T-1356-74
Osborn Refrigeration Sales and Service Inc.
(Plaintiff)
v.
The Ship Atlantean I, her owners, operators
and/or any other person interested in the said ship
(Defendants)
Trial Division, Walsh J.—Montreal, February 14
and 15; Ottawa, March 26, 1979.
Maritime law — Proceedings arising out of order made on
motion for directions concerning proof of claims arising out of
complex and unusual litigation concerning ownership of vessel
— Claims exceeding proceeds of sale of ship — Principles
determining priority of distribution among creditors — Estab
lishment of claims and priorities — Federal Court Act, R.S.C.
1970 (2nd Supp.), c. 10, ss. 43(3), 59 — Canada Shipping Act,
R.S.C. 1970, c. S-9, ss. 38, 43 — Pilotage Act, S.C. 1970-71-
72, c. 52, s. 34 — Federal Court Rule 1010.
The present proceedings arise out of an order for directions
concerning the proof of claims in this Court arising out of
litigation which had taken place concerning the ownership of
and claims against the vessel Atlantean I. Claimants who had
filed caveats were to indicate the nature and amount of the
claim and its priority upon the proceeds of the sale. The
purchaser of the vessel, Caron, following the judicial sale,
incurred expenses in taking possession of it due to legal com
plications and the legal fees paid to overcome them, to meas
ures taken by the ship's captain under a colour of right
resulting from a small claims court judgment, and to expenses
required to maintain the vessel which normally would have
been incurred by the Marshal. The R.C.M.P. and the Coast
Guard claim for expenses incurred pursuing the ship and
returning it to custody. While the R.C.M.P.'s claim was
primarily for time and overtime of Force members, their room
and board, and aircraft rental, it also included amounts expend
ed for the purchase of oil for the ship and for the cost of having
the vessel drained for the winter. The Coast Guard, too,
claimed for their total operating costs incurred securing the
ship's custody and included expenditures for fuel, lubricants
and provisions for the Atlantean I. Ontario Sandblasting Com
pany submitted a necessaries claim—one for sandblasting and
painting the vessel in 1973. Port Colborne Warehousing Lim
ited and others were granted judgment for necessaries; the
warrant for the arrest of the vessel, although effected after
Security National Bank's mortgage, was issued prior to it.
Neither Port Colborne Warehousing Limited, which incurred
advertising expenses incidental to its motion for the sale of the
ship, nor the Judge, were aware that, a sale had already been
authorized. Pilots claim for services actually rendered, and for
those occasions when the ship sailed without a pilot but for
which payment of pilotage was required by operation of law.
Finally, Security National Bank claims an amount as a first
rank maritime hypothec.
Held, the validity of most claims is allowed and the priority
determined. Title vests in the purchaser on approval of the sale
by the Court; the provisions of the Canada Shipping Act are
procedural requirements to complete the transfer of title. Be
tween the date of the Court's approval and the signing by the
Marshal of the deed of sale, the purchaser is owner under a
suspensive condition. Claims arising following that date are
claims against the ship rather than against the fund, except in
the peculiar circumstances of this case for amounts spent for
the preservation of the ship. The original order of sale must be
followed. While fundamental rules as to priorities should not be
ignored, there is authority for the proposition that equity should
be done to the parties in the circumstances of each particular
case. The case at bar requires the application of some equitable
principles in the distribution of the very limited amount avail
able in the fund in comparison to the claims. The Marshal's
costs will be afforded the first priority. These should include
not only disbursements made by the Marshal but also those
made on his behalf by other parties whether specifically author
ized by him or not to preserve the vessel from the time of
adjudication to delivery of possession to the purchaser. Neither
the R.C.M.P. nor the Coast Guard in the performance of their
duties pursuant to a direction from the Court have a claim
against the proceeds of the sale for expenses incurred by them
in this connection. The disbursements for oil and supplies
furnished the ship, and for draining the water, however, are
expenses for the preservation of the vessel to be included among
the Marshal's costs. The costs of the purchaser's lawyers in
obtaining possession of the vessel in this Court are allowed on
the same exceptional but equitable basis. The taxed costs of
Port Colborne Warehousing Limited, and expenses flowing
from the order obtained by it from the Court, too, are to be
allowed. The pilots' claim for services rendered is a maritime
lien but the claim for services not rendered is merely a statutory
lien against the vessel and not the fund. The mortgage creditor
Security National Bank should be collocated for the balance.
The claim of Ontario Sandblasting and the balance of the claim
of Port Colborne Warehousing Limited are settled by section
43(3) of the Federal Court Act.
APPLICATION.
COUNSEL:
No one appearing for plaintiff.
No one appearing for defendants.
Ian E. Harris for claimant Port Colborne
Warehousing Limited.
Richard Gaudreau for claimants Paul -Émile
Caron and Langlois, Drouin, Roy, Fréchette
& Gaudreau.
Claude Joyal for claimants Royal Canadian
Mounted Police and Canadian Coast Guard.
Sean J. Harrington for claimant Security Na
tional Bank.
Pierre H. Cadieux for claimant Ontario
Sandblasting Company.
Michel Bourgeois for claimant Laurentian
Pilotage Authority.
SOLICITORS:
Chauvin, Marler & Baudry, Montreal, for
plaintiff.
Cerini, Jamieson, Salmon, Findlay, Watson,
Souaid & Harris, Montreal, for claimant
Port Colborne Warehousing Limited.
Langlois, Drouin, Roy, Fréchette & Gau-
dreau, Montreal, for claimants Paul -Émile
Caron and Langlois, Drouin, Roy, Fréchette
& Gaudreau.
Deputy Attorney General of Canada for
claimants Royal Canadian Mounted Police
and Canadian Coast Guard.
McMaster, Meighen, Montreal, for claimant
Security National Bank.
Asselin & Cadieux, Montreal, for claimant
Ontario Sandblasting Company.
Guy P. Major, Montreal, for claimant Lau-
rentian Pilotage Authority.
The following are the reasons for judgment
rendered in English by
WALSH J.: The present proceedings arise out of
an order made by Mr. Justice Raymond G. Decary
on January 25, 1977 upon the motion of Paul -
Émile Caron for directions concerning the proof of
claims in this Court arising out of the extraor
dinarily complex and unusual litigation which had
taken place concerning the ownership of and
claims against the vessel Atlantean I. This order
directs that claimants who had filed caveats
should, with permission of the Court, produce
interventions pursuant to Rule 1010 of the Rules
of the Court within 30 days from service of this
order on them, that such interventions should indi
cate the nature and amount of the claim and its
priority upon the proceeds of the sale, that the
interventions must be served within 10 days on all
other parties who had produced caveats, that these
interventions could be contested at the joint hear
ing of them, and that there should be a joint
application within 60 days for such a hearing. In
due course after many delays interventions were
produced on behalf of the Security National Bank,
the Attorney General of Canada, representing the
Canadian Coast Guard and the Royal Canadian
Mounted Police, Port Colborne Warehousing Lim
ited, Paul -Émile Caron, and the legal firm of
Langlois, Drouin, Roy, Fréchette and Gaudreau
which represented him throughout in their own
name, the Laurentian Pilotage Authority and
Ontario Sandblasting Company.
The proof was greatly shortened and the Court
assisted by a lengthy admission of facts signed by
counsel for all these parties outlining the history of
the litigation and the various judgments which had
been rendered during the course of it. Certain
further proof was permitted as to the amounts of
some of the claims by exhibits produced at the
hearing with the permission of the Court. Informa
tion provided by the Registry indicates that as of
January 31, 1979, there was the sum of $36,986.76
in Court to distribute arising out of the proceeds of
the sale amounting to $28,500 plus interest less an
amount already paid out to the Marshal of
$760.62 pursuant to an order of the Court dated
June 13, 1977. As appears from the affidavit of
the Marshal annexed to his application for prefer
ential payment this related to a first sale on Janu-
ary 15, 1975 approval of which was postponed by
order of the Court on the intervention of Security
National Bank. A second sale took place on Febru-
ary 18, 1975 and was approved by the Court this
being for the aforementioned sum of $28,500.
