A-204-82
Marlex Petroleum, Inc. (Appellant)
v.
The Ship Har Rai and The Shipping Corporation
of India Ltd. (Respondents)
Court of Appeal, Heald, Urie and Le Dain JJ.—
Vancouver, October 4 and 5, 1983; Ottawa, Janu-
ary 13, 1984.
Maritime law — Conflict of Laws — Oil supplied to
chartered ship at American port — Prohibition-of-lien clause
in charter party — Presumption under American law that
charterer authorized to subject vessel to maritime lien for
necessaries — Lien arising under American law enforceable by
Canadian action in rem despite absence of shipowner's in
personam liability — Canadian test for recognition of foreign
maritime lien differing from English test — Supreme Court
applying equivalent of American presumption — Where neces
saries supplied in Canada claim in rem unenforceable if ship-
owner not personally liable — Restrictions on exercise of
statutory right in rem inapplicable to enforcement of maritime
lien — Ss. 2 and 22(1) conferring jurisdiction to enforce
maritime lien for necessaries by action in rem — S. 22(2)(m)
conferring jurisdiction only where necessaries not secured by
lien — Lien remaining enforceable on change in vessel's own
ership — Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10,
ss. 2, 22(1),(2)(m), 43(3) — Ship Mortgage Act, 1920 (being s.
30 of the Merchant Marine Act, 1920), subss. P, R (as am. by
Pub. L. No. 92-79, 85 Stat. 285 (1971)), 46 U.S.C. ss. 971, 973
(1976).
Conflict of laws — Whether American lien for necessaries
recognized as enforceable by action in rem only if owner when
supplied personally liable — Recognition of maritime liens
important policy question — Differences of view among mari
time nations — Canadian test for recognition of foreign mari
time liens differing from English — Supreme Court of Canada
decisions holding maritime lien for necessaries arising under
proper law of contract enforceable in Canada although supply
of necessaries in Canada not giving rise to maritime lien —
Recognition not to be confined to cases where owner personally
liable — American principle of presumed authority not so
offensive to Canadian law as to demand denial of recognition.
Jurisdiction — Maritime law — Maritime lien for necessar
ies — Ss. 2 and 22(1) conferring jurisdiction to enforce by
action in rem — S. 22(2) conferring jurisdiction only where
necessaries not secured by lien — Lien remaining enforceable
on change in vessel's ownership — Federal Court Act, R.S.C.
1970 (2nd Supp.), c. 10, ss. 2, 22(1),(2)(m), 43(3).
The appellant supplied oil to the respondent ship at a port in
California. At the time, the ship was owned by the respondent
corporation, but was under time charter to a second company.
The brokers with whom the appellant dealt appeared to be
acting on behalf of that second company, and it was agreed
that the actual purchaser would be a third company. The
plaintiff was unaware, when it supplied the oil, that the ship
was under charter, and that the charter party contained a
prohibition-of-lien clause. Payment for the oil was not forth
coming; therefore, with a view to recovering the cost of the oil,
the appellant instituted an action in the Federal Court. This
comprised; (a) a proceeding in rem against the ship, to enforce
a maritime lien for necessaries which allegedly had arisen
under American law; and (b) a proceeding in personam against
the respondent corporation (which was still the vessel's owner).
The Trial Judge found that American law did give the
appellant the lien alleged, but, having dismissed the in perso-
nam claim against the corporation, he held that the lien was not
enforceable by an action in rem in Canada because the ship-
owner was not liable in personam.
On appeal from the dismissal of the action in rem,
Held, the appeal should be allowed.
Under American law as it has stood since 1971, a charterer is
presumed to have had authority from the shipowner to subject
the vessel to a maritime lien for necessaries, unless the supplier
had actual knowledge of a prohibition-of-lien clause in the
charter party. Pursuant to this principle, a maritime lien for
necessaries may arise in circumstances in which the person who
owns the ship at the time of supply is not personally liable for
the necessaries. This was less likely to occur before the enact
ment of the 1971 amendments; nonetheless, even under the
earlier law, which was the law considered by the Supreme
Court of Canada in The Strandhill and The bannis Daskale-
lis, such a situation could obtain. The issue is whether a lien for
necessaries which arises under American law is to be regarded
as enforceable by action in rem in Canada only if the shipowner
would be personally liable for the necessaries.
The decisions in The Strandhill and The banns Daskalelis
do not preclude the recognition of a lien where liability in
personam is absent. Indeed, it may be that those decisions
afford implicit support for the view that recognition should not
be confined to cases in which the owner would be liable in
personam.
