By Marc de Man
and
Vanessa Major
Ladies, gentlemen, colleagues:
Although I see some familiar faces across the room, I feel I should properly introduce myself. My name is Marc de Man, and I am a freshly minted junior associate at De Man, Pillet. Our law firm, situated in Montreal, Quebec, Canada is a leading transportation and maritime law practice in Canada.
Today I have the pleasure of conducting before you a presentation on a topic that is both obscure yet quite powerful in its effects.
The beast is called the Caveat.
I can already glean over some puzzled looks in the room.
Caveats? What are they? Some of you will say “I’ve never heard of them before and surely, they must not be all that useful!”
Fear not, for if I am successful in my aim, then hopefully, through my presentation, I will manage to make you appreciate the usefulness of the Caveat.
It is likely my fellow Commonwealth colleagues will be more familiar with Caveats, but even so, I believe caveats remain a largely unknown and uncommonly used procedural tool in the Common lawyer’s arsenal.
Indeed, the caveat can be a very useful tool for shipowners and cargo interests alike.
In fact, caveats can be of use to all claimants who benefit from a right in rem; be they claims arising out of a contract for the repair of a ship, for damage to goods, for towage, for unpaid wages or for necessaries, to name but a few examples.
Essentially, Caveats are a peculiar process of limited, but in some cases significant utility.
A good place to start, I think, would be to examine the origin of the very word Caveat as this, in and of itself, will elucidate much of the Caveat’s purpose.
Caveat, like many words in our noble profession, is, of course, a latin word. It means, literally: “let him, or her, beware”. It is, plainly said, a warning.
In the time of Augustus Caesar, in the Roman Empire, you could be walking on the VIA FLAMINIA, and if a hole appeared in the road, there could be a sign which read “CAVEAT”.
Apart from Maritime Law for example, in the contract of sale, we see “caveat emptor” – buyer beware.
In the law of intellectual property, and more specifically, in patent law, a caveat is a way to preemptively register an invention before a more detailed patent could be filed. This caveat is limited in time and it can expire if no patent is filed.
It is quite amazing to note how much Latin is used in our profession, in different areas of law. I could present you with a plethora of Latin expressions. Restrictively, I could mention mutatis, mutandis, volenti non fit injuria, res ipsa loquitur (the thing speaks for itself) in tort law, non adempleti contractus in contract law, pater familias in family law, contra proferentem as a rule of interpretation. In the garment industry, we use the expression semper ubi sub ubi (always wear underwear).
I suggest to you that Latin is by no means a dead language. It is alive and kicking!!
More specifically to the topic at hand, the word Caveat refers to a notice or a warning to refrain from a particular action.
In the case of caveats as they apply to Canadian maritime law, they refer specifically to a notice that certain actions, such as arresting or releasing a ship, may not be taken without informing the person who gave the notice.
Meanwhile, the word Caveator, derived from Caveat, designates the person or the entity which has filed a Caveat.
There exist three types of Caveats in Canadian Maritime law. However, in practice, only two of the three types of Caveats are used, with Caveat releases being the most common procedural tool of the three.
These three types of caveats are:
- The first, caveat warrant: which is a notice filed with the Federal Court for the purpose of preventing the arrest of property
- The second, caveat release: which is a notice filed with the Federal Court for the purpose of preventing the release of property in respect of which an arrest warrant has been issued and served.
- And finally, the caveat payment: which is used by a person who desires to prevent the payment of money out of court.
For the most part, I shall focus on the two first types of Caveats; being the Caveat warrant and the caveat release.
Caveats are provided for in the Federal Courts’ Rules. Specifically, Rules 493 to 495. I will quickly gloss over the applicable Rules, and will then delve deeper into their implications.
The caveat warrant is a notice filed with the Court for the purpose of preventing the arrest of property.
It should be noted that the Federal Court of Canada has jurisdiction throughout the whole of Canada. Before the Federal Court will issue an arrest warrant, a nationwide search for caveat warrants must be performed.
If a caveat warrant is on file, the warrant of arrest will not be issued against the Vessel.
However, this does not mean that the claimant against the Ship has lost its recourse altogether. Otherwise, it would be much too easy for shipowners to dodge arrests! Cunning shipowners would simply lodge caveat warrants for all of their Ships in order to avoid any possible arrests.
Fortunately, the Rules provide for some protection from such manoeuvres.
Indeed, the Shipowner filing a caveat warrant must either provide bail, or pay into court, the amount of money set out in the caveat warrant.
You see here how the caveat is a very useful tool for shipowners who may be aware of potential claims and who wish to protect themselves from ship arrests.
In practice however, caveat warrants are not all that common in Canada for the simple reason that the Shipowner is still required to post bail. This may be seen as an admission of liablity and could explain why shipowners do not, as a matter of habit, register caveat warrants.
Moreover, it is important to note that caveat warrants are not bulletproof against arrests.
In fact, the caveat warrant does not actually prevent the issuance of a warrant of arrest.
Rather, pursuant to 494 FCR, it renders the arresting party liable in “all costs and damages” unless he can show to the satisfaction of the Court “good and sufficient” reason for arresting the res while the caveat warrant was outstanding.
