2019 FC, 2019 FC 1567

Date: 20191206 Docket: T-1406-19 Citation: 2019 FC 1567 Admiralty Action in rem BETWEEN: PROVINCIAL HOLDINGS LIMITED/ GESTION PROVINCIALE LIMITÉE Plaintiff and OCÉAN NOUVEAU-BRUNSWICK INC AND THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP UNDER CONSTRUCTION IDENTIFIED AS A FLOATING DRY DOCK Defendants and LOCATION INDUSTRIES OCÉAN INC Intervener REASONS FOR ORDER PAMEL J. [ 1 ] On September 4 and 5, 2019, I heard an urgent motion filed on August 30, 2019, by the Defendant/Applicant Océan Nouveau- Brunswick Inc [ONB], seeking to quash the warrant of arrest, set aside the arrest of and release the in rem defendant without bail, or alternatively set bail so as to secure its release. [ 2 ] Location Industries Océan Inc [Location], a company related to ONB, sought to intervene in the present proceedings for the limited purpose of joining ONB in its attempt to set aside the arrest of the in rem defendant. [ 3 ] On account of the urgency of the matter, immediately following the hearing , I issued an order from the bench, inter alia , granting the motion in part and setting bail in the amount of $260,000, with reasons to follow.

My written order was issued the next day, on September 6, 2019 [the Order]. [ 4 ] At the same time, there being no objection on the part of the Plaintiff/Respondent Provincial Holdings Limited [PHL] save as to the issue of costs, I granted Location’s request to intervene for the limited purpose of the present motion. I also stayed the present action so that the parties may proceed to have their dispute resolved by way of arbitration as provided for under the governing contract. [ 5 ] These are the reasons for the Order. I.

BACKGROUND [ 6 ] PHL is incorporated under the Business Corporations Act , SNB 1981, c B-9.1 , of the Province of New Brunswick, and is wholly owned by Her Majesty the Queen in Right of the Province of New Brunswick [the Province]. [ 7 ] On October 24, 2016, PHL entered into a contract with, inter alia , the defendant ONB, a Canadian corporation with its head office in Quebec City [the Ship Building Contract] by which ONB agreed to build a floating dry dock [FDD] at the shipyard located in Bas- Caraquet, New Brunswick [Naval Yard], which is operated by ONB under a terminal lease it entered into with PHL on the same day [the Terminal Lease]. [ 8 ] The Ship Building Contract provides for all disputes to be resolved by way of arbitration in New Brunswick. [ 9 ] Ultimately the FDD was being built for Location.

Therefore, in conjunction with the Ship Building Contract and the Terminal Lease, PHL also entered into a lease buyback agreement with Location on October 24, 2016 [the Lease Buyback Agreement] as a financing vehicle by which PHL would lease the FDD to Location, enabling the latter to operate the FDD going forward. Location was also a party to the Ship Building Contract. [ 10 ] For the purposes of the present motion, the parties concede that the FDD is over 95% complete and that PHL has paid for 80% of the FDD, with all of the work to this point having been performed at the Naval Yard.

At the time of the hearing, although a small amount of work had not been completed, ONB was ready to have the FDD undergo sea trials. [ 11 ] ONB alleges to have committed over $750,000 in funds and resources in preparation for the launch of the FDD for sea trials off Bas-Caraquet, and from there, towing the FDD to a place in the Province of Quebec, on the St. Lawrence River, where ONB proposes to perform the small amount of remaining work in order to complete its construction, principally the installation and completion of the electrical and mechanical systems [the Finishing Work].

Thereafter, ONB intends to have the FDD ready for delivery to PHL under the Ship Building Contract, with PHL then effecting delivery to Location under the Lease Buyback Agreement at a place in the St. Lawrence River as provided for in the respective contracts. [ 12 ] PHL disputes that ONB is permitted under the Ship Building Contract to complete the Finishing Work anywhere other than the

Naval Yard. Because PHL is a wholly owned Crown corporation, the policy imperative for the Government of New Brunswick is that the entirety of the work on the FDD be completed at the Naval Yard, save for any portion thereof which is not “reasonably possible” to be performed there, and, most importantly, by New Brunswick workers.

PHL takes the position that such policy imperative is reflected in the manner in which the Ship Building Contract was drafted, and forms an integral part thereof. [ 13 ] The issue as to whether the Finishing Work must be completed at the Naval Yard constitutes the principal dispute between the parties [the Principal Dispute]. Whether it was “reasonably possible” to perform the Finishing Work at the Naval Yard is a live issue to eventually be determined by way of arbitration as called for under the Ship Building Contract, and thus not an issue I need to resolve at this time.

In any event, there is no evidence before me one way or the other on this issue. II. THE UNDERLYING ACTION [ 14 ] The launching of the FDD for sea trials was scheduled for high tide off Bas-Caraquet on Saturday, August 31, 2019. [ 15 ] Concerned that once in the water, ONB would then tow the FDD to a facility in the St. Lawrence River to perform the Finishing Work thereby rendering moot the Principal Dispute, on August 28, 2019, PHL filed with this Court a Statement of Claim seeking a declaration of the right to possession of the FDD, or any

part interest therein [the Possessory Claim]. In conjunction with these proceedings, PHL obtained the issuance of a warrant of arrest against the in rem defendant. The FDD was arrested on the same day. [ 16 ] At the time of its arrest, the FDD was in the actual physical possession and control of ONB, the operator of the Naval Yard, and in the process of being shifted to the water’s edge so that it could be launched for sea trials. [ 17 ] PHL states that this Court has subject-matter jurisdiction in respect of the Possessory Claim by virtue of paragraphs 22(2) (

a) and 22(2) (

n) of the Federal Courts Act , RSC 1985 c F-7 [ FCA ]. [ 18 ] Paragraphs 22(2)(

a) and 22(2)(

n) state the following: "

(2) Without limiting the generality of subsection (1), for greater certainty, the Federal Court has jurisdiction with respect to all of the following: " " " "

(2) Il demeure entendu que, sans préjudice de la portée générale du paragraphe (1), elle a compétence dans les cas suivants : " " (

a) any claim with respect to title, possession or ownership of a ship or any

part interest therein or with respect to the proceeds of sale of a ship or any

part interest therein; " " " "

a) une demande portant sur les titres de propriété ou la possession, en tout ou en

partie , d’un navire ou sur le produit, en tout ou en partie, de la vente d’un navire; " " […] " " " " […] " " (

n) any claim arising out of a contract relating to the construction, repair or equipping of a ship; " " " "

n) une demande fondée sur un contrat de construction, de réparation ou d’équipement d’un navire; " " […] " " " " […] " " " " [Emphasis added.] " " " " [Je souligne] " [ 19 ] In addition, in rem jurisdiction is expressly conferred upon this Court by virtue of

section 43 of the FCA , which states the following:

43(1) Subject to subsection (4), the jurisdiction conferred on the Federal Court by

section 22 may in all cases be exercised in personam . 43(1)

Sous réserve du paragraphe (4), la Cour fédérale peut, aux termes de l’article 22, avoir compétence en matière personnelle dans tous les cas.

(2) Subject to subsection (3), the jurisdiction conferred on the Federal Court by

section 22 may be exercised in rem against the ship, aircraft or other property that is the subject of the action, or against any proceeds from its sale that have been paid into court.

