Salvage and Wreck
We are frequently asked questions about the law of salvage and wrecks. These questions are usually something like "If I find a vessel adrift or in trouble and put a line on it or otherwise save it, is it mine?" or "If something washes up on the beach, can I keep it?" or "If I find lost treasure (or a shipwreck or an airplane hull), is it mine?". The answer in all cases is no. Generally, one does not become the owner of maritime property merely because the person saves it or finds it. If a person renders assistance to a vessel in distress and saves it, they are entitled to a salvage award, not an ownership interest. If a person finds lost or abandoned maritime property, they are required to report it to the Receiver of Wrecks and they are entitled to a salvage award. Both the law of salvage and the law of wrecks are governed extensively by statute and regulations. The most relevant statutes are the Canada Shipping Act, 2001 ("CSA, 2001") and the Navigation Protection Act ("NPA"). The Marine Liability Act ("MLA") is also relevant, but less so.
Salvage is one of the ancient maritime laws. It is concerned with the saving of life or property at sea. Generally,when maritime property is in danger and a volunteer successfully saves the property, the volunteer is entitled to a salvage award that is determined by the courts. The three necessary elements to a salvage award are: danger; voluntary assistance; and success. If the property is not in danger, no salvage award is payable. If the person is not a volunteer (i.e. is under some legal obligation to render assistance), salvage is not payable. (But note that pursuant to s. 147 of the CSA, 2001, assisting a person at sea, responding to distress signals or following the directions of a rescue coordinator does not disentitle a person to a salvage award.) If the salvage attempt is not successful, no salvage award is payable ("no cure no pay").
The amount of the salvage award is dependent on a number of factors including: the value of the saved property; the extent of the danger; the time required and the expenses and losses of the salvor; the skill of the salvor; and the risks and liabilities avoided by reason of the salvage (i.e. pollution).
Although there is no necessity or requirement that there be a contract between the salvor and the owner of the property in danger, most large scale commercial salvage operations today are done under a salvage contract. The most well known, if not the most common, of these is the Lloyd’s Open Form Salvage Agreement, which includes a "no cure no pay" provision as well as arbitration to determine the salvage award. Such contracts are valid but, pursuant to art. 7 of the Salvage Convention (see below) are subject to annulment if entered into under undue influence or the influence of danger or if the payment is excessive for the services rendered.
Priority of Salvage Awards
Salvage has traditionally been considered to be a "maritime lien", which means that a claim for salvage is not defeated by a change in the ownership of the salved property and that the claim has a fairly high priority in the event of a priorities dispute. Pursuant to s. 86(4) of the CSA 2001, a lien arising from a claim for salvage has priority over all claims except costs relating to the arrest and sale of the vessel.
The limitation period for a salvage claim is two years from the date the salvage services were rendered but this period may be extended to the extent and on such conditions as the court deems fit. (CSA 2001, s.145, and Art. 23 of the Salvage Convention)
Limitation of Liability
Salvors are entitled to limit their liability pursuant to article 2 of the Convention on Limitation of Liability for Maritime Claims, 1976, as amended by the Protocol of 1996.(the "LLMC"; Schedule 1 to the MLA) Claims for salvage are, however, exempted from limitation pursuant to art. 3 of the convention.(Schedule 1 to the MLA) The limits of liability for any salvor not operating from any ship or for any salvor operating solely on the ship to or in respect of which he is rendering salvage services, shall be calculated according to a tonnage of 1,500 tons. (Art. 6 r. 4 of the LLMC)
International Convention on Salvage, 1989
Salvage law is predominantly governed by the CSA 2001 which, pursuant to s. 142 implements the International Convention on Salvage, 1989 (Schedule 3 to the CSA 2001). The Salvage Convention applies to both salvage operations at sea and in inland waters. (Canada could have declared the convention did not apply to inland waters under article 30 but did not do so in its reservations, which are recorded in Part 2 of Schedule 3 to the CSA 2001.)
In summary, the main provisions of the Salvage Convention are:
- Art. 4 – State owned vessels are exempted from the Salvage Convention;
- Art 6 – The convention applies to all salvage operations unless a contract specifically provides otherwise but the contract is subject to annulment if entered into under undue influence or the influence of danger or if the payment is excessive for the services rendered (Art. 7).
