Royal Bank of Scotland plc v. Ship Golden Trinity et al., (2004) 254 F.T.R. 1 (FC)

• Court: Federal Court (Canada)
• Case Date: May 31, 2004
• Jurisdiction: Canada (Federal)
• Citations: (2004), 254 F.T.R. 1 (FC);2004 FC 795

Royal Bk. v. Ship Golden Trinity (2004), 254 F.T.R. 1 (FC)

MLB headnote and full text

Temp. Cite: [2004] F.T.R. TBEd. JN.033

The Royal Bank of Scotland plc (plaintiff) v. The Owners and all others interested in the Ship Golden Trinity and Golden Trinity Maritime Inc. (defendants)

(T-32-99)

The Royal Bank of Scotland plc (plaintiff) v. The Owners and all others interested in the Ship Kimisis III and Madonna Navigation (Malta) Limited (defendants)

(T-38-99)

The Royal Bank of Scotland plc (plaintiff) v. The Owners and all others interested in the Ship Ypapadi and Ypapadi Maritime Inc. (defendants)

(T-119-99)

Nedship Bank N.V. previously known as Nederlandse Scheepshypotheekbank N.V. (plaintiff) v. The Owners and all others interested in the Ship Zoodotis and Zoodotis Navigation Inc. (defendants)

(T-186-99; 2004 FC 795)

Indexed As: Royal Bank of Scotland plc v. Ship Golden Trinity et al.

Federal Court

Hargrave, Prothonotary

May 31, 2004.

Summary:

This case involved a priorities dispute respecting the remaining sale proceeds from the court-approved sales of four ships out of a fleet managed by Pronoia Ship Agents. The four ships were the Golden Trinity, the Kimisis III, the Ypapadi and the Zoodotis. The ships were sold above their appraised value. Many of the claims to the sale proceeds were settled on consent. However, the Royal Bank of Scotland plc, as mortgagee of the Golden Trinity, the Kimisis III and the Ypapadi, claimed against the proceeds. Similarly, the Nedship Bank N.V. claimed, as mortgagee, against the sale proceeds of the Zoodotis. The principal challenge to the banks' priority claims was from an in rem claimant, Tramp Oil & Marine Ltd. (Tramp), for bunkers supplied to the four defendant vessels and to various other ships, which were also managed by Pronoia, and which were argued to be sisterships.

The Federal Court determined the priorities to the sale proceeds in accordance with the usual ranking of maritime claims (i.e., with established maritime liens taking priority over the mortgages, but with Tramp Oil's non lien claims as supplier of necessaries ranking after the mortgages). The court rejected Tramp Oil's argument that it could rely on the sistership procedure under the Federal Court Act. The court also rejected Tramp's argument there should be an equitable re-ordering of the usual order of priorities because the banks delayed in moving to enforce their security.

Admiralty - Topic 8330

Practice - Actions in rem - Sale - Sale proceeds - Entitlement to - [See first, second and third Admiralty - Topic 8342 and fourth Admiralty Topic 8347.1 ].

Admiralty - Topic 8342

Practice - Actions in rem - Liens - Priorities - The court approved the sale of four ships out of a fleet managed by a Greek company, Pronoia - Two banks, as mortgagees, and a British company (Tramp Oil) which supplied bunkers to the four ships claimed priority to the remaining sale proceeds - Tramp's priority claim was based in part on a American maritime lien against one of the ships (a vessel flagged out of Panama, the Golden Trinity) for a supply of bunkers in an American port by an American bunkering firm (Petro-Diamond) acting on the instructions of Tramp - The contract between Tramp and Pronoia contained a choice of law clause selecting English law - The Federal Court determined that American law was the appropriate choice of the substantive law to govern this claim, thus giving rise to a maritime lien and jurisdiction - Tramp's right to a maritime lien was by way of subrogation which occurred under American law when Petro Diamond's invoice was paid by Tramp - Therefore, Tramp's claim was accorded the priority of a maritime lien - See paragraphs 55 to 74.

