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Bow, McLachlan & Company Ltd v Camosun (Ship)

The Law Reports Cited in 36 Precedent Map Related
Vincent
JurisdictionUK Non-devolved
Judgment Date1909
Date1909
CourtPrivy Council
[PRIVY COUNCIL.] BOW, MCLACHLAN & CO., LIMITED PLAINTIFFS; AND THE SHIP “CAMOSUN” AND THE UNION STEAMSHIP COMPANY OF BRITISH COLUMBIA, LIMITED DEFENDANTS. ON APPEAL FROM THE SUPREME COURT OF CANADA. 1909 May 3; July 23. LORD LOREBURN L.C., LORD ASHBOURNE, LORD JAMES OF HEREFORD, LORD GORELL, and LORD SHAW.

Exchequer Court of Canada (Admiralty) - Extent of Jurisdiction - Suit to enforce Mortgage of a Ship - Admiralty Court Act, 1861 (Imperial), s. 11 - Plea of Set-off - Damages for Breach of Building Contract.

The Exchequer Court of Canada was constituted by the Exchequer Court Act (50 & 51 Vict. c. 16) (Dominion) for the purpose of dealing with matters in which the Crown was concerned (ss. 15 and 16) and has no general common law jurisdiction. It has also under the Colonial Courts of Admiralty Act, 1890 (53 & 54 Vict. c. 27) (Imperial), and the Admiralty Act, 1891 (54 & 55 Vict. c. 29) (Dominion), jurisdiction in Admiralty, including its statutory extensions.

In an action in rem by the appellants in the said Court, British Columbia Admiralty District, to enforce payment of the balance due on the mortgage of a ship, granted in respect of the price of construction, which it was agreed should be treated as money lent, the respondents, the registered transferees of the ship, pleaded by way of equitable defence that they were entitled to set of I a cum of money expended by them, which was sufficient to prevent their being in default under the mortgage at the date of the action. It appeared that the set-off was claimed as a defence pro tanto so far as it was for a diminution in value of the ship by reason of its having been built negligently and defectively and not in accordance with contract:—

Held, that under the Admiralty jurisdiction as it formerly existed neither appellants nor respondents could have enforced their claims in an Admiralty Court. But s. 11 of the Admiralty Court Act, 1861, extends that jurisdiction so as to include the claim of the appellants, which was in respect of a mortgage duly registered under the Merchant Shipping Act; while the respondents' defence, though pleaded by way of set-off, in reality involved a cross-claim for unliquidated damages under a contract distinct from the mortgage cued upon, which the Court had no jurisdiction to entertain whether the claim was against the ship or the plaintiffs.

APPEAL from a judgment of the Supreme Court of Canada (June 16, 1908) affirming a judgment of the Exchequer Court of Canada (January 7, 1908), which affirmed a judgment of Martin J., the local judge in Admiralty for British Columbia (September 25, 1907), who overruled the plaintiffs' demurrer or objections in law to a plea in defence. The question decided in this appeal is whether in an action in rem brought in the Exchequer Court of Canada in Admiralty to enforce a registered mortgage of a British ship the owners of the ship can by way of defence set off a claim for unliquidated damages against the mortgagee for alleged breach of contract relating to the building of the ship.

The facts of the case and the course of the litigation are set out in their Lordships' judgment. In paragraph 7 of the amended defence the respondents alleged that the appellants did not build the mortgaged ship in accordance with the terms of the contract plans and specifications relating thereto, but, on the contrary, the said ship was built by the appellants negligently and with defective work and materials and not in accordance with the requirements of Lloyd's 100 A1 class and the Board of Trade, nor in accordance with the plans and specifications of the same, with the result that the respondents were forced to expend in repairing and replacing defective materials and bad workmanship and in making the said ship comply with the requirements of Lloyd's 100 A1 class and the Board of Trade, and in repairing and renewing fittings, decorations, furniture, and stores damaged through leaking decks and hull and other defective materials and workmanship, and other incidental expenses, the sum of 3638l., and they claimed that they were entitled to set off and deduct from any money which might be payable by them to the appellants the said sum of 3638l. so expended by them with interest and costs.

