A-621-88
Mount Royal/Walsh Inc. (Plaintiff)
v.
The Ship Jensen Star, Jensen Shipping Limited,
and the owners and all others interested in the
Ship Jensen Star (Defendants)
INDEXED AS: MOUNT ROYAL/WALSH INC. V. JENSEN STAR
(THE) (CA.)
Court of Appeal, Marceau, MacGuigan and Des-
jardins JJ.A.—Montréal, April 4; Ottawa, May
23, 1989.
Federal Court jurisdiction — Trial Division — Maritime
law — Appeal from judgment allowing action in rem for
materials supplied and repairs to ship — Ownership of ship
transferred prior to commencement of action — New owners
demise chartering ship to pre-transfer owners — S. 43(3)
Federal Court Act requiring continuity of ownership as condi
tion for exercise of Court's jurisdiction in rem with respect to
claim based on s. 22(2)(m) and (n) of Act — "Beneficial
owner" in s. 43(3) not encompassing demise charterer —
Estoppel cannot be raised to confer jurisdiction expressly
denied by statute — Pre-transfer claim not sustainable as s.,
43(3) requirement not met — Post-transfer claim allowed.
Maritime law — Action in rem — Jurisdiction — Appeal
from judgment allowing action in rem for repairs and ma
terials supplied to ship — Transfer of ownership of vessel
prior to commencement of action — S. 43(3) Federal Court
Act requiring continuity of ownership for jurisdiction in rem to
be exercised — Condition met only as to claim arising after
transfer of ownership — Post-transfer claim raising issue of
nature and extent of owner's involvement for right in rem to
exist under Act, s. 43(3) — Involvement must be complete and
direct enough to entail owner's personal liability — Owner's
actions tacit authorization to charterer to contract on credit of
vessel — Post-transfer claim allowed.
Maritime law — Practice — Phrase "owners and all others
interested in" ship (R. 1002) indicative of manner to commence
action in rem — For judgment in personam to issue, party
must be personally impleaded.
This is an appeal against a judgment of the Trial Division
granting an action brought by Mount Royal/Walsh Inc. for
repairs done and materials supplied to the ship Jensen Star.
The claim was based on paragraphs 22(2)(m) and (v) of the
Federal Court Act. Although the judgment under attack is one
in rem against the ship and in personam against Jensen Ship
ping Ltd., only the in rem part of the judgment is challenged.
It was established at trial that, prior to the commencement of
the action, Jensen Shipping transferred ownership of the vessel
to Jensen Marine Holdings Ltd. The latter turned over the ship
to Jensen Shipping under a demise bareboat charter. The
appellants, relying on subsection 43(3) of the Act, contend that
the Court cannot exercise its jurisdiction in rem since at the
time the action was commenced, the ship was not beneficially
owned by the person who was the benefical owner at the time
the cause of action arose. The Trial Judge affirmed the Court's
jurisdiction in rem stating that, for the purposes of subsection
43(3), Jensen Shipping remained, at all times, the beneficial
owner of the ship or, alternatively, that Jensen Shipping and
Jensen Marine Holdings were estopped from asserting that
Jensen Shipping was not the beneficial owner at the time the
cause of action arose.
Held, the judgment of the Trial Division should be varied so
as to limit the respondent's claim to the services and materials
supplied to the ship after transfer of the ownership.
Neither of the propositions relied upon by the Trial Judge
was legally correct. The expression "beneficial owner" in sub
section 43(3) does not encompass a demise charterer. Whatever
be the meaning of the qualifying term "beneficial", the word
"owner" can only normally be used in reference to title in the
res itself, a title characterized essentially by the right to dispose
of the res. The French corresponding word "propriétaire" is
clear in that regard.
Nor could it be held that the defendants were estopped from
taking the position that Jensen Shipping was not the beneficial
owner when action was commenced. It did not appear that the
factual basis for estoppel was here present since no one had
altered his position to his detriment due to any promise or
assurance held out. In any event, the requirement of continuity
of ownership imposed by subsection 43(3) to allow an action in
rem goes to the very jurisdiction of the Court, and no estoppel
can give a court jurisdiction expressly denied by statute.
The action in rem relating to the respondent's claim which
arose prior to the transfer of ownership cannot be entertained.
The requirement of subsection 43(3) had not been met. The
statutory right in rem that the respondent could have exercised
to secure payment was extinguished by the transfer of
ownership.
The question raised with respect to the services and materials
supplied to the ship after transfer of ownership is not one of
jurisdiction since the subsection 43(3) condition for the exercise
of the Court's jurisdiction in the case of the post-transfer
invoices has clearly been met. The question is whether the
nature and extent of the relationship between the owner of the
vessel and the supplier of necessaries are such as to enforce a
statutory right in rem.
The principle underlying subsection 43(3) is that, for the
right in rem to come into existence, the owner must, in all
cases, be involved in the contract under which the services were
rendered. This condition is specific to Canadian law and what it
involves cannot be determined by reference to English law.
The Trial Division of this Court has consistently held that
the involvement of the owner in the supplying of necessaries has
to be complete and direct enough to entail his personal liability.
An action in rem is sustainable only if the owner is personally
liable for the amount claimed. To contend that an action in rem
could be sustained even in the absence of any personal liability
on the part of the owner would defeat the underlying principle
which is the protection of the owner. Liability as a result of
some personal behaviour and attitude on the part of the owner
is required whether the latter contracted himself, or has author
ized someone to contract on his personal credit or has expressly
or implicitly authorized a person, in possession and control of a
ship, to contract on the credit of the ship (rather than on the
entirety of his personal assets).
