Date: 20040803
Docket: T-697-03
Citation: 2004 FC 1057
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] This action involves the arrest of the Zodiak by an American Plaintiff, claiming breach of a repair and outfitting agreement which was performed in North Vancouver, British Columbia and a counterclaim for a failure to carry out the contract properly. By order of 6 May 2004 bail was set at $635,000 (US), with the American Plaintiff being required to provide security for costs, in the amount of $100,000 (US). The security for costs ordered to be provided in two stages, $35,000 by 21 June 2004, with the second stage at $65,000 to be put into place on a request for a pretrial conference.
[2] These reasons arise out of two motions. The first motion is that of the Plaintiff, seeking an extension of 60 days within which to put into place the first stage security of $35,000 (US). The second motion, that of the Defendants, is to strike out the first motion and for dismissal of the whole action by reason of delay.
[3] The motion on a motion irregularity was resolved, sensibly and by agreement, with the second motion being adjourned but with counsel for the Defendants using the material to oppose the time extension motion. That opposition is successful, with the time extension being denied. I now turn to a full consideration.
BACKGROUND
[4] By way of background the Plaintiff contracted with the corporate Defendant that it would arrange repairs and conversion of the Zodiak, a 44-metre long former Russian research vessel, into a fish catching and processing vessel and that it would equip the vessel. The dispute as to payment for the Plaintiff's services, which were provided in North Vancouver, B.C., arose and in the result the Plaintiff arrested the Zodiak in May of 2003.
[5] The Defendant owner of the Zodiak filed an amended defence on 12 March 2004, which included a counterclaim of some $1,450,000 (US) said to be the sum paid by the Defendant to the Plaintiff for work on the Zodiak, work alleged to have been improperly done.
[6] An arrest is an extraordinary remedy in many respects, a remedy with serious consequences which, in Canada, is generally granted as a right: see North Saskatchewan Riverboat Co. v. 573475 Alberta Ltd. (1995) 96 F.T.R. 166 at 169. However an arrest can be accompanied by obligations with equally serious consequences including, in the case of an offshore plaintiff, an obligation to post security for costs, to protect a successful defendant from the consequences of a dry judgment for costs and disbursements.
[7] On 3 May 2004 the corporate Defendant moved for release of the Zodiak, on the basis of the Plaintiff essentially being paid in full or, in the alternative, moved that bail be set and that the Defendant be granted security for costs, for the Defendant was concerned as to the worth of the Plaintiff. Bail was set at $635,000 (US). Security for costs was granted in the amount of $100,000 (US) on 6 May 2004, the Plaintiff being resident outside of Canada. The security for costs was to be posted in two stages, $35,000 (US) to cover the period up to a request for a pretrial conference, that amount to be provided within 45 days.
CONSIDERATION
[8] In the present instance the security for costs was not posted within the required 45 days. The Plaintiff filed a motion on 23 June 2004, two days after the time within which security should have been posted, for a further 60 day time extension within which to provide security for costs.
This, in the view of the owner of the Zodiak, justifies its concern as to the financial worth of the Plaintiff.
[9] The basis for the time extension sought by the Plaintiff, Fish Maker LLC, is that it is confident that it will have funds available from which to post security if granted a further 60 days because:
(a) Fish Maker has had the 800 ton refrigerated cargo vessel COASTAL NOMAD for sale and has now received a letter of intent from a purchaser which company is scheduled to provide earnest money in the amount of $20,000. and thereafter to inspect the vessel with the intention of closing the purchase on the 15th of August, 2004. The vessel is owned by Fish Maker with no encumbrances and the purchase price is $370,000. Now produced and marked Exhibit "A" to this my Affidavit is a copy of the letter of intent and free translation. Reference to the identity of the purchaser has been deleted to protect confidentiality.
(b) Fish Maker has also recently concluded a sale of four containers of fish with a company in the Ukraine. The Company has also received a larger order which it is presently endeavouring to fill which will result in a significant commission to Fish Maker which will also assist in enabling it to provide the necessary security for costs.
[affidavit of Peter Bernard]
The above referred to letter of intent to purchase the Coastal Nomad, in free translation is, with identifying names removed, as follows:
18 June 2004
Dear Mr. Garry Alen!
Unfortunately we are not acquainted yet, so I should introduce myself.
My name is I'm executive director of Company and chief manager of Shipping Department.
I want to inform you that our company intends to buy your transport refrigerator ship "Coastal Nomad". Now we are carrying on negotiations for taking a credit with a representative financial company, which is a client of a number of European banks.
We ask you to stop the process of sale of the refrigerator ship "Coastal Nomad" if it is possible, and to consider as a buyer of the ship.
