By Marc de Man
I am here to discuss the latest decision of World Fuel Services versus the Ship NORDEMS and her Owners.
The judgment was rendered on March 25, 2010 by the Honourable Mr. Justice Sean Harrington, for whom I have the highest respect and admiration.
The hearing took place on February 17, 2010. On that day, my learned colleague John O’Connor was brilliant. He argued so well that he could have sold a 1952 LADA to Mr. Justice Harrington for $500,000.00.
For my part, I could not even sell him a ROLLS ROYCE 2010 for $5.00.
The expert evidence in the case was presented by two very distinguished American lawyers, Mr. Michael Marks Cohen from New York City, with whom I have had the pleasure to play tennis several times, and Mr. Stephen Simms from Baltimore, Maryland, a learned and world authority on bunker claims.
It is noteworthy to point out that Mr. Marks Cohen was the lawyer representing the mortgagee in the TEQUILA case, which was the losing party in that case.
Mr. Simms represented the bunker supplier in the HARMONY CONTAINER Appeal case, which has been cited in the LANNER, PACIFIC CHUKOTKA and NORDEMS decisions.
It is likewise worthy of note that Mr. Justice Harrington, with whom many of us argued cases when he was at the Bar, was the losing counsel in the MECHANIK TARASOV case, representing the shipowner and P & I Club, was likewise the losing counsel in the KIRGAN vs. PANAMAX LEADER decision representing the shipowner, and won a pyric victory in the JENSEN STAR case against the late Gerald Barry. Mr. Justice Harrington, in his distinguished career as a lawyer at McMaster Meighen and subsequently Borden Ladner Gervais, generally represented the shipowner and/or the P & I Club.
Before entering into the analysis of the NORDEMS decision, let me point out that to have a thorough understanding of this decision we all should read in detail, and as closely as possible the Canadian jurisprudence stemming from the Canadian Supreme Court decisions of the STRANDHILL, IOANNIS DASKALELIS, the English decision of the HALCYON ISLE, the HAR RAI decision, Kirgan v. Panamax Leader, Imperial Oil culminating with the Appeal decision in the LANNER. The CHARTWELL, BUENOS AIRES MARU. and the HOLT CARGO decisions should likewise be reviewed.
As for American jurisprudence, we should read closely the Lauritzen v. Larsen, TEQUILA, QUEEN OF LEMAN, HARMONY CONTAINER and the PACIFIC CHUKOTKA Appeal decisions. I suggest to you that HARMONY CONTAINER decided by the US Court of Appeal, 9th District in 2008, and the PACIFIC CHUKOTKA decided by the US Court of Appeal 4th District in 2009 are of particular relevance.
Finally, as an introductory point, my analysis today is based on a fundamental principle ingrained in my mind at least 38 years ago, when I attended the illustrious halls of learning of this University. The principle I refer to is that of stare decisis, or respect for precedent.
The decision in the NORDEMS is very well formulated. Apart from two minor errors (the physical supplier is originally described at paragraphs 25 and 26 as CHEVRON South Africa (Pty) Ltd. when it should have been CALTEX South Africa Pty Ltd. and at paragraph 86, the learned Justice writes “contact” when it should be “contract”), it encapsulates the principal topics to be considered.
However it is on its substance that the NORDEMS needs close analysis.
The facts are quite simple. The Plaintiff, World Fuel Services Corporation, a Miami, Florida, US corporation (“WFS”), through the South Korean office of its Singapore branch, communicated a bunker confirmation of sale dated October 15, 2008 addressed exclusively to Parkroad Corporation, a South Korean corporation, the sub-time charterer of the Vessel NORDEMS which eventually declared bankruptcy. The Buyer in the bunker confirmation not only included Parkroad Corporation, but also the ship NORDEMS and/or her Master and/or Owners. The bunker confirmation evidenced a sale of approximately 500 metric tons of marine fuel for the ship NORDEMS with delivery at Cape Town, South Africa under very specific terms. The bunker confirmation stated:
“All sales are on the credit of the vessel. Buyer is presumed to have authority to bind the vessel with a maritime lien. Disclaimer stamps placed by Vessel on the bunker receipt will have no effect and do not waive the Seller’s lien.”
The bunker confirmation further stated:
“This Confirmation is governed and incorporates by reference the Seller’s General Terms and Conditions in effect as of the date that this Confirmation is issued.
