Date: 19990611

Docket: T-111-98

Enter Style of Cause just after [Comment] code.

-    FRASER SHIPYARD AND INDUSTRIAL CENTRE LTD.,

Plaintiff,

- 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 others

interested in the ship "ATLANTIS TWO",

Defendants,

- and -

THE OFFICERS AND CREW OF THE SHIP

"ATLANTIS TWO",

Intervenors.

Heard at Enter City, Province and Date(s) of Hearing just after [Comment] code.Vancouver, British Columbia on November 24 and 25, 1998

Order delivered at Enter City, Province and Date of release just after [Comment] code.Vancouver, British Columbia on June 11, 1999

Please enter name of additional author(s) separated by a hard return

and flush to the right just after the first author.

You may also indicate whether additional authors are concurring or descenting.REASONS FOR ORDER BY:MR. JOHN A. HARGRAVE, PROTHONOTARY

Paragraph

Locations

BACKGROUND     2 - 7

Canadian Ranking of In Rem Claims     8 - 9

American Ranking of some In Rem Claims    10 - 12

Delay in Prosecuting American Necessaries Claims    13

The Ioannis Daskalelis    14 - 20

BUNKERS SUPPLIED BY ORDER OF THE COURT (Claim of James Peebles)    21 - 24

CLAIM OF CREW, OFFICERS AND MASTER    25 - 26

Master's Disbursements    27

Crew Wages    28

Costs    29

Cost of Repatriating Crew    30 - 31

Assignment of Repatriation Costs    32 - 35

BUNKERS CLAIM OF MERMAID SHIPPING CO LTD.    36

Claim as Owner of Fuel    37 - 40

Mermaid's Fuel Used at Vancouver    41 - 52

Mortgagee's Interest in Fuel Aboard    53 - 58

Cost of Sale of Fuel    59 - 60

Award to Mermaid    61

SUPPLY OF NECESSARIES IN THE UNITED STATES    62

Claim of Strachan    63 - 64

Claim of Hellenic    65 - 68

Claim of Atlantic DE    69 - 71

Claim of Atlantic NLN    72 - 74

CLAIM OF NAUTILUS AUSTRALIA LIMITED    75 -77

CLAIM OF MEGA MARINE SERVICES LTD.    78 - 82

CLAIM OF UNITOR ASA    83 - 86

Offshore Necessaries Supplier Using an American Agent    87 - 88

Enforcement of Claims through Sister Ship Procedure    89 - 94

CLAIM OF MERMAID    95 - 100

CLAIM OF INCOFE    101 - 120

INCOFE's Damages    121 - 127

Interest on Cargo Detained Aboard Atlantis Two    128 - 132

Extension of Cargo Insurance    133 - 134

Survey Fees    135

Payment to ABOPAC for Differential on Cost of Replacement Potash    136 - 148

Shortage and Freight and Market Differential    149 - 150

Lost 1997 Profits    151 - 154

Loss of 1998 Profit    155 - 159

Summary    160

CLAIM OF ABN-AMRO BANK N.V.    161 - 163

First Mortgage    164 - 183

CLAIM OF FRASER SHIPYARD    184 - 185

Departure from Usual Ranking of Priorities    186 - 192

Altered Priorities: The Case of Fraser Shipyard    193 - 208

CONCLUSION    209 - 212

Date: 19990611

Docket: T-111-98

Enter Style of Cause just after [Comment] code.

-    FRASER SHIPYARD AND

INDUSTRIAL CENTRE LTD.,

Plaintiff,

- 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 others

interested in the ship "ATLANTIS TWO",

Defendants,

- and -

THE OFFICERS AND CREW OF THE SHIP

"ATLANTIS TWO",

Intervenors,

- and -

LLOYD'S REGISTER OF SHIPPING,

Intervenor.

[1]    These reasons deal with the priorities of in rem claimants to the sale proceeds of the Atlantis Two and also touch upon the assignment of the claim of the crew for repatriation costs to the Crown. Some of the issues as to priorities are fairly standard. Other issues, such as the alteration of usual priorities, the nature of various American claims of lien, including for breach of head charter and of sub-charter and the enforcement, by way of Canadian sister ship procedure, of a substantive American maritime lien, have either been less well canvassed or are novel.

[2]    By way of pertinent background, this action was begun in January of 1998 as a ship-repairer's necessaries claim, being for work done at Vancouver in December 1997 and January 1998, to fulfil Coastguard enforced Port State Control requirements, the ship then being detained. The Atlantis Two was arrested in another necessaries action on 5 January 1998 and in this action on 30 January 1998, while at anchor in Vancouver Harbour. Subsequently, the owners having abandoned the Atlantis Two, the officers and crew of the ship intervened, obtaining an order for sale pendente lite, 27 May 1998, the ship then laden with a cargo of potash for Guatemala and Costa Rica.

[3]    As various interested entities learned of the proceedings they took active parts. Particularly, International Coffee & Fertilizer Trading Co. ("INCOFE"), the cargo owners and Mermaid Shipping Co. Ltd., ("Mermaid"), a bunker supplier, had themselves joined as Defendants. In the result the ship was sold with an obligation to deliver the cargo. The diesel and bunkers aboard, while going with the ship, were valued and the proceeds kept in a notionally segregated fund, for Mermaid claims as an owner of the fuel.

[4]    The sale of the ship, at $1,100,000 was accomplished by Court Order 11 August 1998. At the same time the bunkers were sold, with the ship, at $58,393.49. All dollar figures throughout these reasons are in American currency, unless otherwise noted. The price was below appraised value of $1,450,000, but that was not surprising given the condition of the ship, the fact that she was laden with cargo, thus precluding an inspection of holds and tank tops, and the falling state of the market.

[5]    In the interim, before the sale order, officers and crew, being without funds, obtained a repatriation order to the effect that repatriation expenses paid by the government of Canada would form a part of any maritime lien for wages. The Order allowed the assignment of the lien to the Department of Citizenship and Immigration, who underwrote the cost of returning crew members to India.

[6]    A large number of lien claimants made their appearance. Those who stayed the course are:

[7]    A number of those who initially filed claims chose not to pursue them and did not appear at the hearing to determine priorities. Those claimants, necessary suppliers, through mere accident of location, had only rights in rem, as opposed to the maritime liens claimed by those necessaries suppliers fortunate enough to be operating out of or through the United States.¹ I now turn to the conventional ranking of in rem claims and to some applicable principles.

[8]    The priority given to maritime claims in Canada generally follows the ranking of claims in the United Kingdom but, as there are some minor differences, one is best off to follow Canadian cases unless cognizant of the differences. The leading Canadian cases are Comeau's Seafoods Ltd. v. The Frank and Troy, [1971] F.C. 556, The Ioannis Daskalelis, [1974] 1 Lloyd's 174 (S.C.C.), Osborne Refrigeration Sales & Service Inc. v. The Atlantean I, [1979] 2 F.C. 661 and Llido v. The Lowell Thomas Explorer, [1980] 1 F.C. 339. Also pertinent in any general survey is The Monica S., [1967] 2 Lloyd's 113, a decision of Mr. Justice Brandon, which deals extensively with the position of a necessaries supplier.

[9]    The usual ranking of in rem claims in Canada are as follows:

[10]    In that there are a number of lien holders who claim American maritime liens, I should also touch upon the ranking, inter se, of some American maritime claims. While ranking of American maritime liens for necessaries is, in Canada, governed by the Canadian scheme of priorities, the American ranking may be relevant.

[11]    Under the American system of priorities a preferred maritime lien, for goods supplied before registration of a preferred mortgage, takes priority over the mortgage. Also pertinent is a sub-category of American maritime lien, a lien arising out of a breach of charter. If such a lien predates the mortgage on a ship it is, by 46 U.S.C. § 31301(5)(A), a preferred maritime lien taking priority over the mortgage. If such a lien post-dates an American mortgage it is, by definition, not a preferred maritime lien. Of course, as I have already indicated, and still dealing with the American system of ranking, this is not an isolated instance of loss of priority: a necessaries claimant, who supplies goods to a ship after the registration of a preferred American mortgage, does not have a preferred maritime lien, but only a contract maritime lien, subsidiary to the lien of a preferred mortgagee. Some of these concepts become relevant in considering the claim of INCOFE, as sub-charterer, for breach of charter.

[12]    As to ranking inter se of American maritime liens for necessaries, the rule that they rank in inverse order of accrual is procedural. However, because the valid portions of the American maritime liens and the portion of one Canadian necessaries claim which I have raised to be equivalent to an American maritime lien do not exhaust the available fund, I do not need to consider ranking, inter se, of these claims under Canadian law.

[13]    Not all of the American necessaries claims in this matter are fresh. Therefore I raised the questions of laches as a possible bar. None of counsel were inclined to make submissions. However, reasonable diligence is an important aspect of successful enforcement of an American necessaries claim, a point which I will touch upon later.