- Art. 8 – The salvor has the duty to carry out the operations with due care and to prevent or minimize damage to the environment. The owner has the duty to cooperate with the salvor and to similarly prevent or minimize damage to the environment;
- Art. 10 – Ship’s Masters are obliged to render assistance to any person in danger of being lost so far as can be done without serious danger to his vessel;
- Art. 12 – Salvage operations which have a "useful result" give a right to an award;
- Art 13 – The award shall not exceed the salved value but is to be fixed with a view to encouraging salvage operations and shall take into account: the salved value; the skill and effort to minimize damage to the environment; the measure of success; the danger involved; the skill and efforts of the salvor; the time, expenses and losses of the salvor; the risks run by the salvors; the promptness of the salvage; the vessels and equipment used; and the state of readiness and efficiency of the salvor;
- Art. 14 – Where the vessel threatened damage to the environment and the salvor prevented or minimized damage to the environment, he is entitled to special compensation if the award under art. 13 is not sufficient;
- Art. 18 – A salvor may be deprived of all or part of his award if guilty of fault, neglect, fraud or dishonest conduct;
- Art. 19 – A salvor is not entitled to an award where the owner expressly and reasonably prohibited the salvage operation;
- Art. 21 – Upon the request of the salvor the persons liable to pay an award shall provide security including for interest and costs and the salved property shall not be removed from the port or place to which is first taken until the security is posted;
- Art. 23 – An action for payment of a salvage claim shall be brought within two years from the day on which the salvage operations terminated.
Historical and Cultural Property
Maritime property that is considered of historical or cultural significance may not be subject to salvage. In Part 2 of Schedule 3 to the CSA 2001, the Government of Canada specifically reserved the right not to apply the Salvage Convention "when the property involved is maritime cultural property of prehistoric, archaeological or historic interest and is situated on the seabed". To date, we are not aware of any case in which such a designation has been specifically made, however, we are aware that the Government of Canada is actively looking at this topic. Moreover, there are a number of provincial statutes that purport to apply to maritime ship wrecks that prohibit disturbing the wreck in any way. (See for example the Heritage Conservation Act of British Columbia which declares any ship (or airplane) wreck a heritage object after only two years.) Whether and/or to what extent these provincial acts are constitutionally applicable to ship wrecks is a matter of debate but, as most of them make it an offence to breach their provisions, it would be wise to seek professional advice before disturbing any property found on the sea bed.
The law of "wrecks" is related to but different from salvage. It concerns derelict (i.e. abandoned) vessels, wrecked vessels, stranded vessels, vessels in distress and any other property that is found floating (flotsam) or washed ashore (jetsam) or on the bed of the sea (lagan). "Wreck" is defined in s. 153 of the CSA 2011 as including:
(a) jetsam, flotsam, lagan and derelict and any other thing that was part of or was on a vessel wrecked, stranded or in distress; and
(b) aircraft wrecked in waters and anything that was part of or was on an aircraft wrecked, stranded or in distress in waters.
The finder of a wreck is not entitled to retain the wreck or any part thereof or any lost cargo. To the contrary, the finder is required to report the find to the Receiver of Wrecks, an office created under the provisions of the CSA 2001, and must deal with the wreck as directed by the Receiver.The finder is, however, entitled to a salvage award which is determined by the Receiver but which cannot exceed the value of the wreck. The law relating to wrecks is addressed in Part 7 of the CSA 2001 which provides:
- Any person who finds, takes possession of or brings a wreck into Canada, the owner of which is not known, shall report it to the Receiver of Wrecks (an office designated under the act) and take whatever measures the Receiver directs including deliver it to the Receiver (s.155);
- The person who finds the wreck etc. is entitled to a salvage award determined by the Receiver which may be the wreck, part of the wreck or all or part of the proceeds upon the disposition of the wreck (s.156) but the award cannot exceed the value of the wreck (s. 159);
- Every person is prohibited from possessing, concealing or disposing of a wreck that has not been reported (s. 157);
- The Receiver must release the wreck or the proceeds of its disposition to the owner provided the owner: (1) submits a claim within 90 days of when the wreck was reported; (2) establishes their claim to ownership; and (3) pays the salvage award and the Receiver’s fees and expenses.(s.158);
- The Receiver’s decisions respecting the right of ownership or the salvage award can be appealed to a court but the salvage award of the court shall not exceed the value of the wreck (s. 159);
- The Receiver may sell or destroy the wreck: (a) after 90 days if the value of the property is over $5,000; or (b) at any time if, (i) the value is less than $5,000, (ii) the storage costs would likely exceed the value, or (iii) the wreck is perishable or poses a threat to health or safety (s. 160). If the wreck is sold and the owner does not make a claim within 90 days, the proceeds less the salvage award and the Receiver’s expenses are paid into the Consolidated Revenue Fund (i.e. they go to the Crown) . (s.160); and
- If the owner has established ownership but not paid the salvage award within 30 days, the Receiver may dispose of the wreck and pay the owner the balance after deducting the unpaid salvage award and fees and expenses. (s.161)
It should be noted that the above provisions apply only where the owner of the wreck is not known by the finder. If the owner is known, the finder is only entitled to claim a salvage award unless the finder can prove the owner has abandoned the property. This requires that the finder commence court proceedings for a declaration the owner has abandoned the property and that the finder has title. (See, for example, the unreported decision in All Tow Boat Moving Ltd. v Lovdahl et al. (FCTD) T-2085-14 (2015-03-02), a copy of which can be found here). One would think that this would be a rare occurrence since, if the wreck has value, the owner will not abandon it. Additionally, a declaration of title would make the finder liable for any pollution emanating from the wreck and possibly for wreck removal expenses.
