2019 FC, 2019 FC 1572

Date: 20191209 Docket: T-1666-19 Citation: 2019 FC 1572 Ottawa, Ontario, December 9, 2019 PRESENT: The Honourable Madam Justice Elliott BETWEEN: NORSTAR SHIPPING AND TRADING LTD. Plaintiff and THE SHIP "ROSY" AND THE OWNERS AND ALL OTHER INTERESTED IN THE SHIP "ROSY, AND ROSY MARINE CORPORATION Defendants ORDER AND REASONS I. The Statement of Claim and this Motion [ 1 ] The Defendant, Rosy Marine Corporation, (“RMC”), is the owner of the ship “Rosy” which was arrested in Montreal on October 11, 2019.

After the Defendants posted security by way of a letter of undertaking, Norstar consented to the release of the “Rosy” from arrest.

The Defendants have the right to reduce the amount of security if so ordered in this motion. [ 2 ] In this motion, RMC seeks amongst other relief, to fix bail at CAD $328,535 plus 30% uplift for interest and costs, for the release from arrest of the “Rosy” pursuant to Rule 485 of the Federal Courts Rules, SOR/98-106 (“the Rules ”). [ 3 ] RMC also seeks fixed costs of CAD $2,500 payable forthwith and in any event of the cause plus 12% interest on the total amount fixed for security pursuant to Rule 416. [ 4 ] Norstar maintains that bail should be fixed at US $635,870 plus an uplift of 30% for interest and costs resulting in a total of US $826,631.

Norstar too seeks costs of this motion fixed at CAD $2,500 on the same terms as RMC. [ 5 ] As the “Rosy” has been released from arrest, the purpose of this motion is to have the court set the appropriate amount of bail. The amount of security already provided can then be adjusted, if required. II.

Background Facts and Analysis [ 6 ] On March 18, 2019, the Plaintiff, Norstar Shipping and Trading Ltd., (“Norstar”) chartered the “Rosy” from RMC for a period of six months with an option to extend the charter for another six months plus or minus 15 days. [ 7 ] Claiming that on September 30, 2019, RMC wrongfully repudiated the charter, Norstar issued a statement of claim on October 11, 2019 seeking from the Defendants the sum of $847,487 as the equivalent in Canadian funds of US $635,870, plus interest and court costs. [ 8 ] RMC denies any liability under, or arising out of, the charter and maintains that Norstar owes it a balance of US $137,484.79 arising from disputed deductions from hire made by Norstar over the course of the charter.

RMC recognizes though that such substantive issues are not to be decided in this motion. [ 9 ] RMC first alleges that there is a name discrepancy and that the wrong corporate party is before the Court as Plaintiff. A. Name Discrepancy [ 10 ] Two of the grounds of relief sought in the motion is release of the ship from arrest and the striking out of the in rem action because the named plaintiff was not a party to the charter and did not have the legal right to arrest the “Rosy”.

The Defendants state that there is no owner of the “Rosy” named Norstar Shipping and Trading Ltd., and the chartering entity is Norstar Shipping and Trading LLC. [ 11 ] In response, Norstar submitted the sworn affidavit of Mr. Mike Lax, the senior partner of Lax & Co., London solicitors who act for Norstar. Mr. Lax attested that: [ " T]he correct name of Charterers is Norstar Shipping and Trading Ltd. The reference to “LLC” in the recap was simply an error. There is no company called Norstar Shipping and Trading LLC. " [ 12 ] Norstar also submits that in chartering vessels there is never one owner and one vessel.

The Head Owner is the Registered Owner who enters into a charter. In turn, the Charterer often enters into a sub charter in which it is shown as the Owner. The Registered Owner is not necessarily shown in the paperwork.

[ 13 ] Mr. Lax, in his capacity as a solicitor, swore his affidavit as part of the motion materials in this proceeding. I accept his sworn testimony as an officer of the Court and I am satisfied as a result that the named plaintiff had the legal authority to arrest the ship. B. Lost Profits [ 14 ] Norstar’s claim of US $635,870 is comprised of two amounts. [ 15 ] First, the parties agree that US $246,500 is the balance of account for money paid by Norstar under the charter that has not yet been reimbursed to it by the Defendants.

This amount is not in dispute in this motion. [ 16 ] Second, the balance of US $389,370 is the amount that Norstar says arises from the repudiation of the charter by the Defendants. It is Norstar’s calculation of future lost profits on the next intended chartered voyage of the “Rosy”, which was to Nigeria. This amount is disputed in its entirety. [ 17 ] The Defendants say that no mention was made of lost profits when Norstar’s counsel in the United Kingdom, Mr.

