Précis: The Federal Court of Appeal upheld the decision of the trial Judge enjoining proceedings in a provincial superior court while a limitation action was proceeding.
Two steam turbine rotors were dropped into the waters of the harbour of St. John, New Brunswick in the course of being loaded onto a barge for transport. Siemens, the owner of the turbines, commenced proceedings in the Ontario courts for approximately $45 million against the carrier and a naval architect who provided consulting services to the carrier. The carrier and naval architect brought this action in the Federal Court for a declaration that their liability was limited to $500,000. Siemens brought applications (1) for an order staying the limitation proceedings on the basis that its claims were not governed by Canadian maritime law and the Federal Court was without jurisdiction; (2) for an interlocutory stay pursuant to s. 50 of the Federal Courts Act arguing that the Ontario proceedings were broader in scope than the Federal proceedings and that there was a risk of inconsistent findings if both proceedings were allowed to continue; and (3) for a final stay on the basis the carrier and naval architect were not entitled to limit their liability pursuant to Art. 4 of the Convention on Limitation of Liability for Maritime Claims. (Article 4 provides that a defendant is not entitled to limit liability if the loss resulted from the personal act or omission of the defendant “committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result”.) Siemens relied upon an expert report for evidence that the carrier was reckless. The motions Judge dismissed all of Siemen’s applications. She held that it was “clear” that “the nature of Siemens’ claim is essentially maritime law” and that the Federal Court accordingly had concurrent jurisdiction with the Ontario Superior Court. Concerning the application for an interlocutory stay, the motions Judge noted that a stay order was discretionary and that the appropriate test was whether the continuation of the action would cause prejudice to Siemens and whether a stay would cause an injustice to the carrier and naval architect. She held that Siemens had not demonstrated that it would be prejudiced if the stay was not granted. On the other hand, the motions Judge expressly found that a stay would work an injustice to the carrier and the architect who had “a presumptive right to limit liability”. On the issue of the final stay, she held it was premature to determine such an issue and that a full trial would be required before a party could be denied the right to limit liability.
The carrier also brought an application for an order enjoining the Ontario action pursuant to s. 33(1)(c) of the Marine Liability Act. The motions Judge noted that the language of s. 33 was very broad and that the availability of the enjoining remedy illustrated “the value attached to the importance of adjudicating all issues relevant to the constitution and distribution of a limitation fund in one forum”. She said the large discrepancy between Siemens’ damage claim and the limitation amount was a significant factor in favour of enjoining the Ontario action. She also noted that there would be significant cost savings for all parties if the Ontario action was enjoined. Ultimately, having regard to all the facts, she concluded that it was appropriate to enjoin the Ontario proceedings and have all issues determined in the Federal Court. Siemens appealed.
Decision: Appeal dismissed.
Held: With respect to the issue of the Federal Court’s jurisdiction, the motions Judge made no error of law in concluding the Federal Court had jurisdiction. The grant of maritime jurisdiction to the Federal Court is very broad. “It is indisputable that Siemens’ claim arises from the movement of goods onto a ship…Siemens’ claim against Irving and MMC is clearly of a maritime nature.” With respect to the applications for stays, Siemens argued the Federal Court had no power to enjoin until the right to limit liability had been determined. This argument was rejected as being directly contrary to section 33(1) of the Marine Liability Act, the raison d’etre of which “is clearly to allow a shipowner against whom a claim has been made or where one is apprehended to have the Federal Court determine whether or not he can limit his liability”. The Court next rejected an argument that the Federal Court cannot enjoin a proceeding where a limitation fund is not needed or a vessel is not arrested saying that there was no merit in this argument. Finally, the Court considered the appropriate test applicable under s.33(1) of the Marine Liability Act and concluded that the test is that of “appropriateness”, a broad and discretionary test entitling the court to make an order enjoining proceedings where it is of the view that it would be appropriate. The motions Judge correctly applied this test when enjoining the Ontario proceedings. The circumstances that lead to the conclusion the motions Judge made no error include: the Federal Court is the only court that can adjudicate the right of the defendants to limit their liability; the defendants have a presumptive right to limit their liability; the limitation issue is the “fundamental issue” between the parties; and the dispute will likely be resolved when the right to limit liability is determined. In these circumstances, it would not be reasonable to permit the Ontario action to proceed and there is no prejudice to Siemens in temporarily preventing it from continuing the Ontario action.