T-3242-77
Tito G. Llido and Crew on board the Vessel
Lowell Thomas Explorer (Plaintiffs)
v.
The Vessel Lowell Thomas Explorer and others
interested in the said Vessel (Defendants)
and
Montreal Ship Repairs Ltd. (Intervener)
Trial Division, Marceau J.—Montreal, March 12;
Ottawa, April 5, 1979.
Maritime law — Application for order to determine priority
of claims against a fund established from proceeds of sale of
ship — Fund unable to satisfy all creditors — Claim for cost
of bringing the ship to sale — Various claims for wages and
services provided the crew, and/or for money owing for person
al services performed in connection with the ship — Claim for
tolls owing National Harbours Board — Claim for goods
supplied (some identifiable and some incorporated into the
ship) but for which title did not pass — Claims for repair
services rendered, before and after the arrest — Canada
Shipping Act, R.S.C. 1970, c. S-9, s. 2 — National Harbours
Board Act, R.S.C. 1970, c. N-8, s. 17(1)(a),(4).
The Court is called upon to adjudicate upon the rights of
various claimants to the proceeds of sale of a ship. The amount
in the fund is only a small fraction of the total claims asserted
against the vessel. The order sought is only to determine the
validity, quantum and ranking of each claim made against the
fund. Certain claims raise no difficulty: (1) the cost of bringing
the ship to sale, (2) seamen's claims for wages, the Crown's
claim for the cost of repatriating seamen, and the intervener's
claim for an amount advanced to settle other seamen's wage
claims, (3) a claim for tolls owing the National Harbours
Board, (4) mortgage claims and (5) all claims for necessaries.
Five claims are the subject of contestation or special represen
tation as to their nature or cause, and hence the priorities that
should be attached thereto. (1) Captain Verraen claims an
amount for wages for the period July 31 to September 15,
1977, which would be secured by maritime lien. (2) A supply
company provided goods on board on condition that ownership
not pass until the goods were fully paid, and claims the full
amount despite the fact that a good deal of the goods supplied
had ceased to be separate entities and had become part of the
ship. (3) A marine engineer, even though he had not been
engaged as a seaman, claims for services (largely inspection)
rendered on board. (4) Captain Holland claims one month's
wages, promised him at the end or after his leaving the ship. (5)
The intervener claims for repairs effected and services provided
through May and June 1977; the ship was arrested on May 25,
1977. Priority is claimed because of the ship's additional
market value attributable to the repairs, and because of the
claimant's good faith in continuing its work despite the arrest.
Held, the order to establish priorities is allowed. The value of
identifiable goods provided by a supply company and to which
it retains title must be paid first, followed by the claim for the
costs, yet to be established, for bringing the ship to sale. The
three claims relating to the crew's wages and passage, and
Captain Holland's claim to two weeks' wages, are secured by a
maritime lien and are next in priority. A claim for tolls owing
the National Harbours Board is next in rank, followed by
mortgage claims. The judicial costs to enforce all but the first
claim, and interest for all claims, are to be added to the
amounts claimed. Although all claims for necessaries rightly
asserted against the vessel but without any privilege would be
next in rank, funds are not available to meet them. Captain
Verraen's claim for salary for port duties cannot be secured by
a maritime lien; there is no evidence of his being employed on
board ship as a member of the crew at the relevant time. The
supply company has no title of ownership, legal or equitable, in
goods that ceased to be separate entities and became part of the
ship and has no right to revendicate them pursuant to articles
595 to 616 of the Code of Civil Procedure. That claimant,
further, did not acquire any legal or equitable interest in the
ship. The marine engineer's claims have no priority, for
although he may have performed work on the vessel, he was not
employed on board as required by section 2 of the Canada
Shipping Act. The claim for a month's salary allegedly prom
ised Captain Holland near the end of his employment cannot be
included in salary earned on board the vessel, and if enforce
able, cannot take precedence over privileged claims. The inter-
vener's claim is one for necessaries for which no preference
should be given. Its argument is based essentially on the
claimant's good faith when the services were supplied and the
repairs effected, and the accretion that the work allegedly
brought to the value of the ship. No special circumstances
surround this claim.