[14]    As there are a number of American necessaries claims, which give rise to substantive statutory maritime liens, The Ioannis Daskalelis (supra) is pertinent. There the Supreme Court of Canada decided that the holder of a substantive American maritime lien might bring the lien into Canada and then use our procedural legislation, the Federal Court Act and Rules, to enforce it. In effect the right is American and the remedy Canadian. The right considered by the Supreme Court in The Ioannis Daskalelis was that granted under section 971 of the United States Code which provided, in part, that a person furnishing necessaries "... shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall not be necessary to allege or prove that credit was given to the vessel.". The current provision, section 31342, dealing with establishment of maritime liens, provides in part that:

... a person providing necessaries to a vessel on the order of the owner or a person authorized by the owner -

Section 971 and the present section, 31342, are similar.

[15]    Mr. Justice Ritchie, who wrote the judgment in The Ioannis Daskalelis, referred to The Strandhill, [1926] S.C.R. 680 and particularly touched on a comment of Mr. Justice Newcombe as to the nature of the American maritime lien which was enforced in The Strandhill. Mr. Justice Newcombe pointed out that the Exchequer Court was empowered to enforce a maritime lien for necessaries notwithstanding that the right may have been acquired under foreign law and particularly, and here I refer to Mr. Justice Ritchie's comment at page 177:

Mr. Justice Newcombe, however, had been careful to point out that "it must ... be remembered that it is the right and not the remedy which is regulated by the lex-loci."

Mr. Justice Ritchie then went on to say:

I do not find it necessary to go further than the decision in The Strandhill to find authority for holding that the necessary repairs furnished by Todd Shipyards Corporation in New York gave rise to a maritime lien against the defendant ship which is enforceable in this country, but the further question to be determined in this case is whether that lien takes precedence over the respondent's mortgage claim, and in my view this question must be determined according to the law of Canada (ie. the lex fori).

Mr. Justice Ritchie considered this point briefly but thoroughly and concluded that the maritime lien of the ship repairer, a necessaries lien under American law, took priority over a ship's mortgage. Pertinent here is not only this priority, but also that the ranking, as between the lien and the mortgage, is to be determined according to the law of Canada.

[16]    The Ioannis Daskalelis also contains a further pertinent statement. The Ioannis Daskalelis was a Greek ship. The contest was between the registered mortgagee of the ship and an American necessaries claimant, which had furnished ship repairs. The mortgage of the Ioannis Daskalelis was registered in December of 1961. The necessaries repair work was performed in March of 1963.

[17]    Mr. Justice Ritchie notes, at page 176, that:

It is not questioned that by virtue of 46 U.S.C. pars. 971 and 972, the appellant's claim for necessary repairs gave rise to a maritime lien in the United States of America which in that country would have taken precedence over the mortgage claim...

At first blush one might question this statement, for the mortgage predates the necessaries claim and thus, one might think, fall within the general rule that a preferred mortgage takes priority over all subsequent necessaries claims, including repair services.

[18]    This apparent priority is not the case for, when 46 U.S.C. was amended in 1954, to give preferred status to validly registered foreign mortgages, American necessaries suppliers managed to lobby a proviso that foreign mortgages be subservient to maritime liens for necessaries: this provision is presently found in 46 U.S.C. § 31326(B)(2).² The effect of this subsection, combined with the relevant part of the definition of a preferred maritime lien, requiring that a necessaries claim arise before the registration of the mortgage against the ship, is that such a necessaries claim is not preferred, yet it comes ahead of a foreign mortgage which is a preferred mortgage under the American system.

[19]    The conclusion which must arise out of all of this is that the Supreme Court of Canada was cognizant that it was enforcing a garden variety maritime lien, a lien that was not a preferred maritime lien, by placing it in the Canadian priorities framework under the general rubric of maritime liens. This concept is useful in analyzing the claim of INCOFE, to which I will come in due course.

[20]    The list of priorities set out above and the comments are not exhaustive, but rather are a framework showing the relative positions of various types of relevant in rem claims and some of the special considerations which are relevant in this instance. I now turn to a consideration of the various claims.

[21]    In May of 1998 the Master of the Atlantis Two, the vessel then at anchor in Vancouver Harbour, advised the harbour master that, despite efforts to reduce fuel consumption, the ship would run out of diesel fuel to run generators and to manoeuvre with the main engine by about the 15th of May. At that point the vessel, unable to maintain its systems, including fire suppression systems and unable to move on immediate notice, would not only be in breach of port by-laws, but would also be a danger to the crew and to the port.

[22]    An arrangement was made, approved in advance by the Court, to have a fuel supplier, James Peebles, put diesel fuel aboard up to a value of $16,250, with a priority equivalent to that of an Admiralty Marshal for expenses.

[23]    The cost of the diesel fuel and delivery was $13,250. Mr. Peebles shall have, paid out of the sale proceeds with a priority as if a Marshal's expense, $13,250 for fuel and delivery, $7.50 in bank charges and simple interest at 7% from 14 May 1998, being the date of the bank transfer. As the Sheriff's account has been satisfied Mr. Peebles' claim is now the first charge on the sale proceeds.

[24]    Here I note that where appropriate interest on claims is not governed by invoice conditions or other argeement, I have awarded interest at 7%. This is not an arbitrary figure, but rather one based on an estimate by inspection of the Bank of Montreal commercial lending rates for the relevant period.

[25]    The expense of repatriating the crew was dealt with at an earlier stage. Those repatriation orders were to the effect that repatriation costs formed a part of any maritime lien for wages and that the proceeds of the lien might be assigned to the federal government. I will shortly touch upon the reasons for that order.

[26]    I shall refer to the crew, officers and master collectively as the "Crew", for there is now no longer any distinction between the rights of masters, officers and seamen, as to the quality of the lien of each holder, as there once was.³ The Crew brought a separate motion to establish a priority for payment out of their wages, including the repatriation costs which are assigned to the Crown. On the hearing of the Crew's initial motion for payment at least one counsel urged that the Crew might well have an inferior priority under some applicable off-shore law. Thus I ordered that all priorities be determined at the same time.

[27]    A portion of the claim of the Master is for disbursements, mainly for food for the crew, out of his own pocket. The disbursement became essential because the ship had been abandoned by owners, who would or could not pay for food and essential supplies. The expenditure by the Master, as a result of all of this, clearly falls within the definition and satisfies the tests for a Master's disbursement lien, thus securing the Master's claim by a maritime lien: see for example Doris v. The Ferdinand, now reported (1999), 155 F.T.R. 236 (T.D.), at page 239. Master's disbursements are not only secured by a maritime lien, but also, pursuant to section 212(2) of the Canada Shipping Act, R.S.C. 1985, c. S-9, have the same priority as does the Master's claim for wages:

(2) The master of a ship, and every person lawfully acting as master of a ship by reason of the decease or incapacity from illness of the master of the ship, in so far as the case permits, has the same rights, liens and remedies for the recovery of disbursements or liabilities properly made or incurred by him on account of the ship as a master has for the recovery of his wages.

By reason of the Canada Shipping Act I do not have to consider Master's disbursements separately. In the absence of any substantial challenge I accept the figures for the Master's disbursements as presented.

[28]    No substantial challenge to the priority of the Crew for wages and repatriation costs arose. The Crew thus has a first priority to the sale proceeds that remain after the Sheriff's costs of the sale and reimbursement to Mr. Peebles for diesel fuel. The sum awarded for wages (including Master's disbursements) is $354,357.37. This first priority extends to the repatriation costs in the amount of $31,356.41 (Cdn.). The Crew shall have interest at 7% on wages and on Master's disbursements running, and here I shall be arbitrary, from the date of the arrest, for no Crew member has been paid past that date and indeed, perhaps no payments were made of wages earned after 30 December 1997. Interest at 7% shall run on repatriation costs from the date of the sale, 11 August 1998.

[29]    The Crew also seeks taxed costs. In the present instance I have not awarded costs to other parties or to successful claimants, except as to costs of arrest to the Plaintiff and a lump sum to the crew for organizing the sale. This is so even though many of the claimants and parties assisted in the co-operative effort of bringing the ship to sale. Were there ample funds to satisfy all of the claims and mortgages, that might be an additional factor governing the award of costs. Given that the mortgages registered against the ship will not be fully satisfied I do not see the justification for a substantial or even any award of costs to all of the parties and claimants. Nor do I see the point of forcing those parties and claimants to whom costs are awarded to tax them. Rather a lump sum is more appropriate. The Crew shall have a lump sum for costs and disbursements of $6,000. The lump sum in this instance is not likely an indemnity and is not intended as such. Rather it is in recognition of the efforts put into bringing the ship to a successful sale.

