Purchase and Sale of Ships

Purchase Survey - Liability of surveyor

Perera v. De Groot et al, 2006 BCSC 1281,  2007 BCCA 242

In this matter the plaintiffs alleged that a surveyor retained to perform a pre-purchase survey of a sailing vessel had negligently failed to inform them of existing dry rot in the vessel. Approximately one year after the survey,the plaintiffs hired a second surveyor who found extensive dry rot in the vessel. At trial (2006 BCSC 1281) the Trial Judge found that the rot existed at the time of the initial survey and that the surveyor was negligent in not finding it and reporting it. The Judge awarded the plaintiffs the value of the vessel less salvage plus insurance costs and $3,000 for loss of use. On appeal (2007 BCCA 42), the Court of Appeal held that there was no evidence upon which the Trial Judge could conclude that the rot existed at the time of the initial survey. Accordingly, the appeal was allowed and the claim against the surveyor dismissed.

Unauthorized Sale of Vessel – Damages

Gilling  v. Cox, 2004 FC 1743, 

In this matter the Plaintiff commenced proceedings for a declaration that he was the owner of a yacht, for an order declaring a purported sale of the yacht null and void and for damages against the Defendant for the unauthorized sale of the yacht. The Defendant did not appear at the hearing and the only evidence given was that of the Plaintiff. The facts were that the Plaintiff and Defendant entered into an arrangement whereby the Defendant was permitted to charter the Plaintiff's yacht and retain the charter moneys. In exchange the Plaintiff would receive the benefit of the upkeep of the yacht by the Defendant. In furtherance of the arrangement the Plaintiff executed a Power of Attorney and Appointment of the Defendant as Captain. The arrangement continued for many years although there was an apparent dispute between the parties as to whether the Plaintiff owed the Defendant money for maintenance and capital expenditures. The Defendant executed a bill of sale of the yacht to a third party which prompted the present action. The Court held that the bill of sale was executed without the consent or authority of the Plaintiff and was null and void. Accordingly, the Court granted the Plaintiff a declaration that he was the owner of the yacht. However, the Plaintiff's many claims for damages were refused by the Court on various grounds including that they were not properly proven.

Sale of Vessel - Entitlement to Commission

Clifts Marine Sales(1992) Ltd. et al. v. Moorco Inc. et al., 2001 FCT 1369, 

This was a claim by a yacht broker for commission. The Defendant denied the broker was entitled to a commission as the Listing Agreement had been terminated and the vessel was sold to a person who had not been introduced by the broker. The Prothonotary found, however, that the Defendant terminated the Listing Agreement to sell the vessel himself and that the Defendant knew, or was wilfully blind, to the fact that the purchaser was purchasing the vessel on behalf of a person introduced by the broker. The Prothonotary therefore held that the yacht broker was the effective cause of the sale and was entitled to a commission of 10%. The Prothonotary was not satisfied, however, with the evidence as to the purchase price of the vessel since the price was paid in cash in paper bags. He therefore based the commission on a previous arms length offer.

Breach of Contract of Sale - Parole Evidence

Sproule  v. The “Compass Rose II”, 2001 FCT 1304, 

This was an action by the Plaintiff to recover the balance of $25,000.00 alleged to be owing on a written contract of purchase and sale of a vessel. The defence was that there had been an oral variation of the written contract whereby the Plaintiff agreed to accept a lesser amount in return for prompt payment. The Plaintiff argued, inter alia, that the parole evidence rule applied to prohibit proof of an oral agreement that contradicted the written contract. The Court, however, held that the parole evidence rule had no application since the Defendant did not seek to adduce extrinsic evidence to add to, subtract from or vary the meaning of the written agreement but merely claimed that the agreement had been amended verbally. The Court found that there had been such an amendment and dismissed the action.

