Dongnam Oil & Fats Co. v. Chemex Ltd. et al., (2004) 264 F.T.R. 264 (FC)

• Court: Federal Court (Canada)
• Case Date: March 18, 2003
• Jurisdiction: Canada (Federal)
• Citations: (2004), 264 F.T.R. 264 (FC);2004 FC 1732

Dongnam Oil & Fats Co. v. Chemex (2004), 264 F.T.R. 264 (FC)

MLB headnote and full text

Temp. Cite: [2005] F.T.R. TBEd. JA.004

Admiralty Action in Rem

Dongnam Oil & Fats Co. Ltd. (plaintiff) v. Chemex Ltd., the Owners and All Others Interested in the Motor Vessel (Also Known As the Motor Tanker) Tuapse, the Owners and All Others Interested in the Motor Vessel (Also Known As the Motor Tanker) "Chembulk Clipper", Novorossiysk Shipping Company (Also Known As Novoship) and Chembulk Holding Ltd. (defendants)

(T-1843-02; 2004 FC 1732)

Indexed As: Dongnam Oil & Fats Co. v. Chemex Ltd. et al.

Federal Court

Hargrave, Prothonotary

December 10, 2004.

Summary:

In May 2002, Dongnam Oil & Fats Co. chartered the "Tuapse" for the carriage of yellow grease and bleachable tallow from New Jersey to Korea. Between August 30 and September 4, 2002, the cargo was transhipped from the "Tuapse" to the "Chembulk Clipper", at Nanaimo, British Columbia. Dongnam sued Chemex Ltd., charterer of the "Tuapse"; Novorossiysk Shipping Co. (Novoship), owner of the "Tuapse"; and Chembulk Holdings, owner of the "Chembulk Clipper". Dongnam sought damages for breach of the charterparty and damage to cargo during transhipment and for wrongful arrest of cargo. The defendants Chemex and Novoship moved for a stay of proceedings or alternatively, for an order striking out sections of the statement of claim.

A Prothonotary of the Federal Court allowed the motion by Chemex and ordered a stay of the proceedings against it but denied the motion by Novoship. The Prothonotary struck the disputed sections of the statement of claim.

Admiralty - Topic 8514

Practice - Pleadings - Striking out - General - [See Practice - Topic 2228 and Practice - Topic 2237.1 ].

Arbitration - Topic 105

Right to arbitration - International Commercial Arbitration Act - [See Shipping and Navigation - Topic 1888 ].

Arbitration - Topic 2505

Stay of proceedings - Arbitration clause - Effect of - [See Shipping and Navigation - Topic 1888 ].

Arbitration - Topic 2507

Stay of proceedings - When available - [See Shipping and Navigation - Topic 1888 ].

Conflict of Laws - Topic 728

Jurisdiction - Jurisdiction excluded by contract - Stay of proceedings - When available - [See Shipping and Navigation - Topic 1888 and first Shipping and Navigation - Topic 1950 ].

Conflict of Laws - Topic 2402.1

Admiralty - General - Choice of forum by parties - [See Shipping and Navigation - Topic 1888 and first Shipping and Navigation - Topic 1950 ].

Courts - Topic 4033.2

Federal Court of Canada - Jurisdiction - Trial Division - Stay of proceedings pending arbitration - [See Shipping and Navigation - Topic 1888 ].

Courts - Topic 4033.3

Federal Court of Canada - Jurisdiction - Trial Division - Stay of proceedings - Contractual agreement to submit dispute to foreign jurisdiction - Dongnam Oil & Fats Co. sued the defendants for breach of charterparty, damage to cargo and unlawful arrest of cargo - An arbitration clause provided that all disputes would be settled in London under English law - Section 46(2) of the Marine Liability Act provided that "the parties to a contract may, after a claim arises under the contract, designate by agreement the place where the claimant may institute judicial or arbitral proceedings" - The defendants moved for a stay of proceedings - Dongnam argued that the defendant Chemex Ltd. had commenced an initial action in Federal Court (August 2002 action) which still existed when Dongnam commenced the present action, giving rise to an operating or de facto agreement designating a jurisdiction - A Prothonotary of the Federal Court rejected the argument - Leaving aside the difference in substance between the August 2002 action for dead freight and the present action for breach of a charterparty, Dongnam, although named as a defendant in the August 2002 action, was never served; an ex parte motion for an interim injunction in those proceedings was dismissed; and the action was discontinued - Without more, the court could not find an agreement within the meaning of s. 46(2) - See paragraphs 21 to 22.