, executive director
To paraphrase the position of the corporate Defendant this letter, expressing interest in the Coastal Nomad, without more, is not something which is certain to bring a profit: it is too uncertain to be bankable.
[10] The principal of Fisher Maker L.L.C. advises, through the solicitor who has sworn the affidavit in support of this motion, that his company is determined to move forward on the action. That solicitor goes on to advise that there had been no communication between solicitors for Fish Maker L.L.C. and solicitors for the Zodiak since the security for costs and bail motion in May of 2004 and that no bail has been tendered or discussed. Here I would note that a vessel owner has no obligation to post bail and that generally it is for a plaintiff to move an action forward.
[11] Counsel for the owner of the Zodiak made a number of points in opposition to the time extension including that there is neither evidence as to the inability of the plaintiff to post security nor any real explanation as to why security has not been posted to date, or why there had been no offer of part payment or a bond. Counsel questions why the name of the proposed purchaser and the purchase price for the Coastal Nomad have not been provided and points to the uncertainty of the letter of intent, which indicates that the intended purchaser does not have the funds to purchase the ship, but that the intended purchaser is carrying on negotiations for financing. Counsel for the Defendants makes an obvious point: if Fish Maker has a vessel valued at $370,000 (US), free and clear, why is Fish Maker L.L.C. unable to post security of only $35,000 (US). Further, counsel also questions the usefulness of the information that there has been a sale of four containers of fish to a Ukrainian company, for there is nothing to point to a payment date for the commission of that sale, or to the amount of assistance that commission would provide toward the required security.
[12] Counsel for the Zodiak questions whether Fish Maker L.L.C. has any real determination or intent to move the action forward, given the performance to date. Counsel submits that over all the material in support of the time extension is weak.
The Test for a Time Extension
[13] The only law cited on the motion was a principle from Grewal v. Canada [1985] 2 F.C. 263 (F.C.A.) that the factors bearing upon whether or not to grant a time extension ought to be considered in the over all context of doing justice between the parties, a point made by Chief Justice Thurlow at page 272 and by Justice of Appeal Marceau at 280. These comments were made in the context of considering and balancing all of the factors, including an explanation for the delay, the strength of the case, a continuing intent to proceed with the matter and prejudice to the opposing party. Here I would observe that the Court of Appeal looked at these issues and their resolution as applicable to any time extension (page 272 and at 280-81), however in the latter passage Mr. Justice Marceau suggests that the principles should be adjusted to take into account any unique features presented by the case at issue.
[14] With the comments of the Court of Appeal in Grewal in mind I have looked into Canada v. Hennelly (1994) 244 N.R. 399 (F.C.A.), a more definitive approach to a time extension, but have borne in mind that "Any determination of whether or not the applicant's explanation justifies the granting of the necessary extension of time will turn on the facts of each particular case" (page 400 of Hennelly). The factors which the Court of Appeal considered were whether the applicant had demonstrated:
1. a continuing intention to pursue his or her application;
2. that the application has some merit;
3. that no prejudice to the respondent arises from the delay; and
4. that a reasonable explanation for the delay exists.
[loc cit.]
Because the granting of an extension turns on the facts of each case I have considered whether what is offered, proceeds of a hoped for vessel sale and proceeds of a rather poorly defined commission on a fish sale, offer enough substance upon which to build a time extension. This area might be considered under several of the heads of issues set out by the Court of Appeal in Hennelly, with the concept of doing justice between the parties as the desired result.
[15] The intent of the Plaintiff to proceed with the action, as set out in the affidavit of its Vancouver solicitor, is not challenged directly. However the Plaintiff has taken no steps to move the action forward in the Court, but has merely applied to remove equipment from the Zodiak and has reacted to the security for costs motion. Counsel for the Plaintiff submits that there should be no urgency as to security for costs, for there has been no discovery and nothing is schedule which might run up costs: this observation cuts both ways, for it is an indication of a lack of interest on the part of the Plaintiff. The present delay in posting security, taken together with the Plaintiff's actions, do not support the Plaintiff's assurances that it wishes to get along with the proceedings. This is a decided weakness in the Plaintiff's application for further time within which to post an ordered security.
[16] There have apparently been some settlement discussions, some particulars provided by the Plaintiff and the amendment of the defence and counterclaim: all of this is fairly neutral and not indicative of either any intention to pursue the claim or of a lack of interest.
[17] The merits of the case have not been dealt with in the material filed by the Plaintiff. That bail has been set is some indication that the Plaintiff may have a case, however bail is not set on the basis of deciding the case, but rather on the basis of an overall assessment going to determine the reasonably best arguable case for the Plaintiff, a matter of providing sufficient security without prejudging the case. The best that can be said is that the fact that release of the vessel without bail was denied and that bail was set at a substantial figure, a reasonably best arguable case of the Plaintiff, the case of the Plaintiff probably has some merit.
