Purchase and Sale of Ships
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The database contains 12 case summaries relating to Purchase and Sale of Ships. The summaries are sorted in reverse date order with 20 summaries per page. If there are more than 20 summaries, use the navigation links at the bottom of the page.
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Extension of Time - Barred - Present Motion - Delay
Heddle Marine Service (NL) Inc. v. Kydy Sea (Ship), 2019 FC 1140
Précis: The Federal Court extended the time for a claimant to file its claim against the proceeds of sale of a ship.
Facts: This was a motion in writing for an extention of time for the applicant, Halthorn Marine Group Inc. (“Halthorn”), to file a claim against the ship “Kydy Sea”. Halthorn serviced the “Kydy Sea” which was laid up alongside at the Port of Sydney, Nova Scotia. Pursuant to an arbitral award against the “Kydy Sea” and her owners, on 7 February 2019 Heddle Marine Service (NL) Inc. (“Heddle”) made an application to register that award with the Court. On 26 February 2019 the Court granted Heddle’s application and ordered and the owners and “Kydy Sea” were to pay the amounts, with interest, and that the sale of the “Kydy Sea” was authorized. On 3 April 2019 the Court ordered the appraisal and sale of the “Kydy Sea” on terms that all claims against the Ship shall be filed with the Court within 30 calendar days of the publication of the advertisement and notice to creditors failing which such claims shall be barred. The advertisement was published the next day along with the notice to creditors. Halthorn’s managing director was made aware on 10 May 2019 of the advertisement and attempted to file its claim, but was informed by the Court registry that the documents were incomplete and suffered from procedural inconsistencies. Halthorn’s managing director then contacted Heddle’s counsel on 16 May 2019 for consent to a request for extension of time for filing Halthorn’s claim and an agreement was concluded on 10 June that Heddle would agree to such a request. On 30 May 2019 the Court ordered the sale of the “Kydy Sea” to GFY International S.A. (“GFY”) . On 24 June Halthorn filed the present motion. However, GFY failed to pay the purchase price and on 17 July 2019 the Court declared GFY’s initial deposit forfeited and approved the sale of the “Kydy Sea” to South Eastern Shipping Corporation Inc. (South Eastern).
Held: Motion granted.
Decision: After a review of the Federal Court of Appeal’s decision in the Polar Paraguay No. 2 and the Court’s decision in The Kimissis Ii, the Court found that it had discretion under Rule 8 of the Federal Courts Rules to extend the time to file a claim which is otherwise barred under Rule 492(2). The Court found that Halthorn was aware of the time limit to file its notice of claim and also that it had a continuing intention to pursue their application. Further, the claim was where there was at least a reasonably arguable case to be made and the plaintiff and other claimant consented to Halthorn’s motion so there was no prejudice to be suffered despite the owners of the “Kydy Sea” not taking part in these proceedings. The overriding consideration that justice be done was considered by the Court and found that justice sided with allowing the motion. Lastly, the Court found that compelling service on the owners of the “Kydy Sea” was not warranted as the owners took no part in the proceedings or the arbitration.
Vessel Registry - Ownership - SSOPF - Sale and Transfer of Ownership - Third Party Legal Owner
Canada (Ship-Source Oil Pollution Fund) v. Dr. Jim Halvorson Medical Services Ltd., 2019 FC 35
Précis: The Federal Court held that the registered defendant owner was not liable for oil spill clean up costs as it was not the the legal owner of the vessel at the time of sinking.
Facts: On 27 September 2014 the barge Crown Forest 84-6 sank near Zeballos, British Columbia, leaking fuel and other contaminants into the surrounding waters. The Canadian Coast Guard responded to the spill, and total clean up costs came to $67,348.81. The Coast Guard presented its expenses to the Administrator of the Ship Source Oil Pollution Fund and a total of $71,698.27 was reimbursed, inclusive of interest. The Administrator then sought to recover the cost from the Crown Forest's registered owner, the defendant Dr. Jim Halvorson Medical Services Ltd., and Dr. Halvorson in his personal capacity as the Administrator sought to pierce the corporate veil. A third party was also joined to the action.