Coastal Equipment Agencies Ltd. v. The "Corner" [1970]
Ex.C.R. 13, followed.
APPLICATION.
COUNSEL:
No one appearing for plaintiffs.
No one appearing for defendants.
Michel Benoit for claimant Captain G.
Verraen.
Sean Harrington for claimant Clipper Ship
Supply Ltd.
Trevor H. Bishop for claimants Captain R. E.
Holland and H. Selander.
Peter Slaughter for intervener Christopher H.
Pickwood.
Gary H. Waxman for 18 crew members,
Court file T-2148-77.
Ian Harris for claimant J. M. Chalot Inc.
Suzanne Marcoux- Paquette for intervener
the Queen.
Vincent M. Prager for claimant Charter New
York Leasing Corporation.
Edouard Baudry for intervener and claimant
Montreal Ship Repairs Ltd.
Pierre M. Gauthier for claimant National
Harbours Board.
SOLICITORS:
No one appearing for plaintiffs.
No one appearing for defendants.
Brodie, Polisuk & Luterman, Montreal, for
claimant Captain G. Verraen.
McMaster, Meighen, Montreal, for claimant
Clipper Ship Supply Ltd.
Brisset, Bishop, Davidson & Davis, Montreal,
for claimants Captain R. E. Holland and H.
Selander.
O'Brien, Hall & Saunders, Montreal, for
intervener Christopher H. Pickwood.
Ahern, Nuss & Drymer, Montreal, for 18
crew members, Court file T-2148-77.
Cerini, Jamieson, Salmon, Findlay, Watson,
Souaid & Harris, Montreal, for claimant J.
M. Chalot Inc.
Deputy Attorney General of Canada for
intervener the Queen.
Stikeman, Elliott, Tamaki, Mercier & Robb,
Montreal, for claimant Charter New York
Leasing Corporation.
Chauvin, Marler & Baudry, Montreal, for
intervener and claimant Montreal Ship
Repairs Ltd.
Mousseau, Gauthier & Gagné, Montreal, for
claimant National Harbours Board.
The following are the reasons for order ren
dered in English by
MARCEAU J.: The Court is called upon to
adjudicate upon the rights of various claimants to
the proceeds of the sale of a ship. The issue is
certainly not uncommon but it arises here at an
unusual time and in very special circumstances.
The defendant vessel, the Lowell Thomas
Explorer, was first arrested in May 1977, and
again in June and August of the same year, of
course at the instance of different groups of credi
tors. Other claimants soon followed: two additional
actions in rem were instituted and several interven
tions and caveats against release or payment out
were filed. In the meanwhile, the shipowners had
been forced to make an assignment in bankruptcy.
The ship was eventually sold by the Marshal and
the proceeds paid into Court.
An order for directions to enable the Court to
determine the rights of the several claimants
became at that stage necessary. Pursuant to this
order, dated December 1977, interested parties,
i.e. those who had made known their claims in any
of the actions taken against the vessel, (Court file
Nos.: T-2148-77, T-2497-77, T-2742-77, T-2845-
77, T-3242-77) were to file and serve upon all
other interested parties, on or before a certain
date, affidavits setting out the facts upon which
they relied to assert their claims together with any
documents referred to therein. Cross-examinations
of the affiants were to be conducted within a
certain period, following which was to be set, on
request, an appointment to have the priorities and
amounts of claims determined and the monies in
Court distributed accordingly.
Naturally, the creditors complied with the direc
tions, but since February 1978 nothing further was
done and the situation has remained unchanged.
The reason is that, in one of the cases, that of
action bearing No. T-2148-77, the claim asserted
therein by some of the crew members had been
met by a defence and counterclaim filed on behalf
of the shipowners. Two motions, one to strike out
the defence and counterclaim, the other to join
another party-defendant to the counterclaim, even
tually gave rise to two interlocutory orders against
which appeals were launched by the plaintiffs.
