T-368-84
Federal Business Development Bank (Plaintiff)
v.
The Ship "Winder 4135", Eiger Booming Ltd.,
and Paul Arnold Beltgens (Defendants)
v.
Workers' Compensation Board of British
Columbia (Respondent)
INDEXED AS: FEDERAL BUSINESS DEVELOPMENT BANK V.
"WINDER 4135" (THE)
Trial Division, Walsh J.—Vancouver, April 9 and
11, 1984.
Maritime law — Liens and mortgages — Motion for order
determining priorities as to proceeds from sale of ship "Wind-
er 4135" — Plaintiff creditor of mortgage registered February
11, 1981, against vessel — Owner, Eiger Booming Ltd., regis
tered employer under B.C. Workers Compensation Act —
Respondent, Workers' Compensation Board, filing certificates
against defendant for unpaid assessments under Act — Vessel
seized August 31, 1981, pursuant to filing of certificates and
advertised for sale — Respondent seeking to confirm sale to
co-defendant Beltgens — Plaintiff seeking to prohibit dealing
with vessel pending realization of mortgage — Whether statu
tory provincial claim having priority over claim recognized
under Canadian maritime law — Issue never before addressed
in Canadian or English maritime law cases — No federal
statute governing priorities although recognized by Canadian
maritime law — Workers Compensation Act providing lien
having priority over other liens, charges or mortgages notwith
standing time of creation — Federal authority's failure to
enact statute establishing priorities not creating unoccupied
field permitting application of provincial law — Board having
no specific rights against vessel under seizure — Policy in U.S.
v. Flood adopted — Maritime claims attaching to vessel itself
as instrument of commerce rather than derived through owner
— U.S. caselaw establishing primacy of maritime liens over
secured non-maritime claims — Mortgage prevailing over
claim against employer — Federal Court Act, R.S.C. 1970
(2nd Supp.), c. 10, s. 22(2)(a) — Federal Court Rules, C.R.C.,
c. 663, R. 474 (as am. by SOR/79-57, s. 14) — Workers
Compensation Act, R.S.B.C. 1979, c. 437, ss. 45, 49, 52(1) —
Canada Shipping Act, R.S.C. 1970, c. S-9, s. 44.
Federal Court jurisdiction — Trial Division — Maritime
law — Priority between statutory provincial claim and mari
time claim as to distribution of proceeds from sale of vessel —
No federal statute setting out priorities but recognized as part
of Canadian maritime law — Federal Court having jurisdic
tion pursuant to Act s. 22 to adjudicate on questions of
admiralty law including proceeds from sale of ship — Priori
ties issue within scope of s. 22(2)(a) — Federal Court Act,
R.S.C. 1970 (2nd Supp.), c. 10, s. 22.
This is a motion for an order determining a question of
priorities, with respect to proceeds from the sale of the ship
Winder 4135, as between the Federal Business Development
Bank and the Workers' Compensation Board of British
Columbia. The plaintiff is the holder of a mortgage on the
vessel Winder 4135 granted by the defendant Eiger Booming
Ltd. The mortgage was registered February 11, 1981, and is
now in default. The respondent, Workers' Compensation
Board, filed certificates on November 17, 1980, and September
I1, 1981, for the balance owed by the defendant for assess
ments levied under section 45 of the Workers Compensation
Act. Pursuant to these filings, the vessel was seized August 31,
1981, and advertised for sale. Following the submission of a
bid, the respondent filed a motion in the County Court of
Vancouver Island seeking confirmation of the sale to the
co-defendant, Paul Arnold Beltgens. The plaintiff, wishing to
realize its mortgage, gave notice of its intention to apply for an
order, pursuant to section 44 of the Canada Shipping Act,
prohibiting any dealing with the vessel or any share therein
until further notice of the Court. This motion was adjourned,
both parties agreeing to submit the issue of priorities to the
Federal Court for adjudication.
Held, the claim of plaintiff, the Federal Business Develop
ment Bank, takes priority over that of the Workers' Compensa
tion Board.
The issue of priorities between a statutory claim and a
maritime claim has never been settled in a Canadian or English
maritime law case. Although no federal statute sets out priori
ties, their order is generally recognized as part of Canadian
maritime law. Jurisdiction is given to the Federal Court, pursu
ant to section 22 of the Federal Court Act, to adjudicate on
matters of admiralty law whether the source of law invoked be
statute, regulation or common law. It is by analogy with cases
dealing with the ranking of maritime claims that the issue can
be settled.
