NHM International Inc. v. F.C. Yachts Ltd. et al., (2003) 227 F.T.R. 42 (TD)

• Court: Federal Court (Canada)
• Case Date: January 13, 2003
• Jurisdiction: Canada (Federal)
• Citations: (2003), 227 F.T.R. 42 (TD)

NHM Intl. Inc. v. FC Yachts Ltd. (2003), 227 F.T.R. 42 (TD)

MLB headnote and full text

Temp. Cite: [2003] F.T.R. TBEd. FE.006

Admiralty Action in Rem and In Personam

NHM International Inc. (plaintiff) v. F.C. Yachts Ltd., The Owners and all others interested in the Motor Vessel All Risks, also known as F.C. Yachts Ltd. Hull Number QFY76003K102 (defendants)

(T-1865-02; 2003 FCT 53)

Indexed As: NHM International Inc. v. F.C. Yachts Ltd. et al.

Federal Court of Canada

Trial Division

Hargrave, Prothonotary

January 21, 2003.

Summary:

The plaintiff NHM International Inc., arranged for F.C. Yachts Ltd. to construct a yacht. F.C. Yachts Ltd., as builder and owner of the vessel, gave to NHM International Inc., the buyer and intended ultimate owner of the vessel, a builder's mortgage, to secure the equity of NHM International Inc. in the vessel as it might stand from time to time by reason of deposit and progress payments. Construction began and NHM International made progress payments. In the view of NHM International, progress on the yacht's construction was unsatisfactory. NHM went into possession of the yacht as a mortgagee in possession and had the vessel arrested. A dispute arose over the amount of bail.

A Prothonotary of the Federal Court of Canada, Trial Division, determined the amount of bail accordingly.

Admiralty - Topic 8264

Practice - Actions in rem - Release of property on bail - Bail bond - General - A Prothonotary of the Federal Court of Canada, Trial Division, stated that "bail is a substitution of personal, in the sense of cash or guarantee security, for in rem asset security. The bail represents the ship, so far as the claimant taking the security is concerned. An in rem claimant who has arrested a vessel is entitled to security for principal, interest and costs, to represent his or her reasonably best arguable case. Failing agreement a court which is asked to set bail must, on the one hand, be satisfied as to the sufficiency of the bail, but, on the other hand, must not pre-judge the case. Here a party seeking security is in a position of strength and must not abuse that position. Indeed, courts have always taken a dim view of excessive demands for security ... Bail is to represent reasonable security for a plaintiff, or here, for a claimant which has lodged a caveat ..." - See paragraph 15.

Admiralty - Topic 8264

Practice - Actions in rem - Release of property on bail - Bail bond - General - A Prothonotary of the Federal Court of Canada, Trial Division, rejected the notion that bail ought to be ordered in such a substantial amount as to have the supposedly salutary effect of forcing a party to negotiate - See paragraph 15.

Admiralty - Topic 8264

Practice - Actions in rem - Release of property on bail - Bail bond - General - [See first Admiralty - Topic 8268 ].

Admiralty - Topic 8268

Practice - Actions in rem - Release of property on bail - Bail bond - Quantum - A Prothonotary of the Federal Court of Canada, Trial Division, reviewed the general principles relating to setting the amount of bail - The Prothonotary stated that the general rule governing the amount of bail was that bail should be equal to the claimant's reasonable best arguable case, together with interest and costs, with an upper limit of the value of the arrested vessel itself - The Prothonotary also discussed the importance of not pre-judging the case when the court is called upon to set bail - See paragraphs 16 to 23.

Admiralty - Topic 8268

Practice - Actions in rem - Release of property on bail - Bail bond - Quantum - The plaintiff NHM International Inc., arranged for F.C. Yachts Ltd. to construct a yacht - NHM felt that progress on the construction was unsatisfactory and as a mortgagee under a builder's mortgage had the yacht arrested - An issue arose over quantum of bail - NHM offered security based in part on the price fixed in the original building contract - F.C. Yachts demanded much higher bail, arguing that NHM for some reason never signed the original building contract and therefore there was no contract to build the yacht for a fixed price, but rather the agreement was for construction on a cost plus basis - A Prothonotary of the Federal Court of Canada, Trial Division, held that NHM could rely on the original contract - The court noted that in the absence of a formal execution, a contract may be found in the actions of the parties - The actions of F.C. Yachts in signing the original contract which it drafted and re-drafted, delivering it to NHM and accepting progress payments evidenced a contract between the parties - See paragraphs 24 to 32.

Admiralty - Topic 8268

Practice - Actions in rem - Release of property on bail - Bail bond - Quantum - The plaintiff NHM International Inc., arranged for F.C. Yachts Ltd. to construct a yacht - NHM felt that progress on the construction was unsatisfactory and as a mortgagee under a builder's mortgage had the yacht arrested - NHM offered security based in part on the price fixed in the original building contract - F.C. Yachts demanded much higher bail, claiming that there was no definitive contract - An issue arose over quantum of bail - A Prothonotary of the Federal Court of Canada, Trial Division, discussed whether F.C. Yachts could have bail set on the basis of quantum valebant (i.e., based on a sum representing the value of the goods sold and delivered) - The Prothonotary held a quantum valebant claim was not available in this case where F.C. Yachts failed to elect to bring the contract to an end and raised this issue at such a late date - See paragraphs 33 to 36.

