Kremikovtzi Trade v. Phoenix Bulk Carriers Ltd.

Kremikovtzi Trade v. Phoenix Bulk Carriers Ltd. Court (s) Database Federal Court of Appeal Decisions Date 2006-01-06 Neutral citation 2006 FCA 1 File numbers A-409-05 Notes Reported Decision Decision Content Date: 20060106 Docket: A-409-05 Citation: 2006 FCA 1 CORAM: NADON J.A. SHARLOW J.A. MALONE J.A. BETWEEN: KREMIKOVTZI TRADE also known as KREMIKOVSKI TRADE Appellant and PHOENIX BULK CARRIERS LIMITED, THE CARGO OF COAL loaded on the Ship "M/V SWIFT FORTUNE" and THE OWNERS OF THE CARGO AND ALL OTHERS INTERESTED IN THE CARGO OF COAL loaded on the Ship "M/V SWIFT FORTUNE" Respondents Heard at Ottawa, Ontario, on October 5, 2005. Judgment delivered at Ottawa, Ontario, on January 6, 2006. REASONS FOR JUDGMENT BY: NADON J.A. CONCURRED IN BY: SHARLOW J.A. MALONE J.A. Date: 20060106 Docket: A-409-05 Citation: 2006 FCA 1 CORAM: NADON J.A. SHARLOW J.A. MALONE J.A. BETWEEN: KREMIKOVTZI TRADE also known as KREMIKOVSKI TRADE Appellant and PHOENIX BULK CARRIERS LIMITED, THE CARGO OF COAL loaded on the Ship "M/V SWIFT FORTUNE" and THE OWNERS OF THE CARGO AND ALL OTHERS INTERESTED IN THE CARGO OF COAL loaded on the Ship "M/V SWIFT FORTUNE" Respondents REASONS FOR JUDGMENT [1] This is an appeal from a decision of Rouleau J. of the Federal Court, dated September 15, 2005, which dismissed the appellant's motion for an order striking the respondent Phoenix Bulk Carriers Ltd.'s ("Phoenix") Statement of Claim in rem and setting aside the warrant of arrest of the cargo. [2] The appeal raises an issue of interpretation concerning section 43 of the Federal Court Act, R.S. 1985, c. F-7 (the "Act"), and, in particular, of subsection 43(2), which provides as follows: 43. (1) Subject to subsection (4), the jurisdiction conferred on the Federal Court by section 22 may in all cases be exercised in personam. (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. (3) Despite subsection (2), the jurisdiction conferred on the Federal Court by section 22 shall not be exercised in rem with respect to a claim mentioned in paragraph 22(2)(e), (f), (g), (h), (i), (k), (m), (n), (p) or (r) unless, at the time of the commencement of the action, the ship, aircraft or other property that is the subject of the action is beneficially owned by the person who was the beneficial owner at the time when the cause of action arose. [Emphasis added] 43. (1) Sous réserve du paragraphe (4), la Cour fédérale peut, aux termes de l'article 22, avoir compétence en matière personnelle dans tous les cas. (2) Sous réserve du paragraphe (3), elle peut, aux termes de l'article 22, avoir compétence en matière réelle dans toute action portent sur un navire, un aéronef ou d'autres biens, ou sur le produit de leur vente consigné au tribunal. (3) Malgré le paragraphe (2), elle ne peut exercer la compétence en matière réelle prévue à l'article 22, dans le cas des demandes visées aux alinéas 22(2)e), f), g), h), i), k), m), n), p) ou r), que si, au moment où l'action est intentée, le véritable propriétaire du navire, de l'aéronef ou des autres biens en cause est le même qu'au moment du fait générateur. [Le souligné est le mien] [3] Subsection 22(1) and paragraph 22(2)(i) of the Act are also of relevance to the issue in this appeal. They read as follows: 22. (1) The Federal Court has concurrent original jurisdiction, between subject and subject as well as otherwise, in all cases in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, except to the extent that jurisdiction has been otherwise specially assigned. (2) Without limiting the generality of subsection (1), for greater certainty, the Federal Court has jurisdiction with respect to all of the following: ... (i) any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise; [Emphasis added] 22. (1) La Cour fédérale a compétence concurrente, en première instance, dans les cas - opposant notamment des administrés - où une demande de réparation ou un recours est présenté en vertu du droit maritime canadien ou d'une loi fédérale concernant la navigation ou la marine marchande, sauf attribution expresse contraire de cette compétence. (2) Il demeure entendu que, sans préjudice de la portée générale du paragraphe (1), elle [la Cour fédérale] a compétence dans les cas suivants : [...] i) une demande fondée sur une convention relative au transport de marchandises à bord d'un navire, à l'usage ou au louage d'un navire, notamment pour charte-partie; [Le souligné est le mien] [4] These proceedings arise from the alleged breach of a contract of affreightment dated