Judgments

[1997] 3 F.C. 187

T-738-96

Holt Cargo Systems Inc. (Plaintiff)

v.

Messrs. T. Van Doosselare and F. De Roy as Trustees in Bankruptcy of ABC Containerline N.V., the Owners, Charterers and all Others Interested in the Ship Brussel, and the Ship Brussel (Defendants)

and

Société Nationale de Crédit à l’Industrie S.A. (Intervenor)

Indexed as: Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustee of) (T.D.)

Trial Division, MacKay J.—Halifax, September 19, 1996; Ottawa, April 9, 1997.

Federal Court jurisdiction — Trial Division — Motion for order of payment of net proceeds of sale of ship to trustees in bankruptcy — Ship seized, sold in support of Federal Court action for fees for stevedoring, related services provided in U.S.A. — Plaintiff entitled to maritime lien based on status of claim in U.S.A. — Quebec Superior Court in Bankruptcy approving sale, but ordering net proceeds be paid to trustees for distribution — Appeal suspending effect of that judgment — Federal Court Act, s. 17(6) providing where Act of Parliament conferring jurisdiction in respect of matter on provincial court, Trial Division having no jurisdiction to entertain any proceeding in respect of same matter unless Act expressly conferring jurisdiction on Court — Bankruptcy and Insolvency Act, s. 183 assigning jurisdiction in relation to bankruptcy to provincial superior courts — Federal Court Act, s. 17(6) irrelevant — Enacted as part of revision of s. 17 replacing previously exclusive original jurisdiction in claims against Crown with concurrent original jurisdiction — S. 17(6) implicitly relating to proceedings against Crown — Regardless, only precluding Court from proceeding in bankruptcy matters — Federal Court’s determinations relating to arrest, default judgment, sale, secured creditor’s claim to proceeds of sale, not bankruptcy proceedings.

Bankruptcy — Motion for order of payment of net proceeds of sale of ship to trustees in bankruptcy — Ship arrested, sold in support of Federal Court action for fees for stevedoring, related services provided in U.S.A. — Shipowners declared bankrupt in Belgium — Plaintiff entitled to maritime lien in recognition of status of claim in U.S.A. — Maritime lien created under applicable foreign law secured claim under laws of Canada — Rights of secured creditors in these circumstances not affected by Bankruptcy and Insolvency Act.

Maritime law — Creditors and debtors — Motion for order of payment of net proceeds of sale of ship to trustees in bankruptcy — Ship arrested in support of Federal Court action for fees for stevedoring, related services provided in U.S.A. — Shipowners declared bankrupt in Belgium — Plaintiff entitled to maritime lien in recognition of status of claim in U.S.A. — Whether claim secured claim determined by Canadian maritime law — Maritime lien, long recognized in maritime law as secured claim attaching in rem to ship, secured claim — Maritime lien attaching before shipowners’ bankruptcy enforceable — Claim based thereon may be realized from proceeds of sale of ship without restriction under Bankruptcy and Insolvency Act — Plaintiff secured creditor entitled to payment from proceeds of sale in priority to payment to trustees.

This was a motion for an order that the net proceeds of the sale of the ship Brussel be paid out to the trustees in bankruptcy of the corporations which had owned and operated the ship, rather than to the creditors which had filed claims in accordance with the process of the Federal Court of Canada.

The Brussel was arrested on March 30, 1996 at the instigation of the plaintiff in support of its action in this Court for fees and charges for stevedoring and related services provided to the Brussel in the United States. Thereafter, numerous other claims were filed against the owners or operators of the shipping service or against the vessel. The corporations which owned and operated the Brussel were declared bankrupt by a Belgian court which appointed trustees in bankruptcy. The appointment of the trustees and the bankruptcy judgment of the Belgian Court was recognized and declared executory by the Quebec Superior Court in May 1996. The plaintiff obtained default judgment in rem against the Brussel, a declaration that it should recover from the proceeds of sale of the ship the amount claimed, and a determination that it was entitled to a maritime lien to secure the amounts owing, but the priority of that lien was reserved pending determination of the rights of all claimants. That determination was in recognition of the status of the plaintiff’s claim under American law where services of the sort here rendered are recognized as giving rise, if they are not paid, to a maritime lien enforceable against the ship. An order for the appraisement and sale of the Brussel also issued. Subsequently, a Belgian court judgment requested Canadian courts to deliver the Brussel to the trustees so that they might sell the ship and divide the proceeds amongst creditors, and to suspend all measures of attachment against the Brussel. The next day the Quebec Superior Court, sitting in bankruptcy, ordered ex parte that all measures of attachment be suspended, and that the ship be delivered to the trustees. The latter order was subject to intervention by interested parties. The trustees’ motion for a stay of the plaintiff’s action pending final disposition of the matter by the Quebec Superior Court was dismissed. After hearing applications on behalf of the plaintiff and other creditors, the Quebec Superior Court, sitting in bankruptcy, approved the sale of the Brussel in accordance with the Federal Court judgment, but ordered that the net proceeds of the sale be paid to the trustees for distribution amongst the creditors. Execution of that judgment was suspended by an appeal therefrom. The sale of the vessel was completed on August 1, 1996.

The trustees argued that once the matter was before the bankruptcy court, it alone had jurisdiction over the assets of the bankrupt. This view was predicated upon the assignment by Parliament of jurisdiction in relation to bankruptcy to the superior courts of the provinces under the Bankruptcy and Insolvency Act, section 183 and upon Federal Court Act, subsection 17(6), which provides that where an Act of Parliament confers jurisdiction in respect of a matter on a court constituted or established by or under a law of a province, the Trial Division has no jurisdiction to entertain any proceeding in respect of the same matter unless the Act expressly conferred that jurisdiction on the Court.

Held, the motion should be dismissed.

Federal Court Act, subsection 17(6) was not relevant. It was enacted as part of a revision of section 17, replacing with concurrent original jurisdiction what was until then exclusive original jurisdiction in claims against the Crown. With that amendment this Court shares concurrent jurisdiction with provincial courts. In that context subsection 17(6) implicitly relates to proceedings against the Crown, which this action was not.

Even if subsection 17(6) has broader implications, it would only preclude the Court, in the circumstances of this case, from proceeding in bankruptcy matters. The determinations of this Court in relation to the arrest of a ship, a judgment in default and the sale of the ship, or the determination of a claim by a secured creditor to the proceeds of the sale of the ship, were not bankruptcy proceedings. This Court simply sought to consider the remedies sought under maritime law as it has long been administered in the Federal Court, in accordance with Federal Court Act, section 22. This Court did not lose jurisdiction to deal with all claims filed against the Brussel because concerns of the trustees were later brought to the attention of the bankruptcy court, although in considering some of those claims the Bankruptcy and Insolvency Act and orders of courts made under that Act may have significance.

The Bankruptcy and Insolvency Act does not establish a process that in any way bars a secured creditor from realizing on the security given by the debtor before its bankruptcy. A maritime lien created under applicable foreign law is a secured claim under the laws of Canada. Secured creditors are excluded from the general scope of the Bankruptcy and Insolvency Act. Section 136 provides for the distribution of proceeds realized from the sale of property of a bankrupt in priority in relation to claims of preferred and unsecured creditors. The rights of secured creditors in circumstances here applicable are not affected by the Act. Whether a particular claim is a secured claim in this case is determined by Canadian maritime law. A maritime lien, long recognized in maritime law as a secured claim attaching in rem to a ship, is a secured claim. A maritime lien, attaching before bankruptcy of a ship’s owner, may be enforced and the claim based upon it may be realized from proceeds of sale of a ship without restriction under the Bankruptcy and Insolvency Act, or, with respect to other views, by the courts acting under that Act. Thus the plaintiff was entitled, as were other secured creditors claiming against the Brussel, to payment from the proceeds of sale in priority to any payment to the trustees.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 (as am. by S.C. 1992, c. 27, s. 2), ss. 2 “secured creditor”, 136, 183 (as am. by R.S.C., 1985 (2nd Supp.), c. 27, s. 10; S.C. 1990, c. 17, s. 3; 1993, c. 28, s. 78), 244 (as enacted by S.C. 1992, c. 27, s. 89; 1994, c. 26, s. 9).

Code of Civil Procedure, R.S.Q., c. C-25, Art. 553(12).

Federal Court Act, R.S.C., 1985, c. F-7, ss. 17(6) (as am. by S.C. 1990, c. 8, s. 3), 22.

Federal Court Rules, C.R.C., c. 663, RR. 337(5), 432, 500, 1733.

Financial Administration Act, R.S.C., 1985, c. F-11.

CASES JUDICIALLY CONSIDERED

APPLIED:

Todd Shipyards Corp. v. Altema Compania Maritima S.A., [1974] S.C.R. 1248; (1972), 32 D.L.R. (3d) 571; Husky Oil Operations Ltd. v. Minister of National Revenue, [1995] 3 S.C.R. 453; (1995), 128 D.L.R. (4th) 1; [1995] 10 W.W.R. 161; 35 C.B.R. (3d) 1; 24 C.L.R. (2d) 131.

DISTINGUISHED:

Magnolia Ocean Shipping Corp. v. Soledad Maria (The), T-744-81, Marceau J., order dated 30/4/81, F.C.T.D., not reported.

