Judicial Sales - Case Summaries
The database contains 26 case summaries relating to Judicial Sales. 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.
Value of the Vessel - Pendente Lite - Buyer - Creditors - Appraisal
Canada (Ship-Source Oil Pollution Fund) v. Cormorant (Ship), 2019 FC 977
Précis: The Federal Court refused a motion for judicial sale of an arrested vessel pendente lite where the sale would not abate the costs or liabilities of its arrest.
Facts: The Port of Bridgewater (the “Port”) sought an order allowing the ex-Canadian naval vessel Cormorant (the “Vessel”) to be sold pendente lite, to authorize the Port to take any reasonable step to effect that sale, and for the proceeds to be paid into Court less legal and Marshall’s fees to satisfy claims that may be made following notification to potential claimants. The Vessel was subject to claims by both the Port and the Administrator of the Ship Source Oil Pollution Fund following its sinking and subsequent pollution in 2015. Ownership of the Vessel was a live issue. In 2009 the Vessel was sold through judicial sale by the Court to a Nevada-based corporation whose president was a one Neil Hjelle, which then attempted recommissioning of the Vessel. In 2013 those recommissioning efforts ceased, and Mr. Hjelle sold the Vessel for a sum of $10 to a Mr. Richard Welsford, acting in his capacity as a sole director of a numbered Nova Scotia limited company or as sole director of the Port. Neither the numbered company nor the Nevada based company were in good standing at the time of the sale. The Port argued that the sale was void as the Nevada company’s status had lapsed so that it was still the lawful owner until it ceased to exist, at which time the Vessel then passed in escheat to the province of Nova Scotia. The Nevada company and Mr. Hjelle argued the sale of the Vessel was valid and the ownership transferred to the either the Port or the numbered company.
The Vessel was appraised in 2017 for $40,000.00, but went on to note that it is “unlikely that the Vessel would be sold for even $40,000.00”. The parties to the motion agreed that the sale order should imposed conditions of removal of the vessel from the Port and disposed of or removed from Canada. The Port adduced no evidence of interested buyers. The Port further argued that the immediate sale of the Vessel was justified as it was a threat to navigation, the Canadian Coast Guard requested to inspect it as a “vessel of Concern” and that it appeared to be subject of the measures to remove or dismantle pursuant to the not-yet-in-force Wrecked, Abandonded or Hazardous Vessels Act (“WAHVA”). The Port, by affidavit of Mr. Welsford, stated that the sale or disposal of the vessel under WAHVA is likely to be less favourable to creditors than a sale the Port could obtain, and if the Court were to find the Port were the legal owners of the Vessel then it could be held liable for any additional costs of measures taken under WAHVA. Further deposed was that the Port harboured two other Vessels that, if the Port had obtained a writ of seizure of the Vessel, could all be marketed and towed to take advantage on an “economies of scale” basis.
The Nevada company, Mr. Hjelle and the Administrator opposed the order sought given the sale was unlikely to generate any material proceeds which would protect the creditors of the Vessel, and that the Port’s purpose in selling the Vessel would be to deflect any liability under WAHVA to the Port or the numbered company.
Decision: Motion dismissed.
Held: The Court looked to its own jurisprudence in The Essington II for guiding elements considering a sale pendente lite. In finding that no party wished to assert ownership of the Vessel, the only elements applicable were those that affect the creditors’ interests and the potential application of WAHVA as either a component of the creditors’ interest or as another “good reason” for a sale before trial. The Court had little evidence of the intrinsic value of the vessel despite the 2017 valuation report, which was concluded two years earlier and doubted that the vessel would be sold for even $40,000.00. The Court found no evidence tendered that would support the reasonable likelihood that any buyer could be found who would be willing or able to safely remove and/or dispose of the vessel, and in doing so judged unlikely that any significant proceeds can be obtained from the sale of the vessel, by auction or by private sale. More importantly, the Court was satisfied that judicial sale would deflect and displace future liabilities arising from the ownership. As WAHVA was not in force at the time of the judgment, the Court declined to opine on the Administrator’s arguments on that point.
