Date: 20021106
Docket: T-1116-00
Neutral Citation: 2002 FCT 1122
Montreal, Quebec, November 6, 2002
PRESENT: THE HONOURABLE MR. JUSTICE BLAIS
ADMIRALTY ACTION IN REM AND IN PERSONAM
BETWEEN:
CHAMPION INTERNATIONAL CORP.
Plaintiff
and
THE SHIP "SABINA"
and
THE OWNERS AND ALL OTHERS INTERESTED
IN THE SHIP "SABINA"
and
CARISBROOKE SHIPPING LIMITED
Defendants
REASONS FOR JUDGMENT AND JUDGMENT
[1] The plaintiff claims that the defendants, including the defendant ship "Sabina", be condemned in rem and in personam, jointly and severally, to pay the plaintiff the sum of $50,884.39 U.S.
RELEVANT FACTS
[2] The plaintiff is a U.S. Company having its principal place of business at One Champion Plaza, Stamford, Connecticut, U.S.A.
[3] At all material times, the plaintiff was the shipper, owner and the party in every way interested in a shipment consisting of wood pulp in bales [hereinafter the "Cargo"] to be carried from Menominee, Michigan to Emden, Germany.
[4] At all material times, the in personam defendants were the owners and the parties in every way interested in the defendant ship "Sabina" and Carisbrooke Shipping Limited of Cowes, Isle of Wight, United Kingdom, [hereinafter "Carisbrooke Shipping"], the acting manager for the said owners.
[5] The parties acted through their respective ship broker or agent, namely: Hub Shipping Company Inc. of Cohasset, Massachusetts, U.S.A., [hereinafter "Hub Shipping"], for the plaintiff and Lewis & Clark Shipping Limited of Etobicoke, Ontario, Canada, [hereinafter "Lewis and Clark Shipping"], for the defendants.
[6] On or about June 15, 2000, as a result of several exchanges of faxes, e-mail communications and telephone conversations between Hub Shipping and Lewis & Clark Shipping, the plaintiff suggests that an agreement was reached on all essential terms for the carriage of the Cargo on board the defendants' ship from Menominee to Emden starting at the beginning of July 2000. The defendants are of the opinion that there was no agreement.
[7] Carisbrooke Shipping sent, on June 17, 2000, a telefax dated June 16, 2000, to Lewis & Clark Shipping to advise that the owners had been offered a better rate for a time charter with a third party, Kent Line.
[8] The defendants refused to sign the "Conlinebooking" Liner Booking Note, a pro forma of which had been submitted and agreed to by Lewis & Clark Shipping on June 15, 2000.
[9] By reason of the defendants' repudiation of the agreement, the plaintiff had no other alternative but to book (or charter) a substitute vessel at a higher freight rate than what had been agreed to with the defendants pursuant to the agreement.
[10] As a result, the plaintiff sustained damages in the amount of $50,884.39 U.S.
[11] The defendants have refused to pay the damages incurred by the plaintiff although duly called upon to do so on June 26, 2000 by way of a demand letter from the plaintiff's solicitor.
POSITION OF THE PLAINTIFF
[12] The plaintiff suggests that even where there is no formal signed contract, one should look at the negotiations as a whole. A binding contract may be formed prior to the execution of a formal agreement while outstanding terms are still to be agreed to.
[13] The plaintiff also suggests that there was a meeting of minds on most of the significant terms of the agreement of June 15, 2000, such that it constituted a contract between the parties.
[14] The plaintiff also suggests that the defendant Carisbrooke Shipping acted in bad faith in entering into a new round of negotiations with another agent on June 16, 2000 and in deciding to conclude a fixture with another agent when already an agreement with the plaintiff was in place.
[15] Therefore, the defendants should pay for the costs incurred by the plaintiff who had no alternative but to book a substitute vessel at a higher freight rate than what had been agreed to with the defendants, pursuant to the agreement of June 15, 2000.
POSITION OF THE DEFENDANTS
[16] In a nutshell, the defendants suggest that there was no agreement. Although negotiations lasted a whole week and the parties agreed on many elements, two (2) main terms were still outstanding. Therefore, one could not conclude that a binding agreement existed between the parties, thus making the defendants entitled to enter into negotiations with another agent, which they did.