July 22, 2005, pursuant to which the appellant agreed to ship on the respondent Phoenix's ship, the "FAR EASTERN MARINA", a cargo of approximately 70,000 to 75,000 metric tons of coal (the "cargo") for carriage from Vancouver, Canada, to Bourgas, Bulgaria. [5] Phoenix says that in breach of its contractual obligations, the appellant entered into a contract with the owners of the ship "SWIFT FORTUNE" and loaded its cargo on that ship between September 3 and 5, 2005 in Vancouver. [6] On September 13, 2005, Phoenix filed a Statement of Claim in rem against the aforesaid cargo and in personam against the owners of the cargo and all others interested therein, and on that day, caused the cargo to be arrested while on board the "SWIFT FORTUNE" in Vancouver. [7] On September 14, 2005, the appellant applied to the Federal Court for an order striking the Statement of Claim in rem and setting aside the warrant of arrest, and on September 15, 2005, Rouleau J. dismissed the appellant's motion. This is the judgment appealed from. [8] I should point out that as the underlying motion before this Court is a motion to strike, pursuant to Rule 221 of the Federal Courts Rules, I have assumed without deciding that the appellant was, at all times material to this appeal, the owner of the cargo or its beneficial owner. Whether or not this assumption turns out to be correct will be one of the issues which will have to be decided at the trial. [9] The appellant makes a number of submissions as to why the order of Rouleau J. should be set aside. For the reasons that follow, I need only address one of these submissions, which, in my view, is sufficient to dispose of the appeal in the appellant's favour. [10] The appellant says that, on the facts of this case, Phoenix could not commence proceedings in rem against the cargo of coal and, hence, that the cargo could not be arrested. In making that submission, the appellant relies on this Court's decision in Paramount Enterprises International Inc. v. "AN XIN JIANG", [2001] 2 F.C. 551, and says that there is nothing to distinguish Paramount, supra, from the case before us. I agree. [11] The issue in Paramount, supra, was whether, as in the case before us, failure to deliver cargo to a nominated vessel could lead to the arrest of the intended cargo by the owners and/or operators of the nominated vessel. [12] In Paramount, supra, the shipper of the goods, Beston Chemical Corporation, had agreed with Paramount Enterprises to ship onto the latter's vessel "LEN SPEER" a cargo of explosives for carriage from China to Grande Anse, Quebec. In compliance with its obligations under the aforesaid agreement, Paramount took steps to present its vessel at the port of loading between April 10 and April 12, 1997. However, prior to the vessel's arrival at the port of loading, Beston informed Paramount that its cargo of explosives would not be loaded on board the "LEN SPEER", but rather would be loaded on the ship "AN XIN JIANG", owned and/or operated by a different entity. [13] As a result, Paramount commenced, inter alia, proceedings in rem against both the cargo and the ship "AN XIN JIANG" in the Federal Court, alleging a breach of the contract of affreightment by the owners of the cargo and wrongful interference with their contract of affreightment by the owners of the "AN XIN JIANG". [14] On May 9, 1997, a warrant of arrest was issued and served against both the cargo and the "AN XIN JIANG". [15] The defendants filed a motion seeking an order striking the Statement of Claim in rem and setting aside the warrant of arrest. The motion was heard by Prothonotary Morneau who, on September 30, 1997, allowed the defendants' application in its entirety. This decision is reported at (1997), 146 F.T.R. 161. [16] Paramount appealed Prothonotary Morneau's decision and, on December 17, 1997, Madam Justice Tremblay-Lamer allowed Paramount's appeal in part. In her view, the Prothonotary had erred in striking the action in rem against the cargo and, hence, in setting aside the warrant for its arrest. This decision is reported at (1997), 147 F.T.R. 162. [17] Beston appealed Madam Justice Tremblay-Lamer's decision and, on December 15, 2000, this Court restored the Prothonotary's Order. [18] A brief overview of the reasons underlying the decisions of Prothonotary Morneau and Madam Justice Tremblay-Lamer will be useful before reviewing this Court's decision in Paramount, supra. As we are not concerned in this appeal with the arrest of the ship on which the cargo originally intended for the "FAR