Those appeals, which must now be defended by the
trustee on behalf of the bankrupt owners, are still
pending.
The application which came on raising the issue
of priority and following which this order will be
made, can now be put in context and better under
stood. It was initiated by only one of the claimants
to the proceeds of sale of the vessel, but apparently
all of the others readily agreed that it was war
ranted. The trustee had advised the creditors that
since there were no assets in the bankruptcy (the
Lowell Thomas Explorer was the only asset of the
bankrupt company) he was not prepared to pro
ceed with the appeals unless he was appropriately
remunerated by those who were to benefit from a
successful outcome. The fact was, however, that
the amount of the claims outstanding was greatly
in excess of the amount of the fund that stood to
the credit of the several creditors, and it was unfair
to expect all claimants to contribute to the costs of
the appeals or to force one or two of them to
assume such a financial burden alone. An immedi
ate determination of the questions of priority and
quantum of the several claims seemed in those
circumstances in the interest of justice since it was
the only way to provide the creditors with the
information they needed to make a decision. The
Court agreed in principle to consider the applica
tion: an appointment was ordered and a date for
hearing arguments was set.
The order sought, therefore, is one that will only
determine the validity, quantum and ranking of
each claim made against the fund that now stands
available for distribution. No request for payment
out is made. Such an order is certainly unusual
but, after some hesitation, I came to the conclusion
that there was no reason why it should not issue if
it may indeed serve the ends of justice. The order
will be declaratory but it shall be final, and if not
varied in appeal, the distribution or partial distri
bution of the fund, whenever it takes place, shall
be made according to its terms.
I now come to the substance.
The outstanding balance of the money paid into
Court by the Marshal following the sale of the
Lowell Thomas Explorer is $322,344.55 (includ-
ing accrued interest'). The ship was actually sold
for a greater amount but some payments out have
already been made pursuant to orders of this
Court, covering the Marshal's costs and some pre
viously authorized expenses incurred for the pres
ervation of the ship while under arrest. The
amount remaining in the fund and still standing to
the credit of the several claimants is indeed only a
small fraction of the total of the claims asserted
against the vessel.
I see no advantage in outlining here, as a prelim
inary step, the long list of those claims that have to
be considered, before making any finding as to
their respective validity, quantum or ranking. I
prefer to deal directly and briefly with the claims
that raise no difficulty and then come to those
which, having given rise to contestation, require
special comments.
But some basic and general decisions must first
be made.
The order of preference between liens which
may attach to a ship or the proceeds of her judicial
sale under the principles of admiralty law may be
generally stated to be as follows: (a) the maritime
lien securing claims for wages and disbursements
of seamen and master, under the Canada Shipping
Act, R.S.C. 1970, c. S-9; (b) the very special lien
created by section 17 of the National Harbours
Board Act, R.S.C. 1970, c. N-8 for all tolls owing
to the Board in respect of the vessel 2 ; (c) the other
maritime liens established or recognized by law
' The certificate put on file would have the interest added but
some easy calculations proved this to be a mistake.
2 The pertinent provisions of the Act read as follows:
17. (1) The Board may, as provided in section 19, seize
any vessel within the territorial waters of Canada in any case
(a) where any amount is owing to the Board in respect of
such vessel for tolls;
(4) In any case mentioned in subsection (1), whether or
not the vessel has actually been seized or detained, the Board
has at all times a lien upon the vessel and upon the proceeds
of any sale or other disposition thereof for the amount owing
to the Board, which lien has priority over all other rights,
interests, claims and demands whatever, excepting only
claims for wages of seamen under the Canada Shipping Act.
(namely for bottomry and respondentia, collision
damage, salvage); (d) the possessory lien which
generally arises in connection with a ship repairer's
claim giving him the right to retain possession
until payment; (e) the mortgages; (f) the so-called
statutory liens, which give certain creditors a right
in rem but carry no privilege and therefore are
postponed to all maritime or possessory liens as
well as all registered mortgages which are in exist
ence in the time they are enforced (see Coastal
Equipment Agencies Ltd. v. The "Comer" [ 1970]
Ex.C.R. 13).