In September 2012, the defendant had sold the vessel to the third party defendant for $1, under an "Intent to Purchase" document. That document provided that "upon payment of the purchase price the purchasers shall have possession of the asset and bear legal responsibility for the asset". Upon completion of the sale, neither the defendant nor the third party had registered the barge in the third party's name with the Canadian Register of Vessels. As such, the vessel continued to be registered in the name of the defendant medical company.
Decision: Action dismissed. The third party was the legal owner of the vessel at the time of sinking, and the defendant medical company is not liable to the Administrator for the clean up costs.
Held: The Court began by noting s. 75 of the Marine Liability Act defines "owner" as "the person who has for the time being, either by law or by contract, the rights of the owner of the ship with respect to its possession and use". Importantly, the court found nothing in s. 75 ties ownership of a vessel to the registration of title in the Canadian Register of Vessels. The Court went on to note the statutory provisions under s. 46(2) of the Canada Shipping Act which impose an obligation on an owner to ensure that a vessel is registered (if not a pleasure craft, wholly owned by qualified persons and not registered), as well as s.58(1)(b) which states the authorized representative of a Canadian vessel is required within 30 days after a change in ownership of the vessel to notify the Chief Registrar of that change. Importantly, however, the Court found that the Canada Shipping Act does not set out any formalities that must be complied with before title to a vessel will pass to a new owner. The Court went on to hold that while the Canada Shipping Act does address the consequences that flow from the failure to register a change in ownership of a vessel, it does not provide that the registered owner of a vessel remains liable for pollution damages under the Marine Liability Act after a vessel has been sold to a third party.
The cornerstone of the Courts' reasons are worth reciting in full:
 Importantly, there is no suggestion in either the Canada Shipping Act, 2001, or the Regulations enacted thereunder, that title to a vessel will not pass to a purchaser if the transaction is not registered in the Canadian Register of Vessels. Nor is there any suggestion in the Act (or in the Marine Liability Act for that matter) that a prior owner of a vessel will continue to be responsible for damages caused by the vessel as long as that individual or entity is recorded in the Register as the owner of the vessel.
The Court then turned to examine the conveyance of title to the vessel by the September 2012 transaction, which the Court decided in accordance with the law of contract. There was an offer to sell the vessel, the offer was accepted by the third party, and consideration was paid to the defendant vendor. Therefore, it was the third party and not the defendant who was the owner and had rights to possession and use after September 2012.
Purchase of Vessel – Whether a secured transaction – Entitlement to Foreclosure
Avina v. The Ship Sea Sensor, 2016 BCSC 2488
Précis: The purchase of a vessel through the medium of a company accompanied by a loan to purchase shares in the company is not a secured transaction entitling foreclosure against the purchased vessel.
Facts:The plaintiff and defendant agreed to purchase the “Sea Senor”, a 34-foot trawler. The vessel was put in the name of a company the shares of which were owned 51% by the defendant and 49% by the plaintiff. The parties agreed that operating expenses were to be apportioned by a similar ratio of 51%/49%. The defendant loaned to the plaintiff the funds for his share of the purchase price on terms that it be repaid over time at 5% interest. As security for this loan, the plaintiff endorsed and delivered to the defendant 50,000 shares, worth about $46,000, in an unrelated company. A dispute arose over the repayment of the loan and allocation of the expenses which resulted in the plaintiff commencing this proceeding and arresting the vessel. The defendant then gave notice of foreclose on the vessel under s. 61 of the Personal Property Security Act and also filed a counter-claim alleging the plaintiff defaulted on the loan and owed operating expenses.
Decision:Judgment to the defendant for the amounts owing but the claim for foreclosure is dismissed.
