T. Co. Metals LLC v. Vessel "Federal EMS"

T. Co. Metals LLC v. Vessel "Federal EMS"
Court (s) Database
Federal Court Decisions
Date
2011-09-12
Neutral citation
2011 FC 1067
File numbers
T-1613-08
Notes
Reported Decision
Decision Content
Federal Court
Cour fédérale
Date: 20110912
Docket: T-1613-08
Citation: 2011 FC 1067
Ottawa, Ontario, September 12, 2011
PRESENT: The Honourable Mr. Justice Scott
ADMIRALTY ACTION IN REM AGAINST THE VESSEL “FEDERAL EMS” AND IN PERSONAM AGAINST THE OWNERS, CHARTERERS AND ALL OTHERS INTERESTED IN THE VESSEL “FEDERAL EMS”, CANADA MOON SHIPPING CO. LTD. AND FEDNAV INTERNATIONAL LTD.
BETWEEN:
T. CO. METALS LLC
Plaintiff
and
THE VESSEL "FEDERAL EMS",
THE OWNERS, CHARTERERS AND ALL OTHERS INTERESTED IN THE VESSEL
"FEDERAL EMS",
CANADA MOON SHIPPING CO. LTD.
and
FEDNAV INTERNATIONAL LTD.
Defendants Respondents
and
COMPANHIA SIDERURGICA PAULISTA -COSIPA
Third Party Appellant
REASONS FOR ORDER AND ORDER
I. NATURE OF THE MATTER
[1] This is an appeal to set aside the Order dated March 10, 2011 of Prothonotary Richard Morneau, Esq. (Motion Doc. No 62), by which he dismissed the Motion for a Stay of Proceedings of the third party, Companhia Siderurgica Paulista [COSIPA].
[2] There exists another proceeding (T-2020-08: T. Co. Metals LLC v The Vessel “Federal St. Laurent” et al), to which Prothonotary Morneau’s Order applied mutatis mutandis. The third party did not file a similar motion in Docket T-2020-08, but requests that the order issued in this matter apply mutatis mutandis to the other proceeding as well. Both the respondent and the plaintiff agree.
[3] The Court orders that this order shall apply also to docket T-2020-08.
[4] For the reasons that follow this appeal is allowed.
II. Facts
A. Background to the main action between T. Co. Metals LLC and The Vessel “Federal EMS” et al.
[5] As the basic findings of Prothonotary Morneau are not contested by COSIPA (the appellant), Canada Moon Shipping Co. Ltd. and Fednav International Ltd. (the respondents) or T. Co. Metals LLC (the plaintiff), the Court finds it appropriate to reproduce paragraphs 4 to 17 of the prothonotary’s Reasons for Order (2011 FC 291), in which are set out the background facts. Those paragraphs read as follows:
[4] On October 20, 2008, the plaintiff T. Co. Metals LLC (T.Co), as owner of a cargo of 806 cold‑rolled steel coils, commenced an action in this docket against, inter alia, the defendants Canada Moon and Fednav for a capital sum of C$2,450,000 for damages to that cargo as a result of the defendants carrying it by sea from the port of Piaçaguera in Brazil to the final port of Toronto, Canada, on board the ship Federal Ems (the Ship), owned by Canada Moon.
[5] COSIPA manufactures and exports steel products. Since at least 1996, it has called upon Fednav under similar conditions to transport its products from Brazil to North American ports.
[6] When the cargo was loaded on board the Ship on or about November 16, 2004, the master of the Ship issued two bills of lading (the Bills of lading).
[7] Each bill of lading incorporated by reference a charter party in the following terms: “Subject to all terms, conditions, clauses and exceptions as per charter party dated July 28, 2004 at Rio de Janeiro including arbitration clause”.
[8] The charter party was actually signed on July 22, 2004. This fact does not cause a problem in this case.
[9] It constituted, in fact, a charter party voyage (the Charter party), and the Court understands that it was signed by COSIPA as the voyage charterer and FedNav Ltd. as the disponent owner. It appears, at least for the purposes of this motion, that at all relevant times FedNav Ltd. acted as an agent, inter alia, of Fednav, and consequently the Court will refer to Fednav to designate both interchangeably.