According to subsection 52(1) of the British Columbia
Workers Compensation Act, the lien on the vessel for the
unpaid assessments would have priority over any other liens,
charges or mortgages whenever created or to be created. How
ever, in Gilmore and Black, The Law of Admiralty, it is stated
that claims of a non-maritime nature are subordinate to all
maritime liens even when the governmental claim becomes
entitled to lien status prior to the maritime lien. The case of
U.S. v. Flood establishes that "the basis for the primacy of
maritime claims is that they `attach to the vessel itself as an
instrument of commerce' while other claims are derived only
through the owner". Furthermore, unlike the plaintiffs mort
gage, the respondent's lien is not registered against •the Winder
4135 and no specific right existed against the vessel until the
seizure was made. If priority were given to the respondent's
claim, the plaintiff would have no way of protecting itself
against unregistered statutory claims unknown to it.
The argument put forward by the respondent that the federal
government's failure to enact legislation establishing priorities
leads to the application of provincial law to the dispute, cannot
be sustained. In view of the fact that the order of priorities is
recognized by Canadian maritime law, Parliament's choice not
to legislate in this area does not create an unoccupied field
leading to the prior ranking of statutory provincial claims over
maritime claims. Plaintiffs mortgage prevails over the Work
ers' Compensation Board claim.
CASES JUDICIALLY CONSIDERED
APPLIED:
U.S. v. Flood, 247 F.2d 209 (1st Cir. 1957).
CONSIDERED:
Associated Metals & Minerals Corp. v. The "Evie W",
[1978] 2 F.C. 710 (C.A.); Aris Steamship Co. Inc. v.
Associated Metals & Minerals Corporation, [1980] 2
S.C.R. 322; Comeau's Sea Foods Ltd. v. The "Frank and
Troy", [1971] F.C. 556 (T.D.); W.C.B. v. Kinross Mtge.
Corp., [1982] 1 W.W.R. 87 (B.C.C.A.); Gulf Coast
Marine Ways v. The J.R. Hardee, 107 F.Supp. 379 (5th
Cir. 1952); U.S. v. Jane B. Corp., 167 F.Supp. 352 (1st
Cir. 1958); U.S. vs. "Cape Flattery I", 1972 A.M.C. 345
(W.D. Wash. 1972); Royal Bank of Canada v. Work-
men's Compensation Board of Nova Scotia, [1936]
S.C.R. 560; [1936] 4 D.L.R. 9; North West Ltfe Assur.
Co. of Can. v. Westridge Const. Ltd. (1980), 21 B.C.L.R.
235 (S.C.); Eastern and Chartered Trust Company and
Perry Nelson Holmes Limited et al. (British Columbia,
unreported judgment dated March 31, 1965); Workmen's
Compensation Board v. Sumas Oil & Gas Co., [ 1933] 2
W.W.R. 121 (B.C.C.A.).
REFERRED TO:
Triglav, Zavarovalna Skupnost, (Insurance Community
Triglav Ltd.) v. Terrasses Jewellers Inc. et al., [1983] 1
S.C.R. 283; Tropwood A.G. et al. v. Sivaco Wire & Nail
• Co. et al., [1979] 2 S.C.R. 157.
COUNSEL:
John W. Bromley for plaintiff.
No one appearing for defendants.
G. W. Massing for respondent.
SOLICITORS:
Ray, Connell, Lightbody, Reynolds & Heller,
Vancouver, for plaintiff.
G. W. Massing, Vancouver, for respondent.
The following are the reasons for order ren
dered in English by
WALSH J.: Upon motion dated the 6th day of
April, 1984 on behalf of the plaintiff for an order
"to determine the question of priorities between
the Federal Business Development Bank and
Workers' Compensation Board of British
Columbia, with respect to the proceeds of sale of
the Ship `Winder 4135' pursuant to Rule 474 of
the Federal Court Rules [C.R.C., c. 663 (as am.
by SOR/79-57, s. 14)]."
