Arrested Development: Ship Released from Arrest Despite Pending Appeal
July 20, 2017
In Platypus Marine, Inc. v. TATU (TATU), the Federal Court of Canada (Court) ordered that the defendant ship be released from arrest because there was no outstanding judgment. Although the plaintiff was appealing a judgment dismissing part of the plaintiff’s claim, the ship owner had paid the full amount awarded against it. In those circumstances, the ship owner successfully argued that there was no legal basis to sustain the arrest once the judgment had been satisfied. The Court’s decision is a helpful reminder that plaintiffs who benefit from their procedural right to arrest a vessel must be mindful to follow the correct procedural steps to preserve the arrest.
The TATU (Vessel) is a luxury yacht owned by Platinum Premier Corporation Limited (Owner). The plaintiff, Platypus Marine, Inc. (Plaintiff) is a ship repairer. In the underlying action, the Plaintiff claimed approximately US$285,000 for various services provided to the Vessel such as moorage, storage and repairs (Services Claim). The Plaintiff also claimed US$100,000 for contractual interest (Interest Claim).
The Plaintiff obtained judgment for the Services Claim, but the Court dismissed the Interest Claim and ordered that the Plaintiff was only entitled to interest in the amount of C$35,000. The Plaintiff filed an appeal of the Court’s decision dismissing the Interest Claim and took steps to schedule the hearing of the appeal. However, the Owner paid the full amount of the judgment before the appeal could be heard.
The Owner filed a motion seeking orders releasing the Vessel from arrest and argued that since it had satisfied the judgment, there was no longer any legal basis for the Court to continue holding the Vessel under arrest. The Plaintiff argued that releasing the Vessel from arrest would cause irreparable harm since the Plaintiff would be left without recourse if it were successful on its appeal.
In deciding to release the Vessel from arrest, the Court noted the lack of case law addressing whether a vessel should be released from arrest pending appeal of a dismissed claim. An appeal does not operate as a stay, meaning that the Interest Claim was considered dismissed immediately unless later overturned by the Federal Court of Appeal. Since the Owner paid the judgments and there was no outstanding claim, the Court could not keep the Vessel under arrest. The Court did not accept the Plaintiff’s argument that the Vessel should remain under arrest to ensure that the Plaintiff would have recourse against the Vessel in the event that the Plaintiff was successful in its appeal of the decision dismissing the Interest Claim.
The Court also noted that the Plaintiff could have brought a motion seeking a stay of the underlying judgment dismissing the Interest Claim, but elected not to do so. Had the Court’s decision on the Interest Claim been stayed, the Vessel would have remained under arrest because the dismissal of the Interest Claim would not take effect until the appeal was decided. As such, there would still be an outstanding claim that would have provided a basis for keeping the Vessel under arrest.
Arresting a ship is a powerful procedural right that can provide significant leverage to a plaintiff. That right is a prominent feature of maritime law and courts are reluctant to deprive maritime claim holders of this tool. For more information, see our June 2016 Blakes Bulletin: B.C. Court Confirms Powerful Maritime Arrest is Widely Available in Disputes Involving Maritime Assets, where we discuss the broad scope of the court’s jurisdiction under maritime law to arrest vessels.
Unless the arrest is invalid, the circumstances in which the court will order the release of a vessel from arrest before trial or without bail are rare, as discussed in our April 2015 Blakes Bulletin, Freeze Ship – You’re Under Arrest: Former Warship Now Underwater Following Court Order. In Canada, courts will generally uphold an arrest provided the plaintiff’s claim is properly framed as falling under maritime law and the plaintiff has followed the correct procedural requirements to obtain and sustain the arrest.
By contrast, a plaintiff who fails to establish that the arrest secures an outstanding claim risks losing the arrest and the leverage that comes along with it. The decision in TATU is an example of a situation where the Court could not justify holding a vessel under arrest. As noted by the Court in TATU, there is scant legal authority addressing the circumstances in which the court should release a vessel from arrest on a discretionary basis. On the other hand, as the decision in TATU highlights, maritime claimants must be diligent in taking the correct steps in exercising and preserving their rights of arrest.
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