These incorporated and referenced terms can be found at www.wfscorp.com.
Alternatively you may inform us if you require a copy and same will be provided to you.”
The General Terms and Conditions were very thorough and as Mr. Justice Harrington states in his judgment at paragraph 35, they covered “every possible permutation and combination which may arise in the delivery of bunkers to a ship.”
Of particular relevance was the law and jurisdiction clause at paragraph 17 of the General Terms and Conditions which read as follows:
The General Terms and each Transaction shall be governed by the laws of the United States and the State of Florida, without reference to any conflict of laws rules which may result in the application of the laws of another jurisdiction. The laws of the United States shall apply with respect to the existence of a maritime lien, regardless of the courts in which Seller takes legal action…Disputes over payment and collection may be resolved, at Seller’s option in the Florida courts or in the courts of any jurisdiction where either the Receiving Vessel or an asset of the Buyer may be found. Each of the parties hereby irrevocably submits to the jurisdiction of any such court, and irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum or its foreign equivalent to the maintenance of any action in any such court. Seller shall be entitled to assert its rights of lien or attachment or other rights, whether in law, in equity or otherwise in any country where it finds the vessel.
On October 16, 2008, as evidenced by a Bunker Delivery Receipt issued by the physical supplier, Caltex Oil (SA) (Pty) Ltd., the bunkers were supplied to the ship NORDEMS at Cape Town, South Africa. The supply was acknowledged by the Master of the Vessel, through his signature on the face of the Bunker Delivery Receipt and the seal of the shipowner described as NORDEMS Shipping Company of Limassol, Cyprus.
The Bunker Delivery Receipt had a disclaimer stamp on its face stamped by the Master stating:
“This service/supply is for the account of vessel’s Time Charterers, Parkroad Corporation. On behalf of vessel’s owner, I herewith declare that neither owner nor vessel are responsible for payment of this service/supply.”
Mr. Justice Harrington correctly considered this disclaimer as meaningless as it was apparently issued after the bunkers were accepted on board (ex post facto). After written notice was provided to the Owners by WFS which remained unanswered, the vessel was arrested on December 18, 2008 at Baie Comeau, Province of Quebec. Security was placed and the vessel released.
Cross motions for summary judgment were presented in front of Mr. Justice Harrington. The Reasons for Judgment and Judgment of the NORDEMS commences with an ominous phrase. More particularly, it states:
“This is NO SIMPLE ACTION on account for unpaid bunkers supplied to the ship NORDEMS at the instance of her now bankrupt time charterer Parkroad Corporation.”
The learned judge had to consider the differences between a statutory right in rem and a maritime lien, privity of contract, agency, the relevance of a choice of law clause, whether American or Canadian law applied and the state of the Maritime Law of the United States.
At the outset, he distinguishes the difference between the US law and Canadian law on the presumption of the bunker supplier to have contracted on the credit of the ship. He states at Paragraph 9:
…briefly put, the maritime law of the United States, the law selected by WFS Corp. and Parkroad to govern their contract, is such that a necessaries man is presumed to have contracted on the credit of the ship. That presumption can only be rebutted by establishing that the necessaries man had actual knowledge that the contracting party did not have authority to bind the ship. If that presumption is not rebutted, American law creates a maritime lien on the ship. On the other hand, under Canadian maritime law, apart from a few exceptions which are not relevant here, a necessaries man does not enjoy a maritime lien. Under sections 22 and 43 of the Federal Courts Act, he has a statutory right in rem against the ship, but only if her owners are personally liable. As in American law, there is a presumption that the necessaries were ordered on the credit of the ship. However it is not necessary to establish actual knowledge of lack of authority on the part of the necessaries man to rebut that presumption.
He then distinguishes the maritime lien and a statutory right in rem.
All of the above is generally accurate and instructive.
He further correctly states at paragraph 14 that:
It has also been well established, in cases to which I shall refer, that if our choice of law rules lead us to the conclusion that the transaction is governed by another system of law, and that law has been proven to differ from ours, we will give effect to it. Canada is an attractive forum to necessaries men who enjoy a maritime lien under the proper law of their transaction in that in ranking priorities our law gives the necessaries men the status of a maritime lien, a status which a Canadian necessaries man does not enjoy.”