REASONS FOR ORDER
The facts on which this question'is to be decided
are as follows:
By order dated March 26, 1984, the Workers'
Compensation Board of British Columbia was
added as a party respondent to the plaintiffs claim
herein. The vessel Winder 4135 was placed under
arrest by this Court by proceedings commenced in
rem on February 20, 1984. No defence has been
filed in the action. Eiger Booming Ltd. is a regis
tered employer under Part I of the Workers Com
pensation Act' and was so registered on April 8,
1975, under the industrial classification of log
booming. It is as a result of this assessments under
the Act have been levied and there is a balance due
as follows:
Balance of 1977 assessments $1,955.34
Balance of 1980 assessments $1,350.00
Balance of 1981 assessments $1,620.23
Penalty assessments $1,537.55
Monthly penalty assessments $1,890.62
Total $8,353.74
On January 26, 1981 defendant Eiger Booming
Ltd. granted a mortgage in the sum of $13,000 on
the vessel as well as a chattel mortgage against
certain assets of said defendant in favour of plain
' R.S.B.C. 1979, c. 437.
tiff, the marine mortgage being registered in the
Registry of Shipping in Vancouver B.C. on Febru-
ary 11, 1981, which mortgage is now in default,
the amount due and owing being $12,992.76 with
interest at the rate of 18.25% from October 24,
1981.
The Workers' Compensation Board filed a cer
tificate on November 17, 1980, pursuant to section
45 of the Workers Compensation Act in the
County Court of Vancouver Island, Campbell
River Registry under Action No. 25180 in the
amount of $4,752.51, which certificate became an
order upon filing. A writ of seizure and sale was
issued on that date in the Campbell River Regis
try. On September 11, 1981, in the County Court
of Vancouver Island, Nanaimo Registry under
Action CC4022, another certificate was filed in
the amount of $3,601.23 as a result of which a writ
of seizure and sale was issued.
On or about August 31, 1981, the vessel was
seized by virtue of the judgment of November 17,
1980 and advertised for sale on January 18 and 19,
1982, and a bid was received from defendant Paul
Arnold Beltgens for said vessel in the amount of
$11,000. On January 30, 1984, the Workers' Com
pensation Board filed a notice of motion in the
County Court of Vancouver Island in the Camp-
bell River Registry seeking an order confirming
the sale of the vessel Winder 4135 to Mr. Beltgens.
On February 8, 1984, plaintiff commenced the
present proceedings in this Court to crystallize the
bank's marine mortgage and on February 20,
1984, gave notice that they would apply for an
order prohibiting any dealing with the vessel or
any share therein until further order of the Court
pursuant to section 44 of the Canada Shipping Act
[R.S.C. 1970, c. S-9]. This motion was adjourned
and on February 24, 1984 counsel for the Federal
Business Development Bank and the Workers'
Compensation Board agreed to have the issue of
priorities between the Bank and the Board resolved
by the Federal Court of Canada, as a result of
which agreement the vessel Winder 4135 was
released from arrest. On March 26, 1984 this
motion was granted on the following terms:
Granted on the understanding that both parties agree that
the question of priorities will be settled in the Court without
further reference to proceedings in the County Court of Van-
couver Island that the British Columbia Workers Compensa
tion Board which now has possession of the funds resulting
from the sale of the vessel pursuant to judgment of the said
County Court will pay over such funds or such portion thereof
as may be directed by judgment of this Court to the Federal
Business Development Bank without further litigation other
than by appeal and that both parties agree that the purchaser
of the vessel pursuant to the judgment of the County Court of
Vancouver Island has good title to same and that they will
agree to judgment being issued in the County Court of Vancou-
ver Island directing the Registrar of Shipping to effect said
transfer forthwith after final determination of the issue of
priority of claims against the proceeds of the sale; costs in the
event.
During argument on this motion for priorities,
plaintiff's counsel pointed out that as a result of
the agreement it would have no further claim
against the vessel by virtue of its mortgage once
title has been transferred to the purchaser, Paul
Arnold Beltgens, who would receive it free and
clear of the mortgage despite the fact that adver
tisements for sale in the County Court of Vancou-
ver Island make no mention of the vessel being
sold free and clear of all encumbrances, and that
had the sale been made in this Court following the
registration of plaintiff's mortgage, the sale would
not have had the effect of discharging the mort
gage, whatever the outcome of the determination
of the question of priorities, unless the said mort
gage were discharged in full. Under the circum
stances, and in view of this understanding, Mr.