The nature and extent of the involvement of Jensen Marine
Holdings in the supplying of services by the respondent were
such as to render valid the action in rem. That involvement
consisted in acting through its president in such a manner as to
authorize tacitly Jensen Shipping to contract on the credit of
the vessel and engage, to that extent, its personal liability. It
had to be kept in mind that the president of Jensen Marine
Holdings was also president of Jensen Shipping, and that he did
not treat those entities as separate but, on the contrary, never
considered his legal authority over the ship to have changed.
In any event, Jensen Marine Holdings cannot dispute such an
interpretation. It is well established that necessaries supplied to
a vessel are prima facie presumed to have been supplied on the
credit of the vessel and its owner. No attempt was made to
rebut that presumption.
The Trial Judge could not have done otherwise than render
judgment in personam only against Jensen Shipping: no judg
ment in personam could have been pronounced against Jensen
Marine Holdings since there was no formal order of the Court
authorizing amendment of the statement of claim to implead it
personally. The phrase "the owners and all others interested in"
the ship is merely the manner indicated by Rule 1002 to
commence an action in rem and it can only lead to a judgment
in rem.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Bank Act, R.S.C., 1985, c. B-1, s. 2.
Canada Business Corporations Act, R.S.C., 1985, c.
C-44, s. 2.
Canada Shipping Act, R.S.C., 1985, c. S-9, s. 654 (rep.
and sub. by R.S.C., 1985 (3rd Supp.), c. 6, s. 84).
Federal Court Act, R.S.C., 1985, c. F-7, ss. 22(2)m),n),
43(2),(3).
Federal Court Rules, C.R.C., c. 663, R. 1002.
International Convention Relating to the Arrest of
Seagoing Ships, May 10, 1952, 439 U.N.T.S. 193.
Supreme Court Act 1981, 1981, c. 54, s. 21(4) (U.K.).
CASES JUDICIALLY CONSIDERED
NOT FOLLOWED:
Thorne Riddell Inc. v. Nicolle N Enterprises Inc., [ 1985]
2 F.C. 31 (T.D.).'
REFERRED TO:
I Congreso Del Partido, [1977] 1 Lloyd's Rep. 536 (Q.B.
(Adm. Ct.)); The Andrea Ursula, [1971] I Lloyd's Rep.
145 (Adm.); The Permina 3001, [1979] 1 Lloyd's Rep.
327 (Sing. C.A.); ITO—International Terminal Operators
Ltd. v. Miida Electronics et al., [1986] 1 S.C.R. 752;
The Mecca, [1897] A.C. 286 (H.L.); Coastal Equipment
Agencies Ltd. v. The "Corner", [1970] Ex.C.R. 12; The
Henrich Bjlirn (1886), 11 App. Cas. 270 (H.L.); The
Castlegate, [1893] A.C. 38 (H.L.); Westcan Stevedoring
Ltd. v. The "Armar", [1973] F.C. 1232 (T.D.); Sabb Inc.
v. Shipping Ltd., [1976] 2 F.C. 175 (T.D.); Waterside
Ocean Navigation Co., Inc. v. International Navigation
Ltd., [ 1977] 2 F.C. 257 (T.D.); McCain Produce Co. Ltd.
v. The "Rea", [1978] 1 F.C. 686 (T.D.); Logistec Corp.
v. The "Sneland", [1979] 1 F.C. 497 (T.D.); Kuhr v. The
"Friedrich Busse", [1982] 2 F.C. 709 (T.D.); Marlex
Petroleum Inc. v. The Ship "Har Rai", [1984] 2 F.C.
345 (T.D.); Imperial Oil Limited v. Ship "Expo Spirit"
and Hoverwest Ferry Services Inc. (1986), 6 F.T.R. 156
(F.C.T.D.); Western Stevedoring Co. v. Ship "Anadolu
Guney" Cargo et al. (1988), 23 F.T.R. 117 (F.C.T.D.);
Foong Tai & Co. v. Buchheister & Co., [1908] A.C. 458
(P.C.); The Banco, [1971] 1 Lloyd's Rep. 49 (C.A.); The
August 8, [1983] 2 A.C. 450 (P.C.).
AUTHORS CITED
Halsbury's Laws of England, 4th ed., vol. 16, no. 1515.
London: Butterworths, 1975.
Jackson, D. C. Enforcement of Maritime Claims.
London: Lloyd's of London Press Ltd., 1985.
Snell, E. H. T. Principles of Equity, 27th ed. by R.
Megarry and P. Baker. London: Sweet & Maxwell
Ltd., 1973.
Tetley, W. Maritime Liens and Claims. London: Busi
ness Law Communications Ltd., 1985.
COUNSEL:
Sean J. Harrington for plaintiff [respondent].
Gerald P. Barry for defendants [appellants].
SOLICITORS:
McMaster Meighen, Montréal, for plaintiff.
Barry & Associates, Montréal, for defen
dants.
The following are the reasons for judgment
rendered in English by
MARCEAU J.A.: This appeal is taken against a
judgment of the Trial Division [(1988), 17 F.T.R.
