T-2934-76
International Marine Banking Co. Limited
(Plaintiff)
v.
The M/T Dora and Abyreuth Shipping Company
Limited (Defendants)
Trial Division, Collier J.—Montreal, March 7;
Toronto, March 21, 1977.
Maritime law — Motion for decision on point of law —
Ranking of plaintiff's claim re bunker oil equally with Mar
shal's expenses — Proceeds of sale of vessel added as defend
ant in style of cause.
MOTION.
COUNSEL:
G. Vaillancourt for plaintiff International
Marine Banking.
M. Nadon for Trans-Asiatic Oil Ltd., S.A.
SOLICITORS:
Langlois, Drouin, Roy, Fréchette & Gau-
dreau, Quebec, for plaintiff International
Marine Banking.
Martineau, Walker, Allison, Beaulieu, Mac-
Kell & Clermont, Montreal, for Trans-Asiatic
Oil Ltd., S.A.
The following are the reasons for judgment
rendered in English by
COLLIER J.: By motion dated February 23,
1977, International Marine Banking Co. Ltd.
seeks a decision on a point of law. Some prelim
inary comments are necessary. The motion is
brought in a style of cause different to the one
above.
The M/T Dora was arrested on July 27, 1976,
by the plaintiff in this action. On September 8,
1976, L. J. Daoust, District Administrator of this
Court at Montreal, was, by a special order,
appointed as Marshal in respect of the sale of the
vessel. The Marshal did not take possession of her
until September 20, 1976. The vessel was sold for
$6,650,000. The Marshal turned over possession to
the purchaser effective October 29, 1976.
Pursuant to the provisions of the commission for
sale, claimants against the vessel filed their claims.
There were six, in addition to the plaintiff. This
Court, on November 26, 1976, directed that each
claimant should file a statement of claim or decla
ration, designating itself as plaintiff, and the other
claimants as defendants, setting out its claim, and
its assertion as to priority. The proceedings were to
be then carried on, by way of defence etc., as if
they were ordinary actions pursued under the
provisions of the Rules of this Court. There was no
direction that the vessel or her owners be added as
defendants, or that the action be brought as well
against "The Proceeds of the M/T Dora". (For
the latter description see Rule 1002(2)(e).)' On an
administrative basis, it was decided to have all
those pleadings filed in the same numbered court
file as above. The effect of the order of the Court
has been to have one main action (T-2934-76)
between one plaintiff and essentially one defend
ant, and 7 (for want of a better term) sub-actions
in the same file number. The style of cause in this
particular sub-action is:
BETWEEN:
TRANS-ASIATIC OIL LTD., S.A.
Plaintiff
AND
INTERNATIONAL MARINE BANKING CO. LTD.,
and
ALHOUTYAM HAFIA LTD.,
and
SHELL INTERNATIONAL PETROLEUM CO. LTD.,
and
DREW AMEROID INTERNATIONAL CORPORATION,
and
HITACHI SHIPBUILDING AND ENGINEERING CO. LTD.,
and
THE LONDON STEAMSHIP OWNERS MUTUAL INSURANCE
ASSOCIATION LIMITED,
Defendants.
In the motion before me the applicant is one of
the defendants, International Marine Banking Co.
Ltd. The respondent is the plaintiff Trans-Asiatic
Oil Limited, S.A. The other defendants in the
sub-action have not filed defences to the plaintiff
' For service of a statement of claim in an action in rem upon
the proceeds in Court, see Rule 1002(5)(a).
Trans-Asiatic's statement of claim. The substance
of the point of law is, in effect, to determine the
ranking of the plaintiff's claim against the vessel.