Beltgens was not represented at the hearing,
having no interest in the manner in which the
$11,000 paid by him for the vessel was to be
distributed.
The issue is one which does not appear to have
been determined by any judgment rendered in a
maritime law case in this country or, for that
matter, in England, according to counsel for the
parties. There is no question as to the jurisdiction
of the Federal Court over any claim as to title,
possession or ownership of the vessel or any part
interest therein, or with respect to the proceeds of
the sale of the ship or any part interest therein,
pursuant to paragraph 22(2)(a) of the Federal
Court Act [R.S.C. 1970 (2nd Supp.), c. 10]. In the
case of Associated Metals & Minerals Corp. v.
The "Evie W", 2 Chief Justice Jackett, speaking
for the Federal Court of Appeal stated at page 716
that "the nature and history of admiralty is not
easy to define or relate." He goes on to refer to the
aspects of admiralty law which are obscure, and in
his view [at page 717] the better view is (inter
alia):
(c) that admiralty law and the various bodies of "provincial"
law concerning property and civil rights co-exist and overlap
and, in some cases at least, the result of litigation concerning
a dispute will differ depending on whether the one body of
law or the other is invoked; and
(d) that admiralty law is not part of the ordinary municipal
law of the various provinces of Canada and is subject to
being "repealed, abolished or altered" by the Parliament of
Canada.
This judgment was referred to in the case in the
Supreme Court of Canada of Triglav, Zavaroval-
na Skupnost, (Insurance Community Triglav Ltd.)
v. Terrasses Jewellers Inc. et al., [1983] 1 S.C.R.
283, at pages 300-302, which referred to the judg
ment of Ritchie J. in the Supreme Court in the
Evie W case, 3 in which at page 324 he states
[quoting from Tropwood A.G. et al. v. Sivaco
Wire & Nail Co. et al., [1979] 2 S.C.R. 157, at
page 161]:
What is important to notice is that the heads of jurisdiction
specified in s. 22(2) are nourished, so far as applicable law is
concerned, by the ambit of Canadian maritime law or any
other existing law of Canada relating to any matter coming
within the class of navigation and shipping.
In light of this judgment I am satisfied that Chief
Justice Jackett reached the correct conclusion as
to jurisdiction.
There is no federal statute setting out the priori
ties but the order of priorities is generally recog
nized as part of Canadian maritime law. There
does not appear to be any case, however, where the
question has been decided as to the priority to be
given to a claim resulting from a valid provincial
statute and its rank with respect to claims recog
nized under maritime law, so the issue can only be
settled by analogy to various cases dealing with the
ranking of maritime law claims. These were well
set out in the case of Comeau's Sea Foods Ltd. v.
2 [1978] 2 F.C. 710 (C.A.).
[sub nom. Aris Steamship Co. Inc. v. Associated Metals &
Minerals Corporation] [1980] 2 S.C.R. 322.
The "Frank and Troy", 4 in which at pages 557-
558 Keirstead D.J. stated as follows:
The liens which may attach to a ship, cargo or freight under
the principles of Admiralty law may be classified as:
1. Maritime Liens;
2. Possessory Liens;
3. Statutory Liens.
He then defines what enters into maritime liens
and possessory liens, neither of which can apply to
the claim of the Workers' Compensation Board of
British Columbia. At page 559, with respect to
statutory liens, he has this to say:
A statutory lien differs from a maritime lien in two respects:
(1) A statutory lien accrues only from the day of the arrest
and is subject to claims already subsisting against the res:
The Cella (1888) 13 P.D. 82; and
(2) A statutory lien is defeated by a bona fide transfer of the
property for value: The Henrich Bjorn (1886) 11 A.C. 270.
Statutory liens are postponed to all maritime liens, possesso-
ry liens, registered mortgages which are in existence at the time
the ship is arrested to enforce the statutory lien.
Even if the lien which the Workers' Compensa
tion Board of British Columbia claims, therefore,
resulting from the Workers Compensation Act of
British Columbia, is recognized as a valid lien
against the vessel, it would be postponed according
to this judgment to registered mortgages in exist
ence at the time the ship was arrested to enforce
this lien. In the present case, plaintiff's mortgage
was registered on February 11, 1981, subsequent
to the filing of the first certificate of the Workers'
Compensation Board on November 17, 1980 but
before the filing of the second certificate on Sep-
tember 11, 1981, and before the vessel was seized
on August 31, 1981 by virtue of the British
Columbia County Court judgment of November
17, 1980.