[17] The defendants also remind the Court that on the morning of June 16, 2000, Mr. Craig, representing the defendant Carisbrooke Shipping, sent a fax advising that the negotiations were over and that he was entering into negotiations with another agent. It is only the day after that a copy of this fax was received by the plaintiff's agent while previously, around midnight between June 16 and 17, 2002, the defendants had entered into a final agreement with the third party, Kent Line.
CASE LAW
[18] Where there is no single document evidencing the intentions of the parties, the Court must view the negotiations as a whole and give effect to the objective rather than subjective intentions of the parties. The decision by Joyal J. in Socanav Inc. v. Greater Sarnia Investment Corp., [1988] F.C.J. No. 724, is most helpful. At page 8:
...The test question is, of course, to determine if a binding contract may be formed prior to the execution of a formal written document.
The quick answer to that question is yes. When dealing with this issue, the law in Canada [Footnote: No issue was raised by counsel involving a comparative analysis of admiralty law and Quebec civil law with [resptect] to the formation of contract. I take it that the doctrine is the same or that counsel assumed that it was purely a case in admiralty.] is that an enforceable contract may be formed by verbal acceptance of the terms and conditions, prior to the charterparty being reduced to writing. In addition to being the current law, this principle would seem to reflect and assist commercial practices and commercial trades generally.
and further at page 10:
I should conclude from the foregoing that assuming the parties have clear authority to enter into a binding contract, the ad idem issue and the "subject to contract" issue must be resolved. In resolving these issues, the Court must view the negotiations as a whole.
[19] In Armonikos Corporation Ltd. v. Saskatchewan Wheat Pool, [2002] F.C.J. No. 1067, a more recent case, Dawson J. referred to the decision of Joyal J.
[20] In short, if there is a meeting of minds between the parties on all significant terms but no formal document, the Court must look at the negotiations as a whole and determine whether there was a binding contract.
FINDINGS
[21] Both parties filed close to fifty (50) different documents representing the negotiations. Most of those documents are undisputed and are exchanges of faxes and e-mails over a period extending from June 9, 2000 until June 20, 2000.
[22] Four (4) different people were involved in those negotiations: Mr. Hubert Vanderlugt, whose company Hub Shipping was representing the plaintiff Champion International Corporation, Mr. Glenn Lewis from Lewis and Clark Shipping, representing the defendants Carisbrooke Shipping and the ship "Sabina", Mr. Ian Walker and Mr. John Craig both representing Carisbrooke Shipping.
[23] The negotiations started by an e-mail sent by Mr. Vanderlugt to Mr. Lewis, asking the latter to find out whether they could bid for the transportation of the Cargo from Michigan, U.S.A. to Germany (P-2, June 9, 2000 at 10:18 a.m.). Mr. Lewis immediately responded that there was a ship available for the Cargo but was asking for a few changes (P-3, June 9, 2000, 12:39 p.m.).
[24] Although obvious that on June 9, 2000, no agreement existed, one could immediately conclude that a ship was available for transportation of the Cargo for the scheduled time. From June 9 to June 15, 2000, the negotiations went on regarding the price, the time period, the freight and both parties agreed on the majority of the items.
[25] From our understanding of the three (3) witnesses' testimonies, Mr. Vanderlugt, Mr. Lewis and Mr. Craig (Mr. Walker, though involved in the negotiations, did not testify), the Court could conclude that there were ongoing negotiations between Mr. Lewis and Mr. Vanderlugt. The documents clearly show that Mr. Lewis had received the mandate from Mr. Walker at the beginning of the negotiations, and given that the latter had to leave for the week-end, the former was further given the mandate to conclude the fixture.
[26] In the absence of Mr. Walker, Mr. Lewis and Mr. Craig completed the negotiations.
[27] From the documents exchanged on the last two days of the negotiations, there were still few outstanding issues: the defendants were suggesting that the lay days be read "1/10 July" whereas the plaintiff maintained that they be read "5/15" July. The second outstanding element was in reference to quantities. While the defendants' position was that it be read "minimum 5000 gross metric tons 5% more charterers option", the plaintiff's position was "5000 gross metric tons 5% more or less charterers option".