[30]    On two occasions, following the arrest of the ship, I dealt with motions by intervening Crew members who wished to be repatriated. Normally such expenses would be borne by the owners, however the owners had abandoned both the ship and Crew. In the first instance the Crew, having been on short rations and without pay, wished that a number of their group, who were in excess of the manning required by the ship in port, be repatriated on terms which would allow Citizenship and Immigration to pay the cost and then recoup that expense through an assignment of repatriation costs, those costs to form part of the Crew's wage claim with a similar priority. The Order provided:

The cost of repatriating the seventeen officers and crew members, referred to above, shall form part of any maritime lien for their wages. The officers and crew may assign the proceeds of this lien, to the extent of repatriation costs, to Citizenship and Immigration, a Department of the Federal Government of Canada. Reasons to follow. (Order of 13 July 1998)

[31]    Subsequently I made a second and similar Order to deal with repatriation of the balance of the Crew on the sale of the ship. As I say, usually repatriation costs are for the owner's account. However repatriation costs, borne by seamen themselves, can rank with wage claims. Here I would refer to The Tergeste, [1903] P. 26 at 34, a decision of Mr. Justice Phillimore, the essence of which is captured in a part of the headnote:

Held, by Phillimore J., that the victualling allowance was equivalent to wages, carrying a maritime lien, and, therefore, the total claim of the master and crew for wages and disbursements up to the date of the vessel entering the dry dock, together with the cost of subsistence from the time of leaving the vessel until leaving the country, and the cost of repatriation ranked first, with costs, including in such costs such sum as the registrar should allow by way of subsistence money from the date of the writ to the time of leaving the vessel;

[emphasis added]

The Immacolata Concezione, (1883) 9 P.D. 34, referred to in The Tergeste, is also pertinent. There repatriation costs were ranked in priority with the wages of the seamen.

[32]    The second issue is whether a maritime lien for repatriation may be assigned where, as here, repatriation expenses are paid by someone else. Certainly this Court has ordered such an assignment as referred to in The Lowell Thomas Explorer (supra). There were submissions that the motion granting the assignment referred to in The Lowell Thomas Explorer was wrongly decided. I do not believe so. As I said in The Edmonton Queen (indexed as Scott Steel Ltd. v. The Alarissa), [1996] 2 F.C. 883 at 925, "[s]ubject to the leave of the Court anyone who pays off a seamen's lien for wages acquires no lien on the ship.".

[33]    The concept suggested in The Edmonton Queen is, here, particularly apt, for otherwise the crew members would have remained aboard not only both under employed and under provisioned, but also accruing wages, probably in excess of repatriation costs, which would form a maritime lien for wages to be satisfied out of the sale price. Moreover, at the point of the sale, any crew members who elected to return home would be entitled to repatriation costs along with their wages.

[34]    The view of assignability of wage and like claims, by the authority of the Court, is consistent with English authorities, for example The Vasilia, [1972] 1 Lloyd's 51, The Berostar, [1970] 2 Lloyd's 403 and The James W. Elwell, [1921] P. 351 at 357, together with a number of earlier authorities referred to in Tetley on Maritime Liens and Claim, Second Edition (1998), Blais International Shipping Publications, Montreal, at page 1231. Indeed, Mr. Tetley deals with assignment of maritime liens, by Court authority, fairly briefly:

It would appear clear in virtue of "Canadian maritime law", which, amongst other things, is an expression of English maritime law as of 1934, that a lien may be assigned by order of a court. This is the British practice and was the view of the Court, albeit obiter, in Ross v. The Aragon, [1943] Ex.C.R. 41, at page 43.

[page 1230 - 1231]

[35]    I also considered submissions to the effect that Customs and Immigration had a duty not to let anyone overstay their welcome in Canada and, for that reason, ought to fund repatriation. In rejecting that argument I note that the relevant provisions in the Immigration Act, are permissive and here I would refer, for example, section 87(2) and section 120, dealing with assistance on leaving Canada. Leaving aside the permissive nature of this sort of provision in the Immigration Act, there is a difference between the forced expulsion of an undesirable alien, at the Crown's expense, and the repatriation of a seaman who is properly within the Canadian jurisdiction. There is no reason why the cost of repatriating crew members ought to fall upon taxpayers when there is a fund readily available to satisfy in rem claims, including those of the crew members, against The Atlantis Two.

[36]    Before dealing with the separate issues of the priorities of each of the claimants I will consider part of the claim of Mermaid Shipping Co. Ltd. ("Mermaid"), head charterers under a charter party of 11 July 1997, as owner of bunkers aboard the ship. Mermaid sub-chartered the Atlantis Two to International Coffee and Fertilizer Trading Co. (INCOFE) Ltd. ("INCOFE") pursuant to a voyage charter of 18 November 1997.

[37]    In part Mermaid claims $114,752.38, being the value of bunkers on the vessel at the time of her arrival in Vancouver and subsequently put aboard the vessel by Mermaid. This claim is based on various sections of the head time charter, however only two of those sections are relevant:

Clause 40, referred to in clause 3 of the time charter, refers to the amount of bunkers and diesel fuel aboard ship on delivery by the owners. I have no reason to doubt the affidavit evidence that Mermaid was the owner of all bunkers and diesel fuel aboard the Atlantis Two on arrival at Vancouver and that it put aboard and paid for additional fuel at Vancouver.

[38]    When the Atlantis Two was sold the Sheriff certified that the bunker fuel and diesel oil aboard sold for $58,393.49, a figure which includes the delivery costs of that fuel.

[39]    Mermaid's claim is, as I say, for all of the fuel that was aboard the Atlantis Two on arrival at Vancouver, together with the fuel that Mermaid subsequently paid for and put aboard the Atlantis Two. Mermaid's estimate is that, at one point, it owned about 680 tonnes of bunkers and about 160 tonnes of diesel oil. However, during the time the Atlantis Two was held at the port of Vancouver a good portion of that diesel oil was used to run the ship's generators.

[40]    When the Atlantis Two was sold the bunker fuel aboard total 729.32 metric tonnes, valued at $52,875.70 and a minimal amount of diesel oil, 16.27 metric tonnes valued at $2,684.55. However Mermaid's claim is not just for the residual fuel aboard at the time of the sale, but also for diesel oil consumed while the Atlantis Two was at Vancouver. Moreover, those claims are based on higher fuel prices of an earlier date.

[41]    Mermaid submits that it ought to be paid for the diesel oil consumed at Vancouver, for that fuel was required in order to keep the ship operating, just as was the fuel supplied by Mr. James Peebles which, by Court Order, had a priority as if a Marshal's disbursement. Certainly Mermaid, in addition to owning fuel aboard when the ship arrived at Vancouver, also put aboard diesel fuel at Vancouver.

[42]    Short of a Court Order and perhaps some limited exceptions, I do not accept the argument that fuel supplied and owned by charterers, but burned by owners, during the time the vessel was detained and under arrest at Vancouver, ought to have any substantial priority. It is not as if the value of the fuel used is in any way secured by a lien. Rather it was Mermaid's fuel, used by owners and therefore that portion of the fuel claim is purely an in personam claim against the owners.

[43]    Even if one looks upon Mermaid's actions not as supply of diesel fuel for its own use as charterer, but rather as supply of fuel to the ship, that supply of fuel does not, under Canadian law, constitute more than a mere right in rem against the ship with a low and unhelpful priority.

[44]    In special circumstances one may justify a departure from the Canadian scheme of priorities, either raising or lowering a usual priority. I dealt with this at length in The Edmonton Queen, (supra) at 896 and following. This was upheld on appeal (1997), 125 F.T.R. 284, Mr. Justice Richard, as he then was, paraphrasing my conclusion at page 288:

The Prothonotary stated that any change in the usual ranking of maritime priorities must be accomplished by the application of equitable principles. On his analysis of Atlantean I, Re, [1979] 2 F.C. 661, at 668 (T.D.), and Metaxas et al. v. Ship Galaxias et al. (No. 2), [1989] 1 F.C. 368; 19 F.T.R. 108, at 423 [F.C.] (T.D.), he concluded that the usual priorities ought not to be departed from except in very special circumstances and that the powers in equity to upset the long established orders of priority should be exercised only where necessary to prevent an obvious injustice. He also considered the judgment of Mr. Justice Brandon in Ship Lyrana (No. 2), Re, [1978] 2 Lloyd's Rep. 30 (Q.B.D. Admiralty Ct.), where the test used was that of a plainly unjust result. He was of the view that the phrasing of the test pointed to a heavy onus on the part of Treasury Branches to upset the usual long-established priorities.

[45]    In this instance there is, arguably, some injustice in that American necessaries suppliers succeeded on their maritime lien backed claims, in at least one instance for somewhat mundane, although useful items for domestic shipboard use. In contrast, Mermaid's fuel was used to keep the ship operating, while at Vancouver, as was the diesel fuel supplied by Mr. Peebles and for which the Court agreed, in advance, to grant a priority.

