In issuing the Notice, the information sought to be obtained formed part of the legitimate effort to obtain pertinent information regarding the marine occurrence. The Court below properly concluded the Notice was a reasonable use of the statutory powers available to the Respondent in discharging its legal mandate. No further issue was found by the appeal Court with respect to the authorizing officer or his geographical location. Further, the appellant was expected to have the information requested so there was no basis for this court to intervene.
Excess and Other Insurance Clauses - Contribution -
TD General Insurance Company v. Intact Insurance Company, 2019 ONCA 5
Précis: The Ontario Court of Appeal found that two insurers, both having identical "other insurance clauses", each had to share the cost of the injured party's claim.
Facts: The passenger of an Aluma boat was injured when the boat struck the shoreline. The passenger sued both the operator of the boat as well as its owner. The operator was not the owner of the boat but had the owner's permission to operate. The operator was covered by a TD insurance policy taken out by the owner of the boat that covered him since he was operating the boat with the owner's permission. The operator was also covered by his own home insurance policy, through Intact. Both policies had identical "other insurance clauses" that considered the policy excess if another insurance applied to a loss or claim. TD appealed the trial judge's dismissal of TD's application that both insurance companies would share equally in the defence.
Held: Appeal allowed.
Reasons: The Ontario Court of Appeal found that the trial judge erred in applying the "Minnesota Approach" factors, an approach expressly rejected by the Supreme Court of Canada in Family Insurance Corp. v. Lombard. The Ontario Court of Appeal found that there was overlapping coverage, and that the two limiting "other insurance clauses" in each policy were irreconcilable. Following Family Insurance, the appeal court found that two insurers must share the burden equally under a coordinate obligation to make good on a loss.
Multi-Party Arbitration - Contracts of Design and Construction - SeaBus - Notice a Nullity
South Coast British Columbia Transportation Authority v. BMT Fleet Technology Ltd., 2018 BCCA 468
Précis: The British Columbia Court of Appeal held that multi-party arbitration relating to three marine design and construction contracts could not be commenced by a single notice to arbitrate.
Facts: South Coast British Columbia Transportation Authourity (“TransLink”) gave a notice to arbitrate pursuant to the Arbitration Act, R.S.B.C. 1996, c. 55 in April 2011, seeking to arbitrate four contracts under one arbitrator, without consent of the responding parties BMT Fleet Technology Ltd., International Marine Consultants Ltd., and Victoria Shipyards Ltd. The notice contained details of the alleged deficiencies in the performance of the contacts by the three companies. In this appeal only three of the contracts were in question, which related to the design and construction of TransLink’s SeaBus service. The three contracts each dealt with different aspects of the SeaBus’ design and construction, and each contract contained an arbitration clause under the B.C. Arbitration Act. The contracts stated that if no exception is made to the application of the Rules of the British Columbia International Commercial Arbitration Centre, then the parties have agreed to conduct arbitration under the Centre’s Rules. The TransLink-Victoria Shipyards contract differed from the other two in that it allowed for arbitration only under the agreement’s force majeure clause and specified arbitration before a three-person panel. In May 2011, the Centre wrote to TransLink informing them that three Notices to Arbitrate must be filed with the Centre, instead of only one, as there were three different contracts and none of which were related to each other. TransLink failed to file separate notices. TransLink filed a petition in the Supreme Court of British Columbia in August 2016 and in September 2017 obtained a declaration that arbitration was commenced in April 2011 and a single arbitrator was appointed. BMT and IMC appealed the BCSC Order, arguing in the Court of Appeal that the court below failed to notice s. 21 of the Arbitration Act which permits multi-party arbitration only if all parties agree to the appointment of one arbitrator and agree to steps taken to consolidate the disputes.
Decision: Appeal allowed, Order set aside.
Held:The Court of Appeal found that the essence of the arbitration clause is comprised of both consent and privacy. TransLink sought a different procedure than one contemplated by the contracts, the arbitration clauses and the Arbitration Act. The Court of Appeal found that the BCSC judge did not address s. 21 of the Arbitration Act in light of the facts at bar and whether consolidation without consent fundamentally changed the character of the arbitration from that which was contractually agreed. The Court of Appeal decided this case based on multi-party admiralty arbitration cases, notably the Eastern Saga  2 Lloyd’s Rep. 373 and the Smaro  1 Lloyd’s Rep. 225, to hold that arbitration may address only the contract giving rise to the dispute. TransLink’s notice called on the respondents to engage in arbitration before a single arbitrator which was not known to the Arbitration Act, and only under s. 21 of that act would TransLink have been able to commence the type of arbitration contemplated in its April 2011 notice.