Admiralty - Topic 8342

Practice - Actions in rem - Liens - Priorities - The court approved the sale of four ships out of a fleet managed by a Greek company, Pronoia - Two banks, as mortgagees, and a British company (Tramp Oil) which supplied bunkers to the four ships claimed priority to the remaining sale proceeds - Tramp's priority claim was based in part on a contractual lien against one of the ships (a vessel flagged out of Panama, the Kimisis III) for a supply of bunkers in Korea - Tramp's standard bunkering terms provided that when Tramp supplied bunkers to a vessel, in addition to any other security it "is agreed and acknowledged that the lien over the Vessel is thereby created for the price of the product supplied ..." - The Federal Court held that the priority of such a contractual lien fell below that of a mortgage and in fact the terms did not raise such a claim above other statutory in rem necessaries claims - See paragraphs 75 to 79.

Admiralty - Topic 8342

Practice - Actions in rem - Liens - Priorities - The court approved the sale of four ships out of a fleet managed by a Greek company, Pronoia - Two banks held first mortgages on the ships - A British company (Tramp Oil) had maritime liens and a claim for a supply of necessaries (bunkers) which did not constitute a maritime lien - Tramp Oil argued that the usual priorities (mortgagees ahead of necessaries claims which did not constitute maritime liens) ought to be re-ordered in an equitable manner to provide some priority to Tramp - Tramp submitted that the banks ought to have moved sooner to realise against the ships on which they held mortgages and, because they failed to do so, Tramp continued to supply bunkers to the Pronoia fleet, for which it was not paid - In the result, Tramp submitted that the two banks were unjustly enriched, entitling Tramp to a re-ordering of the usual priorities between maritime in rem claims - The Federal Court held that Tramp failed to establish the very special circumstances which would call for a re-ordering of the long-established ordering of priorities - In any event, Tramp failed to establish unjust enrichment to the necessary degree - See paragraphs 110 to 150.

Admiralty - Topic 8342

Practice - Actions in rem - Liens - Priorities - The Federal Court set out the usual ranking of maritime claims following the court-ordered sale of a ship: 1. Disbursements of the admiralty marshall or sheriff; 2. The costs of the sale, including those of the plaintiff in an action arising out of arrest, appraisal and sale, or in the alternative, the claim of a party, other than the plaintiff, who has been instrumental in bringing the ship to sale; 3. Possessory liens predating other liens; 4. Maritime liens; 5. Possessory liens arising after maritime liens; 6. Mortgages; and 7. Statutory rights in rem, including for the supply of necessaries, which rank pari passu among themselves - See paragraph 111.

Admiralty - Topic 8342

Practice - Actions in rem - Liens - Priorities - The Federal Court discussed the law applicable to the equitable re-ordering of priorities with respect to the ranking of maritime claims following the court-ordered sale of a ship - The court stated, inter alia, that it would not depart from the usual long established order of priorities except in very special circumstances and only then if the departure was essential to prevent an injustice - See paragraphs 116 to 122.

Admiralty - Topic 8342

Practice - Actions in rem - Liens - Priorities - The court approved the sale of four ships out of a fleet managed by a Greek company, Pronoia (owned by the Lygnos family) - Two banks, as first mortgagees, claimed priority to the sale proceeds - Aduanera Columbia, a Columbia company who supplied necessaries to one of the ships, the Golden Trinity, also claimed maritime liens under Columbian law - The Federal Court allowed two items of the claim as subrogated maritime liens, i.e., a levy for lights and buoys and an amount for pilot and tug - See paragraphs 161 to 168.

Admiralty - Topic 8342

Practice - Actions in rem - Liens - Priorities - The court approved the sale of four ships out of a fleet managed by a Greek company, Pronoia (owned by the Lygnos family) - Two banks, as first mortgagees, claimed priority to the sale proceeds - Calogeras Marine, of Montreal, Canada, claimed to have supplied necessaries to various vessels in Canada connected to the Lygnos family - Calogeras Marine argued that its statutory in rem necessaries claim against the sale proceeds should have the benefit of the Canada sistership provision of the Federal Court Act (s. 43(8)) - The Federal Court dismissed the Calogeras claim - The court held that the evidence of Calogeras did not establish a sistership relationship - Even if it did, the banks' security being sound, the Calogeras claims, as statutory rights in rem, came after the claims of the banks as mortgage holders - See paragraphs 151 to 160.

