Judgments

Decision Information

Decision Content

A-170-82
The Ship M/V Seapearl of Cyprus Registry and her owners and all others interested in the said ship and Patmos Navigation Company, a corpora tion having its principal place of business at Limassol, Cyprus (Appellants)
v.
Seven Seas Dry Cargo Shipping Corporation of Santiago, Chile (Respondent)
Court of Appeal, Thurlow C.J., Pratte J. and Lalande D.J.—Montreal, June 21; Ottawa, July 21, 1982.
Maritime law — Appeal from order of Trial Division refus ing stay of proceedings instituted by respondent for damages for breach of charterparty — Clause 17 of charterparty pro viding for settlement of disputes through arbitration in Eng- land — Trial Division denying stay on ground balance of convenience favoured settling dispute in Canada — Appellants contending Trial Judge failed to properly exercise discretion under s. 50(1) of the Act — Appeal allowed — Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 50(1).
Jurisdiction — Federal Court — Charterparty providing for arbitration in England — Federal Court not deprived of jurisdiction but having discretion to stay proceedings com menced in defiance of contract — Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 50 (1).
The respondent entered into a charterparty with the appel lant, Patmos, according to which the appellant's ship, the Seapearl, was to carry a cargo of copper concentrate, owned by the respondent, from Tocopilla, Chile to Quebec City. The charterparty contained an arbitration clause which outlined the manner in which any dispute arising out of the contract would be settled. After the Seapearl had arrived in Quebec such a dispute arose when the respondent contended that the ship did not possess the characteristics it was described as having in the charterparty and that, as a result, it carried less cargo at a higher cost. The respondent brought an action in the Trial Division claiming damages for breach of the charterparty and arrested the ship in an attempt to secure its claim. The appel lant, Patmos, referred the matter to arbitration pursuant to clause 17 of the charterparty. It then, having obtained release of its ship by giving the respondent a letter of guarantee from the Bank of Montreal, brought an application for a stay of the action commenced in the Trial Division on the ground that the matter was, pursuant to the terms of the charterparty, to be decided by arbitration in England. The Trial Division dismissed this application on the ground that, in the circumstances, the balance of convenience favoured having the proceedings con ducted in Canada. The appellants contend that by basing his decision on the balance of convenience, the Trial Judge failed to properly exercise his discretion under subsection 50(1) of the Federal Court Act. Subsection 50(1) provides that the Court may, in its discretion, stay proceedings in any cause or matter
on the ground that the claim is being proceeded with in another court or jurisdiction or where, for any other reason, it is in the interest of justice that the proceedings be stayed.
Held (Thurlow C.J. dissenting), the appeal should be allowed.
Per Pratte J.: The fact that a contract contains a clause whereby the parties have agreed to submit their disputes to a foreign court or an arbitrator does not deprive the Federal Court of jurisdiction. The Court may, however, in the interests of justice, exercise its discretionary power under paragraph 50(1)(b) to stay proceedings where they have been commenced in defiance of the agreement. In that this power is discretionary in nature, the Court of Appeal must uphold the decision of the Trial Division unless it was arrived at on an incorrect basis or was otherwise plainly wrong. In this case, the Trial Judge, by basing his decision on the balance of convenience, applied a wrong principle. The prima facie rule is that a court must grant a stay of proceedings commenced in defiance of a contractual undertaking. Before a court may depart from this general rule there must be sufficiently strong reasons to support the conclu sion that it would not be reasonable or just in the circumstances to keep the plaintiff to his promise and enforce the contract. In this case the facts that the witnesses are in Quebec; that the appellant, Patmos, has submitted a cross-demand which cannot be dealt with by arbitration; that the respondent brought the action in the Federal Court prior to the commencement of arbitration and appointed its arbitrator conditionally only when those proceedings began; and that the respondent would be deprived of the security of the guarantee from the Bank of Montreal because that security only applied to an order of the Court, do not constitute sufficiently strong reasons why the respondent should not be held to its contract.
Per Lalande D.J.: The respondent's case was weak in com parison with the English cases in which stays have been refused to allow claims to proceed in foreign courts designated in bills of lading covering goods delivered to consignees in England who were parties to the proceedings.
Per Thurlow C.J. dissenting: The fact that the parties agreed to settle disputes by arbitration gives rise to a strong prima facie case for staying the proceedings. However, the bringing of an action is not, in itself, a breach of the charterparty and the law is well established that the presence of an arbitration clause in a contract does not deprive the Court of its jurisdiction to entertain a claim for breach of the contract. Nevertheless, unless there is an exceptional case or a strong balance of argument in favour of permitting the action to proceed, where a party insists that the terms of the contract be adhered to, the Courts favour requiring the determination of the respective rights in the manner agreed upon. Nothing in the reasons of the Trial Judge is persuasive that he was unaware of this principle or that his conclusion could not have been reached on the basis of the material before him. Although the Trial Judge did refer to the balance of convenience within the context of his reasons, this reference should not be interpreted as meaning anything more than that, on the whole, the respondent had made out its
case and tipped the scale in favour of refusing a stay. It is unclear how much weight the Trial Judge attached to the letter of guarantee. However, given that the ship had been sold in the interim and that there was no evidence of the existence of interests in England or Canada from which an arbitration award could be recovered, the loss of this security would leave the respondent with no other way of enforcing its claim and this is, in itself, a strong reason for refusing a stay.
