New Case: What happens if you sell a vessel and forget to cancel the registration?
The Federal Court issued an interesting decision last week involving the sale of a barge, failure of the parties to the sale to notify the Canadian Register of Vessels, and a subsequent oil pollution incident (Canada (Ship-Source Oil Pollution Fund) v. Dr. Jim Halvorson Medical Services Ltd., 2019 FC 35).
The facts are as follows:
Dr. Jim Halvorson, through his professional services corporation, purchased a barge in 2012. Although a valuation survey reviewed by Dr. Halvorson prior to the purchase described the vessel as being in “good condition”, it often had a pronounced list, which explains why it was known locally as the “Tiltin’ Hilton”.
Upon realizing the barge was not suitable for his needs, Dr. Halvorson sold the barge to an individual named Fred Adams. Upon completing the sale Dr. Halvorson did not terminate his company’s registration of the barge - nor did Mr. Adams register the barge in his name. As such Dr. Halvorson’s company continued to be the registered owner following the sale.
Two weeks after the sale to Mr. Adams, the barge sank and released some 600 liters of fuel into the Pacific Ocean. The Coast Guard spent $67,348.81 cleaning up the spill and was reimbursed by Ship Source Oil Pollution Fund ("SOPF"). The SOPF sued Dr. Halvorson, his company, and Mr. Adams in a subrogated claim. The issue before the court was whether Dr. Halvorson and his company were liable.
The thrust of the SOPF’s argument was that the sale to Mr. Adams was not finalized because of Dr. Halvorson’s failure to terminate the barge’s registration:
“The Plaintiff concedes that rights to a vessel can be conveyed by contract, whether or not the transaction is registered in the Canadian Register of Vessels. The Plaintiff asserts, however, that for title to fully pass from a previous owner to a new owner, the change in ownership must be registered in the Canadian Register of Vessels. Given that no formal bill of sale was ever delivered to Mr. Adams, the Plaintiff says that the PMC [Dr. Halvorson’s company] continues to be the legal owner of the vessel and as such is liable for the costs of the clean-up.”
In support of this argument, the SOPF introduced Transport Canada’s template Bill of Sale which contains a “Note to Purchasers”, which states that “[a] purchase of a registered vessel does not obtain complete title until the Bill of Sale has been recorded in the Canadian Register of Vessels by a Registrar”.
Ultimately the Federal Court rejected this argument stating that:
[47] Counsel for the Plaintiff was asked to point to the legislative authority for the proposition that legal title to a vessel will not fully vest in a new owner until the transfer is registered in the Canadian Register of Vessels. He was unable to do so…
[54] …As was noted earlier, there are no statutory formalities identified in the Canada Shipping Act, 2001 that have to be complied with in order for title to a vessel to pass from an owner to a new purchaser. All the Act says is that applications for the registration of a vessel must be made in the form and manner specified by the Chief Registrar, and must include the information and be accompanied by the documents identified by the Chief Registrar: subsection 51(1).
[55] The Canada Shipping Act, 2001 does address the consequences that flow from the failure to register a change in ownership of a vessel. It does not, however, support the Plaintiff’s claim that the registered owner of a vessel remains liable for pollution damages under Division Two of Part Six of the Marine Liability Act after a vessel has been sold to a third party.
[56] Subsection 79(1) of the Canada Shipping Act, 2001 provides that every person commits an offence who contravenes certain provisions of the Act. One of these provisions is subsection 46(2), which obliges every owner of a vessel that is required to be registered under the Act to ensure that it is so registered.
[57] Subsection 79(2) of the Canada Shipping Act, 2001 specifically addresses the sanctions that may by imposed where there is a failure to comply with the registration requirements of the Act. It states that “[e]very person who commits an offence under subsection [79](1) is liable on summary conviction to a fine of not more than $10,000”. Subsection 79(3) of the Act addresses continuing offences, stating that “[i]f an offence under paragraph [79](1)(a) or (c) is committed or continued on more than one day, the person who committed it is liable to be convicted for a separate offence for each day on which it is committed or continued”.
[58] Importantly, there is no suggestion in either the Canada Shipping Act, 2001, or the Regulations enacted thereunder, that title to a vessel will not pass to a purchaser if the transaction is not registered in the Canadian Register of Vessels. Nor is there any suggestion in the Act (or in the Marine Liability Act for that matter) that a prior owner of a vessel will continue to be responsible for damages caused by the vessel as long as that individual or entity is recorded in the Register as the owner of the vessel.