289 (F.C.T.D.)] which has granted an action
brought by a ship repairer for work done and
material supplied to a ship. Originally commenced
as a pure action in rem against the ship for
necessaries, the proceedings were later amended to
implead personally, as a party defendant, the ship
ping company at the behest of which the services
had been rendered. The judgment under attack is
thus one in personam against the shipping com
pany as well as in rem against the ship. Only its in
rem part, however, is actually disputed, which
permits us to leave aside some other grounds of
defence raised with respect to the action as a whole
but rejected by the Trial Judge and accept as it is
the amount of condemnation, $237,243.68, even if
there are some difficulties with how the figure was
reached. But even so limited, the appeal raises a
very difficult question which relates to the treat
ment Canadian maritime law reserves to a claim
for necessaries supplied to a ship and to the in rem
jurisdiction of the Federal Court on its admiralty
side.
The facts put in evidence before the Trial Judge
were somewhat involved but, of course, there is no
need to go over those pertaining to grounds of
defence which have been finally disposed of, such
as the contention by the shipping company that the
charges made were excessive or the allegation that
some of the amounts claimed were either not in
relation to maritime services or else had already
been paid. What has to be known of the factual
background to be able to deal with the issue that
the appeal is concerned with is relatively simple.
Mount Royal/Walsh Inc., (hereinafter Mount
Royal), the respondent (plaintiff in the Court
below), is a company which carries on the business
of marine and industrial repairs in Montréal. Over
the period from August 1982 until June 1984,
Mount Royal was requested by Niels Jorgensen,
the president and principal shareholder of Jensen
Shipping Limited, also of Montréal (hereinafter
Jensen Shipping), to do approximately 25 separate
jobs on five different ships operated by the com
pany, among which was the Jensen Star. Seven
teen of these 25 jobs, for a total amount of
$264,036.66, were in respect of the Jensen Star,
the first and last invoices for which were dated
August 30, 1982 and May 21, 1984. All that time,
Mount Royal was working on credit, although
some partial payments were received by it on two
occasions (about which I will speak later). Such an
extended period of credit may appear surprising
for commercial operations but in fact there was a
very special association between Jorgensen and the
president and principal shareholder of Mount
Royal, John Hynes. Jorgensen and Hynes had
been partners in a marine repair and shipping
business until 1982 when, quite amicably, they had
decided to go their separate ways: Hynes, in the
repair business with the existing but renamed firm,
Jorgensen, in the shipping business with a newly
incorporated company, Jensen Shipping, to which
the Jensen Star, the one ship that belonged to the
old operation, had been transferred. The patience
of Mount Royal is, in that context, understand
able. It was not limitless, however, and there came
a time when legal proceedings finally appeared to
be required.
As mentioned at the outset, the action was
commenced, on August 9, 1984, as an action in
rem directed against the Jensen Star, the ship
defendant being described in the title of the state-
ment of claim in the manner indicated by Rule
1002 of the Rules of this Court [Federal Court
Rules, C.R.C., c. 663], namely: the owners and all
others interested in the Ship Jensen Star. The
action was brought under paragraphs 22(2)(m)
and (n) and subsection 43(2) of the Federal Court
Act [R.S.C. 1970 (2nd Supp.), c. 10], which give
this Court jurisdiction to entertain a claim for
materials and services supplied to a ship and pro
vide for this jurisdiction to be exercised in rem
against the ship.' Security was immediately given
in order to avoid arrest, Jorgensen appearing in the
Court's documents as the individual taking charge
of the defence on behalf of the owners. On October
18, 1984, a statement of defence and counterclaim,
alleging exaggerated accounts, partial payments
and amounts due otherwise by plaintiff to "defen-
dants", was filed in the name of the "defendants",
referred to in the pleading as "Jensen". On April
29, 1985, the plaintiff sought and obtained leave to
amend the statement of claim so as to implead
Jensen Shipping personally as a party defendant
and pray for a judgment against it in personam for
the whole amount owed by it for all the jobs done,
along with the condemnation in rem against the
ship for those accounts directly related to it.
' Paragraphs 22(2)(m), 22(2)(n) and subsection 43(2) read
as follows:
22....
(2) Without limiting the generality of subsection (I), it is
hereby declared for greater certainty that the Trial Division
has jurisdiction with respect to any claim or question arising
out of one or more of the following:
(m) any claim in respect of goods, materials or services
wherever supplied to a ship for her operation or mainte
nance including, without restricting the generality of the
foregoing, claims in respect of stevedoring and lighterage;
(n) any claim arising out of a contract relating to the
construction, repair or equipping of a ship;
43....
(2) Subject to subsection (3), the jurisdiction conferred on
the Court by section 22 may be exercised in rem against the
ship, aircraft or other property that is the subject of the
action, or against any proceeds of sale thereof that have been
paid into court.
The amended statement of claim naturally elic
ited a renewed statement of defence. One was filed
on July 12, 1985 by substituted counsel. It reite
rated all the allegations of the original one includ
ing those relating to the counterclaim, and its
prayer for relief was again a simple dismissal of
the action. But there was in it an allegation com
pletely novel. Its paragraph 4 read thus: "The
beneficial ownership of Defendant vessel was sold
by this Defendant [Jensen Shipping] to Jensen
Marine Holdings Ltd. on 24 November 1983."
Nothing else was said about this Jensen Marine
Holdings Ltd., but the revelation in itself, if accu
rate, was no doubt of major consequence to the in
rem side of the proceedings.
The allegation was accurate. It was established
at trial that indeed a transfer of ownership of the
vessel had taken place in 1983 as part of a refi
nancing scheme rendered necessary by the precari
ous situation of Jorgensen and his shipping opera
tion. On November 24, 1983, by statutory bill of
sale which had been regularly registered, the
Jensen Star had been acquired by a recently
formed corporation—Jensen Marine Holdings
Ltd., the shares of which were equally divided
between Jorgensen and the two individuals who
had accepted to inject the money needed—which
corporation had immediately demise chartered it
to Jensen Shipping, for twelve years, by bareboat
charterparty dated December 8, 1983.