Invoking section 139 of the Marine Liability Act, at paragraph 15, he states that:
Canadian domestic law was amended last year to give necessaries men carrying on business in Canada a maritime lien against a foreign ship. The services must have been provided at the request of the owner or a person acting on his behalf. There is no indication that the case law pertaining to the rebuttable presumption of authority has been overridden.
If one reads section 139, it states as follows:
(2) A person, carrying on business in Canada, has a maritime lien against a foreign vessel for claims that arise
(a) in respect of goods, materials or services wherever supplied to the foreign vessel for its operation or maintenance, including, without restricting the generality of the foregoing, stevedoring and lighterage; or
(b) out of a contract relating to the repair or equipping of the foreign vessel.
Services requested by owner
(2.1) Subject to section 251 of the Canada Shipping Act, 2001, for the purposes of paragraph (2)(a), with respect to the stevedoring or lighterage, the services must have been provided at the request of the owner of the foreign vessel or a person acting on the owner’s behalf.”
I think that on this aspect, Mr. Justice Harrington may not be correct.
The evidence in the NORDEMS is reviewed, including evidence of the United States law. The US law was proven by affidavit. On the vessel side, Mr. Michael Marks Cohen submitted his affidavit. He is described as “a prominent New York attorney most knowledgeable in these matters”. WFS or the bunker supplier expert in US law was Mr. Stephen Simms, simply described as “another well-known American attorney”.
At this early stage, one can already see the direction to be adopted by the learned Judge.
He describes the no lien clause, the chain of charter parties, the delivery of the bunkers, and WFS’ General Terms and Conditions. He reproaches the Plaintiff for having such thoroughly protective terms and conditions. He quotes a bill of lading case, Vipond v. Furness Withy which has no relevance to the present case. In this aspect, the learned Judge is suggesting that bunker terms and conditions be written loosely. This is contrary to the basic training we have received as lawyers to protect our clients to the hilt. A reading of any bill of lading or charter party today will illustrate how much each party attempts to cover his liabilities and risks.
In his introductory remarks, the learned Judge correctly decided that WFS Corporation of Miami was the proper plaintiff.
At paragraph 38, Mr. Justice Harrington deals with the proper law. With respect, his analysis does not follow the conflict of laws analysis which was explicitly set out by Chief Justice Richard in the LANNER Appeal decision. In the LANNER case, the Chief Justice at paragraph 17 states that:
Once the issue is characterized as belonging to a particular legal category, the court must then determine what choice of law rule applies to that particular category…
After the appropriate law is selected using Canadian choice of law rules, the court will then apply that law to the issue.
After characterizing the issue and choice of law in the LANNER, the Chief Justice states at paragraph 24:
I believe that the choice of law clause in the supply contracts should generally govern maritime transactions, including the rights which arise from these transactions. The Supreme Court of Canada has suggested that the principles of comity, order and fairness should guide the determination of conflict of law issues…giving greater weight to proper law of the supply contract would pay respect to the notion of order. This would encourage certainty and predictability in maritime transactions of a jurisdictional diverse character.
At paragraph 32, Chief Justice Richard states:
Since the contractual choice of law clause should normally govern and there are no other factors, or combination of factors which indicate that another jurisdiction has a chosen or more substantial connection to the maritime transactions at hand, I disagree with the decision below and conclude that American law is the appropriate law to apply in this case.
In the LANNER case, the four bunker claims at issue had no connections whatsoever to the US except for flimsy jurisdiction clauses in three of the claims and an arbitration clause in the fourth claim. The connection with Canada was quite significant in one of the Kent Trade claims, as bunkers were supplied in Halifax. In the four cases, the LANNER was arrested in Canada. Despite these factors, the learned Chief Justice concluded that American law was the appropriate law to apply.
It seems to me that in the NORDEMS case, the appropriate law should have been the American law, based on the precedent or choice of law set out in the LANNER Federal Court of Appeal decision and not Canadian law.