[28] The Court particularly refers to the e-mail sent by Mr. Vanderlugt to Mr. Lewis on June 14, 2000 at 5:25 p.m., (P-8), which is a recapitulation of fixed elements. Even though the lay days suggested in that document are July 5/15, 2000, the plaintiff addressed the concerns expressed by the defendants and wrote on this recapitulation, that it was understood that the vessel's expected time of arrival at Menonimee, Michigan, was July 1 or 2, 2000, and that the charterer, meaning the plaintiff, was prepared to commence loading prior to July 5. The answer to Mr. Vanderlugt's recapitulation was a fax sent by Mr. Lewis to Hub Shipping, on June 15, 2000 (P-13).
[29] The document P-24 is a fax from Mr. Craig (Carisbrooke Shipping) sent to K & K Warehousing, with copy to Mr. Vanderlugt, showing that they were very close to a final agreement on everything. It states at the last sentence:
We are trying to tie up a few loose ends regarding this cargo now and hopefully will have it concluded Still today.
[emphasis added]
[30] On June 15, 2000, at 22:29, Mr. Lewis sent a two-page fax to Mr. Craig. His fax arrived in the U.K., where Mr. Craig was, in the middle of the night, around 3:30 a.m. on June 16, 2000 (P-25).
[31] In one of the pages of the fax, Mr. Lewis made an offer for another cargo that was available for Europe. The second page addressed the issue of the lay days, stating that the plaintiff would agree to "try for the 1/10 July" and that it would be "more than happy to agree to", a wording which suggests that a vessel can commence loading at any time after arrival. It also gave details regarding seventy (70) rail cars that had definitely been ordered already and addressed outstanding issues on barge costs and clause 16 of the booking note.
[32] The following day, everything collapsed. On the morning of June 16, 2000 at 9:35 a.m. U.K., which is around 4:30 a.m. in Canada, Mr. Craig sent a fax to Mr. Lewis (P-26) which read:
To :lewis and clark shipping
Attention of :glenn
From :JOHN CRAIG
Date :16/06/00 09:35
No of pages inc. cover :1
Glenn / john
Re sabina
Out of the blue we have just been offered a t/c back delivery 24 hrs from sailing
Redelivery continent / uk
Whilst appreciate close with you, the rate we have been offered is too good to turn down
And after careful consideration we have decided to go for the t/c.
Can only say thanks for all your efforts - we will certainly make it up to you in the future and
Hope you understand our position.
Rgds
Jc
[33] Mr. Craig, being cross-examined, explained that he sent the fax (P-26) on a new replacement machine but he could not provide any evidence that this fax was sent or received by Mr. Lewis. On the other side, Mr. Lewis testified that he never received this document. This particular event left the Court sceptical because of the easiness of providing evidence of such facts. When one cannot provide evidence from the fax machine itself, there is always the possibility of providing such evidence from the telephone company. Confronted with these questions, Mr. Craig was unable to provide any significant or valid response.
[34] P-27 is an e-mail from Lars Jonsson Trading to Mr. Craig which is an offer for the "Sabina". It seems that this offer was much more interesting for Carisbrooke Shipping than that of the plaintiff's. This e-mail was sent on June 16, 2000, at 1:12 p.m., Sweden time, which is, pursuant to the witnesses, one (1) hour earlier in the U.K. The first paragraph of this e-mail reads:
John/Mats
Gd Day John, nice speaking to you, as said Kent Line might have a possibility for the Sabina. They need to hear Ows rate idea asap in order to make a decision if to try or not. (Fyg, they have one of their own vessels but she is due to drydock, if Sabina's rate is too high they'll put their own vsl in and push the drydocking off for a couple of weeks).
[emphasis added]
[35] Counsel for the defendants suggests that the wording of this paragraph shows that both parties had a discussion on the phone before sending this document.
[36] The plaintiff's position is that the previous document (P-26), a fax from Mr. Craig to Mr. Lewis, was written later that day or the day after (June 16 or 17, 2002) rather than at 9:35 a.m., June 16, 2002, as suggested by the witness.