CONSIDERED:

Ultramar Can. Inc. v. Pierson SS Ltd. (1982), 43 C.B.R. (N.S.) 9 (F.C.T.D.).

REFERRED TO:

Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897; (1993), 102 D.L.R. (4th) 96; [1993] 3 W.W.R. 441; 23 B.C.A.C. 1; 77 B.C.L.R. (2d) 62; 14 C.P.C. (3d) 1; 150 N.R. 321; 39 W.A.C. 1; Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077; (1990), 76 D.L.R. (4th) 256; [1991] 2 W.W.R. 217; 52 B.C.L.R. (2d) 160; 46 C.P.C. (2d) 1; 122 N.R. 81; 15 R.P.R. (2d) 1.

AUTHORS CITED

Hogg, Peter W. Constitutional Law of Canada, 3rd ed. Scarborough, Ont.: Carswell, 1992.

MOTION for order that the net proceeds of the sale of the ship Brussel be paid out to the trustees in bankruptcy of the corporate owners of the ship, rather than to creditors which had filed claims in accordance with the Federal Court of Canada’s process. Motion dismissed.

COUNSEL:

Thomas E. Hart and James E. Gould for plaintiff.

David G. Colford for defendants.

Edouard Baudry for intervenor.

John D. Murphy, Q.C. and Richard F. Southcott for certain caveators.

SOLICITORS:

McInnes Cooper & Robertson, Halifax, for plaintiff.

Brisset Bishop, Montréal, for defendants.

Lavery, de Billy, Montréal, for intervenor.

Stewart McKelvey Stirling Scales, Halifax, for certain caveators.

The following are the reasons for judgment and orders rendered in English by

MacKay J.:

Introduction

These reasons concern the disposition by this Court of a number of motions on behalf of the plaintiff and on behalf of the trustees in bankruptcy, (the trustees), added as defendants after commencement of the action, who were appointed by the Commercial Court of Antwerp, Belgium as trustees for the assets and obligations of the corporations owning and operating the ship Brussel, and other ships. The M/V Brussel was registered in Belgium when she was arrested under a warrant of this Court on March 30, 1996, and when she was subsequently sold under this Court’s order, at the port of Halifax. After the arrest of the ship the corporations owning and operating the Brussel were declared bankrupt, and the trustees were appointed, by the Court at Antwerp.

These reasons are lengthy and this index of headings may assist the reader.

Introduction	(page 195)
The background : arrest of the ship Brussel and subsequent bankruptcy of her owner and operator	(page 198)
Default judgment and order for appraisement and sale	(page 202)
Trustees’ motions for reconsideration, for a stay of proceedings, appeals filed, and proceedings in bankruptcy courts	(page 207)
Sale of the ship Brussel	(page 221)
Trustee’s motion for payment to them of proceeds of sale	(page 227)
Conclusion and directions	(page 234)

The circumstances are somewhat complex. They raise issues of judicial and international comity and the issue of priority of the processes available for satisfaction of outstanding claims of creditors under Canadian maritime law, administered by this Court under the Federal Court Act, R.S.C., 1985, c. F-7 as amended, and under the Canadian Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3, as amended [as am. by S.C. 1992, c. 27, s. 2] (the Act), administered by courts designated under that Act, i.e., the superior courts of the provinces and territories sitting in bankruptcy. Following arrest of the Brussel and the bankruptcy of the Belgian companies owning and operating the ship, the trustees appointed by the Belgian Court participated in every significant phase of the processes in this Court, first by leave for conditional appearances and later as parties defendant. They also sought assistance of the Superior Court of Quebec, District of Montréal, sitting in bankruptcy and insolvency matters, having applied there, as I understand it, since the agent in Canada of the bankrupt operating companies was based in Montréal.

After sale of the vessel late in July 1996, which the trustees opposed, a motion on their behalf, consistent with terms of an order earlier issued by the Quebec Superior Court sitting in bankruptcy, was heard in September 1996. The motion requested an order that the net proceeds of the sale of the ship Brussel be paid out to the trustees, rather than being paid to those creditors, including the plaintiff, which had filed claims against the vessel or her owners in accord with this Court’s processes. If that order were granted, as sought by the trustees, it would leave all claimants in this Court, including secured creditors, without any recourse except to initiate their claims anew for consideration by the trustees in Belgium in accord with Belgian law.

These reasons trace the proceedings to date and they deal with the basis of an order now issued to allow claims of secured creditors, as may be recognized by this Court, to be met from the proceeds of sale under process of this Court, before any payment to or on account of the trustees. The order provides directions for determination of which claims, if any, in addition to that of the plaintiff, are secured claims and permits unsecured creditors to make submissions since there has been no argument specifically dealing with their status in relation to the proceeds of sale, though my preliminary view is that their claims may be subject to the application of the Bankruptcy and Insolvency Act.

There were several stages in an evolving proceeding where orders of this Court determined issues significant for the parties. Notices of appeal were filed in relation to some of those orders. After reviewing the background these reasons briefly summarize the basis for determinations made as the process unfolded, including:

(1) a default judgment in favour of, and a declaration of recognition of a maritime lien held by, the plaintiff, and an accompanying order for appraisement and sale of the ship, both issued in mid-May, 1996;

(2) dismissal of trustees’ application to stay proceedings pending determination of claims by the bankruptcy courts in mid-June, 1996, and subsequent proceedings in bankruptcy court;

(3) sale of the Brussel, including an order rejecting the one bid tendered in response to an advertisement for sale of the Brussel, placed by the marshall acting under the Court’s direction, and ordering that an auction be held promptly, and thereafter ordering sale of the Brussel, all in July, 1996 with closing of the sale on August 1, 1996;

(4) finally, an order disposing of the trustees’ motion for payment out of the proceeds of sale and directing that secured claims, particularly of maritime lien holders and the mortgagee, be paid before any payment to or on account of the trustees.

The background: arrest of the ship Brussel and subsequent bankruptcy of her owner and operator

The ship Brussel was arrested under warrant of this Court on March 30, 1996 as she was about to enter Halifax harbour. The arrest was made at the instigation of the plaintiff, Holt Cargo Systems Inc., a company incorporated in the state of New Jersey in the United States, in support of its action commenced in this Court on the same day by filing of a statement of claim. In that claim the plaintiff seeks US$414,563 plus pre-judgment and post-judgment interest, and a declaration that it is entitled to a maritime lien against the ship for its claims for outstanding fees and charges for stevedoring and related services provided to the Brussel in the United States, where it is said the claim is recognized in law as raising a maritime lien. The plaintiff’s action was initiated against the defendants, ABC Containerline N.V., a body corporate, of Belgium, believed at the time to be the owners of the ship Brussel and against the owners, charterers and all others interested in the ship Brussel, and the ship Brussel as defendants.

Following arrest of the ship, numerous claims were filed in this Court by cargo and container owners or shippers, suppliers, insurers and others who asserted claims against the owners or operators of the shipping service or against the vessel. Those claims, in accord with this Court’s processes, include statements of claim in some 27 separate actions, and notices of claim filed in this action from more than 20 other claimants in response to this Court’s order for sale of the ship.

As it turned out, at the time of the ship’s arrest she was owned by Antwerp Bulk Carriers N.V. With other interrelated Belgian companies, the owners and ABC Containerline N.V. carried on business using vessels owned or chartered by one of them, in the international carriage of goods by sea. Primarily, they operated a cargo and containerliner service between various ports in Europe, Israel, the United States, Canada, southeast Asia, Australia and New Zealand.

On April 5, 1996 both Belgian companies, ABC Containerline N.V. and Antwerp Bulk Carriers N.V. were judged to be bankrupt by the Commercial Court of Antwerp, Belgium and that Court then appointed Mr. T. Van Doosselare and Mr. Frans G. A. De Roy as joint trustees (the trustees) to the bankruptcies of each of the debtor companies. As noted, the trustees were represented by counsel at the several hearings before this Court, and in mid-June 1996, on application by the trustees, they were added as parties defendant in these proceedings.

On a separate application, in mid-June 1996, the Société Nationale de Crédit à l’Industrie S.A., a Belgian state banking institution, holding substantial first- and second-ranking ship mortgages on the ship Brussel for which it had filed a claim as a secured creditor in the Belgian bankruptcy proceedings, was admitted as an intervenor in these proceedings. At that time the style of cause was ordered to be amended to include the trustees as defendants and the Belgian bank as intervenor.

After her arrest the Brussel was anchored in Halifax harbour. In April, by proceedings conducted mainly by telephone conferences with counsel located in Halifax and Montréal, the Court approved arrangements initiated by, and on application of certain cargo owners, to offload containers of their cargo. Ultimately, when the vessel was moved to dockside under order of the Court, it was ordered that all containers aboard the ship, some 1100, be unloaded from the Brussel.

For the record I commend the admiralty bar for the expeditious organization of arrangements to protect the interests of cargo owners so far as possible in the circumstances. Communications by telephone and fax resulted in arrangements intended to protect the interests of those anxious to arrange onward shipment of their cargo, while minimizing expense from abandoned cargo and protecting the interests of container owners. The admiralty bar, acting on behalf of those interested in cargo and containers, was most effective and efficient in developing arrangements for discharge of the cargo aboard the vessel. In my view those arrangements ultimately served the interests of the trustees and other creditors of the bankrupt companies.