One claimant made representations seeking in
his case, on the basis of equity, a ranking that
would not be in accordance with this normal order
of preference. I will discuss the point later. As a
general rule, however, I think that this order estab
lished by well settled rules should be strictly
followed.
Judicial costs were incurred: costs of making the
fund available by the sale of the vessel as well as
costs of enforcing individual claims. As to the
former, they must be given first priority. As to the
latter, they should have the same ranking as the
claims for the enforcement of which they were
required, provided those claims were secured by a
maritime lien; otherwise maritime liens should be
given priority over the costs of any solicitor who
has acted for another party (Price, The Law of
Maritime Liens, 1940, p. 108).
There is finally the question of interest that need
be disposed of at the outset. Each claim should
bear interest, from the date of filing of the affida
vit verifying same until payment, at the same rate
as that which applied to the interest accruing to
the fund while on deposit in the Consolidated
Revenue Fund of Canada.
As already mentioned, the validity, quantum
and nature of most of the claims raise no difficul
ty; their ranking according to the order of prefer
ence I said should be adopted is easy to determine.
1. The costs for bringing the ship to sale were
assumed by Montreal Ship Repairs Ltd., interven-
er in the present action. Their amount has not
been established yet, but of course it will have to
be paid first.
2. Three claims are undoubtedly secured by a
maritime lien that attached to the vessel from the
same date; they will come next:
(a) The claim for wages and benefits asserted
by 18 of the crew members in action T-2148-77.
This is the action in which the aforementioned
appeals are pending. The aggregate amount
claimed therein (excluding the repatriation costs
which were actually advanced by Her Majesty the
Queen) is $146,814.07, but the amount really
owing, if any, shall be settled by the judgment that
will dispose of the action.
(b) Pursuant to an order of this Court dated
September 21, 1971, Her Majesty the Queen in
right of Canada was granted permission to inter
vene in case No. T-2148-77, and was subrogated to
the rights and priorities of the plaintiffs therein in
respect of the funds that she would advance to
cover their repatriation to the Philippine Islands.
There is no question that seamen are entitled to
their cost of repatriation, which cost ranks in
priority with their wages (see: Price, The Law of
Maritime Liens, p. 62). The sum paid by Her
Majesty the Queen amounted to $6,588.
(c) Montreal Ship Repairs Ltd., intervener in
the present action, advanced the funds required to
settle the claim for wages and salaries asserted by
the plaintiff herein, the other 65 members of the
crew, as well as those needed to assure their
repatriation to the Philippine Islands. Pursuant to
the order of this Court dated September 2, 1977,
which authorized these advances, Montreal Ship
Repairs Ltd. was to be subrogated to the rights
and priorities of the plaintiffs up to the total sum
disbursed and interest thereon. The amount is
$97,252.99.
3. A valid claim for tolls owing was produced
by the National Harbours Board. Here is where it
shall rank. The amount thereof is $7,710.92.
4. Since no creditor is in a position to claim a
possessory lien, mortgage claims are to be con-
sidered next. Charter New York Leasing Corpora
tion is the holder of a valid, registered, first naval
mortgage as security for a loan made to her
owners. The amount owing under the said mort
gage and loan agreement, as of the date of the
filing of the affidavit pursuant to the aforesaid
order for directions, including interest, late
charges and fees calculated in accordance with the
terms of the agreement, was in Canadian dollars.
$543,607.85.
5. Then would come all the claims for necessar
ies that were rightly asserted against the vessel but
did certainly not carry any privilege. It is doubtful
that these claims could be considered here, since
the money left after payment of the mortgage
would, it seems to me, be vested in the trustee in
bankruptcy. But in any event, there will certainly
be no such money, so it is obvious that all the
claims that carry no priority over the mortgage
claim will simply have to be disregarded.
II
Five claims were the subject of contestation or
special representations as to their nature or cause
and hence the priorities that should be attached
thereto. These must now be considered.