Section 45 of the British Columbia Workers
Compensation Act provides that when an assess
ment is not paid, the Board has a right of action
against the defaulting employer and_ the registra
tion of a certificate for the amount unpaid makes
such certificate an order of the court and may be
4 [1971] F.C. 556 (T.D.).
enforced as a judgment of the court against the
defaulting person for the amount mentioned in the
certificate. Subsection (1,) of section 52 of the Act
reads as follows:
52. (1) Notwithstanding anything contained in any other
Act, the amount due by an employer to the board, or where an
assignment has been made under subsection (4), its assignee, on
an assessment made under this Act, or in respect of an amount
which the employer is required to pay to the board under this
Act, or on a judgment for it, constitutes a lien in favour of the
board or its assignee payable in priority over all liens, charges
or mortgages of every person, whenever created or to be
created, with respect to the property or proceeds of property,
real, personal or mixed, used in or in connection with or
produced in or by the industry with respect to which the
employer was assessed or the amount became payable, except
ing liens for wages due to workers by their employer, and the
lien for the amount due the board or its assignee continues to
be valid and in force with respect to each assessment until the
expiration of 5 years from the end of the calendar year for
which the assessment was levied.
According to the British Columbia statute, there
fore, the lien of the Workers' Compensation Board
of British Columbia is payable in priority over all
other liens, charges or mortgages whenever created
or to be created, and since the ship in question was
property used in connection with the industry with
respect to which the employer was assessed, this
seems to apply in the present case. This does not,
of course, give the Board an action in rem against
the vessel such as is recognized in maritime law in
actions brought in the Federal Court. The vessel
was properly seized in the British Columbia courts
as an asset of the debtor in the same manner as
any other of the debtor's assets could have been
seized and were subject to the lien. The issue of
priority comes within the jurisdiction of this Court
for determination by virtue of paragraph (a) of
subsection (2) of section 22 of the Federal Court
Act as a claim with respect to proceeds of the sale
of a ship.
Some analogy is drawn by plaintiff to the case
of W.C.B. v. Kinross Mtge. Corp.,' in which it was
held that the lien of the Workers' Compensation
Board was of no effect because a statutory lien
created by provincial legislation ceased to be valid
and effective upon the debtor's bankruptcy. The
Board was not named as a secured creditor under
5 [1982] 1 W.W.R. 87 (B.C.C.A.).
section 107 of the Bankruptcy Act [R.S.C. 1970,
c. B-3] and hence did not rank in priority over the
first mortgage. The decision was based on the
Bankruptcy Act, however, and the Workers' Com
pensation Board contends that this distinguishes it
from the present case where there is no federal
statutory enactment setting out priority of claims
in connection whith the distribution of proceeds of
sale pursuant to paragraph 22(2)(a) of the Federal
Court Act.
Plaintiff also referred to a number of American
decisions and authorities. In Gilmore and Black, 6
at page 758 it is stated:
Since the early 1950's the lower federal courts have, without
exception, held, in the relatively few cases that have arisen, that
federal, state and local claims, being nonmaritime, are subordi
nate to all maritime liens (including the lien of a preferred ship
mortgage) whether the maritime liens arise before or after the
governmental claim becomes entitled to lien status or priority
under the relevant state or federal law. The agitation for
remedial legislation finally led to the Federal Tax Lien Act of
1966 (80 Stat. 1125 (1966), 26 U.S.C.A. § 6323 et seq.) which
was designed to give the holders of security interests and other
liens more protection against federal tax claims than they had
had under the Supreme Court doctrine. Congress, in drafting
the 1966 Act, could perfectly well have conferred maritime lien
status on tax claims against ships and shipowners. Since the
Act says nothing about such tax claims, the Congress may
reasonably be presumed to have accepted the case law consen
sus which had arisen under which the tax claims, being non-
maritime, were subordinated to all maritime liens.
This was based on various United States judg
ments, including Gulf Coast Marine Ways v. The
J.R. Hardee' in which we find at page 385:
The preferred "lien arising prior in time to the recording and
indorsement of a preferred mortgage" defined in subsection (a)
(1) above unquestionably means a maritime lien. Since the
Government's tax lien is non-maritime, I do not believe that it
has priority, even though notice is filed pursuant to a state
statute, over maritime liens in general, certainly not over the
preferred maritime liens created under the Ship Mortgage Act.
