elias furlong First Plaintiff And: sheila furlong Second Plaintiff And: deep atlantic sea products inc. Defendant, 2021 NLSC 72

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Furlong v. Deep Atlantic Sea Products Inc. , 2021 NLSC 72 Date : May 26, 2021 Docket : 201601G3183 Between: elias furlong First Plaintiff And: sheila furlong Second Plaintiff And: deep atlantic sea products inc. Defendant Before: Justice Vikas Khaladkar Place of Hearing: St. John’s, Newfoundland and Labrador Dates of Hearing: April 12-14, 2021

Summary: The Plaintiffs’ claim for breach of a Settlement Agreement was dismissed. The Plaintiffs had, themselves, breached fundamental terms of the Settlement Agreement and the Court held that it would be inappropriate to grant them the relief that was claimed. Appearances:

Wayne White and Adam Mayo Appearing on behalf of the Plaintiffs Gregory A. French, Q.C. and Maria E. Clift Appearing on behalf of the Defendant Authorities Cited: CASES CONSIDERED: Donovan Homes Ltd. v. Modern Paving Ltd. , 2011 NLCA 39 ; May and Butcher , [1934] 2 K.B. 17 (U.K.H.L.) REASONS FOR JUDGMENT Khaladkar, J. : INTRODUCTION [ 1 ] The Plaintiffs, Elias Furlong and Sheila Furlong, (the “Furlongs”) are commercial fishers. The Defendant, Deep Atlantic Sea Products Inc. is a fish buyer and processor. The Defendant’s principal, Mr.

Greg Mullowney, has been involved in the fish processing business for 50 years. [ 2 ] This case concerns a Settlement Agreement reached by the parties, through their counsel, in Court in 2013. Counsel filed a Joint Book of Documents. The documents under Tab “A” consisted of correspondence between counsel subsequent to the December 2013 trial, and they are tendered for the truth of their contents.

The documents under Tab “B” are documents that are admitted, but not as to the truth of their contents. [ 3 ] The Furlongs were experiencing some financial difficulties as a result of which their fishing vessel, the Plate Cove Commander, was repossessed. They approached Mr. Mullowney and asked him to buy the vessel for $275,000 (being the amount they owed to the lender). Deep Atlantic Sea Products Inc. put a bid in on the vessel and acquired it for $220,000.

Thereafter, for two years, the Furlongs fished with the vessel and delivered their catch to Deep Atlantic Sea Products Inc. [ 4 ] In the third fishing season the Furlongs began to take their catch to other processors. They sued Deep Atlantic Sea Products Inc. and, eventually, the matter was set down for trial commencing December 20, 2013. [ 5 ] On December 3, 2013 Mr.

Kenneth Baggs, Q.C., counsel on behalf of Deep Atlantic Sea Products Inc., the Defendant, advised the Court a week before the trial was set to begin, as follows: There’s been an offer to settle under the Rules of Court 20A and, essentially, the Defendant has accepted that offer. And we’re going to – there’s a couple of issues – insurance and timing issues and mutual releases. Those are the only three items that we have to formalize, really.

And based on our agreement and discussions outside, we were looking to postpone this matter this morning, adjourn the trial Sine Die and with leave to file Notices of Discontinuance. [ 6 ] Wayne White, counsel on behalf of the Plaintiffs, offered to read the terms of the Settlement Agreement into the Court record. He stated: The Furlongs will pay to Deep Atlantic the sum of $80,000 on or before March 15th, 2014. In consideration for that payment, Deep Atlantic will transfer title in the Motor Vessel Plate Cove Commander to either Elias Furlong or Mr. and Mrs.

Furlong – we’ll indicate whom – free and clear of all liens, charges and encumbrances for which Deep Atlantic is responsible. And at which time the parties will execute mutual releases and releasing the other party from any claim they have against that other party as a result of any dealings in relation to this matter. That in the meantime that the Furlongs would have possession and use of the vessel, won’t be much between now and March 15th, but possession and use of the vessel Plate Cove Commander without interference from Deep Atlantic. [ 7 ] Mr.

Baggs, Q.C. immediately responded as follows: The 80,000 would be inclusive of all judgment interest, judgment interests and costs, and in return for that the Defendant would like to be added as a loss payee on the insurance of the vessel. The vessel is currently insured. I guess myself and Mr. White can work that out. Part of it may not be a part of the judgment but it’s important to Deep Atlantic that the vessel is insured until the sum of money is paid on or before March 15th . (Emphasis added).

[ 8 ] Mr. White advised the Court that Mr. Furlong had insured the vessel in his own name, but he was concerned that Mr. Furlong might not have had an insurable interest in the vessel. He undertook to explain to the insurer that Deep Atlantic Sea Products Inc. was the owner of the vessel and that Mr. Furlong would be receiving title in due course. [ 9 ] Mr.