CASES JUDICIALLY CONSIDERED
APPLIED:
The "Adolf Warski" and The "Sniadecki", [1976] 1 Lloyd's Rep. 107 (Q.B.), affirmed [1976] 2 Lloyd's Rep. 241 (C.A.); Kitchens of Sara Lee (Canada) Ltd. et al. v. A/S Falkefjell et al. (The "Makefjell"), [1975] 1 Lloyd's Rep. 528 (Q.B.); [1976] 2 Lloyd's Rep. 29 (C.A.); Owners of Cargo Lately Laden on Board The Ship or Vessel Eleftheria v. The Eleftheria (Owners), [1969] 2 All E.R. 641; [1969] 1 Lloyd's Rep. 237 (Adm.); The "Fehmarn", [1957] 1 Lloyd's Rep. 511 (P.D.A.); [1957] 2 All E.R. 707 (P.D.A.); [1958] 1 All E.R. 333 (C.A.); Zapata Offshore Co. v. The "Bremen" and Unterweser Reederee G.M.B.H. (The Chaparral!), [1972] 2 Lloyd's Rep. 315 (U.S. Sup. Ct.); Bristol Corporation v. John Aird & Co., [1913] A.C. 241; YTC Universal Ltd. v. Trans Europa, [1973] 1 Lloyd's Rep. 480 (C.A.); Owners of Cargo Ex "Athenee" v. "Athenee", [1922] 11 LI. L. Rep. 6 (C.A.).
REFERRED TO:
The Golden Trader, [1975] 1 Q.B. 348. COUNSEL:
P. G. Côté for appellants.
G. Vaillancourt for respondent.
SOLICITORS:
Ogilvy, Renault, Montreal, for appellants.
Langlois, Drouin, Quebec City, for respond ent.
The following are the reasons for judgment rendered in English by
THURLOW C.J. (dissenting): The issue in this appeal is whether the learned Trial Judge properly exercised the discretion vested in him by subsec tion 50(1) of the Federal Court Act [R.S.C. 1970 (2nd Supp.), c. 10], when he refused to stay the respondent's action pending arbitration of the claim in London under a provision of a charter between the appellant, Patmos Navigation Com pany, and the respondent. The provision read:
17. That should any dispute arise between Owners and the Charterers, the matter in dispute shall be referred to three persons at London, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for the purpose of enforcing any award, this agreement may be made a rule of the Court. The Arbitrators shall be Baltic Exchange Members.
Under subsection 50(1) of the Federal Court Act, the Court may, in its discretion, stay proceed ings in any cause or matter,
s0.(1)...
(a) on the ground that the claim is being proceeded with in another court or jurisdiction; or
(b) where for any other reason it is in the interest of justice that the proceedings be stayed.
The charter was arranged in Germany and was for a single voyage from a Chilean port to Quebec. It was made between the appellant, Patmos Navi gation Company, a Cypriot company, owner of the Seapearl, a vessel of Cypriot registry, and the respondent, a corporation having its principal place of business in Chile. Neither party has any place of business in or connection with Canada, or England.
The vessel loaded a cargo of some 10,395.7 metric tons of copper concentrate in bulk at Toco- pilla, Chile, and proceeded to Quebec where, on November 27, 1981, she was arrested at the suit of the respondent in an action for damages for breach of the charter, based on allegations of:
(a) the loading having been carried out contrary to law and contrary to the IMCO regulations by which the loading, stowing, trimming, carriage and discharge were to be carried out,
(b) misrepresentation that the vessel was cap able of carrying 10,700 metric tons of copper concentrate in lower holds, and
(c) misrepresentation that the vessel was flush throughout.
The damages claimed included items arising from delays at the loading and discharge ports alleged to be due to the vessel not being flush throughout and excessive discharge costs resulting therefrom, and from the inability of the vessel to carry a cargo of 10,700 metric tons, and a further item representing the value of the 304.3 tons of cargo not shipped. The vessel was released from arrest on December 7, 1981 on the appellants giving a letter
of guarantee of the Bank of Montreal, submitting to the jurisdiction of the Federal Court of Canada, and undertaking to pay, up to a stated amount, any judgment of the Court obtained on the claim or, up to the same amount, any sum agreed by way of a settlement. Upon her release the vessel was forthwith delivered to a purchaser.
In the meantime, following the arrest of the vessel, the appellant Patmos had appointed an arbitrator in London and, in order to avoid a seven-day limitation provided by the arbitration legislation in England and to protect its right to name an arbitrator, the respondent, on December 8, 1981, also appointed an arbitrator, at the same time instructing him that he had no authority to act and to take no action until the proceedings in the Federal Court should be settled or concluded. I pause to note that the affidavit filed by the appel lants in support of the application for a stay of proceedings, after citing clause 17 of the charter- party, states:
9. I am informed by Mr. G.M.S. Molfetas, legal representative of Defendants in Greece and do verily believe that in accord ance with said clause 17, Plaintiff appointed its arbitrator in London, Mr. Clifford A.L. Clark and Defendants appointed their arbitrator, Mr. A.J. Kanzantzis;
In my view this gives the impression that it was the respondent which invoked the arbitration clause whereas if the clause can be said to have been invoked by anyone in respect of the respond ent's claim—as opposed to the claim asserted in the arbitration proceeding by the appellant Pat- mos—it was the appellant Patmos which invoked the arbitration and it did so after the action in the Federal Court had been commenced and the vessel had been arrested. The case is thus not one in which the respondent has vexatiously brought pro ceedings to enforce its claim in two jurisdictions.