I acceded to the request for determination, prior
to trial, of the point of law on the basis of certain
agreed facts. For the purposes of this motion para
graphs 2, 3, 4, 5, 6 and 8 of the statement of claim
in the sub-action were accepted as true. The facts
in respect of the date of arrest of the vessel, the
taking of possession by the Marshal and her sale,
were common ground. I summarize the agreed
facts:
The plaintiff had chartered the Dora from her
disponent owners. The latter had assigned their
rights to the owners named in the style of cause in
the main action. Under the terms of the charter-
party, the plaintiff agreed to provide and pay for
all fuel. On expiration of the charter, the owner
agreed to pay for all bunker oil then remaining on
board. At the time of the arrest by the applicant,
the bunker oil on board the Dora had been pro
vided for and paid for by the plaintiff. It is conced
ed that from the date of arrest by the applicant on
July 27, 1976, until the date of sale, bunker oil
provided and paid for by the plaintiff was used to
maintain the Dora and "... was necessary to
preserve her while under arrest." The parties told
me the amounts of bunker fuel consumed during
the relevant periods set out below can be readily
ascertained:
(a) July 27, 1976, to September 20, 1976—arrest to taking
of possession by the Marshal.
(b) September 20, 1976, to October 28, 1976 (incl.)—period
vessel under possession of the Marshal.
All parties and all claimants have already con
sented to a judgment in favour of Trans-Asiatic
awarding it $14,961.35, the value of the bunker oil
remaining on board the Dora after the sale. The
judgment is to be paid out of the proceeds of sale. 2
I turn now to the contentions put forward on the
point of law.
Trans-Asiatic asserts the value of the bunker oil,
admittedly consumed from the date of initial
arrest to the date of sale, should rank in priority as
if it were an expense incurred by a marshal in the
arrest and safe-keeping of the ship. No distinction
should be drawn, it is said, between the periods
before and after possession by the Marshal; the
consumption of bunker oil provided by it was
admittedly necessary for the preservation of the
vessel, and obviously was of benefit to all claim
ants, including the mortgagee.
The mortgagee has several answers. In respect
of the first period, it says the fuel cannot rank on
the same level as marshal's costs, because at that
time . the Marshal was not in possession; one cannot
conclude the Marshal would necessarily have
incurred that expense or agreed, in the circum
stances, to reimburse Trans-Asiatic for any fuel
used; the bunker fuel was fortuitously there
because of the pre-existing contractual arrange
ment with Trans-Asiatic and the owners; consump-
2 The Associate Chief Justice, on the application to appoint a
marshal and have the vessel appraised and sold, anticipated
these present problems. At pages 3-4 of his reasons dated
September 7, 1976, he said this:
With respect to the bunker oil, while it appears to me that
in so far as such oil is used from the time the Marshal takes
possession until the vessel is sold, its value might be regarded
as part of the Marshal's maintenance costs, it is premature to
make any order with respect to it at this stage. To that extent
the charterer's claim may, if his ownership of the bunker oil
is established, represent a claim against the Marshal for oil
used by him. If so, the claim can be dealt with when claims
on the proceeds of sale are under consideration. With respect
to bunker oil consumed between the arrest of the vessel and
the taking of possession by the Marshal, the claim, as well,
must await the determination of the rights of the charterer to
recover for it out of the proceeds of sale of the vessel. Even
with respect to bunker oil that may remain at the time of sale
it appears to me that the question of its ownership is not a
foregone conclusion and that question as well must await
determination until claims on the proceeds are considered.
With respect to such bunker oil as remains on the vessel at
the time of sale, however, it may be that the shipbroker will
consider it desirable to ask for offers on the basis that the
successful tenderer will pay extra for such oil at its current
value in Quebec.
tion of some part of it, on the instigation of those
having charge of the vessel after obtaining a war
rant of arrest, cannot convert a possible claim
against those persons into a charge ranking equally
with what is sometimes loosely termed "marshal's
costs".
With those general contentions, and for other
reasons I need not detail, I agree. Trans-Asiatic
has not, to my mind, established any right against
the vessel, other creditors, and the proceeds, enti
tling it to a priority equal to the Marshal's
expenses in taking possession, keeping the vessel
under safe arrest, and selling her. The mere fact of
arrest does not, for example, give, ipso facto, first
priority rights to the owners or suppliers of ship's
stores.