Counsel for Security National Bank stated that
the costs of this sale were paid for by it so that
there is no direct claim by way of intervention by
the Marshal for any costs in connection with this
second sale, but to the extent that his costs in
connection therewith were entitled to be taxed by
priority, it may well be that any sums paid to him
on account of these costs by the Security National
Bank might be deemed to have been made by way
of an advance or with subrogation.
It will be convenient to outline the claims of the
various intervenants, and the principal grounds of
contestation of same by other intervenants before
making any definitive finding as to the validity of
such claims or their rank, as it is evident that only
a small part of them can be settled out of the
proceeds of the sale and that some of the claimants
will not be entitled to share in the distribution at
all.
Claim of Paul-Emile Caron the Purchaser ..
Although the ship was adjudicated by order of
the Court to Mr. Caron on February 20, 1975
following the judicial sale on February 18 the
judgment approving the sale was appealed by a
company known as Vitrai Compania Naviera S.A.
the next day and it was not until October 23, 1975,
that this appeal was dismissed by the Federal
Court of Appeal. Furthermore Mr. Caron was
unable to get possession of the ship when he went
to Quebec City where she was located, being pre
vented from doing so by one Captain Erb who
contended that in his capacity as a representative
of the said company Vitral he had on November
30, 1974, bought the vessel for the sum of $251 at
a bailiff's sale as the result of a judgment by
default dated August 30, 1974, in the small claims
court in the Province of Quebec. The ship had
been under arrest in the present proceedings since
April 1, 1974.
Vitral commenced proceedings in the Superior
Court of Quebec by means of a writ of seizure
before judgment requesting immediate possession
of the ship, while Caron the purchaser in this
Court presented a petition to set aside the seizure
and subsequently a preliminary exception to dis
miss the proceedings based on lis pendens. The
Superior Court in Quebec on July 10, 1975, dis
missed Caron's petition to set aside the seizure
before judgment, maintained the petition of Vitrai
to be given possession of the vessel and on October
9, 1975 dismissed Caron's preliminary exception.
It was not until October 8, 1976, that the Quebec
Court of Appeal maintained Caron's appeals, but
meanwhile he had been put to legal expenses
which the parties admit amounted to $15,000 in
connection with this litigation, which had the
effect of reaffirming his ownership of the vessel
which this Court had adjudicated to him on Febru-
ary 20, 1975.
It is not surprising that the Marshal did not
immediately make out a bill of sale to Caron
following the judgment of this Court on February
20, 1975, especially as the judgment of the Court
did not specifically so direct, but on the contrary
was carefully worded in anticipation of difficulties
which the purchaser might encounter in getting
possession. In fact the order approving the sale
read as follows:
The bid of Paul-Emile Caron in the amount of $28,500.00 is
approved and the vessel Atlantean I now known as The Answer
Panama is adjudicated to him free of all debts, hypothecs, port
and customs dues and other encumbrances whatsoever. The
Court cannot in approving this sale assume responsibility for
the evacuation of persons on board the vessel or the condition of
same, but the purchaser may take such proceedings as the law
provides for taking immediate possession of the vessel, with
costs.
It is not surprising also that despite Mr. Caron's
best efforts neither the Harbour Police in Quebec,
the Provincial Police, nor the R.C.M.P. Detach
ment were prepared to intervene on his behalf to
enable him to take possession of the vessel, and the
private security guards which he retained were not
allowed to carry arms into the harbour area. Erb,
whether in good faith or not, but at least with
some colour of right in view of Vitral's so-called
ownership of the vessel by virtue of the purchase
made as the result of the small claims court judg
ment (rendered at a time when the ship was
already under seizure in this Court) was able to
sail with the vessel in breach of a great many
harbour and merchant shipping regulations and in
defiance of the judgment of this Court.
The express terms of the judgment of January
24, 1975, authorizing the advertisement for resale
made it clear that the Marshal must remain in
possession of the vessel and take whatever conser
vatory measures were necessary and if any monies
were advanced to him for this purpose by Security
National Bank or others they would be reimbursed
out of the proceeds of the sale.
When Erb made off with the vessel an order was
issued by the Court to the Coast Guard and the
R.C.M.P. to follow her and bring her back to
Quebec City. Details of this order will be dealt
with later when considering their claims. It was
necessary however to subsequently amend this
order and permit the vessel to be brought to Sept
Îles when the Coast Guard found it impossible to
deliver her to Quebec in the condition in which the
vessel was and in view of the winter conditions in
the river.
An order dated March 6, 1975 reaffirmed the
custody of the Marshal over the vessel at Sept Îles,
authorizing him to engage such persons to ensure
her maintenance and such guards as he might
deem necessary to assure that she would not be
removed from his custody without an order of the
Court. The order further stated that when a final
determination had been made with respect to the
ownership of the vessel, if that determination was
in favour of Mr. Caron, the Marshal should then
forthwith issue a deed of sale in his favour.
It was not until following the judgment of the
Federal Court of Appeal on October 23, 1975,
dismissing the appeal against the sale judgment of
February 20, 1975, that an order was issued to the
Marshal on November 17, 1975, to proceed to sell
the vessel to Caron and the bill of sale was in due
course made on November 24, 1975. By order of
March 17, 1975 the Royal Canadian Mounted
Police and Coast Guard were authorized to deliver
the vessel at Sept Îles to the custody of either the
Marshal or Mr. Caron, and it was ordered that
they should be relieved from further responsibility
thereafter, having already taken the necessary con
servatory measures to preserve the vessel, but
having been unable to deliver her to the Marshal
in view of his unwillingness to accept same without
being guaranteed payment of his expenses. Vitrai
had previously been ordered to put up $20,000
deposit to guarantee Marshal's costs but failed to
do so. On the same day another order was made on
a request for directions from Mr. Caron to the
effect that unless the $20,000 was provided by
Vitrai within 24 hours Caron would be given
possession of the vessel to take her to Quebec or
Louiseville as he chose. The order provided that
with respect to reimbursement to Mr. Caron for
his expenses this would have to be determined
later.
As a result of these various orders and the
problems encountered by Mr. Caron he claims in
his intervention the sum of $41,739.86 for his
expenses for protecting the vessel at Sept Îles,
bringing her to Quebec, keeping her there and
subsequently in his shipyard in Louiseville as
expenses which would normally have been incurred
by the Marshal and which were authorized by the
Court when it permitted Caron to take this interim
possession of the vessel at Sept Î1es and to take her
to Quebec where the sale had been made and
delivery should have been made. With respect to
taking her eventually from Quebec to Louiseville
he pointed out that this actually reduced the
expenses because to keep a skeleton crew on board
at Sept Îles and Quebec and pay dock charges and
so forth would have been more costly than to have
the ship in his own yard at Louiseville where no
such expenses were necessary. All these charges
were incurred in the period prior to the conveyance
of ownership to him by the bill of sale on Novem-
ber 17, 1975. He therefore claims that they should
be paid by priority out of the fund.
At the hearing his counsel Mr. Gaudreau
amended this claim so as to add an additional
$15,000 for the legal fees which had been billed to
Mr. Caron and paid in connection with obtaining
legal confirmation of his ownership through litiga
tion in the courts of Quebec.
