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Sailor Take Warning: Federal Court and Family Assets
Published in the June 2009 issue of Transportation Notes - View Article
The Federal Court recently held that it has jurisdiction over a dispute about the ownership of a sailboat, despite the fact that the warring parties were simultaneously engaged in divorce proceedings in the provincial family court.
At issue in the Federal Court action was the ownership of a 48 foot sailboat aptly named “Forever Lost” (“the Sailboat”). The plaintiff brought an action in the Federal Court, prior to commencement of the divorce action, seeking a declaration that she was the equitable owner of the Sailboat on the basis that she provided all the purchase funds. The plaintiff raised the funds by taking out a mortgage on her home, which she had owned free and clear and which she had purchased and resided in prior to the marriage. The plaintiff alleged that the Sailboat was to be registered in the names of both parties. However, as the defendant was responsible for all the administration relating to the acquisition of the Sailboat and its importation to Canada from the U.S., only the defendant was identified as the owner and purchaser of the Sailboat on the registration documents. The defendant argued ownership of the Sailboat by way of gift from his former wife and on the basis that he spent countless hours repairing and restoring the Sailboat. After the claim was issued, a warrant for the arrest of the Sailboat was issued and executed.
The defendant disputed the jurisdiction of the Federal Court and requested a stay of the action on the basis that all issues relating to the Sailboat and division of family assets should be dealt with by the provincial family court. He argued the Federal Court should not become a backdoor divorce court with jurisdiction over family assets so as to allow one spouse to seek “illegitimate juridical advantage” over another by proceeding in the Federal Court to obtain possession or sale of a family asset, particularly as the husband used the Sailboat as his home.
The Federal Court held that it has concurrent jurisdiction with the provincial superior courts in relation to Canadian Maritime Law pursuant to the Federal Courts Act which grants the Federal Court jurisdiction with respect to any claim regarding title, possession or ownership of a ship. The Federal Court held that a sailboat clearly fits within the statutory definition of a ship, which is “any vessel or craft designed, used or capable of being used solely or partly for navigation, without regard to method or lack of propulsion…” The Federal Court held that there is clear evidence that the Sailboat, while in the possession of the husband, was in jeopardy from fire, seizure by creditors, or other danger. This finding led to the conclusion that the Federal Court has jurisdiction and ancillary powers necessary to prevent further deterioration of the Sailboat and ensure it is not put in jeopardy by third party creditors. The Federal Court also dismissed the defendant’s argument based on possible inconsistent findings and held that it was simply exercising its jurisdiction to preserve the asset and not engaging in a determination of the issues in the family proceeding; the Sailboat or its proceeds of sale would have to be accounted for in the overall financial settlement in the family proceeding.
The defendant did not meet the test for a stay of proceedings. In coming to this conclusion, the Court placed emphasis on the interests of justice, interests of the parties and juridical advantage conferred on the wife, all of which it found militated against a stay. The juridical advantage to the wife is “exactly the type of juridical advantage that can only be obtained in this Court on these facts”, as the Federal Court Rules provide a procedure for sale of arrested property. Ultimately, the Federal Court appears to have determined what is in the “best interests of the Sailboat”. It referenced evidence that the plaintiff put up the purchase funds but that the defendant was responsible for outstanding insurance and dockage fees. He had left the vessel in an unfinished condition. This, plus his failure to obtain insurance, put the Sailboat in “jeopardy”. The Federal Court thus ordered the husband to give up possession of the Sailboat to the wife for sale. The Order deals with the disposition of the proceeds of the sale to a certain extent (dockage, insurance, legal fees, and the wife’s outstanding mortgage to be paid from the proceeds in any event) and leaves the determination of any right of the husband to the proceeds of the sale (assuming there is an outstanding balance after the mandatory payments) for determination by the divorce court.
Ricci v. Tulley, 2009 FC 493