Date: 19990728
Docket: T-111-98
BETWEEN:
FRASER SHIPYARD AND INDUSTRIAL CENTRE LTD.
Plaintiffs
AND:
EXPEDIENT MARITIME COMPANY LIMITED,
EXPEDIENT MARITIME CO. (CYPRESS) LTD., INTERNATIONAL COFFEE
AND FERTILIZER TRADING CO. (INCOFE), MERMAID SHIPPING CO. LTD.,
and the owners and all others interested in the ship "ATLANTIS TWO"
Defendants
AND:
OFFICERS AND CREW OF THE SHIP "ATLANTIS TWO",
LLOYD'S REGISTER OF SHIPPING, and
THE ABN-AMRO BANK N.V.
Intervenors
REASONS FOR ORDER
ROULEAU J.
[1] This is an appeal of the Order of Prothonotary Hargrave dated June 11, 1999 which order dealt with the priorities of in rem claimants to the sale proceeds of the Atlantis Two a vessel which had been arrested in January of 1998 and sold by a Court order in August of 1998.
[2] The decision itself is some 85 pages long divided into 212 paragraphs; it dealt with various in rem claimants, the establishment and the ranking of their priorities. The only party appealing the decision is Mega Marine Services Ltd. whose maritime lien was denied and the reasons dealing with their claim are outlined in paragraphs 78 to 82 inclusively.
| [78] The claim of Mega Marine Services Ltd. ("Mega Marine") is for the price of two engine cylinder heads, invoices as supplied to the Atlantis Two, F.O.B. Houston, Texas, in September and December of 1997. The invoices, of roughly equal size, total $41,577. Each contains a substantial item for freight. It appears that one cylinder head went to Australia and the other to Vancouver. From the reference to freight and from the shipping directions on the invoice, F.O.B. Houston, it is clear that neither cylinder head was supplied directly to a ship. |
| [79] Counsel for Mega Marine characterizes the transaction as one in which goods were delivered in the United States, ie. F.O.B. Houston. The difficulty is in determining whether an American maritime lien arises at all. In this instance the invoices are addressed to "Master of M/V Atlantis Two and or Owners c/o Off-Shore Oil Services (UK) Ltd.", of London, England. There is nothing in the material to show the cylinder heads were in fact delivered to the Atlantis Two, but rather merely the F.O.B. Houston direction: the Atlantis Two was not at Houston. |
| [80] There is a requirement, under American law, that necessaries must be furnished to a ship. The requirement does not mean, for example, that putting bunkers aboard a third party's barge and then delivering them to a ship in an American port insulates a ship from a maritime lien merely because a middleman was involved. Rather, this American rule, of having to actually furnish the necessary to the ship, is based upon the wording of section 971 of the Unites States Code, requiring necessaries to be furnished to a vessel, wording which has not changed appreciably in its current version. This is summed up in Tetley on Maritime Liens and Claims (supra) at page 595: |
| Section 971 used the phrase "furnishing ... to any vessel", which meant that the goods or services must have actually been furnished to a vessel, if not a specific vessel. In the leading case of Piedmont Coal v. Seaboard Fisheries, (1920), 254 U.S. 1 at page 8, the U.S. Supreme Court ruled that coal, delivered to bins on shore owned by the owner of several ships, was not "necessaries". The coal was to be distributed to those ships and in fact some or all of it was eventually loaded on board. Yet this did not comply with the term "furnishing to any vessel", because the necessaries men were furnishing coal to the shipowner, and not directly to the ships. |
| Piedmont Coal, referred to by Mr. Tetley, is still good law: see for example Foss Launch & Tug v. Char Ching Shipping USA, [1987] A.M.C. 913. |
| [81] In the present instance there is no evidence that the cylinder heads were furnished to the Atlantis Two. The matter falls outside of those cases involving a middleman, such as a bunker barge operator, delivering the bunker supplier's fuel in which case the supplier of the fuel does in fact have a maritime lien against the ship receiving the fuel. Rather the situation is closer to that described in Piedmont Coal. Mega Marine, by selling F.O.B. Houston, did not itself, or by an agent, furnish the cylinder heads directly to the Atlantis Two. Mega Marine may have some in personam right, but has not proven a maritime lien against the Atlantis Two. Mega Marine will not share in the sale proceeds. |
| [82] Having determined that there is no maritime lien I do not have to consider, in the context of Mega Marine, whether necessaries delivered by an American supplier to a ship which is in an off-shore port gives rise to a maritime lien, however that is one of the issues which arises in the claim of Unitor ASA, to which I will now turn. |
| [my underlining] |
[3] Counsel for Mega Marine alleges in argument that the Prothonotary erred in finding that "there is nothing in the material to show the cylinder heads were in fact delivered to the Atlantis Two" and that his reliance upon foreign law for the proposition that goods have to be supplied "directly" to a ship was not a proper interpretation of the prevailing jurisprudence.