Claim of Port Colborne Warehousing Limited
While an intervention was made in connection
with this claim the amount of it was by oversight
not referred to in the submissions. It was agreed
between the parties however at the hearing that
the amount would be $3,700 plus costs. This arose
out of a judgment rendered in Record No. T-5440-
73 brought by Port Colborne Warehousing Lim
ited against the Atlantean I and others interested
in the said vessel for necessaries in which judgment
was rendered on November 18, 1974 by Addy J.
An unusual situation had arisen in connection with
this claim in that proceedings had been issued in
rem and served on the vessel by fixing same to the
mainmast before the proceedings were initiated by
Osborn Refrigeration Sales and Service Inc. in the
present action on April 1, 1974. The warrant for
arrest of the vessel had been taken out before the
mortgage of Security National Bank but for some
reason the ship had not been arrested on that
warrant until March 23, 1974. Mr. Justice Addy's
order provided that before any order for the sale of
the ship was made an application should be made
by a motion returnable on December 16, 1974, and
served on the Security National Bank and also
notices be published in La Presse and The Gazette
the first on or before November 25 and the second
between December 6 and December 10, 1974.
Despite this the original sale in the present action,
which was not approved by the Court, was made
on January 15, 1975 the order for same having
been granted on November 28, 1974 and the
second sale to Mr. Caron at a higher price on
February 20, 1975. It is evident that when Mr.
Justice Addy's judgment and order were made
neither Port Colborne nor the Court were aware
that a sale had already been authorized in the
present proceedings. Accounts for these advertise
ments totalling $221.30 were produced.
Claim of Ontario Sandblasting Company
This claim, although the amount was not men
tioned in the agreement as to the facts was the
subject of an intervention, and a statement show
ing the amount to be $4,840.50 was produced,
indicating that it was for sandblasting and paint
ing the vessel in November and December 1973,
which might be considered as a necessaries claim
although in this case no action was taken.
Claim of Royal Canadian Mounted Police and
Coast Guard
The claim of the Royal Canadian Mounted
Police from the time of the order of February 24,
1975 directing them to intercept the ship and bring
her to the Port of Quebec, expel Captain Erb and
his crew and deliver the ship to the Marshal totals
$18,825.58 for the period from February 28 to
March 6 when the vessel was delivered to Sept
Îles. This claim, details of which were submitted at
the hearing, was primarily for the time and over
time of members of the Force, their meals and
board, leasing of airplanes and so forth, but
included one item of $239 for a purchase of oil for
the ship. The claim for expenses following the
delivery of the vessel to Sept Îles on March 6,
1975, until March 19, 1975, when as a result of
the order of March 17, 1975, Mr. Caron took
possession of the ship when the Marshal refused to
do so, not having been given security amounted to
$38,241.52. Again this included the time and over
time of members of the Force, their meals and
accommodation but included two disbursements
made for the benefit of the ship herself, one being
the furnishing of additional fuel oil in the amount
of $356.85 and the other being an amount of
$5,368.43 for draining the vessel, as she had to be
protected in the freezing winter conditions by
having all water drained. For this purpose the
police authorities engaged engineers at Sept Îles.
The claim of the Coast Guard for services ren
dered pursuant to the Court's said order of Febru-
ary 24, 1975, for the period from February 28 to
March 6 amounted to $97,390. This included time
involved in the interception of the ship and bring
ing her to Sept Îles which took nearly 10 days, fuel
consumed by the Coast Guard vessel during this
period, wages and provisions for officers and crew
including meals served to R.C.M. Police officers,
journalists and the crew of the vessel Atlantean I
herself, charges for helicopters and fuel consumed
by them and other items, but included supply of
fuel oil to the Atlantean I in the amount of $1,106
and lubricating oil in the amount of $832 and
provisions in the amount of $235.
Counsel for the Crown contended that, while he
agrees that Marshal's costs should rank first, all
expenses prior to March 19 when the purchaser
Caron took possession of the vessel were costs
which should have been incurred and claimed by
the Marshal, since following the adjudication and
up to the date of delivery to Caron he was still in
legal possession of the ship, which remained under
seizure until the actual bill of sale was signed
much-later on November 17, 1975, after the
appeals had been disposed of.
In this connection it is of some interest to note
that the order made to the R.C.M.P. and Coast
Guard to recover the vessel, while it was the only
practical way of preventing Captain Erb and his
crew from sailing her illegally to international
waters out of the jurisdiction of the Court, was not
made in strict compliance with the provisions of
the Federal Court Act, R.S.C. 1970 (2nd Supp.),
c. 10. The question of the application of section 59
of that Act was not argued at the time the order
was made but it reads as follows:
59. Such services or assistance in connection with the con
duct of the Court's hearings, the security of the Courts, its
premises and staff, or the execution of its orders and judgments
as may, having regard to the circumstances from time to time
existing, be found necessary, shall be provided, at the request of
the Chief Justice, by the Royal Canadian Mounted Police or
such other police force as the Governor in Council may
designate.
Since the order was not made by the Chief Justice
nor would it appear that the Coast Guard is a
police force the order did not comply with this
section. At the hearing of the present application
the Court was referred to the British case of
Glasbrook Brothers, Limited v. Glamorgan
County Council.' It is not directly in point, as it
deals, not with a court order to police or military
authorities, but with an arrangement made be
tween the police and the owners of a colliery
during an industrial dispute for the protection of
the owner's property. It was held that although the
police authority is bound to provide sufficient pro
tection to life and property without payment, if in
particular circumstances, at the request of an
individual, they provide a special form of protec
tion outside the scope of their public duty they
may demand payment for it. In the present case
the illegal departure of the vessel from Quebec was
not only made in contravention of the judgment of
this Court but also in breach of a great many port
regulations and provisions of the Canada Shipping
Act 2 . She sailed improperly equipped and manned
and without port or customs clearance. In due
course Captain Erb was convicted on a number of
charges and after appeal a fine of $5,000 with
imprisonment in default of payment was imposed
but he is out of the jurisdiction of the Court so this
has been uncollectable. It can be said therefore
that the Coast Guard was assisting in the enforce
ment of the laws of Canada under conditions in
which the R.C.M.P. would be incapable of enforc
ing same, as they had neither the facilities nor the
expertise to take possession of the fleeing ship in
the Gulf of St. Lawrence amid ice floes in mid
winter and bring her to a safe Canadian port.
While the claim is clearly not a salvage claim as
[1925] A.C. 270.
2 R.S.C. 1970, c. S-9.
the ship had not been abandoned nor had she
sought aid, but rather arises from the enforcement
of a court order, it is of some interest to note by
the provisions of section 531 of the Canada Ship
ping Act claims for salvage expenses and supplies
used in connection with salvage cannot be made by
Her Majesty's vessels except with special formali
ties set out therein.
In any event I conclude that neither the
R.C.M.P. nor the Canadian Coast Guard in the
performance of their duties pursuant to a direction
from the Court have a claim against the proceeds
of the sale for expenses incurred by them in this
connection. Possibly a distinction should be made
however with respect to oil and supplies furnished
to the ship, and the disbursement for drainage of
water to protect her while lying idle at Sept Îles,
which are clearly expenses made for the preserva
tion of the vessel. Having insufficient oil she would
have remained adrift in the ice floes until she
perished. Certainly if water had not been drained
and the ship winterized at the harbour in Sept Îles
incalculable damage would have been done so it
too was an expense for the protection and preser
vation of the vessel. Whether these items are a
claim which can validly be made against the fund
will be dealt with later.
Claim of Pilots
Although the amount of this claim is small
being only $1,471.19 the principle involved in the
ranking of it was ably argued at considerable
length by counsel for the pilots. With the exception
of one item amounting to $157.84 for February
23-24, 1975 all the amounts claimed were for a
period prior to the sale and in fact, with one other
exception were for periods of 1974 prior to the
institution of the present proceedings. Three of the
amounts, namely on January 30, 1974 for $139.68,
on February 9, 1974, for $483.12 and on February
23-24, 1975, for $157.84 were for services not
rendered, however, these being occasions when the
ship Atlantean I had sailed without a pilot aboard
for which payment of pilotage is nevertheless
required by virtue of the provisions of section 34 of
the Pilotage Acta which makes the ship liable for
such charges.
