Holt Cargo Systems Inc. v. The "Brussel"

In Maritime Liens, Mortgages & Priorities on (Updated )

This was a hearing to determine priorities to the sale proceeds of the Defendant vessel. The claimants and their claims were: Holt Cargo Systems for costs of sale and Marshall’s expenses; Halifax Port Corporation for port dues owed by the "Brussel" and her sister ships; Atlantic Pilotage Authority for pilotage services rendered to the "Brussel" and her sister ships; American maritime lien holders for goods and services supplied to the "Brussel" and to sister ships of the "Brussel"; the mortgagee for the mortgage debt; Canadian necessaries suppliers; and, the Trustee in Bankruptcy of the bankrupt ship owner. The court gave priority over the mortgagee to the claims of Holt Cargo Systems, the Halifax Port Authority, the Pilotage Authority and the various American maritime lien claimants who had supplied goods and services to the "Brussel". All of the other claimants ranked after the mortgagee, meaning they recovered nothing.

The claim of Holt Cargo Systems for the costs and disbursements related to the sale of the "Brussel" were granted a priority as were other costs which the court had previously ordered would be given a priority equivalent to Marshall’s expenses.

The claim of the Halifax Port Corporation was granted a priority for port dues owed by the "Brussel" on the basis that section 43(5) of the Canada Ports Corporation Act gave it a priority over all other claims except the claims of seamen for wages. The Port Corporation was, however, not given priority for port dues owed by sister ships of the "Brussel". The court held that this claim was a mere statutory right of action in rem ranking behind the mortgagee.

The claim of the Atlantic Pilotage Authority was allowed and given priority for the services rendered to the "Brussel" but not for the services rendered to sister ships. In awarding the Pilotage Authority a priority the court noted that the Pilotage Act did not confer a priority, however, the Prothonotary was referred to Osborn Refrigeration Sales and Service Inc. v The Ship "Atlantean I", [1979] 2 F.C. 661, varied on other grounds 7 D.L.R. (4th) 395, and Ultramar Canada Inc. v Pierson Steamships Ltd. et al., (1982), 43 C.B.R. (N.S.) 9, which did grant a lien for pilotage services. On the basis of these authorities, and because the other claimants appeared to not contest the claim, the court granted the lien for pilotage services. (Note: The authorities on this point are not unanimous. In Ostogota Enskilda Bank v Starway Shipping Ltd., (1994), 78 F.T.R. 304 at 306, Muldoon J. said it had not been established "that there is in law a maritime lien for Canadian pilotage services". This decision was apparently not brought to the attention of the court in The "Brussel".)

With respect to the American lien claimants, the Trustee challenged the recognition of and the priority given to such liens and invited the court to reconsider these issues. The court held that the recognition and priority of such liens had been established by the Supreme Court of Canada and that it was not the role of the court to question established authority unless the circumstances were exceptional, which they were not. The court did, however, hold that the American claimants who had supplied goods and services to sister ships of the "Brussel" were not entitled to maritime liens and, therefore, were not entitled to a priority.

The court ordered that the balance of the sale proceeds after payment of all of the above creditors would go to the mortgagee who had a claim in excess of $68 million.

One of the other claimants, Halterm, had paid the wharfage for the "Brussel" to the Halifax Port Corporation and claimed to be subrogated to the statutory lien of the Port Corporation. The court found, however, that there was no evidence of an explicit assignment of the Port Corporation’s lien rights and further noted that the Canada Ports Corporation Act was silent regarding whether such rights could be assigned. The court ultimately held that there had been no assignment in favour of Halterm. In reaching this decision the court was careful to note that it did not "foreclose the possibility that a maritime right in rem or other lien may be assignable". (Note: in The "Atlantis Two" the court approved of an assignment of the seamens’ liens for repatriation costs to the Crown.)

Another claimant, Bridge Oil, alleged that it was entitled to a maritime lien for bunkers supplied to the "Brussel" in Belgium based on Article 2(5) of the Unification of Certain Rules Relating to Maritime Liens and Mortgages, 1926, which gives a maritime lien for contracts entered into by a Master provided, inter alia, the vessel is away from her home port and the contracts were necessary for the preservation of the ship or the continuation of the voyage. The court disallowed the lien claim on the grounds that the bunkers were ordered by the owner and not the Master.

A lessor of containers alleged that it had a maritime lien for unpaid lease payments on containers supplied to the "Brussel". The lease agreement expressly provided that the lessor was to have a contractual lien against the lessee’s vessels. The court held that such a lien has no special priority as against third parties. (Note: In The "Atlantis Two" the Prothonotary seemed to suggest that a contractual lien might be of some effect in a priorities hearing.)