On 7 December 2012 the M/V Cape Apricot struck and damaged part of the trestle of a marine terminal while at the port of Vancouver, British Columbia, in the appellants’ terminal facility. As a result, the berth became unusable until repaired and parts replaced. The repairs and replacements required at least two months and significant cost. On the same day, the appellants commenced an action in the Supreme Court of British Columbia and arrested the vessel at another berth.

The parties negotiated the vessel’s release, the amount of security required and the availability of sister ships to satisfy the security demanded by the appellants.

On 11 December 2012, the respondents’ solicitors informed the appellants’ solicitors that he was instructed by the respondents and their mutual protection and indemnity association (P&I Club) to issue a Letter of Undertaking (LOU) to secure the release of the vessel from arrest. The LOU provided that (i) the P&I Club and the respondents agreed to submit to the jurisdiction of both the BCSC and the Federal Court, and (ii) upon demand bail not exceeding USD 26 million would be furnished and (iii) the appellants’ recourse and recovery for damage shall not be limited by the LOU. The appellants agreed to release the vessel from arrest and refrain from arresting any other ship owned by the appellants.

The appellants indicated that it would release the vessel once the signed LOU was provided. The signed copy of the LOU was sent to the appellants’ solicitors. The appellants subsequently had a change of heart having taken advice that the provision preventing the arrest of a sister ship was unacceptable. The respondents argued that there was a binding agreement and that the respondents were therefore entitled to have their vessel released from arrest.

To resolve the impasse, the parties agreed that a second LOU would be issued, similar to the first, but without the waiver of sister ship arrest. It was also agreed that the second LOU would not be binding unless a Court ruled that the first LOU was not binding and that under Canadian law a claimant could arrest both the offending ship and a sister ship.

The judge below, Justice Heneghan, ordered that a legally binding agreement was entered into by the Appellants to waive their right to arrest sister ships of the Vessel in consideration of security provided. The Judge considered the wording of s 43(8) 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.

(8) The jurisdiction conferred on the Federal Court by section 22 may be exercised in rem against any ship that, at the time the action is brought, is owned by the beneficial owner of the ship that is the subject of the action.

The Judge held that the word ‘any’ was ambiguous. However, she noted that the word was used in the context of in rem actions where the power to arrest was available to a claimant and that the Arrest Convention 1952, to which Canada was not a party, dealt with the arrest of sister ships. In particular, the Judge opined that the words ‘any ship’ suggested that one ship was intended by the subsections because otherwise Parliament would have used the words ‘any ships’ or ‘any other ship’: see Westshore Terminal Ltd v Leo Ocean SA (CMI446).

The appellants appealed to the Federal Court of Appeal. The appellants argued that their agreement to the first LOU preventing them from arresting a sister ship was not binding on them and that s 43(8) of the Federal Courts Act allowed them to arrest sister ships of the vessel to obtain additional security for their claim.

The appellants argued that the Judge erred in concluding that the appellants could not arrest more than one ship. The Judge did not give s 43(8) of the Act a ‘fair, large and liberal construction and interpretation’ as required by s 12 of the Interpretation Act, RSC 1985, c I-21, but read s 43(8) down so as to accord with the Arrest Convention 1952, which provides that a claimant can arrest either the ‘offending ship’ or ‘any other ship’ owned by the owner of the offending ship. To the contrary, Canada enacted legislation, ie s 43(8), which imposes no limit on the number of ships which a claimant can arrest to secure his claim.

The appellants referred to the decision in Norcan Electrical Systems Inc v FB XIX (The) [2003] 4 FC 938 and the works of Professor William Tetley for the proposition that under Canadian law more than one ship can be arrested by a claimant to secure the same claim.

Held: The Court of Appeal dismissed the appeal. The Court agreed with the conclusion and the reasoning of the Judge, preferring the view based on UK authority ‘and such Canadian authority as currently exist’ that multiple ships arrest are not permissible under Canadian law.

However, the Court opined that the true question on appeal was not whether s 43(8) confers a right of multiple arrests but whether the Federal Court could exercise its jurisdiction in rem both under ss 43(2) and 43(8) with respect to the same claim and issue more than one warrant of arrest.

The Court held that the appellants could either proceed under s 43(2) to secure the vessel’s arrest or under s 43(8) to secure the sister ship’s arrest. Having elected to proceed under s 43(2), the appellants are barred from seeking an arrest under s 43(8). It is permissible to name more than one ship in a statement of claim in rem. However, in Canada, only one ship can be served with the statement of claim in rem and arrested. Until a ship is served with the statement of claim in rem and is arrested (inevitably the service of the action and the arrest of the ship occur simultaneously), the Court’s jurisdiction in rem is not exercised (Owners of Cargo Lately Laden on Board the Berny v Owners of the Berny [1979] QB 80).

The Court opined that Parliament, in enacting s 43(8), intended to confer upon claimants in Canada the right to arrest a sister ship in lieu of the offending ship. Parliament did not intend for the Federal Court to exercise its jurisdiction in rem under both s 43(2) and s 43(8) for the same claim. Although the word ‘or’ does not appear in s 43, it is difficult to see how the provisions can be read otherwise. The fact that Canada did not adopt the Arrest Convention 1952 does not militate in favour of concluding that Canada intended to go its separate way with regard to ship arrests.

Although there is no direct Canadian authority interpreting ss 43(2) and 43(8), other than the Judge’s decision, the Court found considerable support in Elecnor SA v Soren Toubro (The) [1996] 3 FC 422. In that case, the shipowners sought to set aside an order extending the time for a claimant to arrest the offending ship beyond the twelve months, prescribed by the Federal Courts Rules, SOR/98-106, of issuing the statement of claim on the basis that a sister ship had been in the port of Vancouver in May and June 1995. The shipowners argued that the claimant, in seeking the extension, had failed to inform the Prothonotary of its presence in Canada during the initial period. The Respondents further argued the claimant was barred from seeking the extension having failed to name in its action the sister ship, which had entered the jurisdiction, and to arrest her. The Prothonotary rejected the Respondents’ application to set aside. First, s 43(8) was permissive and not mandatory. A plaintiff could sue a sister ship but did not have to. Further, s 43 of the Act paralleled the Arrest Convention 1952 in that a claimant 'may arrest either the wrongdoing ship or a sister ship in respect of certain maritime claims.'  The implication was that a claimant must be extremely careful in proceeding against a sister ship lest its value may be less than the offending ship since a claimant cannot arrest both an offending ship and its sister ship.

Reading s 43 that a claimant must proceed under either s 43(2) or 43(8), not only accords with the Arrest Convention 1952 but also accords with Parliamentary intention when it enacted s 43(8): to grant claimants in Canada an alternative when the offending ship was not available in Canada for arrest or where its value was insufficient to secure the claim. Had Parliament intended to break rank with the international maritime community on the right of arrest, and depart from accepted practice, s 43 would no doubt have been worded very differently so as to make clear that, in Canada, claimants were not restricted to one vessel to secure their claim.