Counsel for the pilots contends that this claim is
equivalent to a maritime lien. Although the Pilot-
age Act does not speak specifically of the rank,
unlike the National Harbours Board Act 4 which
in section 17(4) creates a lien on a vessel on the
proceeds of any sale in priority to all other claims
except for wages of seamen under the Canada
Shipping Act it is his contention that this was
unnecessary as it was well established at the time
by jurisprudence that claims of this nature did
create a maritime lien. He reviewed the old British
law going back to 1765 by virtue of which a pilot
was considered as a mariner unlike the captain and
entitled to sue in admiralty proceedings against the
ship, having the same rank as for seamen's wages.
An example of an early Canadian case on the
subject is that of The Premier, Heard' decided in
the Vice-Admiralty Court of Lower Canada in
which it was held that a lien for pilotage attaches
to a vessel although she may have changed owners
in the interval between the performance of the
pilotage and the institution of the action. In 1854
The Merchant Shipping Act, 1854, 17-18 Vict., c.
104, excluded pilots from being considered as
mariners and some doubt was thereby raised as to
whether this destroyed the privilege. It is his con
tention that even after the Pilotage Act, 1913, 2-3
Geo. V, c. 31, in England there was no removal of
the privilege. In a judgment in 1921, that of the
"Athena" 6 at page 483 it is stated:
Mr. Justice HILL, in giving judgment, said that after pay
ment of the Marshal's costs and charges, and the railway
company's possessory lien (including the claim of the dock
pilots and boatmen), out of the balance over and above the
£15,000 detained in Court pending the decision of the collision
action, would be paid out as follows:—The costs of the St.
3 S.C. 1970-71-72, c. 52.
° R.S.C. 1970, c. N-8.
5 (1856) 6 L.C.R. 493.
6 (1921) 8 Ll. L. Rep. 482.
Vincent Company up to arrest and the costs of Messrs. Mann.
George & Co. up to and including the order for appraisement
and sale; the crew's wages with interest and costs; the master's
wages and disbursements with costs, and next after all these the
mortgagees would rank. Whether the mortgagees would get
anything would depend upon the result of the collision action.
The Marshal would be empowered to pay out to the crew at
once £1000 on account. There could be no payment out of any
costs till they had been taxed. [Emphasis mine.]
In the case of The Ambatielos. The Cephalonia'
the history of the British jurisprudence and stat
utes was reviewed and it was found that a pilot's
right to recover pilotage dues was not restricted to
his right to recover in summary proceedings under
the Pilotage Act, 1913, s. 49, since the High Court
of Admiralty and its successor, the Admiralty
Division of the High Court of Justice, have always
had jurisdiction to entertain an action in rem by a
pilot for the dues. At page 306 Hill J. states:
I hold that a pilot, claiming pilotage remuneration, has a
right in rem, and can sue in this court. In general, he will be
ill-advised to sue when he has a summary remedy, for he is not
likely to be given costs if he neglect the cheaper and pursues the
more expensive remedy. But in cases where the ship is already
under arrest, and especially when the ship is foreign owned, it
may be a proper thing to sue in this court. In the present case, I
hold that it was, and I give judgment for the plaintiff with
costs. I am not deciding that there is a maritime lien for
pilotage dues. It does not necessarily follow that because there
was original jurisdiction in the High Court of Admiralty in
respect of pilotage that there was a maritime lien for pilotage:
see the judgments of LORD BRAMWELL and LORD FITZ•
GERALD in The Henrich Bjôrn (Northcote v. Henrich Bjorn
(Owners) The Henrich BjOrn (1886), 11 App. Cas. 270; 55
L.J.P. 8; 55 L.T. 66, 2 T.L.R. 498; 6 Asp.M.L.C. 1, H.L.; 41
Digest 942, 8333). It is not proper that I should decide in
favour of a maritime lien in the absence of the mortgagees. But
the amounts are so small that probably the mortgagees and the
owners will both recognise that the judgments ought to be
satisfied out of the proceeds of the ships if they are realised.
The Admiralty Act, 1891, S.C. 1891, c. 29.
provided in section 3 that the Exchequer Court of
Canada would be a Colonial Court of Admiralty
and as such but within Canada have and exercise
all the jurisdiction powers and authority conferred
by the Colonial Courts of Admiralty Act, 1890,
53-54 Vict., c. 27 (Imp.) which gave it the exercise
7 [1923] All E.R. 303.
of the powers of the High Court of England as
they existed at that time. The Admiralty Act,
1934, S.C. 1934, c. 31, provided in section 18 that
the jurisdiction of the Court in Admiralty was over
the same persons, matters and things as the admi
ralty jurisdiction possessed at that time by the
High Court of Justice of England whether as a
result of law or otherwise, and could be exercised
in the same manner and to the same extent as by
the High Court. Section 22(2) of the Federal
Court Act gives jurisdiction in subsection (1) over
any claim for pilotage.
In the unreported case of Rochlin and The Ship
"Evie W" Her Owners and the Proceeds of the
sale of the said Ship, Defendants, and Israel
Discount Bank Limited, Exchequer Court No.
1327, a judgment dated January 27, 1970, I had
occasion to state at page 4 in connection with a
claim of $630.21 made by the Pilotage Adminis
tration of the Department of Transport:
On March 27, 1968, A. I. Smith D.J. ordered payment of
$630.21 to the Minister of Transport out of the proceeds of sale
of the defendant ship "notwithstanding any caveat filed
herein".
The pilots' counsel concludes that although he is
unable to find any Canadian jurisprudence specifi
cally stating that claims for pilotage constitute a
maritime lien this was the position in the British
law which was incorporated into Canada and he
now seeks a judgment to this effect ranking these
claims in the first rank with judicial costs.
On behalf of Mr. Caron it was contended that
the British jurisprudence referred to dealt with
non-obligatory pilotage whereas by virtue of the
Pilotage Act in Canada pilotage is obligatory, and
that the rights, of pilots arise from the Act which
makes no specific provision for a maritime lien. I
fail to see why any distinction should be made
between pilotage arising out of a contract with the
Master or owners in Britain and compulsory pilot-
age required by the Pilotage Act in Canada. As
was pointed out in argument the use of pilots is
also compulsory in many areas in Britain. The
various pilotage authorities provided for in the
Pilotage Act in Canada merely organize the
assignment of pilots to vessels and the collection on
their behalf of the fees due which are billed by the
pilotage authority, in this case the Laurentian
Pilotage Authority, to the ship. This different
method of procedure should not affect the rights of
the pilots to their fees nor the order of priority of
their claims, and if under the British jurisprudence
they were entitled to a maritime lien for these
sums it would appear that they should be entitled
to the same priority in Canada, although no specif
ic provision is made in the Pilotage Act for the
ranking of their claims. I believe that a distinction
should be made however for the charges for ser
vices not rendered which arise from the Pilotage
Act and constitute a statutory lien rather than a
maritime lien.
Claim of Mortgage Creditor—Security National
Bank
The Security National Bank has a claim arising
out of a judgment rendered in rem against the
Atlantean I on April 14, 1975, in the amount of
$614,560.79 with interest and costs, Case No.
T-4420-74. This is a maritime hypothec and the
parties admit that it should be considered as a first
rank maritime hypothec according to Canadian
maritime law. This claim arose from a mortgage
granted on February 28, 1974 in the amount of
$530,000 on the Atlantean I. This apparently was
not protocolized however in Panama where the
Atlantean I was registered until April 29, 1974.