Cargo Insurance – Insurable Interest – Sweat Damage - Proof of Loss - Appeals – New Evidence
Broadgrain Commodities Inc. v. Continental Casualty Company, 2017 ONSC 4721 2018 ONCA 438
Précis: The Ontario Court of Appeal confirmed a judgment of the Superior Court holding that a cargo underwriter was not liable under a cargo policy for damage caused during transit when the insured/vendor had been paid in full by the buyer of the cargo.
Facts: The plaintiff sold 26 containers of sesame seeds to be transported from Nigeria to Xingang, China. The sale was on terms “CIF Xingang” meaning the plaintiff was to obtain insurance but the risk of loss or damage passed to the buyer upon shipment. The goods were insured under an open cargo policy with the defendant and were declared under the open policy. During the course of carriage from Nigeria to China, the goods were damaged. All 26 containers were declared unfit for human consumption and were sold for salvage. Even though the plaintiff had been paid in full by its buyer, it filed a claim with the defendant insurer. The insurer denied the claim on 24 of 26 containers on the basis that the cause of the damage was condensation or sweat, a non-transit related fortuity. The plaintiff commenced proceedings against the insurer. The insurer then brought this motion for summary judgment on the grounds that the plaintiff had no insurable interest and that the plaintiff had been paid in full by its buyer.
At first instance (2017 ONSC 4721), notwithstanding the transfer of the risk of loss to the buyer, the motion Judge held the plaintiff had an insurable interest; a term that was broadly defined in the Marine Insurance Act, S.C. 1993, c. 22, and required an expansive interpretation. However, the motion was dismissed because the plaintiff had been paid in full by its buyer and therefore suffered no loss. In reaching this conclusion the motion Judge refused to accept a bald statement in one of the plaintiff’s affidavits that it had suffered a loss because the buyer had short-paid on subsequent shipments.
The plaintiff appealed the dismissal of the motion and also sought to introduce new evidence on appeal. The defendant cross-appealed the finding that the plaintiff had an insurable interest.
Decision: The plaintiff’s appeal and motion to introduce new evidence are both dismissed. The cross-appeal is dismissed as being moot.
Held: There was no palpable and overriding error by the motion Judge in concluding that the plaintiff was paid in full. The plaintiff filed no evidence of any kind in support of the purported short-payments by the buyer nor was any explanation given for the absence of any supporting details or documents. This is sufficient to dispose of the appeal. The motion to introduce fresh evidence must also fail since the evidence was available at the time of the original motion. Additionally, the fresh evidence would not have affected the outcome.
Charters - Bunkers - Bankruptcy of OW Bunkers - Liens - Practice - Interpleader - Parole Evidence – Appeals - Standard of Review
Canpotex Shipping Services Limited v. Marine Petrobulk Ltd., 2015 FC 1108 2017 FCA 47
Précis: The Federal Court of Appeal held that the trial Judge erred in relying upon parole evidence when interpreting bunker supply contracts and further held that the error was sufficiently serious so as to constitute an error in principle justifying review to the standard of correctness.
Facts: Canpotex obtained bunkers from OW Bunkers (“OW”) for two foreign registered vessels that it chartered. The bunkers were actually supplied by the defendant, Marine Petrobulk (“MP”), a Canadian bunker supplier. MP invoiced OW for the bunkers and OW invoiced Canpotex. Before any of the invoices were paid, OW became insolvent and subsequently bankrupt. Pursuant to various court orders and agreements, any sums owing to OW were to be collected by ING, its receivers. MP and ING both claimed entitlement to payment of the amounts owing by Canpotex in respect of the bunkers supplied. Canpotex brought this action and, pursuant to a consent order made by the Prothonotary under Rule 108, deposited the amount owing into a trust account. Canpotex then brought this application for a declaration that the payment of the funds into trust extinguished its liabilities and any in rem claims against the vessels. MP and ING each brought their own applications for declarations that they were entitled to the funds. ING also opposed the relief requested by the plaintiff.
