FEDERAL COURT PRACTICE AND ARREST OF SHIPS
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1 Nova Scotia Barristers Society Continuing Professional Development July 12, 2006 FEDERAL COURT PRACTICE AND ARREST OF SHIPS Richard F. Southcott
2 Admiralty Jurisdiction Federal Court and Provincial Superior Courts largely have concurrent jurisdiction A few areas where Federal Court has exclusive jurisdiction: Canada Shipping Act claims for wages of seamen, salvage and wreck, and constitution and distribution of limitation fund Canada Shipping Act 2001 removes exclusive jurisdiction Marine Liability Act, s. 2 Federal Court still has exclusive jurisdiction over constitution and distribution of limitation fund
3 Source of Federal Court Jurisdiction Statutory court Admiralty jurisdiction conferred by s. 22 of Federal Court Act Section 22 (2) prescribes non-exclusive list of areas of maritime jurisdiction Section 22 (3) clarifies scope of jurisdiction Applies to Canadian and foreign ships and aircraft Applies regardless of whether claims arise on the high seas, in Canadian waters or elsewhere Applies to all mortgages and security interests in ships, whether registered or not, whether legal or equitable, and whether or not governed by foreign law
4 Requirements for Federal Court Jurisdiction ITO International Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752 three requirements: Statutory grant of jurisdiction by Parliament Existing body of federal law essential to disposition of case and nourishing statutory grant of jurisdiction Law on which case is based must be a "law of Canada" Claim for negligence of terminal operator in post-discharge storage of consignee's goods held to meet requirements
5 Why Chose Federal Court Jurisdiction? In rem jurisdiction Ability to arrest ship or other property Jurisdiction is national Ease of service and execution Compelling attendance of witnesses from other provinces All Canadian counsel can practice in Federal Court Expertise of judiciary in admiralty matters
6 Why Not Chose Federal Court Jurisdiction? Case Management regarded by some as inflexible Concern about lack of jurisdiction Inland carriage Claim for breach of warranty of authority to settle action for collision damages Claim for wrongful interference with prosecution of a maritime action Claim for beneficial ownership of ship arising from agreement inseparable from other agreements Contract to drill for oil at sea Tort claim against agent arising from negotiation of purchase of fishing license
7 Administration of the Federal Court General sittings of the Trial Division (Rule 34) Ottawa Tuesdays and Thursdays Montreal, Toronto and Vancouver Monday Halifax, St. John's, Fredericton and Charlottetown once per month Hearings by telephone conference (Rule 32) Court Registry in each major city
8 Proceedings in Federal Court Generally divided into actions (Part IV) and applications (Part V) Jurisdiction of Prothonotaries (Rule 50) Actions not exceeding $50,000 and motions other than: Where jurisdiction expressly conferred on Judge In Court of Appeal Summary judgments Contempt hearings Relating to liberty of a person Stay, set aside or vary Judge's order Appoint a receiver Interim order in judicial review application Appeal from referee
9 Proceedings in Federal Court (cont'd) Appeal of Prothonotary's orders (Rule 51) by motion to Judge of Trial Division Add an extra level of appeal
10 Actions (Part IV) Commenced by Statement of Claim Deadline for Defence depends upon location of service Third party claims now available as of right Default judgments must be brought by motion Affidavit of Documents instead of List of Documents
11 Actions (Part IV) (cont'd) Examinations for discovery may be oral or in writing, not both, except with leave Corporate party must select representative for discoveries Expert witnesses (Rule 279) Affidavit setting out proposed evidence to be served 60 days before commencement of trial No pretrial discovery of experts (Rule 238)
12 Actions (Part IV) (cont'd) Simplified Actions (Rules ) Mandatory for claim less than $50,000, exclusive of interest and costs List of Documents instead of Affidavit of Documents Discovery in writing, not exceeding 50 questions No summary judgment Motions returnable only at Pre-Trial Conference Evidence in chief at trial by affidavit. Witnesses to be available at trial for cross examination
13 Motions (Part VII) Moving party must serve and file Motion Record two clear days before hearing (Rule 364) Motion Record includes: Table of Contents Notice of Motion Affidavits Transcripts Written Representations Any other filed materials necessary for hearing of motion Respondent's Motion Record to be served and filed no later than 2:00 PM on last business day before hearing (Rule 365) Motions may be brought in writing (Rule 369)
14 Appeals (Part VI) Process similar to Nova Scotia Court of Appeal Timeframes are tight and extension by consent limited to half of original period
15 Case Management and Dispute Resolution Services (Part IX) Status reviews (Rules ) Conducted on basis of written representations Specially managed proceedings (Rules ) Judge or Prothonotary may be assigned in Case Management Role Assignment may take place upon motion by party or on initiative of Court
16 Case Management and Dispute Resolution Services (Part IX) (cont'd) Dispute Resolution Services (Rules ) Court may order that a proceeding or any issue in a proceeding be referred to a Dispute Resolution Conference (DRC) DRC conducted by Case Management Judge or Prothonotary and may consist of a mediation, early neutral evaluation, or a mini trial
17 Admiralty Actions (Part XIII) May be in rem or in personam or both Rules prescribe Style of cause Manner of service Arrest of vessels and other property Bail Release from arrest Sale of arrested property Caveats against arrest Limitation of liability proceedings Special rules applicable to collisions