(2) Sous réserve du paragraphe (3), elle peut, aux termes de l’article 22, avoir compétence en matière réelle dans toute action portant sur un navire, un aéronef ou d’autres biens, ou sur le produit de leur vente consigné au tribunal. [ 20 ] Paragraph 10 of the Statement of Claim reads as follows: The Plaintiff states that the Contract entitles the Plaintiff, prior to delivery, to exclusive possession of the Defendant Ship or alternatively to sufficient rights of possession to require the Defendant Ship to remain at Bas-Caraquet continuously until completion of sea trials, subject only to such departure from that port as may be necessary for the conduct of sea trials . [Emphasis added.] [ 21 ] In addition, PHL argues that the concept of possession to which it claims to be entitled is properly set out in paragraph 3 of the Affidavit to Lead Warrant, which reads as follows: THAT the Plaintiff has a claim the subject-matter of which is the Defendant Ship and which claim is against Ocean Nouveau-Brunswick Inc. for determination of a dispute as to which of the Plaintiff and Ocean Nouveau-Brunswick Inc. is entitled to possession of the Defendant Ship such as enables it to direct whether movement of the Defendant Ship away from the port in which it is being construction [sic] is to be permitted. [Emphasis added.] [ 22 ] At the hearing, I asked PHL to clarify its position. [ 23 ] PHL is not directly seeking the determination of the Principal Dispute as that is clearly an issue for arbitration; nor is it seeking actual physical possession of the FDD in the traditional sense. [ 24 ] Rather, PHL seeks a declaration of a right to some form or concept of possession, or

part interest therein, that it claims to have under the Ship Building Contract and that sufficiently entitles it to direct ONB as to the movement of the res in line with the determination of the Principal Dispute; a contractual, limited form of possession for the purposes of meeting the requirements of paragraph 22(2) (

a) of the FCA . [ 25 ] I enquired as to whether having the FDD remain under arrest meant that the res was to remain hostage without the prospect of bail. Counsel for PHL responded that even while under arrest the FDD continued to be available to be worked upon, and added that neither the pursuit of the Principal Dispute nor the Possessory Claim precludes ONB from performing the Finishing Work at the Naval Yard. [ 26 ] In the event that it is ultimately wrong in its

interpretation of the Ship Building Contract, PHL concedes that it may well be open to damages in relation to any increase in costs that ONB would have incurred in performing the Finishing Work in New Brunswick as opposed to Quebec. That may be so, however, I would think that the bar for a claim for wrongful arrest is quite high. [ 27 ] I have always understood the concept of possession to include both a temporal and physical component. I must say that what Counsel for PHL is proposing is a rather novel concept of possession.

Counsel for PHL concedes that the action is, at the very least, atypical and that he has no case law to support his position. But that is not to say such position is devoid of any prospect of success. [ 28 ] By claiming a particular right of possession in the FDD, what PHL is trying to enforce is a promise which it postulates was made by ONB in the Ship Building Contract that the FDD will be completed at the Naval Yard. [ 29 ] ONB, supported by Location, says that the only place where the concept of possession is dealt with in the series of contracts is at

section 12 of the Lease Buyback Agreement, which provides that the FDD will be in the possession of Location for the duration of the lease. PHL acknowledges such a right of possession in the Lease Buyback Agreement, but claims that the concept of possession provided for in that agreement, a more typical form of possession, is different from the concept of possession that PHL is claiming to be entitled to under the Ship Building Contract and regarding which it seeks to engage the in rem jurisdiction of this Court pursuant to paragraph 22(2) (

a) of the FCA . [ 30 ] ONB says that the notion of possession asserted by PHL is inconsistent with the concept of possession that is envisaged by paragraph 22(2) (

a) of the FCA , and that what PHL is actually seeking is a disguised form of injunction compelling completion of the Finishing Work at the Naval Yard in accordance with PHL’s

interpretation of the Ship Building Contract. [ 31 ] I should make clear that there is before me neither a motion to strike the in rem proceedings pursuant to rule 221 of the Federal Courts Rules , SOR/98-106 [ FCR ], nor a motion for

summary judgment on any particular issue pursuant to rules 213 et seq of the FCR . It is thus neither necessary nor desirable for me to express at this interlocutory stage any opinion as to the prospects of PHL’s claim in

respect of the Principal Dispute, or as to the concept of possession it is asserting as part of the Possessory Claim as set out in theStatement of Claim. [32] Although the essence of the Principal Dispute is PHL’s assertion that under the Ship Building Contract ONB is obliged toundertake the Finishing Work at the Naval Yard, the crux of the Possessory Claim, which forms the subject matter of the presentproceedings, is whether PHL has, pursuant to the Ship Building Contract, a contractual right of possession of the FDD that sufficientlyentitles it to require that the FDD remains at the Naval Yard for the completion of the Finishing Work.

Although these are two separateissues, they are related. [33] The present action is concerned with the Possessory Claim, not the Principal Dispute, however, it seems to me that the success ofPHL’s assertion of its rights as regards the Possessory Claim may well be dependent upon the success of its assertion as regards thePrincipal Dispute, hence the need for both issues to be determined in the same forum. III.

THE PRESENT MOTION [34] The launching of the FDD for sea trials was scheduled for high tide in Bas-Caraquet on Saturday, August 31, 2019, hence theurgency of the present motion, especially given the inclement weather in the area on account of the effects of Hurricane Dorian. [35] The sense of urgency is also tied to the fact that Location has already committed the FDD to operations towards the latter part ofOctober 2019, and thus the Finishing Work must be performed and completed without further delay. [36] There is no issue as to the interest of ONB in the FDD, nor in its standing to bring the present motion.

In addition, on account of thecommencement of the lease payments to PHL notwithstanding that delivery of the FDD under the Lease Buyback Agreement has not yettaken place (a feature of the Lease Buyback Agreement), Location claims to be the party having the right of possession of the FDD andthe true party at risk of economic hardship in the event there are delays in the completion of the Finishing Work. [37] As mentioned, I granted Location the right to intervene for the sole purpose of taking

part in the present motion. [38] PHL claims to have paid for, and thus, owns 80% of the FDD in accordance with the Ship Building Contract. However, no issuearose as to whether the arrest of the FDD was caught by paragraph 43(7)(

b) of the FCA as the res was neither on, nor slated for,government service. Nor does there seem to be any issue arising as regards the arrest of the FDD being prohibited in any way by anystatute relating to proceedings against the Crown in Right of New Brunswick.

At least, none were raised before me. [39] Also, ONB concedes that the FDD is a ship as defined in subsection 2(1) of the FCA. [40] PHL takes the position that the arrest should not be set aside, and that the FDD should remain under arrest at the Naval Yard,without bail, considering that PHL’s prospective damages, i.e., the loss of opportunity to fulfil the Province’s policy imperative, are non-monetary in nature. [41] For its part, ONB takes the position that the arrest should be set aside in its entirety and that the FDD should be released, similarlywithout bail, notwithstanding the tendency favouring the setting of bail on the basis of the Plaintiff’s reasonably arguable best case.

IV. SETTING ASIDE THE ARREST A. Preliminary Issue [42] During the hearing, ONB raised a preliminary issue. [43] ONB says that even if PHL is correct as regards the Principal Dispute, the Ship Building Contract can only be interpreted ascreating a personal undertaking or obligation on the part of ONB, and thus cannot form the basis of an in rem obligation. There are noconclusions in the Statement of Claim that are being sought in rem, and therefore the relief sought by way of a declaratory order canonly be pursued in personam.

