T-196-86
Fairway Life & Marine Insurance Limited, also
doing business under the name of Fairway Insur
ance Services (Plaintiff)
v.
The Fishing Vessel Susan Darlene and its owners,
charterers, and all others interested in her includ
ing Savories Fisheries Ltd. (Defendants)
INDEXED AS: FAIRWAY LIFE & MARINE INSURANCE LTD. V.
SUSAN DARLENE (THE)
Trial Division, Giles A.S.P.—Toronto, June 17,
1986.
Federal Court jurisdiction — Trial Division — Action in
rem against vessel for insurance premiums — Court having
jurisdiction — Federal Court Act, s. 42 continuing in force
Canadian maritime law existing prior to June 1, 1971 —
Discussion of origins of Canadian maritime law — In Lower
Canada, matters of marine insurance decided by maritime law
— 1866 codification providing for privilege upon vessels for
insurance premiums — If privilege existing for premium of
insurance in maritime law, insurance premium obligation
which can be subject of action in rem — Federal Court Act,
R.S.C. 1970 (2nd Supp.), c. 10, ss. 2, 22(2)(r), 42, 43(2) —
Civil Code of Lower Canada, art. 2383.
Maritime law — Insurance — Whether action in rem for
unpaid insurance premiums — Federal Court Act, ss. 22(2)(r)
and 43(2) not conclusive — Discussion of origins of Canadian
maritime law — 1866 Civil Code of Quebec referred to as
statement of pre-existing maritime law — Art. 2383 provid
ing for privilege upon vessels for payment of insurance premi
ums — Insurance premium can be subject of action in rem —
Broker, which was personally responsible for payment of pre
miums arranged with insurer, entitled to bring action in rem
— Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, ss. 2,
22(2)(r), 42, 43(2) — Civil Code of Lower Canada, art. 2383.
This is a motion for default judgment in an action in rem
against a fishing vessel. The claim is for premiums payable on
an insurance policy. The issues are whether the Court has
jurisdiction to hear this matter, and whether there is a right to
sue in rem.
Held, the motion should be allowed.
Although paragraph 22(2)(r) of the Federal Court Act,
which provides jurisdiction in respect of any claim arising out
of a contract of marine insurance, may confirm the jurisdiction
of the Court with respect to the present claim, it does not
necessarily indicate a right to bring suit in rem. Nor does
subsection 43(2) definitively answer the question. It provides
that the jurisdiction conferred on the Court by section 22 may
be exercised in rem against the ship that is the subject of the
action, but a question arises as to whether the ship is the
subject of the action. The action appears to be for repayment of
monies advanced.
Section 42 continues in force the Canadian maritime law
which existed prior to June 1, 1971. Section 2 defines Canadian
maritime law as the law that was administered by the Excheq
uer Court of Canada on its Admiralty side. The problem is to
discover what the maritime law with respect to insurance was,
and is, in Canada. When the Colonial Courts of Admiralty
commenced exercising jurisdiction in the colonies they exer
cised the jurisdiction exercised by the Admiralty Court in
England. In those colonies where the common law of England
was in effect, matters involving marine insurance would be
decided by common law, as was the practice in England. In
those colonies where the common law was not in effect, matters
of marine insurance would not have been decided by common
law. In Lower Canada, matters of marine insurance were
decided by maritime law. Maritime law was included in the
codification of 1866 which contained an article respecting
marine insurance. The Code should be referred to because it is
a statement of the pre-existing maritime law. Article 2383
provided that there was a privilege upon vessels for payment of
insurance premiums for the last voyage. 1f a privilege exists for
a premium of insurance in maritime law, an insurance premium
is an obligation which by its nature can be the subject of an
action in rem.
A question remains as to who has a right to bring an action
in rem. The claim is made by the broker, the agent of the
insured. The broker was personally obligated to pay the insurer
premiums in respect of all insurance it has arranged. It is
therefore entitled to the insurer's right to bring an action in rem
for the premiums.
CASES JUDICIALLY CONSIDERED
CONSIDERED:
Sailing Ship "Blairmore" Company Limited and others
v. Macredie, [1898] A.C. 593 (H.L.); DeLovio v. Boit et
al., 7 Fed. Cas. 418 (Mass. 1815) (No. 3776); Provincial
Insurance Company v. Joel Léduc (1874), L.R. 6 P.C.
224; Smith v. Robertson (1814), 2 Dow 474; 3 E.R. 936
(H.L.).