Priorities - Rem - Proceeds - Affidavit - Reallocation
Offshore Interiors Inc. v. Worldspan Marine Inc., 2019 FC 546
Précis: The Federal Court refused to reallocate the priority of claims against proceeds of sale of a vessel.
Facts: This matter involved three interlocutory motions relating to the priority of claims and ranking of those claims against the $5 million in sale proceeds of a vessel which was sold on 7 July 2014. The underlying facts relate to the construction of a luxury yacht pursuant to a vessel construction agreement (“VCA”) dated 29 February 2008 between Sargeant and Worldspan. Sargeant advanced $20 million to Worldspan and was granted a builder’s mortgage over the vessel, which Sargeant ultimately assigned to Comerica Bank. The validity of that builder’s mortgage was affirmed by the Federal Court and Federal Court of Appeal in December 2013 and February 2015 respectively. In the present motion, Sargeant sought an order that the breach of the VCA was irrelevant for determining the priorities of the in rem claims against the vessel. Worldspan sought an order that Sargeant or Comerica was in breach of the VCA for failing to pay claims certificates to Worldspan’s subcontractors. Offshore, Restaurant and Continental, who were all trade creditors to the vessel and Worldspan’s subcontractors, sought declarations that they enjoyed priority over the claim of Sargeant.
Decision: All motions dismissed; Sargeant entitled to proceeds of sale.
Held: The Court found that it was not necessary to determine if the VCA was breached in order to determine the ranking of priorities. While the VCA created rights between Sargeant and Worldspan which had implications for Offshore, Restaurant and Continental, the priority and ranking of claims to the proceeds of sale involves in rem claimants and not those with personal claims against Sargeant or Worldspan, which are to be determined before the British Columbia Supreme Court. Moreover, as Worldspan raised no new legal issue that would change the prior decisions of the Federal Court of Appeal, the principles of stare decisis applied. As such the specific clauses relied on by Worldspan and the creditors in the VCA need not be considered. The Court rejected the argument of the in rem claimants that by Sargeant’s failure to pay Worldspan for the claims certificates, Sargeant benefitted from the work done on the vessel and a failure to reallocate the sale proceeds would create an unjust enrichment for Sargeant. In doing so the Court found nothing in the evidence before it that any one of the in rem creditors performed work that enhanced the value of the vessel, or that there was improper or underhanded behaviour by Sargeant that would trigger the Court’s equitable jurisdiction to reallocate the ordinary priority of claims. Accordingly, the builder’s mortgage took priority over all other asserted claims.
Bankruptcy - Default Judgment - Default of Time Charter - Lien on Cargo
BBC Chartering Carriers GMBH & CO. KG v. Openhydro Technology Canada Limited, 2018 FC 1098
Précis: The Federal Court granted default judgment in favour of the plaintiff and ordered the sale of the in rem defendant cargo, a Turbine Control Centre.
Facts: The plaintiff sought default judgment in the amount of $871,339.97 plus interest and costs against the in rem defendant, a turbine control centre (“TCC”). Pursuant to a time charter party with the plaintiff, the defendants chartered a vessel for, inter alia, the carriage of the TCC, from Ireland to New Brunswick. Once the TCC was delivered, the plaintiffs invoiced the defendants for services rendered, however no payments were made by the defendants towards those invoices. A total of $871,339.97 remained outstanding. Pursuant to the charter party agreement, upon default of payment the plaintiffs were entitled to assert a lien on the TCC in rem. Service on the TCC was impossible as it was located on the bed of the sea offshore Nova Scotia, however service on the in personam defendant was successful on 02 August 2018. On 14 August 2018 the Court validated service on the in rem defendant. On 24 September, the defendants filed a Notice of Intention under the Bankruptcy and Insolvency Act (“BIA”). The only issue for the Court was if default judgment should be granted against the in rem defendant, the TCC.
