Maritime Law – Recent Key Judgments – 2015

2015 has seen the usual variety of important Canadian decisions which bear on maritime law and various admiralty practice areas.

1. Fingad Shipping Ltd. v Ningbo Arts & Crafts Imp & Exp. Co. Ltd., 2015 FC 851

   The plaintiffs in this case had entered into a contract with the corporate defendants for the construction of the defendant vessel, the "Chemical Aquarius." There was a dispute between the parties and the plaintiffs cancelled the contract in 2010. In June 2012, the Chemical Aquarius was sold by the corporate defendants to a third party, Huarong Huiyin Limited ("HH"), and the purported sale was registered. Subsequent arbitral proceedings resulted in arbitral awards against the corporate defendants in 2013, substantial portions of which remained owing to the plaintiffs.

   In April 2015, the plaintiffs commenced a proceeding in France to enforce the arbitral awards and arrest the Chemical Aquarius. The defendant vessel was seized in France and HH sought to have the seizure lifted on the basis that they, as the registered owner of the ship, were not one of the debtors of the arbitral awards. On May 7, 2015, the Tribunal de Commerce de Terre et de Mer du Havre (the "French Tribunal") lifted the seizure of the Chemical Aquarius.

   On July 3, 2015, the plaintiffs commenced a proceeding in the Federal Court for the outstanding amounts and seeking the judicial sale of the Chemical Aquarius. The plaintiffs also obtained a warrant for the arrest of the Chemical Aquarius and commenced a separate ex parte application before the Federal Court for the recognition and enforcement of the arbitral awards. In this motion, HH was seeking an order to strike out the Statement of Claim or, alternatively, to set aside the arrest.

   Under the Federal Courts Rules, SOR/98-106, a party seeking to strike out a pleading must establish that it is "plain and obvious" that the pleading has no merit on one of the enumerated grounds, and the court should only exercise its discretion to strike only in the clearest of cases. HH argued that arrest had to be set aside since the plaintiffs do not have an in rem right against the vessel because they had no right in personam against its owners (HH). HH further argued that the Federal Court proceeding had to be struck out on the basis of issue estoppel - the French Tribunal had already addressed the enforcement of the arbitral awards through the arrest of the Chemical Aquarius, as well as the issue of the genuineness of the sale to HH.

   Justice Locke noted that there are three pre-conditions to the exercise of the court's discretion to apply issue estoppel: (1) the same question has been decided, (2) the judicial decision creates estoppel, and (3) the parties (or their privies) are the same in the judicial decision and the present proceeding (citing Danyluk v Ainsworth Technologies, [2001] 2 SCR 460). In the present case, only the first condition was at issue. Locke J. held that the central issue before the French Tribunal was the same as the central issue in the present motion since the French Tribunal had fully considered whether the ownership of the Chemical Aquarius had changed and its decision on this issue was final. The plaintiffs argued that they had cited new evidence that had not been considered by the French Tribunal, but Locke J. rejected this argument because to allow new evidence would allow parties to "gut issue estoppel of any substantial meaning by simply raising new evidence in a subsequent proceeding."

   Locke J. refused to exercise his discretion to refuse to apply estoppel and struck the allegations regarding the genuineness of the sale to HH and the reference to the action being in rem, removed the defendant vessel from the style of cause, and released the defendant vessel. HH was awarded the costs of the motion in the amount of $7,500.

   Peter G. Pamel and Jean-Marie Fontaine of BLG's Montréal office represented the moving party, Huarong Huiyin Limited, in this motion.

2. Chevron Corp. v Yaiguaje, 2015 SCC 42

   The underlying dispute in this case was alleged environmental pollution in the Lago Agrio region of Ecuador, an oil-rich area that has a long history of oil exploration and extraction. For over 20 years, a group of indigenous Ecuadorian villagers (the "Plaintiffs") have been seeking legal accountability and financial and environmental reparation for harms allegedly caused by the former operations of Texaco, Inc. (which later merged with Chevron Corp.) in the area. In 2011, an Ecuadorian trial court ruled in favour of the Plaintiffs and this decision was affirmed by an Ecuadorian appellate court. Finally, in 2013, Ecuador's highest court upheld the appellate decision, with the exception of the punitive damages award, and held that Chevron was liable to pay the Plaintiffs US$9.51 billion.