[46]    In considering Mermaid's claim for its fuel consumed, at least some of it while the Atlantis Two was under arrest, I have revisited the Atlantean I, [1979] 2 F.C. 661, both generally and particularly at page 688 and following. There the marshal was in possession. Claimants made various disbursements on the marshal's behalf, some authorized and others not, in order to assure the safety and protection of the ship. The expenses included fuel and lubricating oil, supplied in the order of $2,250, by the RCMP and by the Canadian Coast Guard, after the Atlantean I tried to break her arrest, but was brought back by the authorities. Mr. Justice Walsh was of the view that the expenses were of the sort that the marshal, in other circumstances, would have incurred, or which he would have authorized. Therein lies the difference. In the Atlantean I the marshal was in a position to control supplies to the ship, could claim such as marshal's disbursements and indeed did so. Here, while Mermaid rendered a valuable service to the Atlantis Two, it was outside of either the framework of a marshal's supervision or of any court order.

[47]    I have considered various other cases on this issue, referred to me by Mr. Buchan, including The Dora [1977] 2 F.C. 513, a decision of Mr. Justice Collier. In The Dora a fuel supplier succeeded on its claim for fuel supplied to the vessel, but only on the basis that the marshal had charge of the Dora and would undoubtedly have authorized the use of and paid for the fuel consumed while he had charge of the ship. It did not concern Mr. Justice Collier, to the point of departing from the usual priorities, that fuel consumed before the intervention of the marshal, which was for the benefit of all interested in the Dora, was not paid for as a marshal's expense or, indeed, at all.

[48]    All of this, as ably put by Mr. Buchan, on behalf of Mermaid, points to a Canadian dilemma: American necessaries suppliers, even those supplying necessaries in Vancouver are, for the most part in the present instance, able to recover their accounts, while Canadian necessaries suppliers cannot.

[49]    The British solved this dilemma with The Halcyon Isle, [1980] 2 Lloyd's 325 (P.C.), essentially by rejecting the idea of the substantive nature of an American maritime lien and thus levelling the playing field by holding that all necessaries suppliers had the same right, that is the same right that a local necessaries supplier would have had under English law.

[50]    In the present instance and in others there are many examples of the inequity unfortunately brought about by the Supreme Court of Canada's recognition of the substantive nature of American maritime lien in The Ioannis Daskalelis (supra). However I do not think that the circumstances, in the case of Mermaid, constitute very special circumstances, an obvious injustice, or a plainly unjust result. Moreover, to allow Mermaid's claim, short of these tests, with the ship neither under a Sheriff's nor a Marshal's control, nor with the benefit of a Court Order, such as that which Mr. Peebles obtained, would result in wholesale disregard for the Canadian priorities structure. This is not to say that the structure ought not to be changed. Rather, it may be that necessaries suppliers in Canada, in the broadest sense, including shipyards, ought to press for legislative change as has happened and is happening in other maritime jurisdictions.

[51]    In summary, and this is unfortunate, but overall not unjust, the Mermaid claim for bunkers consumed is, at best, at statutory right in rem. Unfortunately there are not sufficient funds to satisfy this aspect of Mermaid's claim.

[52]    Subject to dealing with a possible interest of the mortgagee in the bunker and diesel fuel and leaving aside any argument as to mixing of the Mermaid diesel oil with the Peebles diesel oil, which involves a very small amount of money, Mermaid is entitled to the value of the bunker and diesel fuel aboard, less a share of the costs of the sale, a point which I will deal with in due course, and appropriate interest.

[53]    The mortgagees are not now claiming an interest in the fuel aboard the Atlantis Two. This is appropriate. However, this aspect was dealt with in argument. The topic therefore deserves a brief consideration. Moreover, the case law leads to a pertinent subject, the cost of the sale of the bunkers.

[54]    To begin, the terms of the mortgage do not extend to the fuel and here I would refer to The Eurostar [1993] 1 Lloyd's 106, in which Mr. Justice Sheen considered the position of charterers, who claimed ownership of bunkers and so intervened in proceedings between mortgagee and mortgagor. Mr. Justice Sheen held that, even assuming that the bunkers were the property of the ship owner, the term "appurtenance" in the mortgage deed did not cover fuel and thus the fuel was not the property of the mortgagee.

[55]    Second, by the terms of the head charter, property in the fuel did not pass to owners in any event, but remained in Mermaid, as charterer. For this second proposition I would also refer to The Saint Anna [1980] 1 Lloyd's 180 (Q.B.) and The Span Terza [1984] 1 Lloyd's 119 (H.L.), in addition to The Eurostar (supra).

[56]    In The Saint Anna the charter provisions were analogous to those in the present instance. There the bunkers were held to be the property of the charterer, not the owner. The charterer had paid for and taken over all of the fuel aboard the ship when it took the vessel on hire and subsequently purchased fuel for the vessel. At the end of the charter period it was for the owner to buy the fuel aboard from the charterer. Mr. Justice Sheen held that the charterer was clearly the owner of the fuel.

[57]    In The Span Terza (supra) the terms of the charter party were similar to those in the present instance. There the House of Lords held that on the commencement of the charter, with the payment for and taking over of the fuel, the property in the fuel vested in the charterer. The owner was no more than a bailee of the fuel aboard. In reaching this conclusion the House of Lords specifically approved The Saint Anna. Even when the charter terminated the bunkers remained the property of the charterer, with the owner still in the position of bailee, of course subject to the owner purchasing the fuel from the charterer.

[58]    Finally, in The Eurostar (supra) Mr. Justice Sheen came to the conclusion that, under a similarly worded charter party, bunkers aboard were the property of the charterer. The vessel was laid up, much as in the present instance, with owners being unable to pay for repairs. The Eurostar was then sold. Mr. Justice Sheen concluded that the ship owner had no right to use the bunkers after the charter terminated, but rather the bunkers remained the property of the charterers until they were sold by the Admiralty Marshall and thus the net proceeds of the sale of the bunkers were paid out to the charterers.

[59]    The reference to net proceeds, at page 111 of The Eurostar, brings up a final point, whether it is proper for Mermaid to receive the gross proceeds of the sale of the fuel aboard the Atlantis Two, given that there were costs of sale, costs which would otherwise all detract from the amount available to those claiming against the proceeds of the sale of the ship. It is only equitable that a pro rata portion of the cost of the sale of the ship and of the fuel aboard be absorbed by Mermaid.

[60]    The Sheriff's costs of the sale were, in round figure, $102,000 (Cdn), or in American funds roughly $65,000. The value of the fuel aboard at the time of sale, $58,393.49, amounts to about 5.3% of the sale price. Five point three percent of the cost of the sale is, again in round figures, $3,450. The recovery of Mermaid, on the basis of a fuel sale value of $58,393.49 less costs of sale, of $3,450, is $54,943.49.

[61]    In summary, Mermaid is entitled to the net value of the fuel, being the sale price of the fuel, kept in a notionally separate fund, less an equitable portion of costs of sale As to interest, Mermaid shall be entitled to whatever interest accrued on the value of the fuel sold while it was held in trust and on deposit.

[62]    There are four claims of maritime lien by American necessaries suppliers who supplied goods to the ship in the United States. These claimants are Strachan Shipping Company ("Strachan"), Hellenic Ship Supply Inc. ("Hellenic"), Atlantic Steamers Supply Co. (DE) Inc. ("Atlantic DE") and Atlantic Steamers Supply Co. (NLN) Inc. ("Atlantic NLN"). Except for part of the claim of Atlantic DE, whose supply of goods in 1993 predates the mortgages on the Atlantis Two, these claims are not secured by preferred maritime liens. Rather, they are maritime liens which, by reason of the 1954 proviso added to 46 U.S.C. § 31326, touched upon earlier, would, in the United States, rank above the mortgages of the Atlantis Two. Of course, within the Canadian framework and applying The Ioannis Daskalelis, these claims are ranked above the claim of ABN-Amro, as mortgagee. Because no one made submissions as to laches, or ay other special rule, the claims of maritime lien, as allowed, and given the funds available, rank pari passu.

[63]    Strachan is a Savanna, Georgia, company engaged in stevedoring and general ship supply. It supplied necessaries to the Atlantis Two at Savanna between 6 April 1997 and 13 April 1997, together with a cash advance to the Master. The balance owing to Strachan is $3,429.37. Strachan claims interest at Bank of Canada commercial lending rate plus 2% from 13 April 1997 together with costs.

[64]    Strachan shall have its claim as presented, at $3,429.37 together with interest at 7% from 13 April 1997 to date. Strachan has been successful as a lien claimant, but took no more active a role in bringing the ship to sale than did many of the other claimants, all of whom cooperated with the intervening crew members, who had the major role in bringing the ship to sale. There will be no award of costs to Strachan.

[65]    The claim of Hellenic is for various necessaries, ranging from laundry soap through small parts, tools and fittings supplied in February of 1997 at Tampa, Florida. The outstanding balance is $6,425.75.

[66]    Hellenic's invoice terms provide for interest at 1.5% per month and also for the costs of collection "... such costs to include reasonable attorney's fees if collection through an attorney is necessary.".