Decision: Motion allowed.
Held: The Court looked to its own enabling statute to hold that it had jurisdiction with respect to 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: s. 22(2)(i) Federal Courts Act. It further found that under its enabling statute that the jurisdiction conferred in s. 22 may be exercised in rem against the ship, aircraft or other property that is subject of the action, or against any proceeds from its sale that have been paid into court: s. 43(2). After a review of the lead authority, the Court noted that the action in rem must relate to the specific property contemplated in the contract at issue, and found that although the TCC was no longer on board the vessel, there was a clear nexus between the cargo and the vessel and the cargo was the very subject matter of the charter party agreement.
While the plaintiff noted the bankruptcy proceedings stayed any action against the defendants, the plaintiffs argued that proceedings in rem do not apply to the automatic stay of proceedings under the BIA. The Court, finding in the plaintiff’s favour, held that the arrest of the in rem defendant was commenced before the defendant’s notice of intention under the BIA, and therefore the maritime jurisdiction of the Federal Court was engaged in advance of the BIA proceedings.
Judicial Sale - Early Distribution of Proceeds - Best Arguable Case - Interest
Saam Smit v. The Hanjin Vienna, 2017 FC 745
Précis: The Federal Court permitted partial payment out of proceeds from the sale of a vessel after assessing the best reasonable cases of the various claimants.
Facts: As a consequence of the well publicized international insolvency of Hanjin Shipping Co. Ltd., one of its chartered vessels, the “Hanjin Vienna”, was arrested and later sold by order of the Federal Court for the sum of US$6,676,000. Her bunkers were sold for an additional US$939,000. Various claims were filed against against the vessel which totalled approximately US$3,600,000. In view of the fact that the proceeds of sales exceeded the claims, the former owner of the vessel moved for payment out of the surplus funds to it.
Decision: Motion granted, in part.
Held: The first issue to be determined is whether the proceeds from the sale of the bunkers should be taken into account in determining if there is a surplus. This depends on the ownership of the bunkers at the time of sale but the evidence of ownership is too unclear at the present time. Accordingly, the proceeds from the sale of the bunkers shall not be included in determining if there is a surplus.
All of the parties are agreed that sufficient funds must be retained in Court to secure the best reasonably arguable cases of the various claimants taking into account principal, interest and costs. Taking into account that as a simple rule of thumb a 30% markup is applied to the principal amount of a claim to take into account interest and costs, and further taking into account that interest in admiralty matters is a function of damages and is left to the discretion of the court, the owners are entitled to a surplus of US$1,855,908.
Judicial Sale - Payment of Surplus Proceeds
Offshore Interiors Inc. v. Worldspan Marine Inc., 2017 FC 478
Précis: The Federal Court refused a motion for early payment of alleged surplus proceeds of sale.
Facts: Under a vessel construction agreement (“VCA”) Sargeant commissioned Worldspan to build a luxury yacht. Disputes arose during the course of construction which resulted in the vessel being arrested by Offshore, an unpaid supplier of materials and services. Various in rem claims were filed against the vessel totalling approximately $3.1 million. Sargeant claimed $20 million based on a builder’s mortgage granted to it by Worldspan to secure the advances made towards the construction of the vessel. Worldspan claimed $5 million in respect of amounts alleged to be due and owing to it by Sargeant. The vessel was sold by the Federal Court for $5 million. Prior to the full determination of the issues as between the various parties, Sargeant brought this motion for an order that the portion of the sale proceeds in excess of the amounts claimed by in rem creditors be paid out to it as the mortgage holder.
Decision: Motion dismissed.
Held: There is little precedent to guide the court on a motion such as this for early payment. However, prejudice is a relevant consideration in deciding whether there should be early payment of surplus funds. Sargeant has not shown a lack of prejudice to other parties if payment out is ordered nor has it shown any prejudice to itself if early payment is not made. Additionally, on the evidence, I cannot determine the rights of all claimants to the funds which is required by Rule 491(a) of the Federal Courts Rules.