EASTERN MARINA" was loaded on, i.e. the "SWIFT FORTUNE", I will omit from my discussion of Paramount, supra, those parts of the decisions which deal with the arrest of the vessel "AN XIN JIANG". [19] The Prothonotary began his analysis by stating that an action in rem could only be brought against a ship or cargo if the ship or cargo were "covered by the agreement on which the plaintiffs' action is based" (Paragraph 10 of his Reasons). He then proceeded to apply that principle to the facts before him, which led him to conclude that the requirements of subsection 43(2) of the Act had not been met because the cargo of explosives was not "property that was the subject of the action". In his view, there was not a sufficient connection between Paramount and the cargo over which it sought to exercise in rem rights, because the cargo had neither been loaded on board the "LEN SPEER" nor had it been carried by that ship. [20] Madam Justice Tremblay-Lamer did not agree with the position taken by the Prothonotary regarding the in rem action against the cargo and, as a result, she set aside that part of his Order. The essence of her reasoning appears in paragraphs 24 and 28 of her Reasons, where she states: [24] In the instant case, subsection 43(2) is not ambiguous. The word "property" is clearly defined in section 2 of the Act. It refers to "property of any kind, whether real or personal or corporeal or incorporeal, and, without restricting the generality of the foregoing, includes a right of any kind, a share or a chose in action". Subsection 43(2) therefore allows an action in rem against a cargo, which is personal property. The language does not require either that the cargo be on board or not on board a ship, or that there be a maritime or possessory lien in order to file an action in rem against the cargo. If Parliament had intended to impose such a requirement, it would have expressly so indicated in the Act. ... ... [28] Thus, under subsection 43(2), it is sufficient that the cargo be the subject of the action in order for the plaintiff to exercise its rights in rem, as it has done in the instant case. The plaintiff's action arose out of the defendants' failure to fulfil the contractual obligations under the Conlinebooking charter-party. The cargo of dynamite was the actual subject of that charter-party. In addition, the plaintiff had started to perform its contractual obligations. ... [21] As I indicated earlier, our Court, in Reasons delivered by Décary J.A., restored the Order of Prothonotary Morneau. In Décary J.A.'s view, as it could not be said that the cargo of explosives was the subject of Paramount's action, no rights in rem could be exercised against the cargo and, hence, it necessarily followed that the Statement of Claim in rem had to be struck and the warrant of arrest quashed. [22] Décary J.A.'s ultimate conclusion stems from the following rationale. Firstly, he acknowledges that there is no issue before the Court regarding the Federal Court's jurisdiction, as Paramount's claim is, without doubt, one that arises out of an agreement, i.e. a charter-party in the Conlinebooking form, which relates to the carriage of goods in or on a ship. Thus, the claim clearly falls under paragraph 22(2)(i) of the Act. [23] Décary J.A. also acknowledges that since the words "other property" found in subsection 43(2) encompass cargo, an action in rem can be brought against that type of property. [24] After stating that to the extent that the cargo is not the "subject of the action" the action in rem will be struck, Décary J.A. then proceeds to examine the meaning of those words which, in his view, must be examined in terms of "the field of jurisdiction applicable in a specific case" (paragraph 17 of his Reasons), i.e. in the case before him, subsection 22(2)(i) of the Act. [25] He then poses, at paragraph 23 of his Reasons, the question which must be answered: "... [c]an it be said of this claim, which 'arises out of' a charter-party, that its 'subject' is the ship and the cargo, so as to permit an action in rem? Put otherwise, are the ship and cargo the 'subject' or the 'cause' of the action?" [26] A review of the words "arising out of" found in paragraph 22(2)(i) and the words "the subject of the action" found in subsection 43(2) lead Décary J.A. to observe that the words found in subsection 43(2) are narrower in scope than the words found in paragraph 22(2)(i). He then states that the words "the subject of the action" imply that the property arrested has to be the "cause of" the action