COUNSEL:
Tosh Hayashi for plaintiff.
No one appearing for defendants.
SOLICITOR:
Metcalf, Holm, Halifax, for plaintiff.
No one appearing for defendants.
The following are the reasons for judgment
rendered in English by
GILES A.S.P.: The motion before me is for
judgment in default of defence in an action in rem
against the fishing vessel Susan Darlene. The
plaintiff is a marine insurance broker and the
claim is for premiums payable on an insurance
policy on the Susan Darlene. It is alleged that the
premiums were paid by the broker to the under
writers who were various underwriters at Lloyd's
of London. It is further alleged that the premiums
together with a service charge and survey fee were
to be paid to the broker in installments which if
not paid were to bear interest at 2% a month or
24% a year.
This motion originally came before me in March
of this year, at which time I declined to dispose of
it because the amounts claimed for interest could
not be justified by the allegations in the statement
of claim. At a later date I directed the Registry to
advise counsel that I would appreciate representa
tions as to the jurisdiction of this Court and,
should that matter be resolved, as to the existence
of a right to sue in rem. Subsequently, counsel
directed my attention to paragraph 22(2)(r) of the
Federal Court Act [R.S.C. 1970 (2nd Supp.), c.
10] which provides jurisdiction in respect of "any
claim arising out of or in connection with a con
tract of marine insurance".
That paragraph may provide or confirm the
jurisdiction of this Court with respect to the
present claim but the mere grant or confirmation
of jurisdiction under paragraph 22(2)(r) would not
necessarily indicate a right to bring suit in rem for
unpaid premiums against the vessel insured. Coun
sel also directed my attention to subsection 43(2)
of the Federal Court Act which provides in part
that "Subject to subsection (3), the jurisdiction
conferred on the Court by section 22 may be
exercised in rem against the ship ... that is the
subject of the action ...."
The above quoted section does not answer the
problem but merely raises another, namely is the
ship the "subject of the action"? The action
appears on the face of it to be for the repayment of
monies paid by a broker to an insurer for insur
ance premiums payable in respect of a policy of
insurance. That is to say for repayment of monies
advanced. I do not consider that subsection 43(2)
definitively determines whether or not an action in
rem exists with regard to unpaid insurance
premiums.
Section 42 of the Federal Court Act continues
in force the Canadian maritime law which existed
prior to the 1st day of June 1971. It is to be noted
that what is continued by that section is the
Canadian maritime law not the Admiralty juris
diction. Section 22 provides jurisdiction where a
claim is made by virtue of Canadian maritime law.
Canadian maritime law is defined in section 2 of
the Federal Court Act as "the law that was admin
istered 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 Admi
ralty side, unlimited jurisdiction in relation to
maritime and admiralty matters, as that law has
been altered by this or any other Act of the
Parliament of Canada". I take the reference to
unlimited jurisdiction to refer to the fact that
access to the Admiralty Courts in England was for
many years limited in practice by the Common
Law Courts and various statutes of the reigns of
Richard II and Henry IV where, as in the case of
insurance, the Common Law Courts took effective
jurisdiction. The law they administered was the
common law and not maritime law. What then is
the maritime law of Canada which is administered
by the Federal Court on its Admiralty side, and
where is it to be found?
The maritime law of Canada has its origins in
the maritime law of England and with respect to
those matters to which maritime law was applied
in England the law can be to a large extent
determined by reference to the reported decisions
of the English courts. Marine insurance was a
matter to which the English courts applied
common law and not maritime law. It is necessary
to look to some source other than the recent
decisions of English courts to assertain the mari
time law.
I note that maritime law was not repealed in
England with regard to those matters to which the
courts applied common law. The fact was that
access to the Admiralty and to the right to have
cases decided by maritime law was denied. That
maritime law existed in England with regard to
marine insurance is shown by the fact that insur
ance was mentioned in the patent appointing the
last Judge of the Admiralty, The Right Honour
able Sir Robert Phillimore, as being a matter over
which he had jurisdiction.
Lord Watson pointed out in a speech to the
House of Lords, which was considering the case of
Sailing Ship "Blairmore" Company Limited and
others v. Macredie, [ 1898] A.C. 593, that in Scot-
land the Admiralty Court continued to exercise
the jurisdiction with regard to marine insurance
until Victorian times and that the law which was
administered in that Court was maritime law.