B.C. Admiralty Rules – Arrest – Sale Pendente Lite – Shareholder’s Dispute – Application of PPSA
Avina v. The Ship Sea Senor, 2016 BCSC 749
Précis: The B.C. Supreme Court refused to set aside an arrest but also refused to order the sale of a vessel under arrest pendente lite.
Facts: The plaintiff and defendant purchased a vessel together through a company incorporated by the defendant and of which the defendant was the sole director. Differences arose between the parties leading to the plaintiff’s commencement of this action and the arrest of the vessel. The plaintiff brought this application to sell the vessel pendente lite. The defendant opposed and brought its own application to set aside the arrest.
Decision: Both motions are dismissed.
Held: With respect to the plaintiff’s motion to sell the vessel pendente lite, the plaintiff argues that the vessel is deteriorating and a sale is necessary to halt the deterioration in value. However, the defendant’s evidence is that the vessel is not seriously deteriorating and this evidence is more convincing. Further, the value of the plaintiff’s claim is modest relative to the value of the vessel and it appears the defendant has an arguable defence. In the circumstances, an order for sale is not necessary or expedient.
The defendant argues that the arrest of the vessel should be set aside on the grounds that the dispute between the parties is a shareholder’s dispute and that there is no basis for the exercise of the court’s maritime law jurisdiction. However, Rule 21-2 of the Supreme Court Civil Rules provides that an action in rem may be brought whenever permitted in the Federal Court of Canada. The claim is “with respect to title, possession or ownership of a ship or any part interest therein” within the meaning of s.22(2)(a) of the Federal Courts Act . The claim could have been brought in rem in the Federal Court and is a claim for relief under or by virtue of Canadian maritime law. This is sufficient to dismiss the defendant’s application.
Practice - Judicial Sale - Depreciating Asset – Appeals – Exercise of Discretion
Offshore Interiors Inc. v. Worldspan Marine Inc., 2014 FC 625 2014 FC 655
Précis: The Federal Court approved the private sale of a deteriorating vessel.
Facts: Sargeant and Worldspan Marine entered into a vessel construction agreement in February 2008 whereby Worldspan was to construct a vessel for Sargeant. During the course of construction disputes arose and construction was halted in April 2010. By the time construction ceased, approximately US$20 million had been advanced by or on behalf of Sargeant. The vessel was subsequently arrested in the Federal Court by Offshore, an unpaid supplier of materials, and Worldspan filed a petition in the British Columbia Supreme Court under the Companies Creditors’ Arrangement Act. Offshore was granted default judgment on 31 May 2011 in the amount of $273,000. Offshore subsequently obtained an order to market the vessel for sale at a price of US$18.9 million but, notwithstanding extensive marketing efforts, no buyer could be found. Offshore then found a buyer willing to pay $5 million for the vessel and brought this motion for an order that the vessel be sold by judicial sale for $5 million.
At first instance (2014 FC 625), the Prothonotary ordered that the vessel be sold reasoning that: the vessel had been under arrest for four years; moving the vessel from its current location, instead of selling, would involve risk of damage; the vessel was incomplete and had a limited market; the vessel had significantly declined in value and would depreciate further with additional delay; and additional costs of rent will continue to accrue if the vessel is not sold. The Prothonotary’s decision was appealed.
Decision: Appeal Dismissed, the vessel is to be sold.
Held: The first issue is whether the Prothonotary’s order is vital to the final determination of the case and ought to be reviewed de novo. Following Nordea Bank Norge ASA v “Kinguk”, 2006 FC 1290, the discretion should be exercised de novo. Sargeant argues that an order for judicial sale cannot be made when the mortgagee does not consent. Assuming there is a presumption against a sale when the mortgagee objects, that will not prevent a sale when it is warranted by the circumstances. Vessels are subject to rapid deterioration in value and this court has approved private sales where there is evidence the vessel is deteriorating, timing is essential and prior efforts to sell have not led to higher offers. Here the evidence is that the value of the vessel has substantially diminished. It was aggressively marketed without success for several years. Further marketing will not produce a better price than is currently offered. The evidence is that the current offer of $5 million is a fair offer and is approved.
