Date: 20040506
Docket: T-697-03
Citation: 2004 FC 670
ADMIRALTY ACTION IN REM
BETWEEN:
FISH MAKER L.L.C.
Plaintiff
and
THE OWNERS AND ALL OTHERS
INTERESTED IN THE SHIP "ZODIAK",
and MAGADAN SCIENCE AND RESEARCH INSTITUTE FOR
FISHERIES AND OCEANOGRAPHY
Defendants
[1] The Plaintiff contracted to repair, refit and convert the Zodiak, a 44-metre long Russian research vessel, into a fishing vessel suitable to catch and process various varieties of seafood. The Plaintiff also agreed to equip and supply the Zodiak. For a number of reasons, which are complex and which to explore fully would require evidence and cross-examinations through the trial process, the project has not come out well. The Defendants now apply to release the Zodiak from arrest without security, or to have security set, and to obtain security for costs.
[2] Actions involving disputes over the repair, refurbishing or conversion of vessels and the fixing of security to release such vessels from arrest are often complex and difficult. Each side usually has a firm and opposing view as to the equities. That is the situation here.
[3] The Defendants, on the basis of various interpretations of contractual material, the facts as they see them and what they look upon as an arguable lack of both any claim and any exposure to liability to suppliers and sub-contractors, on the part of the Plaintiff, say that the vessel Zodiak should be released from its arrest by the Plaintiff without security. The Plaintiff's reasonably best arguable case, in round figures, $500,000.00 (US), together with three years' interest at 5%, being $75,000.00 and costs at $60,000.00, all in American dollars, is $635,000.00 (US).
CONSIDERATION
Release of Vessel and Security
[4] On the one hand and admittedly highly simplified, for the Defendants produced much material, the Defendants take the approach that the contracts for repair and conversion are for a fixed price and that there is only a balance owing of some $300,000.00 (US). This $300,000.00 (US) sum is said to be equal to money owed by the Plaintiff to Allied Shipbuilders and to a third party supplier of equipment. The Defendants submit that Allied Shipbuilders, contractor to the Plaintiff, where the vessel was situated for repairs and conversion and where the vessel still remains, are properly secured by their own claim of lien against the Zodiak. As to the claim of the third party equipment supplier, against the Plaintiff, the Defendants say that it ought to be satisfied through the sale of equipment supplied by that third party. There are many loose ends here, for should the Zodiak not be available to execute against, Allied Shipbuilders may well end up looking to its customer, the Plaintiff. Further, the location, control, ownership and value of the highly specialized equipment supplied by the third party equipment manufacturer is vague and questionable. There are too many uncertainties to conclude, short of a full examination of the evidence at trial, that the Defendants owe the Plaintiff nothing and that the Zodiak should be released without security at this time.
[5] On the other hand, there are many items which go to making a reasonably best arguable case for the Plaintiff at $500,000.00 (US). However, neither side has provided an unchallengeable case to support their view. Thus I must do the best that I can, without deciding the case, to determine security on the basis of a reasonable best arguable case. I first turn to the law as to release of an arrested ship without security.
[6] It is only in rare instances, where the circumstances are quite extraordinary, or where a case is beyond doubt hopeless, that a vessel will be released from arrest without security. Here relevant cases are Argosy Seafoods Ltd. v. The Atlantic Bounty (1991), 45 F.T.R. 114 (F.C.T.D.) at 120, a decision of Mr Justice MacKay, Amican Navigation Inc. v. Densan Shipping Co. (1997), 137 F.T.R. 132 (F.C.T.D.) at 135 and 136, a decision of Mr Justice Lutfy as he then was and Pictou Industries Ltd. v. Secunda Marine Services Ltd. (1994), 78 F.T.R. 78 (F.C.T.D.) at 79 and 80, a decision of the Associate Chief Justice Jerome.
[7] Certainly there are instances in which the amount requested as security has been modified, as for example in NHM International Inc. v. F.C. Yachts Ltd. (2003), 227 F.T.R. 42 (F.C.T.D.). In NHM International, while security was set at only a portion of the amount requested, it was not an instance in which the case was pre-judged when security was set, but a recognition that a party seeking security must not abuse that position, for the party seeking security in that instance maintained that high security would have a salutary effect on settlement, for it would force the party giving the security to settle, a clear abuse. In NHM International the security was set to represent the reasonably best arguable case, keeping in mind the necessary balance between sufficient security, but stopping well short of using security to oppress or to force a settlement.