Unfortunately no Scottish case has been directed
to my attention which indicates whether or not an
action existed in rem for the unpaid premiums for
marine insurance. A review of the early English
maritime law is to be found in the case DeLovio v.
Boit et al., 7 Fed. Cas. 418 (Mass. 1815) (No.
3776). This case was decided by Story J. in Mas-
sachusetts in 1815 and reviews the early history of
English maritime law and the dispute between the
common lawyers and the maritime lawyers. This
case itself was one in which it was found that there
was admiralty jurisdiction in matters of marine
insurance. From the DeLovio case it is apparent
that English maritime law originated in the Laws
of Oleron. These are said to have been written on
the order of Eleanor of Aquitaine and brought to
England variously by her son Richard I or various
other sovereigns to and including Edward III. It is
to be noted that the enactment of Edward III did
not enact the Laws of Oleron but gave the English
Admiralty the jurisdiction and instructions to
enforce the Laws of Oleron. An inspection of the
Laws of Oleron in the edition of the Black Book of
Admiralty prepared by Sir Travis Twiss indicates
that the Laws of Oleron were not a code of laws
but a collection of decisions made in various cases.
From the same book it is apparent that the Purple
Book of Bruges also consisted of a collection of
decisions, possibly the same decisions as those of
Oleron. The maritime laws of the various Baltic
cities, also reproduced in the Black Book, also are,
for a large part, reproductions of judgments. From
this it is apparent that maritime law and particu
larly the maritime law of England was not an
unchanging code but was a developing system of
law. That the maritime law of England was
undoubtedly related to that of other countries is
borne out by the dicta of Lord Watson in the case
of Sailing Ship "Blairmore" Company Limited
and others [supra] where, at page 606, he said
that he would have been unwilling to decide a
point of maritime law upon which there were no
recent Scottish cases without argument going
beyond the English and Scottish cases and
"embracing the rationes which have governed the
practice and decisions of other countries which
have not adopted the English rule". The problem is
to discover what the maritime law with respect to
insurance was, and is, in Canada. I note that when
the Colonial Courts of Admiralty commenced
exercising jurisdiction in various colonies they
exercised the jurisdiction in fact exercised by the
Admiralty Court in England. In those colonies
where the common law of England was in effect,
matters involving marine insurance would be
decided by common law. In those colonies where
the common law was not in effect, matters of
marine insurance would not have been decided by
common law.
In Lower Canada matters of marine insurance
appear to have been decided by maritime law
which law is said to have been based on the laws in
Bordeaux, in turn based on the Laws of Oleron. It
would therefore seem possible that by reference to
the laws concerning marine insurance in Lower
Canada one could ascertain the development of
maritime law at that time. The maritime law of
Lower Canada was codified at the time that the
other laws of Lower Canada were codified. The
Civil Code of 1866 contains an article which
makes provisions respecting marine insurance.
While the Code enacted as law its various provi-
sions it is not for that reason that it should be
referred to. The Code should be referred to
because it in fact is a statement of the pre-existing
maritime law and possibly the most authoritative
statement as to the maritime law at the time of the
writing of the Civil Code. The Judicial Committee
of the Privy Council appears to have considered
the Civil Code of Quebec or Lower Canada to
have been definitive of the maritime law of marine
insurance with regard to the matter of abandon
ment in 1874 when it decided the case, Provincial
Insurance Company v. Joel Léduc (1874), L.R. 6
P.C. 224. That case concerned the loss of a vessel
insured on the 3rd of January 1867 lost some time
in December 1867 and subsequently driven ashore.
The matter of salvage was adjudicated in the
Court of Admiralty at Quebec but the matter of
interpretation of a marine insurance policy was
adjudicated in the Superior Court of the Province
of Quebec. From there appeals were taken to the
Court of Queen's Bench of the Province of Quebec
and thence to the Privy Council. That case, which,
as previously noted, involved abandonment was
decided on the basis of the articles concerning
abandonment in the Civil Code. In construing
article 2549 their Lordships referred to Smith v.
Robertson (1814), 2 Dow 474; 3 E.R. 936 (H.L.)
a Scottish case in which the maritime law in
Scotland was applied. It is quite apparent that the
law with regard to marine insurance which was
applied where the common law did not apply, was
the local maritime law. It is apparent also that the
Privy Council considered that the Civil Code set
forth the maritime law with regard to abandon
ment in marine insurance policy matters. Article
2383 of the 1866 Code provided in part "There is
a privilege upon vessels for the payment of the
following debts: ... 7. Premiums of insurance
upon the ship for the last voyage ...."