Insolvency Proceedings - Judicial Sale of Ship -Competing Jurisdiction of Federal Court and Provincial Superior Court
Roynat Inc v. Phoenix Sun Shipping Inc, 2013 ONSC 7308
Précis: The Ontario Superior Court referred applications concerning the sale of a ship to the Federal Court on the grounds that deference had to be paid to the Federal Court Proceedings.
The ship “Phoenix Sun” was arrested in Federal Court proceedings by two creditors. The mortgagee subsequently commenced proceedings in the Ontario Superior Court and obtained an order for the appointment of a receiver over the assets of the ship owner. The mortgagee also obtained a very detailed sales order from the Federal Court that, among other things, appointed the receiver as “Acting Admiralty Marshall” to sell the ship and set up a priorities claims process. The receiver found a buyer for the ship and now brought applications in the Ontario Superior Court for an order approving the sale and for directions regarding the disposition of the sale proceeds.
Decision: The applications should not be brought in the Ontario Superior Court but in the Federal Court.
Held: Although the provincial superior courts and the Federal Court have overlapping jurisdiction in maritime law matters, a creditor must take great care that it sets up a process by which one court will have primary carriage of the realization proceedings. Once in rem proceedings are commenced in the Federal Court the provincial superior court should pay due regard or deference to the Federal Court proceedings. Considering the extensive order made by the Federal Court, it is not appropriate for the Ontario Superior Court to exercise any of its jurisdiction and the motion should be brought before the Federal Court. Any residual matters the Federal Court cannot deal with can then be brought in the Ontario Superior Court.
Summary Judgment - Foreign Judgment - Sufficiency of Evidence - Mortgage Enforcement
Lakeland Bank v. The Ship Never E Nuff, 2013 FC 864
The plaintiff was the mortgagee of the defendant vessel and brought this motion for summary judgment to sell the vessel promptly. In support of its motion the plaintiff filed an affidavit which apparently attached a judgment of the United States District Court of Northern New York in which the plaintiff was awarded US$190,000 and given the right to take possession and dispose of the vessel. The motion was opposed by the defendants who claimed to be the owners.
Decision: Application dismissed.
Held: A motion for summary judgment requires that there be no genuine issue for trial. The evidence is insufficient to meet this threshold. Section 23 of the Canada Evidence Act requires that the US judgment be proven by certified copies not by affidavit. Further, the foreign judgment could not be the basis for execution without more. A full hearing is required.
Jurisdiction - Sale of Property not in Canada
SDV Logistiques (Canada) Inc. v. Dieselgenset Type 8M 25, Engine No. 45085 EX the Barge Andrea, 2013 FC 671
Précis: The court held that it had no jurisdiction to sell property that was not located in Canada.
The plaintiff, at the request of a ship builder, arranged for the pick-up and storage of generators at the Port of Hamburg. The generators were intended to be installed in two vessels being built by the builder. The builder originally paid the storage charges but ran into financial difficulties and ceased to make payments leaving the plaintiff with a debt owing of in excess of $200,000. The plaintiff brought these proceedings in personam against the successor of the builder and the mortgagee of the vessels and also brought in rem proceedings against the generators and other cargo. A Warrant of Arrest was issued but was never served with the result that the action proceeded solely as an in personam action. The plaintiff, nevertheless, brought a motion pursuant to Rule 379 for an order that the generators be sold. At first instance, the Prothonotary refused the order. The plaintiff appealed.
Decision: Appeal dismissed.
Held: Rule 379 cannot be applied because the generators are not and have never been in Canada and there is no evidence the generators are likely to deteriorate. Further, for the court to order the sale of property outside of the jurisdiction, there must be some enabling statutory provision and there is none. Consequently, the court has no jurisdiction to issue the order requested.
