Précis: This matter concerned the ranking of various claimants to proceeds from the sale of a ship.
Facts:The barge “Chaulk Lifter” was arrested by a harbour authority for non- payment of harbour dues. At the time of her arrest she was in the possession of a ship repairer for the purposes of having repair work done. The ship repairer subsequently commenced this proceeding for amounts owing and obtained an order for the sale of the vessel. The barge was sold by court order for $600,000. From the proceeds of sale, the expenses of the Marshall were paid as were two preferred claims under the Canada Marine Act for harbour dues and damage done to a dock. After the payment of these claims there was a balance of approximately $460,000 but the total claims against the vessels exceeded $6.5 million. The claimants and their claims were:
– The ship repairer for the costs of repairs to the barge, the costs of bringing the barge to sale and for various custodia legis expenses;
– The harbour authority for a mortgage claim of $57,000, which mortgage was granted on 20 August 2014 to secure partial payment of harbour dues owing in respect of the barge;
– The harbour authority for $260,000 in wharfage, clean-up and wreck removal, all of which were incurred as a consequence of the sinking of a sister ship;
– The brother and father of the sole officer and director of the owner for a mortgage claim of $407,000;
– The Canadian Coast Guard for $1.8 million representing the costs of cleaning up an oil spill that occurred as a consequence of the sinking of the sister ship;
– The Administrator of the Ship-source Oil Pollution Fund for security to satisfy claims anticipated to be filed as a consequence of the sinking of the sister ship; and
– A lender for funds advanced.
Decision: The balance of the sales proceeds are to be distributed in priority first to the ship repairer then to the harbour authority, in respect of its mortgage claim, with the balance then to be shared pro-rata between the allowed claims of the ordinary in rem creditors. Interest is to be allowed only to the extent earned on the sums on deposit and is to be shared pro rata.
Held:The ship repairer has a possessory lien which outranks the two mortgages that pre-date the commencement of its work on the vessel. The possessory lien covers the work done to the barge, the costs of moving the barge from time to time and the costs of fuel and supplies but not GST and PST for which the repairer was entitled to a rebate. In addition, its claim is reduced by $23,000 for damage caused to the dock while moving the barge and which formed part of the preferred claim under the Canada Marine Act.
The harbour authority claims $57,000 in respect of the mortgage it holds on the barge and $260,000 in respect of a sister ship claim. It is entitled to priority for its mortgage claim but not in respect of the amounts incurred in relation to the sister ship or as a consequence of the sinking of the sister ship. A sister ship claim is a mere claim in rem with no priority and ranks pari passu with other ordinary creditors.
The claims of the brother and father for priority as mortgagees are disallowed. The evidence establishes that the corporate owner of the barge was given no consideration for the mortgage. Moreover, the transactions were not at arms length and the court has inherent power to vary the normal ranking of priorities. If they have any claim, it ranks after the claims of ordinary creditors.
The claim of the Canadian Coast Guard in respect of the costs of clean-up of the oil spill associated with the sinking of the sister ship, being a sister ship claim, ranks pari passu with ordinary creditors.
The claim by the Administrator of the Ship-source Oil Pollution Fund for security is challenged on the basis that s. 102 of the Marine Liability Act gives no right to claim against sister ships. However, neither does the Marine Liability Act contain anything that detracts from the general right under s. 43(8) of the Federal Courts Act to claim against a sister-ship. Accordingly, the Administrator has a right to claim against a sister ship but its claim will rank pari passu with other ordinary creditors.
The claim by the lender is disallowed as the funds advanced were not in respect of the barge or a sister ship of the barge.