After unloading, by order of the Court on May 3, 1996, the Brussel was moved to a dockside layby berth, on the initiative of the trustees, for purposes of maintenance under supervision of her master with a skeleton crew and at the trustees’ expense. There she remained until after sale of the ship closed on August 1, 1996.

In the discharge of their responsibilities under Belgian law, the trustees sought to take possession of all assets of the bankrupt companies, wherever situated, in order to liquidate or marshall the assets for the purpose of orderly liquidation and distribution of the proceeds to creditors of the debtors, in accord with Belgian bankruptcy law. To do so, the trustees travelled to various countries where the debtor companies had assets and claims were being registered against them. They made applications in various jurisdictions where legal action had commenced against the debtors or where they had done business, seeking to direct the submission of all claims to the bankruptcy proceedings in Belgium, and to have lifted any arrest elsewhere of assets, and to prevent further seizure or arrest of assets so that those might be dealt with and liquidated in accord with Belgian law. The principal assets of the debtor companies were six cargo vessels including the Brussel, at least five of which were under arrest in ports across the world, including the ports of Haifa, Singapore, Auckland, and initially at Freeport, in the Bahamas, in addition to Halifax.

On application by the trustees, their appointment and the bankruptcy judgment of the Belgian Court was recognized and declared executory by the Superior Court, District of Montréal, Province of Quebec, by judgment dated May 9, 1996. That judgment noted that the trustees’ motion had been served upon the debtor, Antwerp Bulkcarriers N.V., said to have an office in Quebec at its agent Deepsea Marine Services (Canada) Inc., in Montréal, and it directed that the trustees serve a copy of the judgment and of the English translation of the Belgian bankruptcy decree upon creditors or their attorneys, if known, including those names in an exhibit list. It is not clear whether prior notice of these proceedings in the Quebec Superior Court was given to the plaintiff in these Federal Court proceedings, though it would be surprising if Holt Cargo Systems Inc. was not a creditor listed to have notice of the judgment, since the trustees were aware of this action and of the arrest of the Brussel. The judgment of the Quebec Superior Court simply declares that the Belgian judgment of April 5, 1996 and the appointment of the trustees “be recognized and declared executory in Quebec” and that the trustees:

… be vested in the property of ANTWERP BULKCARRIERS, N.V. as and from the date of the judgment to be rendered herein, for the purpose of obtaining possession of and realizing on the property of ANTWERP BULKCARRIERS, N.V., subject however, to the rights, if any, of any creditors with claims secured under the law of Canada, as by law provided ….

Default judgment and order for appraisement and sale

By motion filed May 7, 1996, made returnable at Halifax on May 14, 1996, the plaintiff sought default judgment against the vessel Brussel pursuant to Rule 432 of the Federal Court Rules [C.R.C., c. 663], since no defence, and no appearance, had been entered on behalf of the defendants for more than 30 days after the statement of claim was filed and served on the ship with her arrest on March 30. By a second motion, returnable the same day, the plaintiff also sought an order for appraisement and sale of the ship. By motion filed May 13, 1996 counsel acting on behalf of the trustees, with leave of the Court, sought an order to adjourn the plaintiff’s motions for default judgment and for appraisement and sale of the Brussel, for a period of four weeks or other time limited by the Court’s order, to permit the trustees to assess all claims of creditors and the assets of the debtor corporations.

When those motions came on for hearing in Halifax on May 14, 1996, counsel for the trustees participated by telephone conference connection with the courtroom in Halifax where counsel for the plaintiff and counsel representing some other claimants were in attendance. The motion on behalf of the trustees, for adjournment of the plaintiff’s motion was heard first. Counsel for the trustees noted the judgment of the Quebec Superior Court on May 9, 1996 recognizing the Belgian Court’s bankruptcy judgment and the appointment of the trustees by the Belgian Court. Counsel also referred to the United States Bankruptcy Court in New York where the trustees had applied for and were concurrently arguing for a restraining order that would direct United States creditors of the debtor companies to refrain from seeking to realize on their claims in the United States or elsewhere. It was noted that the plaintiff in the case at bar was a United States corporation with a claim for services rendered in the United States, not in Canada. Moreover, counsel for the trustees noted that because of the bankruptcy on April 5, tracing and verifying claims from around the world against the debtors was much more difficult and slower than would be expected in the ordinary course of an ongoing business.

I dismissed the motion on behalf of the trustees to adjourn the plaintiff’s motions for a term fixed. No appearance, and no defence to the plaintiff’s action had been filed on behalf of any of the defendants originally named when the vessel was arrested on March 30 some six weeks earlier, or by the trustees subsequently appointed by the Belgian Court. While I appreciate the difficult task of the trustees in seeking to discharge their important responsibilities for the benefit of creditors recognized under Belgian law, in my view those responsibilities must take account of proceedings initiated by creditors here and in other countries where the debtor companies had carried on business. The circumstances of the arrest of the Brussel must have been known to the trustees almost from the time of their appointment on April 5, yet no formal step had been taken to file a defence or to enter an appearance in this action in the more than five weeks since trustees were appointed. The plaintiff and others that have filed claims and caveats in this Court are entitled to have those claims assessed in accord with this Court’s Rules and processes. To adjourn the plaintiff’s motion would simply postpone assessing the interests of claimants who had come forward in this Court and, furthermore, there was no assurance that the trustees or anyone else would ultimately enter a defence against the plaintiff’s or others’ claims. I appreciate the position of the trustees who seek to minimize costs of legal proceedings in that they may not wish to defend an action that is well founded. In the circumstances here they had been unable at that time to verify the claim advanced by the plaintiff, since the agent of the former operating companies in the United States had effectively shut down its operations and there was no access to its records after the debtor companies were declared bankrupt. Difficult as the position of the trustees was, in my view, it merely underlined the uncertainty at that stage about whether they would defend against the plaintiff’s claim, or any other claim before the Court.

These same factors, in my view, supported an order allowing the plaintiff’s motion for default judgment as sought by the plaintiff at the time of hearing. It was so ordered on May 14, 1996 that the plaintiff have judgment in rem against, and should recover, from the proceeds of sale of the ship Brussel or any bail posted for its release from arrest, the amount of $572,128.06 being the Canadian dollar equivalent of US$414,586 dollars claimed by the statement of claim. That quantum of damages was ordered, unless on or before June 14, 1996 a motion were to be brought on behalf of the trustees or the defendant ship for the Court to appoint a referee pursuant to Rule 500 to determine the true quantum of the plaintiff’s claim, in which event the amount so determined would be substituted for the amount of the judgment. The purpose of that provision was to permit the trustees to contest the quantum of the plaintiff’s claim, if that was deemed to be warranted.

Post-judgment interest was the only interest claim advanced by the plaintiff at the hearing, and by order it was awarded at the rate of 7% per annum on the amount of the judgment, to be recovered from the proceeds of the defendant ship.

That judgment also included the determination that the plaintiff is entitled to a maritime lien to secure the amounts owing by the defendant ship, but the priority of that lien was reserved pending determination of the rights of all claimants.

The determination that the plaintiff has a maritime lien is in recognition of the status of the plaintiff’s claim under United States law where services of the sort here rendered to the Brussel are said to be recognized, without objection at the hearing, as giving rise, if they are not paid, to a maritime lien enforceable against the ship. If the claim were one for similar services rendered in Canada to the ship, it would not qualify as a claim supportable by a maritime lien. Nevertheless, it seems clear that recognition of such a claim as a maritime lien in this Court is dictated by the judgment of Mr. Justice Ritchie, speaking for the Supreme Court of Canada, in Todd Shipyards Corp. v. Altema Compania Maritima S.A., [1974] S.C.R. 1248 (the ship Ioannis Daskalelis). Where a right in the nature of a maritime lien exists under foreign law which is the proper law of the contract giving rise to the lien, this Court is bound to recognize it and to give it priority which such a maritime lien has under Canadian maritime law.

Finally, the judgment of May 14, 1996 provided that the plaintiff should serve a copy of the statement of claim and of the default judgment itself upon counsel in Canada for the trustees. The Court was concerned that the statement of claim had been served only upon the ship Brussel. That was done by the sheriff handing up to a crew member of the vessel, in rough seas off Halifax harbour on March 30, the statement of claim and warrant for arrest, and those papers were then delivered to the master of the ship. It was not contested that the arrest of the ship was effective, and the fact of its arrest and initiation of the plaintiff’s action was known to the owners and operators of the ship, and to the trustees in bankruptcy after their appointment. However, the Court was concerned that formal service of the statement of claim and the default judgment be effected upon counsel in Canada for the trustees. I note for the record that counsel for the trustees had participated in conferences leading to orders for discharge of the ship’s containers. In addition, service of the notices of motion by plaintiff for judgment in default and for an order for appraisement and sale of the ship had been effected upon counsel for the trustees. To those notices counsel had responded and had participated in this hearing, seeking adjournment of the plaintiff’s motions and subsequently arguing for dismissal of those motions.

At the hearing on May 14, the plaintiff’s motion for an order of appraisement and sale of the ship was also dealt with and, essentially for reasons similar to those outlined above, the Court indicated that the motion for appraisement and sale would be granted, on terms to be settled after consultation by counsel for the plaintiff and for the trustees. The Court was also persuaded by the plaintiff that, given the continuing uncertainties regarding the resolution of claims against the debtor companies, it was important the ship Brussel should be appraised and an inventory completed without delay. Those steps could be completed and the vessel advertised for sale subject to the Court’s approval, without final commitment at that time concerning sale of the vessel.

