On December 20, 2001, the Supreme Court of Canada rendered two judgments that should influence the future approach of Canadian courts with international insolvencies. These decisions were rendered in the context of the bankruptcy of Antwerp Bulkcarrier N.V., a Belgian shipping company that once operated a worldwide liner service under the name of ABC Container Line.
The dispute presented to the Court originated from conflicting decisions from the Superior Court of Quebec, sitting in bankruptcy matters and the Federal Court of Canada over a demand for judicial aid from a Belgian shipping company that once operated a worldwide liner service under the name of ABC Container Line.
The dispute presented to the Court originated from conflicting decisions from the Superior Court of Quebec, sitting in bankruptcy matters and the Federal Court of Canada over a demand for judicial aid from a Belgian bankruptcy tribunal. At stake were the proceeds of the sale of a ship owned by the debtor that had been arrested in Canada by Holt Cargo Systems, Inc., an American company. The trustees of ABC Container Line were seeking the proceeds for distribution in accordance with Belgian law of bankruptcy. It was conceded that the American creditor would be treated as an ordinary creditor if he were to present his claim in Belgium, whilst he would be deemed a secured creditor if the proceeds were distributed by the Federal Court of Canada, in accordance with the applicable rules of admiralty.
Invoking international comity and the need for coordination in multi-jurisdictions insolvency, the Superior Court of Quebec court had agreed to come in aid to the Belgian tribunal and ordered the Federal Court of Canada to remit the proceeds of the sale of the ship to the trustees. At first instance, the Federal Court of Canada, exercising its admiralty jurisdiction determined that it had been properly ceased with the claim of the American creditor and refused to release the proceeds to the trustees.
The Supreme Court, sitting in full bench, heard the matter on March 20, 2001. By unanimous decision laid down on December 20, 2001, the Supreme Court accepted the arguments of the American creditor and rejected the position advanced by the trustees. With respect to the order from the bankruptcy court, the Supreme Court first held that the assertion of jurisdiction by the bankruptcy court did not oust the admiralty jurisdiction of the Federal Court. It also held that the bankruptcy court has no power to deal with an asset already captured by the competent order of another superior court. Finally, it found that the order of the bankruptcy court amounted to an anti-suit injunction improperly restricting the Federal Court’s ability to exercise its jurisdiction. The Court underlined that in a federal system as in Canada, consideration underlying rules of comity apply with even greater force between the units of a federal state than they do internationally.
In conclusion, the Supreme Court held that since the property was already being dealt with by the Federal Court, the trustees should have gone directly to the latter court to request a stay of the proceeding. The bankruptcy court was of no assistance.
Turning to the judgment rendered by the Federal Court, the Supreme Court held that the Federal Court did not lose jurisdiction to proceed as a result of the bankruptcy of the debtor or the various orders of the Quebec Superior Court sitting in bankruptcy. The Court went on to state that Canadian courts’ function, when presented with a demand for judicial assistance, was not simply to rubber stamp commands issuing from the foreign court of the primary bankruptcy. They had the responsibility to consider the interests of the litigants before them and other affected parties in our country as well as the desirability of international cooperation and other relevant circumstances.
Whilst international cooperation was certainly a significant factor to consider, it was not necessarily one that rumps all other factors. Other relevant considerations were the juridical advantage which those disadvantaged by deferral to the foreign court would enjoy in a Canadian court and the public policy expressed in our own bankruptcy laws. At the end, the Court found that the no error had been committed by the Federal Court.
Holt Cargo Systems, inc. was represented by Ogilvy Renault on matters of bankruptcy (Richard L. Desgagné assisted by Veronique Marquis, from their Montreal office), on matters of maritime law. Goldstein Flanz & Fishman of Montreal (Mark E. Meland), in matters of bankruptcy and by Brisset Bishop, also of Montreal (David Colford), on matters of maritime law, acted for the Belgian trustees.
The dispute presented to the Court originated from conflicting decisions from the Superior Court of Quebec, sitting in bankruptcy matters and the Federal Court of Canada over a demand for judicial aid from a Belgian shipping company that once operated a worldwide liner service under the name of ABC Container Line.
The dispute presented to the Court originated from conflicting decisions from the Superior Court of Quebec, sitting in bankruptcy matters and the Federal Court of Canada over a demand for judicial aid from a Belgian bankruptcy tribunal. At stake were the proceeds of the sale of a ship owned by the debtor that had been arrested in Canada by Holt Cargo Systems, Inc., an American company. The trustees of ABC Container Line were seeking the proceeds for distribution in accordance with Belgian law of bankruptcy. It was conceded that the American creditor would be treated as an ordinary creditor if he were to present his claim in Belgium, whilst he would be deemed a secured creditor if the proceeds were distributed by the Federal Court of Canada, in accordance with the applicable rules of admiralty.
Invoking international comity and the need for coordination in multi-jurisdictions insolvency, the Superior Court of Quebec court had agreed to come in aid to the Belgian tribunal and ordered the Federal Court of Canada to remit the proceeds of the sale of the ship to the trustees. At first instance, the Federal Court of Canada, exercising its admiralty jurisdiction determined that it had been properly ceased with the claim of the American creditor and refused to release the proceeds to the trustees.
The Supreme Court, sitting in full bench, heard the matter on March 20, 2001. By unanimous decision laid down on December 20, 2001, the Supreme Court accepted the arguments of the American creditor and rejected the position advanced by the trustees. With respect to the order from the bankruptcy court, the Supreme Court first held that the assertion of jurisdiction by the bankruptcy court did not oust the admiralty jurisdiction of the Federal Court. It also held that the bankruptcy court has no power to deal with an asset already captured by the competent order of another superior court. Finally, it found that the order of the bankruptcy court amounted to an anti-suit injunction improperly restricting the Federal Court’s ability to exercise its jurisdiction. The Court underlined that in a federal system as in Canada, consideration underlying rules of comity apply with even greater force between the units of a federal state than they do internationally.
In conclusion, the Supreme Court held that since the property was already being dealt with by the Federal Court, the trustees should have gone directly to the latter court to request a stay of the proceeding. The bankruptcy court was of no assistance.
Turning to the judgment rendered by the Federal Court, the Supreme Court held that the Federal Court did not lose jurisdiction to proceed as a result of the bankruptcy of the debtor or the various orders of the Quebec Superior Court sitting in bankruptcy. The Court went on to state that Canadian courts’ function, when presented with a demand for judicial assistance, was not simply to rubber stamp commands issuing from the foreign court of the primary bankruptcy. They had the responsibility to consider the interests of the litigants before them and other affected parties in our country as well as the desirability of international cooperation and other relevant circumstances.
Whilst international cooperation was certainly a significant factor to consider, it was not necessarily one that rumps all other factors. Other relevant considerations were the juridical advantage which those disadvantaged by deferral to the foreign court would enjoy in a Canadian court and the public policy expressed in our own bankruptcy laws. At the end, the Court found that the no error had been committed by the Federal Court.
Holt Cargo Systems, inc. was represented by Ogilvy Renault on matters of bankruptcy (Richard L. Desgagné assisted by Veronique Marquis, from their Montreal office), on matters of maritime law. Goldstein Flanz & Fishman of Montreal (Mark E. Meland), in matters of bankruptcy and by Brisset Bishop, also of Montreal (David Colford), on matters of maritime law, acted for the Belgian trustees.