Moreover, in the Kirgan v. Panamax Leader decision, Mr. Justice Blais, now the Chief Justice of the Federal Court of Canada stated at paragraph 22, after a review of Canadian jurisprudence, that where parties have freely entered into agreements, including a choice of law clause, a lien will be created under US law even if the necessaries were supplied in a country that does not accord lien status to the supply of necessaries. After reviewing the Strandhill decision  S.C.R. 680, the HAR RAI F.C. 345 (C.A.) and other decisions, Mr. Justice Blais at paragraph 24 quotes the following:
It is clear from these decisions that the agreements of private parties, whether freely negotiated or not, are ordinarily to be given full effect by federal courts. Accordingly choice of law and choice of forum provisions in admiralty contracts have generally been held to be enforceable…
Given these Canadian authorities on cases directly on point, namely dealing with bunker supplies, the proper law should have been the US law. This would automatically set aside the law of agency position adopted by Mr. Justice Harrington at paragraphs 41 to 51.
In fact, in the US on account of FMLA and the latest jurisprudence, backed by Professor Tetley in his chapter on Necessaries in his book Maritime Liens and Claims, as quoted by Judge MacKeown in the HARMONY CONTAINER and subsequently in the PACIFIC CHUKTOKA decisions, “CHARTERERS AND THEIR AGENTS are PRESUMED to have authority to bind the Vessel by ordering the necessaries.” This presumption is only rebuttable if it is established that the necessaries man had ACTUAL knowledge that the time charterer did not have authority to bind the ship. In the present case, WFS had no knowledge of the existence of the non-lien clause between the Owner and the Time Charterer.
This is what Mr. Justice Harrington should have decided. Instead, at the hearing he insisted that he was a Canadian judge and he would apply Canadian law.
I shall not deal with Mr. Justice Harrington’s analysis of the Jensen Star case and the Chartwell decision. Although very interesting, the issue in the NORDEMS case is the in rem liability of the ship. The in personam aspect is subsidiary.
At paragraph 52 of his judgment in the NORDEMS, Mr. Justice Harrington asks the question: Does American Law Apply? He summarizes Canadian jurisprudence and enters into the Significant Factors. Maritime liens being created by operation of the law, therefore significant factors have to be analyzed.
At paragraphs 66 and 67, he states as follows:
 In my opinion, the non-American factors outweigh the American ones. These include the flag of the ship (Cyprus), the domicile of her owners (Germany), the place where the offer to purchase bunkers was accepted (South Korea), the place where the bunkers were delivered (South Africa), and the place where the ship was arrested (Canada). If it is necessary to choose among these laws, the proper law is that of South Africa. There are only two points of contact between the ship owner and the plaintiff. The first is South Africa where the bunkers were supplied. If a maritime lien exists, it existed from that moment. Had credit not been extended, the plaintiff would have been in position to arrest the ship then and there. Since the law of South Africa has not been alleged and proven to differ from Canadian law, the arrest would be set aside as there is no personal liability on the part of the owners and as the presumption that the bunkers were delivered on the credit of the ship has been rebutted. The bunker receipt signed by the master does not even refer to World Fuel Services. The receipt is on the letterhead of Caltex Oil (SA) (Pty) Ltd. with a Cape Town post office address and Cape Town telephone number. That receipt gives no indication whatsoever that the plaintiff was Caltex’s unnamed principal. The second point of contact was Canada, the place of arrest.
In my opinion this conclusion accords with Canadian maritime law. The different result in the decisions of the Federal Court of Appeal in Imperial Oil and in the Lanner is that in the latter there was a contract between the necessaries man and the shipowner, while in the former there was not. Absent a contract, we must tote up the points of contact. In a fact situation which has contact with several jurisdictions, pride of place must be given to the place where the necessaries were provided. In my opinion, in the circumstances of this case, that fact alone, or if necessary coupled with the place of arrest, outweighs the other factors.
With all due respect, this conclusion goes against Canadian jurisprudence, namely the decision of the Federal Court of Appeal which is a higher court in the LANNER decision, and the Kirgan v. PANAMAX LEADER decisions on the application of US law.
At paragraph 68 of his judgment, Mr. Justice Harrington states:
“Should my analysis be wrong and the proper law of the transaction is that of the United States, it is only appropriate that I make a finding of fact, based on the evidence before me, as to the state of the law.”
He summarizes concisely the law of the US, i.e. the Commercial Instruments and Maritime Lien Act, 46 U.S.C. 3134 (FMLA). The US law creates “a maritime lien on a ship in favour of a supplier who furnished her with necessaries, such as bunkers on the order of the Owner or a person authorized by the Owner.” As it currently stands, persons presumed under the statute to have authority to procure necessaries include a charterer. The necessaries man has a maritime lien, and is not requested to prove that credit was given to the ship.