One of the concerns raised on behalf of the trustees was that there had not been opportunity for them to assess whether the ship would likely yield a higher sale price if sold as part of larger fleet of vessels of the debtor companies, rather than if sold by itself by this Court in Halifax. That concern continued until the vessel was sold in late July; however, there was nothing more than mere speculation before the Court at any time about this possibility.

After consultation between counsel as directed, a further hearing was held by telephone on May 17, 1996, with counsel for the plaintiff in Halifax and counsel for the trustees in Montréal and with the Court presiding at Ottawa. An order then issued from Halifax, authorizing the issuance of a commission of appraisement and sale of the defendant ship Brussel, to the Sheriff as Marshall of this Court. Sale of the ship was directed to take place at Halifax, by bids submitted on or before July 2, 1996, with a deposit of five percent of the price tendered, which bids were to be opened on July 3, 1996. The sale of the ship was specifically made subject to a confirming order of the Court to be considered on July 9, 1996, a regular motions day in Halifax, with the direction that the sale not necessarily be made to the highest or any other bidder. The Marshall was authorized to retain the services of a named firm of ship-brokers of London, England, to promote and advise upon sale of the ship, for a fee stipulated, and the order specified that the sale be advertised as the Marshall considered appropriate and on advice of the consultant broker, in publications in Canada, New York, London, Australia and Asia.

The Court acknowledges the effective consultation between counsel for the plaintiff and counsel for the trustees, whose participation was without prejudice to the trustees’ opposition to a sale. Both counsel were helpful concerning the terms of the order, and of the commission for appraisement and sale, and on arrangements for advertising, all of which were intended to attract interest from the maritime community across the world with a view to realizing the highest return should the ship be ordered to be sold.

Trustees’ motions for reconsideration, for a stay of proceedings; appeals filed and proceedings in bankruptcy courts

On May 27, 1996, the defendants ABC Containerline N.V., and the owners of the M.V. Brussel and the trustees es qualité as trustees in bankruptcy of the Belgian debtor companies filed motions for reconsideration of the judgment of May 14, 1996, and for reconsideration of the order of May 17 and the commission for appraisement and sale of the ship. Those motions, filed pursuant to subsection 337(5) of the Rules and Rule 1733, were said to be based on relevant new matters arising since the hearings which led to the judgment and order. In particular, it was urged that the plaintiff’s claim to a maritime lien made that claim subject to provisions governing secured creditors under the Bankruptcy and Insolvency Act. It was urged that the plaintiff’s failure to give ten days’ advance notice of its intention to proceed to enforce its security against the ship, as required by section 244 [as enacted by S.C. 1992, c. 27, s. 89; 1994, c. 26, s. 9] of that Act, was an absolute bar to enforcement of the plaintiff’s maritime lien in Canada. That issue was not argued in later proceedings but the trustees’ motions urged that on this basis the judgment of May 14 by this Court was defective, and, by inference, the order of May 17 for appraisement and sale was defective also. Moreover, since the Court order of May 14, the United States Bankruptcy Court, Southern District of New York, on May 16 had issued a temporary restraining order to enjoin the plaintiff and other creditors in the United States from disposing of any property of, or commencing any proceedings against, the Belgian debtor companies or their property in the United States. It was urged this was done in the interests of international comity, to permit expeditious and economical administration of the assets of the bankrupt companies, and to signal to the courts of other jurisdictions the support of the United States Bankruptcy Court for international comity and recognition of the Belgian proceedings.

On May 27, 1996, the trustees, described as “recognized by the Superior Court, province of Quebec, by judgment rendered … at Montreal on the 9th day of May, 1996,” and the defendants originally named in the plaintiff’s action, filed a notice of appeal from the default judgment of this Court, without prejudice to the motions filed the same day for reconsideration. On June 7, the trustees filed a notice of motion which, inter alia, requested they be added as parties to the action and that the style of cause be amended, a motion subsequently granted in that respect, as also was a motion of June 11 by Société Nationale de Crédit à l’Industrie S.A., the Belgian state bank, that, as mortgagee under ship’s mortgages relating to the Brussel, it be added as an “intervenor”. On June 13 the trustees and other defendants filed notice of appeal from the default judgment ordered by this Court on May 14, 1996.

While reviewing proceedings in this Court, it is important also to refer to the activities of the trustees in bankruptcy courts, on which the trustees also relied as the proceedings here developed. Those other proceedings give support to successive submissions by the trustees, that in the interests of international comity, the proceedings in this Court should be stayed temporarily or permanently. That was considered on four occasions: in May 1996, preliminary to the decision to award default judgment and order sale of the vessel; in June, when proceedings for a stay or reconsideration of the judgment and order of this Court were initiated and dealt with; in July, when the sale of the vessel was under consideration; and finally, in September, upon hearing the trustees’ motion that the net proceeds of sale of the ship be paid to them.

At the time of, or shortly after, the arrest of the Brussel in Halifax, other vessels owned and operated by the now bankrupt companies were also arrested in other places as earlier noted, including Haifa, Freeport, Singapore and Auckland. Other actions were also commenced against the debtor companies or their agents in other places. In Canada, the bankrupt companies had operated with what was described as a dedicated full-time agent, Deepsea Marine Services Inc., a corporation with its principal and registered office in Montréal though it apparently also operated or acted through agents in Toronto and Halifax. In the United States, an operating agent had carried on business in New York, Philadelphia, Charleston and New Orleans. Other agents operated in Europe, and in several other countries, including Israel, Singapore, New Zealand and Australia.

Many of the claimants in the case of the Brussel and in other actions elsewhere were said by the trustees to be United States’ corporations with claims for services, or in relation to contracts made for activities done in the United States, and many United States’ creditors had taken or threatened action in United States’ courts. To deal with these actions, the trustees applied to the United States Bankruptcy Court for the Southern District of New York, and, as noted earlier in these reasons, on May 16 that Court, recognizing the standing of the trustees under Belgian law, granted a temporary restraining order. That order prohibited disposing of any interests of the bankrupt companies in the United States and prohibited the prosecution of claims against the debtors or their property in the United States. Further, the order provided that all of the debtors’ assets in or coming into that country were to be marshalled in the United States by the trustees and should be paid into the Court or to the trustees. These directions were made pending hearing, then scheduled for July 2, 1996, of the trustees’ application under United States bankruptcy legislation for ancillary support to permit expeditious and economical administration of foreign estates of the debtors in foreign proceedings.

My understanding of those proceedings is that the order made was temporary, at the behest of the trustees, pending hearing of their application that claims of United States’ creditors, or against the debtors’ assets in the United States, ultimately be dealt with under Belgian law. No final decision was made by the May 16 order in regard to the claims of the trustees and the creditors in the United States. One aspect is noteworthy, but perhaps not surprising. The United States Bankruptcy Court declined to grant an order restraining United States’ creditors from pursuing claims against the debtor companies or their assets in jurisdictions outside the United States, a form of relief requested by the trustees. Whether that Court had jurisdiction to make an order as requested is uncertain. His Honour Judge Arthur J. Gonzalez, in reasons delivered orally, denied that aspect of the trustees’ application, noting that no case law was cited to support such relief in an application in support of foreign bankruptcy proceedings, and moreover the circumstances of the case required the Court “to respect the judgments and law of all foreign countries whose laws are implicated in these proceedings and to fashion a relief accordingly.”

The motions of the trustees to reconsider the judgment of May 14, and the order of appraisement and sale dated May 17, were scheduled to be heard in Ottawa on June 12, 1996. Then on June 7 the trustees filed their motion to be added as parties and to permit conditional appearance to apply for a stay and for an order setting aside the determinations of May 14 and May 17, or alternatively an order staying the plaintiff’s action for six months or longer to permit the trustees to make substantial progress in assessing assets and claims in the Belgian bankruptcy proceedings.

On June 10, 1996, the trustees obtained judgment in the Commercial Court for the District of Antwerp, Belgium which judgment requested the aid of Canadian courts, and specifically requested courts in this country to make the following orders:

i)    that the M/V “Brussel”, located at Halifax, be delivered, without further delay, into the possession of the Trustees appointed by the Belgian judgment of April 5, 1996, so they might proceed to sell the ship, locally or anywhere else, and to divide the proceeds amongst creditors of the bankrupt companies in conformity with Belgian legislation;

ii     that, in conformity with Belgian legislation, all measures of attachment against the “Brussel” be suspended and that every moveable legal claim may only be prosecuted or executed against the Trustees;

iii)   to request all Canadian courts on whose territory assets of the bankruptcy, e.g. the “Brussel”, are found, to recognize that the Trustees have the duty and power to take possession of, to realize and to confirm the assets of the bankruptcy wherever those are located; and

iv)  to request all Canadian courts, pursuant to the Canadian Bankruptcy and Insolvency Act, to grant assistance to the observance and execution of that judgment of the Court at Antwerp.

