On 13 February 1980, a time charterparty was concluded between Aretusa Società di Navigazione per Azione, the owner of the Italian motor vessel Edera, and Rederiaktiebolaget Transatlantic (Transatlantic). The charterparty stipulated that Transatlantic would supply and pay for all fuel. In November 1981, the ship called at Luleå. De Rotterdamsche Droogdok Maatschappij BV, a Dutch shipyard, had the ship arrested by the Swedish Enforcement Agency in Luleå. In order for the ship not to be frozen in at Luleå, it was moved from Luleå to Oxelösund, under its own power and using the fuel provided by Transatlantic under the charterparty. Transatlantic advised the Swedish Enforcement Agency: 'In connection with the ship's transfer from Luleå to Oxelösund, we have no claims against anyone other than the shipping company for used bunker oil and loss of time. Our bunkers can be used for the voyage to Oxelösund.'

On 22 January 1982, Stockholm District arrested the vessel as security for Transatlantic's claim of USD 331,060, of which USD 275,000 related to advance hire paid, and USD 56,060 to bunkers delivered in accordance with the charterparty. On 28 January 1982, the same Court ordered the shipowner to pay the Dutch shipyard NLG 3,100,000 plus interest and legal costs. On February 4, the ship was foreclosed due to this ruling. This meant that the vessel, in accordance with Ch 16 s 15.2 of the Utsökningsbalk 1981 (the Execution Code / UB), was at the same time considered assessed for Transatlantic's claim.

On 4 May 1982, the Swedish Enforcement Agency in Nyköping ordered Transatlantic to pay an advance of SEK 218,250 for the estimated costs for the ship's care and supervision, half by 11 May and the remainder by 11 June. The first instalment was paid within the prescribed time, but the second amount was not paid. Due to this, and as the advance amount previously paid by Transatlantic had been used up, the Swedish Enforcement Agency decided on 24 June 1982 to lift the arrest and foreclosure measures implemented for Transatlantic.

While the executive auction of the ship was postponed until 17 September 1982, claims were received from onboard employees for unpaid wages and two Italian banks, Efibanca, Ente Finanziario Interbancario, and Sezione Speciale par il Credito alle Medie e Piccole Industrie, Banco Nazionale del Lavoro, for claims due to ship mortgages. The onboard employees requested, on the basis of Ch 10 s 5 UB , that the vessel be sold for their wages claims.

Transatlantic argued that when the ship was arrested for another creditor's claim, its bunkers were onboard. According to the charterparty, the owners should bear the cost of using the bunkers during a time when the ship could not be used according to the agreement. The shipowner was thus responsible for these costs. However, the State was also liable to Transatlantic for the costs, as the bunkers were consumed during attachment enforcement for a creditor other than Transatlantic. Transatlantic thus claimed USD 54,884 as administrative costs.

On 11 October 1982, the total sale proceeds of SEK 2,904,156 were distributed. SEK 820,544 went to administrative costs, SEK 601,912 went to the onboard employees, and SEK 1,481,700 went to the two Italian banks. The Dutch shipyard received no coverage for its main claim. On the other hand, the Dutch shipyard was entitled to withdraw from the amount allocated to administrative costs what it had advanced - SEK 670,740.

Transatlantic lodged an appeal with the Svea Court of Appeal. This was opposed by the Italian banks. Transatlantic argued that the cost of the used bunkers should have been considered a cost for the procedure, which should have been accorded first priority. Prior to the 1973 amendments to the Maritime Code (the Code), costs in the creditors' common interest in having the vessel sold and for its preservation until the sale, were combined with a maritime lien on the vessel. According to art 11.2 of the MLM Convention 1967, which was the basis for the current rules in the Code: 'The cost awarded by the Court and arising out of the arrest and subsequent sale of the vessel and the distribution of the proceeds shall first be paid out of the proceeds of such sale.'

For technical reasons, it was impossible to pump the oil out of the ship. Transatlantic assumed that the used oil would be replaced in the enforcement proceedings, and had not given permission for the consumption of oil other than that used for the transfer of the ship. The cost of the oil consumed for heating must be regarded as an enforcement cost, which in the distribution of the sale proceeds should be reimbursed as a first priority. In practice, it has been accepted that costs incurred by a party without the approval of the executive authorities were regarded as costs in the creditors' common interest in the ship's preservation until the executive sale (see Nordiske Dommer 1968 s 163; The Span Terza [1982] 2 Lloyd's Rep 72). The Swedish Enforcement Agency's interpretation of the UB's provisions would lead to an unauthorised gain for the foreclosure creditor in an amount corresponding to what Transatlantic paid in advance for enforcement costs. Such a result cannot be considered to be in accordance with the legislator's intentions or general principles of civil law.