[4] This appeal was challenged by the ABN-AMRO BANK N.V. who are mortgagees of the vessel and are owed a considerable sum; should the Court find that this appellant was entitled to a maritime lien as a necessaries man, the residual amount to which it is entitled would be further reduced.
[5] The first issue that I must determine is the appropriate standard of review applicable. The leading case dealing with such principles are dealt with in great detail by the Federal Court of Appeal in Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425 at 463, 149 N.R. 273, [1993] 1 C.T.C. 186, 93 D.T.D. 5080:
| ... as to the standard of review to be applied by a motions judge to a discretionary decision of a prothonotary. Following in particular Lord Wright in Evans v. Bartlam, [1937] A.C. 473 (H.L.), at 484, and Lacourcière J.A., in Stoicevski v. Casement (1983), 43 O.R. (2d) 436 (Div. Ct.), discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge unless: |
| (a) they are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts, or |
| (b) they raise questions vital to the final issues of the case. |
| Where such discretionary orders are clearly wrong in that the prothonotary has fallen into error of law (a concept in which I include a discretion based upon a wrong principle or upon a misapprehension of the facts), or where they raise questions vital to the final issue of the case, a judge ought to exercise his own discretion de novo. |
[6] Counsel for the appellant suggests that there may have been both a misapprehension of the facts as well as exercise of discretion in interpretation of U.S. law based on a wrong principle.
[7] The U.S. Commercial Instruments and Maritime Liens Act1 provides as follows:
| Persons presumed to have authority to procure necessaries |
| (a) The following persons are presumed to have authority to procure necessaries for a vessel: |
| (1) the owner; |
| (2) the master; |
| (3) a person entrusted with the management of the vessel at the port of supply; or |
| (4) an officer or agent appointed by -- |
| (A) the owner; |
| (B) a charterer; |
| (C) an owner pro hac vice; or |
| (D) an agreed buyer in possession of the vessel. |
| Establishing maritime liens |
| (a) Except as provided in subsection (b) of this section, a person providing necessaries to a vessel on the order of the owner or a person authorized by the owner -- |
| (1) has a maritime lien on the vessel; |
| (2) may bring a civil action in rem to enforce the lien; and |
| (3) is not required to allege or prove in the action that credit was given to the vessel. |
| (b) This section does not apply to a public vessel. |
| [my underlining] |
[8] A review of the affidavits filed by U.S. attorney"s and which were furnished as opinion and expertise in the proceeding are revealing in that they all express opinions as to how a maritime lien arises under U.S. law; they also assert that even if a necessary is provided to a vessel in foreign waters, it does not defeat the maritime lien; none, however, expressed an opinion as to what "providing necessaries to a vessel" means and what one must prove to satisfy the requirement giving rise to a lien.
[9] The learned Prothonotary wrote in his Reasons for Order that there is nothing in the material to show that the cylinder heads were in fact delivered to the vessel, though he does state "it appears that one cylinder head went to Australia and the other to Vancouver." However, the appellant pointed out that he may have overlooked shipping instructions appearing on the upper right hand side of the invoices which direct the goods to be shipped to the Master of the vessel "Atlantis Two" in both British Columbia and in Australia; that this is prima facie evidence that the goods were delivered to the vessel.
[10] Further, he alleges, that in his Reasons for Order, he relied on a quote from Piedmont Coal v. Seaboard Fisheries, (1920) 254 U.S. 1, in paragraph 80 of his decision in which he has referred to Tetley on Maritime Liens and Claims, reproduced above. That a careful review of the Piedmont Coal decision supports the proposition that coal delivered to bins on shore owned by the proprietor of several ships would not be classified as necessaries furnished to a vessel and therefore no entitlement to a maritime lien. He goes on "that Piedmont Coal is still good law and refers to Foss Launch & Tug v. Char Ching Shipping U.S.A., [1987] A.M.C. 913.2" Counsel suggests a more detailed analyses of the latter U.S. decision was incumbent upon the decision-maker.