Both experts in US law agreed that the presumption of authority is only rebutted by establishing that the necessaries man actually knew that authority was lacking. This emanates from the 1971 amendments to FMLA.
At paragraphs 70 to 83, Mr. Justice Harrington analyzes the American jurisprudence. He considers the QUEEN OF LEMAN, HARMONY CONTAINER and PACIFIC CHUKTOKA cases, the last two being the latest American cases on the law governing bunker suppliers, presented by both experts, versus the TEQUILA case, relied on very heavily by Mr. Michael Marks Cohen.
What he fails to do is accept the decision of Chief Justice Richard of the Federal Court of Appeal in the LANNER decision on this aspect. In that case (the LANNER), the Chief Justice after reviewing the various American authorities summarized the HARMONY CONTAINER Appeal decision in the 9th Circuit at paragraphs 42 and following, and stated:
“Trans Tec (Harmony Container) is the only US Court of Appeals case decided on much the same facts as the four transactions at issue: namely a foreign flagged vessel, owned and operated by non-American entities docked at a non US port, being provided by a non-US company under a supply contract governed by U.S. law…
Although I recognize that a decision of one Circuit’s Court of Appeals is not considered binding precedent on the decisions of other Circuits, Trans-Tec is the latest expression of the law from a US appellate court. Therefore, based on the expert evidence before us, I am satisfied that U.S. law would recognize a maritime lien for necessaries where, under a supply contract governed by US law a foreign supplier provided goods or services to foreign vessels in a foreign port.
At paragraph 47, he states:
“There is no aspect relating to any of the four transactions that would serve to distinguish the circumstances at issue from those related in Trans-Tec. Consequently, I conclude that the three appellants have proven to my satisfaction that each have a maritime lien against the LANNER.”
Note that in the LANNER, nothing was said about ships berthing in US ports, or whether the time charterer was American. These are the factors that Mr. Justice Harrington used to distinguish HARMONY CONTAINER and PACIFIC CHUKOTKA from the NORDEMS case. Moreover, in HARMONY CONTAINER and PACIFIC CHUKOTKA, the contracting party was the time charterer, and not a bareboat charterer or an agent/manager for Owners. In addition, the LANNER was decided before the 2009 Appeal decision of the PACIFIC CHUKOTKA in the 4th District, Baltimore, Maryland. In fact the NORDEMS had much more significant connections to the U.S. than the LANNER case. The supplier was American, the choice of law was American and the contract, as per its Terms and Conditions was deemed to have been entered into in the United States.
In my humble opinion, the PACIFIC CHUKOTKA is the present governing authority. It is the “latest expression of the law from a U.S. appellate court”, and, with all due respect to Mr. Justice Harrington, should have been applied in the present case, and not distinguished simply because the sub-charterer, although incorporated in the Cayman Islands, had a place of business in the State of Washington. This is clearly an obiter statement in the PACIFIC CHUKOTKA which has no relevance to the real issues in front of the US Court of Appeals.
Mr. Justice Harrington sets out his assessment of the PACIFIC CHUKOTKA case at paragraph 77 of his judgment. He states:
In the Pacific Chukotka, a foreign corporation provided bunkers on the order of a subcharterer at a foreign port. Under the head charter the owners had required that all bunkers were to be purchased for the charterer’s account, at its own expense, and specifically provided that the charterer had no authority to create, incur or permit a maritime lien. The bunker supply contract, as might be expected, called for the application of American law and identified the buyer as the ship and her master, owners, managing owners, operators, managers, disponent owners, charterers and agents, jointly and severally. The owner’s argument that it was not privy to and not bound by the choice of law provision in the bunker contract was dismissed. The Court emphasized that this argument ignored the fact that this was an in rem action asserting a maritime lien against the ship, rather than an in personam claim against the owners. The inquiry was not whether the parties to the supply contract had authority to bind the owners, but whether they had authority to bind the ship.