The Italian banks argued that it followed from Ch 17 s 9.1 UB that a necessary condition for administrative costs for arrest to be taken as administrative costs out of the sale proceeds, was that the arrest still existed. At the time when the vessel was sold, the enforcement of Transatlantic's arrest had been revoked by the Enforcement Agency in Nyköping, for reasons that were directly caused by Transatlantic. Funds advanced by Transatlantic could therefore not be regarded as administrative costs to be covered by funds received at the executive auction.

The Court of Appeal upheld the assessment made by the Swedish Enforcement Agency that the cost of the used bunkers could not be regarded as administrative costs, but upheld Transatlantic's appeal for compensation for the administrative costs that it advanced. Both the Dutch shipyard and Transatlantic had advanced administrative costs. The amounts thus paid were required for the implementation of the executive procedure, and had also been used for this purpose. This meant that the Dutch shipyard would have been required to pay an extra advance if Transatlantic had not done so. Transatlantic's failure to advance additional administrative costs, as a result of which its granted lien lapsed, did not constitute a special reason why the advance already paid by Transatlantic should not be paid out of the sale proceeds. An additional amount of SEK 327,375 should thus be added to the distribution as a legal cost. The same amount should be paid to Transatlantic from the sale proceeds. The amounts that the Italian banks received from the purchase price should be reduced by a total of SEK 327,375.

Both the Italian banks and Transatlantic appealed to the Supreme Court.

Held: The Supreme Court leaves Transatlantic's complaints without approval.

The question is whether the advances paid by Transatlantic relate to administrative costs to be taken out of the funds received, and whether the value of the diesel and fuel oil consumed while the vessel was under arrest is to be regarded as administrative costs.

As regards, first, the amount of SEK 327,375 advanced by Transatlantic, the following is to be taken into account. When Transatlantic paid the advances, the vessel was partly liable for the Dutch shipyard's claim and partly liable for Transatlantic's claim. The evidence shows that the advances in question were intended for, and also used for, the purchase primarily of diesel oil, which was needed for the ship's heating, and otherwise for provisions etc. These costs referred to measures taken in the interests of both creditors and have thus been common to the creditors. The costs would have arisen even if the ship had been arrested only for the Dutch shipyard's claim. It is irrelevant that the enforcement measures taken in favour of Transatlantic were later lifted due to its failure to make further advances. It should also be noted that the District Court's decision arresting the vessel for Transatlantic's claim was revoked only after the executive sale. The question whether the claim, for which a maritime lien was granted to Transatlantic, corresponded to an additional claim against the shipowner is also irrelevant. The administrative costs corresponding to Transatlantic's paid advances of SEK 327,375, as the Court of Appeal held, shall be paid out of the purchase price and other funds received with the same right as other administrative costs, and that amount shall be allocated to Transatlantic.

As regards the subsequent consumption of diesel oil and fuel oil, which was present in the ship when it was arrested on 19 November 1981, this Court finds as follows. The oil did not constitute an accessory to the ship, but was owned by Transatlantic, which hired the ship according to the charterparty at the relevant time. It was consumed during a time when the ship was arrested for the Dutch shipyard's claim. From the time of enforcement of the ship arrest, it in principle fell to the enforcement agency to provide care and supervision of the ship, in so far as the shipowner itself was not responsible for the necessary measures. In the situation that has arisen, the shipowner cannot be considered to have been entitled to consume the oil belonging to Transatlantic without further ado. It appears that Transatlantic asserted its right to the oil, or its compensation, at an early stage. If the oil belonging to Transatlantic was to be used for the ship's care while the ship was under arrest, it was up to the Enforcement Agency to seek an agreement with Transatlantic on this, and arrange for compensation for what was consumed. The cost of compensation under such an agreement would have constituted administrative costs, which should have been taken out of the funds received. As oil was consumed without agreement, reasonable compensation for what was consumed must be regarded as such an administrative cost.

However, with regard to the fuel oil consumed for the ship's transfer from Luleå to Oxelösund, Transatlantic's telex message must be understood as meaning that it waived compensation for oil consumed for the ship's transfer - but not for its heating - except to the extent that Transatlantic reserved a claim for compensation against the shipowner. Reimbursement for the oil used for the transfer of the ship should therefore not be charged as an administrative cost.

No objection has been raised regarding the amount of spent oil claimed by Transatlantic: USD 54,884.The value of the oil consumed for the movement of the ship must be deducted from this amount. According to Transatlantic, the value of the latter amounts to USD 10,044. The remaining amount, USD 44,840, must therefore also be included as an administrative cost. A corresponding reduction should be made in the funds to be paid to the Italian banks.