Sale of Vessel - Representations

Grosvenor  v. Streifel, 1999 CanLII 6393, 

This was an action for the unpaid balance of the purchase price of a used vessel. The Statement of Defence and Counterclaim alleged that the vendor had made false representations. Specifically, the purchaser alleged he was induced to enter into the transaction by a marine survey that was given to him by the vendor and by statements made by the vendor that the engines were in perfect condition. The court found, however, that the marine survey had been prepared more than one year prior to the transaction for insurance purposes and that it was provided to the purchaser to assist him with his financing. The court further found that the purchaser had used the vessel for two seasons and had done some work to the engines without ever complaining to the vendor or making a claim. This, the court found, was not consistent with the alleged representation. Accordingly, the action for the unpaid balance of the purchase price was allowed.

Breach of Sale and Brokerage Agreement

Amirault  v. Prince Nova (The), 1998 CanLII 7899, 

This was a motion to strike the Statement of Claim as being outside the jurisdiction of the court. The Plaintiff, a ship broker, alleged that it had entered into an option to the "Prince Nova" with the corporate Defendant. the owner of the "Prince Nova". The alleged terms of the option were that it was to be exercised only after the Plaintiff found a buyer for resale and that the Plaintiff was to be paid a 5% commission on the initial sale price. The Plaintiff alleged that it had found a buyer who was willing to purchase the ship for US$1.85 million but that the Defendant entered into direct negotiations with the purchaser and ultimately sold the ship for US$1.4 million. The Plaintiff further alleged that the President of the Defendant had wrongly interfered with their economic relations by inducing the Defendant corporation to breach its contract with the Plaintiff. The Defendants admitted that the corporate Defendant had entered into a non-exclusive brokerage agreement with the Plaintiff with a 5% commission. The corporate Defendant further admitted it had given the Plaintiff an option to purchase but alleged that the option to purchase had expired. The motions judge noted, without deciding, that if the agreement was a mere brokerage agreement it might not fall within the court's jurisdiction. However, if the agreement was one relating to the sale of a ship, it would fall within the court's jurisdiction. Given the pleadings and the contradictory affidavits, the motions judge was not able to decide the true nature of the agreement and therefore dismissed the motion by the corporate Defendant. The motions judge did, however, allow the motion by the President of the corporate Defendant. The motions judge held that the claim against him was one in tort and was outside the jurisdiction of the court.

Breach of Contract of Sale - Specific Performance - Setting Aside Arrest

Gleason  v. The Dawn Light, 1997 CanLII 5118,  1998 CanLII 7318

This was a summary judgment application to dismiss the Plaintiff's claim for specific performance of an agreement of purchase and sale of the Defendant vessel and an application to set aside the arrest of the vessel. The Plaintiff alleged that the Defendant had agreed to sell the Defendant vessel to him but then sold it to the intervenor. The motions Judge held the evidence did not show the vessel was unique or irreplaceable and further held that the fact the vessel had been sold to a bona fide purchaser for value without notice was a strong discretionary reason not to grant specific performance. With respect to the application to set aside the arrest of the vessel, the Motions Judge held that the arrest could not be set aside as the Plaintiff still had a claim in damages for breach of contract. On appeal, the Court of Appeal held that the arrest ought to be set aside because the effect of the sale to a bona fide purchaser for value was that the vessel could not be used to satisfy any potential award of damages.

Contract of Sale - Failure to complete - solicitors Negligence

McPhail's Equipment Co. v. Prairie Warehouse Leasing Corp., 1998 CanLII 7318 , 

This was an action by the buyer of a yacht against the vendor for damages for conveying the yacht to a third party and, against the buyer's solicitor for negligence in the handling of the transaction. The Court found that the Defendant vendor deliberately attempted to avoid the sale to the Plaintiff because it had found a buyer who was willing to pay a higher price than the Plaintiff. The Court held that the Plaintiff was ready, willing and able to complete the sale except to the extent made impossible by the vendor's own failure to perform its obligations. The Plaintiff was awarded damages of $50,000 for the return of a deposit and $30,000 for lost profit on the resale of the yacht. With respect to the action against the Plaintiff's solicitor, the Court found that the solicitor had acted reasonably and did everything he possibly could have.