A caveat release prevents the release of a ship in respect of which an arrest warrant has been issued and served. Before a release will be issued for an arrested ship, a nationwide search for caveat releases is similarly performed by the Federal Court of Canada administrator.
Typically, if a caveat release is on file, the shipowner must either settle the claim in respect of which the caveat release was filed or make a private arrangement with the caveator for security for that claim, in order to obtain the caveator’s withdrawal of the caveat release.
The standard form of the caveat proceeding for caveat releases is quite minimalistic.
There are no allegations supporting the caveat. The amount claimed is not even specified! There is no need to annex or include a Statement of Claim. The simple act of filing this one-page proceeding will prevent an arrested Ship from being released!
Beyond this, the caveator is not yet a formal party to the action. It is in a sort of in between, no man’s land status… oddly not a party to the original arrest proceedings yet all at once piggy-backing on the arresting party’s arrest.
The Federal Court Rules only require that the caveat contain the following information:
- The designation of the caveator, name, place of business, etc.
- The name of the arrested Ship
- And address for service, usually the Solicitors’ contact details.
With a precedent on hand, it can take a lawyer a few minutes to draft and complete the caveat.
However, the prudent lawyer must ensure that his client has a clear “caveatable” interest. Which is to say one that would allow the claimant to arrest the vessel had it not already been arrested.
The Caveat must be served on the Defendant parties and filed in Court.
As I have stated in my introduction, any claimant able to exercise a right in rem claim can avail itself of the caveat.
The withdrawal of Caveat proceeding is equally simple and bare in its form.
As stated, the notice of withdrawal of caveat release is provided for at Rule 495(4) of the Federal Courts Rules.
Lawyers and caveators alike should be mindful of the fact that filing a caveat release will not constitute the commencement of an action for the purposes of “stopping time running”. Indeed, only the service and filing of a Statement of Claim will actually ‘stop time’.
For that reason, caveators should be sure to stake out their claim formally by serving and filing a Statement of Claim without delay if they are made aware that their claim will not quickly be settled by the shipowner.
As I have stated, the arrest of a ship for which there is a caveat warrant may render the arresting party liable in all costs and damages unless it can be shown to the satisfaction of the Court that there was good reason for the arrest in spite of the caveat warrant.
A caveator who lodges a caveat without a caveatable interest may be liable for damages to a person who suffers a loss as a result.
Where caveat releases are concerned, the prerequisite is that a warrant of arrest must already have been filed and served for the Ship. In other words, the caveat is not an originating proceeding. The caveat piggy backs on the arresting party.
Interestingly, caveats bear much of the same impact and forceful effects as does the arrest, yet so little is required of the caveator in comparison to the arresting party, who must duly provide the basis of its claim in a detailed Statement of Claim and an Affidavit to Lead Warrant.
Also, pursuant to 495 (1) FCR, caveator should mark their calendar one year from the filing of the caveat as no caveat remains in force for more than a year following its entry into the Court register.
However, a caveator may file a new caveat following the expiration of the initial caveat. There are no limits set on the amounts of caveat renewals allowed.
- Procedure is both extremely expedient and
- Caveats are very simple proceedings: the form is simple and does not require extensive drafting.
- Can be filed in Court within an hour from the time we are made aware of the particulars of the claim
- There is no need to establish any evidence of the claim
- There is no need to set out the factual basis for the claim
Now, some of you may find yourselves somewhat irked by the very idea of caveats as I have so far described them. There is indeed something which is bothersome about the idea of such a simple and unsubstantiated proceeding bearing such power as to prevent the release or the arrest of a Ship.
The fact that a proceeding which contains no allegations, no affidavits, no evidence can be so impactful comes as a sort of affront to our legal instincts.
That idea that you may prevent the release or the arrest of a ship without being required to minimally justify the grounds on which you stake your claim is completely contrary to the values which are so engrained in us as lawyers; values such as due process and procedural justice.
The rules and procedures adopted by the British in developing their maritime empire are to a large extent still used in Canada today when exercising its admiralty jurisdiction. You will quickly notice of course, that caveats exist in most jurisdiction of Common Law tradition, as imported from the United Kingdom. Caveats, much as they operate in Canada, exist in the following jurisdictions:
- UK
- Australia
- Bahamas
- Ireland
- New Zealand
- Singapore
- Kenya
- Malaysia
- Hong Kong
- Nigeria
- Cyprus
- India
There exists no caveat in the following important jurisdictions:
- USA
- France
- Spain
- Italy
- China
- Japan
Lastly, I will go over a few interesting legal issues and questions pertaining to caveats:
One aspect is the issue of submission to the Court’s jurisdiction. Does the act of lodging a caveat against arrest amount to the shipowner’s submission to the Court’s jurisdiction?
In theory, the Court’s Administrator is responsible for verifying the caveat register when tasked with the arrest or the release of a Ship.
However, it is still wise and prudent to request that the Administrator conduct a thorough search of the caveat register when one is preparing to release a vessel.
You can imagine how embarrassing it would be to realize that a caveat release is outstanding on a given Ship when one anticipates the release of that very Ship at a certain scheduled time. the entire momentum of the release grinds to a halt on account of an outstanding caveat release!
In such cases, the consequence of not having properly checked the caveat register can be very onerous, not to mention embarrassing!