(1) One Captain Verraen filed a claim for an
amount of $3,973.08 purporting to be for wages
and therefore secured by a maritime lien. The
wages are said to have been earned during the
period covering July 31 to September 15, 1977. I
see nothing, however, in the affidavit filed in sup
port of the claim, indicating that Captain Verraen
was at the relevant time on board the Lowell
Thomas Explorer as a member of her crew.
Indeed, the period mentioned is a period during
which the vessel, already under arrest, was under
the command of Captain Tito G. Llido. Moreover,
the agreement under which Captain Verraen was
employed (Exhibit P-1 to his affidavit) was signed
on behalf of Midwest Cruises Inc. not on behalf of
Midwest Cruises Panama S.A., the owners of the
vessel. Captain Verraen may have been employed
during that time to perform certain "port duties"
as representative of Mr. Grueninger, the President
of both Midwest Cruises Inc. and Midwest Cruises
Panama S.A., but the salary he earned in that
capacity could not be secured by a maritime lien
on the Lowell Thomas Explorer.
(2) Clipper Ship Supply Ltd. ("Clipper")
sought leave to intervene in the present action as
early as October 1977. It claimed that some of the
goods then on board the ship belonged to it. These
goods had allegedly been sold and delivered in
accordance with the conditions of the International
Ship Supplies Association as a result of which the
ownership therein was not to pass until full pay
ment of the purchase price amounting to a total
sum of $25,915.13. At the time of the application,
however, only part of the goods had not already
been incorporated into the vessel and could still be
removed. On November 1, 1977, an order of this
Court granted Clipper leave to intervene, declared
that the goods sold by Clipper that were still
capable of being identified and distinguished had a
total value of $3,000, directed that none of them
be removed—obviously in view of the fact that the
advertisements for the sale of the ship had already
been published—but added:
That before payment out of the proceeds of the sale of the
ship pursuant to a Commission of this Court, the value of any
goods listed in the Marshal's Report of Inventory that are
proved, were it not for the operation of the said sale, to have
belonged to Clipper Ship Supply Ltd., shall be distracted and
paid out to it free and clear of the claims in rem against the
ship "LOWELL THOMAS EXPLORER", or in personam against
her owners;
Effect must naturally be given to that order and
an amount of $3,000 plus interest shall be set aside
in favour of Clipper Ship Supply Ltd. prior to any
distribution to the creditors. But Clipper, under
standably, is not quite satisfied with that result. It
requests setting aside in its favour, the whole
amount of $25,915.13 on the ground that its right
of ownership existed with respect to all of the
goods it had supplied when they were sold with the
vessel. To support this contention, counsel for
Clipper submitted substantially the following
argument.
We are dealing here with Canadian maritime
law. This law is either uniform throughout Canada
or some of its non-essential aspects must be filled
out by local rules. If our maritime law is uniform,
the lex non scripta portion thereof is presumed to
be the same as English common law, and therefore
includes the English law of property and trusts.
Under the latter, legal and beneficial title to the
supplies remained with Clipper, and since the ship
and the goods were sold together as one mass,
Clipper and the owners are deemed to be tenants
in common, and the value of Clipper's property
must be set aside first. Alternatively, if legal title
passed, at least equitable title remained by way of
resulting trust, or else the property was acquired
and used in fraud of Clipper as a result of which
the owners would have to be considered as con
structive trustee: equity would then, through the
"doctrine of tracing", impose a charge in favour of
Clipper upon the proceeds of the sale. If, on the
other hand, the argument goes on, our maritime
law is not uniform and some of its aspects are
governed by local rules, Clipper would still be
entitled to "distraction" in its favour under articles
595 to 616 of the Code of Civil Procedure of the
Province of Quebec which have inter alia the
effect of protecting the third party who had a right
to "revendicate" any part of the property seized
and subsequently sold to his detriment.