[10] We note here that the Charter party contained various clauses including an arbitration clause, which can be found at clause 19. This clause is entitled “Law and Arbitration” and reads as follows (Arbitration clause 19):
(b) This Charter Party shall be governed by and construed in accordance with Title 9 of the United States Code and the Maritime Law of the United States and should any dispute arise out of this Charter Party, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and a third by the two so chosen; their decision or that of any two of them shall be final, and for purpose of enforcing any award, this agreement may be made a rule of the Court. The proceedings shall be conducted in accordance with the rules of the Society of Maritime Arbitrators, Inc.
For disputes where the total amount claimed by either party does not exceed the amount stated in Box 24 the arbitration shall be conducted in accordance with the Shortened Arbitration Procedure of the Society of Maritime Arbitrators Inc.
(c) Any dispute arising out of this Charter Party shall be referred to arbitration at the place indicated in box 25, subject to the procedures applicable there. The laws of the places indicated in Box 25, shall govern this Charter Party.
[Emphasis added.]
[11] The Charter party also contained a clause relieving the owners, here essentially Fednav, from liability and imposing, inter alia on the charterer, here COSIPA, the risks and liabilities for everything related to the loading and good condition of the cargo. This clause 5(a) reads as follows:
5. Loading/Discharging
(a) Costs/Risks (See Clauses 22 + 40)
The cargo shall be brought into the holds, loaded, stowed and/or trimmed, tallied, lashed, and/or secured by the Charterers and taken from holds and discharged by the receivers, free of any risk, liability and expense whatsoever to the Owners. The Charterers shall provide and lay all dunnage material as required from the proper stowage and protection of the cargo on board, the Owners allowing the use of all dunnage available on board.
[12] Another document that should be mentioned is a letter of indemnity (Letter of Indemnity or L0I) dated at Săo Paulo, Brazil, November 10, 2004, i.e. after the Charter party was signed and a few days before the cargo was loaded on the Ship.
[13] The LOI was aimed at resolving a difference of opinion that arose between the parties as to whether it was appropriate to pack the cargo of steel coils in plastic sheeting; COSIPA was in favour of this method while Fednav was against it because it believed that doing so would cause condensation or moisture on the metal.
[14] The L0I reads as follows:
Săo Paulo, November 10th, 2004.
To: Fednav Limited
Re: M/V FEDERAL EMS
22,740 mt of steels prod. Piaçaguera/Philadelphia, Toronto and Hamilton
COSIPA/Fednav – C/P’s dated July 22nd and September 21st, 2004
Dear Sirs,
Upon request of Companhia Siderurgica Paulista – COSIPA, as Charterers, we herewith confirm that the cargo of steel products loaded on board of M/V Federal Ems at Piaçaguera and destined to Philadelphia, Toronto and Hamilton was covered with plastic sheets.
Provided that Owners/Master ensure that the vessel’s ventilation system will be properly functioning during all voyage, Charterers hereby confirm that they will relieve Master / Vessel / Owners / Managers from any liability, and will hold them harmless for any possible cargo damage by moisture condensation under the plastic cover as a result of restricted ventilation of the cargo.
Yours faithfully,
(signed)
Joăo Carlos de S. Tranjan
Cia.Siderurgica Paulista - COSIPA
[15] It was on the basis, inter alia, of clause 5(a) of the Charter party and the LOI that the defendants filed a defence with the Court on November 26, 2008, as well as a separate Third party claim against COSIPA.
[16] In the Third party claim, the defendants make the following allegations:
6. The cargo was shipped pursuant to a voyage charter in Gencon Form dated at Rio de Janeiro, Brazil, July 22, 2004, between Fednav Limited as disponent owner, and the Third Party as charterer.
7. Under Clause 5 of the said charter party, the cargo was to be brought into the holds, loaded, stowed, tallied and/or secured by the Third party and was, in fact, loaded, stowed and secured by the Third Party.
8. At time of loading, the Third party covered the cargo with plastic sheets and by letter to Fednav Limited dated at São Paulo, Brazil, November 10, 2004, gave an undertaking that, provided the vessel’s ventilation system functioned properly during the voyage, it would relieve the Master, Owners and managers of the vessel from any liability and would hold them harmless for cargo damage resulting from moisture condensation under the plastic sheeting as a result of restricted ventilation of the cargo.
9. In entering into the voyage charter party and receiving the aforementioned hold harmless letter, Fednav Limited was acting as agent on behalf of the Defendants.
