Fraser Shipyard and Industrial Centre Ltd. v. Atlantis Two ( The )
T-111-98
Hargrave P.
11/6/99
86 pp.
Priorities of in rem claimants to sale proceeds of Atlantis Two ($1,100,000) and bunkers ($58,393.49), assignment of claim of crew for repatriation costs to Crown-Priority given to maritime claims in Canada generally follows ranking of claims in UK, with minor differences-As number of lien holders claim American maritime liens, Court should touch upon ranking, inter se, of some American maritime claims-As valid portions of American maritime liens and portion of one Canadian necessaries claim raised to equivalent of American maritime lien do not exhaust available fund, no need to consider ranking inter se, of these claims under Canadian law-While ranking of American maritime liens for necessaries is, in Canada, governed by Canadian scheme of priorities, American ranking may be relevant-Laches considered in respect thereof-As number of American necessaries claims, which give rise to statutory maritime liens, Todd Shipyards Corp. v. Altema Compania Maritima S.A., [1974] S.C.R. 1248 pertinent-S.C.C. there held holder of substantive American maritime lien might bring lien into Canada and then use our procedural legislation, Federal Court Act and Rules, to enforce it-Ranking determined according to law of Canada-(1) Bunkers supplied by order or Court to be paid out of sale proceeds with priority as if Marshall's expense, with interest based on estimate by inspection of Bank of Montreal commercial lending rates for relevant period-(2) Claims of crew, officers and master (Crew)-Master's disbursements mostly for food for crew out of own pocket secured by maritime lien-Crew's wages given first priority to sale proceeds that remain after sheriff's costs of sale and reimbursement of bunkers-First priority extending to repatriation costs-Crew shall have lump sum for costs and disbursements of $6,000-(3) Repatriation-Costs of repatriating crew normally borne by owners, however, owners herein had abandoned both ship and Crew-Repatriation costs, borne by seamen themselves, can rank with wage claims-Maritime lien for repatriation may be assigned by order of Court where, as here, repatriation expenses paid by someone else-(4) Bunkers claim of Mermaid Shipping Co. Ltd., head charterers under charter party, as owner of bunkers aboard ship-Mermaid sub-chartered Atlantis Two to International Coffee and Fertilizer Trading Co. (INCOFE)-Mermaid's claim for bunkers consumed while ship under arrest at Vancouver at best statutory right in rem-Unfortunately, funds not sufficient to satisfy this aspect of Mermaid's claim-Mermaid entitled to value of bunker and fuel aboard, less share of costs of sale, and appropriate interest-Mortgagees now claiming interest in fuel aboard ship-However, terms of mortgage did not extend to fuel; by terms of head charter, property in fuel did not pass to owners, but remained in Mermaid, as charterer-Equitable that pro rata portion of cost of sale of ship and fuel aboard be absorbed by Mermaid-In sum, Mermaid entitled to net value of fuel, being sale price of fuel, kept in notionally separate fund, less equitable portion of costs of sale-Mermaid entitled to whatever interest accrued on value of fuel sold while held in trust and on deposit-(5) Supply of necessaries in United States (Strachan Shipping Co., Hellenic Ship Supply Inc., Atlantic Steamers Supply Co. (DE) Inc., Atlantic Steamers Supply Co. (NLN) Inc.)-Claims not secured by preferred maritime liens-Rather, they are maritime liens which would, in US, rank above mortgagees of ship-Of course, within Canadian framework and applying Todd Shipyards Corp., these claims ranked above claim of ABN-Amro, as mortgagee-Claims of maritime lien, as allowed, and given funds available, rank pari passu-Claim of Hellenic granted, but no maritime lien for attorney's fees-Claim of Atlantic NLN for necessaries supplied in US before date of registration of mortgages against ship preferred maritime lien-Balance for goods supplied later allowed-As necessaries supplier in Australia not accorded maritime lien, claim of Nautilus Australia Limited for necessaries supplied in 1997 standing in same position as usual supplier of necessaries in Canada, holding form of right in rem, coming below both maritime liens and mortgages-Claim of Mega Marine Services Ltd. for price of two engine cylinder heads neither of which supplied directly to ship, both supplied F.O.B. Houston, Texas-In view of American law requirement necessaries be furnished to ship (not case herein) no maritime lien against Atlantis Two-Claim of Unitor ASA for marine supplies delivered through US agent of New Jersey to Atlantis Two in Mexico in November 1997 and January 1998 and for necessaries delivered to sister ships of Atlantis Two-In view of Federal Maritime Lien Act and case law interpreting it, Unitor, Norwegian company, acting through American agent, has maritime liens against Atlantis Two and two sister ships, whether or not necessaries supplied at American port-With respect to enforcement of claims through sister ship procedure, substantive American lien does not fit into sister ship provision, Federal Court Act, s. 43(8), which merely refers to jurisdiction conferred on Court by Act, s. 22, an in personam jurisdiction, as being enforceable against sister ship, not right or privilege against one ship being enforced against another ship-If American lien holders wished to use sister ship procedure here in Canada, they would need sister ship legislation in US to enable them to bring into Canada full blown maritime lien against sister ship-Of course, lien holder, assuming had in personam right against shipowner and assuming shipowner owner of not only wrongdoing or debtor ship, but also of sister ship at relevant time, might bring that in personam right into Canada and enforce it, procedurally, against one or more of sister ships-However, priority of such claim would then only be that of statutory right