I do not intend to discuss all of the propositions
put forward in this argument. My answer will be
simple. I do not see how Clipper could have
retained a title of ownership, whether legal or
equitable, in goods that had ceased to exist as
separate entities and had become part of the ship
and therefore unidentifiable or undistinguishable;
and I don't think that Clipper, as seller of those
goods, has acquired any legal or equitable interest
in the ship herself. It is clear on the other hand
that Clipper had, within the meaning of the
Quebec Code, no right to "revendicate" goods that
had already been incorporated into the vessel.
I can see no substance in Clipper's contention.
(3) A claim was made by one Harry Selander, a
marine engineer, for an amount of $2,600 U.S.
allegedly owed to him for services rendered on
board the vessel between September 11 and Octo-
ber 17, 1976.
In his affidavit and the accompanying docu
ments filed in support of his claim, Mr. Selander
asserted that he was hired, without any written
contract, by "Mr. Grueninger himself", the Presi
dent of Midwest Cruises Panama S.A., shortly
after the vessel had been purchased in Finland
from previous owners. He went to Finland as a
"mechanical surveyor", under an engagement that
was to end on the first of October but was then
verbally extended for an additional 16 days at the
request of Mr. Grueninger personally. In a supple
mental affidavit, Mr. Selander states slightly
otherwise: the position was offered to him by the
president of a company that was under contract
with Mr. Grueninger to supply crew for the newly
acquired ship, and the position offered was that of
consulting chief engineer aboard the vessel. As for
the duties he performed, here is how he summa
rized them in two relevant paragraphs of this last
mentioned affidavit (which I reproduce verbatim):
That as Consulting Chief Engineer for the S.S. BORE NORD
III (later the S.S. "LOWELL THOMAS EXPLORER") during the
month of September 1976, I was a member of the ship's crew of
four person, to wit: Captain Holland, Senior Captain; Captain
Tito, Junior Captain, Harry Selander, Chief Engineer; and a
first assistant, who was a Philippino, his first name was Pedro. I
had insisted that the boilers be cooled for cleaning and inspec
tion and it was too cold to stay aboard the vessel, so the entire
crew stayed in a hotel ate morning and evening meals in the
hotel and took our noon meal aboard the ship. There was no.
cook in the membership of our crew.
During the month of September it was my responsibility to
make all arrangements for hauling, bottom painting, cleaning,
decoration, installation of steel shutters on all of the portholes
at or below main deck. I acted as translater between the
Finnish representatives and the Non-English speaking members
of the crew. I ran and tested the entire air conditioning and
heating system and inspected the same. And during that time
translated all designations on the valves and machinery in the
engine room from Finnish into English. It was also necessary
for me to attempt to educate the first assistant, who had no
previous steam experience, the care and operation of the vessels
steam engines.
The reading of the two affidavits and of the
exhibits referred to therein leaves the clear impres
sion that Mr. Selander, a marine engineer, was
hired essentially to inspect the vessel and verify
that she could sail even though he went further
and actually performed work thereon. The ques
tion is whether, in those circumstances, the salary
he earned must be considered as seaman's wages
carrying a maritime lien against the vessel under
the Canada Shipping Act.
The difficulty does not come from the fact that
the hiring contract was only verbal (section 180 of
the Act 3 ). It is not that the voyage had not yet
taken place when the work was performed (Price,
The Law of Maritime Liens, p. 62), nor is it that
the salary did not conform with the definition of
"wages", as given by section 2 of the Act, which
"includes emoluments". The difficulty is that Mr.
Selander was never engaged and did not work as a
seaman. He may have performed work on the
vessel, but he was not "employed on board" the
vessel as required by said section 2 which states:
2. In this Act
"seaman" includes
(a) every person (except masters, pilots and apprentices duly
indentured and registered) employed or engaged in any
capacity on board any ship, ... (emphasis added).
In my view, Mr. Selander's claim was not
secured by a seaman's maritime lien.
(4) On October 1, 1976, Captain Roy E. Hol-
land was hired by Midwest Cruises Panama S.A.
as master of the Lowell Thomas Explorer for an
indefinite period of time. The employment agree
ment was put in writing; a copy of the written
contract is on file. Captain Holland served on
board the ship until the end of February 1977: he
disembarked on March 1, of his own will, to return
to America. The ship was then at Ponta Delgada,
St. Michael's (Azores Islands).