Counsel for the Bank argued that the order of
priority should provide first of all for Marshal's
costs followed by the costs of the parties in bring
ing the vessel to sale and that the Bank had
provided the Marshal with the funds for the
second sale in the amount of $417.65 and in
addition had published a Journal of Commerce
advertisement costing $225 making a total of
$642.55. It is his contention that neither Osborn
nor Port Colborne should get costs however, as it
was the Bank that was the moving force in bring
ing the vessel to sale.
In this connection it should be mentioned that
Osborn Refrigeration Sales and Service Inc. now
have no claim against the proceeds of the vessel.
At an early stage in the proceedings in an attempt
to stop the sale ordered for February 20, 1975
plaintiff filed a notice of discontinuance of the
proceedings. In view of the interest of a large
number of other parties in the proceeds of the sale,
including Security National Bank, the Court
refused by judgment dated February 20, 1975, to
permit the discontinuance. While the record does
not disclose this it can be presumed that Vitral had
itself settled plaintiff's claim and costs.
Counsel for the Bank contends that the next
priority would be possessory liens of which there
are none, followed by maritime liens and queries
whether the pilotage authority has any such lien.
Next in line would be the hypothecary claim of the
Bank followed by statutory liens in rem of the
suppliers of necessaries which would exclude Port
Colborne Warehousing Limited and the Ontario
Sandblasting Company from participation in the
distribution, as no funds would be left for their
claims.
In connection with the claim of Port Colborne
Warehousing Limited and its ranking with respect
to that of the mortgage creditor extensive argu
ment was directed as to whether its lien should
date from the institution of proceedings in rem, or
from the date of the seizure which unfortunately
was some time later. The proceedings were
instituted on December 27, 1973 and served on the
vessel on December 28. A warrant for arrest was
not issued until January 15, 1974, and served on
March 23, however. The Security National Bank
mortgage was dated February 28, 1974 but not
protocolized in Panama where the vessel was regis
tered until April 29, 1974.
In the case of the "Monte Ulia" (Owners) v. The
`Banco"$ Lord Denning, M.R., stated at page 53:
When a plaintiff brings an action in rem, the jurisdiction is
invoked, not when the writ is issued, but when it is served on
the ship and the warrant of arrest is executed. The reason is
because it is an action in rem against the very thing itself: and
does not take effect until the thing is arrested. [Emphasis
mine.]
At page 51 he discussed maritime liens stating that
they subsist even if the vessel has been sold to an
innocent purchaser for value so she could still be
arrested—see The Bold Buccleugh (1851) 7 Moo.
P.C. 267. He continues:
Later on, the right to arrest was extended beyond the extent of
a maritime lien so as to cover necessaries, see The Heinrich
8 [1971] 1 Lloyd's Rep. 49.
Bjorn, (1885) 10 P.D. 44. But it only applied to arresting the
ship itself for which the necessaries were supplied.
Reference was also made to the case of The
"Cella" 9 which held "The right to sue in rem
under the Admiralty Court Act 1861, where there
is no maritime lien, gives the plaintiff a charge
upon the res from the date of the arrest, and from
that time he is a secured creditor in respect of his
claim".
In The "Monica S." 1 ° it was held at pages
121-122:
It is, I think, important, when considering this passage, and
other passages in later judgments on the same lines, to keep
clearly in mind the distinction between having a right to arrest
a ship in order to obtain security for a claim, and the actual
exercise of that right by arrest. It is the arrest which actually
gives the claimant security; but a necessary preliminary to
arrest is the acquisition, by the institution of a cause in rem, of
the right to arrest. [Emphasis mine.]
At page 130 the judgment states:
Counsel for Tankoil submitted, in elaboration of his argu
ment from principle, that, if a statutory right of action in rem
became effective as from date of issue of writ, without service
or arrest, serious practical difficulties would arise. He said that
a would-be purchaser of a ship would have to reckon with the
possibility of numerous claims having already attached to the
ship without his having notice of them. I am not much
impressed with this argument for this reason. A purchaser
always has to reckon with the possibility of maritime liens, and
under many foreign laws all or most of the claims which in
England only give a right of action in rem give rise to such
liens. Moreover, there is no means of ascertaining what mari
time liens have attached to a ship, whereas it is at least
possible, by inquiry of the Admiralty Registry, to discover what
writs have been issued against a ship. In practice a purchaser
takes an indemnity from his seller against claims which have
attached prior to the sale, and, unless the seller becomes
insolvent, this affords adequate protection.
In the case of The `Heinrich BjOrn"" which
was also referred to in the case of Coastal Equip
ment Agencies Ltd. v. The "Comer" 12 by Noël J.,
as he then was, at page 23 of his judgment it was
stated by Lord Watson at pages 276 and 277 that
"We have been informed that under the recent
9 6 Asp.M.C. 293; (1888-90) 13 P.D. 82.
10 [1967] 2 Lloyd's Rep. 113.
" Northcote v. Bjorn (1886) 15 H. of L. 270.
12 [1970] Ex.C.R. 13.
practice of the Admiralty Court the remedy is also
given to creditors of the shipowner for maritime
debts which are not secured by lien; and in that
case the attachment of the ship, by process of the
Court, has the effect of giving the creditor a legal
nexus over the proprietary interest of his debtor
as from the date of the attachment". This quota
tion is italicized in Mr. Justice Noel's judgment.
However Lord Watson himself stated at page 278
(also italicized by Mr. Justice Noël) that "It seems
to be the necessary result of the appellant's conten
tion that the claimant, who is an unsecured credi
tor without any preference, when he seeks to
enforce his claim elsewhere, becomes by virtue of
the Act, a creditor preferably secured when he
brings an action in the Court of Admiralty." It
would thus seem that in the same judgment of
Lord Watson both the terms "date of attachment"
and "when he brings an action" are referred to as
the time at which the claim is secured.
Mr. Justice Noël also points out [at page 27]
that in The "Cella" case (supra) at page 85
reference was made to the statement of Lord
Bramwell in The "Heinrich Bjorn" case that the
claim was a security "arising at the commence
ment of this action in rem". At page 87 however in
The "Cella" judgment there is the statement:
... though there may be no maritime lien, yet the moment that
the arrest takes place, the ship is held by the Court as a
security for whatsoever may be adjudged by it to be due the
claimant.
Here again there is a confusion between whether it
attaches from the commencement of the action or
the date of the arrest.
Mr. Justice Noël also at page 27 refers to the
case of Foong Tai Co. v. Buchleister & Co."
stating that in that action it was declared that a
claim for necessaries does not give rise to any right
against the ship "up to the time the action is
instituted." In the Comeau's Sea Foods case' 4 at
page 559 in discussing the difference between a
maritime lien and a statutory lien we find the
statement:
13 [1908] A.2, 458.
14 [1971] F.C. 556.
A statutory lien accrues only from the day of the arrest and is
subject to claims already subsisting against the res ... [The
"Cella" is referred to as authority for this].
At page 560 the learned Judge states however:
A statutory lien arises when a suit is instituted to enforce the
lien.
Counsel for Port Colborne argued that the regis
tration of a mortgage does not take away a statu
tory lien, referring to Mayers" at page 71 as
authority for the statement that the mortgage only
takes priority if its registration is before the insti
tution of the action which is the time when the
jurisdiction of the Court is attached. At page 211
however Mayers talks of the arrest of the vessel
rather than the institution of suit as being the
critical time. At page 57 Mayers refers to a statu
tory lien as commencing with the institution of the
suit. The Port Colborne claim is for a statutory
lien.