In each of the two cases, the Court did adopt the principle
that a maritime lien for necessaries arising under the proper
(albeit foreign) law of the contract would be recognized as
enforceable in Canada even if the supplying of the necessaries
in this country would not have given rise to a maritime lien.
(The test governing recognition of a foreign maritime lien in
Canada is different from the test now applied in England.)
Given the position taken by the Supreme Court, there is no
sound reason of policy for restricting recognition to those cases
in which the person who owned the ship at the time when the
necessaries were supplied would be liable in personam. The
result which might accompany the presumption of American
law as to the charterer's authority is not so offensive to
Canadian maritime law that it requires the refusal of recogni
tion. In fact, what is essentially the same principle has been
approved and applied by our Supreme Court. Although a claim
for necessaries furnished in Canada cannot be enforced by
action in rem unless the ship's owner is personally liable, this is
not a reason for denying recognition to a foreign maritime lien
where personal liability is absent. Restrictions that apply to the
exercise of a mere statutory right in rem are not necessarily
applicable to the enforcement of a maritime lien; consequently,
even if the decision in The Armar was correct, it is not
determinative of the recognition issue herein.
The jurisdiction of the Federal Court to enforce a maritime
lien for necessaries by an action in rem derives from subsection
22(1) of the Federal Court Act, taken together with the
definition of "Canadian maritime law" in section 2. This
jurisdiction must be regarded as issuing from a source other
than paragraph 22(2)(m), which must be understood as confer
ring jurisdiction in respect only of those claims for necessaries
that are not secured by maritime liens. Subsection 43(3)
imposes a limitation upon the jurisdiction which the Court has
in respect of a claim referred to in paragraph 22(2)(m), and by
interpreting the paragraph in this manner, one avoids the
limitation where there is a lien. The lien's enforceability by
action in rem is thereby preserved even if beneficial ownership
of the vessel changes hands between the origination of the cause
of action and the commencement of the suit.
CASES JUDICIALLY CONSIDERED
APPLIED:
The Ship 'Strandhill" v. Walter W. Hodder Company,
[1926] S.C.R. 680; Todd Shipyards Corporation v.
Altema Compania Maritima S.A., [1974] S.C.R. 1248.
DISTINGUISHED:
Westcan Stevedoring Ltd. v. The ship "Armar", [1973]
F.C. 1232 (T.D.).
CONSIDERED:
The Ripon City, [1897] P. 226 (Eng. H.C.—Adm.);
Goodwin Johnson Limited v. The Ship (Scow) AT & B
No. 28, et al., [ 1954] S.C.R. 513.
REFERRED TO:
The Halcyon Isle, [1981] A.C. 221 (P.C.).
COUNSEL:
R. G. Morgan for appellant.
J. W. Perrett for respondents.
SOLICITORS:
Davis & Company, Vancouver, for appellant.
Campney & Murphy, Vancouver, for
respondents.
The following are the reasons for judgment
rendered in English by
LE DAIN J.: This is an appeal from a judgment
of the Trial Division ([ 1982] 2 F.C. 617) dismiss
ing an action in rem to enforce a maritime lien for
necessaries arising under United States law on the
ground that such an action will not lie where the
owner of the vessel is not liable in personam for
the necessaries.
The appellant Marlex Petroleum, Inc. ("Mar-
lex") supplied bunker fuel oil and marine diesel oil
to the respondent ship Har Rai at the port of Los
Angeles/Long Beach, California, in May 1979
when the ship was owned by the respondent, The
Shipping Corporation of India Ltd., but was under
time charter to Libra Shipping and Trading Cor
poration Limited ("Libra"). The inquiry concern
ing the oil came from Universal Bunker Services
Inc., broker in New Jersey who appeared to be
acting for Libra. The purchaser of the oil was
originally to be Libra but because Marlex lacked
credit information concerning this company it was
agreed that the purchaser would be Global Bulk
Handling Limited ("Global"), with which Marlex
had had a satisfactory credit experience. Global's
address for billing was shown as c/o Libra. The
delivery of the oil was arranged by agents for
Libra at Long Beach and receipt of delivery was
acknowledged by the chief engineer of the ship. At
the time Marlex supplied the oil it did not know
that the Har Rai was under charter and that the
charter party contained a prohibition-of-lien
clause. When the oil was not paid for, Marlex
instituted proceedings in rem against the Har Rai
in Vancouver, where the ship was arrested, and
proceedings in personam against the owner, The
Shipping Corporation of India Ltd. The statement
of claim alleged that Marlex had a maritime lien
for necessaries under United States law.
On these facts it was the expert opinion of Mr.