10. In the principal action, the Defendants have pleaded that they are not liable to the Plaintiff for any damage resulting from loading, stowage or handling of the cargo, because these operations were not performed by them and were to be performed by the Third Party free of any risk, liability and expense whatsoever to them.
11. Should it be determined by the Court that these defences cannot be raised against the Plaintiff, as bills of lading holder or otherwise, the Defendants are entitled to contribution or indemnity from the Third Party for any amount they will be ordered to pay the Plaintiff for such damage.
12. In addition, should the Court hold the Defendants liable to the Plaintiff for damage resulting from moisture condensation under the plastic sheeting, the Defendants similarly are entitled to contribution or indemnity from the Third Party for such damage.
[17] The defendants had to ask this Court to issue a letter rogatory to serve their Third party claim on COSIPA.
[6] On October 20, 2008, the plaintiff, T. Co. Metals LLC, as owner of a cargo of 806 cold‑rolled steel coils, commenced an action in this docket against, inter alia, the defendants, Canada Moon Shipping Co. Ltd. (Canada Moon) and Fednav International Ltd. (Fednav), for a capital sum of C$2,450,000 for damage to that cargo as a result of the defendants carrying it by sea from the port of Piaçaguera in Brazil to the final port of Toronto, Canada, on board the ship Federal Ems (the Ship), owned by Canada Moon.
[7] COSIPA manufactures and exports steel products. Since at least 1996, it has called upon Fednav, under similar conditions, to transport its products from Brazil to North American ports.
[8] When the cargo was loaded on board the Ship on or about November 16, 2004, the master of the Ship issued two bills of lading (the bills of lading).
[9] Each bill of lading incorporated by reference a charter party, in the following terms: “Subject to all terms, conditions, clauses and exceptions as per charter party dated July 28, 2004 at Rio de Janeiro including arbitration clause”.
[10] The charter party was actually signed on July 22, 2004. This fact does not cause a problem in this case.
[11] It constituted, in fact, a voyage charter party (the charter party), and the Court understands that it was signed by COSIPA, as the voyage charterer, and FedNav Ltd. as the disponent owner. It appears, at least for the purposes of this motion, that at all relevant times, FedNav Ltd. acted as an agent, inter alia, of Fednav, and consequently, the Court will refer to Fednav to designate both, interchangeably.
[12] We note here that the charter party contained various clauses including an arbitration clause, which can be found at clause 19. This clause is entitled “Law and Arbitration” and reads as follows (arbitration clause 19):
(b) This Charter Party shall be governed by and construed in accordance with Title 9 of the United States Code and the Maritime Law of the United States and should any dispute arise out of this Charter Party, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and a third by the two so chosen; their decision or that of any two of them shall be final, and for purpose of enforcing any award, this agreement may be made a rule of the Court. The proceedings shall be conducted in accordance with the rules of the Society of Maritime Arbitrators, Inc.
For disputes where the total amount claimed by either party does not exceed the amount stated in Box 25 the arbitration shall be conducted in accordance with the Shortened Arbitration Procedure of the Society of Maritime Arbitrators Inc.
(c) Any dispute arising out of this Charter Party shall be referred to arbitration at the place indicated in box 25, subject to the procedures applicable there. The laws of the places indicated in Box 25, shall govern this Charter Party.
[Emphasis added.]
[13] The Charter party also contained a clause relieving the owners, here essentially Fednav, from liability and imposing, inter alia on the charterer, here COSIPA, the risks and liabilities for everything related to the loading and good condition of the cargo. This clause, namely clause 5(a), reads as follows:
5. Loading/Discharging
(a) Costs/Risks (See Clause[s] 22 + 40)
The cargo shall be brought into the holds, loaded, stowed and/or trimmed, tallied, lashed, and/or secured by the Charterers and taken from holds and discharged by the receivers, free of any risk, liability and expense whatsoever to the Owners. The Charterers shall provide and lay all dunnage material as required for the proper stowage and protection of the cargo on board, the Owners allowing the use of all dunnage available on board.
[14] Another document that should be mentioned is a letter of indemnity (Letter of Indemnity or LOI) dated at São Paulo, Brazil, November 10, 2004, i.e. after the Charter party was signed and a few days before the cargo was loaded on the Ship.