Consequently, the arrest must be set aside. [44] First of all, the Principal Dispute is not the subject matter of the motion before me, and as mentioned, there is no motion to strikenor any motion for the determination of a point of law. Also, the primary issue in the present proceedings is the Possessory Claim, whichis quite distinct from, although related to, the Principal Dispute. [45] In any event, I do not agree with ONB’s assertion that a personal obligation cannot in this context form the subject matter of anaction in rem. [46] The subject-matter jurisdiction of this Court in admiralty is set out in

section 22 of the FCA. For the most part, the Court’sjurisdiction involves claims against maritime property, which includes ships. In addition,

section 43 of the FCA provides that the subject-matter jurisdiction of this Court may be exercised in personam, and in rem against, inter alia, the ship or other maritime propertyforming the subject matter of the action. [47] Contractual obligations are by their very nature personal and may be enforced in personam. This would include claims for relief ofboth a monetary and declaratory nature. [48] An action in rem, on the other hand, is generally an action against the res. As expressed by Mr.

Justice Pratte in the trial decision inAntares Shipping Corp v The “Capricorn”, [1973] FC 955 (TD), 1978 CarswellNat 52; reversed (FCA), [1978] 2 FC834 (CA); restored (SCC), [1980] 1 SCR 553 [The Capricorn], the relief sought in an action in rem must be

enforceable against the ship, a finding that was not disturbed on appeal. The learned judge stated the following at pages 959 and 960: “In my view, the following propositions are so plain as not to require any explanations: The relief claimed in an action in rem, which is an action against a res, must be such that it could be enforced against the resitself.

A Court cannot order the specific performance of a contract if the person against whom the order is sought has not beenmade a party to the action.” [49] The proceedings in The Capricorn were initially instituted as a pure action in rem and involved a claim by a prospective buyer of aship for a declaratory order nullifying its sale to a third party and for specific performance compelling the owner of the ship to concludethe contract of sale with the plaintiff. So as to allow for the enforcement of the order sought by the plaintiff, Mr.

Justice Pratte dismisseda motion to strike the proceedings and ordered that the initial owner of the ship and the third party be served with those proceedings, thuscontinuing the proceedings as an action both in rem and in personam. [50] The appeal was pursued on the question of jurisdiction, and the Supreme Court of Canada eventually confirmed that this Court wasvested with the jurisdiction to hear the claim.

The result is that although a claim for specific performance may likely not be able tosupport a pure action in rem, where the action is both in rem and in personam, naming as a defendant the person against whom the reliefis sought, as is the case here, the in rem portion of the action may continue to stand as a proper exercise of the Court’s admiraltyjurisdiction pursuant to

section 22 of the FCA. [51] I am mindful of the distinction between a declaratory order simpliciter, as is being requested by PHL in the present proceedings toresolve legal uncertainty in the Ship Building Contract, and an order for specific performance, which is, by its nature, directed against anindividual or entity. I would think that if a party may pursue the latter by way of an action in rem and in personam, it should equally, ifnot more so, be able to pursue the former in the same way. [52] In addition, it is not necessary that an action in rem only seek monetary relief.

It very much depends on the nature of the claim. [53] Although an action in rem is generally an action against the res, paragraph 22(2)(

a) of the FCA is different as it does not involve aclaim against a ship, but rather an interest or claim in a ship.

The claim with respect to possession does not always lend itself to monetaryrelief, but rather some right, however defined, to possess, hold, and keep the res either directly or by way of an agent who has actualpossession but is acting on one’s behalf (The Cristina, [1938] 60 Lloyd’s Rep 147 (HL)). [54] I therefore find that a claim for breach of an obligation or undertaking in a contract, although personal, may nonetheless be pursuedin rem provided that this Court has the requisite jurisdiction to entertain such a claim. B.

Irregularities in the proceedings [55] ONB asks that the arrest be set aside and the FDD be released without the setting of bail on account of the irregularities in PHL’sprocedure and support material for the arrest. [56] In addition, ONB takes the view that neither a motion to strike nor a motion for

summary judgment are needed as a precondition toit seeking to quash the warrant of arrest. I agree. [57] There is little doubt that this Court may quash a warrant of arrest without necessarily determining or striking any portion of the inrem claim, however, this should only be done in exceptional circumstances.

In Margem Chartering Co v The Bocsa, (FC), [1997] 2 FC 1001 (TD) [Margem], Prothonotary Hargrave stated the following at pages 1014–1015: Neither the affidavit to lead warrant nor the warrant fall within the Rule 2 definition of a pleading and thus Rule 419 is of noassistance in striking out or setting aside the warrant as an abuse.

However, the Court has an inherent jurisdiction, not in thesense of substantive law, or of an antithesis to the Court’s statutory jurisdiction, but rather an inherent procedural jurisdictionto control its own process from abuse, notwithstanding its rules and limiting statutory jurisdiction. The Federal Court ofAppeal, in New Brunswick Electric Power Commission v.

Maritime Electric Company Limited, (FCA),[1985] 2 F.C. 13, at page 26 et seq., refers to this sort of a jurisdiction as an implied jurisdiction I think with the idea that,where Parliament has conferred a power on the Court, there is the implication that there must also exist the necessary powerto control and make the conferred jurisdiction work. Mr. Justice Addy touches on this concept in Nisshin Kisen Kaisha Ltd.v.

Canadian National Railway Co., (FC), [1981] 1 F.C. 293 (T.D.), at page 301 where he writes “everyCourt of superior jurisdiction . . . must possess the innate right of controlling its own process and, subject to the requirementsof justice, to control the actions before it of those wishing to avail themselves of its jurisdiction”. Mr. Justice Mahoney inBandag Inc. v. Vulcan Equipment Co.

Ltd., (FC), [1977] 2 F.C. 397 (T.D.) puts it more bluntly, at page402: “this Court has an inherent jurisdiction over its own process to enable it to carry out the basic raison d’être it shareswith every court of civil jurisdiction”.

Thus, the Court having the statutory jurisdiction to issue a warrant, it must also havean inherent procedural or implied jurisdiction to set aside a warrant that is an abuse of process. [Emphasis added.] [58] After considering the request to strike out portions of the statement of claim as abusive and vexatious, Prothonotary Hargrave thenturned to the warrant of arrest, and continued at page 1025: The way in which I should treat the warrant is a little more complex.