and, hence, that there has to be a connection between the property under arrest and the cause of action. He then states, at the end of paragraph 24 of his Reasons that "... [i]n my opinion, it must be possible to say that it is the use of this ship or the carriage of this cargo that justifies the action in rem brought against the property arrested". [27] He then applies these principles to the facts before him and concludes that the cargo is not "the subject of the action", which, in his view, is the charter-party and the personal actions of the defendants. Although he recognizes that the charter-party pertains to the cargo under arrest, he is of the view that that does not constitute a sufficient connection, since "... the only nexus existing between the action and the cargo is the fact that it was this cargo which would have been transported if the contract had been carried out" (paragraph 28 of his Reasons). To buttress his position, he then indicates that the contract had not been carried out, that carriage had never begun, that the cargo had not been the subject of a maritime lien, and that Paramount had never been in possession of the cargo. Further, he adds that the cargo has not caused any damage, that it has not received any benefit and that it has not been involved in any incident relating to the action. [28] Paragraphs 22, 23, 24, 28 and 29 of Décary J.A.'s Reasons, which provide the essence of his analysis, read as follows: 22] Section 43(2) does not permit an action in rem in every case where the Court has jurisdiction under s. 22. If that had been the case, Parliament, in referring to the action in rem, would have used the general terms it used in s. 43(1) in respect of the action in personam. The very wording of s. 43(2) indicates that the action in rem is only possible, by definition, in a field of jurisdiction covered by s. 22, if the "subject" of the action is the ship or cargo (to simplify matters, I exclude aircraft or property other than cargo). [23] In the case at bar the jurisdiction of the Court relied on by Paramount is that described in s. 22(2)(i), that is "any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise". The parties here agreed that Paramount's claim was based on such an agreement and that the Court accordingly has jurisdiction which it may exercise by an action in personam under s. 43(1). Can it be said of this claim, which "arises out of" a charter-party, that its "subject" is the ship and the cargo, so as to permit an action in rem? Put otherwise, are the ship and cargo the "subject" or the "cause" of the action? [24] The words "fondée"/ "arising out of" in s. 22(1)(i) are broad in scope (see Cormoran Bulk-Carriers Inc. v. Canficorp (Overseas Projects) Ltd. (1984), 54 N.R. 66, at 78 (F.C.A.)). The words "portant sur"/"subject of" in s. 43(2) have a more limited meaning. They imply that the property arrested is "the cause of" the action (as s. 43(3) puts it so clearly), and thus that there is some connection between the property arrested and the cause of action. In my opinion, it must be possible to say that it is the use of this ship or the carriage of this cargo that justifies the action in rem brought against the property arrested. ... [28] Paramount's action in rem against the Beston cargo is based on an allegation of a contractual nature that Beston did not perform the charter-party. It is true that this contract related to that cargo, but the only nexus existing between the action and the cargo is the fact that it was this cargo which would have been transported if the contract had been carried out. The contract was not carried out, the carriage never began, the cargo was not subject to a maritime lien and Paramount was never in possession of the cargo. The cargo as such did not cause any damage, it did not receive any benefit and it was not involved in any incident relating to the action. The action for breach of contract, if it is to succeed, will succeed regardless of whether the cargo was carried or not and, if it was carried, regardless of the ship carrying it. Allowing seizure of the cargo in the case at bar would be to allow the seizure of any property owned by a defendant even where no property is the subject of the action. [29] In short, I have come to the conclusion that there is no "nexus or causal relationship" between the action and the ship and cargo arrested such that it can be said that the ship or cargo is the "subject" of the action. The subject of the action is the charter-party and the personal actions of the defendants. If