"No Cash - No Splash" Policy of Vessel Repairer Can Prove Costly
Any vessel repairer who withholds possession of a vessel until repair invoices are paid in full is at risk for liability for conversion. Conversion is wrongfully denying possession of personal property from the party entitled to possession. In the recent case of 4H Construction Corp. v. Superior Boat Works, Inc., the U.S. District Court for the Northern District of Mississippi held that a shipyard that refused to redeliver a barge to the barge owner until the shipyard’s disputed charges were paid in full was liable for conversion. The court awarded damages in the amount needed to compensate the barge owners for loss of use of the barge during the pendency of the lawsuit.
The court ruled that the maritime lien enjoyed by the shipyard was a non-possessory lien, which could only be enforced against the vessel by an action in rem. Furthermore, there was no separate agreement between the parties allowing for the shipyard to retain possession of the vessel until its charges were paid in full, which may have changed the result.
Vessel owners would be wise not to enter into contractual commitments that leave them vulnerable to being coerced into paying patently unreasonable charges in order to secure possession of their vessels. A better approach is an agreement to escrow the amount of disputed charges until the reasonableness of charges is resolved by agreement or arbitration.
