Maritime Law
Case Study
A.2 Federal Court Workshop
William T. Cahill
Cox & Palmer
St. John’s, NL
Case Study
• The MV Deadbeat Adventurer, an artic cruise
ship, has docked in St. John’s Harbour after
cutting short its latest cruise.
• The owners, Deadbeat Shipping Company Ltd.,
a corporate incorporated in the Cook Islands.
• Crew has gone unpaid and is left stranded in St.
John’s aboard the vessel.
• Other creditors (including the St. John’s Port
Authority) have gone unpaid.
Federal Courts Act
• The Federal Court given “concurrent
original jurisdiction” over Canadian
maritime law or any other law relating to
any matter coming within the class of
subject of navigation and shipping.
• Subsection 22(2) itemizes a “open list” of
maritime claims that can be brought in
the Federal Court.
Federal Courts Act (cont)
• Section 43(2) provides that the
jurisdiction conferred by the Federal Court
in Section 22 may be exercised in rem
against a ship or other property that is the
subject of the action or against any
proceeds of sale of the ship or other
property that have been paid into Court.
Ship Arrest
• Arrest in rem in Canada follows
procedures generally similar to those of
the United Kingdom.
• The procedure for arresting vessels in
Canada is set out in Part 13 of the
Federal Courts Rules and, in particular, in
Rule 481.
Sistership Arrest
• Section 43(8) of the Federal Court Act
states: “The jurisdiction conferred on the
Federal Court by section 22 may be
exercised in rem against any ship that, at
the time the action is brought, is owned
by the beneficial owner of the ship that is
the subject of the action.”
Affidavit to Lead Warrant
• In order to obtain a warrant for the arrest
of a vessel a party must swear an Affidavit
entitled “Affidavit to Lead Warrant” (Rule
481(1)).
• In most cases, because of the urgency
involved in arresting a ship, the Affidavit is
often sworn by counsel on information
and belief.
Affidavit to Lead Warrant (cont)
• If it is a sistership arrest, then it must also
state that the deponent has reasonable
grounds to believe that the ship against
which the warrant is sought is beneficially
owned by the person who is the owner of
the ship that is the subject of the action
(Rule 482(2)(e)).
Warrant of Arrest
• May be issued at any time after the filing
of an in rem statement of claim.
• Statement of claim must be served within
60 days of issuance (Rule 203(1)).
• Served by a sheriff by attaching a certified
copy on some conspicuous part of the
ship or attaching it to the cargo (Rule
479(1)(a) and 479(1)(b)).
Warrant of Arrest (cont)
• Possession of and responsibility for
property continues in the person in
possession immediately before the arrest
(Rule 483(1)).
• The Court may order a sheriff to take
possession on condition that the party
assume responsible for any costs or fees
(Rule 483(2)).
Movement of Arrested Property
• Movement of the property under arrest
can only be done by consent of all parties
and caveators, or by leave of the Court
(Rule 484).
• Unauthorized movement of arrested
property is punishable as contempt of
court.
Release from Arrest
• Vessel may be released from arrest under
the Federal Court Rules if, inter alia, the
amount claimed is paid into Court or, if
the amount claimed is greater than the
appraised value of the property, if the
appraised value is paid into Court.
Release from Arrest (cont)
• Alternatively, bail can be posted. Bail,
under the Federal Court Rules, is a
guarantee of a bank or a bond from a
surety company licensed to do business
in Canada or a bail bond. (Rule 486(1))
Release from Arrest (cont)
• If the amount of the security cannot be
agreed, then an application to Court may
be made to fix the amount (usually value
of the property plus anticipated costs and
prejudgment interest (usually 25% to
50%)).
Release from Arrest (cont)
• Where insurance is available to the vessel
owner, whether through P&I Clubs or
otherwise, a letter of undertaking is
customarily provided to the claimant
instead of a bond, however this is a
matter of negotiation and is not
addressed by the Federal Courts Rules.
Wrongful Arrest
• Damages for wrongful arrest may be
awarded only where the plaintiff’s
conduct amounts to “malice or gross
negligence.”
Sale of Arrested Property
• Federal Court Rule 490 governs the sale
of a ship or other arrested property.
• The Court may order the property sold
with or without an appraisal or
advertisement, and by auction or private
contract.
Sale of Arrested Property (cont)
• When an arrested ship is sold by the
Court the purchaser acquires complete
title, free and clear of all liens under
Canadian maritime law.
Priority of Claims
• The law of priorities under Canadian
maritime law is largely non-statutory.
• Canada is not a party to any of the
international conventions on maritime
liens and mortgages.
Priority of Claims (cont)
• Validly created foreign maritime liens will
generally be recognized and given the
same priority as a lien created in Canada
pursuant to Canadian maritime law.”
• The ranking of claims in Canada is well is
well known and has been set out in a
number of cases.
MV Deadbeat Adventurer
• Vessel sold by order of the Federal Court
for $275,000.00 upon application by St.
John’s Port Authority.
• St. John’s Port Authority granted
“enhanced priority” over proceeds of sale.
• All other creditors and lien holders
(including non-Canadian crew) left to
share surplus proceeds.
Questions?