On June 11, 1996 the trustees, without notice to the plaintiff or other creditors of the bankrupt companies, applied on an ex parte basis to the Superior Court, Province of Quebec, District of Montréal, sitting in bankruptcy and insolvency matters, for an order to give effect to the order issued the previous day by the Commercial Court at Antwerp which sought aid of Canadian courts. That application traced in some detail the background circumstances, including reference to arrest of the ship Brussel which, it was alleged, was wasting physically and in value to the detriment of the mass of creditors entitled under the law applicable in Belgian courts which was said to be the proper forum for determination of creditors’ rights. The application also sought orders or directions in the form requested by the order of the Antwerp Court, and further that an order be made to enjoin all parties upon whom the order might be served, including all those who had asserted rights against the ship, from commencing or continuing proceedings against the debtor companies with respect to any assets in Canada, including the ship Brussel located in Halifax.

On the day of that application, June 11, 1996, judgment was given by the Superior Court of Quebec, sitting in bankruptcy and insolvency matters, ex parte, in the terms sought, including that the Court:

DECLARES that this Court has come in aid of the Belgian Commercial Court of the Judicial District of Antwerp pursuant to a request contained in a Judgment of the President of such Court dated June 10, 1996;

RECOGNIZES the Petitioners as Trustees in bankruptcy with the duty and power to take possession of, to realize upon and to confirm the assets of the bankruptcy situated in Canada;

ORDERS that all measures of attachment against the M/V “Brussel” be suspended and DECLARES that every moveable legal claim may only be prosecuted, introduced or executed against the trustees in bankruptcy in Belgium;

ENJOINS persons upon whom this Judgment is served from commencing or continuing any judicial action, claim or proceedings, including execution proceedings of any kind, against the Debtor with respect to any property of the Debtor situated in Canada, including the ship M/V Brussel located in Halifax;

ORDERS the M/V “Brussel” located in the port of Halifax, Canada, to be delivered into the possession of the Petitioners, in their quality as Trustees in bankruptcy, so that they can proceed to the sale of the ship in question, locally or in any other place they consider more appropriate, and to the distribution of the proceeds amongst the creditors in observance of all their rights and in conformity with Belgian Legislation;

DECLARES that the Order for the delivery of the M/V “Brussel” to the Petitioners es qualité shall be executory on June 18, 1996, at 17:00 hrs eastern standard time, subject to the right of any interested party, after having given at least forty-eight (48) hours prior notice to counsel for Petitioners, to come before the undersigned Judge on June 18, 1996, at 9:15 a.m. in Room 16.12 of the Court House, District of Montreal, to address the present Judgment;

ORDERS that the present Judgment be served promptly on all parties who have asserted a claim in respect to the M/V “Brussel”.

When the motions for reconsideration came on for hearing on June 12, 1996, in Ottawa, the judgment issued June 11 by the Quebec Superior Court sitting in bankruptcy was brought to the attention of this Court by counsel for the plaintiff. His office in Halifax had received a fax copy late the previous day as had the Registry of this Court. There were, before this Court on June 12 two other motions in addition to those for reconsideration. One filed on June 7 on behalf of the trustees, was referred to earlier, for leave to intervene, to be added as parties and to move for a stay for six months or longer, and the other motion of June 11, 1996 by the mortgagees, seeking to be added as an intervenor in the plaintiff’s action.

At the hearing on June 12, 1996 two issues only were determined and confirmed by orders issued the following day. The application of the trustees to be added, as parties, defendants, in the action was allowed without objection by the plaintiff. The application on behalf of the mortgagee to be added as an intervenor was heard on short notice. It was allowed despite objection by the plaintiff and written representation for adjournment of the mortgagee’s motion by counsel for one or more claimants against the ship. That decision was warranted, in my view, because while the mortgagee’s claim against the vessel would ultimately be considered if it were advanced in the usual manner under the Court’s process, at that stage the interest of the mortgagee was more than a claim against the assets. It also concerned support for the proposition that the Brussel be released to the trustees and that all claimants be directed to pursue their claims in the Commercial Court at Antwerp under Belgian law. In my opinion, the mortgagee was entitled to be heard for its interests were not identical to those of the trustees. Moreover, in my opinion, no other creditors’ claim would be prejudiced in any way by admitting the mortgagee, the Belgian state bank, as an intervenor.

The Court then adjourned argument on the motions for reconsideration, and on the motion for a stay. Counsel for the plaintiff was not prepared to deal with the application for a stay and notice that it would be advanced for consideration at the hearing on June 12 had not been provided. In the circumstances, the applications for a stay and for reconsideration, were adjourned to June 14, 1996, and arrangements were made for notice to all interested parties of a hearing in Montréal on that day, with counsel present there and in attendance by telephone conference arrangements with the Court’s facilities in Halifax.

When the Court convened in Montréal on June 14 the trustees then presented an “Amended Notice of Motion for Permission to File a Conditional Appearance and For a Stay of the Action”. That motion was dated June 13 and filed the day of the hearing, June 14. The amended motion varied that originally filed June 7. The amendment, concerning the request for a stay, was advanced by the trustees as their motion, requesting that the action be stayed “pending final disposition of the matter by the Superior Court, District of Montreal, Sitting in Bankruptcy and Insolvency Matters”. In other respects the motions originally set to be heard were adjourned, sine die , at the request of the trustees. The basis for the amendment and for the relief now sought was the judgment of the Quebec Superior Court sitting in bankruptcy and insolvency, dated June 11, 1996. It was urged that:

… the assumption of jurisdiction by another court empowered by federal law to exercise exclusive jurisdiction in bankruptcy matters should be recognized and the judgment rendered and judgments to be rendered by the Superior Court sitting in Bankruptcy and Insolvency Matters should be given full force and effect for the better administration of the law of Canada.

In essence counsel for the trustees urged that since the Quebec Court had undertaken, within its jurisdiction under Canadian law, to assist the trustees in discharge of their responsibilities under Belgian law, this Court should stay its processes pending disposition of matters under consideration by the Quebec Court sitting in bankruptcy. That Court’s order of June 11, 1996 provided opportunity for claimants to intervene before that Court, after giving 48 hours’ notice, on June 18, 1996 on which day at 5 p.m. the order for delivery of the M/V Brussel to the trustees was to be executory, subject to any further order of that Court. The trustees’ position was urged on the basis of the importance of a single jurisdiction for marshalling the assets of, and claims against, a bankrupt party, particularly in an “international bankruptcy” of the sort here in question. That same importance was recognized, it was urged, by the Bankruptcy and Insolvency Act which assigned exclusive jurisdiction in bankruptcy matters in Canada to the bankruptcy courts. Implicitly, now that the Quebec Court, sitting in bankruptcy, was involved, the issues before this Court should become ancillary to the bankruptcy proceedings. The principle of the comity of nations and recognition of the principle of forum conveniens applying in these circumstances was stressed on behalf of the intervenor, the mortgagee, which fully supported the position of the trustees.

The trustees urged that Canadian courts, including the Federal Court, should recognize Belgium as having a closer connection to the bankruptcy issues, and that a juridical advantage of one party should not be a factor in considering the proper forum. (See Amchem Products Inc. v. British Columbia (Workers’ Compensation Board.), [1993] 1 S.C.R. 897.) Here, the plaintiff’s claim to a maritime lien under United States law was for services which, if rendered in Canada would not have the same standing. By analogy with Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, the trustees urged that the judgment of one superior court in Canada should be recognized and supported by other superior courts in Canada, and this Court should so recognize and accept the judgment of the bankruptcy court of Quebec. They urged as well that a stay of proceedings based on a request to recognize the jurisdiction of foreign courts was a procedure already recognized in this Court by the decision of Mr. Justice Marceau, then of the Trial Division, in Magnolia Ocean Shipping Corp. v. Soledad Maria (The), T-744-81, order dated 30/4/81, F.C.T.D., not reported.

I accept the principles of recognizing the comity of nations and judicial comity which respects the determination of all courts properly seized of matters before them. The difficulty for me is in the application of the principles in this case, in which the Court is urged to respect jurisdiction claimed by others and to forego considering claims to relief in proceedings long established in maritime law. I distinguish the Soledad Maria decision as one made soon after arrest of the vessel, without objection by any creditor other than the plaintiff. In that case the foreign plaintiff company arrested a Spanish ship in Canada, claiming failure by the registered owner to perform an agreement to sell the vessel, so there was no claim to a maritime lien. The arrest was made after the registered owner of the ship was determined by a Spanish court to be bankrupt, and after the plaintiff had notice from the trustee appointed by a Spanish court that any claim against the owner should be brought in court proceedings in Spain. Those circumstances are very different from the case at bar. Marceau J. determined that in the circumstances of the Soledad Maria the Court should exercise its inherent jurisdiction and decline to deal with the matter, and he struck out the statement of claim, set aside the warrant of arrest, and lifted the arrest, on terms that stayed the dismissal and set aside the warrant of arrest pending determination of any appeal the plaintiff might initiate within six days.

In this case, by June 14 when the motion to stay proceedings was heard, default judgment had been entered by this Court in the absence of any defence or even of any appearance filed by the defendants or the trustees after the arrest on March 30 and before judgment on May 14. An order of appraisement and sale had been granted and the appraisal was in process, as was advertising for a sale in early July and promotion of the sale by a ship’s broker. While it was suggested the plaintiff was forum shopping when the arrest was made, I am not persuaded it did more than seek recovery of its claim against the vessel where the ship was located. The plaintiff had initiated action in this Court as it was entitled to do when the ship Brussel was about to enter Halifax harbour. The place of the arrest may have been a fortuitous coincidence for the plaintiff in that its claim would be recognized with standing as a maritime lien, established under the law of the United States where the claim arose, but the plaintiff’s commencement of its action in Canada could not, in my view, be characterized as forum shopping simply because the ship to which the lien attached was here.