[15] The LOI was aimed at resolving a difference of opinion that arose between the parties as to whether it was appropriate to pack the cargo of steel coils in plastic sheeting; COSIPA was in favour of this method while Fednav was against it because it believed that doing so would cause condensation or moisture on the metal.
[16] The LOI reads as follows:
São Paulo, November 10th, 2004.
To: Fednav Limited
Re: M/V FEDERAL EMS
22,740 mt of steels [sic] prod. Piaçaguera/Philadelphia, Toronto and Hamilton
COSIPA/Fednav – C/P’s dated July 22nd and September 21st, 2004
Dear Sirs,
Upon request of Companhia Siderurgica Paulista – COSIPA, as Charterers, we herewith confirm that the cargo of steel products loaded on board of M/V Federal Ems at Piaçaguera and destined to Philadelphia, Toronto and Hamilton was covered with plastic sheets.
Provided that Owners/Master ensure that the vessel’s ventilation system will be properly functioning during all voyage, Charterers hereby confirm that they will relieve Master / Vessel / Owners / Managers from any liability, and will hold them harmless for any possible cargo damage by moisture condensation under the plastic cover as a result of restricted ventilation of the cargo.
Yours faithfully,
(signed)
João Carlos de S. Tranjan
Cia.Siderurgica Paulista - COSIPA
[17] It was on the basis, inter alia, of clause 5(a) of the charter party and the LOI that the defendants filed a defence with the Court on November 26, 2008, as well as a separate third party claim against COSIPA.
[18] In the third party claim, the defendants make the following allegations:
6. The cargo was shipped pursuant to a voyage charter in Gencon Form dated at Rio de Janeiro, Brazil, July 22, 2004, between Fednav Limited as disponent owner, and the Third Party as charterer.
7. Under Clause 5 of the said charter party, the cargo was to be brought into the holds, loaded, stowed, tallied and/or secured by the Third Party and was, in fact, loaded, stowed and secured by the Third Party.
8. At time of loading, the Third Party covered the cargo with plastic sheets and by letter to Fednav Limited dated at São Paulo, Brazil, November 10, 2004, gave an undertaking that, provided the vessel’s ventilation system functioned properly during the voyage, it would relieve the Master, Owners and managers of the vessel from any liability and would hold them harmless for cargo damage resulting from moisture condensation under the plastic sheeting as a result of restricted ventilation of the cargo.
9. In entering into the voyage charter party and receiving the aforementioned hold harmless letter, Fednav Limited was acting as agent on behalf of the Defendants.
10. In the principal action, the Defendants have pleaded that they are not liable to the Plaintiff for any damage resulting from loading, stowage or handling of the cargo, because these operations were not performed by them and were to be performed by the Third Party free of any risk, liability and expense whatsoever to them.
11. Should it be determined by the Court that these defences cannot be raised against the Plaintiff, as bills of lading holder or otherwise, the Defendants are entitled to contribution or indemnity from the Third Party for any amount they will be ordered to pay the Plaintiff for such damage.
12. In addition, should the Court hold the Defendants liable to the Plaintiff for damage resulting from moisture condensation under the plastic sheeting, the Defendants similarly are entitled to contribution or indemnity from the Third Party for such damage.
[19] The defendants had to ask this Court to issue a letter rogatory to serve their third party claim on COSIPA.
B. Motion underlying the impugned decision
[20] COSIPA filed a motion on August 31, 2009, seeking a stay of the respondent’s third party claim in favour of arbitration in New York based on the arbitration provision in clause 19 of the charter party. COSIPA had also requested, in the alternative, that the third party claim against it be stayed in favour of proceedings in the Brazilian courts on the basis of the doctrine of forum non conveniens.
C. Present motion and relief requested by COSIPA
[21] The appellant’s present motion, brought pursuant to rules 51 and 359 of the Federal Courts Rules, is an appeal of the prothonotary’s order dismissing the original motion for a stay of the third party claim. In this appeal, the appellant requests from the Court an order:
1) Setting aside the order of Prothonotary Morneau dated March 10, 2011, in which he dismissed the Motion for a Stay of Proceedings of the third party, COSIPA;
2) Staying the present third party claim in favour of arbitration in New York City, in accordance with the terms of the applicable charter party;
3) Alternatively, staying the present third party claim in favour of proceedings in a more appropriate forum, in Brazil, in accordance with the doctrine of forum non conveniens;
4) In the further alternative, granting an extension of time for COSIPA to file a statement of defence with respect to the third party claim;
5) Granting to the third party the costs of the motion heard by the prothonotary and of the present appeal;
6) Applying mutatis mutandis to action T-2020-08 the results of this appeal.