A critical issue was the relevant contractual documents that applied to the purchases. This issue arose because Canpotex and OW had negotiated a Fixed Price Agreement that included as Schedule 3 a set of terms and conditions. However, because market conditions were not favourable, no purchases were made by Canpotex under this agreement. Rather, the parties were agreed that all purchases made by Canpotex were “spot purchases” not subject to the Fixed Price Agreement. Nevertheless, Canpotex led evidence and argued that Schedule 3 of the Fixed Price Agreement was intended to and did apply to “spot purchases”. This issue was important because Schedule 3 to the Fixed Price Agreement provided that “where the physical supply of the fuel is being undertaken by a third party… these terms and conditions shall be varied accordingly”. In contrast, OW’s General Terms and Conditions, which were referred to in the bunker confirmations, provided that “where the physical supply of the Bunkers is being undertaken by a third party which insists that the Buyer is also bound by its own terms and conditions… these Terms and Conditions shall be varied accordingly”.
At first instance (2015 FC 1108), the motions Judge: (1) allowed the plaintiff's interpleader application; (2) ordered that the full amount of MP’s invoice be paid out of the funds held in trust; (3) ordered that the balance of the funds in trust be paid to OW/ING; and (4) declared that the in personam liability of the plaintiff and the in rem liability of the vessels would be extinguished upon the payments being made. In reaching this result, the motions Judge accepted the evidence of Mr. Ball of Canpotex that the purchases were subject to Schedule 3 of the Fixed Price Agreement. He further held that pursuant to Schedule 3 of the Fixed Price Agreement the terms and conditions were varied to include MP’s Standard Terms and Conditions. He then applied MP’s Standard Terms and Conditions and held that the plaintiff and OW were both customers of MP and were jointly and severally liable to pay it for the bunkers delivered. OW/ING appealed.
Decision: Appeal allowed. The matter is referred back to the Judge for reconsideration.
Held: Interpleader relief is available where “two or more persons make conflicting claims”. The claims must pertain to the same subject matter, must be mutually exclusive and must be such that the applicant faces an actual dilemma as to how he should act. The only claims here that are conflicting and can give rise to interpleader relief are the contractual claims of OW and MP. The assertion of a maritime lien against the vessels by MP under s. 139 of the Marine Liability Act is not a conflicting claim as it is a claim against the vessels and their owners not Canpotex. It was wrong for the trial Judge to extinguish the shipowners’ liability in relation to any s. 139 claim.
The Judge erred in considering Mr. Ball’s evidence which led him to err in concluding that Schedule 3 of the Fixed Price Agreement applied to the purchases at issue. There is nothing in the contractual documents to support his oral evidence. The trial Judge should not have used that oral evidence to replace or overwhelm the words used in the contractual documents. “The parole evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing.” In failing to follow the principles of contractual interpretation the Judge erred in law and, although errors of contractual interpretation are normally errors of mixed fact and law and not subject to a standard of correctness, this error constitutes an extricable error in principle and is subject to the standard of correctness. Therefore, this matter is referred back to the trial Judge for reconsideration.
Release from Arrest - Pending Appeal
Platypus Marine Inc. v. TATU (Ship), 2016 FC 1095
Précis: The Federal Court ordered that a Caveat Release be set aside and released the defendant ship from arrest notwithstanding an impending appeal.
Summary not yet available
Construction Mortgage - Entitlement of Purchaser/Mortgagee to Return of Advances – Interpretation of Contracts – Standard of Review on Appeal
Offshore Interiors Inc. v. Worldspan Marine Inc., 2013 FC 1266 2015 FCA 46
Précis: The Federal Court of Appeal dismissed an appeal and confirmed the trial judgment holding that a Builder's mortgage secured advances made by the purchaser and that the builder was under an obligation to repay those advances.
Facts: Pursuant to a vessel construction agreement the builder was to retain title to the vessel until delivery to the purchaser and the purchaser was to make periodic payments in the nature of advances to the builder. The advances were to be secured by a continuing first party security interest supported by a mortgage. A current account Builder’s Mortgage was filed in the ship registry in favour of the purchaser. Disputes arose during the course of construction of the vessel with the result that construction ceased and the builder filed a petition in the British Columbia Supreme Court under the Companies Creditors’ Arrangement Act. The plaintiff, a supplier of goods and services to the vessel, also commenced these proceedings in the Federal Court for unpaid invoices and had the vessel arrested. In the B.C. Supreme Court action an order was pronounced on 22 July 2011 providing that any claimant with an in rem claim against the vessel could pursue that claim in the Federal Court. The Federal Court issued an order on 29 August 2011 establishing a process for the filing of in rem claims against the vessel which included a requirement that any claim be described with sufficient particulars so the court could establish whether it was a proper in rem claim and determine its priority. A claim was filed in the Federal Court by the purchaser/mortgagee for repayment of the funds advanced. The plaintiff brought this application for a declaration that the mortgage did not create a lien or charge on the vessel other than to secure delivery of the vessel. If correct, the effect would be that the funds advanced by the purchaser/mortgagee would be excluded from its claim.
