Digests

Holt Cargo Systems Inc. v. Brussel (The)

T-738-96

MacKay J.

11/2/00

50 pp.

Applications for orders of payment of claims presented against proceeds paid into Court following sale of M/V Brussel in July 1996, and interest attributed to proceeds (fund)--Brussel arrested off port of Halifax in March 1996 in action commenced by plaintiff for unpaid fees and charges related to stevedoring services provided to ship in U.S.--Belgian owner and operator of ship declared bankrupt in Belgium--Defendants, appointed trustees in bankruptcy in Belgium, obtained order in Quebec Superior Court declaring Belgian bankruptcy executory in Canada and sought to take possession of ship as asset of owner for liquidation and distribution among creditors--Plaintiff obtained judgment in default in Federal Court of Canada in action in rem against vessel, declaration it should recover amount claimed from proceeds of sale and declaration it had maritime lien to secure amount owing, with interest on outstanding balance at 7%--Claim's priority left to be resolved at later date--By order, claimants required to file and substantiate claims against Brussel by September 1997--Ship sold for $5,682,978--Mortgagee's claim in amount of $68,100,000 under registered mortgages--Court dismissed trustees' application for order proceeds of sale be paid out to trustees, rather than to creditors who had filed claims against ship and order issued providing secured creditors advancing claims against vessel would rank in accord with maritime law as applied by Court--That decision upheld by Federal Court of Appeal, leave to appeal to S.C.C. allowed 9/12/99--In circumstances now prevailing, Court will set out in reasons for judgment basis on which it will order how claims will be resolved--At this stage, Court will order payment out only in relation to claims that would be recognized in any event of outcome of proceedings before S.C.C.--Court will not order payment of most claims pending decision by S.C.C., or further order of Court by any judge thereof--Since time of arrest and sale, orders have issued for payment of proceeds to meet certain costs associated with preservation, advertisement and sale of vessel, and costs of disposal of unclaimed cargo--(A) General issues or considerations--(1) Statutory liens and priority claims recognized under Canadian maritime law--Any claimant with Canadian statutory lien entitled to priority against fund as provided for under relevant legislation--(2) Maritime liens arising in U.S.--Most claimants submit their claims against Brussel raise American maritime liens by operation of Commercial Instruments and Maritime Liens Act--Maritime liens arising under U.S. law recognized and can be enforced by this Court on same basis accorded to them under American law: Todd Shipyards Corp. v. Altema Compania Maritima S.A., [1974] S.C.R. 1248--(3) Sister ships and claims against sister ships--Although Federal Court Act, s. 43(8) providing for sister ship claims, according to evidence of foreign law, American maritime liens do not attach to sister ships--Sister ship provision of Federal Court Act cannot be construed to allow for interpretation giving maritime lien holders with claim against one ship same priority as maritime lien in relation to sister ship arrested in Canada, regardless of whether claims originated in Canada or abroad--In absence of legislation, special priority accorded to maritime liens not portable to sister ships--Holders of maritime liens against sister ships of Brussel may enforce claims against Brussel under Federal Court Act, s. 43(8), but they do not have same status as holders of traditional maritime liens against vessel--They have statutory right in rem with priority similar to that of any creditor who has ordinary in rem claim against sister ship of Brussel--(4) Interest rates applicable--According to contracts, provincial law concerning pre-judgment interest, federal Interest Act--For equitable treatment of parties with regard to pre- and post-judgment interest, Court will order payment to all claimants will include interest on following bases: where rate set by contract, rate shall apply from date of breach to July 24, 1996, when vessel sold; where no rate set by contract, rate applicable from date of breach to July 24, 1996 shall be 7 %; for all claims, after July 24, 1996, to date of payment, interest shall be paid at rate of interest attributed to fund while held in Court--(5) Exchange rates--Law clear for claims expressed in foreign currency, exchange rate applicable that prevailing at date of breach established--In case of contract claims, date that when invoices underlying claims due--Where date not available, for convenience and equity among claimants, claims expressed in foreign currency should be converted to Canadian dollars at exchange rate prevailing at date of sale of vessel, July 24, 1996, being C$1.37--(B) Claims ranking wholly or in part in priority to ship's mortgages--Canadian statutory claims--(a) Halifax Port Corporation--Claims for sum of $2448.47 for fees and charges for services levied against Brussel at Halifax, based on statutory lien under Canada Ports Corporation Act, with interest at 18% per annum to July 24, 1996, and thereafter with interest at rate attributed to fund while held in Court, up to date of payment--Claims have first priority--Halifax Port Corp. also claiming amounts owing for services provided to ships said to be sister ships of Brussel--Court can allow claim only if consistent with law here applied to all other claims--Corporation has claim against fund, but ranking behind that of mortgagee--(b) Atlantic Pilotage Authority--Claiming preferred maritime lien in amount of $2197.38 against vessel for pilotage services--Case law recognizing maritime lien ranking ahead of ship's mortgage--Claim against fund for services provided to sister ship ranking behind ship's mortgages--American maritime liens--(a) Holt Cargo Systems Inc.--Plaintiff has already obtained judgment in default entitling it to $527,128.06, with provision for interest at 7% per annum, declaring interest of Holt in Brussel maritime lien--Payment suspended pending determination of priorities of claimants, and outcome of appeal from Court's order for sale of ship--Solicitors' costs associated with appraisement, advertisement and sale of vessel should be paid when billed, from fund, with priority ahead of payment to mortgagee--(b) Necessaries provided to Brussel in U.S. giving rise to maritime lien having priority to mortgages--Claims in relation to goods and services supplied to sister ships giving rise to statutory in rem claims against Brussel, but without priority ahead of mortgages--Claims against vessels other than sister ships cannot be advanced against Brussel--Then comes mortgagee ($68,100,000)--Then other claims, ranking after mortgage (for which no money will be left)--Halterm Ltd.--Claim for services provided to Brussel in course of operating container terminal, vessel berth and container storage facility--Under terms of contract between Halterm and Halifax Port Corp., Halterm pays Port Corp. fees for wharfage and dockage ordinarily owed directly by vessels to Port Corp.--Fees paid by Halterm to Port Corp. billed by Halterm to vessels and vessels pay amounts billed to Halterm--Halterm cannot enjoy same priority as Port Corp. as no evidence of guarantee or explicit assignment of Port Corp.'s right to enforce its claims for fees by lien against vessels--Supply of bunkers to Brussel by Bridge Oil Ltd. in Belgium resulting in "preferential rights" under Belgian law, but not maritime liens--Not ranking ahead of ship's mortgages, since not established claim raised maritime lien against ship--Claims of container lessors under agreements with ABC Containerline providing contractual lien against ABC's vessels having no special priority as against claims of third party, including mortgagee--Some claims perfected but not pursued at hearing--Some claimants failed to provide evidence of foreign law--Some claims against other than sister ships--Some claims remained without proof and were deemed abandoned--Commercial Instruments and Maritime Liens Act, 46 U.S.C. § 31342--Federal Court Act, R.S.C., 1985, c. F-7, s. 43(8).