Some two months later the appellants brought a motion for an order staying proceedings in the action on the grounds that "the claim is being proceeded with in another jurisdiction and that it is in the interests of justice that said proceedings be stayed". In support of the motion the affidavit to which I have referred was filed. Apart from preliminary matters not in dispute and the para graph respecting the appointment of arbitrators, it contained the following:
10. I am informed by Captain C. Alexandrou, Defendants' representative in New York and do verily believe that the vessel "Sea Pearl" was built in Sunderland, England, under Lloyd's Classification Society and that, since one of the issues arising between the parties herein relates to the ship's description, that is, that the "Sea Pearl" was wrongly represented by Defendants as being "flush throughout" (as appears from paragraphs 12, 13, 14 and 15 of Plaintiffs Statement of Claim) witnesses from England might be called to give evidence on this issue, some witnesses from the builders are readily available in England should the matter be arbitrated in London, England;
11. I am informed by Captain C. Alexandrou, Defendants' representative in New York and do verily believe that the vessel "Sea Pearl", formerly known as the "Custodian", was then flying the British flag, was owned by Charente S.S. Co. Ltd. of England and managed by T. & J. Harrison of Liverpool and that again witnesses from the former owners and managers might be called to give evidence on the issue mentioned in paragraph 10 hereof and that those witnesses are readily available in England should the matter be arbitrated in London, England.
12. Plaintiff also alleges in its Statement of Claim, particularly in paragraphs 4 and 11 thereof, that the "Sea Pearl" was to carry a cargo of copper concentrates which was to be loaded, stowed and trimmed, carried and discharged as per IMCO regulations and that said cargo was carried contrary to IMCO regulations but since IMCO, that is, Intergovernmental Mari time Consultive [sic] Organization, has its headquarters in London, England, witnesses would be readily available to testi fy on this issue should the matter be arbitrated in London, England;
13. Following the arrest of the "Sea Pearl" by Plaintiff, a letter of guarantee was provided to Plaintiff by Defendants through the Bank of Montreal as appears from copy of said letter of guarantee attached hereto as exhibit "C" to this my affidavit and Plaintiff can enforce its award, if successful, through this Honourable Court and be paid accordingly;
14. It appears from copy of said time charter-party attached hereto as exhibit "A" to this my affidavit that Canadian Law does not apply to it.
These paragraphs, in my view, add little if any support for the motion. The first two refer to witnesses who "might be called", in the one case "witnesses from the builders" on an issue as to whether a 21-year old vessel was flush throughout, and in the other "witnesses from the former own ers" on the same issue. These witnesses are said to be readily available in England. Nothing is said as to how many of such witnesses "might be called" or as to what savings in the costs of obtaining their evidence might result if the matter were to be determined in England rather than in Canada. Moreover, I fail to understand what useful admis sible testimony witnesses, who are said to be readi-
ly available in England to testify, could be expect ed to contribute on the issue as to whether the cargo was loaded, stowed, trimmed, carried and discharged as per IMCO regulations or contrary thereto. Further, paragraph 13 is, on its face, an opinion and quite plainly suffers from the possibili ty that it may be held to be erroneous having regard to the decision in The Golden Trader.' With respect to paragraph 14, there is no evidence that the applicable law, be it English, German, Chilean or Cypriot, differs from the Canadian law.
A supplementary affidavit filed on February 17, 1982 in support of the motion exhibits a copy of a letter of February 8, 1982 from the appellant to the arbitrator it had named giving elaborate details of a claim being asserted by the appellant in the arbitration and a copy of a proposed order for directions. This affidavit, in my opinion, adds nothing to enhance the position of the appellant. The strength of its case, and it is not inconsider able, lies in the fact that by the charter the parties agreed to the settlement of disputes arising from the charter by arbitration which by itself gives rise to a strong prima facie case for staying proceed ings in the action.
The law is well established, 2 however, that the presence of an arbitration clause in a charter does not deprive the Court of its jurisdiction to enter tain a claim for breach of the charter. To bring an action is not itself a breach of the charter or of the arbitration clause in it. Resort to the Court for the settlement of a claim is the right of anyone includ ing one who has agreed to determination by another means, the only question arising as a result of such an agreement being that of whether the Court in the particular situation should, if an adverse party insists, require the complainant to submit to the determination of his rights in the manner agreed upon. The courts lean to this course but do not stay their hand or decline to exercise their jurisdiction when what has variously
' [1975]I Q.B. 348.
2 Bristol Corporation v. John Aird & Co., [1913] A.C. 241
per Lord Moulton at p. 256; and citations 3, 4, 5, 6 and 7 infra.
been characterized as a "strong", 3 or "excep- tional" 4 case or a case in which there was a "strong balance of argument" 5 in favour of per mitting the action to proceed appears. Examples of what may amount to a case justifying the refusal of a stay appear from the following cases.