[67]    Dealing first with the claim for attorney's fees, my understanding is that in the United States there is no maritime lien for attorney's fees. This is touched upon in Parks on the Law of Tug and Tow, Third Edition (1994), Cornell Maritime Press, at page 792. As well, Tetley on Maritime Liens and Claims (supra) makes the statement that "The basic principle is to refuse a lien for attorney's fees because usually no service has been rendered to the ship or for the common benefit of all the creditors." (page 241). Mr. Tetley goes on to refer to The Wahcondah [1964] A.M.C. 2425 at 2427:

The nature of maritime liens, even those firmly established by statute and time, required a service to the ship if premised on contract ... This court can find no reasonable hypothesis to support a finding that these attorney fees were expended as a service to the ship. Moreover the claim does not relate to any established lien which would allow an extension to cover this unusual situation. There is simply no basis in law or equity for the recognition of privileged payment of this claim.

[68]    Hellenic will have its claim in the amount of $6,425.75 together with interest at 1.5% per month from 13 February 1997. No costs are awarded.

[69]    The total claim of Atlantic DE is for $25,456.08, together with interest at 2% per month for necessaries supplied in Phillidelphia, Tampa and Baltimore.

[70]    The necessaries delivered in Tampa and Baltimore were supplied in July of 1997. The amount owing on those three invoices is $5,114.84. The larger invoice upon which Atlantic DE claims is one in the amount of $20,341.24 dated 19 December 1996, for necessaries delivered in Phillidelphia on 13 November 1996. These claims are allowed in full. There will be no award of costs.

[71]    The invoices clearly set out that interest is at 2% per month, by some measures excessive, but not out of the ordinary in the trade. Interest is allowed on the 1997 portion of the claim from 10 August 1997 to date and on the 1996 portion of the claim from 1 January 1997.

[72]    The claim of Atlantic NLN, $23,421.54, is for necessaries supplied at New Orleans, Louisiana.

[73]    Two of the invoices under which Atlantic NLN claims are for goods delivered in November of 1993. As I say, neither laches nor limitation were argued. The total amount owing on those two invoices is $5,756.75. By reason of the date on those invoices, a date before that of the registration of the mortgages against the Atlantis Two, the substantive right which Atlantic NLN brings into Canada is that of a preferred maritime lien.

[74]    The balance of the Atlantic NLN claim is for goods supplied in December and in June of 1996, in the amount of $17,664.79. Atlantic NLN shall have its claims as presented with interest at 2% per month from 1 December 1993 in the case of the first two claims. In the case of the second two claims, interest shall run on $3,018.73 from 15 December 1996 and on $14,646.06 from 22 June 1996. No costs are awarded.

[75]    The claim of Nautilus Australia Limited ("Nautilus"), with a place of business in Port Adelaide, Australia, is for goods and services supplied in 1997 at Port Lincoln, Australia, in the amount of $13,938.65 (AUS), say just over $13,000.

[76]    While the goods and services supplied are clearly necessaries, a necessaries supplier in Australia is not accorded a maritime lien, for generally the Australian 1988 Admiralty Act added no new liens to augment those recognized under the former colonial legislation.

[77]    Regrettably Nautilus stands in the same position as a usual supplier of necessaries in Canada, that is it holds some form of in rem right, coming below both maritime liens and mortgages.

[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 United 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 necessariesmen 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.

[83]    Unitor ASA ("Unitor") of Oslo, Norway, delivered marine supplies, through an agent, Unitor Ships Service Inc., of Jersey City, New Jersey, USA, to the Atlantis Two in Mexico in November of 1997 and in Vancouver in December of 1997 and January of 1998, for which Unitor claims a maritime lien in the amount of $7,413.64.

[84]    The matter does not end there for Unitor also claims for the price of goods delivered to the Epta and the Atlas, said to be sister ships to the Atlantis Two. For the purpose of the present consideration I am prepared to assume that the Epta and the Atlas are sister ships.

[85]    In the case of the Epta the claims total $15,729.14. The necessaries were delivered at ports in China, Norway and the United States. Some of the necessaries were delivered as long as four months after the arrest of the Atlantis Two at Vancouver. In the case of the Atlas all of the necessaries involved, valued at $4,493.80 and delivered at American ports, were provided in March and April of 1998, several months after the arrest of the Atlantis Two.

[86]    I am tempted to comment on the propriety of trying to claim for necessaries against a vessel which has already been arrested, for one of the requirements of successful enforcement of a maritime lien for necessaries is diligence and here I refer to the "Atlas" necessaries. The maritime community is a small one. Anyone being diligent would or ought to have been aware of the arrest of the Atlantis Two and thus of the fact that owners were in difficulty. From this it might well follow that the necessaries supplier, not having been diligent, ought not to be able to enforce maritime liens for goods supplied well after an arrest. However, this point was not argued. The claims of Unitor may thus be dealt with by determining two issues: first, whether goods provided to the Atlantis Two, by a Norwegian ships supplier, acting through an American agent, may claim a maritime lien when goods are delivered to a ship which is not at an American port; and second, whether an American maritime lien which is not against the Atlantis Two, may be enforced against ships in the same ownership using Canadian sister ship procedure.

[87]    Dealing first with whether an off-shore necessaries supplier, using an American agent, may claim a maritime lien for goods supplied either in an American port, or in yet another off-shore port, I have considered and accepting the expert evidence of Charles S. Donovan of the Walsh Donovan firm in San Francisco. Mr. Donovan is well known in the international admiralty bar. His credentials are solid. His opinion is that "... under the laws of the United States, having sold and delivered goods and services to those three vessels⁴, Unitor obtained maritime liens against the vessels to the extent of its claims against them.". Now the reasoning by which Mr. Donovan reaches this conclusion is interesting, concise and shows a grasp of the subject. It is worth while setting out a portion of his affidavit sworn 30 October 1998:

    5.    Under U.S. law, a maritime lien may arise by statute. Prior to 1989, the relevant statute, The Federal Maritime Lien Act ("FMLA"), 46 U.S.C. §§ 971-974, in pertinent part, provided as follows:

        46 U.S.C. § 971.

Other necessaries include such things as vessel stores and supplies of the type Unitor furnished. Findley v. Robert C. Herd & Co., 250 F. 2d 77, 80 (5th Cir. 1957); Gounares Bros. & Co. v. United States, 292 F. 2d 79, 84 n. 12 (5th Cir. 1961).

    6.    The FMLA legislative history makes it clear that the purpose of the act is to protect terminal operators, ship chandlers, ship repairers, stevedores and other suppliers who furnish necessaries to vessels. See, e.g., H.R. Rep. No. 340, 92 Cong. 1st Sess. (1971) reprinted in 1971 U.S.C.C.A.N. 1363, 1971 W.L. 11348 (Leg. Hist.).

    7.    The case law interpreting the FMLA also makes it clear that a maritime lien arises in favor of a supplier even if the goods and services are provided in a foreign port. See, e.g., Exxon Corp. v. Central Gulf Lines, Inc., 780 F. Supp. 191 (S.D.N.Y. 1991) (Exxon held to have maritime liens for bunkers supplied in New York and Saudi Arabia); Mobil Sales and Supply Corporation v. M/V PANAMAX VENUS, 1986 A.M.C. 420 (C.D. Cal. 1985), aff'd, 804 F. 2d 541 (9th Cir. 1986) (Mobil held to have maritime liens for lubrication oil supplied in China and Japan); Gulf Trading & Transportation Co. v. M/V TENTO, 694 F. 2d 1191 (9th Cir. 1982) (Gulf held to have maritime liens for bunkers and canal expenses supplied in Italy and Panama Canal). See also W. Tetley, Maritime Liens and Claims 249 (1985) ("In virtue of 46 U.S.C. § 971, it is now clear that the lien for supplies and services is against U.S. as well as foreign vessels, whether or not the supplies or services were provided in U.S. or foreign waters.").

    8.    When, as here, the owner's agent, C Ventures of New York, places an order with the supplier's agent, Unitor Ships Services, Inc., in New Jersey, a lien arises under U.S. law, even though physical delivery takes place outside the United States. See M/V TENTO, 694 F. 2d at 1192, 1195 (where transaction was concluded in the United States, lien arose even though fuel delivered to vessel in Italy). The fact that Unitor A.S.A. is incorporated outside the United States doe not defeat its lien claim. A/S Dan-Bunkering, Ltd. v. M/V ZAMET, 945 F. Supp. 1576 (S.D. Ga. 1996) (lien enforced in favor of Danish bunker supplier); Conti-Lines, S.A. v. M/V BARONESS V., 1992 A.M.C. 681 (M.D. Fla. 1991) (lien enforced in favor of Belgian company who advanced money in U.S. for repairs).

    9.    The FMLA, in 1988, was amended and re-codified as part of the Commercial Instruments and Maritime Liens Act, 46 U.S.C. §§ 31301-31343 ("CIMLA"). CIMLA, in pertinent part, provides as follows:

            (1)    the owner;

            (2)    the master;

                (A)    the owner;

                (B)    a charterer;

                (C)    an owner pro hac vice; or

                (D)    an agreed buyer in possession of the vessel.

        46 U.S.C. § 31341

        Establishing maritime liens

            (1)    has a maritime lien on the vessel;

        (b)    This section does not apply to a public vessel.