Carter Quinby, a specialist in American maritime
law, that the supply of the oil to the Har Rai gave
rise under sections 971 and following of Title 46 of
the United States Code [Ship Mortgage Act, 1920
(being s. 30 of the Merchant Marine Act, 1920),
subss. Pff. (as amended), 46 U.S.C. ss. 971ff.
(1976)] to a maritime lien which could be
enforced by action in rem in the United States
although the owner was not personally liable.
Under these sections, as amended in 1971 [46
U.S.C. s. 973 (1976) incorporates amendments to
the Ship Mortgage Act, 1920, subs. R, 46 U.S.C.
s. 973 (1970), effected by an Act of August 10,
1971, Pub. L. No. 92-79, 85 Stat. 285], a charter-
er is presumed to have authority from the owner to
subject the ship to a maritime lien for necessaries
in the absence of actual knowledge by the supplier
of a prohibition-of-lien clause in the charter party.
It was agreed at trial that the Court would
determine the question of liability, the quantum of
damages to be the subject of a reference if neces
sary. On motion at the close of the plaintiffs case,
the Trial Judge held that the owner of the Har
Rai, the Shipping Corporation of India Ltd., was
not personally liable for the cost of the oil and
dismissed the in personam claim against it. On the
question of liability in rem the Trial Judge found,
on the basis of the expert evidence, that the appel
lant had a maritime lien under United States law
but held that the lien was not enforceable by
action in rem in Canada because the owner of the
ship was not liable in personam.
The Trial Judge based this conclusion on the
judgment of Collier J. in Westcan Stevedoring
Ltd. v. The ship "Armar", [1973] F.C. 1232
(T.D.), where it was held that a claim for stevedor-
ing services rendered in Canada, assuming it to be
one for necessaries, could not be enforced by
action in rem where the owners of the vessel were
not personally liable. The plaintiff in that case did
not have a maritime lien because the necessaries
were furnished in Canada, but was attempting to
exercise a statutory right in rem. Collier J. held,
relying particularly on the decision in The Mogi-
leff, [1921] P. 236 (Eng. H.C.-Adm.) and The
"Heiwa Maru" v. Bird & Co. (1923), I.L.R. 1
Ran. 78 (H.C.), that the statutory right in rem to
enforce a claim for necessaries which existed under
Canadian maritime law prior to the enactment of
the admiralty provisions of the Federal Court Act
[R.S.C. 1970 (2nd Supp.), c. 10] could only be
exercised if the owner of the vessel was personally
liable for the claim, and that the applicable provi
sions of the Act—paragraph 22(2)(m) conferring
jurisdiction with respect to a claim for necessaries
and subsection 43(2) providing that the jurisdic
tion conferred by section 22 may be exercised in
rem—did not change the law in that respect.
The appellant contends that The Armar is not
applicable because it dealt with a mere statutory
right in rem and not with a maritime lien, and that
on the authority of the decisions of the Supreme
Court of Canada in The Ship "Strandhill" v.
Walter W. Hodder Company, [1926] S.C.R. 680,
and Todd Shipyards Corporation v. Alterna Com-
pania Maritima S.A., [1974] S.C.R. 1248 [herein-
after referred to as "The b annis Daskalelis"], the
maritime lien arising in the present case under
United States law must be recognized as enforce
able by action in rem in Canada, although the
owner is not personally liable. The Trial Judge
considered The Strandhill and The banns Das-
kalelis, but distinguished them as cases in which,
on the facts disclosed by the pleadings and state
ments of the Court, the owners of the vessels
would have been personally liable.
In The Strandhill the Supreme Court of
Canada held that a maritime lien arising under
United States law for necessaries furnished in the
United States would be recognized as enforceable
by action in rem in Canada, and that the Exche
quer Court of Canada had jurisdiction to entertain
such an action. The statement of claim alleged
that the necessaries were furnished upon the order
of the owner of the ship or a person authorized by
the owner to order necessaries for the ship. While
such authority from the owner, whether actual or
presumed, was a condition of the existence of the
maritime lien under United States law, there is no
suggestion in the judgment that the recognition of
the lien as enforceable by action in rem in Canada
and the jurisdiction of the Exchequer Court to
entertain such action depended on whether, on the
facts, the owner of the ship at the time the neces
saries were supplied would have been personally
liable for them. There was no reference to the
question of personal liability. On the question of
recognition Newcombe J., who spoke for a majori
ty of the Court, said at pages 686-687:
It cannot of course be said that the contract is void on the
ground of immorality, nor is it contrary to such positive law as
would prohibit the making of it, and therefore I think that the
right which has accrued under or incident to it, may be
recognized and enforced, if the tribunal to which the plaintiff
has resorted have the requisite jurisdiction.