In the ` Athenee", 6 Bankes L.J. summed up the case thus [at page 6]:
I think the learned Judge was justified, upon the materials before him, in refusing to exercise his discretion. It is not disputed that this contract is one of the class in which a Judge of the Courts of this country has a discretion as to whether he will or will not stay the action to enable the parties to go to the tribunal which they selected. The learned Judge, in my opinion, is entitled to take all the circumstances into account, particu larly the fact that the vessel is under arrest, and the fact of the dispute being in reference to the condition of the onions on arrival, and the fitness of the ship to carry them. Apparently there has been a survey at which both parties were represented; and the witnesses of the material facts are all in this country. I think there was an abundance of material upon which the learned Judge, if he thought right, could have exercised his discretion in the way he did.
In the same case, Atkin J. said [at pages 6-71:
I agree, and I should like to add this. This is a clause by which the parties no doubt have agreed that disputes should be referred to a foreign tribunal. There is no indisposition on the part of the Courts of this country to give effect to such a bargain: but such a bargain is treated as equivalent to an arbitration clause.
The question arises in respect of a clause to refer to a foreign tribunal as to a clause to refer to a domestic tribunal, whether there are proper reasons for not enforcing it. To my mind there were ample reasons for the learned President not enforcing it in this case. I think the balance of convenience and the substantial advantage which the plaintiffs have by suing in this country (and which they lose by not being able to proceed in rem against this ship), and many other advantages such as in respect of proof of loss, a matter which any commercial tri bunal would wish should be decided, if possible, having regard to the evidence obtained at the time by inspection of the vessel and so on—all those grounds seem to me to afford ample reason for the learned President coming to the conclusion that, in the circumstances of this particular case, the clause in the contract should not be given effect to.
3 The "Fehmarn", [1957] 1 Lloyd's Rep. 511 (P.D.A.) per Willmer J. at p. 514.
4 YTC Universal Ltd. v. Trans Europa, [1973] 1 Lloyd's Rep. 480 (C.A.) per Denning L.J. at p. 481.
5 The "Adolf Warski" and The "Sniadecki", [1976] 1 Lloyd's Rep. 107 (Q.B.) per Brandon J. at p. 112.
6 Owners of Cargo Ex "Athenee" v. "Athenee", [1922] 11 LI. L. Rep. 6 (C.A.).
In The "Fehmarn", Willmer J. (as he then was), put the matter thus [at page 514]:
Where there is an express agreement to submit to a foreign tribunal, clearly it requires a strong case to satisfy the Court that that agreement should be overridden and that proceedings in this country should be allowed to continue. But, in the end, it is, and must necessarily be, a matter for the discretion of the Court, having regard to all the circumstances of the particular case. That being so, I do not think it would be profitable to refer in detail to the numerous cases which were cited to me, where the principle as I have tried to state it has been stated over and over again, but the discretion of the Court was exercised one way or other having regard to the circumstances of the particular case.
After discussing the facts and the submissions put forward on both sides, he proceeded [at pages 515-516]:
I have already said that I do not find this at all an easy matter to determine. One's natural inclination is to say that these parties have made their bargain and should keep to it. Moreover, I think it is right to say that this Court must assume, and I do assume, that equal facilities for trying the case exist in Russia as exist in this country, and that the parties will get just as fair a trial in Russia as they will get here. But, having made all due allowances for that, in the end I have come to the conclusion that the plaintiffs have shown sufficient grounds for displacing the prima facie presumption, grounds which are, in my judgment, sufficient to entitle them to take advantage of the undoubted jurisdiction of this Court.
Having read the solicitors' correspondence, I am bound to say that I cannot fail to be left with the impression that the defendants do not really want this case to be tried in Russia. They have, in the course of correspondence, already expressed willingness, on certain terms, to have it disposed of in this country, and one is left with the suspicion that the principal object of the defendants is not to achieve a trial in Russia, but merely to make it more difficult for the plaintiffs to assert their claim.
In making those observations, I do not wish it to be thought that I am accepting the argument addressed to me on behalf of the plaintiffs to the effect that the defendants have not acted bona fide. I do not wish it to be thought that I am making any observations on the bona fides of the defendants. They are entitled to fight their case with all the weapons at their disposal. The weapon, they have chosen in this motion is a perfectly legitimate weapon to use. But it is the fact that, if I were to stay these proceedings which have already been launched, I might be depriving the plaintiffs of any remedy at all. It is not as though the defendants' ship was a Russian ship belonging to an organization domiciled in Russia. There seems to be no possible guarantee that, if I ordered these proceedings to be stayed so as to enable the plaintiffs to start alternative proceedings in Russia, any judgment obtained would necessari ly be of any value to them at all. Of course, it is equally true to say that the ship, being a German ship and not yet having been arrested, may keep clear of this country so as to avoid arrest, and that, in those circumstances, there is no guarantee that a judgment obtained in this country would be enforceable. But
the fact is that there are at least proceedings under way in this country. If I stay them and leave the plaintiffs to start afresh in Russia, costs will be thrown away, there will inevitably be delay, and I apprehend that, if the plaintiffs' witnesses have to go to Russia, there will be very considerable added expense in disposing of the case.
All that, I think, is sufficient to justify me in the conclusion which I have already stated, namely, that the plaintiffs have proved enough to discharge the burden of proof which is upon them.
