Article issued for the third edition of “Ship Arrests in Practice”, 2008, published by shiparrested.com network.

 By Shelley Chapelski, partner
Bull, Housser & Tupper LLP
sac@bht.com
www.bht.com
3000 – 1055 West Georgia Street
Vancouver, V6E 3R3 Canada
Tel: 604.687.6575
Fax: 604.641.4949

Overview

1. Please give an overview of ship arrest practice in your country.
Ship arrest in Canada is usually simple and relatively inexpensive. Three documents arerequired:

a. Statement of Claim to commence the action briefly setting out the relevant facts to establish in rem jurisdiction.
b. Affidavit to Lead Warrant, which can be sworn by the solicitor upon information and belief.
c. Warrant for Arrest issued by the Court to the Sheriff

In Canada, it is not required that the Sheriff go into possession of the ship following arrest, unless specifically ordered by the Court. Therefore, the only costs to arrest are disbursements to the Court and Sheriff and the legal costs to prepare the documentation. lf a straightforward matter, it can be done for as little as Cdn.$ 1 500 to $2000 in all.

Applicable laws

2. Which International Convention applies to arrest of ships in your country?
Canada has not acceded to the Arrest Conventions.

3. Is there any other way to arrest a ship in your jurisdiction?
There is no other way to arrest a ship but it may be seized through other processes described in the next answer.

4. Are these alternatives e.g. saisie conservatoire or freezing order?
In appropriate circumstances, Canadian Courts may grant Mareva lnjunctions with respect to seizure of a defendant’s assets within the jurisdiction. A vessel may also be seized and sold as an asset of a judgment debtor to satisfy a debt.

Claims subject to ship arrest

5. For which types of claims can you arrest a ship?
S. 22(2) of the Federal Courts Act provides for in rem jurisdiction for:
(a) any claim as to title, possession or ownership of a ship or any part interest therein or with respect to the proceeds of sale of a ship or any part interest therein;
(b) any question arising between co-owners of a ship as to possession, employment or earnings of a ship;
(c) any claim in respect of a mortgage or hypothecation of, or charge on a ship or any part interest therein or any change in the nature of bottomry or respondentia for which a ship or part interest therein or cargo was made security;
(d) any claim for damage sustained by, or for loss or a ship including, without restricting the generality of the foregoing damage to or loss of the cargo or equipment o or any property in or on being loaded on or off a ship;
(e) any claim arising out of an agreement relating to the carriage of goods on a ship under a through bill of lading or in respect of which a through bill of lading is intended to be issued, for loss or damage to goods occurring at any time or place during transit;
(f) any claim for loss of life or personal injury occurring in connection with the operation of a ship including, without restricting the generality of the foregoing, any claim for loss of life or personal injury sustained in consequence of any defect in a ship or in her apparel or equipment, or of the wrongful act, neglect or default of the owners, charterers or persons in possession or control of a ship or the master or crew thereof for of any other person for whose wrongful acts, neglects or defaults the owners, charterers or persons in possession or control of the ship are responsible, being an act, neglect or default in the management of the ship, in the loading, carriage or discharge of goods on, in or from the ship or in embarkation, carriage or disembarkation or persons on, in or from the ship;
(g) any claim for loss of or damage to goods carried in or on a ship including, without restricting the generality of the foregoing, loss of or damage to passengers, baggage or personal effects;
(h) any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use o hire of a ship whether by charter party or otherwise;
(i) any claim for salvage including, without restricting the generality of the foregoing, claims for salvage of life, cargo, equipment or other property of, from or by an aircraft to the same extent and in the same manner as if such aircraft were a ship;
(j) any claim for towage in respect of a ship or of an aircraft while such aircraft is waterborne;
(k) any claim for pilotage in respect of a ship or of an aircraft while such aircraft is waterborne;
(l) any claim in respect of goods, materials or services wherever supplied to a ship for her operation or maintenance including, without restricting the generality of the foregoing, claims in respect of stevedoring and lighterage;
(m) any claim arising out of a contract relating to the construction, repair or equipping of
a ship;
(n) any claim by a master, officer or member of the crew or a ship for wages, money, property or other remuneration ore benefits arising out of his employment;
(o) any claim by a master, charterer or agent of a ship or shipowner in respect of disbursements or by a shipper in respect of advances, made on account of a ship;
(p) any claim in respect of general average contribution;
(q) any claim arising out of or in connection with a contract of marine insurance; and
(r) any claim for dock charges, harbour dues or canal tolls including, without restricting the generality of the foregoing, charges for the use of facilities supplied in connection therewith.