All of these cases and authorities were merely
deciding the effect of an action in rem resulting
from a claim for necessaries, rather than directing
the Court's attention specifically to the question of
whether such a claim attached from the institution
of the proceedings in rem or the arrest of the
vessel.
It appears fortunately relatively unusual for pro
ceedings to be brought in rem against the vessel
but her arrest to be delayed.
While there appears to be considerable doubt
among the authorities I am inclined to the view
that it is not the institution and service of proceed
ings which establishes the date of a statutory lien
against a vessel, but rather the date of her actual
arrest if the latter date be subsequent.
Quite aside from the date the claim attaches, it
is apparent that a claim for necessaries does not
thereby become privileged.
In The "Comer" case (supra) Noël J. concludes
at pages 31-33:
This action in rem, however, does not give any privilege or
lien or preference whatsoever, and the claimant for necessaries
seems to me to be in the same position as an ordinary
1 5 Mayers, Admiralty Law and Practice in Canada.
unsecured creditor. If he is an execution creditor, he will be
entitled to his costs of action but his claim will be ranked only
in accordance with the order of priorities set by law. In fact, to
give him, through the mere fact that he has a simple right of
action in rem, a right and specific privilege which would
deprive the same debtor's other creditors of exercising their
claims against the property seized, especially after the corpora
tion owning such property has made a proposal under the
Bankruptcy Act, seems to me inacceptable and based on no
legal text or judgment. In fact, this would be a serious blow to
the principle whereby the property of a debtor is the security of
his creditors.
With respect to the claim of Ontario Sandblast
ing it was the contention of counsel for the Secu
rity National Bank that this would not survive the
sale from the former owners of the vessel, the
Messrs. Fournier to Atlantean Corporation on
February 27, 1974, being a claim for necessaries
dating from 1973. (See Westcan Stevedoring Ltd.
v. The `Armor" a judgment of Collier J. [1973]
F.C. 1232 which held that personal liability of the
vessel and her owner has to be established before a
claimant can enforce its rights in rem against the
vessel.) The same applies to the claim of Port
Colborne Warehousing Limited which also origi
nated before the sale of the vessel to Atlantean
Corporation, and although this was the first action
brought it does not convert a claim for necessaries
to a maritime lien, although there may be priority
as to costs in the peculiar- circumstances of this
case.
I believe the question is clearly settled in any
event by section 43(3) of the Federal Court Act
which reads as follows:
43....
(3) Notwithstanding subsection (2), the jurisdiction con
ferred on the Court by section 22 shall not be exercised in rem
with respect to a claim mentioned in paragraph 22(2)(e), (I),
(g), (h), (i), (k), (m), (n), (p) or (r) unless, at the time of the
commencement of the action, the ship, aircraft or other prop
erty that is the subject of the action is beneficially owned by the
person who was the beneficial owner at the time when the cause
of action arose.
The paragraph (m) of section 22(2) is that dealing
with a claim for necessaries.
A serious question which must be decided is
whether it is the adjudication which transfers the
ownership rather than the actual bill of sale which
in this case was not passed until many months
later after most of the expenses claimed had been
incurred and following the disposal of the appeals.
However, some of these claims were for the protec
tion and preservation of the ship. There has been
considerable conflict in jurisprudence relating to
this due to a somewhat ambiguous use of the word
"sale" in the two contexts. It will be of interest to
review some of it.
The case of The Hon. John Augustus Chas-
teauneuf v. Capeyron 16 was based primarily on the
interpretation of the pertinent sections of the Brit-
ish The Merchant Shipping Act, 1854. It held that
a sale by licitation of a British ship without a
conveyance by bill of sale did not create such an
interest in the purchasers as rendered it compul
sory on the Registrar, under The Merchant Ship
ping Act, 1854, to register them as owners, and
that the Registrar was right in refusing so to do,
and to erase from his books the inscriptions con
tained in the register against the ship in the names
of the mortgagees. At page 135 of the report the
judgment states:
It may be stated, in corroboration of the view of the case
taken by their Lordships, that upon a sale of a ship in execution
of a judgment the sheriff passes the property by bill of sale, and
their Lordships understand that, although upon the sale of a
ship by order of the High Court of Admiralty in a judgment in
rem, the vessel becomes the property of the purchaser, it is the
practice for the purchaser to procure a bill of sale from the
marshal or commissioner, in order to entitle him to be regis
tered in accordance with the Merchant Shipping Act, 1854.
There are somewhat similar provisions in the
Canada Shipping Act (supra) section 38 and 43 of
which read:
38. (1) A registered ship or a share therein (when disposed
of to a person qualified to own a British ship) shall be trans
ferred by bill of sale.
(2) The bill of sale shall contain such description of the ship
as is contained in the surveyor's certificate, or some other
description sufficient to identify the ship to the satisfaction of
the registrar, and shall be in the form prescribed by the
Governor in Council, and shall be executed by the transferor in
the presence of and be attested by a witness or witnesses.
43. Where any court, whether under the preceding sections
or otherwise, orders the sale of any ship or share therein, the
16 (1881-82) 7 App. Cas. 127.
order of the court shall contain a declaration vesting in some
person named by the court the right to transfer that ship or
share, and that person is thereupon entitled to transfer the ship
or share in the same manner and to the same extent as if he
were the registered owner thereof; and every registrar shall
obey the requisition of the person so named in respect of any
such transfer to the same extent as if such person were the
registered owner.
Neither Rule 1007 of the Rules of this Court
however nor the Forms referred to therein specifi
cally require the Marshal to sign a bill of sale, and
in the present case it was not until November 17,
1975, that the Marshal was directed to sign this
document. I am of the opinion that the better view
is that the provisions of the Canada Shipping Act
are procedural requirements to complete the trans
fer of the title and have the name of the new owner
duly registered, but that title is vested in the
purchaser on approval of the sale by the Court, in
this case on February 20. In the interval between
that date and the signing by the Marshal of the
deed of sale the purchaser is the owner under a
suspensive condition. It follows that claims arising
following that date (save possibly, in the peculiar
circumstances of this case for expenses of the
Marshal or expenses incurred on his behalf for the
preservation of the vessel, at least until delivery of
possession to the purchaser—which in this case
was much earlier than the bill of sale) are claims
against the ship rather than against the fund. This
will be dealt with later.
It must be borne in mind that a clear distinction
must be drawn between claims against the fund
itself and claims which subsist but only against the
ship. Adjudication of the vessel to Mr. Caron on
February 20, 1975, stated that it would be free of
all debts, hypothecs, port and customs dues and
other encumbrances whatsoever although the
Court would not assume responsibility for the
eviction of persons on board the vessel or the
condition of same, provided that the purchaser
might take such proceedings as the law provides
for taking immediate possession of the vessel, and
the purchaser was allowed the costs of the motion.
The order for sale of January 24, 1975 con
tained the following conditions:
(f) The costs of the sale and of the advertisements and of all
fees, disbursements and charges in connection therewith shall
be costs, disbursements and charges of this action ranking
ahead of all other claims save those arising out of the previous
sale;
(g) The costs, expenses and charges incurred in maintaining
the vessel and in moving her if the need might arise and such
costs, expenses and charges incurred since the date of the arrest
of the vessel shall be costs, disbursements, expenses and charges
of this action ranking immediately after costs, disbursements,
expenses and charges mentioned in the preceding paragraph;
[emphasis mine]
(h) In order to preserve and further maintain the vessel for the
benefit of all concerned, the Court shall give authority to Mr.