[22] The appellant further emphasizes that the order herein is vital to the final issue of the third party claim, as a stay of proceedings would put an end to the jurisdiction of this Court on the merits of the third party claim.
D. Impugned decision of Prothonotary Morneau
[23] Prothonotary Morneau, in his Reasons for Order of March 10, 2011, made three findings that are disputed in the present appeal.
[24] Firstly, the prothonotary agreed with COSIPA’s submission that the Letter of Indemnity signed between it and Fednav should be regarded as an amendment to the charter party rather than a separate agreement, as is argued by the respondents.
[25] In his decision, the prothonotary reasoned that the LOI was drafted in order to reassure Fednav (para 24), that it was intended to resolve a difference of opinion that arose between the parties as to whether it was appropriate to pack the cargo of steel coils in plastic sheeting, and that the fact that it serves as an amendment to the charter party is reinforced by the subject line of the LOI, which references directly the charter party.
[26] Secondly, Prothonotary Morneau analyzed subsection 46(1) of the Marine Liability Act (the Act) and agreed with the respondent’s identification of the purpose and key elements of the provision. Specifically, the prothonotary accepted the respondent’s submissions and found that, in order for section 46 to apply, it must be shown that:
a) there is:
i. a contract for the carriage of goods by water
ii. to which the Hamburg Rules do not apply, and
b) the actual port of loading or discharge, or the intended port of loading or discharge under the contract, is in Canada, or
c) the defendant has a place of business or an agency in Canada, or
d) the contract was concluded in Canada.
[27] The main subject of dispute between the applicant and respondent was whether a charter party constitutes “a contract for the carriage of goods by water” under section 46. If so, the prothonotary reasoned, that it would favour the respondent in the motion and prevent clause 19 of the charter party from ousting the jurisdiction of the Federal Court over the third party claim against COSIPA (para 29).
[28] On this issue, the prothonotary found he could not agree with COSIPA’s submissions. COSIPA had made a comparison between section 46 and article 21 of the Hamburg Rules. Although the prothonotary agreed that various decisions and authorities confirm the similarity of those two provisions, the Hamburg Rules (article 2(3)) expressly provide that they do not apply to charter parties (para 35-36). He reasoned that the Marine Liability Act did not expressly exclude charter parties and that, since the Hamburg Rules are included in a schedule to the said Act, had Parliament wanted to clearly exclude charter parties from section 46, it would have done so (para 37). Moreover, the various comments made by COSIPA regarding the Parliamentary debates surrounding the enactment of the Marine Liability Act did not support a finding that section 46 did not contemplate the relationship between a charterer and a disponent owner (para 39).
[29] Finally, the prothonotary considered COSIPA’s alternative argument that Canada is a forum non conveniens. That is a determination which is governed by the Federal Court of Appeal decision in Mazda Canada Inc v Cougar Ace (The), [2009] 2 FCR 382 [Cougar Ace]. The Cougar Ace decision emphasized that the Court will intervene only exceptionally with respect to the forum chosen by a plaintiff (here, the defendants), only doing so where the choice is “clearly inappropriate compared to another obviously superior jurisdiction” (para 43). The Federal Court of Appeal decision also referred to the 10 factors set out in Spar Aerospace Ltd v American Mobile Satellite Corp, [2002] 4 SCR 205 [Spar Aerospace], to be weighed by the Court in making a determination of forum non conveniens.
[30] Prothonotary Morneau weighed each factor from Spar Aerospace and made the following determinations:
1. the parties’ residence and that of witnesses and experts à this factor is neutral or at best, Brazil has a small advantage;
2. the location of the material evidence à this factor favours Canada;
3. the place where the contract was negotiated and executed à this factor is neutral;
4. the existence of proceedings pending between the parties in another jurisdiction à this factor favours Canada;
5. the location of the defendant’s assets à this factor favours Brazil;
6. the applicable law à the applicable law is that of New York, so this factor is neutral;
7. advantages conferred upon the plaintiff by its choice of forum, if any à this factor favours Canada, as two of the three parties support the jurisdiction of the Federal Court;
8. the interests of justice à this factor favours Canada;
9. the interests of the parties à this factor favours Canada;
10. the need to have the judgment recognized in another jurisdiction à this factor favours Brazil.