Congress has evidenced no clear intention to give it such status.
6 The Law of Admiralty, 2nd ed., p. 757.
7 107 F.Supp. 379 (5th Cir. 1952).
See also the case of U.S. v. Flood, 8 in which it is
stated at pages 211-212:
The government's lien for taxes is based upon the provision
of § 3670 of the Internal Revenue Code of 1939, 26 U.S.C.A. §
3670, reading as follows:
"If any person liable to pay any tax neglects or refuses to
pay the same after demand, the amount (including any
interest, penalty, additional amount, or addition to such tax,
together with any costs that may accrue in addition thereto)
shall be a lien in favor of the United States upon all property
and rights to property, whether real or personal, belonging to
such person."
Later, on page 212 we find the following
statement:
Throughout the long history of the general maritime law,
maritime liens have uniformly been given preference over
secured non-maritime claims of other kinds, both prior and
subsequent. See, e. g., The Favorite, D.C.D.Or.1875, 8
Fed.Cas. 1104, No. 4699 (subsequent mortgage); The J.E.
Rumbell, 1893, 148 U.S. 1, 13 S.Ct. 498, 37 L.Ed. 345 (prior
mortgage). The theoretical basis for the primacy of maritime
claims is that they "attach to the vessel itself as an instrument
of commerce," while other claims are derived only through the
owner.
Reference was also made to two United States
cases in which it was held that a tax claim was
outranked even if it antedated a maritime lien for
supplies.
In the case of the U.S. v. Jane B. Corp., 9 these
cases are referred to at page 356 in the statement:
statement:
A tax lien is given no priority by 26 U.S.C.A. § 3670. It is
clearly a non-maritime lien. United States v. Flood, supra.
Hence it is not entitled to priority over a subsequently recorded
preferred ship mortgage. Gulf Coast Marine Ways v. The J.R.
Hardee, D.C., 107 F.Supp. 379.
Reference was also made to the case of U.S.
vs. "Cape Flattery I", 1 ° in which at page 348 it is
stated:
The tax lien of Clallam County is non-maritime and, as such,
is not entitled to participate in the distribution of proceeds from
the sale of the Defendant vessel before payment of all known
and existing preferred maritime liens. United States vs. Flood,
1957 A. M. C. 1715, 247 F.(2d) 209, 211 (1 Cir., 1957); Gulf
Coast Marine Ways vs. J.R. Hardee, 1952 A. M. C. 1124, 107
F. Supp. 379, 384-385 (S.D. Tex., 1952)
8 247 F.2d 209 (1st Cir. 1957).
9 167 F.Supp. 352 (1st Cir. 1958).
10 1972 A.M.C. 345 (W.D. Wash. 1972).
In all of these cases the term "maritime lien"
seems to be used in a broader sense than that in
which it is used under our maritime law and
includes registered mortgages. Counsel for the
Workers' Compensation Board points out, how
ever, that the decision in these cases were based on
the fact that United States federal authority could
have legislated so as to give its tax claims priority
over ship's mortgages had it so desired, but had
failed to do so. In the present case, it is argued,
that federal authority could have passed a statute
enacting priority of maritime law claims against
the proceeds of the sale of a ship in the same
manner as it had enacted priorities in section 107
of the Bankruptcy Act, over which it also has
jurisdiction, but it failed to do so:
I find it difficult to conclude, however, that its
failure to do so created an unoccupied field, as it
were, and that therefore provincial law could be
applied in a dispute depending on whether the
provincial law concerning property and civil rights
(which co-exists with and overlaps the federal
admiralty law, as the judgment of Chief Justice
Jackett in the Evie W case (supra) suggests)
would have the result of ranking the claim of the
Board to a lien for the amounts due, at least prior
to the registration of plaintiff's mortgage, if not for
the entire amounts due, ahead of the claim of
plaintiff in the distribution of the proceeds of the
sale of the vessel.
In support of its position the Workers' Compen
sation Board also referred to extensive jurispru
dence. In the case of Royal Bank of Canada v.
Workmen's Compensation Board of Nova Scotia"
the issue was whether the respondent had the right
to levy on a quantity of hardwood flooring and
lumber in priority to the security held by the bank
by virtue of section 88 of the Bank Act [R.S.C.