A. S. Wilson or Mr. A. J. Landriau to take such steps as are
proper in this regard and that the costs, expenses, charges and
disbursements and those incurred under their authority shall
rank amongst those costs, expenses, charges and disbursements
referred to in the preceding paragraph; [emphasis mine]
(i) To the extent that any such costs have been advanced to the
Marshal by the plaintiff or its attorneys in connection with the
previous sale or by the Security National Bank or its attorneys
in connection with the resale, these costs shall be reimbursed to
the said parties by the Marshal when he recovers same out of
the proceeds of the resale;
(j) All further costs and expenses incurred in the implementa
tion of this order shall be paid out of the proceeds of the sale as
privileged costs of this action. [Emphasis mine.]
The order also stated:
The Security National Bank is directed to assume responsibility
to the Marshal for any costs or fees incurred or earned by him
in connection with the further advertisement and sale of the
vessel and maintenance of same in the interval under reserve of
such rights as it may have to claim such costs or fees from the
eventual proceeds of the sale.
While the terms of this order may have gone
beyond the usual order which would relieve the
Marshal of responsibility from the approval of the
adjudication, with possession being turned over
forthwith to the purchaser, and followed soon after
by the execution of a bill of sale it appears implicit
in the order that there would be further expenses
incurred by or on behalf of the Marshal in the
implementation of the order. The order stands as a
judgment of the Court which must be complied
with, and I do not believe that the order of Febru-
ary 20, 1975 approving the sale to Caron (supra)
providing that the Court could not assume respon
sibility for the evicting of persons on board or the
condition of the vessel had the effect of changing
this or relieving the Marshal of all responsibility,
until such time as the physical possession of the
vessel could be given to Caron in the unusual
circumstances of this case. Moreover there was the
further order of March 6, 1975 (supra) reaffirm-
ing the custody of the Marshal in the vessel at
Sept Îles and authorizing him to engage such
persons to ensure her maintenance and engage
guards as he might deem necessary to ensure that
she would not be removed from his custody. I do
not propose to deal with the difficult question of
who is responsible for insuring and protecting the
vessel from the time of the adjudication to delivery
of possession to the purchaser in normal circum
stances, but in this case I believe the terms of the
order of January 24, 1975 must be followed even
if, as a result, additional claims result against the
fund for expenses which would normally be
incurred by the purchaser himself or be merely a
claim against the ship or those responsible for the
illegal actions which resulted in those expenses.
The ranking of claims is not provided for in the
Federal Court Act or Rules but a very good
discussion of this is found in the judgment of
Keirstead D.J. in the case of Comeau's Sea Foods
Limited v. The "Frank and Troy" (supra) in
which he discusses the distinction between mari
time liens, possessory liens and statutory liens and
at page 560 gives the order of preference as
follows:
(i) Cost of rendering a fund available by the sale of the res ...;
(ii) Maritime liens;
(iii) Possessory liens;
(iv) Mortgages;
(v) Statutory liens.
He goes on to state:
The time when a lien attaches is material in determining
priorities. A maritime lien attaches when the event giving rise
to the lien occurs. A possessory lien arises when the claimant
obtains possession of the property. A statutory lien arises when
a suit is instituted to enforce the lien.
Another statement of the principles involved is
found in McGuffie" at pages 742-743. In the first
rank he places Marshal's charges and expenses
adding "priorities are determined in relation to the
net fund available thereafter or, alternatively, if an
arresting plaintiff pays the charges, etc., in accord
ance with his undertaking, he will recover the sum
17 British Shipping Laws, Vol. 1.
paid as costs". In the second rank he puts "The
costs of the plaintiff in whose action the res was
arrested, up to the moment of arrest and including
the costs of arrest, and later costs up to and
including appraisement and sale, either of that
plaintiff or, where the order for appraisement and
sale was obtained in a different action, of the
plaintiff in the latter action, are accorded priority
over all other claims, whether for costs or not."
Next he puts possessory liens and then salvage,
damage claims, Masters' and Crews' wages none
of which is applicable in the present case. He then
states that mortgages have priority according to
date of registration over necessaries unless the ship
was already under arrest for the necessaries when
the mortgage was entered into. He points out that
a mortgage has no priority over maritime liens. He
ranks necessaries at the end of the list except when
the ship has been arrested in a necessaries action
in which case they have priority over mortgages
entered into after the arrest, and under similar
conditions priority over an execution by which a
sheriff seizes the arrested ship. As I have already
pointed out however the two necessaries claims of
Port Colborne Warehousing Limited and Ontario
Sandblasting Company in the present case did not
properly give rise to a statutory lien in view of the
change of ownership resulting from the sale of the
vessel from the Fourniers to Atlantean Corpora
tion after the claim for necessaries was incurred.
While fundamental rules as to priorities should
not be ignored there is some authority for the
proposition that equity should be done to the par
ties in the circumstances of each particular case.
In the unreported case of The "Evie W" (supra) at
page 38 dealing with a claim for the provision of
necessary fuel oil for the vessel while under seizure
and not yet sold I had occasion to say:
Had this fuel oil been ordered by the Marshal and the claim
made against him, it would properly have been included in his
claim for expenses in connection with the seizure and sale of
the vessel. It would appear that the fuel oil deliveries continued
to be made after the seizure and that same were essential to
preserve the ship in the severe winter conditions prevalent at
the time, and hence tended to preserve the security of the
mortgage creditor. As stated in Halsbury's Laws of England,
2nd ed., Vol. 30, p. 955, the question of the priority of one lien
over another rests on "no rigid application of any rules but on
the principle that equity shall be done to the parties in the
circumstances of each particular case". I would rank the claim
of Golden Eagle Canada Ltd. therefore ahead of the mortgage.
This passage was referred to by Noël J. in another
unreported case of Canadian Vickers Limited v.
The Atlantean I" (ex Clara Clausen), No. 1741
dated January 22, 1971 at page 2 although it was
distinguished by Noël J. stating:
There is, however, a difference with the present case where
although electricity and steam were supplied to the vessel Clara
Clausen after seizure by Canadian Vickers Limited such sup
plies were made as the result of a business deal whereby, as
pointed out in my prior reasons for judgment, "Canadian
Vickers having invited the vessel to enter its shipyard, it was
prepared to maintain her until the owners of the vessel had
obtained the necessary funds to repair her". There would,
therefore, in my view, be no reason to rank the claim of Vickers
ahead of all those who have supplied necessaries to the vessel.
In the previous unreported judgment in the
Canadian Vickers Limited v. The `Atlantean I"
case, No. 1741, dated October 16, 1970, Noël J.
had stated at page 5:
There is no question that Vickers were alone instrumental in
bringing the vessel to sale and should be considered as being, in
so far as their fees are concerned, in the position of a créancier
exécutant and, therefore, these costs should rank as preferred
claims.
The case of Hawker Siddeley Canada Ltd. v. The
"St. Ninian" an unreported judgment of Collier J.
file No. T-3785-72 dated May 26, 1978, at page
13 states:
I conclude from the evidence that all parties concerned
(Hawker Siddeley, the bank and Atlantique) concurred in the
marshal's instruction that the vessel be berthed at the plaintiff's
marine slip and that she be maintained and kept safe. I have
already outlined the instructions and requests of Mr. Phillips on
behalf of the owners. It is conceded the bank at all times knew
what was going on. The excerpts from the correspondence
between solicitors (which I have set out) show that all parties,
including North Sydney, knew Hawker Siddeley had custody,
was maintaining and keeping her, and all were content with
that arrangement.
and again at page 14:
In my view, the arrangement adopted by all, was that the
plaintiff should indeed keep custody of the vessel and maintain
her as was reasonably necessary. That was to everyone's
benefit.
In the case of International Marine Banking Co.
Limited v. The `Dora" 1 S Collier J. at pages 517-
518 referred to the decision in "Evie W" with
approval. Applying the same reasoning to the case
before him he states at page 518:
The vessel had to have and use fuel. The logical source of
supply was that already on board. If the point had been put to
him, the Marshal would undoubtedly have formally authorized
the use of the fuel, and payment for it to the person entitled. He
would then have included the amount in his accounts and
charges.
