Offshore Interiors Inc. v. Worldspan Marine Inc.

In Admiralty Practice, Judicial Sales on (Updated )

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.