At first instance (2013 FC 221), the Prothonotary granted the declaration sought. The Prothonotary said the question of whether there was an obligation under the mortgage that funds advanced be repaid depended on the construction of the vessel construction agreement and mortgage. The Prothonotary held there was no express provision requiring repayment of funds advanced for the construction of the vessel. Despite the mortgage stating it was a “current account” mortgage, the Prothonotary found no evidence that, in fact, an account current was created by the vessel construction agreement which allowed the builder to retain all advances. The Prothonotary found the parties contemplated that all monies advanced would be used in the construction of the vessel and not exist as a fund. The purchaser/mortgagee appealed.
On appeal (2013 FC 1266), the appeal Judge allowed the appeal holding:
(1) The Prothonotary correctly recognized that he was to determine the intent of the parties based on the language of the contract documents and correctly identified the principles of interpretation but failed to properly apply those principles. The purpose of the mortgage was to provide a continuing security interest in the vessel to secure the advances. It was intended to be effective as against third parties and was not limited to securing the delivery of the Vessel. Although the documents did not state the advances were a loan, they did state they would be made “on account”.
(2) Although there was no express requirement for repayment of advances, considering the agreements as a whole and within the factual matrix, there was an implied obligation to repay the advances. With respect to the Prothonotary’s reasoning that the funds advanced were not a loan because they would be used in the construction and not available as a fund, the purpose of any loan is to permit the borrower to spend the monies lent. A commercial absurdity would result if the advanced funds could not be used for the intended purpose and instead had to be set aside to create a fund. The sums advanced comprised the “account current” secured by the mortgage, even in the absence of an explicit reference in the construction agreement. It was not necessary to specify the amount owing or the time of repayment in the mortgage when there was sufficient detail in the construction agreement. It is also difficult to see how the mortgage could be intended to only secure the delivery of the vessel when the construction agreement expressly states it is to create a first priority security interest to secure advances.
(3) In addition, the purchaser has a claim pursuant to s. 22(2) (n) of the Federal Courts Act (which addresses claims arising out of the construction, repair or equipping of a ship), which can be addressed at the priorities hearing.
The plaintiff appealed to the Federal Court of Appeal. There were four issues on appeal, namely:
(1) What is the correct standard of review?
(2) Was the appeal Judge plainly wrong in her interpretation of the agreements?
(3) Was the appeal Judge plainly wrong in concluding there was an implied repayment obligation in the construction agreement?
(4) Did the appeal Judge err in law in her consideration of s. 22(2)(n) of the Federal Courts Act?
Decision: Appeal Dismissed.
(1) The standard of review enunciated in Bristol-Myers Squibb Co. v. Apotex Inc., 2011 FCA 34, applies to issues 2 and 3, i.e. whether the appeal Judge was plainly wrong in her interpretation of the agreements and in concluding there was a repayment obligation. The test is whether the appeal Judge “had no grounds to interfere with the Prothonotary’s decision or, in the event such grounds existed, if the Judge’s decision was arrived at on a wrong basis or was plainly wrong”. The proper test for issue 4, is whether the appeal Judge was correct in her conclusions with respect to s. 22(2)(n) of the Federal Courts Act.
(2) In Sattva Corp. v. Creston Moly Corp., 2014 SCC 53, the Supreme Court set out the guiding principles for contractual interpretation to determine the intent of the parties and the scope of their understanding. The contract is to be read as a whole giving the words their ordinary and grammatical meaning consistent with the surrounding circumstances. However, the surrounding circumstances “must never be allowed to overwhelm the words of that agreement” and must consist of “objective evidence of the background and facts”. The court should interpret the contract in accord with sound commercial principles and good business sense and avoid commercial absurdity. The appeal Judge was aware of these principles and applied them in construing the documents. After proper consideration she held the intent of the parties was to secure the advances which were in the nature of a loan. She did not imply a term of repayment. The Prothonotary’s finding that no “account current” was created because the advances were to be used in the vessel construction and not kept in a fund does not withstand scrutiny. It ignores the express wording in the Builder’s Mortgage which refers to an “account current” and would render the mortgage of no force or effect to secure delivery. Moreover, it ignores the essential promise of a builder’s mortgage which is to pay the mortgagee. While the documents may be unclear as to when and how advances are to be repaid, this is not fatal.