Lax, provided an estimate of the claim at US $246,500 plus interest and costs or, an all-inclusive figure of US $500,000. [ 18 ] The Defendants conclude that the lost profits argument was ‘made up’ to delay matters.

As evidence of that, they say if Norstar had entered into another charter, then that party would be suing them, but there is no evidence of such a suit. [ 19 ] The Defendants dispute Norstar’s entitlement to any lost profits because Norstar never fixed the voyage and even if it did, it never mitigated the loss either by finding another ship or another job for the “Rosy”. [ 20 ] Norstar disputes the notion that profitable cargoes are readily available on short notice following an unanticipated repudiation of a fixed price contract.

It submits that no evidence was put forward that there was an available market or that suitable vessels were available for a 6 month time charter on the required dates. [ 21 ] The disagreement as to the lost profits claim is composed of two main issues. [ 22 ] One issue is whether there was a repudiation of the charter or the option was triggered.

If the option was triggered, there is a question of whether the accounting for the amount of lost profits accurately reflects the various expenses that would have been incurred in sailing to Nigeria. [ 23 ] The second issue is whether Norstar mitigated any loss and whether there was an available market and another vessel to perform the fixtures that the “Rosy” had been contracted to perform.

(1) Exercise of the Option and Nigeria [ 24 ] Norstar says in order to re-position the “Rosy” to take the Nigerian job; it incurred a loss of US $287,902 in anticipation of the larger contract. That amount is not claimed from the Defendants in this motion. [ 25 ] Regarding exercise of the option, Norstar says that there was no express requirement in the charter to declare that the option was exercised. Rather, there was an obligation to deliver notice to the Defendants if Norstar intended to redeliver the “Rosy”.

By not giving a redelivery notice, Norstar says that the option to extend the charter was exercised. [ 26 ] The Defendants simply answer that Norstar misstates the law on options – in order to add a period to a charter party, an option must be declared within a reasonable time. Norstar did not exercise the option for a second six-month charter period so it suffered no loss. [ 27 ] The Defendants also claim that under the terms of the charter, the “Rosy” was not allowed to sail to Nigeria. It was a country listed as excluded from trading by the Underwriters for the “Rosy” as being in a “war” or “war-like” area.

The Defendants state that for the “Rosy” to sail to Nigeria, Norstar required the permission of RMC and no such permission was sought or granted. [ 28 ] In addition, the Defendants say that a variety of expenses would be incurred in sailing to Nigeria and Norstar failed to take those into consideration in calculating its future lost profits.

Norstar says any extra expense in sailing to Nigeria, such as war risk premiums, did not have to be taken into account as they were to be covered by the sub-charterer and, if commercially available, an insurance policy against all risks would be obtained. [ 29 ] Regarding the calculation of the estimated profit of US $389,370, Norstar submitted the details of a Voyage Estimate calculation that was prepared before the repudiation.

For the purpose of this motion, that satisfactorily addresses both the question of whether the lost profits claim was “invented” and the arguments regarding the numbers used in the calculation. [ 30 ] Overall, there is sufficient evidence in the record to support Norstar’s reasonably best arguable case with respect to both the exercise of the option and the issue of additional expenses incurred on the Nigeria charter. [ 31 ] Ultimately, these are the factual matters that will be determined as part of the London arbitration, which is discussed later in these reasons.

(2) Mitigation and Available Market [ 32 ] The Defendants state that if Norstar had a sub-charterer and the “Rosy” was not available it had a duty to find either a replacement ship for the job or other jobs with different ships. The Defendants state that Norstar did not make any effort to mitigate, and if they did mitigate, they did not show why those efforts failed.

[ 33 ] The Defendants put forward a list of vessels it said were comparable to the “Rosy” that were available for charter around September 30, 2019 when they took redelivery of the “Rosy”. The Defendants say that the replacement ships were available in the market at the relevant time and could have been fixed at a lower rate of hire than the hire cost of the “Rosy”. [ 34 ] Norstar says that the terms of their sub-charters provided for laydays from October 10-25, 2019 and required the performing vessel to be nominated at the latest 10 days prior to the first layday.