At paragraph 82, Mr. Justice Harrington quotes the decision of Judge Reidinger at page 7 of his judgment, but for some reason which I simply cannot understand, omits to quote the most important paragraph of said decision which has a direct impact on the NORDEMS case. Judge Reidinger states (quoted by Mr. Justice Harrington):
Green Pacific (the shipowner) first argues that the choice-of-law provision in the Bunker Confirmation cannot bind [**9]Green Pacific or its property without its knowledge or consent. Green Pacific’s argument, however, ignores the fact that this case involves an in rem action asserting a maritime lien against the Vessel, rather than an in personam claim against Green Pacific as the Vessel’s owner. As such, the relevant inquiry is not whether the parties to the supply contract had authority to bind the Vessel owner, but whether the parties had the authority to bind the Vessel. In the case of a maritime lien, the vessel itself is viewed as the obligor, regardless of whether the vessel’s owner is also obligated. See Amstar Corp. v. S/S ALEXANDROS T., 664 F 2d 904, 908-09 (4th Cir. 1981); see also Black’s Law Dictionary 943 (8th ed. 2004) (“[The maritime lien]arises by operation of law and exists as a claim upon the property, secret and invisible.”) (quoting Griffith Price, The Law of Maritime Liens 1 (1940)) (emphasis added).
(not quoted by Mr. Justice Harrington):
As the sub-charterer of the Vessel, ERL (the time charterer) had the presumptive authority to bind the Vessel in this case. It is a fundamental tenet of maritime law that “[c]harterers and their agents are presumed to have authority to bind the vessel by the ordering of necessaries2.” Trans-Tec, 518 F.3d at 1127-28. If it were not so, charterers could not stray far from a ship’s owner for fear of being stranded by their inability to secure fuel, repairs or other necessaries. ERL’s presumptive authority was not diminished by the existence of a “no lien” clause in Green Pacific’s charter, as there is nothing in the record to suggest that Triton (the bunker supplier) had actual knowledge of that provision. See id. at 1129. Accordingly, we conclude that ERL had the authority to bind the Vessel to the provisions of the Bunker Confirmation, even without Green Pacific’s knowledge or consent.”
What is very relevant in Judge Reidinger’s decision is the emphasis given to the fact that the supply contract binds the VESSEL. This is critical and crucial. The vessel is in fact personified. In case of a maritime lien, the Vessel itself is viewed as the obligor, regardless of whether the vessel’s owner is also obligated. The time charterer had authority to bind the Vessel to the provisions of the Bunker Confirmation.
Action in personam, action against the Owners themselves is irrelevant. It is the ship/vessel that is relevant. This is the party that is liable. This is not pointed out by Mr. Justice Harrington.
Much reliance was placed by Mr. Michael Marks Cohen on the TEQUILA decision. Mr. Justice Harrington likewise favours the TEQUILA case in his judgment.
The TEQUILA case is an old decision rendered on June 18, 1973 by the 2nd Circuit, US Court of Appeal decision. Mr. Michael Marks Cohen represented the mortgagee, namely the losing party. This case has been thoroughly criticized and discarded by both the HARMONY CONTAINER 2008 and the PACIFIC CHUKOTKA 2009 decision. The QUEEN OF LEMAN (2002 Fifth Circuit Court of Appeals decision) has consistently been preferred to the TEQUILA by these two latest US Court of Appeal decisions.
A study of the facts shows that the TEQUILA had nothing to do with bunker suppliers or necessaries men. It dealt with a breach of charter party giving rise to a maritime lien, the priority of the lien and the choice of law. The owner withdrew the ship from the charterer (Rainbow) before the charterer could exercise its option to renew for an additional period. An arbitration award went in favor of the charterer. In the meantime, the vessel was sold to new owners and renamed TEQUILA. She was arrested, several other claims arose, including that of the mortgagee Empire Commercial Corp. represented by Mr. Michael Marks Cohen. The vessel was sold and the parties disputed the distribution of the fund. The mortgagee wished English law to apply. The charterer, US law.
In the analysis by Judge Anderson in the TEQUILA, really as an obiter dictum, he states “But maritime liens arise separately and independently from the agreement of the parties, and rights of third persons cannot be affected by the intent of the parties to the contract.”
This statement comes from the 1866 The Bird of Paradise decision, being an appeal from the Circuit Court for the Northern District of California. but this case dealt exclusively with a lien upon cargo for freight in favor of the shipowner, which has nothing whatsoever to do with the maritime lien of the bunker supplier under US law. It was a decision well prior to the FMLA legislation. In fact in 1866 there was no codified United States maritime lien law.