[18] Counsel for the Defendants submits that delay in getting on with the action is, in itself, prejudicial, as is the loss of use of the vessel. On the one hand an apparent lack of interest and a failure to move a matter along can be prejudicial, but on the other hand the corporate Defendant has the remedy of posting bail. Moreover, if as suggested by counsel for the Defendants, the bail requested and ordered is too high, or if the arrest is eventually shown to be unfounded there are, at least in theory, remedies. Overall I agree with counsel for the Plaintiff that there is no real prejudice, or at least no real prejudice at this point.
[19] The lack of explanation for the delay in providing security for costs gives me difficulty. I accept the submission of counsel for the Defendants that it is hard to understand why the Plaintiff, which represents that it has an unencumbered vessel, the Coastal Nomad, worth $370,000 (U.S), but cannot post security in the amount $35,000 (U.S.), even if that means putting up the Coastal Nomad as security for a short term loan. It is no answer to say that the sale of the Coastal Nomad may be in the offering, at an unknown date, if an unnamed buyer can obtain financing, or that there are unquantified fish sale commissions coming in the future, with the possibility of further unquantified commissions "... which will also assist in enabling it to provide the necessary security for costs." (paragraph 3(b) of the affidavit in support of the motion). This leads to the final and most important aspect, that of doing justice between the parties.
Doing Justice Between the Parties
[20] I am required to balance the elements bearing on a time extension. Here the balance is in favour of the Defendants and leads to denial of the time extension, for various reasons. The continuing intent of the Plaintiff to pursue the action is, despite the assurances of the Plaintiff, questionable, when one looks at over a year of litigation which has not proceeded as far as discovery. There is probably some merit to the claim, although the affidavit in support does not deal with that aspect. I do not see any prejudice to the Defendant, for by posting bail the Defendant can have the use of its vessel. There is no explanation for the delay in posting security, other than that the Plaintiff has expectations of funds, which have not yet come to fruition.
[21] I am well aware that to deny an extension of time may result in the Plaintiff not only losing its security in the Zodiak, but also being denied its day in Court. Here I have kept in mind the view of Madam Justice of Appeal Sharlow in Bernier v. Minister of Human Resources, an unreported 5 February 2004 decision, 2004 FCA 58 at paragraph 7:
All litigants have an obligation to comply with the Rules, even if they are not represented by a lawyer. However a failure to comply with the Rules need not be fatal if there is a reasonable and bona fide attempt to cure the failure, especially if the failure can be cured relatively easily and the other party has not suffered any substantial prejudice.
I am not convinced that there has been a reasonable and bona fide attempt to cure the failure to post security for costs in a timely manner. For example, the Plaintiff says that it owns a marketable vessel free and clear, yet there is no explanation why the vessel could not have been used to obtain short-term funding for security for costs. Nor is there any explanation as to the financial status of Fish Maker LLC or of its principles. The evidence about the expected funds is uncertain and lacks specifics. Thus the second branch of the explanation suggested in Bernier need not be considered.
[22] As to doing justice between the parties, as I pointed out earlier, the Plaintiff has relied upon an extraordinary remedy and has taken a distinct advantage through that remedy, the arrest of the Zodiak, however the Plaintiff has not, in well over a year, pressed the litigation. In turn, the Defendant has a right to the ordered security for costs and indeed it would appear that the corporate Defendant's concern as to the worth of Fish Maker LLC may be well justified.
[23] Justice between the parties requires that the corporate Defendant not be kept waiting, either indefinitely or at all, for its security for costs.
CONCLUSION
[24] Based upon the Hennelly test, the balance is against an extension of time within which to provide security for costs. There being little or no evidence of a reasonable and bona fide attempt to cure the failure, the caution set out in Bernier does not come into play. All circumstances considered, justice requires the timely provision of the ordered security for costs. The extension of time within which to provide security for costs is denied.
[25] Costs of the motion forthwith to the Defendant, based on Column III, in the amount of $700.
(Sgd.) "John A. Hargrave"
Prothonotary
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-697-03
STYLE OF CAUSE: Fish Maker L.L.C.
-and -
The Ship "Zodiak" et al
PLACE OF HEARING: Vancouver
DATE OF HEARING: July 19, 2004
REASONS FOR ORDER : HARGRAVE, P.
DATED: August 3, 2004
APPEARANCES:
Mr. Andrew Mayer FOR PLAINTIFF
Ms. Ellen Bond FOR DEFENDANTS
SOLICITORS OF RECORD:
Bernard & Partners FOR PLAINTIFF
(Vancouver)
Rankin & Bond FOR DEFENDANTS
(Vancouver)