North King Lodge v. The “Gowlland Chief” et al.

In Admiralty Practice, In Rem Actions and Arrest on (Updated )

This was an application to set aside the arrest of the Defendant vessel or alternatively for setting the form and amount of security. The underlying action concerned the sinking of the Plaintiff’s vessel due to the alleged negligence of the Defendants. The motions Judge considered first whether the arrest should be set aside due to abuse of process and noted in this regard that an abuse of process would be an arrest done for some purpose other than a legitimate desire to secure the claim, for example, to leverage a defendant into an improvident settlement. The motions Judge found there was no evidence of abuse of process. With respect to the form of security required, the motions Judge noted that the Rules contemplated security in the form of a payment into court, a surety bond, letter of credit or letter of undertaking and held that these forms of security should not be departed from absent a very good reason. He specifically declined to order posting of security by way of a mortgage on the Defendant vessel. Turning to the maximum amount of security, the motions Judge found that the parties were in agreement that the Defendant vessel had a market value of between $350,000 and $360,000. He next considered the amount of security that should actually be posted and found that the Plaintiff’s best arguable case was the value of its vessel at $700,000. However, applying a contingency of 50% , he reduced this amount to $350,000. He also refused to apply a mark-up to take into account interest and costs. (Note: Rule 55(26) of the British Columbia Supreme Court Rules does not permit security to be given by way of a letter of undertaking as this judgment suggests. Also, the reduction in the amount of security from the Plaintiff’s best arguable case by taking into account contingencies is questionable given the existing authorities. Similarly, the refusal to take into account interest and costs in setting security would seem to be contrary to the weight of authority. Nevertheless, the result arrived at is justifiable given the value of the Defendant vessel, and therefore the upper limit on security, was approximately $350,000)