If at that time, there was a privilege for insur
ance premiums for the last voyage, I take it that
without question there was a right to an action in
rem for such premiums. The term of the insurance
policy in this case is defined by reference to date
rather than duration of a voyage.
The French Code de Commerce, from which in
some considerable degree the Civil Code of Lower
Canada, was derived, appears in Petite Collection
Dalloz, 12th Ed., Paris, Librairie Dalloz, 1913.
That edition indicates that in the law "décrété" on
15th September 1807 and promulgated on the
25th of that month, article 191 of the 2nd Book of
that Code indicates that there is a privilege for
premiums of insurance for the last voyage. Foot
note 4 of that edition reads:
[TRANSLATION] 4. The lien conferred on insurers by Art
191-10e C Corn for the insurance premium on a ship shall
apply only to the part of the premium pertaining to the last
voyage, that is, for the period between the last fitting out and
laying up of the ship; and this shall be the case even when the
insurance was obtained for a definite period during which the
ship made several voyages.
That modern commentary indicates that the
privilege was limited to that portion of the premi
um which could be attributed to the last voyage
where the premium itself applied to a policy writ
ten for a longer term. However, the purpose of
referring to this Code is not to determine whether
or to what extent a right to a lien or privilege
existed in maritime law but whether a right to
bring an action in rem for premiums generally
existed.
A commentary in 1766 (Nouveau Commentaire
sur L'Ordonnance de la Marine du Mois d'Août
1681) by M. René-Josué Valin, Procureur du Roi
of the Admiralty Court of La Rochelle upon the
ancient ordinances of France and the usages and
customs of the sea indicates, at page 363, that the
privilege for insurance premiums was not men
tioned in that Code because the assumption was
that the premium would be paid in cash when the
policy was signed. The learned author indicates
that although that is the case the insurer would
without difficulty have a privilege on the ship for
the payment of the premium. On page 364 he
indicates that other matters are decided by the
article of the Code [TRANSLATION] "in accord
ance with the ordinary law governing the priority
ranking of liens as determined by the origin of the
debt". (I take the phrase "droit commun" not to
refer to the common law of England but to the
maritime law which existed before that Code.)
If, as is evident, a privilege, which is a type of
priority ranking, exists for a premium or a part of
a premium of insurance in maritime law, it is
apparent that an insurance premium is an obliga-
tion which by its nature can be the subject of an
action in rem.
The next matter to be determined, is who has
the right to bring the action in rem? The insurer
without doubt has such a right. In this case the
claim is made by the broker who is not the agent
of the insurer but is the agent of the insured.
It has been held that a volunteer who pays a
seaman's wages is not entitled to step into the
shoes of the seaman and enjoy the seaman's lien
for wages. However, I take notice of the fact
referred to in many places that a broker arranging
insurance with the underwriters at Lloyd's is per
sonally obliged to pay the insurer premiums for all
insurance that the broker has arranged whether or
not the insured pays the broker. A broker paying
premiums is therefore not a volunteer and I find
entitled to the insurer's right to bring an action in
rem for the premiums.
The plaintiff not having justified the sums
claimed for interest and having waived any right to
them, I do not have to consider any contractual
right to interest. This judgment being given under
the Admiralty jurisdiction of the Court, the plain
tiff is entitled to interest from the date the various
sums became due. Because no evidence is before
me as to the rate at which such interest should be
calculated, it will be calculated at 5% per annum
from the dates that the various sums became due
until the date of judgment.
The statement of claim indicates that the sum of
$2,325 became due on the 25th of July 1985 and a
similar sum became due on the 25th of August
1985 and that neither sum was paid. There is
therefore due at this date the sum of $4,650 being
the amounts overdue and $199.69 for interest
thereon. Judgment will be signed for $4,849.69
with interest after judgment at 5% per annum and
costs to be taxed.
JUDGMENT
THIS COURT DOTH ORDER AND ADJUDGE that
the said plaintiff recover from the defendant ship
Susan Darlene the sum of four thousand eight
hundred and forty-nine dollars and sixty-nine cents
($4,849.69), with interest at the rate of five per
cent (5%) from the date of judgment, pursuant to
section 3 of the Interest Act, R.S.C. 1970, c. I-18,
and the plaintiff's costs of the action to be taxed.
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.