(3) The appeal Judge’s conclusion that there was an implied repayment term was an alternative conclusion. As she was correct in her interpretation, this issue need not be considered.
(4) There is no doubt the appeal Judge was correct in concluding that the purchaser had a claim falling within s. 22(2) (n) of the Federal Courts Act. This section provides that the Federal Court has jurisdiction over “any claim arising out of a contract relating to the construction, repair or equipping of a ship”.
Discovery - Privilege - Appeals - Whether Order of Prothonotary Discretionary
Webasto (Hagedorn) v. Shasta Equities Ltd. (The Helios), 2013 FC 101 2015 FCA 135
Précis: The Federal Court of Appeal held that preliminary investigation reports were not privileged even though counsel had been retained.
Facts: A fire broke out on board the defendants’ ship “Helios” and spread to other nearby vessels. The broker of the “Helios” appointed a surveyor and fire expert to attend the scene and investigate the fire on behalf of underwriters. The surveyor and fire expert were told they were being retained by counsel and would report directly to counsel. The broker next retained counsel who in turn retained a claims service to interview one of the owners of the “Helios”. The moving party brought an application to compel production of various documents over which privilege was claimed including survey reports, the report of the fire expert and reports from the claims service which attached an interview and pre-fire survey reports. At first instance the Prothonotary was not convinced the documents were created “wholly or mainly” with litigation in mind and held they were not privileged. The “Helios” defendants appealed.
On appeal (reported as Hagedorn v Helios I (Ship), 2013 FC 101), the appeal Judge held that the order of the Prothonotary was not discretionary and the correct standard of review was one of correctness. The appeal Judge further held that, with the exception of some pre-fire survey reports, the documents were privileged as the parties were in an adversarial position from the outset. A further appeal was taken to the Federal Court of Appeal.
Decision: Appeal allowed, in part.
Held: Litigation privilege requires both that litigation be ongoing or reasonably contemplated at the time of the creation of the document and that the dominant purpose of creating the document is for that litigation. Relevant considerations include: the author and the authority upon whose direction a report is prepared; the date of the report; when counsel was appointed; the person to whom the report was addressed; and, the content of the report. The initial report of the surveyor and the report of the fire investigator were prepared at a time when, although there was the possibility of litigation, neither party was in a position to assess the incident. The parties were in the preliminary stage of investigation. Litigation had not commenced and was not reasonably contemplated. These reports are not privileged as was held by the Prothonotary. The report from the claims service, on the other hand, is protected by privilege. The investigator was directly retained by counsel, the report was prepared when litigation was more clearly contemplated and the attached interview is detailed and extensive and in the nature of what one would expect of an interview of a possible witness. The balance of the documents were prepared when litigation was in reasonable contemplation and are privileged.
Stay Pending Appeal
Alpha Trading v. Sarah Desgagnés (Ship), 2010 FCA 209
In this matter the respondent had obtained an anti-suit injunction and an order requiring the appellant to release the defendant ship from arrest in proceedings in Belgium. The appellant sought a stay of the order pending the hearing of the appeal. The application was granted. The Court noted that the test for granting a stay required: that there is a serious question to be decided on appeal (a relatively easy condition to satisfy); refusing the stay is likely to cause irreparable harm; and, the balance of convenience favours granting the stay. The fact that the release of the vessel from arrest would result in the loss of the appellant’s security was a paramount consideration. A request by the respondent for counter-security was also refused on the grounds that there was no basis for such a condition in the circumstances.
Appeals – Overruling Prior Panels – Appeals to Supreme Court
Kremikovtzi Trade v. Phoenix Bulk Carriers Limited, 2006 FCA 240
In an application under section 37.1 of the Supreme Court Act for leave to appeal to the Supreme Court of Canada, the Federal Court of Appeal, although noting that the Supreme Court should be allowed to set its own agenda and that it should rarely grant leave, nevertheless granted leave reasoning that the issue was one of considerable importance to the maritime Bar. In a dissent, the dissenting Justice held that the mere fact of conflicting decisions should not be a sufficient reason for granting leave and that the Supreme Court should determine itself whether to grant leave.