[37] Obviously, this fax is self serving for the defendant Carisbrooke Shipping, even if it was never received by Mr. Lewis, nor provided any evidence that it had been sent on that particular day. Nevertheless, as per P-31, Mr. Lewis sent a fax to Carisbrooke Shipping asking if he had any comments relating to the previous fax (P-25), sent at 22:29 the day before. The plaintiff provided evidence (P-40) that this fax (P-25) had been sent on June 16, 2000, at 2:30 p.m., and that they never received any response following it.
[38] It is surprising that when Mr. Craig received that fax (P-25) around 7:30 p.m. on June 16, 2000, he never responded to it. In reading that document, it is obvious that Mr. Lewis had never received the fax (P-26) that Mr. Craig said he had sent on June 16, at 9:35 a.m.
[39] Mr. Craig eventually responded to those faxes (P-25; P-31) by another fax (P-32), but only the following day, June 17, at 10:14 a.m. In it , he confirmed that his previous fax (P-26) had "obviously" not been received by Mr. Lewis. A very significant sentence in that fax (P-32) is the following:
[...]
In this fax I said that I appreciate it is not very nice to drop something when close
But after speaking with directors and owners of the vessel (we are not owners but managers)
It was decided this was too good opportunity to miss.
[40] It is interesting to note that Mr. Craig's fax (P-26) dated June 16, 9:35 a.m., gives no answer nor makes reference to the previous faxes sent by Mr. Lewis. Mr. Craig never mentioned that there were still pending issues to be settled. Another sentence in that fax speaks for itself:
Whilst appreciate close with you, the rate we have been offered is too good to turn down and after careful consideration we have decided to go for the t/c.
[41] What is striking is the fact that six (6) hours after receiving a very detailed document from Mr. Lewis (P-25) which addressed all the outstanding issues raised previously by Mr. Craig, the evidence we have is an e-mail (P-27) sent more than three (3) hours later which is an offer from another company, referring to a previous conversation between Mr. Jonsson and Mr. Craig, and constituting the initial steps of the negotiations between these parties.
[42] The wording "after careful consideration" seems to be less than accurate in the circumstances. During his testimony and cross-examination, Mr. Craig was imprecise, particularly on what happened on Friday June 16, 2002. He said that he was unable to reach Mr. Lewis on that day and that finally, he reached an agreement (fixture) close to midnight on June 16, 2000 with another customer and thus went along with it.
[43] Mr. Craig's fax (P-26), sent on June 16, 2000 at 9:35 a.m., stated that "the rate we have been offered is too good to turn down". However, when you read the e-mail from Mr. Jonsson to Mr. Craig sent on June 16, 2000 at 1:12 p.m. (P-27), it mentions: "They need to hear Ows rate idea asap in order to make a decision if to try or not. (Fyg, they have one of their own vessels but she is due to drydock, if Sabina's rate is too high they'll put their own vsl in and push the drydocking off for a couple of weeks)".
[44] That same day, at 1:50 p.m., Mr. Craig sent an e-mail to Mr. Jonsson, where for the first time, he gave details and specifically mentioned the "Sabina"'s rate which was "usd 5400 per day incl o/t" (P-28).
[45] Dated June 19, 2000 at 8:28 a.m., the following is an e-mail from Mr. Jonsson to Mr. Craig (P-29) which reads:
From: Lars@JonssonTrading.se
To: "john@caship.com" < john@caship.com >
Date: 6/19/00 8:28am
Subject: mv sabina / kent line
john/lars
ref telcon late Friday evening - below plse find recap of the fixture as follows:-
RE: MV SABINA / KENT LINE
AS PER AUTHORITY, PLEASED TO RECAP FOLLOWING CLEAN FIXTURE CONCLUDED YDAY FRI 16 JUNE 2000:
[...]
[46] Later, in that document, we see that the final agreement on price is "HIRE USD 5200. DAILY INCL OT".
[47] We also see that there are certain elements that are left unsettled. To quote Mr. Craig: "There are still loose ends".
[48] By looking at those three (3) documents, P-27, P-28 and P-29, one realizes that what Mr. Craig wrote in his unreceived fax (P-26) on June 16, 2000 at 9:35 a.m., was at the least premature, Carisbrooke Shipping having not yet been offered a rate for the "Sabina" that was "too good to turn down". How could he write that on June 16 at 9:35 a.m. when Carisbrooke Shipping put in writing its request for USD 5400 per day, four (4) hours later? We have no evidence of the negotiations from 1:50 p.m. to midnight, which is the time when the agreement was concluded. The document that confirmed the agreement on the rate, is dated three days later and the price is $200 less than the one requested on June 16.