[31] In sum, the prothonotary concluded that COSIPA failed to demonstrate that the Federal Court is clearly inappropriate and that Brazil is an obviously superior jurisdiction.
III. Issues
[32] This appeal raises the following three issues:
1) What is the standard of review for the appeal of the prothonotary’s Order?
2) Does the definition of “contract for the carriage of goods by water” in subsection 46(1) of the Marine Liability Act encompass an agreement to hire a vessel by way of a charter party?
3) Is there a forum more convenient for the hearing of the dispute between COSIPA and the defendants (respondents) than the Federal Court?
IV. RELEVANT PROVISIONS
[33] The relevant provisions are appended to this decision.
V. SUBMISSIONS OF PARTIES AND ANALYSIS
1. What is the standard of review for the appeal of the prothonotary’s Order?
Appellant’s submissions
[34] The appellant submits that the prothonotary’s Order is to be reviewed de novo on the standard set out in Merck v Apotex, below. Had the motion been granted, it would have put an end to the third party proceedings in the Federal Court in favour of proceedings in New York (arbitration) or Brazil (courts). Therefore, the questions raised in the motion for a stay are vital to the third party claim.
Respondents’ submissions
[35] The respondents agree that the interpretation of section 46 of the Marine Liability Act and whether this Court is a forum non conveniens are questions vital to the issues herein and, hence, that the prothonotary’s Order should be reviewed de novo (respondent’s Written Representations at para 14).
[36] The respondents note that but for section 46 of the Marine Liability Act they would have had no choice but to pursue the appellant via arbitration in New York (respondent’s Written Representations at para 15).
[37] They also argue, alternatively, that if they cannot avail themselves of section 46, the agreement to arbitrate should be declared inoperative pursuant to article 8(1) of the Commercial Arbitration Code, due to the LOI (respondent’s Written Representations at para 16), which, they claim, constitutes an implied waiver of any agreement to arbitrate in the event of any proceedings instituted by a third party cargo interest such as the plaintiff and an explicit waiver of any right to raise a forum non conveniens objection.
Analysis
[38] As noted in a previous appeal of an Order by Prothonotary Morneau in this case (judgment rendered by Justice Yvon Pinard, on September 21, 2010), the applicable test governing appeals from a prothonotary’s decision is set out in Canada v Aqua-Gem Investments Ltd, [1993] 2 FC 425 (QL) (CA), as follows:
95 … discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge unless:
(a) they are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts, or
(b) they raise questions vital to the final issue of the case.
Where such discretionary orders are clearly wrong in that the prothonotary has fallen into error of law (a concept in which I include a discretion based upon a wrong principle or upon a misapprehension of the facts), or where they raise questions vital to the final issue of the case, a judge ought to exercise his own discretion de novo.
[39] The test was reformulated in Merck & Co. v Apotex Inc, 2003 FCA 488, to read as follows:
. . . "Discretionary orders of prothonotaries ought not be disturbed on appeal to a judge unless: (a) the questions raised in the motion are vital to the final issue of the case, or (b) the orders are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts."
(See also: ZI Pompey Industrie v ECU-Line N.V., 2003 SCC 27, [2003] 1 SCR 450.)
[40] If the stay of proceedings is granted to the third party, COSIPA, the third party claim by COSIPA against the respondents will be taken out of the Federal Court. This is certainly vital to the final issue in the third party claim, which is whether the defendants are entitled to contribution or indemnity from COSIPA.
[41] Arguably, a stay of proceedings would also deprive the respondents of the evidence they need to defend the main action; that is, their defence would be incomplete without the presence of COSIPA to defend its use of the plastic sheeting (see respondent’s Written Representations at p 29). This is also vital to the final issue of the main action and, consequently, it is this Court’s determination that a de novo review is appropriate.
2. Does the definition of “contract for the carriage of goods by water” in subsection 46(1) of the Marine Liability Act encompass an agreement to hire a vessel by way of a charter party?
Appellant’s submissions
1) Source of contract
[42] The appellant submits that even if a bill of lading is issued, the charter party is still the contract of carriage and the Court should therefore refer the matter to arbitration (appellant’s Written Representations at para 106-114). In the carriage of goods at issue, the appellant (the shipper and voyage charterer) received bills of lading from Fednav; these functioned only as receipts for the goods loaded aboard the ship since the documents remained in the appellant’s hands. The charter party remained at all times the applicable and binding contract for the carriage of goods.