Navigation Protection Act
A vessel, or part of one, that is wrecked, sunk, partially sunk lying ashore or grounded is an obstruction within the meaning of the Navigation Protection Act (the "NPA") and is subject to the provisions of that act. In summary, such vessels must be removed by the owner or person in charge, and if they fail to do so, the Crown will do so at the owner’s expense. More specifically, the provisions provide:
- the person in charge of the obstruction (i.e. the owner) shall notify the Minister of the obstruction, maintain a sufficient signal and light to indicate the position and shall immediately remove the obstruction. If the owner fails to remove it the Minister may do so. (s.15);
- If the Minister is required to remove the wreck the costs incurred are a debt owing to the Crown recoverable from the person in charge of the wreck or any person through whose act or fault the obstruction was occasioned or continued (s.18);
- If any vessel is wrecked, sunk, partially sunk, lying ashore, grounded or abandoned in any navigable water, the Minister may authorize any person to take possession of and remove the vessel, part of the vessel or thing for that person’s own benefit, on that person’s giving to the registered owner or other owner of the vessel or to the owner of the thing, if known, one month’s notice or, if the registered owner or other owner of the vessel or owner of the thing is not known, public notice for the same period in a publication specified by the Minister (s.20).
Limitation of Liability
Under Canadian law there is no right to limit liability in respect of claims for wreck removal. Pursuant to Article 18 of the Convention on Limitation of Liability for Maritime Claims, 1976, as amended by the Protocol of 1996 and Part 3 of Schedule 1 to the MLA, Canada has exempted from limitation of liability "Claims in respect of the raising, removal, destruction or rendering harmless of a ship that is sunk, wrecked, stranded or abandoned, including anything that is or has been on board that ship".
Nairobi International Convention on the Removal of Wrecks
The Nairobi International Convention on the Removal of Wrecks, 2007 is a brand new convention that comes into force on 14 April 2015. The convention applies to "wrecks" in the territorial waters of signatory states but can be extended to include internal waters. Canada is not a party to the convention but Transport Canada has recommended that Canada accede to the convention and apply it to Canada’s internal waters and territorial sea in two separate discussion papers. The 2010 Transport Canada discussion paper on this can be found here. In July 2015 Transport Canada issued a second discussion paper with specifics of what is proposed to be implemented in Canada. The 2015 discussion paper can be found here.
In summary, the convention requires that a "wreck" be reported and, if it is determined the "wreck" is a hazard to navigation or the environment, the wreck must be removed. The convention requires owners to have compulsory insurance to cover the costs of wreck removal and provides for direct action against the insurers. The owner of the "wreck" is responsible for the costs of removal unless the owner proves the wreck:
- resulted from an act of war or similar hostilities; or
- resulted from a natural phenomenon of an exceptional, inevitable and irresistible character; or
- was wholly caused by acts or omissions by third parties done with intent to cause damage; or
- was wholly caused by the negligence or other wrongful act of any Government or authority responsible for the maintenance of navigational aids.
The convention permits the owner to limit liability under any applicable national law or convention but, as indicated above, Canada and many other countries have exempted wreck removal claims from limitation of liability.
The limitation period established by the convention is three years from the date the "wreck" is determined to be a hazard but subject to a maximum of six years from the date of the casualty.