The Court found no persuasive grounds that would warrant the action proposed by the trustees, that is, to stay its own processes which were then underway, and to permit determination of the outcome to be effectively left to the bankruptcy proceedings of the Commercial Court at Antwerp, recognized by the Superior Court of Quebec. I was not persuaded that matters before this Court were those of bankruptcy. Moreover, it was not suggested that any bankruptcy would be based in or administered by any court in Canada.

At the same time the Court was persuaded by the plaintiff that, in relation to the stay of process sought, there was no evidence of irreparable harm to the trustees if the stay were not then granted, for no action would be taken in regard to the ship before July 9, 1996, when any bid for purchase of the vessel would be subject to approval of the Court. The interests of all parties continued to be protected, and generally were yet to be assessed by this Court’s process. Moreover, it was urged that in the circumstances of this case, the balance of convenience favoured denying the stay since the majority of claimants, in Canada and the United States, appeared to be based on the east coast of North America with relatively easy access to the Court’s process in Canada.

In my opinion, no reason, taking into account this Court’s process and the circumstances of the case, was suggested that would warrant granting a stay in mid-June of the proceedings then underway. Thus, on June 14, the application for a stay pending a final determination of the matters by the Superior Court of Quebec sitting in bankruptcy and insolvency matters, was dismissed. The motions by the trustees, for a stay of six months or more and for reconsideration of this Court’s judgment of May 14 and the order of May 17, were adjourned sine die, with the Court indicating its preparedness to hear argument on those motions by telephone, or if possible, by personal appearance of counsel, if desired, on two days’ notice by the trustees to all interested parties.

The judgment of June 11 by the Superior Court, Province of Quebec, District of Montréal sitting in bankruptcy and insolvency matters, originally made executory on June 18 subject to intervention by interested parties, was extended ultimately to June 28, 1996 to permit submissions from interested parties to be heard. That Court heard applications on behalf of the plaintiff in this action and on behalf of another creditor in these proceedings, that the original judgment be varied.

After hearing the parties, Mr. Justice Guthrie sitting as judge in bankruptcy and insolvency, concluded that:

The continued detainment of the “Brussel” in Halifax harbour in no way benefits either the ordinary or secured creditors of the Bankrupt. The indefinite continuance of the detention charges in Halifax harbour as well as the costs of sailing the “Brussel” to Antwerp militate in favour of its sale without further delay. In the Court’s opinion, the parameters for its sale spelled out in the May 17th Order of the Federal Court are quite reasonable and there is no proof that a sale in Antwerp would fetch a better net purchase price. Therefore, this Court will not stay the sale.

That Court then issued judgment varying the order granted on June 11 and providing, inter alia, a declaration that the Superior Court of Quebec sitting in bankruptcy and insolvency matters has come in aid of the Commercial Court of Antwerp pursuant to the latter’s request by its judgment of June 10, 1996, and was recognizing the trustees “with the duty and power to take possession of, realise upon and confirm the assets of the Bankrupt situated in Canada, subject however to the rights if any of any creditors with claims secured under the laws of Canada, as by law provided”. In relation to this Court’s proposed sale of the Brussel the judgment of the Quebec Superior Court dated June 28, then provided: that Court:

PERMITS the sale of the ship “Brussel” to take place in accordance with the judgment rendered by the Federal Court of Canada, Trial Division, on May 17, 1996 provided that such sale is completed and the purchase price paid in full by the close of business in Halifax, Canada on July 12, 1996;

ORDERS that, in the event that the said sale is completed as aforesaid, the net proceeds of such sale (after payment of all expenses of advertisement of the sale, appraisal fees, insurance and all other costs, disbursements, commissions and other expenses necessary for the sale) be paid promptly to the Trustees for distribution amongst the creditors of the Bankrupt in observance of all their rights and in conformity with Belgian law;

ORDERS that, in the event the said sale is not so completed, the ship “Brussel” be delivered into the possession of the Trustees so that they can proceed to the sale of the said ship, locally or in any other place they consider more appropriate, and to the distribution of the net proceeds amongst the creditors of the Bankrupt in observance of all their rights and in conformity with Belgian law;

REQUESTS the aid of the Supreme Court of Nova Scotia with jurisdiction in bankruptcy, insofar as such aid may be necessary under the laws of Nova Scotia to give effect to the present judgment;

ORDERS that the present judgment be served promptly on Chief Justice of the Supreme Court of Nova Scotia, on the Marshall of the Federal Court of Canada in Halifax, on the Sheriff of the Halifax Regional Municipality, and on all parties who have asserted a claim in Canada in respect of the ship “Brussel”.

On July 8, 1996, Container Applications International Inc., one of the creditors with a separate statement of claim filed in this Court in relation to a claim against the Brussel, said to be based on a maritime lien for services rendered in the United States, which had been an applicant before the Quebec Superior Court to vary the judgment of June 11, 1996, filed a notice of appeal from the judgment of Mr. Justice Guthrie dated June 28. That appeal related in particular to the paragraphs quoted above concerning sale of the Brussel by this Court. An inscription in appeal was filed in the Quebec court, the effect of which, under the Quebec Code of Civil Procedure [R.S.Q., c. C-25], was to suspend execution of the judgment under appeal, there being no execution otherwise provided by law or ordered by the Court, and a request by the trustees for such an order, for execution, had been denied.

Sale of the ship Brussel

Terms of this Court’s order, and the commission of appraisement and sale, dated May 17, 1996 have been summarized earlier. They provided for advertising in major journals of interest to the shipping trade, for sale of the ship on sealed tender bids, subject to later approval of the Court. Bids were to be received on July 2 and only bids received before the opening of tenders on July 3 would be considered.

When the Court convened on July 9 in Halifax it was informed that only one bid was received, for purchase at a price in the amount of US$3,000,000. Early in the proceedings in this Court the trustees, by affidavit, had estimated the market value of the Brussel as US$5,000,000. The appraisal completed for the Court in connection with the proposed sale of the vessel, after survey and inventory, estimated the ship’s value in a reasonable market and sale, not necessarily a forced sale, at US$7,000,000. Thus, there was a substantial difference between the amount bid for the vessel and the appraisal value. The broker/adviser retained by the Marshall advised by affidavit that his estimate, without inspecting the vessel, was that the Brussel had a value of US$7,000,000 in a negotiated sale between a willing buyer and a willing seller. He believed, however the price was likely to be adversely affected in a forced sale by the Court, and by slow trends for ship sales in a lagging freight market, and as a result of some confusion arising from reports in European commercial news that the Brussel and other vessels of the bankrupt companies were to be sold together, by brokers operating in Belgium.

Counsel for the trustees opposed the sale, by the Court, at least in part on the basis that no bid had been received in accord with the order of May 17, and urged the Court to consider delivery of the vessel to the trustees, as indicated should be done by the order of Guthrie J. of the Quebec Superior Court dated June 28, 1996 if the vessel were not sold. The mortgagee supported the position of the trustees initially, and in any event opposed sale of the vessel at the price bid by the sole bidder. A few of counsel present at the hearing indicated concern that the sole bid might be the best indication of market conditions for the ship which, although fully operational until arrested more than three months earlier, was now subject to some uncertainties about her condition and was due for inspections and assessments under terms of her insurance coverage. No one, except counsel for the sole bidder, urged that the sale be completed on the basis of the only bid received.

The opinion of the ship’s broker/adviser was conveyed to the Court, that while the world market for ships appeared to be declining, on the basis of some oral indications after July 3, he considered it possible that an auction sale of the vessel with no advance deposit might yield a higher price than US$3,000,000.

Ultimately the Court was not persuaded the sole bid received was the best price that would be offered for purchase of the Brussel. In light of the Court’s responsibility to obtain the best price for the benefit of all creditor claimants and others with any interest in the ship, the Court rejected the one bid received and declined to confirm the sale.

The Court then ordered that the Brussel be offered for sale at an auction to be conducted by the Marshall at the Court’s office at 11:00 a.m. on July 24, 1996, subject to approval of the Court, for a price to be expressed in U.S. dollars, bidding to be by US$100,000 units and the highest bidder to be required upon acceptance of his bid to post ten percent of the bid price forthwith, with the balance to be paid by August 1, 1996. Upon payment of the balance the Marshall would deliver a bill of sale conveying title to the vessel, unencumbered, in an “as is, where is” state. The Court wishes to acknowledge the assistance of counsel present in advising upon terms for the order to provide for the sale by auction, and it acknowledges also the assistance of ship-brokers in circulating information about arrangements for the sale by auction. No further advertising was done in newspapers or journals.

In so deciding the Court acted in exercise of the inherent jurisdiction to provide for sale under arrangements that would appear to yield the maximum proceeds for the benefit of all creditor/claimants and others with interests in the ship. Moreover, the action was within the terms of the order of May 17 which provided, in part, in relation to the sale proposed with bids to be submitted on July 2:

13. If the sale to the highest bidder or any other bidder is not confirmed by the Court or if the buyer’s deposit be forfeited by reason of its failure to pay the balance of the purchase price when due, then the Plaintiff may request that the Marshall communicate the amount of the highest offer to the other offerors with a view to obtaining a higher offer or, alternatively, request that the Court adjudge the sale of the Ship to the second highest bidder, should he be willing and, failing same, then a new tender for bids may be issued following the same terms and conditions as contained herein, or upon such other terms and conditions as the Court may deem fit to impose.