This is not, however, to say the courts have been anyless severe where a warrant constitutes an abuse of process, as compared with an abuse in a statement of claim, but rather thetest of abuse carries a high onus and thus a court will try to salvage a warrant, just as a court will give the benefit of any

doubt to a plaintiff so she or he may not be deprived of a day in court. [59] ONB does not plead that the Affidavit to Lead Warrant is deficient in terms of its statutory content under rule 481(2) of the FCR, aswas the case in Magnolia Ocean Shipping Corp v The “Soledad Maria”, (FC), [1982] 1 FC 205 (TD) [The SoledadMaria]. Rather, ONB argues that the warrant of arrest should be quashed for having been obtained for collateral purposes for which inrem proceedings are not available, as well as for misrepresentation in the Affidavit to Lead Warrant. [60] In short, its attack on the arrest of the FDD may be summarized as follows:

a) What PHL is seeking is a disguised form of injunction. By seeking to engage this Court’s in rem jurisdiction and the remedy ofarrest, PHL is using the rules of this Court for an ulterior or collateral purpose, and thus the arrest is an abuse of process;

b) Contrary to the allegations of PHL, there is no dispute between the parties as regards the Principal Dispute. PHL acted withoutcolour of right and misrepresented the situation in the proceedings, and in particular in the Affidavit to Lead Warrant;

c) The timing of the arrest was calculated to inflict economic harm on ONB; and

d) The remedy of arrest was disproportional to the claim. [61] I will deal with each issue separately.

a) Is PHL’s arrest a disguised form of injunction, thus constituting an abuse of process? [62] In Margem, Prothonotary Hargrave defined abuse of process at pages 1013 and 1014 in the following way: The term abuse of the process “connotes that the process of the Court must be used bona fide and properly and must not beabused” […] It means that: The Court will prevent the improper use of its machinery, and will, in a proper case, summarilyprevent its machinery from being used as a means of vexation and oppression in the process of litigation. [63] This Court certainly has the power to strike proceedings or affidavits where it finds there has been an abuse of the Court’s procedure(Bauer Hockey Ltd v Sport Maska Inc dba CCM Hockey, 2018 FC 1200; Levi Strauss & Co v Timberland Co (1997), 74 CPR (3d) 49(TD); Tsiopoulos v Commercial Union Assurance Co (1986), 32 DLR (4th) 614, (ON SC)). [64] In Jazz Air LP v Toronto Port Authority, 2007 FC 114 , Prothonotary Milczynski had to deal with the appropriateness of asecond application for judicial review, which was determined to be simply a revamped version of an earlier application that was orderedto be converted to an action.

At paragraphs 26 and 27, the Prothonotary stated the following: [26] The issue on this motion is whether it is an abuse of process for Jazz to have commenced Application #2 instead ofconverting Application #1 into an action, and if so, whether the Court should dismiss the application on those grounds. [27] Whether the actions of a party constitute an abuse of process depends upon the facts and surrounding circumstances,and must be approached on a case-by-case basis. Further, even if an abuse is found, the Court has discretion to allow thematter to proceed.

The Federal Court has applied the doctrine of abuse of process: - to prevent misuse of the Court’s procedure in a way which, although not inconsistent with the literalapplication of its procedural rules, would be manifestly unfair to a party or otherwise bring the administration ofjustice into disrepute; […] [Emphasis added.] [65] PHL instituted its proceedings as an admiralty action under

Part 13 of the FCR without a corresponding motion for an interim orinterlocutory injunction as may have been available pursuant to rules 372 et seq of the FCR. Nor did PHL proceed by way of anapplication for an injunction under

Part 5 of the FCR. [66] The purpose of advancing the claim as an admiralty action was for PHL to engage this Court’s in rem jurisdiction and theprocedural remedy of an arrest so as to preclude the FDD from being towed to the St. Lawrence River for the Finishing Work. Recourseto a warrant of arrest would not be available to PHL had it proceeded by way of an application. [67] Ultimately, PHL was looking to enforce its contractual rights, which would be defeated if the FDD was allowed to be launched andtowed to a St.

Lawrence River facility. [68] ONB takes issue with what it sees as an exercise in contortionism by PHL in seeking to define the Principal Dispute in terms ofsome artificial notion of possession for the ultimate purpose of forcing ONB’s hand in having the Finishing Work performed at the NavalYard. [69] ONB states that by proceeding as it did, PHL is actually seeking a mandatory injunction, or more likely an order for specificperformance, disguised as an action in rem, with the warrant of arrest compelling performance by ONB under the Ship Building Contractto perform the Finishing Work at the Naval Yard, but without the normal procedural safeguards afforded to a respondent whereinjunctive relief is sought such as, for example, an undertaking as to damages and the requirement for full and frank disclosure whenproceeding ex parte (as was done here with the filing of the Affidavit to Lead Warrant), measures from which ONB says it cannot nowbenefit because the originating proceeding is an admiralty action.

[70] PHL says that ONB is conflating an arrest with an injunction, something which has been rejected by Canadian courts in the past(Armada Lines Ltd v Chaleur Fertilizers Ltd, (SCC), [1997] 2 SCR 617 [Chaleur Fertilizers]). PHL underscores thepoint that as a public body, its primary interest of supporting economic development in the Province of New Brunswick is a legitimateexpectation stemming from the Ship Building Contract, and that it is proper for PHL to enforce it by way of an action in rem with thecorresponding remedy of an arrest as long as its claim can come within the purview of paragraph 22(2)(

a) of the FCA. [71] Although the effect of the arrest may well be to ultimately force ONB’s hand in completing the Finishing Work at the Naval Yard, Ido not agree with ONB and find that PHL followed the appropriate procedure. [72] The Statement of Claim, at paragraph 12, makes it clear that where the Possessory Claim is to be determined by way of arbitration,PHL’s procedural recourse of arrest is to be seen as an interim measure of protection pursuant to

article 9 of the Commercial Arbitration Code, being

Schedule 1 of the Commercial Arbitration Act, RSC 1985 c 17 (2nd Supp) [Commercial Arbitration Code]. [73] As I mentioned earlier, PHL’s assertion of its Possessory Claim is likely tied to its success on the Principal Dispute, and thusshould be heard together. Had PHL sought to enforce its right of position by way of a mandatory injunction or an order for specificperformance, along with a request for a stay in favour of arbitration under the Ship Building Contract, it may possibly have run into somedifficulty. As was determined by Mr.

Justice Pinard in Relais Nordik Inc v Secunda Marine Services Ltd (1988), 24 FTR 256 (TD), anapplication for a mandatory injunction to compel the defendant to comply with its contractual obligations was not an interim measure ofprotection within the meaning of

article 9 of the Commercial Arbitration Code. [74] As I set out earlier, the decision in The Capricorn is support for the proposition that there is nothing inconsistent in proceeding byway of an action in rem and in personam and seeking declaratory relief, as long as this Court’s in rem jurisdiction is properly engaged. [75] It may well be that on account of the tight timelines and the need on the part of ONB and Location to complete the work ratherurgently, the practical effect of maintaining the FDD at the Naval Yard is to force ONB’s hand as regards its options on the completionof the Finishing Work.

But that is often the consequence of an arrest of maritime property, hence the importance of the setting of bail forthe possible release of the res without delay so as not to allow the arrest to create, in and of itself, additional rights in favour of one party. [76] Rule 64 of the FCR allows a party to seek a declaration of rights simpliciter by way of an action (Ward v Samson Cree Nation No444 (1999), 247 NR 254, (FCA)). It is necessary, however, that such proceedings have a useful purpose or practicaleffect, and that they involve a legal

interpretation rather than a pure finding of fact (Laurentian Pilotage Authority v Pilotes du Saint-Laurent Central Inc (1993), 74 FTR 185 (TD)). [77] Here, the Possessory Claim involves the determination of a legal issue as it calls for the

interpretation of the Ship BuildingContract. The determination of this issue will also have a practical effect of identifying which party may direct the place where theFinishing Work will be performed. [78] In addition, the fact that it may have been open to PHL to seek an injunction does not preclude PHL from seeking a declaratoryorder by way of an action, and then pursuing simpler and less costly alternative remedies open to it in the context of such action. Again,this, of course, supposes that there is a valid action in rem. [79] PHL may or may not have a possessory right in the FDD along the lines it is suggesting, but as there is no motion to strike the inrem claim or motion for

summary judgment, I need not make a determination on the merits of PHL’s assertion as regards the PossessoryClaim. [80] ONB cites the decision in Prentice v Canada, 2005 FCA 395, [2006] 3 FCR 135 [Prentice], a case where it was determined that aclaim for damages is but a disguised grievance or discrimination complaint better pursued under the governing grievance provisions of astatute. ONB suggests a similar situation exists in this case with PHL seeking what is tantamount to a disguised injunction. I find thisdecision to be of little assistance.