Held:The defendant says: that in substance the transaction as a whole was a secured transaction with the vessel as security; that the voluntary foreclosure provisions of s. 61 of the Personal Property Security Act applied to the vessel as security; and, that the plaintiff’s interest in the vessel is now foreclosed with the result that the vessels is now owned by the company free and clear of any interest of the plaintiff. However, the only secured aspect of the transaction was the loan which was secured by the shares. There was no security interest in the vessel which belongs to the company of which the parties hold the shares. The plaintiff is, however, in default under the loan agreement and owes the defendant.
Canadian Maritime Law - Application of Provincial Statutes - Sale of Vessel - Misrepresentation
9171-7702 Quebec Inc. v. Canada, 2013 FC 832
Précis: The Federal Court surprisingly held that the sale of a vessel in Quebec was governed by the Quebec Civil Code.
The plaintiff purchased a vessel from the defendant, Her Majesty the Queen in Right of Canada, and later discovered that the model of the engine in the vessel was not as had been described by the defendant. The plaintiff therefore commenced these proceedings against the defendant for breach of contract. The defendant denied breaching the contract but also commenced proceedings against the surveyor who was allegedly responsible for the erroneous description. The error in the description was a single digit in the model number. The offer to purchase described the engine as a model 3612 whereas it was, in fact, a model 3512, which was about four times heavier and produced three times the horsepower of the 3612 model. Notably, the offer to purchase and the sale documents correctly identified the horsepower of the engine. The terms of sale also provided that the sale was “as is, on the spot” and that there were no warranties of quantity, nature, character, quality, weight, size or description.
The issues in the case were characterized as follows:
(1) What is the applicable law?
(2) Did the defendant breach the contract?
(3) If the defendant did breach the contract, is the surveyor liable?
Decision: Action dismissed.
(1) The applicable law could be Canadian maritime law or the law of the Province of Quebec, where the sale took place. The Supreme Court of Canada has not specifically ruled on the question of whether contracts for the sales of vessels are governed by Canadian maritime law. There is no close connection between the transfer of ownership of a vessel and maritime law and nothing to indicate that the objectives of uniformity or compliance with international conventions require the ouster of provincial law. This is one reason why various cases have in the past applied provincial law to property disputes. The decision of the Supreme Court of Canada in Canadian Western Bank v Alberta provides a new approach to interjurisdictional immunity and paramountcy. The application of provincial law would not impair federal jurisdiction over navigation and shipping. The applicable law is therefore the Civil Code of Quebec.
(2) Turning to the issue of whether the defendant had breached the contract, art. 1716 of the Civil Code contains implied warranties of ownership and quality but these were not breached as the vessel was adequately described overall. The result might have been different if the plaintiff had advised the defendant that the model number was an essential component. Further, absent fraud or misrepresentation, the conditions of sale being “as is, on the spot” and without warranties were a complete defence.
(3) The liability of the surveyor need not be addressed but, given the finding of the applicable law, the Federal Court probably has no jurisdiction to deal with the claim against the surveyor.
Comment: Given the recent decision of the Supreme Court of Canada in Marine Services International Ltd. v Ryan Estate, 2013 SCC 44, there is perhaps some justification for holding that the Quebec Civil Code could apply to a sale of a vessel. However, any implication that the sale was solely governed by provincial law would not be correct. Sales of vessel are clearly also governed by Canadian maritime law, at least in part, as any review of Part 2 of the Canada Shipping Act, 2001 will confirm. Moreover, in Wärtsilä Canada inc. c. Transport Desgagnés inc., 2017 QCCA 1471,at paras.108-111, Mainville J.A. seems to doubt the correctness of this decision, saying it is contrary to jurisprudence of the Supreme Court of Canada.