1927, c. 12]. At page 563 S.C.R.; 12 D.L.R. the
judgment states:
" [1936] S.C.R. 560; [1936] 4 D.L.R. 9.
While we have no doubt that the provisions of s. 88 of the
Bank Act are provisions which strictly relate to banking, and
are therefore within the competency of the Dominion Parlia
ment under s. 91(15) B.N.A. Act, we are of opinion that in
enacting them Parliament did not intend to remove any prop
erty, which might be assigned to a bank by way of security
thereunder, from the operation of any statute enacted by the
legislature of the province, in which the property is situated, in
the legitimate exercise of its power in relation to direct taxation
for provincial purposes under s. 92(2) B.N.A. Act.
At pages 564-565 S.C.R.; 13 D.L.R. it is stated:
Section 88 of the Bank Act itself creates no lien, though it
provides that a bank may lend money to dealers in certain
products upon the security of such products in a form set forth
in schedule (c), and that by virtue of such security the bank
shall acquire the same rights and powers in respect of such
products as if it had acquired the same by virtue of a warehouse
receipt. No lien results except by agreement between the bank
and its customer. Section 79(2) of the provincial Workmen's
Compensation Act itself directly creates a lien for a public tax
or charge. There is, therefore, no conflict between the federal
and provincial statutes on the face of the enactments them
selves, and no conflict in their operation, as disclosed in this
case, unless it be that s. 88 of the Bank Act contemplates that
no property assigned to a bank under its provisions shall be
subject to provincial taxation under 92(2) of the B.N.A. Act.
We think that such is not the intendment of the federal
enactment and that the provincial enactment must therefore
prevail.
I have some doubt as to the relevancy of this,
however, as section 88 of the Bank Act does not
dispossess a company from possession of or use of
the property nor would it prevent a lien being
created on it as is the case for workers' compensa
tion dues. In the present case it would appear that
it is not the ship which is liable for the workers'
compensation claim, but rather the owners of it,
the ship being only one part of their property
subject to a lien, along with other property of the
owners.
Reference was also made to some cases where
no ship was involved. In the case of North West
Life Assur. Co. of Can. v. Westridge Const. Ltd.,"
it was held that the provisions of section 49 of the
Workers Compensation Act creating a lien on an
employer's real property give that lien priority over
previously registered mortgages.
12 (1980), 21 B.C.L.R. 235 (S.C.).
Reference was made to an apparently unreport-
ed case in British Columbia of Mr. Justice Dryer
in the case of Eastern and Chartered Trust Com
pany and Perry Nelson Holmes Limited et al., a
judgment dated March 31, 1965, on the issue of
whether the plaintiff mortgagee had priority over
the interest of the Workers' Compensation Board.
It was held that it did not and also that the Board
did not have to elect between execution of judg
ment and assertion of the lien, the two being
separate remedies.
Counsel for the Board also referred to the case
of Workmen's Compensation Board v. Sumas Oil
& Gas Co., 13 in which the British Columbia Court
of Appeal held that a claim of the Workmen's
Compensation Board prevailed over a claim of a
prior mortgagee. Chief Justice Macdonald said at
page 123, in reference to what was then section 46
of the Act:
By its terms it gives the debtor of the appellant priority over all
"liens, charges, or mortgages" affecting the property in ques
tion "whenever created or to be created" except wages due to
workmen, and this notwithstanding any Act to the contrary. If,
therefore, the appellant has a charge upon the property seized
by the sheriff, sec. 46 expressly declares that that charge shall
have priority over a mortgage whenever created, that is to say,
whether prior or subsequent to the mortgage. To put it shortly
the appellants' lien takes priority of the respondent's mortgage.
The appellants here are seeking to enforce their right by
execution, and the mortgagees are seeking to prevent them so
doing. No doubt they are owners of the property by reason of
their mortgage from the debtor, but if the appellant has by its
execution a lien or charge upon the property, as I think it has,
that lien or charge is entitled to priority over the mortgage by
reason of the said section. The Legislature can make that the
law which formerly was not the law, and may destroy vested
rights both at law and in equity if it expresses its intention so to
do.
and again,
There is, therefore, nothing in the way of appellant in enforcing
its lien or charge which in equity and without the assistance of
sec. 46 it would not have, but in view of sec. 46 it has priority
not in the equity of redemption but in the property seized. The
Legislature had power to give them the whole property and I
think meant to do so as security for their lien.