On July 9 two motions were before the Court. The first, by the plaintiff was a motion that sale of the vessel be confirmed, which was not accepted, or in the alternative that directions be given with a view to obtaining a higher offer for the ship. The alternative was, in effect, accepted and the Court ordered an auction sale for July 24, as earlier outlined. The second motion, by the trustees, sought to implement the terms outlined in the judgment of the Superior Court of Quebec dated June 28. This motion requested an order that if the ship were sold in accord with the order of May 17 and the sale completed by July 12 the net proceeds be paid out to the trustees. In the event the sale was not so completed, the motion requested that the ship be released from arrest, that caveats release filed by creditors be released, and the ship be delivered into possession of the trustees. That second motion was adjourned to July 24, 1996.

On July 12, 1996, my colleague Mr. Justice Gibson dealt with an urgent request by counsel for the trustees to hear an application for a stay of the Order made July 9 directing an auction sale of the Brussel. That request was heard by telephone conference call on July 15, with counsel for the trustees and counsel for eight other interested parties. The application was for a stay of the ordered sale pending determination of appeals of three orders earlier issued, including the default judgment of May 14, the order for appraisement and sale of May 17, and the order of June 14, dismissing the earlier application to stay proceedings in this Court. Counsel for the trustees conceded no irreparable harm would be occasioned between the date of that hearing and July 24, when this Court would again convene in Halifax and counsel was directed to bring a motion for a stay pending appeals before this Court on July 24, if that motion was then still desired to be heard.

Notice of appeal of the order directing arrangements for sale of the Brussel on July 24 was filed by the trustees, but was subsequently discontinued by notice filed on July 22, 1996.

When the Court convened in the afternoon of July 24, I was pleased to confirm sale of the Brussel to the highest bidder of five, four of whom were represented at the Court that morning, and the fifth was attending by telephone conference line, at the auction conducted at the Court’s premises by the Marshall. The order for sale of the vessel issued on July 24 provided, in accord with the terms of sale previously directed, for sale at the accepted bid price of US$4,600,000, ten percent of which was deposited (in equivalent Canadian funds) with the Court, and the balance was directed to be paid by noon on August 1, 1996. Upon payment in full the Marshall was directed to deliver a bill of sale, and insurance coverage from that time was to be the responsibility of the ship’s purchaser. Until July 24, insurance had been maintained by the trustees, and their counsel indicated willingness to continue so doing until the sale was finalized. Nevertheless, the plaintiff and other creditors arranged for the Marshall to effect port risk insurance coverage on the vessel until August 1, payable to the Marshall, in the event of loss, for the benefit of creditors.

For the record I note that the trustees did not oppose the sale at the hearing on July 24 and they did not then move for a stay application as had been indicated might be done, if they were so interested, during the telephone conference with Gibson J. on July 15. I note also for the record that counsel for the mortgagees was reported by counsel for the plaintiff as not opposing sale of the vessel at the price bid and accepted on July 24.

On August 1 the sale of the vessel was completed and a bill of sale delivered by the Marshall to the new owner, Ocean Profile Maritime Limited, as designated in writing by counsel for the successful bidder. Within a day or so a crew had been flown to Halifax and the ship Brussel was underway from Halifax harbour, to assume a new role.

On July 24 the motion of the trustees for payment to them of the proceeds of sale was adjourned and arrangements were made for that motion to be heard, together with any other ongoing business in the action, in mid-September in Halifax.

One issue raised at the hearing on July 24 is worth brief mention, if only as a report to interested parties then in attendance. Counsel for creditors were interested in any possibility of investing funds to be held in Court, in secure investments, which might yield a higher return than the modest interest their experience indicated could be expected to be paid on Court-held funds. Inquiries were made of the senior Court staff concerned with policy for management of funds within the Court’s responsibilities, and this Court was advised there is no legal authorization for investing such funds, and the Court is bound to administer funds within the terms of the Financial Administration Act, R.S.C., 1985, c. F-11, and regulations thereunder.

At a hearing in Halifax on September 11, 1996, costs of the sale were taxed, on a party and party basis, in accord with the order for sale of May 17, 1996, in the total amount of CAN$42,365.57, and were thereafter paid to counsel for the plaintiff in trust for those to whom costs and fees allowed were owing.

Trustees’ motion for payment to them of proceeds of sale

The Court convened in Halifax on September 19, 1996, for consideration of the trustees’ motion for payment to them of the net proceeds of the sale. On that occasion, the Court also considered motions then advanced in relation to arrangements for destruction of some cargo abandoned at the pier and for costs of its storage until ultimately ordered removed and destroyed, and of storage of containers, matters dealt with by separate orders.

In regard to disposition of the proceeds of the sale of the Brussel, counsel were prepared to deal with the trustees’ motion but not, at that stage, with any other proposal for payment of the proceeds to other claimants, pending clarification and ranking of other claims which it was anticipated might take some time.

In support of the trustees’ motion argument was based principally upon the reasoning set out in the judgment of Mr. Justice Guthrie on June 28, 1996 in the Quebec Superior Court sitting in bankruptcy and insolvency matters, in particular with reference to the term providing for payment to the trustees of the net proceeds of any sale of the ship. It will be recalled one term of the order then issued provided that Court:

ORDERS that, in the event that the said sale is completed as aforesaid, the net proceeds of such sale (after payment of all expenses of advertisement of the sale, appraisal fees, insurance and all other costs, disbursements, commissions and other expenses necessary for the sale) be paid promptly to the Trustees for distribution amongst the creditors of the Bankrupt in observance of all their rights and in conformity with Belgian law.

Counsel for the trustees urged that once the matter was before the bankruptcy court, it alone had jurisdiction over the assets of the bankrupt. Implicitly proceedings before this Court from that time on, i.e., essentially from June 11, 1996 were concerned with matters that had become bankruptcy matters. Thereafter this Court was without jurisdiction. This view was predicated upon the assignment by Parliament of jurisdiction in relation to bankruptcy to the superior courts of the provinces under the Bankruptcy and Insolvency Act, section 183 [as am. by R.S.C., 1985 (2nd Supp.), c. 27, s. 10; S.C. 1990, c. 17, s. 3; 1993, c. 28, s. 78], and upon subsection 17(6) [as am. by S.C. 1990, c. 8, s. 3] of the Federal Court Act, the latter of which provides:

17. …

(6) Where an Act of Parliament confers jurisdiction in respect of a matter on a court constituted or established by or under a law of a province, the Trial Division [of the Federal Court] has no jurisdiction to entertain any proceeding in respect of the same matter unless the Act expressly confers that jurisdiction on the Court.

In this case counsel urged that there was no jurisdiction in relation to bankruptcy proceedings expressly conferred on this Court by the Bankruptcy and Insolvency Act. I accept this Court has no jurisdiction in bankruptcy matters.

I am not persuaded subsection 17(6) of the Federal Court Act is relevant in this situation. It was amended by S.C. 1990, c. 8, section 3 as part of a revision of section 17 of the Act, replacing with concurrent original jurisdiction, what was until then exclusive original jurisdiction of this Court in claims against the Crown in right of Canada. With that amendment this Court shares concurrent jurisdiction with provincial courts. In that context subsection 17(6) implicitly relates to proceedings against the Crown, which this action is not.

Nevertheless, if subsection 17(6) has broader implications, as the trustees suggest, it would only preclude this Court, in the circumstances of this case, from proceeding in respect of bankruptcy matters. I do not consider the determinations of this Court in relation to the arrest of a ship, a judgment in default and the sale of the ship, or the determination of a claim by a secured creditor to the proceeds of the sale of the ship, to be proceedings in bankruptcy. With respect for the role of the bankruptcy courts under the Bankruptcy and Insolvency Act, this Court simply seeks to consider the remedies here sought by various applicants, which remedies have long been available under maritime law as it has been administered in the Federal Court, in accord with section 22 of the Federal Court Act. I do not agree that because concerns of the trustees were later brought to the attention of the bankruptcy court this Court lost jurisdiction to deal with all claims filed against the ship Brussel. I do acknowledge that in considering some of those claims the Bankruptcy and Insolvency Act and orders of courts made under that Act may have significance.

For the trustees it was urged that so far as this Court may have jurisdiction over the proceeds of the sale it should defer to the determination of the bankruptcy court. It was again said that the principle of judicial recognition of the judgment of another court as set out by Mr. Justice La Forest for the Supreme Court of Canada in Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, particularly at pages 1096 and 1098, with reference to relations between courts of different provinces, should be equally applicable in relations between superior courts exercising jurisdiction under different federal statutes. Thus, this Court, acting under the Federal Court Act, was urged to recognize and accept the determination of the Quebec Superior Court sitting in bankruptcy and insolvency matters.