Admiralty - Topic 8343

Practice - Actions in rem - Liens - Maritime lien - Assignment or subrogation of - [See first and sixth Admiralty - Topic 8342 ].

Admiralty - Topic 8345

Practice - Actions in rem - Liens - Maritime lien for necessities - Bunkers - [See first, second and third Admiralty - Topic 8342 and fourth Admiralty - Topic 8347.1 ].

Admiralty - Topic 8347

Practice - Actions in rem - Liens - Maritime lien created by law of foreign jurisdiction - [See first and sixth Admiralty - Topic 8342 ].

Admiralty - Topic 8347.1

Practice - Actions in rem - Liens - Maritime lien - Enforcement - Sistership procedure - The Federal Court discussed the elements needed in order to constitute a group of ships as sisterships - See paragraphs 82 to 102.

Admiralty - Topic 8347.1

Practice - Actions in rem - Liens - Maritime lien - Enforcement - Sistership procedure - The Federal Court discussed the standard of proof required to establish beneficial ownership and a sistership relationship - The court stated that "the standard by which to establish a sistership relationship is that of proof by a preponderance of evidence, or reasonable degree of probability, that it be more probable than not that the vessels in question are sisterships. Even though the sistership remedy, as a whole, is an extraordinary remedy that ought not to be lightly invoked, it is still this civil standard of proof which applies" - See paragraph 102.

Admiralty - Topic 8347.1

Practice - Actions in rem - Liens - Maritime lien - Enforcement - Sistership procedure - The Federal Court discussed the background and purpose of the sistership legislation - The sistership principle had its foundation in art. 3 of the International Convention for the Unification of Certain Rules Relating to the Arrest of Sea-going Ships, Brussels, 1952 - The court stated that the purpose of the sistership procedure was to prevent an owner from improperly insulating his or her assets by putting each of a number of ships into separate companies in fact owned by that individual - Canada, although not ratifying the 1952 Brussels Convention, enacted sistership legislation in s. 43(8) of the Federal Court Act - The court noted, that as pointed out in a prior case, Canada had taken two approaches, one in the English language and another in the French language, with the former making little sense and the latter being similar in form and effect to the 1952 Brussels Convention - The court stated that "the plain wording of the sistership provision in s. 43(8) of the Federal Court Act, in the French version, sets out the sistership concept in a meaningful way in that it allows a plaintiff to exercise in rem jurisdiction against a ship which, at the time the action is brought, is owned by the beneficial owner of the ship that is the subject of the action" - See paragraphs 83 to 85.

Admiralty - Topic 8347.1

Practice - Actions in rem - Liens - Maritime lien - Enforcement - Sistership procedure - The court approved the sale of four ships out of a fleet - Each vessel was owned by separate companies, but all were managed by Pronoia, a Greek company, owned by the Lygnos family - Two banks, as first mortgagees, and a British company (Tramp Oil) as lien claimant claimed priority to the sale proceeds - Tramp sought to enforce its liens using the Federal Court sistership procedure in Canada (Federal Court Act, s. 43(8)) - The Federal Court stated that American maritime liens for bunkers against vessels which may be sisterships could not be enforced as such using Federal Court sistership procedure in Canada - Only where there was either a flaw in the banks' security or a reduction in the priority of the banks' mortgage security could Tramp succeed as an in rem necessaries claimant - There was no flaw in the security in this case - The court opined, however, that even if the procedure was available, a sistership relationship was not established in accordance with the applicable standard of proof - The evidence did not establish the existence of a beneficial owner as required by s. 43(8) - See paragraphs 79 to 109.

Admiralty - Topic 8347.1

Practice - Actions in rem - Liens - Maritime lien - Enforcement - Sistership procedure - [See seventh Admiralty - Topic 8342 ].