2) Letter of Indemnity
[43] The appellant also preemptively countered the respondent’s argument that the Letter of Indemnity is a separate contract from the charter party (appellant’s Written Representations at para 115-131). The appellant submits that this is a question within the arbitrator’s jurisdiction, but that it is apparent that the LOI, on its face, is an amendment to the charter party. The heading of the LOI supports this proposition, as does the fact that the terms of the LOI restate clauses already in the charter party. It was the understanding of the appellant’s representative, Mr. Eduardo Vieira Munhoz, that the LOI was an amendment to the charter party. Mr. Munhoz was not, however, cross-examined on this. Finally, the appellant argues that it never received any consideration based on the LOI; consequently, no separate contract could have arisen. It is the appellant’s view that since the LOI was an amendment to the charter party, it cannot affect the referral of the matter to arbitration, which was agreed to between the parties in their original charter party agreement.
3) Statutory interpretation
[44] The appellant’s main contention is that charter parties, such as the voyage charter used in this case, are excluded from section 46 of the Marine Liability Act, since Parliament based that section on the Hamburg Rules, which expressly exclude charter parties. Moreover, the fact that a bill of lading was issued on behalf of the master of the vessel does not alter the analysis of section 46 of the Marine Liability Act (appellant’s Written Representations at para 50).
[45] The appellant presents several arguments to support this contention.
· Firstly, it submits that the prothonotary erred in his interpretation of the Marine Liability Act under the principles of statutory interpretation outlined in Canada Trustco Mortgage Co v Canada, 2005 SCC 54 at para 10 [Canada Trustco Mortgage] and Celgene Corp v Canada (Attorney General), 2011 SCC 1 at para 21 [Celgene Corp]. Specifically, it claims that the prothonotary ignored the definition of “contract for the carriage of goods by water” within the scheme of the Act, misconstrued the purpose of the Act as also including sophisticated chartering arrangements rather than being to protect shippers and consignees, and misconstrued Parliament’s intention to exclude charter parties (appellant’s Written Representations at para 51-53).
· The appellant further argues that the exclusion of charter parties from the Act conforms to the scheme of the Act (appellant’s Written Representations at para 54-65), the object of section 46 of the Act (appellant’s Written Representations at para 66-77), and Parliament’s intention to protect Canadian shippers and receivers under bills of lading, because these are essentially contracts of adhesion. (appellant’s Written Representations at para 78 - 101). Furthermore, the appellant contends that section 46 must be interpreted in light of Canada’s international obligations (appellant’s Written Representations at para 102-105).
4) Scheme of the Act
[46] Essentially, the appellant argues that the Act must be interpreted in light of the definitions in the Act itself and its schedules. The Hamburg Rules are appended thereto as a schedule, and they explicitly exclude charter parties (article 2(3)). Given the similarity in drafting and intention between article 21 of the Hamburg Rules and section 46 of the Act, these provisions, the appellant argues, should be interpreted similarly. The Hague-Visby Rules are likewise appended to the Act as a schedule, and the definition of “contract of carriage” in those rules also excludes charter parties, so it is the appellant’s position that the term “contract of carriage” in the Act, properly construed within the scheme of the Act, must exclude charter parties.
5) Object of section 46
[47] The appellant argues that the object of section 46 was to incorporate a strikingly similar provision to that in the Hamburg Rules. It was meant to be an advanced incorporation of part of the Hamburg Rules and will become mostly redundant once the Hamburg Rules come into force. The appellant cites several academic and Parliamentary examples showing that section 46 of the Act is indeed reflective of articles 21 and 22 of the Hamburg Rules. The appellant argues that it is illogical to assign to section 46, a transitional provision, a wider scope than the international convention (the Hamburg Rules, once they come into force) that will replace it.