   Chevron refused to acknowledge or pay the award ordered by the trial court and fought the Plaintiffs in the United States courts. Since Chevron did not hold any Ecuadorian assets, the Plaintiffs had to select another forum to get satisfaction on the debt. In 2012, the Plaintiffs commenced an action in the Ontario Superior Court of Justice for the recognition and enforcement of the Ecuadorian judgment against Chevron (a U.S. corporation), Chevron Canada (a Canadian corporation that is a seventh-level indirect subsidiary of Chevron), and Chevron Canada Finance Limited.

   The Supreme Court of Canada confirmed that Canadian courts should take a generous and liberal approach to the recognition and enforcement of foreign judgments. Although this type of process was once technical and challenging, the last twenty years has seen significant streamlining of and openness towards the process of enforcing foreign judgments in Canada. Yaiguaje continues this trend, and offers great assistance to parties who wish to seek to enforce a foreign judgment in Canada, whether or not:

   the judgment debtor/defendant is located in Canada; the judgment debtor/defendant has assets in Canada; or the original underlying dispute that led to the foreign judgment has any connection to Canada. There is no need for the applicant to prove a real and substantial connection between the Canadian province where the foreign judgment is sought to be registered and the original underlying dispute that led to the foreign judgment, or between the Canadian province and the judgment debtor/defendant. So long as a real and substantial connection exists between the foreign court and the original action, and so long as the defendants were properly served with the original claim, the enforcing Canadian court has jurisdiction to recognize and enforce the judgment.

   The decision further reiterates Canadian courts' commitment to the principles of comity to and respect of foreign legal systems, and upholds the principles outlined in previous authorities, including Club Resorts Ltd. v Van Breda, 2012 SCC 17 and Beals v Saldanha, 2003 SCC 72. By taking a strong position with respect to the rights of the plaintiffs, the Court confirmed that there are few circumstances in which a Canadian court will not have jurisdiction to recognize and enforce a foreign judgment.

3. Aquavita International S.A. v Pantelis (The), 2015 FC 180

   In this decision, the Federal Court interpreted its jurisdiction over maritime law to include redelivery of a vessel with excessive bunkers. The plaintiff Aqua vita International S.A. ("Aquavita"), the sub-sub-time charterer of the defendant vessel, the M/V "Pantelis," alleged that it owned bunkers that remained on board when the vessel was redelivered to its disponent owners and that the bunkers were misappropriated by the defendants. The plaintiffs brought an action for unjust enrichment and conversion, framed both in rem and in personam, and arrested the Pantelis.

   The defendants brought a motion to strike the action pursuant to Rule 221 of the Federal Courts Rules on the basis that the Federal Court lacked jurisdiction to adjudicate the matter. The defendants submitted that the plaintiff was not entitled to rely on paragraph 22(2) (m) of the Federal Courts Act, RSC 1985, c F-7, which grants jurisdiction to the Federal Court over "any claim in respect of goods, materials or services wherever supplied to a ship for the operation or maintenance of the ship, including, without restricting the generality of the foregoing, claims in respect of stevedoring and lighterage." The defendants argued that the plaintiff was not a bunker supplier, so its claim was based on a contractual obligation.

   On the question of jurisdiction, Justice Harrington did not determine whether or not the plaintiff's claim fell under paragraph 22(2)(m), instead relying on subsection 22(1) of the Federal Courts Act to ground the Court's jurisdiction. Justice Harrington cited the Supreme Court of Canada's decision in ITO-International Terminal Operators Ltd v Miida Electronics Inc., [1986] 1 SCR 752 ("ITO"), wherein the Court had "specifically held that the claim did not fall within subsection 22(2), but rather fell within subsection 22(1) which for this purpose is more or less coextensive with Parliament's jurisdiction over "navigation and shipping" under subsection 91(10) of the Constitution Act, 1867." Justice Harrington held that what was at issue in the present case was "fuel on board the ship, which fuel was allegedly used to propel her over the ocean blue" and that "[n]othing could be more maritime."

   Accordingly, Justice Harrington dismissed the motion to strike, noting that while he had "no hesitation in holding that [the Federal Court] had jurisdiction to decide this action on its merits," this decision was...