Here again this case dealt solely with British
Columbia property law, no ship mortgage being
involved, so it is not really in point.
13 [1933] 2 W.W.R. 121 (B.C.C.A.).
Counsel for the Board also referred to Volume
14 of the British Shipping Laws, dealing with the
maritime liens, No. 418, in which it is stated:
"There has to date been no attempt by the legisla
ture, beyond giving a statutory priority to the
maritime lien of the life salvor to lay down a
precise scheme of priorities. Nor has the judiciary
been attracted by such an approach. On the con
trary, the Admiralty and Appellate Courts have
adopted a broad discretionary approach with rival
claims ranked by reference to considerations of
equity, public policy and commercial expediency,
with the ultimate aim of doing that which is just in
the circumstance of each case."
It is of interest to note however No. 454 under
the heading "Execution creditor":
An execution creditor who causes property of a judgment
debtor to be seized by a sheriff under a writ of fi. fa. or other
similar process stands in the position of a secured creditor, i.e.
he has the legal right to have the goods sold and to have the
judgment satisfied out of the proceeds of sale. The possession
by a sheriff does not preclude an arrest by the Admiralty
Marshal but as with the case of a possessory lienee the court
will thereafter protect both the interest and priority of the
execution creditor. The arrest in Admiralty therefore does not
deprive the execution creditor of his security.
An execution creditor can only take in execution that which
belongs to the judgment debtor. Where a prior charge exists,
such as a maritime or statutory lien, or a mortgage, the
execution creditor can only take the property subject to these
incumbrances. Liens and charges which attach subsequent to
the sheriffs seizure are however subordinate to the security of
the execution creditor.
In the present case, although the first writ of
seizure in the provincial court was issued on
November 17, 1980, it was not until August 31,
1981 that the vessel was seized and by this time
the plaintiff's mortgage had been registered
against it on February 11, 1981, so if priority was
the issue, plaintiff's claim would prevail in any
event. While the Workers' Compensation Board
has the right, as previously stated, to seize the
vessel as part of the property of defendant Eiger
Booming Ltd., its debtor, it had no specific rights
against the vessel until this seizure was made. The
lien which it had under the Workers Compensa-
tion Act was not one which was registered against
the vessel, unlike the ship's mortgage granted by
plaintiff. Whether the lien could have been or not
is not in issue before the Court since there was no
such registration.
As counsel for the Board points out there may
be many claims against a ship which do not appear
in the Register but this does not affect their validi
ty. As a result, in recent years the Federal Court
has taken the position that in advertisements for
sale and in the sale, no guarantee is given by the
Court that the purchaser takes the vessel free and
clear of all charges other than those which appear
in the Register of Shipping. The advertisements
for sale in the present case did not indicate the
vessel was being sold free and clear of any encum
brances. On the facts of the present case, it is
conceded that the purchaser, Paul Arnold Belt-
gens, was not unaware of the claim of the Work
ers' Compensation Board nor most likely that the
vessel was used in log booming operations and the
owners would be subject to pay workers' compen
sation assessments, but generally speaking this
would not be the case, and the purchaser would be
unaware of any such possible claim. The same
situation applies to the plaintiff, the mortgage
lender. Such a lender, generally speaking, making
such a loan in good faith, has no way of protecting
itself against unregistered claims of which it has
no knowledge. I agree with the statement in the
American case of Flood (supra) that "the
theoretical basis for the primacy of maritime
claims is that they `attach to the vessel itself as an
instrument of commerce' while other claims are
derived only through the owner." I believe this is
the policy which should be adopted and that,
therefore, the claim of plaintiff by virtue of its
registered mortgage must prevail over that of the
Workers' Compensation Board of British
Columbia arising from its claim against the ship's
owner for workers' compensation assessments. The
proceeds of the sale of the ship should be distribut
ed accordingly, with costs in favour of plaintiff.
ORDER
The claim of plaintiff, the Federal Business
Development Bank, takes priority over that of the
Workers' Compensation Board of British
Columbia with respect to the proceeds of sale of
the Ship Winder 4135.
With costs against the Workers' Compensation
Board of British Columbia.
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.