Judicial Sales - Priorites - Costs - Procedure in Priorities Disputes
Cameco Corporation v. The MCP Altona, 2013 FC 177
Précis: A party was ordered to pay the costs of a priorities hearing, an unusual order as normally costs are a charge on the funds in court.
The “MCP Altona” was sold by judicial sale following a spill of yellowcake uranium in one of her holds. Following the sale, the mortgagee of the vessel brought an application for payment out of the proceeds of sale. Cameco, the owner of the uranium cargo, defended that motion arguing that it had priority over the mortgagee. The court ultimately determined (at 2013 FC 23) that the mortgagee had priority and ordered payment of the proceeds to it. The mortgagee now moved for costs from Cameco on an enhanced basis.
Decision: The mortgagee is entitled to its costs against the cargo owner based on the tariff.
Held: The procedure in priorities disputes is similar to that for applications. Each party is to file written submissions supported by affidavits and documents to be relied on. Parties are entitled to cross-examine affiants. Although Cameco was unsuccessful in challenging the mortgagee’s priority, it had legitimate points. Further, although the issues were complicated and interesting, for the reasons given in Universal Sales, Ltd v Edinburgh Assurance Co, 2012 FC 1192, costs should be based on the tariff.
Comment 1: In Universal Sales, Ltd v Edinburgh Assurance Co, 2012 FC 1192, the court held that there must be reprehensible conduct to justify an order for enhanced costs.
Comment 2: The decisions addressing the taxation of the costs can be found at 2013 FC 1263 and 2013 FC 1264. An appeal from the taxation can be found at 2014 FC 255
Liens - Mortgages - Priorities - Necessaries Lien - Salvage Convention
Cameco Corp. v. The MCP Altona, 2013 FC 23
Précis: The Federal Court considered s. 139 of the MLA but confirmed the priority of a mortgagee.
The “MCP Altona” was sold by judicial sale following a spill of yellowcake uranium in one of her holds. Following the spill, the plaintiff, the owner of the uranium cargo, arranged and paid for the discharge of the uranium cargo as well as other cargo on the ship and undertook remedial efforts to clean the ship. The plaintiff allegedly incurred expenses in excess of $8 million. The plaintiff sought priority to the proceeds of sale for these costs over the mortgagee of the vessel. The plaintiff argued that it should have priority on four grounds: 1. the discharge of the cargo and remediation of the ship were necessary to bring the ship to sale and those costs should enjoy a priority akin to marshal’s expenses; 2. the services it rendered to the vessel have the status of a maritime lien pursuant to s. 139 of the Marine Liability Act; 3. the services it rendered to the ship were in the nature of salvage services having a priority pursuant to the International Convention on Salvage, 1989; and 4. the court ought to exercise its equitable jurisdiction to alter the usual order of priorities in its favour.
Decision: The mortgagee has priority.
Held: The costs of discharging the cargo and cleaning the ship form part of the plaintiff’s claim against the ship owner and are not to be equated with marshal’s expenses. The plaintiff was not a volunteer but was acting under compulsion of law. With respect to s. 139 of the Marine Liability Act, which grants a maritime lien to Canadian suppliers of goods or services to a foreign ship, the goods or services must be supplied at the request of the shipowner. They were not so supplied. There was no contract with the shipowner. With respect to the claim for a salvage maritime lien, the law of salvage requires that the services be voluntary, the adventure be in danger at sea and the salvage efforts be successful. The International Convention on Salvage, 1989 did not alter the law of salvage other than in relation to compensation for protection of the environment. The ship was not in danger once she arrived at the port and the plaintiff was not acting as a volunteer. Finally, with respect to the equitable ranking of priorities, the thread which ties recent cases on equitable ranking together is unjust enrichment. The mortgagee did not lull the plaintiff into doing something it would not have done in any event. The plaintiff acted not as a volunteer but as it was required to do by law. There is no reason to change the usual priorities.
