Date: 20040113
Docket: T-283-00
Citation: 2004 FC 40
ADMIRALTY ACTION IN REM AGAINST
THE SHIP "GERTRUDE OLDENDORFF"
AND IN PERSONAM
BETWEEN:
GOODMAN YACHTS LLC
Plaintiff
and
PENGUIN BOAT INTERNATIONAL LIMITED,
MARITIME CLAIMS & SERVICES PTE. LTD.,
RICHARD HOWE,
NEW RESOLUTION SHIPPING CORP.,
EGON OLDENDORFF
and the Owners and all Others Interested in
the Ship "GERTRUDE OLDENDORFF"
Defendants
[1] This action involves the loss of a substantial yacht which was being carried as deck cargo from Singapore to Vancouver, British Columbia at the request of an American owner. The action is subrogated to a Singapore underwriting firm which presents a claim of $1,750,000 (U.S.).
[2] The present motion, brought by the Singapore Defendant, Penguin Boat International Limited ("Penguin") is for additional security for costs in the amount of $100,000.
[3] This litigation is case managed. From my case management perspective I have observed that the litigation has not been easy for any of those involved. This is particularly so from the point of view of Penguin, which at an early stage lost the opportunity, through no fault of its own, to view the object at issue, a failed yacht transport cradle built by Penguin, but designed and approved by another party, the remains of which had been landed at Vancouver by court order for safekeeping. This turn of events has placed an additional burden on Penguin and its counsel.
[4] The Plaintiff, being outside of Canada, with no Canadian assets, Penguin obtained an interim order in February of 2002 for security for costs in the amount of $50,000. That security is in the form of a letter of guarantee from Royal and Sun Alliance, of Canada, a branch of the offshore underwriting company which is subrogated to this claim. The order went on to provide a liberty to apply for further security for costs as the circumstances might warrant.
[5] On this motion Penguin has produced a draft bill of costs, running through to the end of trial, at $161,010.95. It is not a bill of costs for the purpose of taxation, but contains many estimates and that is as should be the case. A motion for security for costs is not a taxation, but rather the determination of such a motion involves a consideration of the general reasonableness of what is sought as security, keeping in mind that a bill of costs presented in the context of security for costs may take a somewhat optimistic approach. Such an approach should not be carried too far, for there is always the prospect that the matter may never go trial or that some costs items will be cut down by the taxing officer at the end of the day.
[6] There is also the balance which must be achieved between reasonable security, on the one hand and prejudice to the party providing the security, on the other hand. Security for costs should not be an uncalled for burden and disincentive for proceeding with legitimate and substantial litigation. However the burden on the Plaintiff is, in this instance, small, for the security is merely a letter of undertaking from a related company, tying up no hard assets.
[7] The bill of costs is presented, as I say, at $161,010.95. While this is not a taxation, there are some items which are unreasonably soft. However in the present context I do not subscribe to the stricter approach by which to question and disallow all but the most firm items in calculating security for costs, advocated by Plaintiff's counsel and as taken by Mr. Justice McKeown in Faulding (Canada) Inc. v. Pharmacia S.P.A. (1997) 138 F.T.R. 73 (F.C.T.D.), which case is limited to security for costs under section 60 of the Patent Act.
[8] Faulding determined what was reasonable security at the time, in the light of security required under section 60 of the Patent Act. In that instance, a Canadian company had challenged the Canadian holder of a patent. In a Faulding situation there is every possibility that the Plaintiff, as a Canadian company, would be available at the end of the day to cover any additional award of costs. That is not the situation in the present instance, for once this action comes to an end, in all likelihood the horse will be long gone: there will be no certainty of any recovery from the American Plaintiff, apparently an importer, from time to time, of yachts.
[9] Nor do I accept the British Columbia case law, bearing upon retention of out of town counsel, within British Columbia, with the result that travel costs of such counsel are apparently disallowed as taxable disbursements. This might well be justified as a cost saving approach in provincial litigation. However that is not necessarily applicable in the case of the Federal Court which, by comparison, has a much broader geographic scope of operation. Thus security for the reasonable travel costs is proper.