That meant the vessel had to be nominated by September 30, 2019. As that was the date the defendants took back the “Rosy”, Norstar says that the only vessels that could have been substituted for the “Rosy” needed to be available for a six month time charter on September 30, 2019. Norstar says the Defendants produced no evidence of a vessel meeting those requirements. [ 35 ] Norstar also says that the three Fairchem ships listed by the Defendants as available substitute vessels were verified by the Head of Chartering at Fairfield Chemicals as not being in position to take the cargo.

Similarly, the other vessels listed were either not available, too small and out of position or, not willing to call at Nigerian ports. [ 36 ] Norstar says the only alternative time charter vessel that was in position and available and identified by the Defendants was fixed on a time charter on September 11, 2019, which was three weeks before the “Rosy” was re-delivered to the Defendants. [ 37 ] In conclusion, Norstar submits that there was no available market in which they could have mitigated their lost profits.

They submit that there is no evidence that as of September 30, 2019 there was an available market for a 6 month charter, for a vessel in position, that could take advantage of the fixtures that would have been performed by the “Rosy”. There is also no evidence of the rates that would have been charged for such a 6 month charter. [ 38 ] The Defendants have not persuaded the Court that Norstar’s reasonably best arguable case on lost profits and mitigation is unreasonable.

There is evidence in the record to support Norstar’s arguments. [ 39 ] Once again, these are factual matters to be determined as part of the London arbitration, discussed below. It is not necessary that they be resolved as part of this motion. III. The London Arbitration [ 40 ] The parties have agreed to resolve their dispute through arbitration to take place in London, England.

Clause 90 of the charter stipulates that the charter shall be governed and construed under the laws of England and any dispute arising out of or in connection with the charter shall be referred to arbitration in London. [ 41 ] At the hearing of this motion, the Court was advised that the arbitrators have been selected and that the arbitration is expected to take two years. [ 42 ] The London arbitration will determine issues related to: interpreting the terms of the charter or fixture recap; whether the option for an additional six months was triggered; whether a breach occurred; whether there was a repudiation; whether Nigeria was a war-like country; determining the final accounting between the parties, including the calculation of any damages and any lost profits; and • any other matter in dispute that arises. [ 43 ] Neither the arbitration agreement nor the terms of the arbitration were put before the Court on this motion.

It is not known, for example, whether each party will bear its own costs in the arbitration. As a result, that is not a factor that will be taken into account in setting the amount of bail. IV. Setting the Amount of Bail [ 44 ] The parties agree that when determining the amount of bail required to obtain the release of an arrested vessel, the general rule is that it should be equal to the reasonably best arguable case, plus interest and costs, as limited by the value of the arrested vessel: Striebel v Chairman (The) , 2002 FCT 995 at para 14 of the

Schedule to Reasons [ Striebel ]. There is agreement that the value of the arrested vessel is not a limiting factor in this case. [ 45 ] The amount of bail is usually, but not always, set at the amount claimed in the statement of claim.

However a court has discretion within the limits of the value of the ship to determine the value of the reasonably best arguable case: Striebel at paras 15 and 16 . [ 46 ] Looming large in the analysis of the reasonably best arguable case in this matter is the fact that everything in dispute, except the amount to be set for bail, is going to be determined by the arbitrators in London, England. [ 47 ] I am very mindful of the admonition in the jurisprudence that in setting bail at this early stage the Court should be careful not to prejudge the ultimate merits of the dispute: Cyber Sea Technologies, Inc. v Underwater Harvester Remotely Operated Vehicle, 2002 FCT

794 at para 24 [ Cyber Sea Technologies ]. [ 48 ] The amount of bail to be set has been described as a “rough measure” of what might be recovered on the reasonably best arguable case plus interest and costs. A close examination of the merits of the plaintiff’s claim is not required but the amount claimed may be reduced where the circumstances are “quite extraordinary” or there are special circumstances.

Those circumstances include major uncertainties in the claim, or evidence that the security sought is exorbitant: Norcan Electrical Systems Inc. v FB XIX (The) , 2003 FCT 702 at paras 8 and 11 . [ 49 ] That the amount of bail is at best a rough measure is readily supported by the fact that the evidence in this motion has not been tested; nor is it complete. That is not meant as a criticism. It is simply a description of the difficulty in arriving at an amount for bail that is anything more than a rough and ready measure. [ 50 ] For example, the full charter terms, including riders, were not part of the record.

The number of matters in dispute are relatively extensive. The opposing affidavits were fulsome, each critiquing the other, but no cross-examination has taken place. There are a number of facts and, in particular, accounting practices upon which there is significant disagreement. [ 51 ] Both counsel are experienced and seasoned maritime law litigators. They each mounted reasonable arguments for the respective positions of their clients.