Unlike the situation in Prentice, the subject-matter jurisdiction of this Court is not in dispute. [81] I make no finding as to the validity of PHL’s claim to possession along the lines it is asserting, only that it may pursue such a claimin the manner that it did.

b) Was there misrepresentation on the part of PHL in the proceedings and the Affidavit to Lead Warrant? [82] The issue of where the Finishing Work was to be performed has been the subject of discussion between ONB and the Province atleast since February 2019.

The situation developed thereafter as follows: In preparation for a meeting between the parties to be held on March 26, 2019, the Province, through the Regional DevelopmentCorporation of New Brunswick [RDC], the provincial agency handling the technical aspects of the construction of the FDD, sent aletter to ONB’s parent company dated March 25, 2019, requesting further information as regards, amongst other things, aguarantee by ONB that all the remaining work on the FDD would be completed in New Brunswick.

Following that meeting, in a letter dated April 15, 2019, the Province took the position, rightly or wrongly, that ONB had no rightunder the Ship Building Contract to complete the Finishing Work elsewhere than at the Naval Yard, but left the door open tofurther discussions on that issue provided that certain conditions were met. In particular, the Province requested cost comparisonsfor the Finishing Work as performed by New Brunswick or Quebec suppliers. ONB responded by letter dated April 30, 2019, addressed to PHL contesting the Province’s

interpretation of the Ship BuildingContract as regards any obligation to perform the Finishing Work at the Naval Yard. As regards the Province’srequest for costcomparisons, ONB advised that it had enquired with a New Brunswick supplier as to the cost of having the Finishing Workperformed, but was without a response. ONB also reported that its parent company had recently purchased a company in Quebecthat would be able to perform the Finishing Work, and as the intention was to launch the FDD around June 17, 2019, ONB

requested that PHL provide it with its position in relation thereto, amongst other things, within 10 days. In June 2019, the Government of New Brunswick announced that it would not fulfil a commitment made by the previous provincial government to participate in the funding of a new slipway or haul-up ramp at the Naval Yard (a feature which ONB says was vital to the development of the yard), although it was pressed by ONB to fulfill that previous commitment. Between July 10 and 15, 2019, a series of emails were exchanged between ONB and the RDC. The emails sought comments from the parties on the revised production

schedule for the completion of work on the FDD. The revised

schedule provided for, amongst other things, the launch and towing of the FDD to Quebec between August 28 and 30, 2019, and for the Finishing Work to be completed in Quebec starting on September 6, 2019. The Province’s decision not to participate in the funding of the new slipway or haul-up ramp resulted in ONB announcing in mid- July that it was laying off 37 workers at the Naval Yard effective August 27, 2019. Within two weeks of such announcement, and, according to ONB, as a result thereof, on July 23, 2019, PHL issued to ONB and Location a series of notices of default under the governing contracts relating to:

(1) ONB’s failure to deliver the FDD within 30 months of the execution of the Ship Building Contract;

(2) Location’s failure to make lease payments under the Lease Buyback Agreement; and

(3) ONB’s failure to make timely lease payments under the Terminal Lease for the Naval Yard. The notices urged ONB and Location to rectify the defaults, failing which PHL would seek appropriate recourse under the governing contracts. On August 19, 2019, PHL sent a letter to ONB stating that it understood that ONB intended to launch the FDD and, thereafter, tow it to Quebec to complete the Finishing Work, but that on account of the numerous defaults by ONB under the governing contracts, PHL would not permit ONB to launch or shift the FDD to Quebec.

Between August 21 and 23, 2019, PHL personnel took measures to prevent ONB from removing rocks along the berm bordering the water adjacent to the Naval Yard; work that was being performed by ONB so as to create a path for the FDD to be transferred to the water’s edge for launch. PHL had also arranged for heavy equipment to be placed along the berm so as to block any such transfer of the FDD.

On August 28, 2019, the FDD was arrested by PHL as set out earlier. [ 83 ] ONB argues that PHL obtained a warrant of arrest under false pretences by misrepresenting the nature of the issues in its proceedings and by omitting to make any mention of the interests of Location in those proceedings, and that it acted in a deliberate way so as to intentionally cause commercial harm to ONB by having seen to the arrest of the FDD at the “eleventh hour”, after ONB had committed to significant expenses in view of the expected launch of the FDD for sea trials and the proposed towing of the res to the St. Lawrence River. i.

ONB’s argument that there is no Principal Dispute [ 84 ] ONB argues that although there may have been disagreement in the

interpretation of the Ship Building Contract in the late winter of 2018 and early spring of 2019 as regards where to perform the Finishing Work, the exchanges between the parties between July 10 and 15, 2019 clearly anticipate the towing of the FDD and the completion of the Finishing Work in Quebec. The RDC did not object, and in fact even made suggestions on how to improve the launch of the FDD.

ONB says that the only way to reasonably interpret these exchanges is to conclude that the Province finally agreed to ONB’s position. [ 85 ] ONB also states that the principle of estoppel would preclude PHL from denying that such an agreement had in fact taken place, and that it was within its rights to assume that PHL had consented to its request. [ 86 ] In addition, if the Principal Dispute was still a live issue, ONB argues that one would have reasonably expected PHL to issue a notice of default as required under the Ship Building Contract, as it did in respect of the three issues for which notices of default were issued on July 23, 2019; yet no notice of default or notice of arbitration was issued in respect of the Principal Dispute, further supporting ONB’s understanding that PHL had finally consented to allowing ONB to proceed as it indicated it would. [ 87 ] PHL takes a different view.

It says that its position on the Principal Dispute was made clear to ONB in its letter of April 15, 2019, and that there was never any agreement on the part of PHL allowing ONB to conduct itself otherwise. [ 88 ] As regards the exchanges between July 10 and 15, 2019, PHL concedes that its technical support team may have made comments on the proposed schedule, which provided for the launching of the FDD for sea trials and the Finishing Work to be performed in the St. Lawrence River, however, those exchanges were taking place at a lower, technical, level.

The discussions between the parties as to the Principal Dispute were taking place at a higher, administrative and political level within the Government of New Brunswick, and it was only when the higher level decision-makers became aware of the fact that the FDD was actually being shifted for sea trials in late August 2019 that they realized that the arrest of the FDD was necessary. [ 89 ] In fairness, it seems to me that whether anyone in high level management at RDC actually turned his or her mind to how imminent the launch would be or to the fact that ONB would have to mobilize equipment and incur substantial costs, is unclear.

I am not prepared, at this stage of the proceedings, and without the benefit of cross-examination and a full hearing of the evidence, to find that simply because one of the high level management team members at the RDC was being copied on email exchanges on this issue as early as July 12, 2019, there is evidence of capitulation on the part of PHL.