On the question of jurisdiction, Newcombe J.,
after referring to the jurisdiction in respect of a
claim for necessaries conferred by The Admiralty
Court Act, 1840, 3 & 4 Vict., c. 65, section
6(U.K.), and The Admiralty Court Act, 1861, 24
Vict., c. 10, section 5(U.K.), and exercisable by
the Exchequer Court of Canada by virtue of sub
section 2(2) of the Colonial Courts of Admiralty
Act, 1890, 53 & 54 Vict., c. 27 (U.K.), said at
page 689:
Now in view of these enactments I apprehend that if a
provision, corresponding to that of the United States statute
which I have quoted, had been enacted in England, the High
Court of Admiralty would have found itself adequately
equipped to enforce it, in the cases provided for in the Acts of
1840 and 1861. And, seeing that equivalent local jurisdiction
exists, the Exchequer Court of Canada is empowered, when, in
those cases, the claim for necessaries is secured by a maritime
lien, to enforce that lien, notwithstanding that the right may
have been acquired under the law of a foreign country.
In The loannis Daskalelis, which involved the
question of priority between a maritime lien for
necessary repairs arising under United States law
and a mortgage registered in Greece, the Supreme
Court reaffirmed the principle adopted in The
Strandhill that a foreign maritime lien for neces
saries or repairs arising under the proper law of
the contract will be recognized as enforceable in
Canada although the contract if made in Canada
would not give rise to a maritime lien. After
quoting from the judgment of Newcombe J. in The
Strandhill, Ritchie J., who delivered the judgment
of the Court, said at page 1254: "I do not find it
necessary to go further than the decision in The
Strandhill to find authority for holding that the
necessary repairs furnished by Todd Shipyards
Corporation in New York gave rise to a maritime
lien against the defendant ship which is enforce
able in this country...." In The loannis Daskale-
lis Todds Shipyards alleged [page 1251] that the
necessary repairs were furnished to the ship " ` .. .
at the request of her Owners and their aforesaid
representatives ...' ", and Ritchie J., in his state
ment of the facts, said [at page 1250] that the
repairs had been performed "at the request of
those responsible for the management of the ship
..." , but once again, while these facts were a
condition of the existence of the lien under United
States law, there is no suggestion in the judgment
that the personal liability of the owner of the ship
at the time of the repairs was a condition of the
recognition of the lien as enforceable in Canada.
Under the United States law that applied in The
Strandhill and The loannis Daskalelis, a charter-
er was presumed to have authority to subject a
ship to a maritime lien for necessaries although the
supplier had a duty to use reasonable diligence to
determine whether the charter party contained a
prohibition-of-lien clause, which in practice largely
nullified the presumed authority, until this duty
was removed by amendment in 1971. See Gilmore
and Black, The Law of Admiralty, 2nd ed., 1975,
pages 670 ff. It was nevertheless possible under the
law before 1971 for a maritime lien for necessaries
to arise under United States law in circumstances
in which the owner of the ship at the time they
were supplied would not be personally liable for
them. As the expert evidence in this case indicates
this is more likely to occur in practice because of
the 1971 amendment. The issue, as I see it, is
whether an American lien for necessaries is to be
recognized as enforceable by action in rem only
where the owner of the ship at the time the
necessaries were supplied would be personally
liable for them, or whether it is to be recognized as
enforceable in all cases. For the reasons I have
indicated I do not, with respect, think that the
judgments of the Supreme Court of Canada in
The Strandhill and The boannis Daskalelis pre
clude its recognition in all cases, if they do not
imply, because of the absence of any reference to
personal liability or the policy underlying the
American law, that such was the view of recogni
tion assumed by the Court. There is no question
that the recognition of maritime liens is an impor
tant question of policy in maritime law on which
there have been strong differences of view among
the maritime nations. It is also clear that the test
applied in Canada to the recognition of a foreign
maritime lien differs from which now applies in
England. See The Halcyon Isle, [1981] A.C. 221
(P.C.). In view of the position that has been
adopted by the Supreme Court of Canada in The
Strandhill and The Ioannis Daskalelis—that a
maritime lien for necessaries arising under the
proper law of the contract will be recognized as
enforceable in Canada although the supply of
necessaries in Canada does not give rise to a
maritime lien—there is in my respectful opinion no
sound reason of policy for confining that recogni
tion to cases where the owner of the ship at the
time the necessaries were supplied would be per
sonally liable. The result to which the principle of
presumed authority may lead under United States
law is not so offensive to Canadian maritime law
as to require the refusal of recognition. It is essen
tially the same principle as that expressed by
Gorell Barnes J. in The Ripon City, [1897] P. 226
(Eng. H.C.-Adm.), where in holding that a master
had a maritime lien for liability incurred to obtain
necessaries on the credit of persons who were not
the owners of the ship but had been put in posses
sion of it by the owners, he said at page 244:
The principle upon which owners who have handed over the
possession and control of a vessel to charterers, and upon which
mortgagees and others interested in her who have allowed the
owners to remain in possession are liable to have their property
taken to satisfy claims in respect of matters which give rise to
maritime liens, may, in my opinion, be deduced from the
general principles I have above stated and thus expressed. As
maritime liens are recognized by law, persons who are allowed
by those interested in a vessel to have possession of her for the
purpose of using or employing her in the ordinary manner,
must be deemed to have received authority from those interest
ed in her to subject the vessel to claims in respect of which
maritime liens may attach to her arising out of matters occur
ring in the ordinary course of her use or employment, unless the
parties have so acted towards each other that the party assert
ing the lien is not entitled to rely on such presumed authority.