6. Can you arrest a ship irrespectively of her flag?
Yes, although the Canadian Courts will recognize sovereign immunity but not for governmentown ed commercial ships.

7. Can you arrest a ship irrespectively of the debtor?
No, other than for maritime liens and certain statutory rights in rem, the ship owner itself must be liable for the debt. If the debt is owed by the charterer, and the charterer was NOT acting as agent for the owner in incurring the liability, there is no right in rem. See also the answer to Question 9 below.

8. What is the position as regards sister ships and ships in associated ownership?
Section 43(8) of the Federal Courts Act was added to allow sistership arrest of vessels that are beneficially owned by the person who was the owner of the ship that is the subject of the action. Section 43(8) states:
“43(8) 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 was the owner of the ship that is the subject of the action.”

9. What is the position as regards Bareboat and Time-Chartered vessels?
In the instance of a bareboat charter, and the claim is for necessaries, there is a rebuttable presumption that the bareboat charterer is acting as agent for the ship owner. With respect to time chartered vessels, the claimant bears the onus to prove that the time charterer was acting as agent of the owner in order to advance the claim in rem.

Claims subject to ship arrest

10. Do your Courts require counter-security in order to arrest a ship?
Countersecurity is not required for the arrest. However, if the plaintiff is a foreign entity without any assets in the jurisdiction, security for costs of the litigation, should that party lose the case and be ordered to pay costs to the defendant, is often ordered (if such an order is sought by the defendant).

11. Is there any difference in respect to arresting a ship for a maritime claim and a maritime lien?
The procedure is the same. However, if ownership of the ship has changed subsequent to the action in rem arising but before being arrested, the in rem liability of the ship is extinguished (subject to certain statutory exceptions).

12. Does you country recognise maritime liens? Under which International Convention, if any?
Canada recognizes the traditional English maritime liens but is not a party to a Conventionwith respect to them. Canada also recognizes maritime liens for pilotage and if a foreign claim constitutes a maritime lien under the applicable foreign law, Canada will recognize the lien even though the same claim would not constitute a lien under Canadian law.

13. What lapse of time is required in order to arrest a ship since the moment the file arrives to your law firm?
If we are provided with all the documents evidencing the debt or claim enabling the solicitor to swear the Affidavit to Lead Warrant, and the vessel is located in the port of Vancouver during normal business hours we can arrest in as little as 90 minutes. Otherwise, it can require up to 24 hours depending on the ship’s location in Canada.

14. Do you need to provide a POA, or any other documents of the claim to the Court?
No, but to swear the Affidavit to Lead Warrant, we need written or oral advice from the claimant or his representative of the specific amount owing and the reason for the claim.

15. What original documents are required, what documents can be filed electronically, what documents require notarisation and/or apostille, and when are they needed?
No original documents are required to arrest. Should the matter eventually proceed to a trial, original documents may then be required.

16. Will your Courts accept jurisdiction over the substantive claim once a vessel has been arrested?
Subject to an application from the defendant on the basis of forum conveniens, the Court will generally keep jurisdiction. If the Court agrees to stay the proceeding in favour of forum conveniens, it will generally require that the arrest security be transferred to that alternate jurisdiction so that the Plaintiff is not prejudiced. In the instance of an arbitration agreement, the court may order a stay to enforce the arbitration agreement, but again the arrest security should stand wherever the arbitration is taking place. For cargo claims, Canada exercises Hamburg Rules – style jurisdiction, subject again to arguments of forum conveniens.

Miscellaneous

17. Which period of time will be granted by the Courts in order for the claimants to take legal action on the merits?
The Court will generally enforce the time limitation provisions applicable to the transaction whether they be determined by Convention (i.e. Hague Visby Rules, Athens Convention), the contract or law of the location of the tort (in Canada, tort limitation generally ranges from 2 to 6 years, with 2 years being most common).

18. Do the Courts of your country acknowledge wrongful arrest?
Canadian law on wrongful arrest follows that of the UK. Damages for wrongful arrest can be awarded only when the owner of the arrested ship proves that the action was commenced with malice or gross negligence.

19. Do the Courts of your country acknowledge the piercing and lifting of the corporate veil?
Canadian Courts will generally respect the corporate veil except in the instances of fraud.

20. Is it possible to have a ship sold pendente lite; if so how long does it take?
The Court will consider sales pendente lite, especially if the ship is a deteriorating asset that the interested parties are not maintaining, and is likely to be sold in any event. The length of time to sell is largely determined by the degree of resistance from the ship interests. It can be done in as little as two months — the Court order must be obtained for the sale, the ship appraised, the sale advertised and bids accepted and Court approval of the specific sale granted.