BBC Chartering Carriers GMBH & CO. KG v. Openhydro Technology Canada Limited

In Charters of Ships, Judicial Sales on (Updated )

Précis: The Federal Court granted default judgment in favour of the plaintiff and ordered the sale of the in rem defendant cargo, a Turbine Control Centre.

Facts: The plaintiff sought default judgment in the amount of $871,339.97 plus interest and costs against the in rem defendant, a turbine control centre (“TCC”). Pursuant to a time charter party with the plaintiff, the defendants chartered a vessel for, inter alia, the carriage of the TCC, from Ireland to New Brunswick. Once the TCC was delivered, the plaintiffs invoiced the defendants for services rendered, however no payments were made by the defendants towards those invoices. A total of $871,339.97 remained outstanding. Pursuant to the charter party agreement, upon default of payment the plaintiffs were entitled to assert a lien on the TCC in rem. Service on the TCC was impossible as it was located on the bed of the sea offshore Nova Scotia, however service on the in personam defendant was successful on 02 August 2018. On 14 August 2018 the Court validated service on the in rem defendant. On 24 September, the defendants filed a Notice of Intention under the Bankruptcy and Insolvency Act (“BIA”). The only issue for the Court was if default judgment should be granted against the in rem defendant, the TCC.

Decision: Motion allowed.

Held: The Court looked to its own enabling statute to hold that it had jurisdiction with respect to any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise: s. 22(2)(i) Federal Courts Act. It further found that under its enabling statute that the jurisdiction conferred in s. 22 may be exercised in rem against the ship, aircraft or other property that is subject of the action, or against any proceeds from its sale that have been paid into court: s. 43(2). After a review of the lead authority, the Court noted that the action in rem must relate to the specific property contemplated in the contract at issue, and found that although the TCC was no longer on board the vessel, there was a clear nexus between the cargo and the vessel and the cargo was the very subject matter of the charter party agreement.
While the plaintiff noted the bankruptcy proceedings stayed any action against the defendants, the plaintiffs argued that proceedings in rem do not apply to the automatic stay of proceedings under the BIA. The Court, finding in the plaintiff’s favour, held that the arrest of the in rem defendant was commenced before the defendant’s notice of intention under the BIA, and therefore the maritime jurisdiction of the Federal Court was engaged in advance of the BIA proceedings.