A third example is the case of The `Adolf Warski ", 7 a case in which security had been pro vided to cover the claim wherever judgment might be obtained. All three Judges of the Court of Appeal held the Trial Judge's discretion had not been exercised erroneously in denying a stay on the principal ground of the more ready availability of the evidence of surveyors of the cargo in England. Sir Gordon Willmer, after referring to a number of considerations put forward, said [at page 249]:
Most of these considerations the learned Judge found, I think with justification, to be fairly evenly balanced. But in his view the most important factor to be considered was that of the evidence to be called in support of either party's case in order to ensure a fair trial of the dispute. He pointed out that upon discharge the cargo was surveyed by English cargo surveyors representing both parties. Both parties also employed English fruit pathologists to report on the cause of the damage. The learned Judge envisaged, I think quite rightly, that it would probably be necessary to call oral evidence from at least four English expert witnesses. This would be easy enough to arrange if the trial were to take place in England, but it would be a matter of no little difficulty and considerable expense if these English expert gentlemen had to travel to Poland to give their evidence. Nor would it be easy for them to present expert evidence of this character through interpreters in a foreign Court. Further, as pointed out by the learned Judge in the passage from his judgment which I have quoted, if the defend ants persist in the defence adumbrated on their behalf, it could well be necessary to call witnesses from Chile to speak as to the condition of the cargo when loaded and as to any instructions which may have been given by the shippers with regards to the temperatures to be maintained during the voyage. As to possi ble difficulties in obtaining visas for such witnesses to enter Poland, the evidence seemed to be extremely vague. But cer tainly no such difficulties would be likely to arise if such witnesses had to be brought to England to give their evidence.
Having weighed these various considerations the learned Judge stated his conclusion (at p. 112 of [1976] 1 Lloyd's Rep.) as follows:
I accept that the arguments with regard to evidence are not all one way. Nevertheless, I think that, when the question
7 The "Adolf Warski" and The "Sniadecki", [1976] 2 Lloyd's Rep. 241 (C.A.) at p. 249.
of the feasibility, convenience and cost of placing before a Court the main evidence necessary to enable these claims to be decided justly are looked at in all their aspects, there is a strong balance of argument in favour of trial in England rather than in Poland.
For that reason the learned Judge came to the conclusion that, leaving aside the factor of the time bar in Poland, the Court should exercise its discretion by refusing a stay and allowing the actions to proceed in England.
I might or might not have reached the conclusion myself had I been sitting at first instance. As I have already indicated, the arguments in favour of one view or the other seem to me to be very evenly balanced. But I do not think it can be denied that there was abundant material on which the learned Judge could properly come to his conclusion. I am certainly quite unable to say that his exercise of his discretion was plainly wrong. In these circumstances, I agree that the learned Judge's decision should be affirmed and the appeal dismissed.
In the present case the respondent filed an affidavit which, after referring to the charter, con tains the following paragraphs:
4. As may be seen from paragraph 9 of the Statement of Claim filed in this action on November 22, 1981, the Plaintiff claims that upon arrival at Quebec the vessel was overloaded, a point which will require testimony from Quebec City ocular witnesses;
5. As may be seen from paragraphs 12 to 15 of the said Statement of Claim the Plaintiff alleges the breach of rider clause number 29 of the time charter, annexed to Me Savard's affidavit as exhibit "A", in that the vessel was not "flush throughout", a point which will require testimony from Quebec witnesses;
6. As may be seen from paragraph 16 of the said Statement of Claim the Plaintiff also alleges breach of rider clause number 29 in that the cargo was not stowed, as contracted, in the lower holds of the vessel, another point which requires local Quebec City witnesses;
7. As may be seen from paragraph 5 of the said Statement of Claim the Plaintiff alleges short shipment of cargo contrary to this same rider clause 29 of the time charter; I am personally aware of the fact that both parties to this action named local Quebec City surveyors to verify these claims, the Defendants having named Mr. Louis Rhéaume and the Plaintiff Mr. René Laroche;
8. As may be seen from paragraphs 20 and 21 of the Statement of Claim the Plaintiff alleges unloading and trimming problems in Quebec, a point which will require numerous Quebec City witnesses who worked on the unloading gangs aboard the vessel at the Quebec harbour;
9. As it appears in paragraph 21 of the said Statement of Claim there is also involved the question of excess loading port costs encountered in Chile; I have been credibly informed by Mrs. Lise Martel, a registered travel agent of the firm Voyage 2000 of Quebec City that the round-trip price of bringing a witness of Chile to Quebec City is approximately $1,500.00 (Cdn) whereas taking the same witness to London, England would cost 1600 pounds or more than twice the price and I
verily believe Mrs. Martel for she is an independent travel agent with no interest in this claim;
10. In all, the great bulk of the evidence necessary to support Plaintiff's claim is in Quebec City and any additional evidence is more easily accessible to Quebec City; as a result the relative convenience and expense of trial favors Canada;
11. As it appears in rider clause 29 of the time charter, annexed to Me Savard's affidavit, the "SEAPEARL" was built 21 years ago;
12. As may be seen from paragraph 10 of the Statement of Claim Plaintiff alleges breach of the I.M.C.O. regulations, international regulations requiring judicial interpretation only, which this Court will be asked to do;
13. As it appears from a perusal of the said time charter annexed to Me Savard's affidavit as exhibit "A", no clause stipulates that the laws of a foreign country need be applied by this Court;
14. As it appears in paragraphs 3 and 4 of Me Savard's affidavit, neither party is connected with England in any way whatsoever;
15. In his affidavit Me Savard states, at paragraph 9, that Plaintiff appointed Mr. Clifford A.L. Clark to act as arbitrator, while, in fact, following the naming of an arbitrator by Defend ants, I personally communicated with Mr. Clark in order to prevent the delay effects of section 7 of the English Arbitration Act, 1950 which stipulates that following the naming of an arbitrator the other party must name its own within 7 days or be foreclosed from so doing; therefore Mr. Clark was chosen on a conditional basis, to act as the Plaintiffs arbitrator only if this Court refused to exercise its jurisdiction, as may be seen from a copy of the telex communication between Mr. Clark and myself annexed hereto as exhibit "A" of this, my affidavit;
16. As appears from the letter of guarantee annexed to Me Savard's affidavit as exhibit "C", the Defendants' bank pro mises to indemnify the Plaintiff; however three points in par ticular appear in this letter: first, the Defendants' bank submits to the jurisdiction of the Federal Court of Canada alone (clause 1 of the said exhibit "C"); secondly, the guarantee applies to a final judgment "on the merits" rendered by this Court (clause 3 of the said exhibit "C"); thirdly the guarantee applies to a compromise or settlement between the parties "in the said proceedings" (clause 3 of the said exhibit "C");
17. Our firm consented to a release of the "SEAPEARL" in consideration of the letter of guarantee annexed to Me Savard's affidavit alone; as it appears in the above paragraph the letter has no effect vis-à-vis an arbitration award or a settlement while in arbitration; therefore arbitration proceedings would deprive Plaintiff of security for his claim.