The claim filed herein by Captain Holland is
twofold. First he claims his salary of $600 U.S.
($662.34 Can.) for his last two weeks of service on
board, which is still owed to him. This part of the
3 This section reads as follows:
180. In any legal or other proceeding a seaman may bring
forward evidence to prove the contents of any agreement
with the crew or otherwise to support his case, without
producing or giving notice to produce the agreement or any
copy thereof.
claim is no doubt secured by a maritime lien 4 . But
he also claims an additional amount of $1,500
U.S. (or $1,655.85 Can.) on the basis of a promise
made to him by Mr. Grueninger that he would be
entitled to an additional month's pay on leaving
the ship. The issue here is, of course, whether this
second portion of the claim is secured by the same
maritime lien as the first one and must therefore
be given the same priority.
Captain Holland was permitted, by an order of
this Court, to file an additional affidavit in lieu of
his being cross-examined on the one already fur
nished. In this supplemental affidavit, he states in
paragraph 5 (which again I reproduce verbatim):
I have no written proof that Mr. Grueninger promised me
$1,500 (Fifteen Hundred Dollars) as one (1) month's leave on
pay but swear that Mr. Grueninger personally promised me this
in his office in Indianapolis, where I attended to obtain funds to
pay my crew and to settle accounts outstanding with the
Authorities in Ponta Delgarda. There was no provision made in
my Employment of Agreement. This arrangement was made
purely by word of mouth and I trusted Mr. Grueninger to
honour same.
It must be noted that no date is given. It appears
from the file, however, that the vessel entered
Ponta Delgada harbour on the 4th of February
1977, sailed for Bermuda on the 5th, returned to
port on the 6th, sailed on the 10th, returned again
on the 11th and remained under -the command of
Captain Holland until he disembarked on the first
of March to fly back to North America (Exhibits
to the claimant's affidavit dated January 23,
1978). It follows that the alleged promise made by
Mr. Grueninger, on the basis of which Captain
Holland is claiming, was made at the very end of
the employ and even after termination thereof.
A maritime lien attaches to a vessel for salaries
or wages earned on board by the master and the
crew members. If the additional pay that is the
subject matter of the claim here had been a condi-
'Section 214(1) of the Canada Shipping Act reads as
follows:
214. (1) The master of the ship, so far as the case per
mits, has the same rights, liens and remedies for the recovery
of his wages as a seaman has under this Act, or by any law or
custom.
tion of employment of Captain Holland, I think it
would have been part of his wages earned on
board. If it had been compensation for wrongful
dismissal, a case could have been made to have it
included in the wages earned on board. (See, on
these points, Price, op. cit. pp. 61 and 62). But in
the circumstances of this case, I fail to see how it
can be said that the money so promised should be
taken as being included in the salary earned on
board the vessel, as being part of the remuneration
or of the "emoluments" due for services rendered
on board the vessel.
Captain Holland's claim based on the promise
of Mr. Grueninger, if it can be enforced against
the vessel, which I doubt, cannot take precedence
over the privileged claims.
(5) The last issue raised was thoroughly and
very ably debated. Yet I do not think lengthy
comments are required to dispose thereof. Here is
how it was presented.
Montreal Ship Repairs Ltd. has a substantial
claim against the vessel for repairs effected and
services provided, which amounts to a sum of
$559,174.12. The work was ordered by Mr. Gru-
eninger with a view to bringing the vessel to a
desired classification. It was commenced immedi
ately upon the vessel's arrival at Montreal on the
9th of May 1977 and continued until June the
30th. Although the ship was arrested as early as
May the 25th, the officers of the Company
believed in good faith that Mr. Grueninger would
succeed in making some financial arrangements
and then be able to settle their account. Unfortu
nately, it was not to be so.