Nor am I prepared to find at this point that the circumstances set out by ONB amount to a level of misconduct, oversight or malfeasance on the part of the Province to warrant the quashing of the arrest independently of the striking of the action in rem . [ 90 ] As to the fact that PHL had not issued any notice of default as regards ONB’s expressed intention to remove the FDD from the Naval Yard, I cannot see how it could have done so. Until ONB actually begins to shift the FDD so as to perform the Finishing Work

away from the Naval Yard, there is no breach. [ 91 ] I am also not certain whether it would have been open to PHL in this case to have issued a notice of default as a result of what it may have perceived as an anticipatory breach of the Ship Building Contract.

In any event, I see no evidence of any unqualified statement by ONB to the Province or to PHL, to the effect that it was preparing for and moving ahead with transfering the FDD to Quebec, that could constitute a notice of anticipatory breach. [ 92 ] Given PHL’s position that the July 10 to 15, 2019 exchanges were with technical personnel, I am not prepared to find that those exchanges, and the attached proposed schedules, would be sufficient to constitute such evidence. [ 93 ] Under the circumstances, and without an actual breach of the Ship Building Contract, and no corresponding cure period, I cannot see how PHL could have issued a notice of default prior to ONB actually beginning to move the FDD out of the Naval Yard.

At that point, the FDD was arrested. [ 94 ] Although the Principal Dispute was an issue that could have been arbitrated as early as February 2019, or as late as August 19, 2019 when PHL advised ONB that it would not allow for the removal of the FDD from the Naval Yard, PHL chose not to proceed with arbitration.

I cannot see how a failure to arbitrate an issue at what may have been a more convenient time could constitute a bar to seeking an arrest at a later stage. [ 95 ] In any event, I would add that there was also no issuance of a notice of arbitration by ONB prior to it interpreting the exchanges between July 10 and 15, 2019 as confirmation that PHL had agreed to allow ONB to perform the Finishing Work in Quebec. Given the significance of the financial commitment that ONB was in the process of making, I am not certain on the evidence before me how commercially prudent that

interpretation or assumption was. Whether that assumption was premature will no doubt be an issue to be dealt with in the arbitral process. [ 96 ] I should point out that the obligation of disclosure in an affidavit to lead warrant is limited to those elements that are set out in rule 481(2) of the FCR ( The Soledad Maria ) . Although seeking a warrant of arrest is an ex parte proceeding, it is not equivalent to an injunction and thus not subject to, for example, the requirement of full and frank disclosure ( Chaleur Fertilizers ) .

That is not to say, however, that false or misleading statements in the fulfilment of the statutory requirements of rule 481(2) of the FCR would not be met with the appropriate consequences, but only that any inaccuracy would most likely have to be found to be deliberate and affecting the merits of the remedy being sought by the arresting party before the affidavit to lead warrant is struck ( The “Nordglimt” , [1987] 2 Lloyd’s Rep 470 ) . [ 97 ] PHL says that paragraph 3 of the Affidavit to Lead Warrant fairly and accurately summarizes PHL’s claim.

It accepts that ONB does not agree with the concept of possession it is asserting, however that is a live issue. As long as the description of the claim is proper and truthful as to the nature of the claim, that is all that is required. [ 98 ] I must agree with PHL. ONB is not formally contesting the nature of PHL’s Possessory Claim, as this would require a motion to strike, or at least a motion for

summary judgment on this point. Rather, ONB is contesting the remedy chosen by PHL to pursue and secure its claim. Under these circumstances, an attack on the warrant of arrest is limited to the accuracy of the description of the “nature of the claim” as required under rule 481(2)(b). Regardless of whether one agrees with PHL’s assertion of its right of possession, I must say that paragraph 3 of the Affidavit to Lead Warrant does properly set out the nature of that claim. ii.

Any dispute, if one exists, relates to the Principal Dispute and not to the Possessory Claim [ 99 ] Alternatively, ONB argues that even if there is any ongoing dispute between the parties, it relates strictly to the Principal Dispute and not to the Possessory Claim, regardless of how one may define the right of possession. [ 100 ] ONB asserts that nowhere in the exchanges between the parties prior to the arrest of the FDD did PHL claim to somehow have a right of possession in the res , and that such a claim is crafted for no other purpose than to artificially engage this Court’s in rem jurisdiction. [ 101 ] I have difficulty following ONB’s argument.

It seems to me that PHL is not asserting the Possessory Claim as a stand-alone dispute, but rather, rightly or wrongly, as a legitimate mechanism to enforce its position as regards the Principal Dispute. The two are related, and the fact that the exchanges between the parties revolved around the Principal Dispute and not the Possessory Claim is not surprising.

c) The timing of the arrest [ 102 ] ONB states that the arrest of the FDD just as it was being shifted to the water’s edge and after ONB had committed over $750,000 in tug mobilization and preparatory costs is indicative of malicious intent on the part of PHL to inflict economic harm upon ONB. [ 103 ] As to the last-minute timing of the arrest, PHL says that although the launching of the FDD for sea trials was expected and non- controversial, the towing of the FDD to the St.

Lawrence River outside of the Province of New Brunswick so as to complete the Finishing Work had been a live issue since February, with no resolution.

The parties simply agreed to disagree on the Principal Dispute. [ 104 ] In addition, although it was aware of ONB’s stated intention to tow the FDD to Quebec to complete the Finishing Work, PHL’s evidence before me is that it was not until August 27, 2019, when the first tug and barge engaged by ONB to tow the FDD arrived in the harbour of the Naval Yard, that the Government of New Brunswick had “first verification” that ONB was about to remove the FDD from the Naval Yard and that it had committed expenses as a result thereof. [ 105 ] According to PHL, this is simply a case where there had been discussions, exchanges, assertions, and intentions expressed on both sides as to whether the FDD was to be taken to Quebec for the completion of the Finishing Work, but it was only when the tug and other

equipment mobilized by ONB arrived off Bas-Caraquet that the Government of New Brunswick realized that ONB was actuallyproceeding with its stated intention, thus the need to stop the process as quickly as possible. [106] The evidence before me does not convince me that PHL was somehow “waiting in the brush” to pounce on the FDD at theopportune time so as to inflict the maximum economic harm upon ONB.

PHL may have reacted a little slowly to ONB’s statedintentions, but this is not the first time a ship has been arrested at the eleventh hour, often on a Friday afternoon just before a longweekend, and just prior to sailing, after financial commitments had been made by its operator. There is no requirement in the FCR that anarrest be undertaken at a time convenient to the ship operator. The real issue in setting aside an arrest is whether the arrest itself is valid.

d) Disproportionality of the remedy of arrest [107] ONB states that the procedural remedy of arrest was disproportional to any claim that PHL may possibly have. With about 95% ofthe $12 million project already having been completed at the Naval Yard, the arrest of the FDD under these circumstances wastantamount to “using a sledgehammer to kill a fly.” [108] PHL says that it is entirely proper for it to use the procedural remedy of an arrest to secure its contractual rights, regardless of thequantification of those rights. I agree.

I think it would be a dangerous step to impose monetary limits or thresholds before a party is ableto exercise its right of arrest of maritime property. I cannot see how any rule of proportionality would assist on this issue. [109] On the whole, the issue of contractual rights is left to arbitration. What is important for the purposes of this motion is to determinewhether ONB has satisfied me that the warrant of arrest should be quashed, and if not, whether this is an appropriate case to set bail. [110] This Court has, as part of its inherent powers, the ability to release a ship without the posting of bail.