In dismissing the appellants' application, the learned Trial Judge endorsed the record as follows:
There appears [sic] to be witnesses in both London and here, and, if Plaintiff agreed to arbitration in London it did so
conditionally and to protect its rights there but at the same time indicating it wished to proceed in the Federal Court. Defendant's counter-claim filed with the arbitrator in London can equally be invoked here. The letter of guarantee specifies that Plaintiff invokes the Federal Court jurisdiction (this does not of course bind Defendant). While the burden is on Plaintiff to establish that the proceedings should be carried on here rather than by arbitration in London, it appears that the balance of convenience suggests that this is the case. In the exercise of my discretion therefore I dismiss Defendant's motion to stay the proceedings with costs.
On the appeal counsel quite properly empha sized the need of a strong case, something excep tional or something unjust in the situation, to overcome the obligation of parties to abide the term of their contract providing for arbitration which, in this case, showed on its face, by an alteration to the printed form so as to substitute London for New York, that the parties had given consideration to it and regarded it as a vital part of the contract between them.
There is much to be said for that view, particu larly in light of the fact that the parties chose arbitration in a country with which neither had any connection. But, giving the argument all the weight it should have, I have not been persuaded either that the learned Trial Judge was not fully aware of the power of the appellants' case or that his conclusion was not one that he might reach on the material before him. Moreover, I do not find in his reasons, short and somewhat obscure as they appear, any basis for disturbing his order.
The evidence respecting the availability and expense of necessary witnesses in my view heavily favours the respondent's position. The witnesses most likely to be needed are in Quebec. The surveyors for both sides are there. The cost of transporting Chilean witnesses to Quebec is con siderably less than the cost of transporting them to London. It is possible there may be witnesses in London as well but the learned Trial Judge was not unaware of that and I would assume that he appreciated where the balance lay. He mentioned the burden on the respondent and the balance of convenience, as did Atkin L.J. in the "Athenee". In the context of the learned Trial Judge's reasons, I do not think that his reference to the balance of convenience should be read as meaning anything more than that on the whole the respondent had
made out its case and tipped the scale in favour of refusing a stay.
The learned Trial Judge also mentioned the letter of guarantee in a sentence which leaves uncertain how much weight he attributed to it and how he regarded the matter of the security obtained by the respondent on the release of the vessel from arrest. In my view, the fact that the respondent, having lawfully obtained that security, may well lose it if the action is stayed supports the learned Trial Judge's conclusion and is, in itself, a strong reason for refusing a stay. The ship having been sold by the appellant, there is no way the respondent can obtain other security or enforce its claim by arresting the ship in this country or elsewhere after the arbitration and nothing in the record indicates that there are assets of the appel lant in Canada or in England from which an arbitration award in favour of the respondent could be recovered.
I would dismiss the appeal with costs.
* * *
The following are the reasons for judgment rendered in English by
PRATTE J.: This is an appeal from a judgment of the Trial Division refusing to stay an action brought by the respondent against the appellant.
The appellant, Patmos Navigation Company, is a corporation having its principal place of business in Limassol, Cyprus; it is the owner of the Sea- pearl, a vessel registered in Cyprus. The respond ent, Seven Seas Dry Cargo Shipping Corporation, has its principal place of business at Santiago, Chile. Neither the appellant nor the respondent has any connection with Canada.
Pursuant to a time charterparty made at Ham- burg, West Germany, on October 14, 1981, the appellant Patmos chartered its ship to the respond ent for one voyage from Tocopilla, Chile, to Quebec City. The ship was to carry "a cargo of copper concentrate to be loaded, stowed and trimmed, carried and discharged as per IMCO
regulations". The charterparty contained a guar antee that the vessel could "load/carry 10,700 metric tons copper concentrate in lower holds". It also contained an arbitration clause reading as follows:
17. That should any dispute arise between Owners and the Charterers, the matter in dispute shall be referred to three persons at London, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for the purpose of enforcing any award, this agreement may be made a rule of the Court. The Arbitrators shall be Baltic Exchange Members.