[8] In striking a balance between sufficient security, without pre-judging the case, and avoiding any abuse by the arresting Plaintiff, who has a position of strength, I would point out that there are also additional safeguards. First, if the security requested and substantially granted turns out to be too high, the arresting Plaintiff may be penalized in costs. Second, if as suggested by counsel for the Defendants, the amount of security exceeds the value of the vessel and here I recognize that the outlook in the fishing industry, generally, is not good, although there is no evidence before me as to the actual value of the Zodiak, this Court has, on occasion, as set out in The Algobay, [1980] 2 F.C. 366 (F.C.T.D.) at 367, entertained motions for moderation of security on the basis of ship value.
[9] In the present instance the Defendants have provided a large amount of material, some of it contradictory. Here and there the Defendants have over-stated their case. In one instance the Defendants have misinterpreted and put an uncalled for gloss on evidence of the Plaintiff in connection with providing documents, a tactic which calls into question the credibility of the Defendants overall. When a litigant alleges or even implies a criminal activity or a criminal investigation, without any evidence or first-hand knowledge, on the part of or against the other side, that litigant should take special care to have the facts right, indeed, to have unassailably correct facts. As an overall result of this the Defendants have a credibility problem: where I must chose between conflicting affidavit evidence, or conflicting views of counsel, I prefer the evidence or the views put forward on behalf of the Plaintiff.
[10] A weakness in the case of the Defendants is that they discount the possibility that modifications to and interpretations of the contractual material might well favour the Plaintiff, who expected the fairly new vessel, one built in 1997, to be in relatively good condition, instead of which the vessel was produced by the Defendants in sad condition, including requiring re-welding of the hull by reason of neglect to prevent underwater corrosion. Here I would observe that, leaving aside the possibility of unwritten modifications to the various ongoing versions of the conversion and repair contracts, the written contracts themselves are difficult to interpret and indeed should not be interpreted without the procedure inherent in a full trial.
[11] There is dispute as to the efficiency and sobriety of the Defendants' crew members who were to provide the labour necessary for some of the repairs and conversion. There are claims for many other items which would clearly be necessaries, said to have been provided by the Plaintiff, running from funeral expenses, master's travel expenses to witness the cremation, hotel expenses when the Defendants' crew members refused to live aboard, crew payroll at a new and higher rate negotiated between crew and owners, and through to and including meal expenses when the cook is said to have become incapacitated by reason of alcohol abuse. These are also all factors which have not only complicated the work and extended the time for completion, but also increased the cost of the project.
[12] No litigation is certain, however I accept a slightly discounted version of the calculation of the claim of the Plaintiff, as its reasonably arguable best case at $500,000.00 (US). The Plaintiff seeks interest which has now run for about a year and which may well run for a further two years before there is a determination of this matter. Thus I have allowed interest for three years at 5% simple interest, which is my best estimate of the Plaintiff's cost of borrowing, a total of $75,000.00 (US). As a measure of costs, the Defendants estimate their costs at $100,000.00 (US). That may be possible, but I am of the view that the costs of the Plaintiff will be less and put them at $60,000 (US). Thus security will be in the amount of $635,000.00 (US).
Security for Costs
[13] The Defendants seek security for costs on the basis that the Plaintiff is an American company thus falling within Rule 416(1)(a), a plaintiff ordinarily resident outside of Canada, thus allowing the Court discretion to give security for costs. Security for costs in favour of the Defendants as a group, will be in the amount of $100,000.00 (US), in two stages. The first stage is to be put in place within 45 days and will carry through until completion of examinations for discovery, including as to answers to undertakings. The second stage of security shall be provided at the time for the request of the pre-trail conference, in the amount of $65,000.00 (US).
[14] Taking all of the circumstances into consideration, costs of the present motion will be in the cause. I make this allocation recognising that the Plaintiff was successful in establishing security which generally reflected its evidence, but also recognising that the Defendants succeeded in establishing substantial security for costs.
(Sgd.) "John A. Hargrave"
Prothonotary
Vancouver, British Columbia
6 May 2004
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-697-03
STYLE OF CAUSE: Fish Maker L.L.C. v. The Ship "Zodiak" et al.
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: 3 May 2004
REASONS FOR ORDER BY: Hargrave P.
DATED: 6 May 2004
APPEARANCES:
Peter G Bernard, QC FOR PLAINTIFF
Ellen Bond FOR DEFENDANTS
SOLICITORS OF RECORD:
Bernard & Partners FOR PLAINTIFF
Barristers & Solicitors
Vancouver, British Columbia
Rankin & Bond FOR DEFENDANTS
Barristers & Solicitors
Vancouver, British Columbia