Carriage – Fire – Dangerous Goods – Hague Rules – Appeal – Standard of Review
Elders Grain Company Limited et al. v. The “Ralph Misener” et al., 2005 FCA 139
This matter involved the carriage of a cargo of alfalfa pellets from Thunder Bay to Montreal. During the discharge of the cargo in Montreal a fire broke out damaging the cargo and the carrying ship. The Plaintiffs claimed for the damage to the cargo and the Defendants counter-claimed for the damage to the ship. The Plaintiffs argued that the bills of lading, which were clean, created a prima facie presumption against the Defendants that the cargo was received in good order and condition. The trial Judge, however, held that during the loading the cargo was surrounded by a cloud of dust which made visual inspection difficult and that under these circumstances the presumption did not apply. The trial Judge then turned to the cause of the fire and reviewed the evidence of the various experts and witnesses. He concluded that the evidence overwhelmingly supported the conclusion that spontaneous combustion caused the fire. He next considered whether the alfalfa pellets were a “dangerous cargo” within the meaning of Article IV r. 6 of the Hague Rules. He noted that the word “dangerous” had to be given a broad meaning and concluded with little difficulty that the cargo was indeed dangerous since if not properly stored it could ignite. He further held that there was no evidence the Defendants consented to the shipment of the cargo with knowledge of its dangerous character. The Plaintiffs failed to advise the Defendants of its flammable nature and failed to provide any information to the Defendants with respect to the cargo. In their defence the Plaintiffs argued that pursuant to Art. IV r. 3 of the Hague Rules they could not be liable to the Defendants without proof of an act, fault or neglect. The trial Judge rejected this argument, holding that a shipper's liability for damage caused by dangerous goods was strict both under Art. IV r. 6 and at common law. In result, the Plaintiffs' action was dismissed and the Counterclaim was allowed. The Plaintiffs appealed.
At the Court of Appeal the Court first noted that the standard of review depended on the nature of the questions appealed from. The standard of review for pure questions of law is one of correctness. The standard for questions of fact is whether the trial judge made a palpable and overriding error i.e. “one that gives rise to a reasoned belief that the trial judge must have forgotten, ignored or misconceived the evidence in a way that affected his conclusion”. The standard for a mixed question of law and fact is that of “palpable and overriding error unless it is clear that the trial judge made some extricable error in principle with respect of the characterisation of the legal test or its application”. Applying these standards of review the Court of Appeal upheld the trial Judge and dismissed the appeal.
Jurisdiction Clause – MLA s.46 – Parallel Proceedings – Appeal from Prothonotary – Standard of Review
Ford Aquitaine Industries SAS et al. v. The “Canmar Pride” et al., 2005 FC 431
This action concerned the loss of or damage to several containers carried from LeHavre to Montreal. The damages were estimated at $6 million. The carriage was pursuant to a transportation services agreement which provided for American law and jurisdiction. The carrier under the transportation services agreement was OOCL but OOCL was expressly permitted to subcontract the carriage, which it did, to CP Ships. The Plaintiff originally commenced proceedings against only OOCL in a U.S. District Court. The Plaintiff attempted to discontinue those proceedings but was not allowed to do so. The Plaintiff also commenced this proceeding in the Federal Court against both OOCL and CP Ships. The Defendants brought this application to stay the Canadian proceedings. At first instance, the Prothonotary granted the application for a stay. He held that section 46 of the Marine Liability Act did not oust the court's jurisdiction under section 50 of the Federal Court Act to grant a stay on grounds other than a forum selection clause. He then applied the test from the decision of the British Columbia Court of Appeal in Westec Aerospace v Raytheon Aircraft Co., (1999) 173 DLR (4th) 498. That test was: 1) Are there parallel proceedings underway?; 2) If so, is the other jurisdiction an appropriate forum?; and, 3) Has the Plaintiff established by cogent evidence that there is some personal or juridical advantage available to him in the British Columbia action that is of such importance that it would be unjust to deprive him of it? The Prothonotary held that the Plaintiff had failed to meet the third element of that test. In this regard a main point argued by the Plaintiff was that a U.S. Court would apply the COGSA limit which was substantially lower than the limitation that would apply in a Canadian court applying the Hague-Visby Rules. The Prothonotary, however, considered that the issue of the applicable limitation would be argued in either court. On appeal, the appeal Judge first considered the appropriate standard of review from a discretionary order of a Prothonotary and noted that the test had been recently reformulated to require the reviewing judge to first determine whether the questions raised are vital to the final issue in the case. If so, the discretion should be exercised de novo and the reviewing judge need not consider the second branch of the test (whether the orders were clearly wrong). The appeal Judge considered the Prothonotary's decision final and thus proceeded to exercise her discretion de novo. The appeal Judge held that the Prothonotary had erred in applying the test from Westec. She considered that the Westec approach was incorrect in that it set up “loss of juridical advantage” as a separate test or step rather than weighing it with the other usual factors to be taken into account. Moreover, she considered that the objective was not just to determine if the foreign forum was equally appropriate to the domestic forum but whether it was more appropriate than the domestic forum. Nevertheless, weighing the relevant factors she concluded that the U.S District Court was a more appropriate forum and upheld the decision of the Prothonotary.