[10] The Federal Court has two relevant aspects. First, it is a Canadian court offering its assistance, within its statutory jurisdiction, to all litigants in Canada and the opportunity for those litigants not only to use local registries, but also to retain Canadian counsel from anywhere in Canada. Second, it is in a sense also an international court in that it reaches out to and is available for use by foreign litigants who may either properly bring a Federal Court proceeding in Canada, or be brought into a Canadian proceeding and such litigants, often knowledgeable litigants who have established connections with Canadian law firms should, within reason, be able to select counsel of their own choice, regardless of where in Canada that counsel practises. Nor would it be reasonable to require, in all instances, that a Canadian law firm retain an outside agent or instruct a lawyer from one of its branch offices to handle all matters which might otherwise require counsel to travel. Here I have in mind special circumstances surrounding specific litigation and also the familiarity that outside counsel or counsel from another branch of the firm may lack, both as to the subject matter and as to Federal Court procedure. These observations are general and of course would not apply across the board, particularly at a taxation stage, where a taxing officer might, quite rightly, observe that high-priced counsel from one end of the country ought not to be called upon to deal with low-priced actions at the other end of the country.
[11] As I have indicated the bill of costs provided by Penguin, while generally reasonable, does contain some soft spots. Here I also recognize that the total of the costs, already secured, $50,000, and sought to be secured, $100,000, is some $11,000 less than the $161,010.95 draft bill of costs. In making the best calculation that I am able to make, on the available material, as to reasonableness, I am of the view that this $11,000 allowance is slightly less generous than should be the case. Thus the further security for costs is set at $95,000.
[12] That this successful application might encourage other parties to seek security is not a reason to deny increased security. The floodgates theory, if it ever was a legitimate theory, is not applicable today.
[13] Counsel for the Plaintiff, while agreeing that the cost of the security to the subrogated underwriter is minimal, submitted that the present security for costs ought to be in two stages, one set on the present motion and payable now and, if needed, a second future motion for security for costs to cover matters between the pre-trial conference and the conclusion of the trial. The cost of what would be a third motion for security for costs, which is not in the circumstances required, would be considerable. With these factors in mind the $95,000 in costs, determined at this point, will be provided in two segments. The first segment, $45,000, will be given, in the form of a letter of undertaking similar to that already provided, within forty-five days, failing which the action will be stayed and Penguin may, at that point, apply for a remedy so that the action does not hang over Penguin's head indefinitely.
[14] The second amount of security, $50,000, in similar form, will be payable after the pre-trial conference if at the conference a trial date is sought. It will be up to the judge or prothonotary, conducting any pre-trial conference, to set a timetable, reasonable from the perspectives of both Penguin and the Plaintiff, for the timing of the provision of that security and to set the terms which might apply in the case of a default.
[15] As to the costs of the present motion, I recognize that Penguin has been substantially successful, but not entirely successful and that both sides had proper arguments. Costs will therefore be in the cause.
(Sgd.) "John A. Hargrave"
Prothonotary
FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-283-00
STYLE OF CAUSE: GOODMAN YACHTS LLC
- and -
PENGUIN BOAT INTERNATIONAL LTD., MARITIME CLAIMS & SERVICES PTE. LTD., RICHARD HOWE, NEW RESOLUTION SHIPPING CORP., EGON OLDENDORFF And the Owners and all Others interested in The Ship "GERTRUDE OLDENDORFF"
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: January 12, 2004
ORDER OF: HARGRAVE, P.
APPEARANCES:
Mr. Hein Poulus for DEFENDANT
Mr. Roger Watts for PLAINTIFF
SOLICITORS OF RECORD:
Stikeman Elliott LLP for DEFENDANT
Vancouver
McEwen, Schmitt & Co. for PLAINTIFF
Vancouver