there is a nexus between the action and the ship and cargo arrested, it is "merely incidental or fortuitous", to use the words of Major J. [29] Phoenix takes the position that Paramount, supra, can be distinguished. Unfortunately, I see no merit in this submission. In my view, there are no distinguishing factors between Paramount, supra, and the present case. To the contrary, the factual situation in both cases is, for all intents and purposes, identical. [30] In the alternative, Phoenix submits that if Paramount, supra, cannot be distinguished, we should reconsider the meaning of the expression "subject of the action" found in subsection 43(2) of the Act. In other words, Phoenix is asking us to overturn Paramount, supra. [31] In a number of recent decisions, different panels of this Court have clearly indicated that we would not overrule a prior decision unless the decision was manifestly wrong, i.e. that the Court had overlooked a relevant statutory provision or a case that ought to have been followed. [32] In Miller v. Canada (A.G.), 2002 FCA 370, October 7, 2002, at paragraphs 8, 9 and 10, the Court explained its approach in the following terms: [8] There is no doubt that this Court may overrule its own decisions. However, the values of certainty and consistency lie close to the heart of the orderly administration of justice in a system of law and government based on the rule of law. Accordingly, one panel of this Court ought not to depart from a decision of another panel merely because it considers that the first case was wrongly decided. The Supreme Court of Canada will normally be the appropriate forum for correcting the errors of intermediate courts of appeal. [9] The jurisprudence on the overruling of prior decisions was reviewed by Urie J.A. in M.E.I. v. Widmont, [1984] 2 F.C. 274 at 278-282 (C.A.), and his comments have been approved in subsequent cases: see, for example, Eli Lilly and Co. v. Novopharm Ltd. (1996), 197 N.R. 291 at 293 (F.C.A.). To summarize, the jurisprudence cited by Urie J.A. holds that, in the interests of certainty and consistency, sound judicial administration requires that, save in exceptional circumstances, a Court of intermediate appellate jurisdiction should follow its prior decisions. The Court is responsible for the stability, consistency and predictability of the law. [10] The test used for overruling a decision of another panel of this Court is that the previous decision is manifestly wrong, in the sense that the Court overlooked a relevant statutory provision, or a case that ought to have been followed: see, for example, Eli Lilly and Co., and Janssen Pharmaceutica Inc. v. Apotex Inc. (1997), 208 N.R. 395 at 396 (F.C.A.). The same test has been applied by provincial Courts of Appeal: see, for example, R. v. White (1996), 29 O.R. (3d) 577 at 604-05 (C.A.); Bell v. Cessna Aircraft Co. (1983), 149 D.L.R. (3d) 509 at 511 (B.C. C.A.); R. v. Grumbo (1988), 159 D.L.R. (4th) 577 at para. 21 (Sask.C.A.); and Lefebvre c. Québec (Commission des Affaires Sociales) (1991), 39 Q.A.C. 206. [33] In Mathew v. Canada, 2003 FCA 371, October 7, 2003, Wannan v. Canada, 2003 FCA 423, 12 November 2003, M.C.I. v. Amado-Cordeiro, 204 FCA 120, 22 March 2004, panels of this Court have reiterated the principles enunciated in Miller, supra. [34] Consequently, in order to successfully argue that a prior decision of this Court should be overturned, it will not suffice to simply argue, as Phoenix argues before us, that the prior case was wrongly decided. I have therefore not been persuaded that Paramount, supra, is one of those exceptional cases where this Court will overturn a decision of another panel. [35] Before concluding, however, I wish to add that were I not bound by Paramount, supra, I would have been inclined to decide the issue in favour of Phoenix. Since I suspect that the issue before us is of some importance to the maritime community and, hence, that leave to appeal to the Supreme Court of Canada might be sought, it will be useful for me to elaborate as to why I believe Paramount, supra, was wrongly decided. [36] The question to be answered, as in Paramount, supra, is whether the cargo is the "subject of the action" within the meaning of subsection 43(2) of the Act. I must say at the outset that I agree entirely with Madam Justice Tremblay-Lamer's interpretation of subsection 43(2) and, in particular, when she states, at paragraph 24 of her Reasons, that the subsection is not ambiguous. In her view, the subsection cannot be read as requiring, for the exercise