As to the ground of defence that counsel drew
from these facts, it was directly related to the
limitation of the in rem jurisdiction of this Court
in maritime matters imposed by subsection 43(3)
of the Federal Court Act, which reads:
43....
(3) Notwithstanding subsection (2), the jurisdiction con
ferred on the Court by section 22 shall not be exercised in rem
with respect to a claim mentioned in paragraph 22(2)(e), (f),
(g), (h), (i), (k), (m), (n), (p) or (r) unless, at the time of the
commencement of the action, the ship, aircraft or other prop
erty that is the subject of the action is beneficially owned by the
person who was the beneficial owner at the time when the cause
of action arose.
The contention was, of course, that the Court had
no jurisdiction to entertain the proceedings against
the ship, since there had occurred a change in the
beneficial ownership of the Jensen Star between
the time the cause of action had arisen and the
time the action had been commenced.
The Trial Judge rejected the contention and
affirmed his jurisdiction on the basis of a two-tier
reasoning which he summarized in his reasons as
follows:
In my view this Court has the right to exercise in rem
jurisdiction notwithstanding the transfer because, for the pur
pose of subsection 43(3), Jensen Shipping remained the benefi
cial owner of the ship or, in the alternative, Jensen Shipping
and Jensen Holdings are estopped from claiming that Jensen
Shipping was not the beneficial owner of the ship at the time
this action was commenced.
The appellants submit again before this Court
that the Trial Judge lacked jurisdiction to con
demn the ship and ask that this part of the judg
ment be set aside.
My first comments will be to express, with
respect, my difficulty with the reasoning on the
basis of which the Trial Judge has arrived at his
conclusion. In fact, I do not think that either of the
two propositions relied on by him is legally correct.
1. It seems to me impossible to hold that Jensen
Shipping could have remained the beneficial owner
of the ship for the purposes of subsection 43(3) of
the Federal Court Act, unless the transfer from
Jensen Shipping to Jensen Marine Holdings Ltd.,
on November 24, 1983, could be seen as only a
sham aimed at concealing the true ownership of
the vessel in order to shield it from risk of seizure
as security, and the Trial Judge was satisfied that
this was not so.
To arrive at his conclusion that Jensen Shipping
had remained the beneficial owner of the ship, the
Trial Judge accepted the view, expressed in obiter
by Mr. Justice Addy in a previous case, 2 that the
demise charter of a vessel should be regarded as
carrying with it an ownership interest sufficient to
support an action in rem, a position our courts
should adopt, even if it meant departing from the
2 Thorne Riddell Inc. v. Nicolle N Enterprises Inc., [1985] 2
F.C. 31 (T.D.).
English decisions which had refused to accept that
a demise charterer could be the beneficial owner
referred to in an English statutory provision akin
to subsection 43(3) of the Federal Court Act.
That the English decisions referred to should be
considered with caution is obvious since they were
rendered in the context of a statutory framework
quite different from ours. When section 43 of the
Federal Court Act was adopted, the corresponding
provision conferring Admiralty jurisdiction to the
High Court in England was subsection 3(4) of the
Administration of Justice Act, 1956, 1956, 4 & 5
Eliz. 2, c. 46 (U.K.). 3 This provision had been
enacted in the context of Britain's ratification of
the International Convention Relating to the
Arrest of Seagoing Ships, Brussels, May 10, 1952
[439 U.N.T.S. 193]; its aim was essentially to
extend the in rem jurisdiction of the Court, not
only to the ship in respect of which a maritime
claim had arisen, but also to any sister ship, i.e. to
any ship belonging to the same owner; and the
reference in it was to the "beneficial owner of all
the shares" in the ship. Canada has not adhered to
the 1952 Brussels Convention; the in rem jurisdic
tion conferred by our provision is strictly limited to
the ship to which the services have been rendered,
and the text speaks of "beneficial owner of the
ship", with no reference to shares. A passive
importation of the English case law would no
doubt be unwarranted. As to the preoccupations of
3 It read thus:
3....
(4) In the case of any such claim as is mentioned in
paragraphs (d) to (r) of subsection (1) of section one of this
Act, being a claim arising in connection with a ship, where
the person who would be liable on the claim in an action in
personam was, when the cause of action arose, the owner or
charterer of, or in possession or in control of, the ship, the
Admiralty jurisdiction of the High Court ... may ... be
invoked by an action in rem against—
(a) that ship, if at the time when the action is brought it
is beneficially owned as respects all the shares therein
by that person; or
(b) any other ship which, at the time when the action is
brought, is beneficially owned as aforesaid.