I hold therefore that the reasonable value of the bunker oil
consumed by the Dora between September 20, 1976 and Octo-
ber 28, 1976 shall rank in priority, in the proceeds of the sale,
equally with the Marshal's expenses.
If ever there has been a case requiring the
application of some equitable principles in the
distribution of the very limited amount in the fund
arising from the proceeds of the sale in comparison
with the magnitude of the claims it is the present
case.
Applying these principles to the various claims
involved I now find that the order of priorities of
the amounts to be distributed should be as follows:
1. Marshal's Costs
These should include not only disbursements
actually made by the Marshal but also made on
his behalf by other parties whether specifically
authorized by him or not to preserve the vessel
from the time of adjudication to delivery of posses
sion of same to the purchaser Caron at Sept Îles
on March 19, 1975 by order of the Court dated
March 17, 1975. The safety and protection of the
vessel had to be assured in the interest of all
creditors. The various claims under this heading
can be itemized as follows:
18 [1977] 2 F.C. 513.
a) The Security National Bank
undertook on behalf of the
Marshal to pay for the
advertisements for the second sale
resulting in the purchase by Caron,
which sum including $225 for
advertisements in the Journal of
Commerce amounted to $642.55
b) The Royal Canadian Mounted
Police during their pursuit of the
vessel down the river disbursed for
oil in order to enable her to be
brought to Sept îles the sum of $239.00
On arrival in Sept Îles the
R.C.M.P. again provided fuel oil
for the ship at a cost of $356.85
The R.C.M.P. engaged engineers
for the drainage of the vessel which
was necessary to prevent the pipes
and boilers freezing at a cost of $5,368.43
These three amounts for
which the R.C.M.P. should be
collocated total $5,964.28
c) The Canadian Coast Guard
provided fuel oil for the vessel in
the amount of $1,106.00
Lubricating oil in the amount of 832.00
and provisions in the amount of 235.00
These three amounts total $2,173.00
I believe these should also be collocated as
expenses which would necessarily have been
incurred by the Marshal and which he would have
authorized had he been required to do so and
which are in accordance with the order of January
24, 1975 which did not, in my view, terminate all
responsibility of the Marshal from the moment of
the adjudication. This should not be regarded as a
precedent however for allowing as claims against
the fund expenses incurred subsequent to the sale
although prior to delivery of physical possession of
the vessel. All other services of the R.C.M.P. and
the Coast Guard while undoubtedly useful and
necessary were in my view rendered in the
performance of their duty and cannot be collocat
ed against the fund.
d) On the same exceptional but equitable basis the
taxable costs of Mr. Caron's attorneys in obtaining
possession of the vessel in this Court should be
allowed. Information has been provided by the said
attorneys, Messrs. Langlois, Drouin and Company
in which they claim a cost of $50 in connection
with each of six motions heard in Court dealing
with approval of the adjudication, the order to the
R.C.M.P. and Coast Guard, the order for Posses
sion by the Marshal of March 6, the order of
March 18, 1975, directing that possession be deliv
ered to the purchaser Caron at Sept Î1es, and the
order to the Marshal for the passing of bill of sale.
One order dated April 14, 1975, however was for
permission for the purchaser Caron to bring the
ship from Sept Î1es to Louiseville. While normally
the Marshal would be required to turn over posses
sion of the vessel to the purchaser at the place of
the sale, in this case Quebec, in view of the sale
having been made on the usual terms "where is as
is", I consider that the effect of the order of
March 6, 1975 authorizing the Marshal to take
custody of the vessel at Sept Îles and engage such
persons as might be necessary to ensure her main
tenance and guards to ensure her security, and the
subsequent order of March 17, 1975, authorizing
the delivery of the vessel at Sept Îles to Mr. Caron
had the effect of amending the conditions of sale
so that the Marshal was justified in delivering
possession to Mr. Caron at Sept Îles instead of at
Quebec. The subsequent order permitting Mr.
Caron to take the vessel to Louiseville is therefore
one which cannot be claimed against the fund.
The collocation should therefore be as follows:
Fees on 5 motions $250.00
Service of 5 motions (instead of 6) 200.00
Cost of three appeals which had the effect
of enabling the eventual delivery of
possession of the vessel to the purchaser
Caron $1,800.00
Total $2,250.00
These five items are properly claimed because of
the exceptional circumstances and orders made in
this case but I cannot allow additional fees beyond
the tariff as suggested by the attorneys despite
their eloquent argument that these steps were in
the interest of all the creditors and not only of Mr.
Caron, and that they preserved the fund.
In the case of National Capital Commission v.
Bourque [No. 2) 19 Associate Chief Justice Noël
held at page 135 that:
There is indeed nothing in the Federal Court Act, or in our
Rules, which states that a condemnation to costs involves
distraction in favour of the solicitor or attorney of the party to
whom they are awarded, such as exists in art. 479 of the
Quebec Code of Civil Procedure, which reads as follows:
479. Every condemnation to costs involves, by operation of
law, distraction in favour of the attorney of the party to
whom they are awarded ...
It is Mr. Caron therefore who should be collocated
for these costs.
With respect to the claim of $15,000 for costs
incurred by Mr. Caron in defending his title to the
vessel in the Quebec Court of Appeal, I do not
think that these can properly be claimed against
the fund even though he will presumably be unable
to secure payment from Vitral against whom they
would normally be claimed. From the time of the
adjudication on February 20, 1975 and consistent
ly thereafter this Court always took the position
that the sale by bill of sale pursuant to an order of
the small claims court in Quebec while the ship
was already under seizure in this Court could not
confer any valid title on the purchaser. While the
signing of the deed of sale in this Court awaited
the outcome of the appeals from decisions of this
Court to the Federal Court of Appeal, as soon as
they were disposed of the deed of sale was then
passed without awaiting the outcome of the pro
ceedings in the Quebec Court of Appeal. While
Mr. Caron cannot be blamed for contesting the
proceedings to protect him from any cloud on the
title, the cost of such proceedings cannot be
accepted as a claim against the fund in this Court.
2. Costs of Parties up to the Sale
Port Colborne Warehousing Limited com
menced proceedings before the present plaintiff
and obtained a judgment for $3,700 plus costs on
November 18, 1974, from Addy J. who however
directed that before any order of the sale of the
ship was made an application should be made by
Port Colborne and served on the Security National
Bank and notices published in La Presse and The
19 [1971] F.C. 133.
Gazette. This order was complied with but eventu
ally the sale was made in the proceedings brought
by the present plaintiff whose claim including costs
has already been settled however. Port Colborne
Warehousing Limited should therefore be collocat
ed for the taxed costs of their proceedings, the
amount of which is not available but can readily be
determined, and in addition for the amount of
$221.30 for the advertisements published pursuant
to the order of Mr. Justice Addy.
Claim of Pilots
I have determined that the better view seems to
be that the claim of the pilots for services rendered
is a maritime lien, but that for services not ren
dered it is merely a statutory lien. The pilots'
claim should be taxed in the next rank but not,
therefore, for the full amount of $1,471.19 since
the amount includes an item of $157.84 for the
period for February 23-24, 1975 which is not only
subsequent to the adjudication but also for services
not rendered, and two other items of $139.68 and
$483.12 for services not rendered. The claim to be
collocated therefore is reduced to $690.55, the
balance being merely a statutory lien claim against
the vessel and not the fund.
Claim of Mortgage Creditor—Security National
Bank
The mortgage creditor Security National Bank
should be collocated for the balance.
ORDER
The matter is referred to the District Adminis
trator of the Federal Court in Montreal in order
for him to obtain the further details necessary and
prepare the collocation and distribution, in accord
ance with these reasons.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.