Montreal Ship Repairs Ltd. never had posses
sion of the vessel; it therefore had no right of
retention until payment. It nevertheless seeks pri
ority for its claim on the following grounds put
forward in the affidavit of its general manager and
director:
When the alterations and repairs performed by Montreal
Ship Repairs Ltd. were completed on the 30th June 1977, the
LOWELL THOMAS EXPLORER was fit to commence trading as a
passenger vessel, subject to minor items which would have
taken a few days to complete, whereas she was not in operating
condition when the work was undertaken.
Montreal Ship Repairs Ltd. requests that the sum of $170,-
000.00, being the additional market value as established in his
affidavit by Mr. E. Edwardson attributable to the repairs and
alterations performed by Montreal Ship Repairs Ltd. be dis
tracted and awarded to it by preference to the claims filed
against the proceeds which had arisen and were payable prior
to the carrying out of the said repairs and alterations.
In support of such a request, counsel for the
claimant cites a passage in Halsbury's Laws of
England (3rd ed. Vol. 35, p. 788, paragraph 1213)
which reads as follows:
It would seem that the determination of the priority of liens
over one 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.
He also relies on a Canadian decision, that of
the Supreme Court in The Montreal Dry Docks
and Ship Repairing Company v. Halifax Ship
yards, Limited (1919-20) S.C.R. 359, wherein, on
the basis of equity, shipwrights, who were left in
possession of a ship after she had been arrested,
were given priority not only for the work done by
them before arrest (for which they had a possesso-
ry lien), but also for the value of the accretion
resulting from the work completed after arrest,
although not especially authorized by the Court.
Of course, this is sufficient authority for the
proposition that considerations of equity may have
a role to play in the determination of priorities
among outstanding claims against the proceeds of
sale of a vessel. But as is said in Halsbury in the
sentence immediately following that cited above:
There is, however, a general order of priority, and there are
certain general rules which, in the absence of special circum
stances, the Court tends to apply.
And indeed it is clear, from a reading of the
reasons given in the judgment referred to, that
these special circumstances were thought to be
present in the case there decided.
I fail to see here any such special circumstances.
The argument is essentially based on the good
faith of the claimant when the services were sup
plied (although for an experienced dealer, its
behaviour was surprisingly unwary) and the accre
tion that the work performed brought to the value
of the vessel (which accretion, I should add inci
dentally, has certainly not been very satisfactorily
established as to its relative importance and fur
thermore did not necessarily call for a higher
bidding price). If on that sole basis of good faith
and accretion, the general rules governing priori
ties of claims against the proceeds of sale of a
vessel were to be put aside, the whole system
would be jeopardized and the credit of the ship-
owners would be directly and adversely affected.
The claim of Montreal Ship Repairs Ltd. for the
services it performed to the vessel in May and June
1977, is a claim for necessaries to which no prefer
ence should be given.
As a result of the foregoing, the order of priority
among the several claims outstanding against the
proceeds of sale of the Lowell Thomas Explorer
must be established as follows:
(1) The sum to be set aside in favour of Clipper
Ship Supply Ltd. $ 3,000.00
(2) The judicial costs assumed by Montreal
Ship Repairs Ltd. for bringing the ship to
sale.
(3) The claims which carried a seaman's mari
time lien to be paid concurrently, namely:
(a) That of the plaintiffs in Action
T-2148-77 in the amount to be estab
lished by judgment to intervene in said
action.
(b) That of Her Majesty in right of
Canada for repatriation of the plain
tiffs in Action T-2148-77 6,588.00
(c) That of Montreal Ship Repairs Ltd.
for funds advanced to settle the claim
for wages asserted by the plaintiffs
herein 97,252.99
(d) That of Captain Holland for his last
two weeks of service on board 662.34
(4) The claim of the National Harbours Board 7,710.92
(5) The claim of Charter New York Leasing
Corporation 543,607.85
Each of these claims shall bear interest from the
date and at the rate specified herein above and the
judicial costs incurred to enforce those mentioned
in (2), (3), (4) and (5) above, in this action or in
any other action still pending, shall be added
thereto.
The order will go accordingly.
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.