Mr. Justice Addy and the Trial Judge, who would
want to assure a greater protection to the supplier
of necessaries when there was nothing to warn
him, at the time his services were requested, that
the ship was not then in the possession and control
of her owners or their employees, no one could
deny their legitimacy. 4
The problem, however, is that I simply do not
see how a court could suppose that Parliament
may have meant to include a demise charterer in
the expression "beneficial owner" as it appears in
subsection 43(3). Whatever be the meaning of the
qualifying term "beneficial", the word owner can
only normally be used in reference to title in the
res itself, a title characterized essentially by the
right to dispose of the res. The French correspond
ing word "propriétaire" is equally clear in that
regard. These words are clearly inapt to describe
° Addy J. could not express his views in this regard more
forcefully [at pp. 37-38]:
Where an owner turns over a ship to another person under a
demise bare boat charter, knowing full well that it will be
sailing to foreign ports and that it will be obliged to take on
fuel and other supplies from time to time, it would seem, at
first sight, in any event, to be impractical and unnecessarily
restrictive of commerce and of the movement of ships to
expect that the suppliers in all these cases would be required
to receive prepayment in specie or to check with the actual
registered owners at or through the port of registry in
whatever corner of the world it might be, to enquire whether
proper authority had been granted before supplying that ship
with the essential requirements to enable it to continue on its
voyage. Whether it be by virtue of presumed or implied
authority or otherwise, unless the supplier is put on notice or
has reason to suspect that the actual owner has forbidden the
credit of the ship to be pledged, then it would seem that an
action for such necessaries might well be maintainable in rem
against the ship when its owner pro tempore, that is, the
charterer by way of demise, would be responsible at law for
those supplies.
the possession of a demise charterer.' In my view,
the expression "beneficial owner" was chosen to
serve as an instruction, in a system of registration
of ownership rights, to look beyond the register in
searching for the relevant person. But such search
cannot go so far as to encompass a demise charter-
er who has no equitable or proprietary interest
which could burden the title of the registered
owner. As I see it, the expression "beneficial own
er" serves to include someone who stands behind
the registered owner in situations where the latter
functions merely as an intermediary, like a trustee,
a legal representative or an agent. The French
corresponding expression "véritable propriétaire"
(as found in the 1985 revision, R.S.C., 1985, c.
F-7) leaves no doubt to that effect. 6
Only Parliament, in my view, can relax the
constraints of subsection 43(3) by placing the
demise charterer on the same level as a beneficial
owner. This cannot be done by the courts.
2. It seems to me likewise impossible to hold
that the defendants-appellants could be estopped
from claiming that Jensen Shipping was not the
beneficial owner of the ship at the time the action
was commenced.
It is clear on the evidence that at no time did
Jorgensen give Mount Royal notice of the transfer
of ownership of the vessel, or act in such a way as
5 See the comments of Mr. Justice Goff in I Congreso Del
Partido, [1977] I Lloyd's Rep. 536 (Q.B. (Adm. Ct.)), at pp.
560 et seq. where he vigorously disputes the possibility to
attribute to a demise charterer the characteristics of a benefi
cial owner, refusing to follow in that respect the previous
decision of Mr. Justice Brandon in The Andrea Ursula, [1971]
I Lloyd's Rep. 145 (Adm.). See also The Permina 3001, [1979]
1 Lloyd's Rep. 327 (Sing. C.A.).
6 In both the Canada Business Corporations Act, R.S.C.,
1985, c. C-44, section 2 and the Bank Act, R.S.C., 1985, c. B-1,
section 2, where the expression "beneficial ownership", again
translated by "véritable propriétaire", is also to be found, it is
made clear there that it is used in the sense I suggest.
Elsewhere, in that Part of the Canada Shipping Act dealing
with pollution, prevention and control, when it is sought to give
a name to "the person having for the time being, either by law
or by contract, the rights of the owner of the ship as regards the
possession and use thereof' (R.S.C. 1970, c. S-9, s. 727 (rep.
and sub. by S.C. 1987, c. 7, s. 81)) [now R.S.C., 1985, c. S-9, s.
654 (rep. and sub. by R.S.C., 1985 (3rd Supp.), c. 6, s. 84)], a
special and express definition of the word "owner" is employed,
rather than the addition of the qualifying term "beneficial".
to suggest that his authority to bind the ship could
have changed. It is also somewhat disturbing to see
that Jensen Shipping presented itself in the pro
ceedings as the owner of the ship, up until the
filing of the amended statement of defence when
the transfer was revealed. But nevertheless I do not
see how the doctrine of estoppel could come into
play here so as to preclude any effect flowing from
the fact that the vessel had become the property of
Jensen Marine Holdings Ltd. and was no longer
that of Jensen Shipping.
Assuming that the conditions for an estoppel
could be seen to be present here, which I seriously
doubt since there was no promise or assurance
having induced anyone to alter his position to his
detriment; and assuming further that such an
estoppel could have effect against Jensen Marine
Holdings Ltd., the registered owners, which
appears to me difficult to accept, since it, itself,
has never expressly denied its title; even so, the
requirement of continuity of ownership imposed by
subsection 43(3) to allow an action in rem is one
that goes to the very jurisdiction of the Court, and
no estoppel can give a court a jurisdiction express
ly denied by statute (Halsbury's Laws of England,
Vol. 16, no. 1515, fn. 3; Snell's Principles of
Equity, 27th ed., page 563).
I therefore conclude that the reasons given by
the Trial Judge to reject the jurisdictional argu
ment advanced against the action in rem are not
valid. Does that mean that the conclusion itself
was totally unjustified? I do not think so and I will
try to explain why.
It will be recalled that Mount Royal claimed in
its action in rem the aggregate of the amounts due
to it for seventeen different jobs done on the
Jensen Star at different dates between August 30,
1982 and May 21, 1984. Six of these seventeen
jobs predated November 24, 1983, the date of sale
of the vessel by Jensen Shipping to Jensen Marine
Holdings Ltd. In my view of the situation, since I
reject the possibility that Jensen Shipping be seen
as having remained beneficial owner of the ship
after November 24, 1983, the action in rem in
regard to the costs involved in these six "pre-sale
jobs" cannot be entertained. There is no doubt that
the requirement of continuity of ownership estab
lished by paragraph 43(3) is not met. The statu
tory right in rem that Mount Royal could have
exercised in order to secure payment of its due for
the six first jobs it did on the Jensen Star has been
definitely extinguished by the transfer of the vessel
to new owners. The judgment in rem appealed
from cannot stand with respect to those six jobs,
the invoices for which amounted to the sum of
$102,875.66.