The plaintiff argues there is no bankruptcy in Canada in this case and thus no basis for the bankruptcy court to be involved. The Superior Court of Quebec as a superior court might recognize a foreign judgment or order, in this case of the Commercial Court at Antwerp, but here there is no assignment in Canada to the official receiver which would give rise to a bankruptcy in this country. Absent that, it was urged that this Court was really being asked to exercise its discretion and defer to the application of Belgian law by a Belgian court, without reference to the rights of the plaintiff and other creditors, particularly secured creditors recognized by the process of this Court. It was urged that there was no onus on these creditors to show they would be less advantageously treated under Belgian law, as the trustees, relying on the reasons of Mr. Justice Guthrie, urged; rather, the onus should be on the trustees to show that the creditors would not be less well treated under Belgian law. There was some speculation that creditors with a maritime lien created under U.S. law, a lien recognized in this Court, might not have that lien similarly recognized under Belgian law. Let me put that matter aside for purposes of these reasons for there simply was no evidence of the comparative status of the plaintiff’s claim under Belgian and Canadian law.

The plaintiff does urge that it has a maritime lien created by U.S. law and recognized by the default judgment of this Court on May 14, on the basis of the Ioannis Daskalelis case (i.e. Todd Shipyards Corp. v. Altema Compania Maritima S.A., supra). In that case, Mr. Justice Ritchie for the Supreme Court of Canada, found that a claim originating in the United States which gives rise to a maritime lien against a ship, is enforceable in this country as a maritime lien, even in circumstances where a similar claim arising in Canada would not give rise to a maritime lien. Moreover, Ritchie J. indicated that, by virtue of the maritime lien, under the maritime law of Canada such a claim is enforceable in priority to a mortgagee’s claim. In this case the latter ranking of secured claims may ultimately be the real point of difference under Canadian maritime law and under Belgian bankruptcy law, but again I note there was no clear evidence of this.

In argument for both parties it was assumed that in this case claims of secured creditors including the mortgagee, would exhaust the funds available as proceeds from sale of the ship. That may be for there are a number of maritime lien claims and the claim filed by the intervenor as mortgagee is itself for approximately CAN$70,000,000. Whether that ultimately proves to be the case will depend upon recognition of the claims submitted, the status accorded to them and the amount of claims by secured creditors. In my opinion, those matters are for determination by this Court.

In the final analysis, the argument for the trustees is that all of the proceeds of the sale (net of sale costs) should be paid to them, consistent with the terms of the judgment of the Quebec Superior Court of June 28, essentially because the matter is one of bankruptcy or because the court, in judicial comity should defer to another superior court, and to the court in Antwerp. The argument for the plaintiff was that the issue is not one of bankruptcy and no ground for staying proceedings underway in this Court has been established.

In my opinion, the Bankruptcy and Insolvency Act does not establish a process that in any way bars a secured creditor from realizing on the security given by the debtor before its bankruptcy. Mr. Justice Gonthier in Husky Oil Operations Ltd. v. Minister of National Revenue, [1995] 3 S.C.R. 453, at page 472, after referring to the authority under the statute for courts to determine the priorities of distribution of the bankrupt’s assets in accord with a statutory scheme, said: “Lastly, the entire scheme of distribution is ‘[s]ubject to the rights of secured creditors’ (s. 136) which, as Professor Hogg has noted, ‘enables secured creditors to realize their security as if there were no bankruptcy’ (Hogg, [Constitutional Law of Canada (3rd ed. 1992), Vol. 1], at p. 25-9)”.

Recognition of that principle is clearly set out in the judgment of Mr. Justice Guthrie on June 28, wherein the status of the trustees and their “duty and power to take possession of, realise upon and confirm the assets of the Bankrupt situated anywhere in Canada” is specifically made “subject however to the rights, if any, of any creditors with claims secured under the laws of Canada, as by law provided”. For the trustees it was urged that a claim such as that of the plaintiff, made a secured claim by virtue of a maritime lien created under foreign law but which, if arising in Canada would not be so recognized, ought not to qualify as a “claim secured under the laws of Canada, as by law provided”. In my opinion a maritime lien created under applicable foreign law is a secured claim under the laws of Canada, in accord with the decision of the Supreme Court in the Ioannis Daskalelis case, supra. I note the exclusion of secured creditors from the general scope of the Bankruptcy and Insolvency Act in Canada was implicitly recognized in the judgment of May 9, 1996 when the Superior Court, not specified to be sitting in bankruptcy, first accorded recognition to the trustees. That exclusion is specifically repeated in the introductory words of section 136 of the Act, which provides for the distribution of the proceeds realized from the property of a bankrupt in priority, as established by that section, in relation to claims of preferred and unsecured creditors. The rights of secured creditors in circumstances here applicable are not affected by the Act.

A “secured creditor” is defined under the Bankruptcy and Insolvency Act , section 2, in the following terms:

2. …

“secured creditor” means a person holding a mortgage, hypothec, pledge, charge, lien or privilege on or against the property of the debtor or any part thereof as security for a debt due or accruing due to him from the debtor, or a person whose claim is based on, or secured by, a negotiable instrument held as collateral security and on which the debtor is only indirectly or secondarily liable.

Whether a particular claim is a secured claim in the context of claims in this case is determined, in my view, by Canadian maritime law. If the claim is not secured and is within section 136 of the Act it would be subject to any distribution from assets by the trustees in accord with the priorities under that section, at least in the case of a bankruptcy in Canada. There can be no doubt, in my view, that a maritime lien, long recognized in maritime law as a secured claim attaching in rem to a ship, is a secured claim. In my opinion, a maritime lien, attaching before bankruptcy of a ship’s owner, may be enforced and the claim based upon it may be realized from proceeds of sale of a ship without restriction under the Bankruptcy and Insolvency Act, or, with respect to other views, by the courts acting under that Act.

Thus, in my opinion, the plaintiff is entitled, as are other secured creditors claiming against the ship Brussel, to payment from the proceeds of sale now held by the Court, in priority to any payment to the trustees. Creditors with unsecured claims, in my preliminary view, must look to the trustees in another court for satisfaction, but I acknowledge that issue has not been argued before me.

That process would be entirely consistent with that approved by Mr. Justice Mahoney in Ultramar Can. Inc. v. Pierson SS Ltd. (1982), 43 C.B.R. (N.S.) 9 (F.C.T.D.). In that case Mahoney J. dealt with an application by the trustee in bankruptcy to cancel statements of claim and warrants for arrest and to order release of ships, owned by the bankrupt defendant, which ships were under arrest. The Court declined to cancel the statements of claim and Mahoney J. noted that a trustee in bankruptcy is not entitled to release of a ship from arrest on a basis that does not protect those asserting apparently valid marine liens. He did stay the actions and he ordered the release of the ships conditional upon the trustee in bankruptcy providing a bail bond or satisfactory security in an amount calculated to cover all secured claims, and costs, and he further provided opportunity for claimants to be heard in relation to any claim for a maritime lien.

Conclusion and directions

In this case, I propose to consider argument of any claimant that claims a maritime lien which should be recognized by this Court and the priorities, if any, to be applied to maritime liens and other secured creditors’ standing.

The order for sale of the ship dated May 17 directed that all claimants against the vessel file notice of their claims on or before July 2, 1996 or face the barring of their claims. Numerous claims were so notified. In all there were 26 claimants in addition to the plaintiff that had initially filed statements of claim initiating separate actions and in addition more than 20 other claimants, including the intervenor, filed notice of their claims within the time fixed by order. A number of those various claimants claimed maritime liens.

If there are unsecured creditors that desire to be heard in relation to my preliminary indication that their claims, filed in this Court, should be subject to resolution in the bankruptcy courts, I am prepared to hear and to consider argument on the issue. Submissions on the rights of unsecured creditors, made in writing in advance of, or by personal appearance at, the motions day on May 13, 1997 in Halifax, as referred to below, are invited.

The trustees as defendants, and the intervenor, in these proceedings may, of course, be heard in relation to any claim by a creditor to a maritime lien, and in response to any claim by an unsecured creditor that its claim should be considered by this Court. I note that the motion of the trustees, filed June 12, 1996, in accord with the default judgment of May 14, 1996, to appoint a referee to review the quantum of the plaintiff’s claim, has not yet been brought before the Court, and the trustees may still wish to pursue that matter, and they or the intervenor may wish to review or contest the quantum or the validity of any other claim.

Perhaps for the record I should note that if the trustees were prepared to provide security sufficient to meet the claims of secured creditors the Court would consider ordering payment of the proceeds of sale to a bankruptcy court in Canada for the account of the trustees. Just as it was open to the trustees to post security for release of the Brussel at an earlier stage, so it is still open to them to post security to meet the claims of secured creditors under maritime law. If no such security is paid, this Court will order payment of claims of secured creditors direct from the proceeds of sale before any payment to or on account of the trustees.

An order goes directing that payment to the trustees or to their account shall be subject to the rights of secured creditors, including claimants with maritime liens as recognized under maritime law applied in Canada, and of the mortgagee, to be paid by the Court from proceeds of sale of the ship Brussel.

The order further directs that interested counsel be prepared to advise the Court by submissions in writing, or by personal appearance at the Court’s motions day in Halifax on May 13, 1997 of a process for resolving all issues outstanding before payment is made from proceeds of sale of the ship to any secured creditor, or to any other claimant or the trustees. If counsel not in Halifax on that day wish to participate in the hearing by telephone conference connection, the Court would seek to arrange for this.

The Court’s order directs that any submissions on costs of the motion heard September 19, 1996 be submitted in writing or addressed at the hearing on May 13, 1997.