of the in rem jurisdiction, that the cargo be loaded on board the ship, that it be carried or that there be in existence a maritime or possessory lien. The fact that the contract of affreightment pertains to the carriage of the cargo under arrest and that that contract has allegedly been breached, is sufficient to render the cargo "the subject of the action" within the meaning of subsection 43(2). [37] I am satisfied that Madam Justice Tremblay-Lamer's approach constitutes the correct interpretation of subsection 43(2) of the Act. I therefore make mine her reasoning and would only add the following remarks. [38] In my view, Décary J.A. has taken too narrow a view of the words "subject of the action". To say, as he does, that the contract of carriage itself and the personal actions of the defendant are the "subject of the action", rather than the cargo, is, in my respectful opinion, a distortion of the plain meaning of those words. [39] Décary J.A. uses the words of paragraph 22(2)(i) to limit the scope of application of the words in subsection 43(2). After stating that the words "arising out of" are broad in scope and that the words "subject of" have a narrower meaning, he comes to the view that the property to be arrested under subsection 43(2) must be the "cause of the action". This leads him to the conclusion that in order to justify an arrest of property, it must somehow be possible to conclude that "it is the use of this ship or the carriage of this cargo" that justifies the action in rem brought against the property arrested. [40] In my view, there is simply no basis for that approach. In other words, I cannot see any rationale for interpreting the words "subject of the action" by reference to the words "arising out of" found in paragraph 22(2)(i). In proceeding as he did, Décary J.A. did not give the words "subject of the action" their plain meaning. One of the definitions given in the Shorter Oxford Dictionary, 3d edition, 1973, at page 2167 of the word "subject" is: "That which forms or is chosen as the matter of thought, consideration, or inquiry; a topic, theme". I find this definition to be most apposite. On the basis of this broad definition, I see no basis for limiting the scope of the words "subject of the action". I therefore cannot see how it can be argued that to be the "subject of the action", the cargo or other property has to be the cause of the action. [41] Paragraph 22(2)(i) simply provides that the Federal Court has concurrent original jurisdiction with respect to claims which arise out of agreements relating to the carriage in or on a ship, or to the use or hire of such a ship. Once a claimant has crossed that hurdle, he may then, pursuant to subsections 43(1) and (2), ask the Federal Court to exercise its jurisdiction in personam and in rem. In the case of in personam actions, the Court may exercise its jurisdiction in all cases which fall under section 22. In the case of subsection 43(2), the Court may exercise its jurisdiction in rem if the property against which a claimant seeks to exercise its in rem rights is the "subject of the action" The only exception to this rule is the one enunciated in subsection 43(3), which provides that certain claims which fall under the Court's maritime jurisdiction under section 22 cannot be exercised in rem unless, at the time of the commencement of the action, the ship or property "... that is the subject of the action is beneficially owned by the person who was the beneficial owner at the time when the cause of action arose". [42] It should be noted, however, that certain claims can be exercised in rem, notwithstanding a change in the beneficial ownership of the ship and/or cargo sought to be arrested. For example, the claims falling under paragraphs 22(2)(i) and (o) of the Act, i.e. claims for salvage and for crew wages, can be exercised in rem, notwithstanding a change in beneficial ownership. I have deliberately taken these two examples because both of these claims fall under the category of maritime liens, which Professor William Tetley, Q.C., has defined in the following terms in Arrest, Attachment, and Related Maritime Law Procedures, Tulane Law Review, Vol. 73, Nos. 5-6, 1999, Tulane Law Review Association, at pages 1909 and 1910: ... Maritime liens arise with the claims that they secure without any registration, notification, or other formalities, they are independent of possession and follow the ship into whoever's hands it passes (therefore surviving a sale of the ship by mutual agreement, although not a judicial