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August 2016

Lockdown at the Harbour: Arresting Multiple Ships?

A vessel strikes a marine terminal trestle while in port in Vancouver, causing damage in excess of $60 million dollars. The vessel's worth pales in comparison to the damages caused, though there are a number of sister ships also docked at the port. The terminal owner is rightfully concerned that the vessels will simply leave Canadian waters, sailing out of the jurisdiction and taking the opportunity for any realistic recovery along with them. How can the terminal owners guarantee a future judgment will be satisfied when no one ship can satisfy the damages? This was the case before the courts in Westshore Terminals Limited Partnership v. Leo Ocean, S.A.1

Every plaintiff involved in a situation where a vessel causes damage should be concerned about satisfying the eventual judgment. This issue can be powerfully addressed by "arresting" the vessel – preventing it from leaving port – and therefore at least guaranteeing some recovery.

The Federal Court takes jurisdiction over the vessel by its mere presence in Canadian water,2 regardless of the flag it flies. This power is contained in subsection 43(2) of the Federal Courts Act, RSC 1985, c F-7:

43(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.

How can the terminal owners guarantee a future judgment will be satisfied, when no one ship can satisfy the damages?

Arresting a vessel may seem dramatic, which makes it surprising that it is so easy to do. It requires only the filing of a Statement of Claim, along with an Affidavit to Lead Warrant, and a Warrant for Arrest. It is a quick and inexpensive process that, when done correctly, can often be effected in less than a day.

There is no doubt many nuances to exercising this power, as well as to effecting a release from arrest.3 Entire textbooks have been written on this issue, and how far it goes. This brings us to Westshore. At issue in Westshore was the scope of subsection 43(8), which allows for the arrest of a "sister ship". In the event that the ship that caused the damage itself sailed off before the warrant was granted, or the ship is so damaged to be worthless, this subsection allows a plaintiff to arrest a different ship with the same owner. However, does subsection 43(8) allow for the arrest of a sister ship in addition to the offending ship? After all, the damages were $60 million, and the ships individually came nowhere close to that amount. There had been conflicting commentary by maritime experts and professors on this point, and there had been little guidance in Canadian jurisprudence.

The proceeding was before Justice Heneghan of the Federal Court. After consulting both the English and French versions of the Federal Courts Act, as well as drawing parallels between its provisions and the unratified 1952 International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-Going Ships, Justice Heneghan ruled that there was no evidence that Parliament intended to extend the scope of the right of arrest to multiple ships.

Considering the hefty damages at issue, it is not surprising that the terminal owners appealed. On appeal, the Federal Court of Appeal unanimously upheld the decision, and has thus clarified the law:

I believe that had Parliament intended to break rank with the international maritime community in regard to the right of arrest, which as I have already said, would constitute a dramatic departure from the accepted practice, section 43 would no doubt have been worded very differently so as to make it clear that in Canada claimants were not restricted to one vessel to secure their claim.4

The ruling leaves little ambiguity: a plaintiff cannot arrest multiple ships even as a means of guaranteeing security even if the value of any one ship would be grossly inadequate. This makes the decision of which ship to arrest even more important, and therefore makes consulting your counsel one of the first things that should be done in cases like these.

1 2014 FC 136, upheld at 2014 FCA 231.
2 Note that in B.C. the application is made to the Supreme Court of British Columbia.
3 The leading case on arrest is Mount Royal/Walsh Inc. v. Jensen Star (The), [1990] 1 F.C. 199 (Fed. Ct. App.).
4 Supra note 1, at para. 86.


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