Conflict of Laws - Topic 2454

Admiralty - Liens - Maritime lien created by law of foreign jurisdiction - The court approved the sale of four ships out of a fleet managed by a Greek company, Pronoia - Two banks, as mortgagees, and a British company (Tramp Oil) which supplied bunkers to the four ships claimed priority to the remaining sale proceeds - Tramp's priority claim was based in part on a American maritime lien against one of the ships (a vessel flagged out of Panama) for a supply of bunkers in an American port by an American bunkering firm (Petro-Diamond) acting on the instructions of Tramp - The contract between Tramp and Pronoia contained a choice of law clause selecting English law - Tramp relied on the doctrine of subrogation and the "rule of advances" - An issue arose respecting whether the court was bound by the views of an American expert and had to treat those views as fact - The Federal Court discussed the law applicable in this situation - The court stated that it could consider the expert's opinion on maritime liens, and if there was a conflict or obscurity, look to the case law to which he referred - The court could fill in any gaps with the application of Canadian law - See paragraphs 55 to 59.

Conflict of Laws - Topic 2454

Admiralty - Liens - Maritime lien created by law of foreign jurisdiction - [See first Admiralty - Topic 8342 ].

Conflict of Laws - Topic 2481

Admiralty - Choice of law - General - [See first Admiralty - Topic 8342 and first Conflict of Laws - Topic 2454 ].

Cases Noticed:

Canada Square Corp. v. Versafood Services Ltd. et al. (1981), 130 D.L.R.(3d) 205 (C.A.), refd to. [para. 14].

Neves v. Ship Kristina Logos et al. (2001), 220 F.T.R. 15 (T.D.), refd to. [para. 21].

Nova Scotia Barristers' Liability Claims Fund v. Ship Ashley Lynn et al. (1994), 80 F.T.R. 141 (T.D.), refd to. [para. 21].

Allen v. Hay (1922), 64 S.C.R. 76, refd to. [para. 56].

Estonian State Cargo v. Ship Elsie, [1948] Ex. C.R. 435, refd to. [para. 56].

Banco do Brasil S.A. v. Ship Alexandros G. Tsavliris et al., [1992] 3 F.C. 735; 145 N.R. 140 (F.C.A.), refd to. [para. 57].

First National Bank of Jefferson Parish v. Ship M/V Lightning Power (1988), 851 F.2d 1543 (5th Cir. C.A.), refd to. [para. 61].

International Paint Co. v. Ship M/V Mission Viking (1981), 637 F.2d 382 (5th Cir. C.A.), refd to. [para. 61].

Tramp Oil & Marine Ltd. v. Ship M/V Mermaid I, 1987 AMC 866 (1st Cir. C.A.), refd to. [para. 62].

Ship Tyson Lykes, Re (1993), 837 F. Supp. 1357, refd to. [para. 63].

Governor and Co. of the Royal Bank of Scotland v. Ship M/V Maria S.J., 1999 WI 130632 (E.D. La. Dist. Ct.), refd to. [para. 64].

Textainer Equipment Management B.V. v. Baltic Shipping Co. et al. (1994), 84 F.T.R. 108 (T.D.), refd to. [para. 66].

Imperial Oil Ltd. v. Petromar Inc. et al. (2001), 283 N.R. 182 (F.C.A.), refd to. [para. 67].

Ship Atlantis Two - see Fraser Shipyard and Industrial Centre Ltd. v. Expedient Maritime Co. et al.

Fraser Shipyard and Industrial Centre Ltd. v. Expedient Maritime Co. et al. (1999), 170 F.T.R. 1 (T.D. Protho.), revd. (1999), 170 F.T.R. 57 (T.D.), refd to. [para. 68].

Bank of Scotland v. Ship Nel et al., [2001] 1 F.C. 408; 189 F.T.R. 230 (T.D.), refd to. [para. 79].

Scott Steel Ltd. v. Ship Alarissa et al., [1996] 2 F.C. 883; 111 F.T.R. 81 (T.D. Protho.), affd. (1997), 125 F.T.R. 284 (T.D.), refd to. [para. 80].

