Also known as maritime mortgages, ship mortgages can be either registered or unregistered and much of the law on real property mortgages applies to the field, especially where a statute is silent on an essential point.
In Maritime Law, authors Gold, Chircop and Kindred wrote:
"A mortgage of a ship is a common way of financing its construction or purchase. In essence a mortgage provides a creditor with security for the repayment of a loan or the performance of some other obligation by the acquisition of a property interest in the ship. It may in fact be used to secure any financial obligation involving the ... operation of a ship."
Ship mortgages usually include all the machinery but not cargo or freight.
Indeed, in some jurisdictions, cargo or freight can be the subject of distinct mortgages although they are not usually registered.
As security for the non-payment of a loan of money, a ship mortgage is no sure thing as was mentioned in Laming & Co.:
"The mortgagee of a ship holds a security over a floating subject which in the very act of use as a ship may be withdrawn from the jurisdiction and control of the courts to which the mortgagee can have recourse, and in that use is exposed to the perils of the sea whereby the value of the security may be wholly or in great part destroyed."
Further, in the case of a foreclosure, mortgages are subject to all maritime liens.
In the case The Royal Arch, the court wrote:
"Where money is advanced on mortgage of the ship, the mortgagee must always be aware that he takes his security subject to all liens, and if he suffers therefrom, his only remedy must be against the owners."
REFERENCES:
- Duhaime, Lloyd and Williams, Darren, Maritime Law - A Glossary
- Duhaime.org wishes to thank Mr. Darren Williams, maritime law lawyer of Victoria, British Columbia, for his assistance in suggesting this definition.
- Gilmore, G. and Black, C., The Law of Admiralty (New York: Foundation Press, 1975), p. 568-569.
- Gold, E. and others, Maritime Law (Toronto: Irwin Law, 2003), page 242..
- Jackson, D., Enforcement of Maritime Claims, 4th Ed. (London: Lloyd's Shipping Law Library, 2005).
- Laming & Co. v Seater 1889 16 R 828
- Maritime Law @ duhaime.org
- The Royal Arch 30 LT 198 (1857)