        46 U.S.C. § 31342.

The CIMLA legislative history makes it clear that, in amending and re-codifying the FMLA, the U.S. Congress did not intend to make any substantive change in the law regarding the creation of a maritime lien in favor of a supplier of necessaries to a vessel. See, H.R. Rep. No. 918, 100th Cong., 2nd Sess. (1988), reprinted in 1988 U.S.C.C.A.N. 6104, 1988 W. L. 169925 (Leg. Hist.).

    9.    Consequently, in view of the cited statutory provisions, legislative history and judicial decisions, and based upon my personal experience, I hold the firm opinion that the claims of Unitor constitute maritime liens under U.S. law with respect to the goods and services sold and delivered to each of the aforementioned three vessels regardless of whether the goods and services were delivered to the vessel at foreign or U.S. ports.

[88]    To summarize, to this point, I am satisfied that Unitor, a Norwegian company, acting through Unitor Ships Services Inc., an American agent, has maritime liens against the Atlantis Two, the Epta and the Atlas, whether or not the necessaries were supplied at an American port. I now turn to the issue of enforcement of the substantive maritime liens against the Epta and the Atlas through Canadian sistership procedure.

[89]    I was referred to no case law dealing with the enforcement of substantive American maritime liens, in Canada, against a sister ship, using Federal Court sister ship procedure. I am unaware of any determinative case law on point.⁵ Nor would there be any American law that might be of assistance, for there is no American sister ship legislation. I must begin with a basic analysis.

[90]    My understanding of an American maritime lien is that it is a privilege in the form of a substantive right in property, a right against a given ship, travelling with the ship, unconditionally, until discharged and which is the foundation of an American in rem proceeding. Under the American theory of maritime liens the lien is separate and apart from the action in personam. The concepts are considered, at length, together with the underlying theory of the American maritime lien, that it is based upon personification of the ship, as opposed to the English or Canadian procedural theory, in both Price on the Law of Maritime Liens, (1940), Sweet and Maxwell Limited, London, at page 115 and following and in Parks on Tug and Tow (supra) at page 784 and following. It is this substantive right, a right against a given ship, which the American maritime lien holder brings into Canada to enforce, procedurally under Canadian law, against the particular ship with which the lien is travelling. The lien is not a substantive right against or attached to any other ship.

[91]    The sister ship provision in the Federal Court Act (the "Act"), section 43(8) is as follows:

(8) Arrest - The jurisdiction conferred on the Court by section 22 may be exercised in rem against any ship that, at the time the action is brought, is beneficially owned by the person who is the owner of the ship that is the subject of the action.

Section 22, referred to in section 43(8) of the Act set out above, gives the Court a maritime jurisdiction including as to:

22(2)(m) 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;

This specific jurisdiction, arising out the supply of goods, materials or services to a ship, may be enforced as a statutory right in rem, as set out in section 43(2) of the Act. This statutory right in rem is in the form of a necessaries claim with a priority coming after maritime liens and after mortgages.

[92]    In this framework the substantive American maritime lien does not fit into the sister ship provision, section 43(8) of the Act, which merely refers to the jurisdiction conferred on the Court by section 22 of the Act, an in personam jurisdiction, as being enforceable against a sister ship, not a right or privilege against one ship being enforced against another ship. If American maritime lien holders wished to use the sister ship procedure here in Canada they would need sister ship legislation in the United States to enable them to bring into Canada a full blown maritime lien against the sister ship.

[93]    Of course, a lien holder, assuming he or she also had an in personam right against a shipowner and assuming that shipowner was the owner of not only the wrongdoing or debtor ship, but also the sister ship or ships at the relevant time, might bring that in personam right into Canada and enforce it, procedurally, against one or more of the sister ships. However the priority of such a claim would then only be that of a statutory right in rem, of no assistance here, given the limited sale proceeds involved.

[94]    In summary, to the extent that the claim of Unitor is against sister ships, it is of no effect. Unitor's claim is limited to $7,413.64, being the maritime liens claimed against the Atlantis Two, together with interest at 2% per month, commencing 30 days after the dates of its invoices. There will be no award of costs.

[95]    I have already dealt with and allowed a portion of Mermaid's claim arising out of ownership of fuel aboard the Atlantis Two. The second portion of the claim of Mermaid is for breach of charter party by the shipowner and includes claims for overpayment of hire, loss of income and anticipated claims from Mermaid's sub-charterer, INCOFE.

[96]    Mermaid chartered the Atlantis Two from Expedient Maritime Company Limited, a Cypriot company, utilizing a New York Produce Exchange time charter. Mermaid is a Bahamian company with a place of business in Norway.

[97]    Mermaid's claim consists first of anticipated claims from the sub-charter, INCOFE, for additional cargo delivery costs ($160,000), interest on cargo value by reason of delay ($75,000), legal fees and loss of market ($95,000). Second, Mermaid claims direct loss through overpayment of charter hire to owners ($72,884), and loss of income ($132,825). Third, Mermaid anticipates ongoing expenses including those of dealing with claims against the Atlantis Two and legal fees in London, New York and Vancouver ($100,000). These claims total $635,699.01. The affidavit of claim sworn on behalf of Mermaid also seeks other expense, which might have been costs to Mermaid had the Atlantis Two not eventually delivered the cargo. Moreover, it may well be, again by reason of the eventual voyage by the Atlantis Two to deliver the cargo aboard, that some of the anticipated claims did not arise.

[98]    Under American law a charterer can have a maritime lien, for breach of charter, against an owner. In the present instance I do not see any connection with the American jurisdiction. The breach occurred in Canada. Further, clause 48 of the charter party makes it clear that English law applies. Under English law and also under Canadian law, there is generally only a statutory right in rem as a remedy for breach of charter, subject to there being some form of contractual lien. There is no maritime lien in this instance.

[99]    Clause 18 of the New York Produce Exchange charter party provides, in part, that "The Charterers shall have a lien on the Ship for all monies paid in advance and not earned, ...". Here The Lancaster [1980] 2 Lloyd's 497 applies. In that case, Mr. Justice Goff, as he then was, acknowledges the charterer's lien under clause 18 might be some form of an equitable lien, ranking below the priority of assignments to the bank. Moreover, the lien granted by section 18 of the New York Produce Exchange form was held not to be a possessory lien, for the charter was, as is the case here, a time charter, as opposed to a demise charter: ibid., pages 501 through 503.

[100]    At best, in this jurisdiction, Mermaid has a statutory in rem claim, under the Federal Court Act, for breach of contract. In the present instance, given the limited funds available, this statutory in rem right is, unfortunately, of no value.

[101]    The sub-charterer INCOFE claims, as secured by an American maritime lien, the sum of $435,851.10 primarily by way of breach of charter party between Mermaid as disponent owner and time charterer, on the one hand, and INCOFE as voyage charter, on the other hand. A portion of this claim may be somewhat speculative in nature, however the initial issue is whether the claim for breach of charter party gives rise to an American maritime lien enforceable in priority to the mortgage against the Atlantis Two, a mortgage held by ABN-Amro Bank N.V. ("ABN-Amro"). INCOFE also refers to some minimal loss of cargo said to be established on the eventual out-turn of the bulk cargo of potash on delivery. I do not accept that this has anything to do with the Atlantis Two either pre-sale or to the proceeds of the sale. Nor is this loss useful to bootstrap an American contractual maritime lien into an American preferred maritime lien, for the cargo loss, if any, could not have occurred while the ship was at Vancouver, either before or after arrest.

[102]    INCOFE's argument, reduced to its essentials, is that the charter party provides for arbitration in New York and therefore American law is the proper law of the contract. The breach relied upon by INCOFE, as giving rise to its claim, is that of the seaworthiness warranty in clause 2 of the charter party. Indeed, the Atlantis Two did not become a seaworthy ship, either in the usual sense or in a financial sense, ready and able to proceed, until her sale to new owners. All of this is said to constitute a substantive American maritime lien which may be enforced as such, using Canadian procedure as set out in The Ioannis Daskalelis. However, the reasoning by which INCOFE's expert on American law, Peter Gutowski, reaches this conclusion is a little more involved.

[103]    Mr. Gutowski, of the Freehill, Hogan and Mahar firm of New York, begins with the general concept that, in the United States, a breach of contract results in a maritime lien. Both Mr. Gutowski and the opposing expert on American law, on behalf of ABN-Amro, Robert G. Shaw, of the Healy and Bailie firm of New York, agree that American law applies to the present breach of sub-charter. The experts diverge in their opinions. While I may, if unable to decide on the basis of expert opinion, look at the case law myself and come to my own conclusion, I believe it is quite possible to reconcile the two sets of opinions without doing violence to either and to come to a conclusion.