Practice - Topic 2228

Pleadings - Striking out pleadings - Grounds - Res judicata - In May 2002, Dongnam Oil & Fats Co. chartered the "Tuapse" for the carriage of yellow grease and bleachable tallow from New Jersey to Korea - The charterparty included an arbitration clause which provided that any arbitration would be settled in London under English law - Between August 30 and September 4, 2002, the cargo was transhipped from the "Tuapse" to the "Chembulk Clipper", at Nanaimo, British Columbia - Dongnam sued Chemex Ltd., charterer of the "Tuapse"; Novorossiysk Shipping Co. (Novoship), owner of the "Tuapse"; and Chembulk Holdings, owner of the "Chembulk Clipper" - Dongnam sought a negative declaration as to payment of deadfreight - The defendants Chemex and Novoship moved for an order striking out that section of the statement of claim - A Prothonotary of the Federal Court allowed the motion - The issue of entitlement to deadfreight was dealt with in arbitration in London - The arbitration award had to be recognized by the Canada-United Kingdom Civil and Commercial Judgments Convention Act - See paragraphs 30 to 32.

Practice - Topic 2237.1

Pleadings - Striking out pleadings - Grounds - Failure to comply with conditions precedent - In May 2002, Dongnam Oil & Fats Co. chartered the "Tuapse" for the carriage of yellow grease and bleachable tallow from New Jersey to Korea - The charterparty included an arbitration clause which provided that any arbitration would be settled in London under English law - Between August 30 and September 4, 2002, the cargo was transhipped from the "Tuapse" to the "Chembulk Clipper", at Nanaimo, British Columbia - Dongnam sued Chemex Ltd., charterer of the "Tuapse"; Novorossiysk Shipping Co. (Novoship), owner of the "Tuapse"; and Chembulk Holdings, owner of the "Chembulk Clipper" - Dongnam sought declaratory relief as to wrongful arrest of cargo and damages for the arrest of cargo - The defendants Chemex and Novoship moved for an order striking out that section of the statement of claim - A Prothonotary of the Federal Court allowed the motion - On its face, the plea was an improper plea because the cargo in question was not only in the possession of, but also owned by West Coast Reduction Ltd., an entity which was not a party to the present action - The Prothonotary held that ownership was not a precondition to a claim of tortious interference with property, however, Dongnam, if not the owner, should at least be in possession of the goods at the time of the interference to maintain an action - See paragraphs 34 to 39.

Shipping and Navigation - Topic 1888

Carriage of goods - Charterparties - Arbitration clauses - In May 2002, Dongnam Oil & Fats Co. chartered the "Tuapse" for the carriage of yellow grease and bleachable tallow from New Jersey to Korea - The charterparty included an arbitration clause which provided that any arbitration would be settled in London under English law - Between August 30 and September 4, 2002, the cargo was transhipped from the "Tuapse" to the "Chembulk Clipper", at Nanaimo, British Columbia - Dongnam sued Chemex Ltd., charterer of the "Tuapse"; Novorossiysk Shipping Co. (Novoship), owner of the "Tuapse"; and Chembulk Holdings, owner of the "Chembulk Clipper" - Dongnam sought damages for breach of the charterparty and damage to cargo during transhipment and for wrongful arrest of cargo - The defendants Chemex and Novoship moved for a stay of proceedings - A Prothonotary of the Federal Court granted Chemex's motion - There was clearly an agreement in the May 24, 2002, charterparty between Chemex and Dongnam, for London arbitration, thus effectively calling for a stay between those parties in favour of London arbitration (Art. 7 and 8 of the Commercial Arbitration Code) - See paragraph 24 to 26.