Seizure – Setting Aside – Corporate Veil – Appeals – Standard of Review
Foresight Shipping Co. Ltd. v. Union of India et al., 2004 FC 1501
This was an appeal from an Order of a Prothonotary in which the Prothonotary had set aside the seizure of the ship. The facts were that the Plaintiff had obtained an arbitral award against the Union of India and the Food Corporation of India and registered the judgment in the Federal Court. The award/judgment was not paid and in an effort to obtain payment the Plaintiff seized the ship “Lok Rajeshwari” at Sorel, Quebec. The owner of the ship, the Shipping Company of India Ltd., brought an application to set aside the seizure, which was granted by the Prothonotary. On appeal, the appeal Judge initially addressed the question of the standard of review from orders of Prothonotaries. She referred to the test enunciated in Canada v Aqua-Gem Investments,  2 F.C. 425 where it was held that discretionary orders of Prothonotaries should not be disturbed unless they are clearly wrong or raise questions vital to the final issue of the case. She also referred to the more recent formulation of this test in Merck & Co. Inc. v Apotex,  2 F.C. R. 459 where it was said that the first inquiry now concerns whether questions vital to the final issue of the case are raised. It was on this basis that the appeal Judge determined her discretion should be exercised de novo. The appeal Judge reviewed conflict of laws principles and determined that the law of India, not the law of Canada, should be applied to determine whether the ship was an asset of the Union of India subject to execution proceedings. She then reviewed the affidavits of foreign law and held that the law of India regarded the Shipping Company of India as having a distinct legal personality separate and apart from its major shareholders and that under the law of India the lifting of the corporate veil was allowed only in exceptional cases such as fraud. The appeal Judge was not prepared to disregard the distinct legal personality of the ship owner and dismissed the appeal.
Dismissal for Delay – Appeal – Standard or Review
Precision Drilling International B.V. v. The “BBC Japan” et al., 2004 FC 701
This was an appeal from an order of a Prothonotary dismissing the action for delay after a status review. The only explanation for the delay was that the Plaintiff had been negotiating a settlement with one of the Defendants. The appeal Judge considered first whether discretion should be exercised de novo on the appeal and held that it should since the Prothonotary's decision was final. The appeal Judge then considered the proper test to be applied and noted that the questions to ask were: 1) What are the reasons for the delay and do they justify the delay? and, 2) What steps are proposed to move the matter forward? The appeal Judge further noted that the overarching concern should be whether the Plaintiffs recognize their responsibility to move the action along and are taking steps to do so. Applying this “liberal” approach the Judge held that although the Plaintiff might have provided a better explanation for the delay it had justifiably explained the delay. The Judge further found that although the Plaintiff had failed to propose a time table they did ask that the matter be set over for a few months to allow the settlement to be finalized. The Judge considered this a reasonable response and queried why the court should insist on litigants preparing an artificial timetable when the parties are involved in meaningful negotiations. In the result, the appeal was allowed and the order dismissing the action set aside.
Appeal – Finding of Fact – Contract
Sabina A.G. v. Carisbrooke Shipping Limited, 2003 FCA 366
This was an appeal by the Defendant from the judgment of the trial Judge who found there was a contract between the parties on the basis of documents, conversations and the evidence as a whole. The appeal was dismissed because the appellate Court would not interfere with the trial Judge's findings of fact unless there was an overriding and palpable error.