Executive Summary: Key Legal and Evidentiary Issues

• Allied Shipbuilders Ltd. sought default judgment both in rem against the ships "Queen of Diamonds" and "Abitibi" and in personam against Vancouvercruises.com Charters Ltd. for unpaid ship repair invoices totaling $413,291.04 in principal.

• Proper service upon Vancouvercruises was established through a process server who handed the Statement of Claim to Russell Bennett, a director of the corporation, on May 13, 2025.

• The Court found Allied's in rem service deficient because it failed to comply with Rule 479, which requires attaching a certified copy of the statement of claim to a conspicuous part of the ship or, alternatively, demonstrating that access to the vessel could not be obtained.

• Allied's argument to invoke Rule 55 to dispense with compliance with Rule 479 was rejected, as no special circumstances or explanation for the service failure were established.

• Prejudgment interest at the contractual rate of 18% per annum was awarded, while post-judgment interest was set at 5% per annum, consistent with the Court's standard practice in maritime matters.

• Lump sum costs of $5,000.00 were awarded to Allied, representing approximately 25% of actual legal fees plus disbursements, rather than the $10,000.00 sought.

The facts of the case

Allied Shipbuilders Ltd., a ship repair company incorporated under the laws of the Province of British Columbia with an office in North Vancouver, B.C., entered into a verbal agreement in or about March 2024 with Vancouvercruises.com Charters Ltd., also incorporated under the laws of British Columbia with an address at West Vancouver, B.C. The agreement, made between Mr. Russell Bennett and Mr. Chuck S. Ko, President of Allied, concerned Allied supplying necessaries and performing repairs to the ship "Queen of Diamonds," which was owned by Vancouvercruises along with its sistership, the "Abitibi." Both vessels were registered in the Port of Vancouver. The repair work was part of the vessel's obligatory five-year docking and inspection required to maintain compliance with the Canada Shipping Act 2001 and regulations thereunder. Vancouvercruises also hired Lloyd's Register to act as the vessel's Recognized Organization to perform inspections as part of Transport Canada's Delegated Statutory Inspection Program. As with past dealings between Allied and Vancouvercruises, the work on this project was to be performed on a time and materials basis, and Allied's work was directed by Vancouvercruises or Lloyd's Register in its capacity as the Recognized Organization for the Defendant Ship.

The repair work and outstanding invoices

Allied carried out its supply of repairs and necessaries to the Queen of Diamonds between March 14, 2024, and May 22, 2024. During the course of the project, Allied issued invoices to Vancouvercruises, and Vancouvercruises paid those invoices in part. However, a principal balance of $413,291.04 remained owing to Allied, along with interest accruing at a contractual rate of 18% per annum. Allied's invoices stated they were payable upon receipt, and its last invoice for services was dated July 31, 2024. Allied began invoicing Vancouvercruises for interest on November 30, 2024, with its invoice of that date calculating interest commencing October 1, 2024. Allied issued its Statement of Claim on April 25, 2025, naming both vessels as in rem defendants pursuant to section 43(8) of the Federal Courts Act and Vancouvercruises as the in personam defendant.

Service of the Statement of Claim

Allied made efforts to serve Vancouvercruises and the in rem defendants on dates in May 2025. A process server, Ms. Carrie-Lee Godfrey, swore two affidavits on June 11, 2025, stating that on May 13, 2025, she served each of the Defendant Ship and the Defendant Sistership with the Statement of Claim by handing it to and leaving it with Mr. Russell Bennett, General Manager. Ms. Godfrey also stated that, at the time of service, Mr. Bennett admitted to being the proper person to be served in this action. The Company Summary obtained from BC Registry Services identified Mr. Bennett as a director of Vancouvercruises. The Court was satisfied that, through Ms. Godfrey's efforts to serve the in rem defendants, the in personam defendant, Vancouvercruises, was properly served with the Statement of Claim as of May 13, 2025, under Rule 130(1)(a)(i) of the Federal Courts Rules, which provides that personal service on a corporation is effected by leaving the document with a director of the corporation. None of the defendants filed a Statement of Defence.