sale); and they rank immediately after special legislative rights, the costs of arrest and judicial sale and custodia legis expenses and prior possessory liens. They therefore take precedence over ship mortgages and hypothecs in the distribution of the proceeds of the judicial sale of the arrested res. Under English maritime law, maritime liens are limited to salvage, damage, seamen's and master's wages, master's disbursements, bottomry, and respondentia (the last two being virtually obsolete). [43] Although Professor Tetley, in the above passage, is dealing with English law, there are no relevant distinctions to be made insofar as Canadian law is concerned (See Tetley, supra, pages 1920 to 1924). [44] Thus, once it has been determined that the action relates to an agreement which falls within the purview of section 22, the enquiry then turns to what constitutes the subject of that particular action. The plaintiffs, both in Paramount, supra, and in the case before us, were suing cargo owners who had allegedly refused, notwithstanding their contractual obligations, to ship their cargo on board the plaintiffs' vessels. As a result, they proceeded to arrest the cargo which was at the very heart of the contract. It should not be forgotten that both actions were concerned with loss of profits on the freight which would have been earned had the cargo owners fulfilled their contractual undertakings. In the case before us, the freight, which includes a component of profit, was payable per metric ton. Indeed, the fixture recap provided that freight was USD $24.25 per metric ton. That amount bears a direct relation to the amount of coal which should have been loaded on the nominated vessel. Consequently, in this light, I have great difficulty with Décary J.A.'s view that there is not a sufficient connection between the property under arrest and the cause of action. [45] It would be difficult to characterize the cargo under arrest as anything but the "subject of the action". In my view, it is not possible to separate the cargo from the action, by reason of the existence of a close nexus between the breach of contract and the cargo. [46] Needless to say, I disagree with Décary J.A.'s assertion that there is some relevance to the fact that the cargo was never loaded on board the intended ship, nor that it was not subject to a maritime or possessory lien. The only relevant question is whether the property sought to be arrested is the "subject of the action". [47] I am therefore of the view that subsection 43(2) does not require a physical nexus between the cargo and the vessel in order to give rise to in rem rights. Rather, subsection 43(2) proposes identifiability of the property as the controlling factor so as to ensure that the scope of the in rem proceedings is not unduly enlarged. In other words, the action in rem must relate to the specific property contemplated in the contract at issue. To the extent that the cargo can be clearly identified as being the one contemplated under the contract, the breach of which is alleged by Phoenix in its Statement of Claim (as was alleged by Paramount in Paramount, supra), the cargo under arrest is the "subject of the action". I should emphasize that there is no issue in this appeal with regard to the identity of the cargo arrested by Phoenix. [48] In conclusion, in view of this Court's decision in Paramount, supra, and notwithstanding my own view of subsection 43(2) of the Act, I would allow the appeal with costs in this Court and in the Federal Court, set aside the warrant of arrest and strike the in rem Statement of Claim. I would also order that the security posted in the trust account of Bromley Chapelski, the appellant's solicitors, be released to the appellant, but not before the expiry of a delay of 60 days from the date of the Judgment. "M. Nadon" J.A. "I agree. K. Sharlow J.A." "I agfree. B. Malone J.A." FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKET: A-409-05 (Appeal from an Order of the Federal Court, dated September 15, 2005, in Court file T-1558-05) STYLE OF CAUSE: KREMIKOVTZI TRADE - v - PHOENIX BULK CARRIERS LTD. et al PLACE OF HEARING: OTTAWA, ONTARIO DATE OF HEARING: October 4, 2005 REASONS FOR JUDGMENT BY: NADON J.A. CONCURRED IN BY: SHARLOW J.A. MALONE J.A. DATED: January 6, 2006 APPEARANCES: Mr. J.W. Berrett FOR THE APPELLANT Mr. Jean-Marie Fontaine FOR THE RESPONDENTS SOLICITORS OF RECORD: Bromley Chapelski, Barristers & Solicitors Vancouver, B.C. FOR THE APPELLANT Borden Ladner Gervais LLP Montreal, Qc FOR THE RESPONDENT