I go now to the period when the Dora was in the
possession of and under the authority of the Mar
shal. The mortgagee concedes that bunker fuel,
provided by Trans-Asiatic, was consumed by the
vessel during that time; that the supply and con
sumption of fuel was necessary. I hold, further, it
was for the benefit of all creditors including the
mortgagee. The chief ground relied upon by the
mortgagee, for disputing a declaration of priority,
is that the Marshal never expressly or impliedly
authorized the consumption of the bunker oil; he
did not direct that Trans-Asiatic, the provider,
should be paid or reimbursed; he did not include,
in his accounts presented for taxation, the cost of
the oil consumed. Reliance is placed on two deci
sions of Noël J.: Pelchat v. M.V. Morrisburg et al
#379—Exchequer Court—(Sept. 17, 1970,
unreported) and Canadian Vickers Limited v.
Atlantean I #1741—Exchequer Court—(January
22, 1971, unreported). In my view those cases are
completely distinguishable.
The remarks of Walsh J. in "Evie W" #1327—
Exchequer Court—(January 27, 1970, unreport-
ed) are much more applicable. He dealt with the
priority of a claim for fuel oil supplied to a vessel
while under arrest and in the possession of the
Marshal. I quote from page 38:
This claim arose out of necessary fuel oil being supplied to
the vessel between November 28, 1967 and January 23, 1968,
while the vessel was under seizure and not yet sold. Had this
fuel oil been ordered by the Marshal and the claim made
against him, it would properly have been included in his claim
for expenses in connection with the seizure and sale of the
vessel. It would appear that the fuel oil deliveries continued to
be made after the seizure and that same were essential to
preserve the ship in the severe winter conditions prevalent at
the time, and hence tended to preserve the security of the
mortgage creditor. As stated in Halsbury's Laws of England
the question of the priority of one lien over another rests on "no
rigid application of any rules but on the principle that equity
shall be done to the parties in the circumstances of each
particular case". I would rank the claim of Golden Eagle
Canada Ltd. therefore ahead of the mortgage.
It appears obvious to me in this case that no one,
the Marshal, the applicant or the respondent, ever
specifically raised the point of supply of bunker
fuel for the Dora, or of the use of and payment for
the fuel already on board. I do not think, applying
equity, that is fatal to Trans-Asiatic's claim. The
vessel had to have and use fuel. The logical source
of supply was that already on board. If the point
had been put to him, the Marshal would undoubt
edly have formally authorized the use of the fuel,
and payment for it to the person entitled. He
would then have included the amount in his
accounts and charges.'
I hold therefore that the reasonable value of the
bunker oil consumed by the Dora between Septem-
ber 20, 1976 and October 28, 1976 shall rank in
priority, in the proceeds of the sale, equally with
the Marshal's expenses.
I think it will be apparent from these reasons
that I have not really accepted the particular
wording, put forward by the applicant in its
motion, of the question of law. I think it should be
as follows:
Is the whole, or any part, of the reasonable value of the bunker
oil consumed by the M/T Dora during the period July 26, 1976
to October 28, 1976 entitled to rank, in respect of the proceeds
of the sale of the vessel, equally with the expenses incurred by
the Marshal?
The answer will be as I have already indicated.
3 After Trans-Asiatic's statement of claim was filed, a
request was made to the Marshal that he include, in his costs,
the value of the fuel consumed for the whole period July 27 to
September 20. He understandably declined to do so, on the
ground the issue at that stage had to be determined by the
Court.
I have deliberately not stated that the respond
ent Trans-Asiatic is entitled to claim that priority
and be paid accordingly. On this motion it seemed
to be assumed, if not in fact conceded, that Trans-
Asiatic was the legal owner of the fuel consumed.
That, to me, does not necessarily follow from the
agreed facts, including the charterparty. It may be
arguable that title to the oil, on delivery, passed to
the owners. I express no opinion. The formal pro
nouncement will therefore be silent as to owner
ship and entitlement. Perhaps all interested parties
and claimants can come to some agreement.
In order that there be an effective judgment
covering this decision, I think it is necessary to
amend the style of cause in this sub-action. I direct
there be added as a further defendant: "The Pro
ceeds of the M/T Dora". 4 All future proceedings
shall show that defendant in the style of cause.
There has been divided success on this motion. I
direct there be no costs to either party.
° I suggest that the other claimants, in their actions, should,
at some convenient time apply for similar amendments.
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.