I need to pause here for a moment to say a few
words about an alternative ground of appeal raised
by the appellants in their submissions to which I
have not yet made reference. In my review of the
facts at the outset, I made allusion to some partial
payments that Jensen Shipping had made to
Mount Royal on account of its outstanding debts
for all the jobs done to the several vessels it was
operating. On making those partial payments, on
December 31, 1983 and April 23, 1984, Jensen
Shipping did not specify which particular accounts
were to be discharged thereby. On June 20, 1984,
Mount Royal sent to Jensen Shipping a statement
of accounts in which the invoices were listed
chronologically and the partial payments were
entered, on their proper dates, as reducing the
total debt then due, which appeared to mean that
they were being attributed on the basis of "first
invoice in—first out", but otherwise no express
declaration was made by either party as to how the
payments were to be imputed.
Upon commencing its action in rem before the
Court, however, Mount Royal purported to apply
the partial payments to accounts relating to vessels
other than the Jensen Star, which permitted it to
arrest the ship for most of the invoices relating to
it, regardless of their dates ($237,243.68). The
defendants objected to such allocation claiming
essentially that Mount Royal had already made an
allocation in its June 1984 statement as a result of
which the oldest accounts, including the six first
relating to the Jensen Star, had been extinguished.
The objection was denied by the Trial Judge on
the basis that the common law principles relating
to attribution of payments between debtor and
creditor were applicable and that those principles
had been illustrated in the judgment of the House
of Lords in The Mecca, [1897] A.C. 286 (H.L.)
where it had been decided that, in the absence of a
specific appropriation by the debtor, the creditor
remains free to elect at any time and may do so in
bringing his action.
While the Trial Judge was no doubt correct in
referring to the rules of common law as they are
applied in Admiralty matters (ITO—International
Terminal Operators Ltd. v. Miida Electronics et
al., [ 1986] 1 S.C.R. 752), I am not sure that the
reasoning in The Mecca would necessarily lead to
the conclusion he adopted and, more particularly,
that the June 20, 1984 statements are not to be
seen as a plain and irrevocable expression of inten
tion to which effect should be given. But, be that
as it may, it will be seen that my conclusion as to
the lack of jurisdiction to entertain the action in
rem for the "pre-sale invoices" (which include all
those claimed by the appellants to have been extin
guished by the initial appropriation) renders the
issue moot.
I now revert to my analysis.
The "post-sale accounts", for a total amount of
$145,582, are to be completely distinguished from
the "pre-sale" ones. The problem they raise has
nothing to do with jurisdiction. In their case, the
condition, established by subsection 43(3) of the
Federal Court Act, for the exercise by this Court
of its jurisdiction in rem is obviously met. The
problem with them is of a totally different order.
The problem with the "post-sale accounts"
relates to the required relationship between the
supplier of necessaries and the owner of the vessel
for the statutory right in rem to be eventually
recognized and enforced. Here is what I mean.
As it is well known, the so-called statutory right
in rem that the Canadian law accords to the
supplier of necessaries is quite different from a
maritime lien. A maritime lien is, in effect, a
privilege against a ship which attaches and gains
priority by pure effect of the law and travels with
the ship wherever it goes and in whosever hands it
comes. (See: William Tetley, Maritime Liens and
Claims, 1985, c. 1, more specially at page 40.) A
statutory right in rem is merely a right to sue the
ship itself to obtain payment. The action in rem,
which, as noted by Noël J. in Coastal Equipment
Agencies Ltd. v. The "Comer", [1970] Ex.C.R. 12,
originated in England as a procedural device
whose object was to grant a claimant pre-judg
ment security and to safeguard by so doing the
Admiralty Court jurisdiction against intrusions by
the courts of common law, was in due course
implanted in Canada where it has become a basic
feature of our maritime law.
This so far is easy enough. But a question
immediately arises. Does that right to sue in rem
exist by the sole fact that necessaries were sup
plied? The difference between a statutory right in
rem and a maritime lien, entrenched by the judg
ments in The Henrich Bjôrn (1886), 11 App. Cas
270 (H.L.) and The Castlegate, [1893] A.C. 38
(H.L.), precludes an affirmative answer. The pro
tection of the owners was seen to be more impor
tant than that of the suppliers. The provision of
subsection 43(3) of the Federal Court Act may
appear, at first, to be concerned only with the
protection of a new owner, but it is clear that the
theory behind it is that the owner must, in all
cases, be directly involved in the creation of the
cause of action. The broad answer to the question
set forth is therefore that the supplier of necessar
ies will have the right to sue in rem if the owner of
the vessel has been involved in the contract under
which his services were rendered. But this answer
needs to be completed, as it lacks precision as the
nature and extent of the involvement required.