[49] Counsel for the plaintiff asked numerous questions in an attempt to demonstrate that the fixture was not yet finalized at midnight on Friday, June 16, since on Monday, June 19, there were still some outstanding issues to be resolved between the parties.
[50] In my view, counsel for the plaintiff succeeded in demonstrating that Mr. Craig, on behalf of Carisbrooke Shipping, was negotiating with two (2) different potential customers at the same time and thus not demonstrating a high standard of professionalism in his negotiations with the two other parties involved.
[51] The Court had the benefit of hearing the examination of Mr. Lewis who has a lot of experience in shipping contracts. Mr. Lewis is a very credible witness. He confirmed all the evidence that was before the Court, particularly the e-mails, faxes and also the telephone conversations. Mr. Lewis mentioned that he had been at many times involved in shipping contracts with Carisbrooke Shipping and, as a matter of courtesy, it would always inform him of parallel cargos or negotiations. He mentioned that Carisbrooke Shipping's representatives never told him that there was another ongoing negotiation.
[52] Regarding one of the outstanding issues between the two parties, the quantity of the Cargo, Mr. Lewis filed a document (P-38) which demonstrates that Mr. Craig was not accurate in stating that the annotations on the said document were made before it was sent to Mr. Lewis. Mr. Lewis filed the document he received from Mr. Craig, not showing paragraph 6, which is a handwritten note referring to the quantity of the Cargo.
[53] Mr. Lewis testified that he had received verbal authority from Mr. Walker to fix the Cargo on behalf of Carisbrooke Shipping. That information was not contradicted.
[54] On cross-examination, Mr. Lewis admitted that he had no written contract with Carisbrooke Shipping but that he would have received 2.5% of the contract as commission from the company, had the fixture been finalized.
[55] Mr. Lewis mentioned that there were two (2) outstanding issues to settle: the lay days and the final quantity of the Cargo, which quantity was established on June 17, 2000, referring to a fax from Mr. Lewis to Mr. Craig (P-35):
...Charts confirmed the quantity to be loaded would be 5100 GMT...
[56] Counsel for the defendants raised the point that when the booking note
(P-11) was faxed, only the two first pages were received. Consequently, the arbitration clause was missing.
[57] Nevertheless, this question was never raised by the agents participating in the negotiations nor by the parties themselves. I conclude that this was not an important point for the parties and, in any event, it would not change my finding that indeed a contract existed between the parties.
[58] Mr. Lewis testified that he called and tried to reach Mr. Craig on June 16. Mr. Craig was not available. After receiving the two (2) faxes on June 17, Mr. Lewis responded strongly by sending a fax to the attention of Mr. Craig (P-35). In my view, there was a clear understanding that Mr. Lewis was representing Carisbrooke Shipping and that this was never contradicted.
[59] The first paragraph of this fax (P-35) reads:
I RECEIVED YOUR FAXES ONLY THIS MORNING SATURDAY THE 17TH AND HAVE TO SAY I AM REALLY AM TAKEN A BACK AT THE INFORMATION BEING PASSED AS THERE IS A FULL UNDERSTANDING THAT THERE IS INDEED A FIRM FIXTURE IN PLACE WITH ONLY SOME TECHNICAL DETAILS TO AMEND.
[emphasis added]
[60] This fax was sent on June 17, 2000, at 11:45, and was received around 5:00 p.m. in the U.K. It is remarkable that what Mr. Craig qualified, on June 15, at 14:44, in a fax sent to K & K Warehousing (P-24) as:
We are trying to tie up a few loose ends regarding this cargo now and hopefully will have it concluded
Still today.
[emphasis added]
became "two fundamental points outstanding, ie lay days and quantity of cargo", as qualified in a fax from Mr. Craig to Lewis and Clark Shipping on June 19, 2000 at 2:59 p.m. If it is not bad faith, it is arguably the worst business attitude for an agent involved in that kind of business.