Shipping and Navigation - Topic 1950

Carriage of goods - Bill of lading - Forum selection clauses - In May 2002, Dongnam Oil & Fats Co. chartered the "Tuapse" for the carriage of yellow grease and bleachable tallow from New Jersey to Korea - The charterparty included an arbitration clause which provided that any arbitration would be settled in London under English law - The bills of lading incorporated the voyage charterparty between Chemex and Dongnam - Between August 30 and September 4, 2002, the cargo was transhipped from the "Tuapse" to the "Chembulk Clipper", at Nanaimo, British Columbia - Dongnam sued Chemex Ltd., charterer of the "Tuapse"; Novorossiysk Shipping Co. (Novoship), owner of the "Tuapse"; and Chembulk Holdings, owner of the "Chembulk Clipper" - Dongnam sought damages for breach of the charterparty and damage to cargo during transhipment and for wrongful arrest of cargo - The defendants Chemex and Novoship moved for a stay of proceedings - A Prothonotary of the Federal Court dismissed Novoship's motion - Novoship could only call for London arbitration on the strength of the bills of lading - The bill of lading incorporation wording was general, did not refer to arbitration and was insufficient to import the arbitration clause from the charterparty into the bill of lading - Novoship did not have the benefit of London arbitration and therefore the stay had to be denied - See paragraphs 27 to 29.

Shipping and Navigation - Topic 1950

Carriage of goods - Bill of lading - Forum selection clauses - [See Statutes - Topic 510 ].

Shipping and Navigation - Topic 2321

Carriage of goods - Loading - General - Loading - What constitutes - In May 2002, Dongnam Oil & Fats Co. chartered the "Tuapse" for the carriage of yellow grease and bleachable tallow from New Jersey to Korea - The charterparty included an arbitration clause which provided that any arbitration would be settled in London under English law - Between August 30 and September 4, 2002, the cargo was transhipped from the "Tuapse" to the "Chembulk Clipper", at Nanaimo, British Columbia - Dongnam sued Chemex Ltd., charterer of the "Tuapse"; Novorossiysk Shipping Co. (Novoship), owner of the "Tuapse"; and Chembulk Holdings, owner of the "Chembulk Clipper" - Dongnam sought damages for breach of the charterparty and damage to cargo during transhipment and for wrongful arrest of cargo - The defendants Chemex and Novoship moved for a stay of proceedings - Dongnam argued that the Federal Court had jurisdiction to hear the matter pursuant to s. 46(1)(a) of the Marine Liability Act because the transhipment that occurred at Nanaimo, B.C., constituted loading or discharging at a Canadian port - A Prothonotary of the Federal Court held that "what occurred was a pure transhipment between adjacent vessels, without any of the usual mutual aspects of loading, that is without the cargo interests bringing the cargo alongside for delivery to the ship and without the ship accepting cargo, from the cargo interest and stowing it aboard. On the basis that no loading took place section 46 of the [Act] does not come into play" - See paragraphs 11 to 15.

Statutes - Topic 510

Interpretation - General principles - Strict interpretation - A Prothonotary of the Federal Court held that s. 46 of the Marine Liability Act, which dealt with claims under a contract which provided forum selection clauses or arbitration clauses designating the resolution of claims in a place other than Canada, should be interpreted strictly - The court stated that "there should be a narrow interpretation of legislation where there is encroachment or impingement upon commercial activity of the contractual rights of strangers, who do not clearly and manifestly fall within the legislation in question. It was surely not the intent of Parliament to interfere with a legitimate operation taking place only between ships, merely because they happen to be in Canadian waters: that is too much of an interference with the rights of business people to justify a broad interpretation and application of s. 46 of the [Act]" - See paragraph 16 - Section 46 of the Act was a restriction on freedom to contract and thus it should be interpreted strictly - See paragraph 17 - Finally, where no subjects, citizens or residents were involved, but rather the principles were offshore companies, Parliament did not intend to abolish or to limit or to interfere with the rights of those companies unless they clearly came within the bounds of the legislation - See paragraph 18.