[11] There is no doubt that under U.S. law the prerequisites for the grant of maritime lien are that a party has furnished repairs, supplies, or other necessaries, to vessel, upon the order of the owner of such vessel, or of person authorized by owner. The only issue to be concerned with in this appeal is the interpretation of the expression "providing necessaries" or "furnishing." In the Foss Launch & Tug case, the United States Court of Appeals, Ninth Circuit, analyzed the meaning of the word "furnishing" (providing). The learned judge, in his opinion, found that "controlling precedents governing interpretation of the Act favour a narrow construction of the quote "furnishing" requirement, and wrote at pages 701-2 in the Federal Reporter:
| We begin with the plain meaning of 46 U.S.C. 971. Stripped to its essentials, the statute states that "[a]ny person furnishing ... necessaries ... to any vessel ..." We note initially that the verb "to furnish" as found in the statute appears in the form of the active and not the passive voice. For example, the statute could have been drafted to state that "necessaries that are furnished to any vessel'' can support a maritime lien. In such circumstance, it would have been possible for even the fortuitous application or use of necessaries by a vessel to create a valid maritime lien against a vessel. In creating a preferred class of secured creditors, Congress chose not to draft the Act in the passive voice and we think the correct inference is that Congress intended "furnishing" to require active forethought or advanced identification of particular vessels in relation to "necessaries" supplied. |
| ... |
| Our restrictive interpretation of "furnishing" is supported by longstanding precedents interpreting 46 U.S.C. 971. Piedmont & Georges Creek Coal Co. v. Seaboard Fisheries Co., 254 U.S. 1, 41 S.Ct. 1, 65 L.Ed. 97 (1920), and its progeny are particularly apposite to this action. In Piedmont, the Supreme Court denied maritime liens sought against vessels that had received coal which had been sold to the vessels' owner on credit. The defect was not "in failure to show that the coal was furnished to the vessels but in failure to prove that it was furnished by the libelant." Piedmont, 254 U.S. at 13, 42 S.Ct. at 5. |
| Appellees contend that Piedmont represents a case drive by a simple failure of proof as to the amounts of coal actually received by each vessel in a group of vessels supplied with coal. However, it is clear that Piedmont has not been interpreted in such a limitation fashion. In Bankers Trust Co. v. Hudson River Day Line, 93 F.2d 457 (2d. Cir.1937), maritime liens were denied a supplier of oil who had delivered oil to a buyer's barges under a single bulk supply contract. In denying the lien, the Bankers Trust court understood the holding of Piedmont on the "furnishing" question to require that "supplied, though delivered in mass to the owner of the fleet under a single contract, [must be] expressly ordered by the owner and delivered to him by the supplyman for the use of named vessels in specified portions." Id. at 458 (emphasis supplied by Second Circuit) (quoting The American Eagle, 30 F.2d 293, 295 (D.Del.1929)). |
| In Dampskibsselskabet Dannenbrog v. Signal Oil & Gas Co., 310 U.S. 268 (1940), the Supreme Court decided to grant a maritime lien only after distinguishing Piedmont in the following manner: "In the instant case, the oil was supplied exclusively for the vessels in question, was delivered directly to the vessels and was so invoiced; and there was nothing in the general contract to the effect that the supplies were to be furnished [to some degree] upon the credit of the vessels." Id. at 277. Thus, the holding of Dampskibsselskabet should be read to encompass only those cases in which a materialman has taken care, in an ascertainable manner, to designate the items or services he contracts to provide for use on the particular vessel against which a lien is subsequently sought. See also The Everosa, 93 F.2d 732, 735 (1st Cir.1937) (lien granted) ("In the present case, the master of a particular vessel requisitioned for coal to the coal company; it was sent to a particular vessel, loaded on her by the coal company's representative and paid for by her master"); Carr v. George E. Warren Corp., 2 F.2d 333, 334 (4th Cir.1924) (lien granted) ("In this case, the coal was actually purchased on the credit of the steamers, billed to the steamers, and used by them." |
| (my underlining) |
[12] It should be noted that the cylinder heads in the case at bar are not as interchangeable as coal, as seen in the Piedmont Coal case; it could be delivered to any vessel. Also in the Piedmont Coal case the Court attached great significance to the fact that coal, when delivered, was not specifically delivered to any particular ship of the nineteen vessels owned by the purchaser of the coal; in the Foss Launch case (supra) it is clear that the designation of the goods to a named vessel was an essential aspect for finding that goods were "furnished to a vessel".