[104]    Turning to the opinions, Mr. Gutowski builds his opinion carefully, pointing to not only a breach of the warranty of physical seaworthiness in the charter party, but also to a breach of financial seaworthiness, in the sense that the ship was financially incapable of the voyage: he refers to Morrisey v. The A&J Faith (1965), 252 F. Supp. 54 at 58 and to Assoc. Metals and Minerals Co-op v. The Alexander's Unity (1995), 41 F. 3d 1007 at 1016. In The A&J Faith the voyage was interrupted by litigation and the vessel deemed unseaworthy. In The Alexander's Unity the breach of contract and resulting maritime lien arose both by reason of physical and financial unseaworthiness. In the present instance there was both physical unseaworthiness and, in the sense used in the American cases, financial unseaworthiness.

[105]    Mr. Gutowski's next proposition is that there is a maritime lien enuring to the benefit of INCOFE. Here there is a reference to Rainbow Line Inc. v. The Tequilla (1973), 480 F. 2d 1024 at 1027-1028 and specifically that:

The American law is clear that there is a maritime lien for a breach of a charter party, and because the damages sought to be recovered by Rainbow are all of a maritime nature and flow directly from the breach of the charter, it has a maritime lien.

There then follow some standard propositions to the effect that the lien, arising out of the contract of affreightment, is a means by which the ship is made answerable for non-performance. Mr. Gutowski goes on to define a maritime lien as a privileged claim attaching simultaneously with the cause of action and adhering to maritime property throughout changes of ownership until properly extinguished. He makes the point that the lien attaches when goods are delivered to a ship (or at least when the ship is ready to receive cargo) and notes, in the present case, that INCOFE's cargo was aboard.

[106]    Mr. Gutowski's third and concluding point, in his initial opinion, is that the lien created by the breach of a contract between INCOFE and the Atlantis Two is a lien for breach of contract recognized under American law, as a true maritime lien and here refers to Tramp Oil & Marine Ltd. v. The Mermaid One (1986), 630 F. Supp. 630 at 632, subsequently affirmed 805 F. 2d. 42.

[107]    Mr. Shaw's initial answer to all of this, on behalf of ABN-Amro, is that as a sub-charterer INCOFE is denied a lien on a ship, for breach of a sub-charter, because INCOFE failed to show that by reasonable diligence it could not have ascertained the existence of a prohibition of lien clause in the head charter, here citing Cardinal Shipping Corp. v. The Seisho Maru (1984), 744 F. 2d 461 at 469, United States v. The Lucie Schulte (1965), 343 F. 2d. 897 at 900-01 and Acme Operating Corporation v. United States (1922), 283 F. 449. Applying this proposition Mr. Shaw submits that the head charter is on a standard New York Produce Exchange time charter form and that there has been a prohibition of lien clause, clause 18, in that form since it first appeared in the early part of the century. The charter between INCOFE and Mermaid makes it clear that the latter is a disponent owner and thus, in Mr. Shaw's view, there is notice of the existence of both the head charter and the prohibition of lien clause.

[108]    In his supplemental opinion, Mr. Gutowski submits that a prohibition of lien clause does not operate to insulate an owner from its own breach. Mr. Gutowski points out that a plain reading of the New York Produce Exchange clause 18, the lien clause, is that it offers no protection of any sort to an owner against liens arising from the owner's own actions. The applicable portion of clause 18 reads:

Charterers will not suffer nor permit to be established, any lien... incurred by charterer of their agent...

and on a plain reading it has no application to the discussion whatsoever. This plain reading approach is supported by Cardinal Shipping Corporation v. The Seisho Maru, a case referred to by Mr. Shaw and cited above, at page 473: such clauses, by their terms "only bar liens incurred by the charterer (or his agent)." Mr. Gutowski goes on to refer to International Marine Towing Inc. v. Southern Leasing Partners Ltd. (1983), 722 F. 2d. 126 to the same effect and to Roberts v. C.T. Echternach (1962) 302 F. (2d) 370 for the proposition that:

The prohibition-of-lien clause ... does not undertake to deal with the power of the owner himself to subject his vessel to maritime liens. Indeed, the circumstances in which the owner could restrict his own power are severely limited and one could safely say, never permit the owner, as such, to obtain any advantage. The (prohibition of lien) clause ... has to do with the power of others - master, agent, charter, etc. - to subject the vessel to liens for work done by third parties at the request of those presuming to speak for the ship. (page 372-373)

[109]    The prohibition of lien clause does have a purpose and here Mr. Gutowski returns to the Cardinal Shipping case (supra) at page 471:

The Prohibition-of-Lien clause still serves a valid purpose. It encourages freer trade in the chartering and sub-chartering of vessels. Owners will be more likely to permit their charterers to enter freely in contract of affreightment if the owners know that no "secret liens" will arise from obscure provisions in sub-agreements.

Mr. Gutowski concludes:

Thus, the U.S. policy for enforcing these clauses is the prevention of "secret liens" arising without the Owner's knowledge. However, this is not a relevant concern where, as here, the lien arose due to the Owner [sic] own actions, not the unknown actions of some third party. Consequently, the prohibition of lien clause in the Head Charter has no bearing on the Sub-charterer INCOFE's lien against the ship. INCOFE's lien arose from the acts and/or omissions of the Owner and such actions are simply not covered by the wording of clause 18 in the Head Charter.

[110]    At this point Mr. Shaw takes an alternative attack and says that even if, despite the prohibition of lien clause in the head charter, the breach gave rise to an American maritime lien, not all lien rights, in rem, against vessels under American law, out-rank the lien of a ship mortgage and indeed, "Only a limited number of rights characterized as maritime liens under U.S. law outrank a ship mortgage." (para. 11 of 2 November 1998 Affidavit). Now here I must keep in mind not only that, as to precedence of liens and mortgages, I must look to Canadian law, as pointed out by Mr. Justice Ritchie in The Ioannis Daskalelis at page 177 (supra), but also that I must look closely at the substantive right that INCOFE brings into this jurisdiction for enforcement. In any event, the comment as to different grades to maritime liens is not unique for the usual ranking of American maritime liens, in part, is first, preferred maritime liens, arising before the filing of a preferred mortgage; this is followed by preferred ship mortgage liens; and after such ship's mortgages, come contractual liens including necessaries claims arising after the registration of any preferred mortgage. This is subject to the proviso in 46 U.S.C. § 31326(b)(2) giving non-preferred necessaries liens priority over foreign mortgages. Mr. Shaw also approaches this hierarchy from the point of view of a breach of contract contained in the bills of lading and submits that even if this breach is considered in the context of American law, the resulting lien ranks below a ship's mortgage.

[111]    At this point I accept that INCOFE has an American maritime lien arising out of breach of the charter, but the lien, arising after the registration of ABN-Amro's mortgages, is not a preferred maritime lien coming ahead of a preferred mortgage in the American ranking system. This American maritime lien for breach of contract ranks, again referring to the American system, after all previously registered preferred ship's mortgages, a point to which I will return shortly.

[112]    ABN-Amro's argument proceeds to the effect that, other than for a possible maritime lien arising by reason of the breach of the charter between Mermaid and INCOFE, INCOFE has no other liens against the ship. Here the expert for ABN-Amro points to his uncontested view that any claim by INCOFE directly against the owner must arise either by way of tort, or by breach of contract of affreightment under the bill of lading to which INCOFE , as shipper and the vessel owner, through its master, are parties, for there is no other contract between the owner and INCOFE as sub-charterer.

[113]    The tort claim, if such exists, is easily disposed of. Mr. Shaw's view, with which I agree, is that any tort, in this instance, would be founded on Canadian law, for the failure to proceed with the voyage occurred in Canada and involved a Cypriot owner, Expedient Maritime Company Ltd. and a cargo owner, INCOFE, with Head Office care of Lloyd's Bank International (Bahamas) Ltd. of Nassau and another office, in Guatemala. It is Mr. Shaw's uncontested view that an American court would not apply American tort law on these facts, but would apply Canadian tort law. An action in Canada based on the tort of failing to proceed with a voyage would not result in a maritime lien. At best there could be a statutory right in rem. And this right, according to Mr. Shaw, would be the right an American court would grant. I accept this view that, on a tort basis, INCOFE's claim against the ship would be, at best, a statutory right in rem.

[114]    There is also, as I have already noted, the argument that there is a maritime contractual lien for breach of the contract of carriage under the bill of lading issued by the master to INCOFE. The parties to the bills of lading are neither American entities nor is the voyage from or to any American port. The vessel is not an American vessel. Now, under Canadian law, which one would expect to apply in this sort of instance, where no one has any connection with the United States, there would be merely a right in rem for breach of the contract to carry. However, Mr. Shaw, in his opinion, gives the benefit of the doubt to the possibility of American law applying because the "terms, conditions, exceptions, liberties and arbitration clause", contained in the charter, are incorporated into the bills of lading. By this means American law could be incorporated into the bills of lading. Again, without contradiction, Mr. Shaw concludes that this incorporation of American law would give a maritime lien, for breach of charter "... at least in the case of a shipper who is not also a sub-charterer.". Now I do not see that this distinction is necessary in the present instance. I will accept Mr. Shaw's comment that the resulting lien, and this is a qualified view, would not be a preferred maritime lien, but a lien ranking beneath a preferred ship's mortgage. This requires some definition of a preferred mortgage.

