Cross-Border Ship Mortgage Enforcement

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and ArbitratorCommercial, Contract Disputes, Creditors Rights, Cross-Border Litigation, Debt and Enforcing Judgments, Enforcement of Foreign Judgments, Heavy Industries, Jurisdictional Challenges, Lenders | Borrowers, Loan and Guarantee, Marine | Maritime | Aviation, Mortgage Enforcement, Mortgage Litigation, Of Interest to US Counsel0 Comments

In an admiralty action in rem and in personamLakeland Bank v. Never E Nuff (Ship), 2016 FC 1096, the Federal Court dismissed the action in personam on a US mortgage, registered in New York State, against the mortgagor, a U.S.based former owner of a 38-foot pleasure craft and against its innocent purchaser for value without notice in Canada and dismissed the purchaser’s counterclaim for abuse of process, but ordered the return of a trailer and other personal items, which had been arrested in Canada with the pleasure craft, but were not covered by the mortgage.

The Federal Court did however order that the action in rem be maintained and provided that the plaintiff shall promptly move for sale of the pleasure craft.

The plaintiff, an American bank, held a first preferred mortgage registered at the National Vessel Documentation Center, United States Coast Guard. The bank had instituted proceedings in personam and in rem in the United States District Court, Northern District of New York, but it could not proceed in rem in that court as the pleasure craft could not be arrested in the U.S. since it had been sold and exported to Canada. The mortgage was not registered in Canada.

The claim in rem against the pleasure craft was based on s22(3)(d) of the Federal Courts Act which gives the Federal Court jurisdiction in relation to all mortgages on a ship, registered or not, whether legal or equitable, and whether created under foreign law or not.

The Federal Court rejected the defences alleged on behalf of the pleasure craft, that the plaintiff failed to prove American law to prove the mortgage was valid, that the claim is time-barred under American law and that the bank’s interest in the pleasure craft had to be registered in accordance with the provisions of the Quebec Civil Code.

Justice Harrington, in his Judgment and Reasons, made it clear that proceeding is not an action in the Federal Court, as Canada’s Admiralty Court, to enforce an in rem judgment of a Foreign Admiralty Court. The Justice referred to City of Mecca (1879), 5 P D 28 where Sir Robert Phillimore held that the English Court of Admiralty could and ought to enforce an in rem judgment of a Foreign Admiralty Court, on the grounds of international comity (reversed on appeal not on a point of law, but because, like the subject case, the foreign judgment was in personam only.)

The length of this blog comment does not permit a description of the reasons provided for the rejection of the defences asserted in the Federal Court, namely why proof of Canadian domestic maritime law sufficed in the absence of proof of American law; why a legal unregistered mortgage under Canadian Maritime Law is opposable to a bona fide purchaser for value without notice; or why the mortgage need not be registered under the Quebec Civil Code.

This case demonstrates how the Federal Court dealt with a cross-border mortgage enforcement proceeding in the marine context and recognition of unregistered mortgages under Canadian Maritime Law.

If you have a foreign ship mortgage enforcement matte or have obtained a foreign in rem judgment against a ship and wish to consider the options concerning its enforcement in Canada, please contact us for an initial consultation.

This blog author has over fifteen years of extensive experience in maritime law practice in the premier maritime and marine insurance / reinsurance centres of London, England, Bermuda and Dubai. In London this practice was focused on marine arbitration and matters in the Admiralty and Commercial Court.  He also possesses a U.K. post graduate law degree which included the study of maritime law, carriage of goods by sea and marine insurance.

Please visit our related practice area webpage on Maritime Law.

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About the Author
David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and Arbitrator

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and Arbitrator

David Alderson, LL.B, LL.M (Commercial and Corporate), Q.Arb, Lawyer and Arbitrator David has practiced over 35 years as a commercial and business litigator in diverse matters in the courts and in domestic and international arbitration proceedings in Ontario, England & Wales, Bermuda and Dubai. Also admitted in New York. The ADR Institute of Canada has accredited David as a Qualified Arbitrator (Q.Arb). He accepts appointment as a commercial, business, condo and marine arbitrator. Bio | Lawyer | Arbitrator | Contact

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