In and of itself, the fact that this litigation will be settled through arbitration and that the arbitration is expected to take two years indicates the disagreements are complex and the arguments of each party have some merit. [ 52 ] The Defendants argued that Norstar did not mitigate its loss. Mitigation may be taken into account as a special circumstance to moderate bail from the amount of the reasonably best arguable case: Zhoushan Zhongchang Shipping Co. v Handybulk Shipping Ltd. , 2004 FC 1135 . In this instance, I have found that the reasonably best arguable case is not affected by a lack of mitigation.

Norstar relies on the affidavit of Mike Lax to support its position that it was not possible to mitigate, as there was no suitable replacement ship and no alternative time charter. That is Norstar’s reasonably arguable best case. [ 53 ] Overall, having reviewed the motion materials and jurisprudence, after considering the submissions I am not persuaded that there is anything quite extraordinary or special that merits departing from the general rule for setting the amount of bail. There is no evidence that the amount of security sought is exorbitant or that the power of arrest was used in an oppressive fashion.

While there are certainly disagreements between the parties on the facts, given the lack of evidence before me, I am not convinced that Norstar’s claim is subject to major uncertainties. [ 54 ] For all the foregoing reasons, bail will be set at the amount claimed by Norstar in the statement of claim for the equivalent in Canadian funds of US $635,870, plus a 30% uplift for interest and costs resulting in a total of US $826,631. [ 55 ] Using the equivalency values stipulated in the Statement of Claim, the total Canadian amount equivalent to US $826,631 is CAD $1,101,733.10.

That is the amount to be paid into Court. [ 56 ] Norstar is also entitled to the costs of this motion fixed at $2,500, payable forthwith. V. Security for Costs [ 57 ] The Defendants ask that security for their costs be paid into Court under Rule 416(1) because Norstar is a corporation that is ordinarily resident outside of Canada. [ 58 ] The Defendants are required to provide a significant amount for bail. They suggest that an interest rate of 12% be applied to the amount of bail to reflect the cost of borrowing the money necessary to post the security for bail.

I accept that 12% interest is a reasonable rate of interest. [ 59 ] Although not in the motion materials, Norstar submitted at the hearing of this motion that it already put up security for the Defendant’s costs in London, England. However, as a non-resident corporate entity, Rule 416(1) applies to Norstar in a Canadian lawsuit and security for costs will be ordered to be paid into Court. [ 60 ] Norstar is to pay into Court as security for costs the Canadian equivalent amount of 12% of CAD $1,101,733.10 which is CAD $132,207.97. ORDER in T-1666-19 THIS COURT ORDERS that: 1 .

The bail for the release of the ship “Rosy” is hereby fixed in the amount of the Canadian equivalent of US $826,631, being $1,101,733.10 to be paid into Court. 2 . The Plaintiff shall pay into court as security for the Defendants’ costs the amount of CAD $132,207.97, within ninety (90) days of the date of this Order. 3 . The Plaintiff shall not take any further steps in this action, including the bringing of any motions, until it has paid the security for costs hereby ordered. 4 .

Costs of the motion, hereby fixed in the amount of $2,500, inclusive of disbursements and taxes, shall be paid forthwith by the Defendants, Rosy Marine Corporation, the ship “Rosy”, and the owners and all others interested in the ship “Rosy”, to the

Plaintiff, in any event of the cause. "E. Susan Elliott" Judge FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-1666-19 STYLE OF CAUSE: NORSTAR SHIPPING AND TRADING LTD. v THE SHIP "ROSY" AND THE OWNERS AND ALL OTHER INTERESTED IN THE SHIP "ROSY, AND ROSY MARINE CORPORATION MOTION HELD VIA TELECONFERENCE ON OCTOBER 31, 2019 FROM OTTAWA, ONTARIO, TORONTO, ONTARIO AND MONTREAL, QUEBEC ORDER AND REASONS: ELLIOTT J. DATED: December 9, 2019 ORAL AND WRITTEN REPRESENTATIONS BY: Victor DeMarco For The Plaintiff Robin Squires For The Defendants SOLICITORS OF RECORD : DeMarco Spillane s.e.n.c.

Barristers and Solicitors Montreal, Quebec For The Plaintiff Borden Ladner Gervais LLP Barristers and Solicitors Toronto, Ontario For The Defendants