In the Supreme Court Fitzpatrick C.J. dissented from the judgment of the majority, but without stating any reasons. Davies J., “though entertaining many doubts,” held that the appeal should be dismissed, but, in view of the particulars given by the respondents of the set-off, he desired to emphasize the limitation of their right, if the plea in paragraph 7 was established, to a deduction of the difference in value at the time of the delivery between the ship as she was and as she ought to have been according to the contract, but not of any special or consequential damages or any damages on account of any subsequent necessity for more extensive repairs. Idington J., after referring to the same limitation on the amount which could be set off, held that by virtue of s. 11 of the Admiralty Court Act, 1861, conferring on the High Court of Admiralty in England Admiralty jurisdiction “over any claim in respect of any duly registered mortgage,” and s. 24, sub-s. 2, of the Judicature Act, 1873, as to the concurrent administration of the rules of law and equity in every civil cause commenced in the High Court, the Exchequer Court of Canada had on its Admiralty side power to give effect to any equitable defence. He considered that the set-off pleaded in paragraph 7 was an equitable defence, because if the vessel was not constructed in accordance with the building contract there was a failure of part of the consideration for which the mortgage was given, and the Court would in these circumstances have power to reduce accordingly the amount recoverable under the mortgage. Duff J. also concurred, subject, however, to the observation that the right of the respondents to obtain any abatement of the price might depend on whether any such right was allowed by the law of Scotland. If it depended on the law of England or of British Columbia, their right to abatement would be limited to the extent referred to in the judgment of Davies J.

Sir R. Finlay, K.C., and C. R. Dunlop, for the appellants, contended that the Exchequer Court had no jurisdiction or power to give effect to a claim pleaded as a set-off when it had no jurisdiction to entertain it if made the ground of a counter-claim or cross-action. The Court had not the general or common law jurisdiction of the High Court in England. The Admiralty jurisdiction of the High Court did not include authority to hear a claim for breach of a contract to build a ship in accordance with certain specifications; and the claim put forward in paragraph 7 of the defence could not be described as either legal or equitable set-off. The claim was in rem to enforce a registered mortgage to secure payment of money lent; the alleged set-off was a claim in personam arising out of a contract totally distinct from that of the mortgage. The validity of the mortgage was not disputed and it bound the ship, while the defence had nothing to do with the ship, but raised questions as to the terms of a building contract and their due fulfilment, which could and ought to be adjudicated upon in Scotland, where the appellants reside. Reference was made to Mondel v. SteelF1; Government of Newfoundland v. Newfoundland Ry. Co.F2; Warwick v. NairnF3; Benjamin on Sales, 5th ed., p. 98; and as to the jurisdiction of the Court, to the Exchequer Court Act (Dominion), ss. 15 and 16; Colonial Courts of Admiralty Act, 1890 (53 & 54 Vict. c. 27) (Imperial), s. 2, sub-ss. 1, 2, and s. 3; the Admiralty Act, 1891 (54 & 55 Vict. c. 29) (Dominion), ss. 3, 4, 9, and 25; The CheapsideF4; and r. 63 of the Practice Rules of the Exchequer Court.

Butler Aspinall, K.C., and the Hon. Malcolm Macnaghten, for the respondents, contended that the Exchequer Court had jurisdiction in respect of the claim put forward in the said paragraph 7. By the Canadian Admiralty Act and the Imperial Colonial Courts of Admiralty Act, 1890, the Exchequer Court had jurisdiction over the like places, persons, matters, and things as the Admiralty jurisdiction of the High Court in England, and might exercise it in like manner and to as full an extent as the High Court in England. In a suit between mortgagee and mortgagor the Court will consider the whole transaction between the parties. The action was brought to enforce a security given for the payment of the price of a ship. In order to ascertain the amount due under that security it was necessary to ascertain what amount, if any, was at the date of the issue of the writ legally and properly due thereunder. That amount could not be ascertained without determining whether any and, if so, what amount ought to be set off against the agreed price by reason of the appellants' breach of contract or breach of warranty in and about the construction of the ship. Reference was made to the Sale of Goods Act, 1893, s. 53; The CathcartF5; The Benwell TowerF6; The Innisfallen.F7

Dunlop, in reply.

The judgment of their Lordships was delivered by

[1909 July 23.] LORD GORELL. This appeal raises a question of considerable interest and importance as to the jurisdiction in Admiralty of the Exchequer Court of Canada.

The facts giving rise to the case are these:

The appellants are a shipbuilding company, having their office at Paisley, and in 1904 agreed with the respondent company (hereinafter called the respondents), whose office is at Vancouver, British Columbia, to build a steamship...

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  • Charting Our Own Courses: The Australia, New Zealand, and Singapore Journeys in Maritime Law
    • Australia
    • Australian and New Zealand Maritime Law Journal No. 30-1, June 2016
    • 1 June 2016
    ...at 5. 16 See, eg, Bow, McLachlan & Co Limited v The Ship “Camosun” and the Union Steamship Company of British Columbia Limited [1909] AC 597. 17 Sections 5(1)(a) and (c) Administration of Justice Act 1920. 18 Sections 3 and 4 1890 Act.͒ 19 The Yuri Maru at 914 and 915. (2016) 30 ANZ Mar LJ ......

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