As I have already mentioned, the United King
dom has adopted in 1956 a special legislation
respecting the right in rem of a claimant in mari
time law. According to that legislation (which is
now contained in the Supreme Court Act 1981,
1981, c. 54, (U.K.) at subsection 21(4)), the action
in rem is only receivable if "the owner as respects
all the shares in the vessel" or (a significant
amendment) its demise charterer, at the time the
action is commenced "would be liable on the claim
in an action in personam". In other words, wheth
er the situation of the person at the behest of
whom the services were rendered was that of
owner, charterer, or mere possessor of the vessel,
the action in rem lies if that person is owner or
demise charterer at the time of the action.' The
focus is there put almost exclusively on the person
al liability of the owner or the demise charterer at
the time of the action, which is quite understand
able since, as I said, the right of the supplier to sue
in rem exists, not only with respect to the ship for
the benefit of which the services were rendered,
but also with respect to any sister ship. So, this
condition that the owner of the vessel be involved
in the supplying of the necessaries for the right in
rem to come into existence, is now wholly peculiar
to our law, and what it involves can in no way be
determined by reference to English law.
' I have already reproduced the text of subsection 3(4) of the
Administration of Justice Act, 1956. Here is that of subsection
21(4) of the Supreme Court Act 1981.
21....
(4) In the case of any such claim as is mentioned in
section 20(2)(e) to (r), where—
(a) the claim arises in connection with a ship; and
(b) the person who would be liable on the claim in an
action in personam ("the relevant person") was, when
the cause of action arose, the owner or charterer of, or
in possession or in control of, the ship,
an action in rem may (whether or not the claim gives rise to
a maritime lien on that ship) be brought in the High Court
against—
(i) that ship, if at the time when the action is
brought the relevant person is either the beneficial
owner of that ship as respects all the shares in it or
the charterer of it under a charter by demise; or
(Continued on next page)
Most of the decisions of the Trial Division of
this Court rendered since 1970 have taken the view
that the involvement of the owner in the supplying
of the necessaries has to be complete and direct
enough to entail his personal liability. These deci
sions repeat, in effect, that an action in rem is
sustainable only if the owner is personally liable
for the amount claimed. (See: Westcan Stevedor-
ing Ltd. v. The "Armar", [1973] F.C. 1232
(T.D.); Sabb Inc. v. Shipping Ltd., [1976] 2 F.C.
175 (T.C.); Waterside Ocean Navigation Co., Inc.
v. International Navigation Ltd., [1977] 2 F.C.
257 (T.D.); McCain Produce Co. Ltd. v. The
"Rea", [1978] 1 F.C. 686 (T.D.); Logistec Corp.
v. The "Sneland", [1979] 1 F.C. 497 (T.D.); Kuhr
v. The `Friedrich Busse", [1982] 2 F.C. 709
(T.D.); Marlex Petroleum Inc. v. The Ship "Har
Rai", [1984] 2 F.C. 345 (T.D.); Thorne Riddell
Inc. v. Nicolle N Enterprises Inc., [1985] 2 F.C.
31 (T.D.); Imperial Oil Limited v. Ship "Expo
Spirit" and Hoverwest Ferry Services Inc. (1986),
6 F.T.R. 156 (F.C.T.D.). Some doubts have occa
sionally been expressed as to the validity of this
view (for instance Thorne Riddell Inc. referred to
above, Western Stevedoring Co. v. Ship "Anadolu
Guney" Cargo et al. (1988), 23 F.T.R. 117
(F.C.T.D.), and of course the decision under
attack here), but I believe that it is basically
indisputable. To contend that an action in rem
could be sustained even iii the absence of any
personal liability on the part of the owner would
go against the whole idea behind the system which
is, again, the protection of the owner. A claim
against a ship cannot be viewed apart from the
owner; it is essentially a claim against the owner.
It may be that the terms in which the principle has
been put in many decisions was somewhat too
broad. This personal liability of the owner could
exist, I suggest, only in relation to the vessel, that
is to say only to the extent to which the proceeds of
sale of the vessel may be applied to the claim; in
other words, a liability to be satisfied strictly out
of the res (see in that respect the interesting
decision of the Privy Council in Foong Tai & Co.
v. Buchheister & Co., [1908] A.C. 458 (P.C.)). It
is not a fact that there are three possibilities which
have to be reckoned: the owner may have contract-
(Continued from previous page)
(ii) any other ship of which, at the time when the
action is brought, the relevant person is the benefi
cial owner as respects all the shares in it.
ed himself, or he may have authorized someone to
contract on his personal credit, or he may have
expressly or implicitly authorized a person, in
possession and control of a ship, to contract on the
credit of the ship (rather than on the entirety of
his personal assets). But, I essentially agree that
liability as a result of some personal behaviour and
attitude on the part of the owner is required.
Would that mean, though, that a judgment in rem
cannot be rendered without being accompanied by
a judgment in personam against the owner? If it
were so, the whole notion of a distinct action in
rem would be defeated, it seems to me, and to my
knowledge no one has ever contended that such
could be the case (comp. D. C. Jackson, Enforce
ment of Maritime Claims, 1985, at page 59).
It is on the basis of that understanding of our
law that I have come to the conclusion that, in the
circumstances of this case, the action in rem must
be sustained in respect of all of the "post-sale
invoices". It should be recalled that Jensen Marine
Holdings Ltd. was created for financing purposes
only; that Jorgensen, who ran Jensen Shipping,
was also president of Jensen Marine Holdings
Ltd.; that Jorgensen himself did not treat Jensen
Shipping and Jensen Marine Holdings Ltd. as two
separate entities, but on the contrary showed, by
his conduct at the moment of the contracts as well
as his attitude at the time of the action, that he
never considered his legal authority over the ship
to have changed. I have no difficulty in finding
that Jensen Marine Holdings Ltd., have had, in
the supplying of the services by Mount Royal, the
involvement required for the validity of the action
in rem, involvement which consisted in acting
through its president in such a manner as to
authorize tacitly Jensen Shipping to contract on
the credit of the vessel and engage, to that extent,
its personal liability. Whether or not the terms of
the charterparty governing the contractual rela
tions inter se between the two corporations would
bear that interpretation of the situation is
immaterial.