Baggs, Q.C. indicated to the Court that once the consideration was paid and the title to the boat was transferred, the parties would discontinue the action. [ 10 ] The presiding justice adjourned the trial of the matter sine die . [ 11 ] On December 3, 2013 Mr. White wrote to Fairway Insurance Services Inc. directing them to issue the policy in the names of both Deep Atlantic Sea Products Inc. and Mr. Furlong “as their interests may appear”. [ 12 ] On December 16, 2013 Mr. White wrote to Mr.

Baggs, Q.C. advising that Fairway Insurance Services Inc. had not received the premium for the policy and, therefore, the policy had been cancelled. Mr. White advised that he had informed his clients of the seriousness of the situation, and strongly recommended to them that they insure the vessel immediately. [ 13 ] The Furlongs did not place the insurance as directed. [ 14 ] On February 13, 2014 Mr. Baggs, Q.C. wrote to Mr. White requesting an update on the Furlongs’ efforts to obtain the financing necessary to pay the $80,000 on or before March 15, 2014. He also requested Mr.

White to provide proof of insurance on the vessel. In the closing paragraph of the letter, Mr. Baggs, Q.C., stated: I ask you to remind your clients that should they not comply with the terms of the Settlement Agreement read into the Court record, I will proceed immediately to either enforce the terms of the Settlement Agreement or apply to the court to have the adjourned application for leave to file a Counterclaim heard and seek immediate recovery of the Plate Cove Commander from your clients. [ 15 ] On April 2, 2014 Mr. Baggs, Q.C. again wrote to Mr. White.

He indicated that his client was prepared to give the Furlongs additional time, until April 15, 2014 to obtain financing. He also said: As well, my client has instructed me to advise that Deep Atlantic will not permit the Furlongs to utilize the fishing vessel to fish its licenses this Spring without the express consent of Deep Atlantic and on terms acceptable to Deep Atlantic.

Should the Furlongs attempt to fish the vessel or further delay the settlement agreement, Deep Atlantic has instructed me to make application to court to obtain leave to file a Counterclaim, a Recovery Order to obtain possession of the vessel and an injunction to prevent use of the vessel, if necessary. [ 16 ] On April 7, 2014 Mr. White wrote to Mr. Baggs, Q.C. and indicated that the vessel had been insured in the name of the Furlongs only. He indicated that he had instructed the insurance agency to have Deep Atlantic Sea Products Inc. named as co-insured and would confirm when this had been done.

In the same letter he advised that the Furlongs had been approved for financing and that the funds were being sent to his office. He asked for a variety of documents attendant on the sale including, inter alia , a “duly signed Boat and Lien Warranty in preapproved form”. [ 17 ] In a subsequent letter on April 7, 2014 Mr. White requested that the title to the vessel be transferred to Mr. Furlong and that the purchase price for the vessel be shown in the Marine Bill of Sale as $220,000.00. [ 18 ] On April 9, 2014 Mr. White wrote to Mr.

Baggs, Q.C. and confirmed that insurance coverage was now in place for the vessel. He also confirmed that he was in receipt of the purchase funds and that the Furlongs had signed all of the required papers. He then stated: The Furlongs are preparing for the upcoming fishing season. If we cannot close this before the season starts please advise whether your client will consent to the Furlongs fishing the vessel before closing.

The only delay we see to closing at this point is registration of the documents, given that we now have to deal with Ottawa and their turnaround is about one week. [ 19 ] In April, 2014 it was determined that the vessel would require, and had to pass, a Canadian Steamship Inspection (“CSI”) before it was allowed to fish commercially. Mr. Mullowney, on behalf of Deep Atlantic Sea Products Inc., executed a letter dated April 16, 2014 allowing Mr. Furlong to have the inspection carried out.

To that end he agreed that Transport Canada could carry out an in water inspection for the purpose of allowing the vessel to be steamed to dry dock. He also consented to Mr. Furlong steaming the vessel to a port within the Province for the purpose of dry docking for inspection by Transport Canada. For that purpose Mr. Mullowney constituted Mr. Furlong as an authorized representative of Deep Atlantic Sea Products Inc. [ 20 ] A document dated September 9, 2014 was filed (Tab A-13) indicating that insurance had been renewed through Fairway Insurance Services Inc. for the vessel effective September 6, 2014.

Deep Atlantic Sea Products Inc. was listed as an additional insurer. [ 21 ] By November 5, 2014 it had become apparent that there were two significant clogs on the title of the vessel: Canada Revenue Agency (“CRA”) had obtained judgment for $400,000 against Deep Atlantic Sea Products Inc. and Workers’ Compensation had also obtained a judgment in the amount of $178,000. Mr. Baggs, Q.C. wrote to Mr. White on November 5, 2014 and, in the closing paragraph, suggested that one option might be to pay the $80,000 into the Sheriff’s office. Mr. Baggs, Q.C. gave Mr.