[115]    A preferred mortgage, under the American system, includes, for the purpose of enforcement, a mortgage on a foreign ship properly executed and registered under the law of the country where the ship is documented: see U.S.C. § 31301(6). In the present instance the two mortgages held by ABN-Amro were registered in the relevant shipping registry, against the Atlantis Two, 31 December 1995 and 24 January 1996. Those mortgages stand as the first and second charges in the registry. Both of these mortgages predate any lien of INCOFE and thus, under the American system, INCOFE's maritime lien, arising out of breach of charter or breach of carriage, follows after the ABN-Amro mortgages.

[116]    Counsel for ABN-Amro submits that I ought to look upon an ordinary American maritime lien, as opposed to a preferred American maritime lien, as being analogous to our Canadian statutory in rem right and thus place INCOFE's claim with other statutory in rem claims in this proceeding which have a relatively low priority. This analysis does not stand up, for the basis of in rem actions are very different in the United States and in Canada. In the United States, in addition to any number of types of claims which are subordinate to maritime liens, including unregistered mortgages, perfected non-maritime liens, State liens and mortgages and liens for marine attachment (see Tetley (supra) at page 876), there are also in personam claims of a maritime nature. In the United States those in personam claims or causes of action are just that: they cannot be enforced in rem because it is not the in personam claim that is the basis for an in rem claim. Rather, in the United States, an in rem right is the basis for a claim against a ship. This is in contrast to the Canadian approach which requires an in personam cause of action on which to found a statutory in rem action. On this analysis an ordinary American maritime lien, as opposed to a preferred American maritime lien, is not analogous to our statutory right in rem. The approach that I should take has been indicated by the Supreme Court of Canada in both The Strandhill and The Ioannis Daskalelis (supra).

[117]    What the Canadian Courts have done with American in rem claims is to determine the substantive right that is being brought into this jurisdiction and then place that right into a position in the Canadian framework of priorities. Relying upon The Ioannis Daskalelis and upon The Strandhill, that is generally a simple enough mechanical process. In order to place the ordinary American maritime lien of INCOFE, into this framework, I must look closely at what INCOFE brings into this jurisdiction.

[118]    The lien which INCOFE brings to this jurisdiction might, but for timing, have been a preferred maritime lien, pursuant to 46 U.S.C. §§ 31301(5)(A): see for example Rainbow Line Inc. v. The Tequilla (supra), a decision of the U.S. Court of Appeals, second circuit, referred to by the parties and particularly see pages 1027 and 1028. There the court held that a maritime lien arose from breach of a charter party and that such a lien would take priority over a mortgage, presumably as a preferred maritime lien, if the lien attached to the ship before the registration of the mortgage (see also Tetley (supra) at page 875).

[119]    Here, the lien of INCOFE is not a preferred maritime lien, but might have been had the sequence of mortgage registration and lien attachment been different. Yet this was precisely the situation in The Ioannis Daskalelis (supra). There the Ioannis Daskalelis was encumbered by a prior mortgage. Thus the lien of Todd Shipyards Corporation was not a preferred maritime lien. Certainly the Supreme Court of Canada recognized, presumably because of the necessaries suppliers lobbied proviso of 1954 (to which I referred earlier), that the maritime lien did take priority over a mortgage in the United States, yet the American priority was not a part of the decision. The Court merely recognized the right as a maritime lien and then placed it in the Canadian priorities framework.

[120]    Similarly, in the present instance, I recognize the right of INCOFE for breach of sub-charter as a maritime lien, travelling with the ship. In the Canadian scheme, even though it is not a preferred maritime lien, it ranks ahead of the ABN-Amro mortgages. I now turn to damages.

[121]    The experts giving evidence, by affidavit as to American law, for an against INCOFE, go on to consider the appropriate way in which to measure damages claimed by INCOFE. It may be that damages in American and in Canadian law are based on similar theory. However, the damages claimed are not in the nature of a substantive American right, the nature of which is to be explained by American experts in order to determine the manner of enforcement in Canada, but a Canadian remedy to be determined by this Court without expert help.

[122]    In classical terms I must measure damages in terms of:

"That sum of money which will put the party who has been injured, or has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation."

[Livingston v. Rawyards Coal Company (1880), 5 App. Cas. 25 at 39 (H.L.)]

Broadly, having determined that INCOFE has a proper claim I must quantify the claim so that, to the extent the sale proceeds are sufficient, INCOFE is awarded a sum to put it, as nearly as possible, in the same position it would have been in had the breach of charter party not occurred.

[123]    This is the concept expressed and footnoted by Mr. Justice Stone in his dissenting reasons in Northeast Marine Services Ltd. v. Atlantic Pilotage Authority (1995), 179 N.R. 17 at 43-44:

The aim of an award in damages in contract is to put a plaintiff (in this case the respondent) in the same position he would have been in if the breach had not occurred.

and here Mr. Justice Stone refers to Baud Corporation N.V. v. Brook, [1979] 1 S.C.R. 633 and to Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd., [1949] 2 K.B. 528 (C.A.)

[124]    One difficulty in setting damages in contract is that contract damages are forward-looking damages, based on a plaintiff's expectations, expectations which may well be different, depending upon where one stands, or how one assesses contradictory evidence. However, as Mr. Justice of Appeal Hugessen pointed out in Public Service Alliance of Canada v. Staff of Non-Public Funds (1996), 199 N.R. 81 at 97:

In my view, it is well settled law that once it is know that a plaintiff has suffered damage, a court cannot refuse to make an award simply because the proof of the precise amount thereof is difficult or impossible. A judge must do the best he can with what he has.

I recognize that some of the material is challenged and some of it is contradictory, but I must do the best that I can with the affidavit material and answers to interrogatories presented to me.

[125]    In November of 1997 INCOFE purchased a total of 16,524 M.T. of different grades of potash at a cost of $1,786,368, as set out on a Campotex invoice of 28 November 1997, the cargo being loaded aboard the Atlantis Two for discharge in Guatemala and in Costa Rico. This purchase and shipment by INCOFE was in response to the need of a firm buyer who was prepared to pay $1,849,409.39, to result in an expected profit of $3.81 per tonne. INCOFE was to pay freight at $16.50 per M.T. and insurance, however the documentation indicates these costs were essentially passed through to customers, so I need not concern myself with freight and insurance. As it turned out, by reason of the delay, INCOFE's customers, or at least one of them, had to obtain potash elsewhere at a greater price.

[126]    Returning to the cargo which had been loaded aboard the Atlantis Two at Vancouver at the end of November, 1997, INCOFE was able to sell that potash, once the Atlantis Two finally got under way, in September of 1998, for $1,936,439.55. Some of the potash was sold to original customers, including Abonos Del Pacifico S.A. ("ABOPAC").

[127]    INCOFE now claims the following:

I will now consider each of these items in turn.

[128]    INCOFE claims interest on the $1,786.368 tied up in the value of the cargo aboard ship between loading, about 28 November 1997 and eventual delivery, about 27 August 1998, at total of 272 days, at 8.5%. The interest rate is said by INCOFE to be its average commercial rate. By this calculation interest claimed is $113,152.95.

[129]    There are several comments as to this portion of the INCOFE claim. First, INCOFE did not pay Campotex for the cargo until 18 May 1998, some six months after it was loaded aboard.

[130]    Second, INCOFE's cargo would have been aboard the ship for perhaps a month in Order to deliver it some 4,000 miles to Guatemala and Costa Rico and at each port discharge the cargo.

[131]    Third, counsel opposing INCOFE point out that, by reason of delay and a rising market, INCOFE realized an additional $87,030.16, about $5.25 per M.T. over an above its expected profit of $3.81 per M.T. However, this additional profit, if it is a factor, should be taken into account when looking at INCOFE's loss of profit claim.

[132]    I allow INCOFE's interest claim at 8.5% on the purchase price of the cargo for the period from payment of the cargo, 18 May 1998, to delivery of the cargo, 27 August 1998, a period of 101 days less the thirty days the cargo would have been aboard for delivery in any event. Interest thus runs at 8.5% for 71 days, being $29,536.25.

[133]    This portion of the claim, said to be for extra premium to extend the cargo coverage, paid 22 January 1998, required by reason of the delay, is presented at $12,992.37. Initially the value of insurance to be passed through by INCOFE to its proposed customers, had the Atlantis Two departed on schedule, would have been about $10,500. This figure did not include additional insurance. Yet the insurance paid by INCOFE's eventual customers for the Atlantis Two cargo amounted only to some $6,500. The insurance premium receipt, sets out an insured value substantially in excess of INCOFE's purchasing price. The receipt refers to the date on which the cargo was loaded. It makes no reference either to the premium being in addition to any premium already paid or to any extension of term.

[134]    There may have been additional premium paid. If so, it was likely at a date somewhat later than that indicated on the 22 January 198 receipt. However, there is no convincing evidence of any additional premium. This portion of the claim is denied.

[135]    INCOFE commi