After the arrival of the ship at Quebec, a dispute arose between the parties. It was the respondent's contention that the Seapearl did not possess the characteristics described in the charterparty and had, for that reason, carried less cargo at a higher cost. The respondent brought an action in the Trial Division claiming $413,109.46 U.S. from the appellant as damages for breach of the charterpar- ty; it also arrested the Seapearl. Those proceedings were commenced on November 27, 1981.
On December 1, 1981, the appellant, acting pursuant to clause 17 of the charterparty, referred the dispute to arbitration and appointed a Mr. Kazantzis as its arbitrator. A few days later, the respondent, Seven Seas, appointed a Mr. Clark to act as its arbitrator in the event that the proceed ings commenced in the Trial Division were stayed.
On December 7, 1981, counsel for the appellant supplied counsel for the respondent with a letter of guarantee from the Bank of Montreal. As a conse quence, the respondent consented to the release of the appellant's ship.
A short time later, the appellant applied to a Judge of the Trial Division for an order staying the action on the ground that the claim raised in it was a claim that, under clause 17 of the charterparty, was to be decided by arbitration in London. The Judge dismissed the application by an order read ing as follows:
ORDER
There appears [sic] to be witnesses in both London and here, and, if Plaintiff agreed to arbitration in London it did so conditionally and to protect its rights there but at the same time indicating it wished to proceed in the Federal Court. Defendant's counter-claim filed with the arbitrator in London
can equally be invoked here. The letter of guarantee specifies that Plaintiff invokes the Federal Court jurisdiction (this does not of course bind Defendant). While the burden is on Plaintiff to establish that the proceedings should be carried on here rather than by arbitration in London, it appears that the balance of convenience suggests that this is the case. In the exercise of my discretion therefore I dismiss Defendant's motion to stay the proceedings with costs.
This appeal is directed against that order.
Contractual undertakings whereby parties agree to submit their disputes to a foreign court or to arbitration do not deprive the Federal Court of its jurisdiction. However, when proceedings are com menced in defiance of such an undertaking the Court has the discretion to order that the proceed ings be stayed. Paragraph 50(1)(b) of the Federal Court Act confers on the Court the discretionary power to stay proceedings where "it is in the interest of justice that the proceedings be stayed." As a rule, it is certainly in the interest of justice that contractual undertakings be honoured.
It is well established that in reviewing a discre tionary decision of a judge of first instance upon an application to stay proceedings on the ground that the parties have agreed to submit their dis putes to arbitration or to a foreign jurisdiction, a court of appeal must uphold the decision made by the judge "unless it was arrived at on a wrong basis or was plainly a wrong decision." 8
On what basis or according to what principle did the motion Judge exercise his discretion in this case? As I read his order, it was made on the basis that the proceedings commenced in the Trial Divi sion had to be stayed unless it appeared more convenient that the issues between the parties be decided by the Court in Canada rather than by arbitration in London. In other words, the Judge decided on a mere balance of convenience. In so doing, the learned Judge applied what I consider to be a wrong principle. Prima facie, an applica tion to stay proceedings commenced in the Federal Court in defiance of an undertaking to submit a dispute to arbitration or to a foreign court must
8 The "Adolf Warski" and The ' Sniadecki", [ 1976] 2 Lloyd's Rep. 241 (C.A.), at p. 245, per Cairns L.J.
succeed because, as a rule, contractual undertak ings must be honoured. In order to depart from that prima facie rule, "strong reasons" are needed, that is to say reasons that are sufficient to support the conclusion that it would not be reasonable or just, in the circumstances, to keep the plaintiff to his promise and enforce the contract he made with the defendant. This is the principle which is now applied in England 9 and in the United States; '° that is also, in my opinion, the principle that should be applied in this Court.
The decision under attack having been based on a wrong principle, it is necessary for this Court to determine whether the circumstances of this case are such that it can be said that there are strong reasons for not complying with the arbitration clause. Four circumstances are invoked by the respondent as constituting "strong reasons" for not complying with the arbitration clause:
1. Many of the witnesses are from Quebec City;
2. the appellant (defendant in first instance) has submitted to the arbitrators a cross-demand that cannot be disposed of by arbitration;
3. the respondent brought its action in the Trial Division before the commencement of the arbi tration proceedings and, when those proceedings were commenced, appointed its arbitrator condi tionally; and
4. the respondent would be deprived of security if its claim were to be decided by arbitration in London since the letter of guarantee from the Bank of Montreal supplied by the appellant merely guaranteed the payment of sums to be awarded by the Court.
9 The "Adolf Warski" and The "Sniadecki", [1976] 1 Lloyd's Rep. 107 (Q.B.), affirmed [1976] 2 Lloyd's Rep. 241 (C.A.); Kitchens of Sara Lee (Canada) Ltd. et al. v. AIS Falkefjell et al. (The "Makefjell "), [ 1975] 1 Lloyd's Rep. 528 (Q.B.); [1976] 2 Lloyd's Rep. 29 (C.A.); Owners of Cargo Lately Laden on Board The Ship or Vessel Eleftheria v. The Eleftheria (Owners), [1969] 2 All E.R. 641; [1969] 1 Lloyd's Rep. 237 (Adm.); The "Fehmarn", [1957] 2 All E.R. 707 (P.D.A.); [1958] 1 All E.R. 333 (C.A.).