[13] I now turn to a careful examination of the invoices themselves which were attached to the affidavit of George Giannakopoulos, sworn October 26, 1998, and which he refers to in paragraphs 5 and 6. The invoice referring to the Australian delivery of a cylinder head no doubt indicated F.O.B. Houston and was billed to the Atlantis Two owners in London but the invoice in the top right hand corner indicates "Ship to: Master MV Atlantis Two Spares in Transit c/o the Thevenard Shipping Agents, 103 Thevenard Road, Caduna, Australia." The second invoice from Mega Marine, also billed to London and F.O.B. Houston, indicates "Ship to: Master MV Atlantis Two spares in transit c/o Canpotex Shipping Services Ltd., Park Royal South, West Vancouver, B. C." This invoice is dated November 21, 1997. There is evidence the vessel was in Vancouver at approximately that time.
[14] As mentioned earlier there was no expert opinion or one even inferred regarding "providing necessaries" or "furnishing directly to vessel" or as the Prothonotary wrote, "supplied directly to a ship." In the absence of such a clear determination by the experts, the Court may presume that the law is the same as the law of the forum. As was stated in Dicey and Morris, The Conflict of Law , (12th) at page 226:
| Rule 18-(1) In any case to which foreign law applies, that law must be pleaded and proved as a fact to the satisfaction of the judge by expert evidence or sometimes by certain other means. |
| (2) In the absence of satisfactory evidence of foreign law, the court will apply English law to such a case. |
[15] It is suggested that since the foreign law was not precisely proven, the learned Prothonotary may have based his decision upon a misapprehension of an essential fact. He wrote that there was no evidence to support the contention that the cylinder heads in question were delivered to the vessel. Since there may be some doubt with respect to the facts as well as the foreign law, Canadian law for the shipping of goods to the Master of a specifically named vessel may be sufficient to establish a maritime lien.
[16] In the River Rima3, the court was concerned with a maritime lien arising out of a contract to provide containers to a corporation operating vessels; though it set aside the writ in rem it provided a very clear analysis of certain conditions that should apply in order to establish the claim to a maritime lien. The court was analysing legislation similar to what is found in s-s. 22(2)(m) of the Federal Court Act:
| any claim in respect of goods, materials or services wherever supplied to a ship for the operation or maintenance of the ship, including, without restricting the generality of the foregoing, claims in respect of stevedoring and lighterage; |
une demande relative à des marchandises, matériels ou services fournis à un navire pour son fonctionnement ou son entretien, notamment en ce qui concerne l'acconage et le gabarage; |
[17] In summary the court concluded that it was essential that the identity of the ship to which the containers were to be assigned had to be specified. Lord Brandon wrote at p. 195:
| The main question to be decided, therefore, is whether having regard to the terms of the leasing agreement, and the procedure followed by the parties under it, each of the series of claims, relating to individual containers made by Tiphook, is a " |
| ... claim in respect of goods or materials supplied to a ship for her operation or maintenance ... |
| within the meaning of par. (m) of s. 20(2) of the 1981 Act. |
At pages 197-198, he continues:
| Since proceedings in rem in respect of a claim under par. (vii) of s. 22(1)(a) of the 1925 Act could only be brought against the particular ship in respect of which the claim arose, it was an essential ingredient of such a claim that it should relate to necessaries supplied to a particular ship, the identity of which had either been specified in the contract of supply, or at least notified to the supplier by the time when the necessaries came to be delivered under such contract. Since specification of the identity of the particular ship to which necessaries were supplied was an essential ingredient of a claim under par. (vii) of s. 22(1)(a) of the 1925 Act, it is to be inferred that it was also intended to be an essential ingredient of a claim under par. (k) of art. 1(1) of the Convention, which was derived from that earlier English provision. |
| ... |
| On the basis that specification of the identity of the particular ship to which goods or materials were supplied was an essential ingredient of a claim under par. (k) of art. 1(1) of the Convention, it must also have been intended to be an essential ingredient of a corresponding claim under par. (m) of s. 20(2) of the 1981 Act. |
| [my underlining] |
[18] It is evident from his Reasons for Order that the learned Prothonotary did not turn his mind to the issue of the shipping of goods by Mega Marine to the vessel at an off-shore port as stated on the invoice; he nevertheless does confirm that goods supplied by an American agent, notwithstanding the fact that it may be delivered to a non U.S. port, does give rise to a U.S. maritime lien. The fact that they were F.O.B. Houston does not relate to delivery but essentially to the issue that responsibility and title to the goods has passed.