Accordingly, this case is good authority for the rule that the sale of a vessel is not invalidated as a result of the parties’ failure to document that sale with the Canadian Register of Vessels. Doing so is of course nevertheless good practice.
The other interesting issue discussed by the Federal Court was the applicability of British Columbia Sale of Goods legislation in the maritime context:
[75] The Defendants also rely on the British Columbia Sale of Goods Act, R.S.B.C. 1996, c. 410 in support of their argument that title to the Crown Forest passed from the PMC to Mr. Adams on September 25, 2012.
[76] In particular, the Defendants rely on subsection 22(1) of the Act which provides that where there is a contract for the sale of specified goods, “the property in them is transferred to the buyer at the time that the parties to the contract intend it to be transferred”. Subsection 22(2) of the Act provides guidance in ascertaining the intent of the parties, stating that in order to do so “regard must be had to the terms of the contract, the conduct of the parties and the circumstances of the case”.
[77] Citing the decision of the Supreme Court of Canada in Ordon Estate v. Grail, 1998 CanLII 771 (SCC), [1998] 3 S.C.R. 437, [1998] S.C.J. No. 84, the Plaintiff submits that the British Columbia Sale of Goods Act has no application to this case. According to the Plaintiff, Part 2 of the Canada Shipping Act is a complete mandatory code insofar as the registration, listing and recording of vessels are concerned, and as such there is no room for the application of a conflicting provincial statute such as the Sale of Goods Act.
[78] The Supreme Court of Canada has, however, cast doubt on the continuing authority of its decision in Ordon Estate v. Grail: Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44 (CanLII) at para. 64, [2013] 3 S.C.R. 53. While recognizing that the concept of interjurisdictional immunity will apply where a provincial statute of general application has the effect of indirectly regulating a maritime negligence law issue, the Supreme Court nevertheless noted that decisions rendered after Ordon Estate had clarified the two-step test for interjurisdictional immunity: Canadian Western Bank v. Alberta, 2007 SCC 22 (CanLII), [2007] 2 S.C.R. 3; Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39 (CanLII), [2010] 2 S.C.R. 536.
[79] While the British Columbia Sale of Goods Act is a provincial statute, the Supreme Court of Canada has confirmed that the Federal Court may apply provincial law that is incidentally necessary to resolve the issues presented by the parties: ITO-International Terminal Operators Ltd. v. Miida Electronics Inc., 1986 CanLII 91 (SCC), [1986] 1 S.C.R. 752 at para. 30, 28 D.L.R. (4th) 741 (“ITO”); Kellogg Co. v. Kellogg, 1941 CanLII 53 (SCC), [1941] S.C.R. 242. Provincial sale of goods legislation has, moreover, been applied by this Court in maritime law cases: see, for example, Governor and Company of the Bank of Scotland v. Nel (The), 1999 CanLII 9334 (FC), [1999] 2 F.C. 578, 161 F.T.R. 303.
[80] While it disputes the applicability of the British Columbia Sale of Goods Act to this case, I understand the Plaintiff to accept that the sale of goods legislation in effect in the United Kingdom in 1934 has been imported into Canadian maritime law: National Bank of Canada v. Rogers, 2015 FC 1207 (CanLII) at para. 43, [2015] F.C.J. No. 1267; Wärtsilä Canada inc. c. Transport Desgagnés inc., 2017 QCCA 1471 (CanLII) at para. 87, [2017] J.Q. no 13424, leave to appeal to S.C.C. granted; ITO, above at pp. 771 and 774. That law included the Sale of Goods Act, 1893 (U.K.), (56 & 57 Vict., c.71).
[81] It is not necessary to resolve which sale of goods legislation governs this case as the British Sale of Goods Act, 1893 is in fact very similar to the British Columbia Sale of Goods Act. Indeed, section 17 of the U.K. legislation is almost identical to section 22 of the British Columbia Sale of Goods Act, providing in subsection 17(1) that “[w]here there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred”. Like subsection 22(2) of the British Columbia legislation, subsection 17(2) of the U.K. Act further provides that “[f]or the purpose of ascertaining the intent of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case”.