This principle was quoted with approval and
applied by the Supreme Court of Canada in Good-
win Johnson Limited v. The Ship (Scow) AT & B
No. 28, et al., [1954] S.C.R. 513, where it was
held that an action in rem would lie to enforce a
maritime lien for damage caused by a ship when it
was under demise charter. It was held that the
existence of the lien and the right to enforce it did
not depend on the owners of the ship at the time
the damage occurred being personally liable for it,
but that it was sufficient if the owners had volun
tarily entrusted the control of the ship to charter-
ers or others.
The fact that a claim for necessaries furnished
in Canada is not enforceable by action in rem
unless the owner of the ship is personally liable is
not a reason under Canadian law, any more than
the fact that such a claim does not give rise to a
maritime lien, for not recognizing a foreign mari
time lien for necessaries as enforceable by action
in rem in the absence of liability in personam. The
limitations applicable to a mere statutory right in
rem are not in principle necessarily applicable to a
maritime lien. They are two different things. I am,
therefore, of the view that the issue is not deter
mined by the principle affirmed in The Armar,
assuming that case to have been correctly decided.
As for the question of jurisdiction to enforce a
maritime lien for necessaries by action in rem, I
think it must rest, in view of the decision in The
Strandhill, on the general terms of subsection
22(1) of the Federal Court Act, as completed by
the definition of "Canadian maritime law" in sec
tion 2 of the Act. These provisions read as follows:
22. (1) The Trial Division has concurrent original jurisdic
tion as well between subject and subject as otherwise, in all
cases in which a claim for relief is made or a remedy is sought
under or by virtue of Canadian maritime law or any other law
of Canada relating to any matter coming within the class of
subject of navigation and shipping, except to the extent that
jurisdiction has been otherwise specially assigned.
2....
"Canadian maritime law" means the law that was administered
by the Exchequer Court of Canada on its Admiralty side by
virtue of the Admiralty Act or any other statute, or that
would have been so administered if that Court had had, on
its Admiralty side, unlimited jurisdiction in relation to mari
time and admiralty matters, as that law has been altered by
this or any other Act of the Parliament of Canada;
Under these provisions the jurisdiction of the Fed
eral Court includes any jurisdiction in maritime
matters that was exercisable by the Exchequer
Court of Canada. In my view the jurisdiction to
enforce a maritime lien for necessaries must be
considered to be in addition to the jurisdiction
conferred by paragraph 22(2)(m) of the Act with
respect to a claim for necessaries that is unsecured
by maritime lien. Otherwise, the limitation
imposed by subsection 43(3) of the Act on the in
rem jurisdiction of the Court with respect to a
claim mentioned in paragraph 22(2)(m)—that it
shall not be exercised unless at the time of the
commencement of the action the ship is beneficial
ly owned by the person who was the beneficial
owner at the time when the cause of action arose—
would deprive the lien of one of its principal
effects. It was an implication, on the facts in The
Strandhill, that the Court assumed the lien to be
enforceable by action in rem despite a subsequent
transfer of ownership.
For these reasons I am of the opinion that an
action in rem will lie to enforce the maritime lien
in the present case. I would accordingly allow the
appeal, set aside the judgment of the Trial Divi
sion, and refer the matter back to the Trial Divi
sion for determination of the claim, the whole with
costs in this Court and in the Trial Division.
HEALD J.: I concur.
URIE J.: I concur.
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.