[19] As I understand the decision in Aqua Gem (supra) a trial judge must show deference to a learned prothonotary"s decision unless he has been convinced that there was a clear misapprehension of a fact so essential that it led to an unrealistic application of a legal principle vital to a final issue.
[20] As I have stated, I am of the view that the shipping invoice clearly indicated that the cylinders were, according to the invoice, to be shipped to Australia and Canada and to a specially identified vessel. There was no U.S. expert opinion before the Court determinative of this issue, but I am persuaded that in light of the House of Lords" decision in River Rima (supra) as well as obiter in Foss Launch & Tug (supra) that both the facts and the law support the conclusion that Mega Marine is entitled to a maritime lien.
(Sgd.) "Paul Rouleau"
Judge
Vancouver, British Columbia
28 July 1999
FEDERAL COURT TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
| HEARING DATED: July 14, 1999 |
| COURT NO.: T-111-98 |
| STYLE OF CAUSE: Fraser River Shipyard and Industrial Centre Ltd. |
| v. |
| The Ship "Atlantis Two" and others |
| PLACE OF HEARING: Vancouver, BC |
| REASONS FOR ORDER OF: ROULEAU J. |
| dated July 28, 1999 |
APPEARANCES:
| Mr. Brad Caldwell for Atlantic NLN, Atlantic DE, Mega Marine Services Ltd. and Hellenic Ship Supply Inc. |
Mr. Greg Blue for the Claimant ABN-Amro Bank N.V.
Mr. Christopher Giaschi for the Plaintiffs and Nautilus Australia Ltd.
| Mr. Doug Morrison for the Defendant INCOFE |
SOLICITORS OF RECORD:
| Brad M. Caldwell for Atlantic NLN, Atlantic DE, Mega Marine Services Ltd. |
| Vancouver, BC and Hellenic Ship Supply Inc. |
| McEwen, Schmitt & Co. for the Claimant ABN-AMRO Bank N.V. |
Vancouver, BC
| Giaschi & Margolis for the Plaintiffs and Nautilus Australia Ltd. |
Vancouver, BC
| Bull, Housser & Tupper for the Defendant INCOFE |
Vancouver, BC
| Campney & Murphy for the Defendants Expedient Maritime Company Limited, |
| Vancouver, BC Expedient Maritime Co. (Cypress) Ltd., the owners and others interested in the Ship "Atlantis Two" and Mr. James Peebles |
| C.T.L. Westrans for Bernard J. Jones Shipbroker |
| Vancouver, BC |
| McGrady, Baugh & Whyte for the Captain and Chief Officer |
| Vancouver, BC and officers and crew |
Russell & DuMoulin for the Claimant ICS Petroleum Ltd.
Vancouver, BC
Hara & Company for Governor Control Sales and Services Ltd.
Vancouver, BC
| Mr. P. Daniel Le Dressay for the Claimant Ward Smith Mechanical Inc. |
Vancouver, BC
Evans, Goldstein & Eadie for Elander Inspection Ltd.
Vancouver, BC
| Owen, Bird for the Intervenor Lloyd's Register of Shipping |
Vancouver, BC
Bromley, Chapelski for the Claimant Unitor
Vancouver, BC
| Cohen, Buchan, Edwards for Mermaid Shipping Co. Ltd. |
Richmond, BC
Sproule Castonguay Pollack for the Claimant Strachan Shipping Co.
Montréal, PQ
Stikeman, Elliott for Man B & W Diesel AG
Montréal, PQ
A.B. Oland Law Corp. for Monson Agencies Pty. Ltd.
Vancouver, BC
| J. W. Perrett for Triton Holdings Inc. |
Vancouver, BC
Morris Rosenburg for the Minister of Citizenship and Immigration Canada
Deputy Attorney General
of Canada
[21]
__________________2 Also found at 808 Federal Reporter (2d) 697.
3 [1988] 2 Lloyd"s Law Reports 193, a decision of the House of Lords.