Admiralty - Topic 8268

Practice - Actions in rem - Release of property on bail - Bail bond - Quantum - The plaintiff NHM International Inc., arranged for F.C. Yachts Ltd. to construct a yacht - NHM felt that progress on the construction was unsatisfactory and as a mortgagee under a builder's mortgage had the yacht arrested - NHM offered security based in part on the price fixed in the original building contract - F.C. Yachts demanded much higher bail, based on the price of the vessel determined on a cost plus basis - A Prothonotary of the Federal Court of Canada, Trial Division, set security at an amount which paralleled the amount set out in the original building contract - The Prothonotary stated that to require security for the claim of F.C. Yachts as presented would be clearly unreasonable - See paragraphs 1 to 47.

Admiralty - Topic 8268

Practice - Actions in rem - Release of property on bail - Bail bond - Quantum - The plaintiff NHM International Inc., arranged for F.C. Yachts Ltd. to construct a yacht - NHM felt that progress on the construction was unsatisfactory and as a mortgagee under a builder's mortgage had the yacht arrested - NHM offered security based in part on the price fixed in the original building contract - F.C. Yachts demanded much higher bail, including an amount for potential tax liability, should it be determined that in taking possession as mortgagee NHM had somehow taken delivery of the vessel in Canada as opposed to offshore as contemplated by the parties in order to avoid tax - A Prothonotary of the Federal Court of Canada, Trial Division, refused to set security for tax liability - The Prothonotary stated that neither going into possession as mortgagee in possession, nor arresting the vessel, constituted delivery of the vessel such as to give rise to sales tax or goods and services tax liability - See paragraphs 40 to 44.

Contracts - Topic 1144

Formation of contract - Signing - Failure to sign - Effect of - [See second Admiralty - Topic 8268 ].

Cases Noticed:

Ship George Gordon (1884), 9 P.D. 46, refd to. [para. 15].

Ship Irish Fir (1943), 76 Lloyd's Rep. 51, refd to. [para. 15].

Athens Sky Compania Naviera S.A. v. Port Services Corp.; Ship Tribels, [1985] 1 Lloyd's Rep. 128 (Q.B.), refd to. [para. 15].

Amican Navigation Inc. v. Densan Shipping Co. et al. (1997), 137 F.T.R. 132 (T.D.), refd to. [para. 15].

Striebel v. Sovereign Yachts (Canada) Inc. et al. (2002), 222 F.T.R. 187 (T.D.), refd to. [para. 16].

Ship Moschanthy, [1971] 1 Lloyd's Rep. 37 (Q.B.), refd to. [para. 16].

Brotchie v. Ship Karey T (1994), 77 F.T.R. 71 (T.D. Protho.), refd to. [para. 16].

Atlantic Shipping (London) Ltd. v. Ship Captain Forever et al. (1995), 97 F.T.R. 32 (T.D.), refd to. [para. 17].

Lundberg v. Ship Manitou III, [1988] F.C.J. No. 1124 (T.D.), refd to. [para. 18].

Ship Gulf Venture, [1984] 2 Lloyd's Rep. 445 (Q.B.), refd to. [para. 19].

Brogden v. Metropolitan Railway Co., [1877] 2 A.C. 666 (H.L.), refd to. [para. 29].

Dr. T. Torfason Inc. v. 338058 B.C. Ltd. (1994), 1 B.C.L.R.(3d) 370 (C.A.), refd to. [para. 30].

Schiff Food Products Inc. v. Naber Seed & Grain Co., [1997] 1 W.W.R. 124; 149 Sask.R. 54 (Q.B.), refd to. [para. 32].

Canadian Vickers Ltd. v. Ship Susquehanna (1918), 18 Ex. C.R. 210, dist. [para. 33].

Jesionowski v. Gorecki and Ship Wa-Yas (1992), 55 F.T.R. 1 (T.D.), refd to. [para. 33].

Morrison-Knudsen Co. v. British Columbia Hydro and Power Authority (1978), 85 D.L.R.(3d) 186 (B.C.C.A.), refd to. [para. 35].

Authors and Works Noticed:

Fridman, Gerald Henry Louis, The Law of Contract in Canada (3rd Ed. 1994), p. 701 [para. 34].

Jackson, D.C., Enforcement of Maritime Claims (2nd Ed. 1996), p. 311 [para. 22].

Mayers, Admiralty Law and Practice in Canada (1916), p. 235 [para. 16].

Counsel:

David F. McEwen, for the plaintiff;

K. Joseph Spears, for the defendants.

Solicitors of Record:

McEwen, Schmitt & Co., Vancouver, British Columbia, for the plaintiff;

Spears and Company, Vancouver, British Columbia, for the defendants.

This motion was heard in Vancouver, British Columbia, on January 13, 2003, before Hargrave, Prothonotary, of the Federal Court of Canada, Trial Division, who delivered the following judgment on January 21, 2003.