White the phone number for the representative of CRA that he had been conversing with. [ 22 ] On February 19, 2015 Mr. Baggs, Q.C. wrote to Mr. White inquiring about insurance on the vessel. He referenced a letter of November 5, 2014 in which Mr. Baggs, Q.C.’s client had advised it had been notified by Fairway Insurance Services Ltd. that the policy had lapsed. Mr. Baggs, Q.C. also advised Mr. White that while CRA was prepared to accept the $80,000 and release the vessel, Workers’ Compensation was not prepared to release its judgment without receiving some portion of the $80,000. Mr.

Baggs, Q.C. felt that a Court application might be necessary to resolve the impasse. [ 23 ] On February 21, 2015 Mr. White wrote to Mr. Baggs, Q.C. inquiring whether Workers’ Compensation, like CRA, had agreed

to accept the $80,000 or a portion thereof, in consideration of releasing the vessel. If not, Mr. White indicated that he would have to assert the Furlongs’ claim to the vessel. Mr. White was preparing an application for the purpose of determining entitlement to the $80,000. [ 24 ] The Furlongs used the Plate Cove Commander to fish during the 2014 fishing season. They did not inform Deep Atlantic Sea Products Inc. that they were using the vessel.

They did not have valid insurance on the vessel during the 2014 fishing season. [ 25 ] The Furlongs were using the Plate Cove Commander to fish during the 2015 fishing season as well. In the month of May the vessel began taking on water and had to be taken to dry dock in the town of Harbour Grace for repairs. While in dry dock, in June, 2015 the vessel was spotted by Mr.

Mullowney – who had the vessel arrested after commencing an action in Federal Court. [ 26 ] The Furlongs have claimed, inter alia , an Order enforcing the Settlement Agreement and, in the event that the vessel has been sold, the value of the vessel at the time that it was arrested. This claim assumed that the vessel might have been sold by Deep Atlantic Sea Products Inc.

However, with respect to this claim for relief, there was evidence tendered during the trial that the Furlongs had obtained the release of the vessel from Federal Court and had sold the vessel in 2018 along with their license. issue Is the Settlement Agreement entered into between the parties on December 3, 2013 enforceable? analysis [ 27 ] The Settlement Agreement contained several express terms: a. Deep Atlantic Sea Products Inc. agreed to accept $80,000. b. Furlongs agreed to pay Deep Atlantic Sea Products Inc. $80,000 by March 15, 2014. c.

Furlongs agreed to keep the vessel, Plate Cove Commander, insured and to make loss payable to Deep Atlantic Sea Products Inc. (until the $80,000 was paid to Deep Atlantic Sea Products Inc.). d. Furlongs were to have possession of the vessel without hindrance until March 15, 2014. e. Deep Atlantic Sea Products Inc. would convey title to the vessel to the Furlongs upon payment of $80,000 free and clear of all encumbrances. [ 28 ] The terms of the Settlement Agreement underwent modification because the Furlongs were not able to secure the financing necessary to pay the $80,000 by March 15, 2014 as had been agreed.

As a result, Deep Atlantic Sea Products Inc. extended the time period for payment on April 2, 2014 to April 15, 2014. In doing so, Deep Sea Atlantic Sea Products Inc. made the following proviso: As well, my client has instructed me to advise that Deep Atlantic will not permit the Furlongs to utilize the fishing vessel to fish its licenses this Spring without the express consent of Deep Atlantic and on terms acceptable to Deep Atlantic.

Should the Furlongs attempt to fish the vessel or further delay the settlement agreement, Deep Atlantic has instructed me to make application to court to obtain leave to file a Counterclaim, a Recovery Order to obtain possession of the vessel and an injunction to prevent use of the vessel, if necessary. [ 29 ] The Furlongs never obtained permission from Deep Atlantic Sea Products Inc. to use the vessel for the purposes of fishing for the 2014 or 2015 fishing seasons.

At best the Settlement Agreement contemplated that the Furlongs would have possession and use of the vessel until March 15, 2014 – when the $80,000 was to become due and payable.

While the vessel may have undergone preparations for the fishing season during this time period, there would have been no fishing because the season does not begin until after March 15. [ 30 ] On April 9, 2014 counsel for the Furlongs wrote to counsel for Deep Atlantic Sea Products Inc. and asked: If we cannot close this before the season starts please advise whether your client will consent to the Furlongs fishing the vessel before the closing.