On a related note, the applicability of provincial sale of goods law is a salient topic given the Supreme Court of Canada’s decision to hear the case of Wärtsilä Canada inc. c. Transport Desgagnés inc., 2017 QCCA 1471.
The facts are as follows:
Dr. Jim Halvorson, through his professional services corporation, purchased a barge in 2012. Although a valuation survey reviewed by Dr. Halvorson prior to the purchase described the vessel as being in “good condition”, it often had a pronounced list, which explains why it was known locally as the “Tiltin’ Hilton”.
Upon realizing the barge was not suitable for his needs, Dr. Halvorson sold the barge to an individual named Fred Adams. Upon completing the sale Dr. Halvorson did not terminate his company’s registration of the barge - nor did Mr. Adams register the barge in his name. As such Dr. Halvorson’s company continued to be the registered owner following the sale.
Two weeks after the sale to Mr. Adams, the barge sank and released some 600 liters of fuel into the Pacific Ocean. The Coast Guard spent $67,348.81 cleaning up the spill and was reimbursed by Ship Source Oil Pollution Fund ("SOPF"). The SOPF sued Dr. Halvorson, his company, and Mr. Adams in a subrogated claim. The issue before the court was whether Dr. Halvorson and his company were liable.
The thrust of the SOPF’s argument was that the sale to Mr. Adams was not finalized because of Dr. Halvorson’s failure to terminate the barge’s registration:
“The Plaintiff concedes that rights to a vessel can be conveyed by contract, whether or not the transaction is registered in the Canadian Register of Vessels. The Plaintiff asserts, however, that for title to fully pass from a previous owner to a new owner, the change in ownership must be registered in the Canadian Register of Vessels. Given that no formal bill of sale was ever delivered to Mr. Adams, the Plaintiff says that the PMC [Dr. Halvorson’s company] continues to be the legal owner of the vessel and as such is liable for the costs of the clean-up.”
In support of this argument, the SOPF introduced Transport Canada’s template Bill of Sale which contains a “Note to Purchasers”, which states that “[a] purchase of a registered vessel does not obtain complete title until the Bill of Sale has been recorded in the Canadian Register of Vessels by a Registrar”.
Ultimately the Federal Court rejected this argument stating that:
[47] Counsel for the Plaintiff was asked to point to the legislative authority for the proposition that legal title to a vessel will not fully vest in a new owner until the transfer is registered in the Canadian Register of Vessels. He was unable to do so…
[54] …As was noted earlier, there are no statutory formalities identified in the Canada Shipping Act, 2001 that have to be complied with in order for title to a vessel to pass from an owner to a new purchaser. All the Act says is that applications for the registration of a vessel must be made in the form and manner specified by the Chief Registrar, and must include the information and be accompanied by the documents identified by the Chief Registrar: subsection 51(1).
[55] The Canada Shipping Act, 2001 does address the consequences that flow from the failure to register a change in ownership of a vessel. It does not, however, support the Plaintiff’s claim that the registered owner of a vessel remains liable for pollution damages under Division Two of Part Six of the Marine Liability Act after a vessel has been sold to a third party.
[56] Subsection 79(1) of the Canada Shipping Act, 2001 provides that every person commits an offence who contravenes certain provisions of the Act. One of these provisions is subsection 46(2), which obliges every owner of a vessel that is required to be registered under the Act to ensure that it is so registered.
[57] Subsection 79(2) of the Canada Shipping Act, 2001 specifically addresses the sanctions that may by imposed where there is a failure to comply with the registration requirements of the Act. It states that “[e]very person who commits an offence under subsection [79](1) is liable on summary conviction to a fine of not more than $10,000”. Subsection 79(3) of the Act addresses continuing offences, stating that “[i]f an offence under paragraph [79](1)(a) or (c) is committed or continued on more than one day, the person who committed it is liable to be convicted for a separate offence for each day on which it is committed or continued”.
[58] Importantly, there is no suggestion in either the Canada Shipping Act, 2001, or the Regulations enacted thereunder, that title to a vessel will not pass to a purchaser if the transaction is not registered in the Canadian Register of Vessels. Nor is there any suggestion in the Act (or in the Marine Liability Act for that matter) that a prior owner of a vessel will continue to be responsible for damages caused by the vessel as long as that individual or entity is recorded in the Register as the owner of the vessel.