Purchase Survey - Liability of surveyor
Perera v. De Groot et al, 2006 BCSC 1281 2007 BCCA 242
In this matter the plaintiffs alleged that a surveyor retained to perform a pre-purchase survey of a sailing vessel had negligently failed to inform them of existing dry rot in the vessel. Approximately one year after the survey,the plaintiffs hired a second surveyor who found extensive dry rot in the vessel. At trial (2006 BCSC 1281) the Trial Judge found that the rot existed at the time of the initial survey and that the surveyor was negligent in not finding it and reporting it. The Judge awarded the plaintiffs the value of the vessel less salvage plus insurance costs and $3,000 for loss of use. On appeal (2007 BCCA 42), the Court of Appeal held that there was no evidence upon which the Trial Judge could conclude that the rot existed at the time of the initial survey. Accordingly, the appeal was allowed and the claim against the surveyor dismissed.
Unauthorized Sale of Vessel – Damages
Gilling v. Cox, 2004 FC 1743
In this matter the Plaintiff commenced proceedings for a declaration that he was the owner of a yacht, for an order declaring a purported sale of the yacht null and void and for damages against the Defendant for the unauthorized sale of the yacht. The Defendant did not appear at the hearing and the only evidence given was that of the Plaintiff. The facts were that the Plaintiff and Defendant entered into an arrangement whereby the Defendant was permitted to charter the Plaintiff's yacht and retain the charter moneys. In exchange the Plaintiff would receive the benefit of the upkeep of the yacht by the Defendant. In furtherance of the arrangement the Plaintiff executed a Power of Attorney and Appointment of the Defendant as Captain. The arrangement continued for many years although there was an apparent dispute between the parties as to whether the Plaintiff owed the Defendant money for maintenance and capital expenditures. The Defendant executed a bill of sale of the yacht to a third party which prompted the present action. The Court held that the bill of sale was executed without the consent or authority of the Plaintiff and was null and void. Accordingly, the Court granted the Plaintiff a declaration that he was the owner of the yacht. However, the Plaintiff's many claims for damages were refused by the Court on various grounds including that they were not properly proven.
Sale of Vessel - Entitlement to Commission
Clifts Marine Sales(1992) Ltd. et al. v. Moorco Inc. et al., 2001 FCT 1369
This was a claim by a yacht broker for commission. The Defendant denied the broker was entitled to a commission as the Listing Agreement had been terminated and the vessel was sold to a person who had not been introduced by the broker. The Prothonotary found, however, that the Defendant terminated the Listing Agreement to sell the vessel himself and that the Defendant knew, or was wilfully blind, to the fact that the purchaser was purchasing the vessel on behalf of a person introduced by the broker. The Prothonotary therefore held that the yacht broker was the effective cause of the sale and was entitled to a commission of 10%. The Prothonotary was not satisfied, however, with the evidence as to the purchase price of the vessel since the price was paid in cash in paper bags. He therefore based the commission on a previous arms length offer.
Breach of Contract of Sale - Parole Evidence
Sproule v. The “Compass Rose II”, 2001 FCT 1304
This was an action by the Plaintiff to recover the balance of $25,000.00 alleged to be owing on a written contract of purchase and sale of a vessel. The defence was that there had been an oral variation of the written contract whereby the Plaintiff agreed to accept a lesser amount in return for prompt payment. The Plaintiff argued, inter alia, that the parole evidence rule applied to prohibit proof of an oral agreement that contradicted the written contract. The Court, however, held that the parole evidence rule had no application since the Defendant did not seek to adduce extrinsic evidence to add to, subtract from or vary the meaning of the written agreement but merely claimed that the agreement had been amended verbally. The Court found that there had been such an amendment and dismissed the action.