Rule 488 of the FCR statesthat the Court may, at any time, order the release of a ship. In addition, rule 485 of the FCR states that the court may fix bail, whichallows a court not to fix bail under the appropriate circumstances. [111] The Court’s inherent powers as regards the conditions of release have been clearly set out in Cyber Sea Technologies, Inc vUnderwater Harvester Remotely Operated Vehicle, 2002 FCT 794 , [2003] 1 FC 569 (TD), in which Prothonotary Hargravestated the following at paragraph 22: In Argosy Seafoods Ltd. v. Atlantic Bounty, The (1991), 45 F.T.R. 114 (F.C.T.D.), at page 119, Mr.

Justice MacKayobserved that “the Court has discretion to release property held on warrant of arrest and to do so on such terms as it thinksappropriate”. Associate Chief Justice Jerome, in Pictou Industries Ltd. v. Secunda Marine Services Ltd. (1994), 78 F.T.R. 78(F.C.T.D.), at page 80 said that only rarely, in the absence of a consent, would the court release an arrested vessel withoutsecurity and that was so even where the parties were pursuing arbitration.

Admiralty Jurisdiction and Practice, 2nd ed. byNigel Meeson, London: LLP Professional Pub., 2000, notes [at page 145] that release from arrest is discretionary and whilea court could release an arrested vessel without security “this is only done in exceptional circumstances, and only wheresome satisfactory alternative to ordinary security is provided”, there referring to Vanessa Ann, The, [1985] 1 Lloyd’s Rep.549 (Q.B. (Com. Ct.)), at page 551 and to North Saskatchewan Riverboat Co. v. 573475 Alberta Ltd. (1995), 96 F.T.R. 166(F.C.T.D.).

In the latter case I denied the release of the Edmonton Queen, without bail or security, for among other things,“[t]he release of a vessel without bail or security is an implication that the arrest was unlawful and the securityunnecessary:” (page 170), here relying upon Armada Lines Ltd. v. Chaleur Fertilizers Ltd., (FCA),[1995] 1 F.C. 3 (C.A.), at page 18, reversed on other grounds, (SCC), [1997] 2 S.C.R. 617.

Indeed, theusual practice is to release the vessel only on the provision of enough security to cover the claim, interest and costs, on thebasis of the plaintiff’s reasonably best arguable case: Bazias 3, The, [1993] 1 Lloyd’s Rep. 101 (C.A.), at page 105. [112] In North Saskatchewan Riverboat Co v 573475 Alberta Ltd (1995), 96 FTR 166 (TD), Prothonotary Hargrave stated the following: [13] The release of a vessel without bail or security is an implication that the arrest was unlawful and the securityunnecessary […] [14] One of the functions of an arrest is to provide security to the plaintiff to an amount sufficient to cover the amount of aplaintiff’s reasonably best arguable case, in rem, together with interests and costs, capped at the value of the vessel. [113] Consequently, the issue, as noted by Madam Justice Reed in Atlantic Lines & Navigation v The “Didymi”, [1985] 1 FC 240, waswhether the Court should exercise its discretion and release a ship in the absence of security. [114] I am not prepared at this stage of the proceedings, without any cross-examination, to say that there was a deliberate attempt in theAffidavit to Lead Warrant to mislead the Court.

It may be, after hearing all the evidence, that an arbitrator may find otherwise, but at thisstage of the proceedings the benefit of the doubt must go to saving the warrant of arrest (Kiku Fisheries Ltd v Canadian North PacificOcean Corp (1997), 137 FTR 192 (TD)). [115] I am reminded of the words of Mr.

Justice Brandon in The “Myrto”, [1977] 2 Lloyd’s Rep 243 [The Myrto], when faced with amotion for the release of a ship without bail, he stated at page 259: There is the further point that an order for the release of the ship, made in interlocutory proceedings before trial, is a drasticorder which should in my view only be made in a clear case, and this case, whatever else it is, is not such a case. [116] After citing this passage from The Myrto, Mr.

Justice Sheen, in The “APJ Shalin”, [1991] 2 Lloyd’s Rep 62, stated the followingat page 67: I cannot foresee any circumstances in which it would be right for the Court to order the release of a ship without securitybeing given against the wishes of a creditor who has properly exercised his right to arrest the ship.

[ 117 ] Although, I might not go as far as Mr. Justice Sheen in not being able to foresee any circumstance allowing for it, I think that the sentiment expressed against the release of a ship under arrest without bail holds true in this case as well. [ 118 ] Consequently, I am also not prepared to quash the warrant of arrest or release the FDD without bail as requested by ONB.

This is not to say that PHL has a viable action in rem , but as I need not determine that issue without a motion to strike, I will not do so, but rather leave the matter of the conduct of the parties and the legal issues between them to be determined in arbitration. [ 119 ] I should also make it clear that the fact that I am not striking the arrest does not mean that I acknowledge PHL’s position as regards either the Principal Dispute or the Possessory Claim, but only that, upon the evidence before me, I see no justification for setting the arrest aside. [ 120 ] Any issue as to the

interpretation of, or the rights of the parties in, the Ship Building Contract, including any damages that may flow from PHL having proceeded as it did with the present action and arrest of the FDD, are left to be dealt with by way of arbitration as provided for therein. V.

MAINTAINING THE ARREST OF THE FDD WITHOUT BAIL [ 121 ] Both parties are asking me not to set bail, but for different reasons, and I have already addressed the reason why I cannot adhere to ONB’s request to release the FDD without setting bail. [ 122 ] For its part, PHL asks that the arrest be maintained, also without the setting of bail, on account of the fact that its claim is non- monetary in nature, and that the normal rules on the setting of bail not be followed. [ 123 ] There was a time, at least until the early 20th century, when the general practice of the admiralty courts was to not allow for bail in possession cases.

This practice, however, seems to have fallen out of favour towards the mid-20th century ( The “Gay Tucan” [1968] 2 Lloyd’s Rep 245 ) . [ 124 ] I appreciate that what PHL is seeking in this action is a declaratory order to secure the fulfilment of a provision of the contract, the breach of which cannot be easily quantified as it stems from a policy consideration to have all the work on the ship performed at the Naval Yard by New Brunswick workers. It is this policy imperative that PHL is looking to secure as reflected, as it asserts, by the terms of its contract with ONB.

The argument is that policy imperative cannot be monetized. [ 125 ] PHL’s primary position is that the rules generally applicable to bail are not applicable to what is, in essence, a non-monetary claim.

