This case arose out of Court-approved sales of four ships, Golden Trinity, Ypapadi, Kimisis III and Zoodotis, and the subsequent priorities hearing. All of the vessels were managed by Pronoia Ship Agents & Brokers Inc (Pronoia). Some of the claims against the sale proceeds were settled by consent, largely on the basis that they constituted maritime liens with an evident priority in the sales proceeds. Claimants to the balance of the proceeds as mortgagees are the Royal Bank of Scotland (RBS), the mortgagee of the Ypapadi, Golden Trinity and Kimisis III, and Nedship Bank NV (Nedship), the mortgagee of the Zoodotis.

The main challenges that the banks faced were claims from Tramp Oil & Marine Ltd (Tramp) for bunkers supplied to the four defendant vessels and to various other ships, which were also managed by Pronoia. Until his death in 1998, Peter Lygnos was the principal of Pronoia.

Held: The usual ranking of claims is unaltered.

The sister ship principle has its foundation in art 3 of the Arrest Convention 1952. Its purpose is to prevent an owner from improperly insulating its assets by putting each of a number of ships into separate companies in fact owned by that individual. While Canada has not ratified the Arrest Convention 1952, it has enacted sister ship legislation in s 43(8) of the Federal Courts Act, RSC 1985, c F-7. Canada has taken two approaches, one in the English language and another in the French language, with the former making little sense and the latter being similar in form and effect to the 1952 Brussels Convention. The plain wording of the French version of the sister ship provision in s 43(8) sets out the concept in a meaningful way in that it allows a plaintiff to exercise in rem jurisdiction against a ship which, at the time the action is brought, is owned by the beneficial owner of the ship that is the subject of the action: 'La compétence de la Cour fédérale peut, aux termes de l'article 22, être exercée en matière réelle à l'égard de tout navire qui, au moment où l'action est intentée, appartient au véritable propriétaire du navire en cause dans l'action'. Here, if Tramp is able to establish that any of the dozen vessels which it bunkered and which did not pay were, at the material time, beneficially owned by the owners of the Kimisis III, the Golden Trinity or the Ypapadi, in the case of RBS ships, or of the Zoodotis in the case of Nedship, those ship constitute sister ships. In such an instance, the Golden Trinity, Kimisis III, Ypapadi and Zoodotis, or the value of those ships, would be vulnerable to the claim of Tramp, of course subject to the usual priorities allowing the mortgage holders to be paid out first, with Tramp's sister ship claim being subsidiary to the claims of the mortgage holders. Tramp's sister ship claim, after making various allowances for what it has already received and including interest to 30 June 2001, amounts to USD 1,270,803.43.

The onus is on Tramp to demonstrate the beneficial ownership link. The standard by which to establish a sister ship relationship is that of proof by a preponderance of evidence, or reasonable degree of probability, that it is more probable than not that the vessels in question are sister ships. Even though the sister ship remedy as a whole is an extraordinary remedy that ought not to be lightly invoked, it is still this civil standard of proof which applies.

Tramp has established that the single-ship companies which owned vessels mortgaged to RBS and Nedship were subsidiaries of Aigida Enterprises Inc and Aegean Enterprises Co Ltd. The links to Aigida Enterprises and to Aegean Enterprises Co Ltd do not make these two parent companies beneficial owners for sister ship determination purposes: for that reason Tramp tried to establish a passing through of beneficial ownership to Peter Lygnos. While both RBS and Nedship dealt with Peter Lygnos, as the person in charge, that does not establish him as the beneficial owner. The bankers who were cross-examined felt that the Pronoia fleet was probably owned by the Lygnos family, all in keeping with the fairly usual practice of Greek shipowning families, but that stops short of the reasonable degree of probability or the preponderance of evidence required to establish ownership by a single beneficial owner, or group of owners, each with the same interest in all of the vessels. At best, Tramp has established a likelihood that Peter Lygnos was a beneficial owner, but not that he was the beneficial owner: there is a preponderance of probability that some other family members were also beneficial owners. All of this stops short of establishing the beneficial owner as required by s 43(8).