Sale of Vessel - Representations
Grosvenor v. Streifel, 1999 CanLII 6393
This was an action for the unpaid balance of the purchase price of a used vessel. The Statement of Defence and Counterclaim alleged that the vendor had made false representations. Specifically, the purchaser alleged he was induced to enter into the transaction by a marine survey that was given to him by the vendor and by statements made by the vendor that the engines were in perfect condition. The court found, however, that the marine survey had been prepared more than one year prior to the transaction for insurance purposes and that it was provided to the purchaser to assist him with his financing. The court further found that the purchaser had used the vessel for two seasons and had done some work to the engines without ever complaining to the vendor or making a claim. This, the court found, was not consistent with the alleged representation. Accordingly, the action for the unpaid balance of the purchase price was allowed.
Breach of Sale and Brokerage Agreement
Amirault v. Prince Nova (The), 1998 CanLII 7899
This was a motion to strike the Statement of Claim as being outside the jurisdiction of the court. The Plaintiff, a ship broker, alleged that it had entered into an option to the "Prince Nova" with the corporate Defendant. the owner of the "Prince Nova". The alleged terms of the option were that it was to be exercised only after the Plaintiff found a buyer for resale and that the Plaintiff was to be paid a 5% commission on the initial sale price. The Plaintiff alleged that it had found a buyer who was willing to purchase the ship for US$1.85 million but that the Defendant entered into direct negotiations with the purchaser and ultimately sold the ship for US$1.4 million. The Plaintiff further alleged that the President of the Defendant had wrongly interfered with their economic relations by inducing the Defendant corporation to breach its contract with the Plaintiff. The Defendants admitted that the corporate Defendant had entered into a non-exclusive brokerage agreement with the Plaintiff with a 5% commission. The corporate Defendant further admitted it had given the Plaintiff an option to purchase but alleged that the option to purchase had expired. The motions judge noted, without deciding, that if the agreement was a mere brokerage agreement it might not fall within the court's jurisdiction. However, if the agreement was one relating to the sale of a ship, it would fall within the court's jurisdiction. Given the pleadings and the contradictory affidavits, the motions judge was not able to decide the true nature of the agreement and therefore dismissed the motion by the corporate Defendant. The motions judge did, however, allow the motion by the President of the corporate Defendant. The motions judge held that the claim against him was one in tort and was outside the jurisdiction of the court.
Breach of Contract of Sale - Specific Performance - Setting Aside Arrest
Gleason v. The Dawn Light, 1997 CanLII 5118 1998 CanLII 7318
This was a summary judgment application to dismiss the Plaintiff's claim for specific performance of an agreement of purchase and sale of the Defendant vessel and an application to set aside the arrest of the vessel. The Plaintiff alleged that the Defendant had agreed to sell the Defendant vessel to him but then sold it to the intervenor. The motions Judge held the evidence did not show the vessel was unique or irreplaceable and further held that the fact the vessel had been sold to a bona fide purchaser for value without notice was a strong discretionary reason not to grant specific performance. With respect to the application to set aside the arrest of the vessel, the Motions Judge held that the arrest could not be set aside as the Plaintiff still had a claim in damages for breach of contract. On appeal, the Court of Appeal held that the arrest ought to be set aside because the effect of the sale to a bona fide purchaser for value was that the vessel could not be used to satisfy any potential award of damages.
Contract of Sale - Failure to complete - solicitors Negligence
McPhail's Equipment Co. v. Prairie Warehouse Leasing Corp., 1998 CanLII 7318
This was an action by the buyer of a yacht against the vendor for damages for conveying the yacht to a third party and, against the buyer's solicitor for negligence in the handling of the transaction. The Court found that the Defendant vendor deliberately attempted to avoid the sale to the Plaintiff because it had found a buyer who was willing to pay a higher price than the Plaintiff. The Court held that the Plaintiff was ready, willing and able to complete the sale except to the extent made impossible by the vendor's own failure to perform its obligations. The Plaintiff was awarded damages of $50,000 for the return of a deposit and $30,000 for lost profit on the resale of the yacht. With respect to the action against the Plaintiff's solicitor, the Court found that the solicitor had acted reasonably and did everything he possibly could have.