In fact, I do not even believe that Jensen Marine
Holdings Ltd. can now dispute such an interpreta
tion. It is well established that necessaries supplied
to a vessel are prima facie presumed to have been
supplied on the credit of the vessel and its owner.
The presumption is a rebuttable one, of course, but
here, not only was it not in fact rebutted, no
attempt was even made to do so. It is true that the
Trial Judge did not formally pronounce on the
question of the personal liability of Jensen Marine
Holdings Ltd. and rendered judgment in personam
only against Jensen Shipping; but, in my view, he
could not do otherwise, since, on the action as it
came before him, judgment in personam could
issue against the latter company only, and not the
former which had never been personally implead-
ed.
In relation to that last statement of mine, I must
say here the surprise I felt when I noticed, in the
course of analyzing the file, that the style of cause
on the appeal book (which had been prepared by
counsel for the appellants) was not the same as the
one appearing on the Trial Division documents,
including the judgment: Jensen Marine Holdings
Ltd. had been added as a party defendant. Appar
ently the change was explained to the registry as
being based on the following passage in the judg
ment [at page 296]:
There remains to consider the defendant's third line of
defence, that the plaintiff has no claim in rem against the ship
because the beneficial owner of the ship at the time this action
was commenced was not the beneficial owner of the ship at the
time the claim arose.
Before I deal with that submission on the part of the
defendant, however, I must deal with an application made by
counsel for the defendant in the course of the trial to amend the
statement of defence to show Jensen Shipping Limited and
Jensen Marine Holdings Limited as defendants. Counsel for
the defendant claimed it was his intention, when he filed his
defence in July of 1985, to file it on behalf of Jensen Holdings
as well as on behalf of Jensen Shipping and that he made that
fact clear in paragraph 4 of the defence which pleaded the
following:
4. The beneficial ownership of defendant vessel was sold by
this defendant to Jensen Marine Holdings Ltd. on 24
November 1983;
Counsel for the plaintiff opposed the application to show
Jensen Holdings as a defendant on the grounds that having
previously identified Jensen Shipping as the owner of the vessel
Jensen Shipping was precluded from later claiming that Jensen
Holdings was the owner. Counsel for the defendant Jensen
Shipping appeared to be concerned that unless Jensen Holdings
was made a party to the action he, as counsel for Jensen
Shipping, might not be able to argue that Jensen Holdings was
the owner.
I must confess that I did not appreciate the significance of
the application by counsel for Jensen Shipping at the time nor
did I appreciate the significance of the opposition to the motion
by counsel for the plaintiff.
For whatever reason counsel for Jensen Shipping sometimes
filed documents as solicitor for the defendant and sometimes as
solicitor for the defendants. The defence itself was filed as the
"statement of defence of Jensen Shipping Limited" and filed by
"solicitors for the defendants". It appears that counsel was
laying the grounds for claiming either that Jensen Holdings
was or was not before the court depending on which submission
would be most advantageous at the time it had to be made.
In view of the documents filed with the court showing the
transfer of the ship from Jensen Shipping to Jensen Holdings
on November 24, 1983, the fact that counsel claims he intended
to act on behalf of Jensen Holdings as well as Jensen Shipping,
and the fact that the owner is named as one of the defendants, I
am satisfied that Jensen Holdings is a party to the action and is
represented by Barry & Associates as its solicitors.
While the last words used by the Trial Judge
were somewhat equivocal, it was nevertheless clear
that what was meant was that the defendants were
entitled to argue that the ship was owned by
Jensen Marine Holdings Ltd. The phrase "the
owners and all others interested in" the ship is, I
repeat, merely the manner indicated by the Rules
of the Court (Rule 1002) to commence an action
in rem, which by itself can only lead to a judgment
in rem. To implead the owner so as to obtain
against him a judgment in personam, a plaintiff, it
seems to me, has to amend, with leave, his state
ment of claim, specially the style of cause thereof
and the prayer for relief. On the other hand, if it
must be accepted, as it seems to be in England,
that by raising a defence to the action in rem on
the basis of absence of liability on his part, an
owner submits himself to the jurisdiction of the
Court with the result that the action continues
against him as an action in personam as well as in
rem (see The Banco, [1971] 1 Lloyd's Rep. 49
(C.A.) and The August 8, [1983] 2 A.C. 450
(P.C.), at page 456), it would appear to me dif
ficult to understand that, by simply coming before
the Court to reveal his ownership, without raising
the issue of his personal liability, as here, an owner
would automatically become a party defendant
against whom judgment in personam must be
entered, failing which the judgment in rem could
not sand. In any event, he who prepared the appeal
book should know that a change in the style of
cause requires a formal order of the Court. I
repeat that, in my view, no judgment in personam
could have been pronounced against Jensen
Marine Holdings Ltd.
My conclusion therefore is that if the judgment
in rem rendered by the Trial Judge is not sustain
able with respect to the "pre-sale jobs", it is, on
the contrary, well founded with respect to all of
the "post-sale invoices". I would then vary the
judgment a quo so as to limit the amount to
$145,582. I do not think an award for costs would
in the circumstances be warranted.
MACGUIGAN J.A.: I agree.
DESJARDINS J.A.: I concur.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.