18 In Rem Proceedings Means of obtaining security for claim Ship not a distinct legal person Does not confer priority Jurisdiction conferred by ss. 22 and 43 Section 43 (2) Section 22 jurisdiction may be exercised in rem against ship, aircraft or other property that is the subject of the action
19 In Rem Proceedings (cont'd) Action can be both in rem and in personam In rem style of cause names "Owners and Others Interested in [vessel name]" In rem jurisdiction affords right to arrest vessel or other property
20 Substantive Prerequisites to Arrest Claim must fall within Court's maritime jurisdiction Arrested property must be subject of the action (s. 43 (2)) e.g. can't arrest time charterer's bunkers for unrelated debts Owner of arrested property must be liable in personam Mount Royal Walsh Inc. v. Jensen Star (1989), 99 N.R. 42 (F.C.A.) Arrest not permitted where demise charterer is liable for claim May be exception in case of maritime lien Marlex Petroleum Inc. v. The Har Rai claim for necessaries entitled to maritime lien under US law
21 Substantive Prerequisites to Arrest (cont'd) For some categories of claims, ownership must not have changed s. 43(3) e.g. necessaries claims Not an issue for maritime lien categories e.g. wages, collision damages, mortgage claims
22 Sistership Arrest Jurisdiction conferred by s. 43 (8) May be exercised against any ship that, at the time the action is brought, is beneficially owned by the person who is the owner of the ship that is the subject of the action Ryan Leet (1997), 135 F.T.R. 67 Interpreted to mean that registered owner of wrongdoing ship must beneficially own sistership In practical terms typically means both vessels in same registered ownership
23 Sistership Arrest (cont'd) Piercing corporate veil remains a possibility Bank of Scotland v. The Nell, [2001] 1 F.C. 408 Expanding scope of sistership arrest currently subject of debate among maritime lawyers and Transport Canada Maritime liens do not attach to sisterships The "Atlantis II" (1989), 170 F.T.R. 1
24 Procedural Requirements for Arrest Commencement of action in rem, naming vessel as in rem defendant Affidavit to Lead Warrant (Rule 481) Name, address and occupation of party Nature of claim and basis for invoking in rem jurisdiction of Court Claim has not been satisfied Nature of property to be arrested and, where the property is a ship, name and nationality of the ship and the port to which it belongs If sistership arrest, that deponent has reasonable grounds to believe that the ship is beneficially owned by person who is the owner of the ship that is the subject of the action
25 Procedural Requirements for Arrest (cont'd) Statement of Claim, Affidavit to Lead Warrant and draft Warrant filed with Registry, and Registry Officer issues Warrant Arrest effected by service of Statement of Claim, Affidavit to Lead Warrant and Warrant upon ship or property (Rule 482) Service effected by attaching certified copies to vessel or other property typically mast or wheelhouse
26 Possession and Responsibility of Arrested Property Continues in person in possession of property immediately before arrest (Rule 483) Court may order Sheriff to take possession of arrested property, upon responsibility for costs and fees being assumed (Rule 483 (2)) Claimant often chooses to place Marshal in possession where concerned about preserving asset Marshal's expenses typically rank first in priority among claims against ship
27 Release from Arrest Owner can apply to set aside arrest if not considered proper Can also bring action for wrongful arrest, but typically only available if Plaintiff's conduct amounts to malice or gross negligence Armada Lines Ltd. v. Chaleur Fertilizers Ltd., [1997] 2 S.C.R. 617
28 Release from Arrest (cont'd) Security can be posted Bail contemplated by Rules can be bank guarantee, surety bond, bail bond or cash paid into Court. Registry Officer will issue Release Security often provided in form of P&I Club letter of undertaking. Arresting solicitor files Consent to Release and Registry Officer issues Release Release effected by serving Release on Sheriff
29 Sale of Arrested Property On Motion, a Court may order arrested property appraised and sold (Rule 490) Can be before or after judgment Typical Sale Order Appraisal of ship Advertising of ship for sale Process to solicit offers for ship Requirement for Court approval of highest offer Sheriff authorized to execute Bill of Sale Deadline for filing claims by Affidavit Priorities of claims reserved
30 Sale of Arrested Property (cont'd) Property sold is free of any liens under Canadian maritime law (Rule 490 (3)) Proceeds of sale replace vessel as subject of in rem claims
31 Other Details Arrested property can be moved only with leave of the Court or consent of all parties and caveators (Rule 484) Caveat Release can be filed to prevent release (Rule 493 (2))
32 Adjudication of Priorities Procedure prescribed by Court Order typically issued on motion following sale of vessel Deadline for claimants to advise of intent to challenge and/or cross examine competing claimants Deadline for conduct of cross examinations on Affidavits Hearing to adjudicate competing priorities based on written record Proceeds of sale paid out of Court in accordance with priorities Canadian law recognizes priorities under foreign law
33 Actions for Collision (Rule 498) Plaintiff files Preliminary Act with Statement of Claim. Defendant with Defence. Preliminary Act states the party's allegations concerning details of collision Preliminary Acts are sealed until after pleadings closed Preliminary Acts form part of pleadings
34 Conclusion Right of arrest a valuable pre-judgment remedy Particularly useful in claims against foreign vessels Relatively quick with limited risk to arresting party Setting aside arrest can be procedurally complex with limited recourse to damages A powerful tool available to claimants in maritime matters Not necessarily of assistance in cases of ship owner insolvency
35 Nova Scotia Barristers Society Continuing Professional Development July 12, 2006 FEDERAL COURT PRACTICE AND ARREST OF SHIPS Richard F. Southcott
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