The Court's analysis of in rem service

The Court had more concern about the effectiveness of Allied's service upon the in rem defendants. Rule 479(1)(a) provides that a statement of claim in an action in rem shall be served by attaching a certified copy of the statement of claim to some conspicuous part of the ship. Rule 479(2) provides an alternate method — personal service on a person who appears to be in charge of the property — but only if access cannot be obtained to the property. The Court found that Allied's evidence clearly did not demonstrate service by attaching the Statement of Claim to some conspicuous part of the ship in accordance with Rule 479(1), nor did it demonstrate that the process server was unable to access the ship so as to permit Allied to rely on Rule 479(2). Allied acknowledged that it remained unclear from the evidence whether Ms. Godfrey was able to access either vessel before she served the Statement of Claim on Mr. Bennett. Allied argued that it was available to the defendants to bring a motion under Rule 58 to challenge service as an irregularity and the defendants had not done so, but the Court found no merit to this argument, noting that Allied's own evidence was deficient.

Allied's alternative arguments and the Elders Grain precedent

Allied also asked the Court to deem its service against the in rem defendants effective, notwithstanding non-compliance with Rule 479, as an exercise of flexibility pursuant to the Court's authority under Rule 55 to vary a Rule or dispense with its compliance in special circumstances. Allied relied on the precedent in Elders Grain Company Limited v Carling O'Keefe Breweries of Canada Limited, 1997 CanLII 4751 (FC), where the statement of claim had been delivered to the master of the vessel, who was on board at the time, and the Court concluded that the plaintiffs had employed a process substantially similar to what the rule called for. However, the Court distinguished Elders Grain from the present case, noting that in that case the pleading had been left aboard the ship, a similarity absent here. The Court also noted that in Elders Grain, the defendants had filed a statement of defence and counterclaim, acknowledging ownership and the nature of the claim. Allied argued that the delay in the Court's processing of its Motion constituted special circumstances, but the Court was not convinced, particularly as the forward-looking delay was strictly a function of Allied having failed to effect service in accordance with Rule 479 and Allied had offered no explanation for that failure.

The ruling and outcome

The Court allowed Allied's motion in part. Default judgment was granted against the in personam defendant, Vancouvercruises.com Charters Ltd., in the principal amount of $413,291.04. Prejudgment interest was awarded totaling $101,437.75, calculated at 18% per annum from October 1, 2024, to the date of the February 10, 2026 Judgment. The Court accepted the calculations from the affidavit of Lucky Herath, a paralegal employed with Allied's counsel's firm, which calculated interest from October 1, 2024, to August 31, 2025, as amounting to $68,226.72, plus a daily amount of $203.81 thereafter, with 163 additional days from August 31, 2025, to the date of judgment amounting to $33,211.03. Post-judgment interest was set at 5% per annum rather than the 18% contractual rate sought, as the Court noted, citing Nordea Bank Norge ASA v "Kinguk" (Ship), 2007 FC 434, that it was not bound by a contractual rate in setting post-judgment interest. Allied was awarded lump sum costs in the all-inclusive amount of $5,000.00, calculated at approximately 25% of actual legal fees of $18,412.80 inclusive of taxes, plus disbursements of $440.90, rather than the $10,000.00 it had requested. The motion for default judgment against the in rem defendants, the Ship "Queen of Diamonds" and the Ship "Abitibi," was dismissed without prejudice to any future motion for judgment against those defendants or either of them based on new facts. In sum, the successful party, Allied Shipbuilders Ltd., was awarded $413,291.04 in principal, $101,437.75 in prejudgment interest, post-judgment interest at a simple rate of 5% per annum until the judgment is satisfied in full, and $5,000.00 in costs against Vancouvercruises.com Charters Ltd.