The TEQUILA case was decided on points of contact applying Lauritzen vs. Larsen, 1953 AMC 1210. It was decided on its own facts which showed that virtually all the points of contact in the transaction giving rise to the dispute were with the United States: the charterer had a maritime lien for breach of charter party having priority over the mortgagee if the lien attached before the mortgagee was recorded.
This decision is very remote from the facts in the NORDEMS case. As Judge McKeown stated in the HARMONY CONTAINER Appeal decision, supported by Judge Reidinger in the PACIFIC CHUKOTKA, at page 6:
“It is worth noting that the adversely affected party involved in Rainbow Line (TEQUILA) was a third party lender to a subsequent owner of the vessel; an entity far removed from the original parties to the charter. For the reasons previously stated, we prefer the Fifth Circuit’s rule in Queen of Leman.”
Judge Reidinger in PACIFIC CHUKOTKA at page 9 adds the following:
“Concisely, the third party affected by the maritime lien in the present case is the ship owner itself, a party that has a direct contractual relationship with the charterer. For these reasons, Rainbow Line (TEQUILA) is also distinguishable on its facts.”
The Judgment of Mr. Justice Harrington concludes that the shipowners were not a party to the WFS contract and not bound by its terms. I think, with all due respect that this is not exactly correct. The ship was a party to the WFS contract and bound by its terms as per the latest US jurisprudence, namely the PACIFIC CHUKOTKA. The judgment further states that Parkroad had no actual or ostensible authority to contract on Owners’ behalf or on the credit of the ship. This statement is improperly expressed. WFS, the bunker supplier, did not have actual knowledge that Parkroad did not have authority to bind the ship. Charterers or their agents are presumed to have authority to bind the vessel by the ordering of necessaries in accordance with the US law and jurisprudence. US law is the proper law and it created a maritime lien on the VESSEL. The action in rem should have been maintained.
Much was said on the issue of possession of the ship. This is on the issue of presumed authority applying Canadian law. Mr. Justice Harrington states that the time charterer did not have possession and control of the ship. This is a point where Kirgan, Jensen Star and Imperial Oil have different views. I simply do not have the time to deal with this aspect as well as many other aspects in this decision which is so fertile in its ramifications. However, in Imperial Oil, Mr. Justice Stone at paragraph 23 states:
A maritime lien does not include or require possession…A maritime lien exists, which gives a privilege or claim upon the thing, to be carried into effect by legal process. This claim or privilege travels with the thing, into whosoever’s possession it may come. ……from the moment the claim or privilege attaches, and when carried into effect by legal process, by a proceeding in rem, [it]relates back to the period when it first attached.
In this respect, I do not think that Mr. Justice Harrington is correct in his analysis of “possession of the ship”.
To conclude, if this decision stands, certainly the bunker supplier will have to change its practice. The decision forces the bunker supplier to contact the Owner each time he supplies bunkers to a time charterer. Note Judge Reidinger in PACIFIC CHUKOTKA when he states:
“Charterers and their agents are presumed to have authority to bind the vessel by the ordering of necessaries. If it were not so, charterers could not stray far from a ship’s owner for fear of being stranded by their inability to secure fuel, repairs or other necessaries.”
Moreover, Judge Reidinger at footnote 4 states:
Additionally, it should be noted that Green Pacific (the ship owner) could have taken any number of steps, including requiring the charterer to post a bond, demanding a letter of credit or even possibly procuring some sort of insurance, in order to protect its interest in the Vessel from the effects of a maritime lien, but no such actions were apparently taken in this case.
Mr. Justice Harrington‘s judgment is seen from the perspective of the Shipowner. All the other decisions, LANNER, KIRGAN, HARMONY CONTAINER, PACIFIC CHUKOTKA are decided from the perspective of the bunker supplier. It is a decision that is based on old precedent, unfortunately and with respect, regressive rather than progressive in character. It does not follow the current established by contemporary precedent.
Finally, note that with the exception of the KIRGAN case decided by Mr. Justice Blais, the LANNER, HAR RAI, IMPERIAL OIL, TEQUILA, QUEEN OF LEMAN, HARMONY CONTAINER, PACIFIC CHUKOTKA are all appeal decisions. The NORDEMS was appealed on April 1, 2010.