The only delay we see at this point is registration of the documents, given that we now have to deal with Ottawa and their turnaround is about one week. [ 31 ] There was no response to this letter and no consent was given by Deep Atlantic Sea Products Inc. for the use of the vessel for fishing. Permission was provided to have an inspection performed for the purpose of obtaining a CSI certificate. [ 32 ] The Furlongs used the vessel for the 2014 and 2015 fishing seasons, until it was arrested in June, 2015, for the purpose of fishing.

No consent was ever given for such use. [ 33 ] Up until the arrest of the vessel, the purchase funds sat in Mr. White’s trust account. They had never been tendered to counsel for Deep Atlantic Sea Products Inc. [ 34 ] Deep Atlantic Sea Products Inc. was having its own problems. Judgments against the corporation had been obtained by CRA and Workers’ Compensation for significant amounts of money. This might have contributed to the Furlongs’ counsel’s reluctance to

forward funds to Mr. Baggs, Q.C. However, had he done so on trust conditions that the money was not to be disbursed unless and until title to the vessel could be conveyed free and clear of all encumbrances, the parties could have lived up to the terms of their Settlement Agreement – the Furlongs could have had the use and benefit of the Plate Cove Commander with the consent of its owner. Deep Atlantic Sea Products Inc. made arrangements with CRA and Workers’ Compensation to pay the amounts owing and, eventually, the judgments were satisfied.

The corporation was then in a position to provide title free and clear of all encumbrances. [ 35 ] I find that the Furlongs breached the Settlement Agreement by using the Plate Cove Commander to fish during the 2014 and 2015 fishing seasons without obtaining consent of Deep Atlantic Sea Products Inc. for such use. The express terms of Mr. Baggs, Q.C.’s April 2, 2014 correspondence, the request by Mr. White a week later to allow for the use of the vessel for fishing, and the specific terms of the consent by Deep Atlantic Sea Products Inc. concerning the acquisition of CSI militate against any other conclusion.

The Furlongs, and their counsel, knew that they were not allowed to use the vessel for fishing purposes. The Furlongs did so regardless of that knowledge. [ 36 ] I find that the Furlongs breached the Settlement Agreement by failing to insure the vessel until September 9, 2014.

It was an express term of the Settlement Agreement that insurance be obtained and loss be made payable to Deep Atlantic Sea Products Inc. until the $80,000 was released to the corporation. [ 37 ] The obligation to insure the vessel and name Deep Atlantic Sea Products Inc. as the payee in the event of loss was a fundamental term of the Settlement Agreement. [ 38 ] The prohibition on the use of the vessel for fishing without obtaining her owner’s consent became a fundamental term at the time that Deep Atlantic Sea Products Inc. granted an extension of the time to pay the settlement funds to April 15, 2014.

This prohibition was acknowledged by Mr. White a week later when he asked for permission to use the vessel for fishing pending completion of the Settlement Agreement. [ 39 ] In Donovan Homes Ltd. v. Modern Paving Ltd. , 2011 NLCA 39 , the Newfoundland and Labrador Court of Appeal discussed the principle that in order to be binding an agreement must be settled and complete.

The Court cited the dicta of Viscount Dunedin’s concurring judgment in May and Butcher , [1934] 2 K.B. 17 (U.K.H.L.) : To be a good contract there must be a concluded bargain, and a concluded contract is one which settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties. Of course it may leave something which still has to be determined, but then that determination must be a determination which does not depend upon the agreement between the parties. [ 40 ] The terms of the Settlement Agreement between the parties did not lack precision.

The amount and timing of payment was clear. In time an extension became necessary because the Furlongs were having difficulty obtaining financing. In consideration of granting an extension, a term was imposed – no use of the vessel until monies are paid without the express consent of its owner. In addition, it was clear from the beginning that insurance was to be placed on the vessel with Deep Atlantic Sea Products Inc. being noted as the payee in the event of loss. [ 41 ] The Furlongs, at trial, characterized the lack of placement of insurance on the vessel as “an oversight”.

Oversight or not, the lack of placement of insurance fundamentally breached the terms of the Settlement Agreement. Without insurance the interest of Deep Atlantic Sea Products Inc. was completely unprotected. In the event of a loss the corporation would, potentially, have received nothing. [ 42 ] In order to obtain the type of relief requested in this matter, the Plaintiffs must come to Court with clean hands.

The Furlongs breached a fundamental term of the original Settlement Agreement (placing insurance) and, as well, breached a term that was imposed in consideration of an extension for the time of payment (not to use the vessel for fishing without consent). It would be inappropriate to grant the Furlongs relief when they, themselves, have fundamentally breached the clear and unequivocal terms of the Settlement Agreement. [ 43 ] The Furlongs’ claim is dismissed with costs calculated under Column III of the Scale of Costs. _____________________________ Vikas Khaladkar Justice