Words and Phrases

Loading - A Prothonotary of the Federal Court discussed the meaning of the word "loading" as used in s. 46(1)(a) of the Marine Liability Act, S.C. 2001, c. 6 - See paragraph 13.

Words and Phrases

Transhipment - A Prothonotary of the Federal Court discussed the meaning of the word "transhipment" - See paragraph 14.

Cases Noticed:

Harris v. Best Ryley & Co. (1892), 68 L.T. 76, refd to. [para. 13].

H.B. Contracting Ltd. v. Northland Shipping (1962) Co. (1971), 24 D.L.R.(3d) 209 (B.C.C.A.), refd to. [para. 19].

Incremona-Salerno Marmi Affini Siciliani (I.S.M.A.S.) s.n.c. et al. v. Ship Castor et al. (2002), 297 N.R. 151 (F.C.A.), refd to. [para. 20].

Nestlé Canada Inc. et al. v. Vessel Viljandi et al., [2003] F.T.R. Uned. 16; 2003 FCT 28, refd to. [para. 20].

Thyssen Canada Ltd. v. Mariana Maritime S.A., [2000] 3 F.C. 398; 254 N.R. 346 (F.C.A.), refd to. [para. 23].

Nanisivik Mines Ltd. et al. v. F.C.R.S. Shipping Ltd. et al., [1994] 2 F.C. 662; 167 N.R. 294 (F.C.A.), refd to. [para. 26].

The Rena K, [1978] 1 Lloyd's 545 (Q.B.), refd to. [para. 28].

Beattie et al. v. Canada (2001), 278 N.R. 158 (F.C.A.), refd to. [para. 31].

Fibreco Pulp Inc. et al. v. Star Shipping A/S et al. (1998), 145 F.T.R. 125 (T.D. Protho.), affd. (1998), 156 F.T.R. 127 (T.D.), affd. (2000), 257 N.R. 291 (F.C.A.), refd to. [para. 41].

Statutes Noticed:

Commercial Arbitration Code - see Commercial Arbitration Act.

Commercial Arbitration Act, R.S.C. 1985 (2nd Supp.), c. 17, Commercial Arbitration Code, Schedule, art. 7, art. 8 [para. 23].

Marine Liability Act, S.C. 2001, c. 6, sect. 46(1) [para. 11].

Authors and Works Noticed:

Brodie's Dictionary of Shipping Terms (4th Ed. 2003), generally [para. 14].

Côté, Pierre-André on the Interpretation of Legislation in Canada (3rd Ed. 2000), pp. 472, 474 [para. 17].

Salmond, The Law of Torts (14th Ed. 1965), p. 189 [para. 37].

Sullivan's Marine Encyclopedic Dictionary (4th Ed. 1995), generally [para. 14].

Sullivan, Ruth, Sullivan and Driedger on the Construction of Statutes (4th Ed. 2002), p. 399 [para. 18].

Counsel:

Jeffrey Smith, for the plaintiff;

Shane Nossal and J.D.L. Morrision, for the defendant, Novorossiysk Shipping Co.;

P.G. Bernard, Q.C., and H. Peter Swanson, for the defendant, Chemex Ltd.;

G. Tucker, for the defendant, Chembulk Holding Inc.

Solicitors of Record:

Lindsay, Kenny, Vancouver, British Columbia, for the plaintiff;

Bull, Housser & Tupper, Vancouver, British Columbia, for the defendant, Novorossiysk Shipping Co.;

Bernard & Partners, Vancouver, British Columbia, for the defendant, Chemex Ltd.;

Owen Bird, Vancouver, British Columbia, for the defendant Chembulk Holding Ltd.

These motions were heard on March 18, 2003, at Vancouver, British Columbia, before Hargrave, Prothonotary, of the Federal Court, who delivered the following decision on December 10, 2004.