6) Parliament’s intention
[48] The appellant submits that Parliament’s stated intention was to benefit Canadian shippers and receivers, not shipowners and chartering companies such as Fednav and Canada Moon. It refers to several articles, books, and statements made before Parliamentary committees to support this assertion. There is a distinction between bills of lading (contracts for the carriage of goods) and charter parties (contracts for the hire of a ship or her services), and this distinction relates to the differences in the negotiation dynamics of the two instruments. While the bill of lading is often treated as a contract of adhesion, with little bargaining, between contracting parties, charter parties are contracts negotiated in the free market, where the respective weight of the negotiating parties has a direct impact on the final provisions found in that contract. Thus, it is illogical to apply section 46 to charter parties, which are not regulated, as are bills of lading, to protect weaker parties.
7) Canada’s international obligations
[49] The appellant argues that any doubt as to the applicability of section 46 should be resolved in favour of enforcing the arbitration clause of the “Gencon (standard form) Charter Party”. This is supported by Canada’s acceptance of international commercial arbitration as a mode of dispute resolution (as Canada’s United Nations Foreign Arbitral Awards Convention Act gives force of law to the New York Convention of 1958 (Convention on the Recognition and Enforcement of Foreign Arbitral Awards) and the Commercial Arbitration Code does so for the UNCITRAL (United Nations Commission on International Trade Law) Model Law on International Commercial Arbitration).
Respondents’ submissions
1) Source of contract
[50] The respondents admit that the charter party is the contract of carriage between Fednav and the appellant, COSIPA. They argue, however, that this is not the case with respect to the defendant Canada Moon Shipping and the appellant. The respondents maintain that, in this latter case, the contractual relationship is governed by the bill of lading, even though it incorporates the terms and conditions of the charter party. They submit that, in the event that the Court were to find that section 46 does not apply to charter parties, Canada Moon would still have recourse under section 46 because it is a party to a contract of carriage evidenced by a bill of lading. The respondents contend that this distinction was not properly considered by Prothonotary Morneau.
2) Letter of Indemnity
[51] The respondents also argue that the Letter of Indemnity is a separate agreement which constitutes an implied waiver of any agreement to arbitrate and an explicit waiver of any right to raise a forum non conveniens objection. There is no evidence, other than self-serving statements of the appellant’s representative, to suggest that the LOI was an amendment to the charter party. The wording, according to the respondents, does not give Fednav any rights beyond those that Fednav already had under the charter party. The LOI was redrafted by the appellant to include the wording repeating clause 5(a) of the charter party, but does not incorporate the jurisdiction, choice of law or arbitration clauses found in the charter party.
3) Statutory interpretation
[52] Applying the test—that was repeated by Prothonotary Morneau in his order—for the applicability of section 46 of the Marine Liability Act, the respondents state that:
a) there is:
i) a “contract for the carriage of goods by water”, as this term is all-inclusive and had Parliament intended to restrict its meaning, it would have done so,
ii) to which the Hamburg Rules do not apply, as they have never been declared in force in Canada,
iii) and the contract provides for the adjudication of claims in a place other than Canada, as the bills of lading incorporate by reference an agreement to arbitrate disputes in New York and there is also such an agreement in the charter party;
b) the port of discharge under the contract was in Canada (Toronto) and the cargo was in fact discharged in Canada: and
c) neither (c) nor (d) of the test are applicable in this case.
[53] Contrary to the appellant’s submission, the respondents argue that on a plain reading of section 46 either party to a contract for the carriage of goods by sea may invoke the rights conferred by that section and that there is no ambiguity or lack of clarity as to the provision’s meaning that would justify recourse to external aids in order to understand the sense of the words used in section 46.
[54] The respondents argue that there is no restriction on the scope of the expression “contract for the carriage of goods” in section 46. They also submit that the appellant argues for a restrictive approach to the section which ignores section 12 of the Interpretation Act and Ruth Sullivan’s caution that freedom of contract must be counterbalanced with other values that Parliament seeks to protect, namely, the right of access to Canadian courts for shippers and receivers.
[55] The respondents further submit that there is no restriction on the nature of the interest a party must have under section 46 in order to be a “claimant”. According to the respondents, the essence of the appellant’s argument is that it was Parliament’s intention to extend section 46 rights to cargo interests, but not to carrier’s interests. The respondents contend that there is no evidence that denies the availability of the right to sue to carrier interests. Moreover, a statute’s meaning should not be interpreted in light of what those present at Senate hearings wanted the statute to mean, but according to what Parliament’s elected representatives finally decided. The respondents submit that the assertion that cargo interest claimants can only exercise section 46 rights when they are holders of a bill of lading is wrong and unsupported.
[56] According to the respondents, Parli