Accordingly, this case is good authority for the rule that the sale of a vessel is not invalidated as a result of the parties’ failure to document that sale with the Canadian Register of Vessels. Doing so is of course nevertheless good practice.
The other interesting issue discussed by the Federal Court was the applicability of British Columbia Sale of Goods legislation in the maritime context:
[75] The Defendants also rely on the British Columbia Sale of Goods Act, R.S.B.C. 1996, c. 410 in support of their argument that title to the Crown Forest passed from the PMC to Mr. Adams on September 25, 2012.
[76] In particular, the Defendants rely on subsection 22(1) of the Act which provides that where there is a contract for the sale of specified goods, “the property in them is transferred to the buyer at the time that the parties to the contract intend it to be transferred”. Subsection 22(2) of the Act provides guidance in ascertaining the intent of the parties, stating that in order to do so “regard must be had to the terms of the contract, the conduct of the parties and the circumstances of the case”.
[77] Citing the decision of the Supreme Court of Canada in Ordon Estate v. Grail, 1998 CanLII 771 (SCC), [1998] 3 S.C.R. 437, [1998] S.C.J. No. 84, the Plaintiff submits that the British Columbia Sale of Goods Act has no application to this case. According to the Plaintiff, Part 2 of the Canada Shipping Act is a complete mandatory code insofar as the registration, listing and recording of vessels are concerned, and as such there is no room for the application of a conflicting provincial statute such as the Sale of Goods Act.
[78] The Supreme Court of Canada has, however, cast doubt on the continuing authority of its decision in Ordon Estate v. Grail: Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44 (CanLII) at para. 64, [2013] 3 S.C.R. 53. While recognizing that the concept of interjurisdictional immunity will apply where a provincial statute of general application has the effect of indirectly regulating a maritime negligence law issue, the Supreme Court nevertheless noted that decisions rendered after Ordon Estate had clarified the two-step test for interjurisdictional immunity: Canadian Western Bank v. Alberta, 2007 SCC 22 (CanLII), [2007] 2 S.C.R. 3; Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39 (CanLII), [2010] 2 S.C.R. 536.
[79] While the British Columbia Sale of Goods Act is a provincial statute, the Supreme Court of Canada has confirmed that the Federal Court may apply provincial law that is incidentally necessary to resolve the issues presented by the parties: ITO-International Terminal Operators Ltd. v. Miida Electronics Inc., 1986 CanLII 91 (SCC), [1986] 1 S.C.R. 752 at para. 30, 28 D.L.R. (4th) 741 (“ITO”); Kellogg Co. v. Kellogg, 1941 CanLII 53 (SCC), [1941] S.C.R. 242. Provincial sale of goods legislation has, moreover, been applied by this Court in maritime law cases: see, for example, Governor and Company of the Bank of Scotland v. Nel (The), 1999 CanLII 9334 (FC), [1999] 2 F.C. 578, 161 F.T.R. 303.
[80] While it disputes the applicability of the British Columbia Sale of Goods Act to this case, I understand the Plaintiff to accept that the sale of goods legislation in effect in the United Kingdom in 1934 has been imported into Canadian maritime law: National Bank of Canada v. Rogers, 2015 FC 1207 (CanLII) at para. 43, [2015] F.C.J. No. 1267; Wärtsilä Canada inc. c. Transport Desgagnés inc., 2017 QCCA 1471 (CanLII) at para. 87, [2017] J.Q. no 13424, leave to appeal to S.C.C. granted; ITO, above at pp. 771 and 774. That law included the Sale of Goods Act, 1893 (U.K.), (56 & 57 Vict., c.71).
[81] It is not necessary to resolve which sale of goods legislation governs this case as the British Sale of Goods Act, 1893 is in fact very similar to the British Columbia Sale of Goods Act. Indeed, section 17 of the U.K. legislation is almost identical to section 22 of the British Columbia Sale of Goods Act, providing in subsection 17(1) that “[w]here there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred”. Like subsection 22(2) of the British Columbia legislation, subsection 17(2) of the U.K. Act further provides that “[f]or the purpose of ascertaining the intent of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case”.
On a related note, the applicability of provincial sale of goods law is a salient topic given the Supreme Court of Canada’s decision to hear the case of Wärtsilä Canada inc. c. Transport Desgagnés inc., 2017 QCCA 1471.
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