10 Zapata Offshore Co. v. The "Bremen" and Unterweser Reederee G.M.B.H. (The Chaparrall), [1972] 2 Lloyd's Rep. 315 (U.S. Sup. Ct.).
I do not think that the fact that many witnesses are from Quebec City is very important in this case. Certainly it could not be expected when the charterparty for the voyage from Chile to Canada was signed in Hamburg that the arbitration clause would only apply to cases where all or most of the evidence would be found in England.
As to the cross-demand made by the appellant in the arbitration proceedings, it does not, in my view, help the respondent's case. By that cross- demand the appellant claims from the respondent a sum representing the hire due for the period during which the ship Seapearl was under arrest and, in the alternative, damages for the wrongful arrest of the ship. Counsel for the respondent argued that this claim could not be disposed of by the arbitrators because, in his view, a claim for wrongful arrest of a ship cannot be decided unless the proceedings in which the arrest was made have terminated in favour of the persons aggrieved by the arrest. He said that, for that reason, it would be preferable if both the respondent's claim and the appellant's counterclaim were decided by the Federal Court. I reject that argument. If the coun terclaim made by the appellant is a claim which, under clause 17 of the charterparty, had to be referred to arbitration, I do not see why the arbi trators could not dispose of it.
Respondent's counsel also invoked, in support of his contention that the action in the Trial Division should be allowed to proceed, the fact that the respondent brought its action in the Trial Division before the commencement of the arbitration pro ceedings and the additional fact that, when those proceedings were commenced, he appointed its arbitrator conditionally. I do not understand how these facts may help the respondent. All that I can infer from them is that the respondent, by its conduct, has not impliedly agreed that the arbitra tion clause was to be complied with.
The last argument put forward by counsel for the respondent was based on the assumption that, if the case were to be decided by foreign arbitra tors, the respondent would lose the benefit of the letter of guarantee supplied by the appellant to obtain the release of its ship. Counsel for the
appellant answered that this assumption was gratuitous and that, in his view, the stay of the proceedings in the Trial Division would not deprive the respondent of its security. I am not too sure of that. The terms of the letter of guarantee are such, in my view, as not to guarantee the payment of an award made by an authority other than the Feder al Court. And that Court may lack the authority to give judgment in the proceedings before it on the sole basis of a foreign award. Moreover, in any event, if the proceedings in the Trial Division are stayed, the appellant may be entitled to be released from the guarantee that has been given to obtain the release of its ship. " However, it is not necessary to resolve those questions because, in my view, even if it is assumed that the stay of the proceedings in the Trial Division would, in effect, deprive the respondent of its security, this is not a factor which, in the circumstances of this case, I would consider sufficient to justify a refusal of the stay. If the material before us showed or suggested that, in the absence of security, the respondent will not be able to obtain payment of the amount that may be awarded by the arbitrators, then the proper course, in my view, would not be to reject the application for a stay of the proceedings but to grant that application on the term that alternative security be provided outside the Court to satisfy the award of the arbitrator. However, I do not think that the Court would be justified in imposing such a term on the appellant because I cannot find anything in the record showing that the respondent will suffer a real prejudice from the loss of the security.
I am, for those reasons, of the opinion that the respondent failed to show sufficiently strong rea sons why it should not be held to its contract. I would, therefore, allow the appeal with costs, set aside the decision of the Trial Division and, pro nouncing the decision that should have been pro nounced, grant the appellant's application with costs and order that the proceedings in this case be stayed until the issues between the parties have been decided by arbitrators in accordance with clause 17 of the charterparty.
* * *
" See: The Golden Trader, [ 1975] 1 Q.B. 348.
The following are the reasons for judgment rendered in English by
LALANDE D.J.: I have read the reasons for judgment of the Chief Justice and those of Mr. Justice Pratte.
I agree with Mr. Justice Pratte's statement of the principle to be applied in this appeal from an order refusing a stay under subsection 50(1) of the Federal Court Act, and that the respondent has not shown a strong enough case to allow it to disregard the arbitration clause in the charterpar- ty.
In my respectful view the respondent's case is weak when one compares it to the cases in the English courts, referred to in my colleagues' rea sons, where stays were refused to allow claims to proceed in foreign courts designated in bills of lading covering goods delivered to consignees in England who were parties to the proceedings.
Here we have a dispute between a foreign owner and a foreign charterer centred on the carrying capacity and structural features of a vessel built in England. The consignee of the cargo delivered in Quebec is not a party to the dispute. Regulations of the International Maritime Consultative Organ ization concerning carriage of copper concentrates are also involved. IMCO's headquarters are in London. I doubt very much any Quebec witnesses will need go to London for the arbitration.
As to the security that respondent obtained in Quebec by arresting the vessel, I give it no weight in the balance of argument 12 because it was obtained as a consequence of action heedless of provisions of the charterparty.
I would dispose of the appeal as proposed by Mr. Justice Pratte.
12 The expression "strong balance of argument" in order to overcome a prima facie case for a stay, such as this one is, is Mr. Justice Brandon's at first instance in The "Adolf Warski" and The "Sniadecki", [1976] 1 Lloyd's Rep. 107 (Q.B.), affirmed [1976] 2 Lloyd's Rep. 241 (C.A.).
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