Assessment of Sheriff's Costs
TAM International Inc. v. The MCP Altona, 2012 FC 1168 2013 FC 9
The defendant ship was ordered to be sold and the order of sale provided that all reasonable expenses and agency fees necessary for the preservation, safekeeping or maintenance of the vessel were to be treated as sheriff’s costs. Upon assessment of the sheriff’s costs certain invoices and expenses were contested by one of the parties. The contested invoices included: amounts paid to the ship’s manager; invoices for parts ordered before the arrest; invoices to maintain the registration of the vessel; wages and associated expenses of a full complement of crew members; invoices for alcohol; and other miscellaneous invoices. The Assessment Officer (2012 FC 1168) allowed some but not all of the disputed amounts. The Assessment Officer found the expenses paid to the ship’s manager were reasonable and necessary and were allowed. Invoices for items or services not necessary for the preservation, safety or management of the vessel were disallowed. The invoices for parts ordered outside of the period covered by the order of sale were not allowed. The invoices for maintaining the registration of the vessel were allowed only for the period applicable to the arrest and sale, which was 1/24 of the entire period. The wages and associated expenses of all but two crew members were allowed, the number being arrived at based on the safe manning certificate of the vessel. Invoices for alcohol were disallowed as not reasonable. The mortgagee appealed those parts of the award with regard to manning and flag registration.
Decision: Appeal dismissed.
Held: The Court should not intervene in an assessment officer’s decision absent an error in principle or an award of an amount so unreasonable as to suggest such an error. With regard to manning, no evidence was submitted as to the minimum crew required during anchorage. With regard to the flag registration, the decision to allow the expenses only to the date of sale does not reflect an error in principle.
Practice - Intervenors – Judicial Sale
Keybank National Association v. The “Atchafalaya”, 2010 FC 406 (CanLII）
This was a motion to intervene and to set aside an in rem judgment and order for sale. The intervenor was Dragage Verreault (“DV”), the plaintiff in another action who had a claim against the same vessel. The plaintiff in this action, Keybank, had been advised of the other action. Keybank obtained a judgment in this action on consent and provided DV with a copy of that judgment. Keybank later brought a motion for sale which DV attempted to delay but because DV did not obtain intervenor status its requests were refused and the order for sale was granted. DV then brought this application. The Court held first that DV as an arresting party had an interest in the ship and was entitled to intervene. The Court further held that the judgment should be set aside, primarily on the grounds that Keybank ought to have given DV prior notice of its application for judgment. With respect to setting aside the order for sale, the Court said that this should be determined by the justice who ordered the sale.
Ownership - Matrimonial Dispute – Sale – Stay of Proceedings
Ricci v. Tully, 2009 FC 493
This was a dispute between a husband and wife involved in divorce proceedings as to the ownership of a sailboat named “Forever Lost”. The boat was purchased with funds raised by the plaintiff/wife from a mortgage on her home but was registered in the name of the defendant/husband. The plaintiff claimed that she was the equitable owner of the boat and the defendant claimed that the boat was a gift to him from the plaintiff. The defendant/husband was living on the boat but had failed to make payments as required by a previous court order and had failed to maintain insurance on the vessel as required. The issue before the Court was whether to grant the plaintiff an order of sale. The defendant argued that the Federal Court should stay the proceedings to permit the issues to be determined in the divorce proceedings in the Provincial Family Court. The Court held that it clearly had jurisdiction to deal with the sailboat but noted that it should not become “a surrogate divorce court for warring spouses”. The Court ordered the sale of the vessel and directed how the proceeds were to be applied with the balance, if any, to be paid into the Court to await the outcome of the divorce proceedings.
