Finansbanken ASA v. The “GTS Katie”

In Maritime Liens, Mortgages & Priorities on (Updated )

In this matter a supplier of necessaries attempted to obtain priority by entering into an agreement with the ship owner for the transfer of property on board the ship. The property transferred consisted of plans, manuals, drawings, 5 life rafts and 2 breathing apparatus. The agreement provided that the ship owner could retake possession and ownership of the property by the payment of the outstanding amount owed for necessaries. The mortagee of the defendant vessel challenged the agreement arguing that the property allegedly transferred was covered by the mortgages and was invalid as the transfer had not been consented to by the mortgagees. The Prothonotary agreed with the mortgagee. He reviewed the terms of the mortgage and the meaning of the term “appurtenances” and concluded that the property was subject to the mortgage. He further held that the consent of the mortgagee is required where the mortgage security is dealt with so as to reduce the value of the security. The decision of the Prothonotary was upheld on appeal (2002 FCT 339).