in rem, of no assistance here, given limited sale proceeds involved-Claim of Mermaid for breach of charter party by shipowner, including claims for overpayment of hire, loss of income and anticipated claims from Mermaid's sub-charterer, INCOFE-Although under American law, charterer can have maritime lien for breach of charter against owner, in present case, no connection with American jurisdiction-Breach occurred in Canada-Charter party clause provided English law applies-No maritime lien herein-With respect to monies paid in advance, at best, Mermaid has statutory right in rem, under Federal Court Act, for breach of contract, which, herein, of no value-Subcharterer INCOFE claims, as secured by American maritime lien, by way of breach of charter party between Mermaid as disponent owner and time charterer, on one hand, and INCOFE as voyage charterer, on other hand-Initial issue whether claim for breach of charter party gives rise to American maritime lien enforceable in priority over mortgage against Atlantis Two held by ABN-Amro Bank N.V.-INCOFE's argument that charter party providing for arbitration in New York and therefore American law proper law of contract-Breach relied upon by INCOFE, as giving rise to claim, that of seaworthiness warranty in charter party-INCOFE has American maritime lien arising out of breach of charter, but lien, arising after registration of ABN-Amro's mortgages, not preferred maritime lien coming ahead of preferred mortgage in American ranking system-This American maritime lien for breach of contract ranks, again referring to American system, after all previously preferred ship's mortgages-However, in present instance, right of INCOFE for breach of sub-charterer as maritime lien, travelling with ship recognized-In Canadian scheme, even though not preferred maritime lien, it ranks ahead of ABN-Amro mortgages-INCOFE's damages-Damages claimed not in nature of substantive American right, nature of which to be explained by American experts in order to determine manner of enforcement in Canada, but Canadian remedy to be determined by Court without expert help-Having determined INCOFE has proper claim, Court must quantify claim so that, to extent sale proceeds sufficient, INCOFE awarded sum to put it, as nearly as possible, in same position it would have been in had breach of charter party not occurred-INCOFE claiming interest on value of cargo detained aboard ship by reason of delay in sailing, extension of insurance coverage by reason of delay, ship board survey at Vancouver, reimbursement of claim by buyer of potash who had to obtain same from other source, lost profit-Interest claim allowed on purchase price of cargo for period from payment of cargo to delivery of same-Claim for payment to buyer of potash for differential on cost of replacement potash-Claim raising difficulty in that INCOFE did not contest buyer's expense of mitigation-Same principles of remoteness will apply to claims whether sound in tort or contract subject only to special knowledge, understanding or relationship of contracting parties or to any terms expressed or implied of contractual arrangement relating to damages recoverable on breach: Asamera Oil Ltd. v. Sea Oil & General Corporation, [1979] 1 S.C.R. 633-Nothing herein in contractual arrangements dealing with breach of contract-Court has been referred to no persuasive material by way of effective challenge to hard costs making up differential in value of Atlantis Two cargo as opposed to cost of replacement cargo, trucking from Guatemala and Nicaragua to Costa Rica and for parcel of bagged phosphate which came by sea-That portion of claim will stand-Claim for interest not proper or justified item-Claim for lost 1997 profits denied as delay of 1997 Atlantis Two potash, sold in rising market in 1998, meant that INCOFE suffered no profit loss whatsoever in 1997-As for claim for 1998 profit, INCOFE has not established that, but for Atlantis Two debacle, it would, on balance of probabilities, have sold all of cargo earmarked for it by seller-Applying Houweling Nurseries Ltd. v. Fisons Western Corp. (1988), 49 D.L.R. (4th) 205 (B.C.C.A.), at p. 217 (where claims represent loss of opportunity, which, while it probably would have arisen, must be discounted for possibility it might not have fully materialized), 75% reasonable and common sense award-Claim of ABN-Amro Bank N.V. for total of $11,374,895 under first and second mortgages-Mortgage security of ABN-Amro ranks, in usual scheme of priorities, ahead of statutory rights in rem, but behind maritime liens-Various creditors submit ABN-Amro ought to have moved against ship at earlier date, thereby putting creditors on notice not to extend credit-Creditors argue ABN-Amro ought therefore to lose priority-No reason to disturb priority of ABN-Amro as first mortgage holder as no evidence it stood by, knowing repairs to ship undertaken for which owner could not pay and value of which woud fall into pocket of mortgagee on forced sale of ship-Claim of Fraser Shipyard,. based on unjust enrichment, for major repair work done on ship enhancing sale price of ship-Consideration of when Court will depart from usual priorities and whether it ought, in present instance, to enhance priority of Fraser Shipyard claim because repair work enhanced ship's sale price-Equitable jurisdiction of Court should only be used to upset longstanding priorities where necessary to prevent obvious injustice-Present unjust result that, without Fraser Shipyard's work, ship would, in all likelihood, have sold at scrap value plus intrinsic value increment-On material and argument presented, including expert evidence, value of Atlantis Two might have been increased by say 25% above scrap and intrinsic value by reason of repair work, from $880,000 to $1,100,000 ship fetched on sale-By that calculation, $220,000 US of Fraser Shipyard's claim allowed to stand pari passu with American lien claimants, together with interest at 7% from completion of repairs.