Extension of time for Service and Arrest – Order for Sale Pendente Lite
Franklin Lumber Ltd. v. The “Essington II” et al., 2005 FC 95
This was an application by a mortgagee for a substantial extension of time (more than six years) within which to serve and arrest the vessel and a further application for Court approval of a private sale pendente lite. In deciding to grant the time extension, the Prothonotary applied the three-part test from Registered Public Accountants Association of Alberta v. Society of Professional Accountants of Canada, (2000) 5 C.P.R. (4th) 527 that the applicant must demonstrate a continuing intention to pursue the claim, that there is an arguable case and that there is no prejudice to the defendant by granting the extension. This test was to be applied within the context of the “overarching” principle of ensuring justice is done between the parties. In this case, the Prothonotary considered the fact that the dispute was essentially between family members to be particularly significant. In view of the fact that the vessel owner had not found a buyer in seven or eight years, but had at one time agreed to sell the vessel to the present buyer at the same price, the Prothonotary also made an Order for the private sale of the vessel pendente lite without appraisal and on the terms that a down payment of just under 8% of the sale price would be paid into Court immediately with closing approximately four months thereafter. The elements to be considered in deciding whether to order a sale pendente lite are open-ended, but the Prothonotary noted that they include: 1) the value of the vessel compared to the amount of the claim; 2) whether there is an arguable defence; 3) whether the owner can carry on, that is, whether there must be a sale at some point; 4) whether there will be any diminution in the value of the vessel or of the sale price by the delay; 5) whether the vessel with depreciate by further delay; and 6) whether there is any good reason for a sale before trial.
Extension of time - Stay
Global Enterprises International v. The Ships “Aquarius”,“Sagran” and “Admiral Arciszewski”, 2001 FCT 605
This was an application by the Polish trustee in bankruptcy of the Defendant shipowner for an extension of time in which to file an appeal of an order authorizing the sale of the Defendant ships and for a stay of the sale proceedings. The Prothonotary reviewed the case authorities on time extensions and noted that an applicant must generally show an intention to appeal before the time ran out, that the appeal has merit, a reasonable explanation for the delay and that the other parties are not prejudiced. The Prothonotary held that the applicant had failed to address these issues in its affidavit evidence and further found that there was prejudice to the other parties given that the vessels were incurring substantial expenses and a delay might frustrate a sale. The Prothonotary next considered the stay application. The proper test on such an application is that there must be a serious question to be tried, there must be irreparable harm if the application is refused and the balance of convenience must be considered. The Prothonotary noted that the applicant’s material did not suggest the sale order was in error and was silent as to irreparable harm. On the matter of balance of convenience, the Prothonotary was of the view that the balance of convenience favoured an early sale of the ships.
Reconsideration of Sale Order
Annacis Auto Terminals (1997) Ltd. v. The "Cali", 1999 CanLII 8667
This was a motion by the mortgagee to vary an order of sale. The motion arose because one of the terms of the sale order was that any moorage charges from the date of the sale order to the time the ship left the berth were to be given priority as sheriff's costs. At the time it was contemplated that the ship would leave the berth within 45 days of the sale. However, the ship remained at the berth 75 days after the sale and it was not apparent that she would be leaving any time soon. This resulted in ever increasing moorage charges which, as each day passed, meant a smaller recovery for the mortgagee. Although the court clearly had sympathy for the mortgagee, it held that the words "liberty to apply" in the sale order did not confer a right to vary the order. The court held that the order was final and binding. The court did, however, suggest that if a motion was brought pursuant to Rule 399(2) that the mortgagee might obtain some relief by way of an assignment of the claim of the dock owner against the purchaser of the ship.
Priorities - Advance Payments Out of Court
Bank of Scotland v. The "Golden Trinity" et al.,, 1999 CanLII 8106
These reasons dealt with a reconsideration of a previous Order made from the bench allowing an advance payment to the mortgagees of the Defendant vessel from the sale proceeds of the Defendant vessel. The court confirmed the previous Order on the grounds that the advertising and search of lien claimants had been completed, the funds remaining in court were sufficient to satisfy all claimants with a reserve for costs and interest, and the mortgagees had undertaken to return the advances should that be necessary.