[61] In my view, the defendant Carisbrooke Shipping was very unfortunate in that the fax sent on June 16, at 9:35 a.m., never went through and in that he could not provide any evidence that it was even sent with the fax machine that was, again unfortunately, a replacement machine.
[62] Even though there is no strong contradiction between Mr. Craig's and Mr. Lewis' testimony, it should be stressed that Mr. Lewis strongly testified that he had a mandate to fix this Cargo as he did, and unfortunately, Mr. Craig who was replacing Mr. Walker, decided to enter into a new round of negotiations with another customer even though there was "a firm fixture in place with only some technical details to amend", as Mr. Lewis affirmed in his fax sent to Mr. Craig on June 17, 2000 at 11:45 a.m.
[63] In Pagnan v. Feed Products, [1987] 2 Lloyd's Rep. 601 at 619, the Court held:
...the fact that the terms yet to be agreed were of economic significance would not prevent a contract coming into existence...
[64] As was addressed by Joyal J. in Socanav, supra, the real question is whether there is an agreement on the more substantive terms of the agreement.
[65] If the answer is yes, there is a contract.
[66] Pursuant to Mr. Craig's testimony, what was described as "loose ends"one day became "fundamental points" the day after.
[67] This is not acceptable and does not represent the result of the negotiations between the parties.
[68] When a party is dealing with an agent acting as a broker, there are consequences; the broker needs to have some room to manoeuvre. If a party gives a mandate to a broker, it has to live with the repercussions, including the risk that the broker arrives to a fixture that is binding for the party.
[69] If the party decides on its own to enter into negotiations with another customer, dealing with the same vessel, at the same period of time without giving notice to its agent, the party shall assume the consequences. Otherwise, the relative stability of a market and the minimal confidence that agents shall inspire to their customers on both sides will simply vanish.
[70] A party cannot distance itself from its responsibility that easily.
[71] I have no hesitation in concluding that the plaintiff provided sufficient evidence that there was a meeting of minds on all significant terms, as mentioned by Joyal J. in Socanav, supra, and that considering the negotiations as a whole, this Court must give effect to the objective intentions of the parties, even if the final document was never signed.
[72] Therefore, on the terms of all documents exchanged between the parties such as e-mails, faxes or telephone conversations, and on the evidence as a whole, it is my conclusion that there was a firm fixture in place with some technical details to amend, to take the wording used by Mr. Lewis himself who had the mandate to represent Carisbrooke Shipping.
QUANTUM
[73] The parties have agreed that the quantum of the damages suffered by the plaintiff was set at $50,884.39 U.S.
Exchange rate
[74] The parties have agreed that the exchange rate at the time of this action was set at 1.4835 Cdn dollars per U.S. dollar.
Pre-judgment interest rate
[75] The parties have agreed that the pre-judgment rate was set at 5.79 % per annum.
CONCLUSION
[76] In looking at the negotiations as a whole, I conclude that the Court shall give effect to the objective intentions of the parties as I am convinced that there was a meeting of minds on all significant terms and that there was a fixture between the two parties.
[77] By reasons of the defendants' wrongful and illegal repudiation of the fixtures, the plaintiff had no other alternative but to charter a substitute vessel at a higher freight rate than what had been agreed to with the defendants pursuant to the fixtures, which is $45 per ton.
[78] The plaintiff has provided evidence that he had to pay $55 per ton which represents a $10 per ton of extra freight paid by the plaintiff.
J U D G M E N T
[79] Therefore, the defendants, including the defendant ship "Sabina", are condemned, jointly and severally, to pay to the plaintiff the sum of $50,884.39 U.S. plus pre-judgment interest at a rate of 5.79% per annum since June 26, 2000 and post-judgment interest at the actual prime rate plus 2% per annum. The exchange rate applicable for the total claim is established at 1.4835 Cdn dollars per U.S. dollar.
Costs
[80] On costs, the parties have asked to make representations.
[81] The plaintiff shall file and serve written representations on costs no later than ten (10) days after the date of this judgment, the defendants shall file and serve their submissions no later than twenty (20) days after this judgment and the plaintiff shall file and serve, if necessary, a reply no later than twenty-five (25) days after this judgment.
[82] I will remain seized of the file for the purpose of the decision on costs.
« Pierre Blais »
J.F.C.C.