Ssangyong Australia Pty. Ltd. et al. v. Ship Looiersgracht et al., [1995] 2 Lloyd's 411; 85 F.T.R. 265 (T.D. Protho.), refd to. [para. 81].

Norcan Electrical Systems Inc. v. Feeding Systems A/S et al., [2003] 4 F.C. 938; 235 F.T.R. 237 (T.D.), refd to. [para. 83].

Hollandsche Aannaming Maatschappij, b.v. v. Ship Ryan Leet et al. (1997), 135 F.T.R. 67 (T.D.), refd to. [para. 84].

Smith v. Smith and Smedman, [1952] 2 S.C.R. 312, refd to. [para. 102].

Mount Royal/Walsh Inc. v. Ship Jensen Star et al., [1990] 1 F.C. 199; 99 N.R. 42 (F.C.A.), refd to. [para. 105].

Scott Steel Ltd. v. Ship Alarissa et al., [1996] 2 F.C. 883; 111 F.T.R. 81 (T.D. Protho.), refd to. [para. 116].

Scott Steel Ltd. v. Ship Alarissa et al. (1997), 125 F.T.R. 284 (T.D.), refd to. [para. 118].

Osborn Refrigeration Sales and Service Inc. v. Ship Atlantean I (1982), 52 N.R. 10; 7 D.L.R.(4th) 395 (F.C.A.), refd to. [para. 122].

Sorochan v. Sorochan, [1986] 2 S.C.R. 38; 69 N.R. 81; 74 A.R. 67; 29 D.L.R.(4th) 1, refd to. [para. 123].

Garland v. Consumers' Gas Co. (2004), 319 N.R. 38; 186 O.A.C. 128; 2004 SCC 25, refd to. [para. 123].

Ship Pickaninny, Re; Hammond (George) & Co. (Interveners), [1960] 1 Lloyd's Rep. 533 (Admin. Div.), refd to. [para. 145].

Statutes Noticed:

Federal Court Act, R.S.C. 1985, c. F-7, sect. 43(8) [para. 83].

Authors and Works Noticed:

Benedict on Admiralty (1986), pp. 3-12, 3-13 [para. 62].

Buchan, Mortgages of Ships: Marine Security in Canada (1986), p. 57 [para. 21].

Castel, Canadian Conflicts of Laws (4th Ed. 1997), p. 448 [para. 67].

Cross and Tapper on Evidence (9th Ed. 1999), p. 667 [para. 56].

Hughes, Robert T., Federal Court of Canada Service (Looseleaf Ed.), para. 22:459 [para. 23].

Sweet and Maxwell, Constant on The Law Relating to the Mortgage of Ships (1920), pp. 15, 16 [para. 21].

Thomas, Maritime Liens, British Shipping Laws (1980), vol. 14, p. 24 [para. 78].

Counsel:

Peter G. Bernard, Q.C., and Pauline V. Gardikiotis, for the plaintiffs;

R. Glenn Morgan, for the claimant, Tramp Oil & Marine Ltd.;

Elyn Underhill, for the claimant, United Maritime Supplies Inc.;

Bradley M. Caldwell, for the claimant, Aduanera Columbia S.I.A. Ltd.;

Louis Buteau, for the claimants, Calogeras Marine Inc. and Calogeras & Master Supplies Inc.

Solicitors of Record:

Bernard & Partners, Vancouver, British Columbia, for the plaintiffs;

Davis & Co., Vancouver, British Columbia, for the claimant, Tramp Oil & Marine Ltd.;

Giaschi & Margolis, Vancouver, British Columbia, for the claimant, United Maritime Supplies Inc.;

Caldwell & Co., Vancouver, British Columbia, for the claimant, Aduanera Columbia, S.I.A. Ltd.;

Flynn Rivard, Montreal, Quebec, for the claimants, Calogeras Marine Inc. and Calogeras & Master Supplies Inc.

This case was heard on August 28 to 31, September 4, December 11 to 14, 2001 and January 17 and 18, 2002, before Hargrave, Prothonotary, of the Federal Court, who delivered the folllowing decision on May 31, 2004.