To facilitate the release of the FDD, and so as not to impose bail, PHL proposes that I order the conditional release of the FDD and order that the work be completed at Dalhousie or alternatively at a place chosen by ONB, but be performed by New Brunswick workers, and reserving ONB’s rights, if ultimately successful, to claim any increase in cost that may result from the completion of the Finishing Work. [ 126 ] In support of its position, PHL filed a letter from the New Brunswick Building and Trades Unions which confirmed that of the approximately 200 licensed journeymen electricians in the Province, a minimum 75 workers do have experience in the marine industry. [ 127 ] In setting out these options, PHL relies on the legitimacy and importance of its policy imperative that New Brunswick residents acquire skills and experience in all aspects of shipbuilding, and submits the option of a conditional release as a way to achieve that purpose while also accommodating ONB’s concerns over costs and the need to have the work completed without delay. [ 128 ] The difficulty with what PHL is proposing is that by imposing such conditions for the release of the FDD in lieu of bail, I am in fact agreeing with PHL that the Ship Building Contract obliges ONB to either complete the remaining work at the Naval Yard or have the remaining work on the FDD completed by New Brunswick workers, in line with the Government of New Brunswick policy imperative. [ 129 ] That is the crux of the issue for arbitration, so I do not think it appropriate in this case to impose such conditions in lieu of bail so as to allow for the release of the FDD. [ 130 ] It may well be the case that the release of the FDD will defeat the right being sought by PHL, but the reverse is also true as regards ONB. [ 131 ] More importantly, this is not the first time contractual parties have found themselves in a situation where a breach of the contract may cause damages which cannot be quantified, in this case the inability to follow through with the Government’s policy imperative so as to have the FDD built by New Brunswick workers. [ 132 ] In such a situation, parties often provide for such matters in the contract, possibly by way of a liquidated damages clause or the recognition of the fact that a breach would cause irreparable harm thereby clearing the path to a recognized right to an injunction.

Here, I was directed to no such provisions in the Ship Building Contract. [ 133 ] The fact that PHL’s shareholder, the Province, cannot monetize its policy imperative sufficiently to allow for the quantification of bail cannot be a burden imposed upon a party seeking the release of the vessel. As mentioned, if there are concerns about how to compensate the parties for a breach of contract, there are available remedies that can be set out in the contract. [ 134 ] I also keep in mind that this is a commercial endeavour, and that PHL is a New Brunswick company, although wholly owned by the Province.

The interests of shareholders are not normally taken into consideration in assessing damages suffered by a corporation in the event the corporation faces a breach of contract by a third party contractor.

[ 135 ] The policy imperative is particular to the shareholder, and not PHL, which is a commercial enterprise. The policy considerations that prompted the Province to help fund the building of the FDD so as to revive the shipbuilding industry in Bas-Caraquet and develop relevant capacity and expertise in the Province are truly laudable and worthy goals.

However, they should not, in my view, be allowed to prevent the setting of bail so as to allow an interested party to release a vessel under arrest pursuant to a warrant issued by this Court. [ 136 ] The mechanism of arrest is not meant to enhance the position of the arresting party or create any vested rights in the party which did not exist prior to the arrest ( The Soledad Maria ). It is a procedural mechanism by which a claimant may secure its claim, not seek to enforce it.

Maintaining the arrest without the prospect of bail will not only secure PHL’s claim, but will also have the effect of compelling performance in conformity with PHL’s assertion of that claim. That is not the purpose of the in rem jurisdiction of this Court. VI.

SETTING OF BAIL [ 137 ] The discretionary power of this Court to control its docket and proceedings militates in favour of being able to grant bail as may be appropriate to safeguard the interests of the parties, keeping in mind the more general principle that bail should secure the arresting party. [ 138 ] The usual practice is that bail is to be set on the basis of the claimant’s reasonably arguable best case ( The “Moschanthy” , [1971] 1 Lloyd’s Rep 37 ). [ 139 ] Also, although the assessment of the strength of the arrest may be relevant on a motion to strike, it is not as regards the setting of bail.

In Argosy Seafoods Ltd v The Atlantic Bounty (1991), 45 FTR 114 , Mr. Justice MacKay stated the following at paragraph 16 : […] In my view, the same arguments in relation to a motion to release from arrest do not go to the quantum of security to be posted as a condition of release. In such a motion the arrest is deemed to be valid and the claims of the plaintiff, at least at this stage in proceedings, must be anticipated as being capable of being established. [ 140 ] The amount of bail as security should reflect the potential damages to be suffered by PHL.

However, PHL pleads that its damages in lost opportunities for the training of New Brunswick workers cannot be quantified. [ 141 ] I appreciate that the consequences of the work not being undertaken at the Naval Yard is that New Brunswick jobs may be lost, however, I cannot accept that the inability to quantify a claim should be a bar to setting bail. There is a difference between a situation where there is no evidence of a quantifiable claim, and a situation where it is simply difficult to assess damages.

Here, we are dealing with the latter. [ 142 ] In such a case, a court is left to assess the level of security in the most reasonable way possible, given the evidence. [ 143 ] The evidence suggests that the value of the remaining work to be undertaken amounts to about $190,000, although it is not clear as to whether this represents only labour costs, or also the cost of materials. In any event, this is a fraction of the overall cost of construction.

If PHL is to suffer a loss in not having the Finishing Work undertaken at the Naval Yard, without any other evidence, the most reasonable value to be placed on that loss is the market value of what PHL would have been charged by ONB had ONB undertaken the work at the Naval Yard. [ 144 ] As to the need to actually set bail, I am also mindful of the ongoing obligations and continuing lease payments being made by Location to PHL under the Lease Buyback Agreement.

PHL says that Location is not suffering any harm, even if payments have already begun, because those payments are “being banked”, and will be applied to the overall obligation of Location before it takes ownership of the FDD at the end of the lease.

In other words, the fact that lease payments are been made under the Lease Buyback Agreement prior to the taking of possession only means that Location’s purchase option triggers earlier than expected. [ 145 ] However, it seems to me that there nonetheless remains a cash flow consideration for Location if the protracted Principal Dispute between ONB and PHL continues for a significant period of time and the FDD remains under arrest without the prospect of release.

There are also the impending contractual commitments in respect of the FDD that must be kept in mind. [ 146 ] As to the form of bail, ONB proposed that because ONB’s parent company, Industries Océan Inc, has already intervened in the Ship Building Contract to guarantee the obligations of ONB therein, such a guarantee is sufficient to secure PHL’s claim and for the purposes of bail. [ 147 ] I do not agree. The guarantee by Industries Océan Inc relates to the performance of ONB under the Ship Building Contract, and in particular any breach of the terms thereof.

It is conceivable that the nature of the damages that may be awarded to PHL in the event that it is successful in the present action would fall outside the scope of Industries Océan Inc’s undertaking as part of its intervention in the Ship Building Contract.

That would be an issue in arbitration. [ 148 ] I have therefore determined that bail should be set at $260,000 to take into account interest and costs, including the costs of arbitration. [ 149 ] As for the present motion, I have determined costs should be in the cause, keeping in mind that Location, as intervener, would normally have no costs awarded in its favour. [ 150 ] Under the circumstances, I issued the following Order on September 6, 2019: THIS COURT ORDERS that : 1 . The present motion is granted in part;

2 . Location Industries Océan Inc. is granted leave to intervene in the present proceedings for the purpose of joining Océan Nouveau- Brunswick Inc. in the present motion; 3 . Bail for the release of the in rem defendant presently under arrest is fixed at $260,000, to be provided in a form set out in Rule 486 of the Federal Courts Rules , SOR/98-106 , unless otherwise agreed by the parties; 4 . The present action is hereby stayed in favour of the parties proceeding to arbitration as provided for in the governing contract.

The parties are to advise the Court at six-month intervals as to the progress and status of the proceedings; 5 . The rights of the parties are reserved as to any claim regarding the entitlement to damages; 6 . I shall remain seized of this matter should there be any issue relating to the form of the bail to be provided; and 7 . Costs are to be in the cause. “Peter G. Pamel” Judge [Montreal, Quebec] December 6, 2019