RMI Marine Limited v. Scotia Tide (Ship)

RMI Marine Limited v. Scotia Tide (Ship)
Court (s) Database
Federal Court Decisions
Date
2019-01-28
Neutral citation
2019 FC 114
File numbers
T-1460-18
Notes
A correction was made on May 30, 2019.
Decision Content
Date: 20190128
Docket: T-1460-18
Citation: 2019 FC 114
Ottawa, Ontario, January 28, 2019
PRESENT: The Honourable Mr. Justice Southcott
BETWEEN:
RMI MARINE LIMITED
Plaintiff
and
THE SHIP “SCOTIA TIDE” AND THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP “SCOTIA TIDE”AND OPENHYDRO TECHNOLOGY CANADA LIMITED
Defendant
ORDER AND REASONS
I. Overview
[1] This decision addresses two motions, argued together on January 15, 2019, in this action by the Plaintiff, RMI Marine Limited [RMI], against the Defendants, the vessel “Scotia Tide” [the Vessel] and its owner, OpenHydro Technology Canada Ltd. [OHTC]. The first motion is brought by RMI seeking default judgment against the Defendants, an order for sale of the Vessel through Federal Court process, and ancillary relief. The second motion is brought by OHTC, seeking a stay of RMI’s action in rem against the Vessel and the release of the Vessel from arrest; in the alternative seeking to strike RMI’s pleading and to release the Vessel from arrest; or, in the further alternative, seeking an extension of time to file a Defence.
[2] OHTC’s motion arises in the context of proceedings under the Companies’ Creditors Arrangement Act, RSC 1985, c C-36 [CCAA] in the Supreme Court of Nova Scotia [NSSC] arising out of the insolvency of OHTC, in which the NSSC has issued a stay of other proceedings against OHTC.
[3] For the reasons explained below, my decision is to dismiss RMI’s motion and to allow OHTC’s motion on particular terms that I consider appropriate to the circumstances of this case. I will grant a stay of RMI’s action, effective until the earlier of 90 days from the date of my Order or such time as the stay by the NSSC may in the meantime be lifted, with leave to RMI to apply to have the Federal Court stay lifted at an earlier time in the event of any material change in circumstances. I will also order the release the Vessel from arrest. In recognition of the caveats that have been filed against the release of the Vessel, such release will be delayed until ten days following the date of my Order.
II. Background
[4] The Plaintiff, RMI, is a corporation incorporated in Nova Scotia which operates as a marine contractor and provider of marine services and vessels.
[5] The in personam Defendant, OHTC, is a corporation, also incorporated in Nova Scotia, the parent company of which is OpenHydro Technology Ltd. of Ireland [OHT] and which is described as having a grandparent company named Naval Energies of France. OHTC was incorporated for the purpose of delivering services to Cape Sharpe Tidal Ventures Ltd. [CSTV], a joint venture between OHT and Emera Inc., for the completion of a tidal energy demonstration project to be operated from the Fundy Ocean Research Centre for Energy [FORCE] site in the Minas Basin of the Bay of Fundy [the Project].
[6] CSTV developed the Project under a Marine Renewable-Electricity License issued by the Province of Nova Scotia pursuant to the Marine Renewable-energy Act, SNS 2015, c 32. OHTC initially signed a sublease with FORCE for the use of a berth at the FORCE site referred to as Berth D, and, on December 22, 2014, the sublease was assigned to CSTV. CSTV thereby assumed the rights and obligations of OHTC under the sublease.
[7] OHTC is the owner of the Vessel, which is registered under the Canada Shipping Act, 2001, SC 2001, c 26 with port of registry Halifax, Nova Scotia. The Vessel is a rigid-hull catamaran which was purpose-built for the assembly, deployment, testing, maintenance, and retrieval of the underwater tidal turbine owned and used by OHTC in connection with the Project [the Turbine].
[8] The operation of the Vessel in connection with the Project required assistance from support vessels and dive teams. On or about August 18, 2015, OHTC and RMI entered into a charter agreement based on the Supplytime 2005 form [the Charterparty] for the charter of RMI’s vessel “Tidal Runner” and for ancillary services. The Charterparty provided that OHTC could issue supplemental purchase orders to “call up” the vessel and for ancillary services at previously agreed rates, which it did from time to time. RMI now claims $444,719.54 owing by the Defendants in respect of charter hire of RMI’s vessels, repair and maintenance of the Vessel, and necessaries supplied by RMI to the Defendants.
[9] The Turbine was installed on the floor of the Minas Basin on July 22, 2018. However, on July 26, 2018, Naval Energies announced it would no longer fund tidal energy technology. As a result, the High Court of Ireland appointed Grant Thornton as the provisional liquidator of OHTC’s parent company, OHT. That company is presently insolvent and in liquidation in Ireland.
[10] As a consequence, OHTC also became insolvent, and a number of its suppliers commenced actions in the Federal Court against the Vessel, the Turbine, or the Turbine’s control centre. RMI commenced the within action on August 1, 2018, and caused the Vessel to be served and arrested at its berth in Saint John, New Brunswick, on August 2, 2018. Counsel for OHTC accepted service on behalf of OHTC on August 7, 2018. Several of the Vessel’s other suppliers have filed caveats against its release in RMI’s action, but RMI is the only claimant which has arrested the Vessel.
[11] Following service of its Statement of Claim upon the Defendants, RMI’s counsel afforded OHTC an extension of time to September 14, 2018 to file a Statement of Defence. No Defence was filed, as a consequence of which RMI brought the present motion seeking default judgment and an order for sale of the Vessel. As an alternative, if the Court is not prepared to grant default judgment, RMI seeks an order for sale of the ship pendente lite, to avoid deterioration in its value while this litigation proceeds.
[12] In September 2018, it was determined by former employees of OHTC that the Turbine was damaged beyond repair. It presently remains on the floor of the Minas Basin at Berth D.
[13] On September 24, 2018, OHTC filed a Notice of Intention [NOI] to make a proposal to creditors under s 50.4(1) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 [BIA]. Subsequently, on October 23, 2018, OHTC filed a motion to convert the bankruptcy proceeding into a proceeding under s 11.6 of the CCAA in order to undertake a court-supervised orderly wind-down of the business. OHTC describes the main components of its plan for an orderly wind-down as follows:
Maintain compliance of the Turbine with environmental regulations until it can be removed;
Maintain and ensure the safety of the Vessel while a sales process is undertaken;
Plan for the retrieval of the Turbine from the Minas Basin; and
Realize upon or recover any other company assets for the benefit of stakeholders and creditors.
[14] OHTC’s plan involves the use of the Vessel for the retrieval of the Turbine from the floor of the Minas Basin, which it believes will not be possible before May 2019 because of winter weather conditions. OHTC explains that it has provided the Province of Nova Scotia with a bond in the amount of $1,020,000.00 as security for compliance by CSTV with its environmental obligations, including removal of the Turbine. Once the Turbine is removed, OHTC can recover the bond, and OHTC then plans to sell its assets, including the Vessel, for the benefit of its creditors. It contemplates employing a sale process under the supervision of the monitor appointed under the CCAA and subject to the approval of the NSSC.
[15] On November 13, 2018, the Honourable Justice Michael Wood of the NSSC issued an Initial Order, granting the Defendant’s motion to convert the bankruptcy proceeding into a proceeding under the CCAA [the Initial Order]. The Initial Order appointed Grant Thornton as the CCAA monitor [the Monitor] to manage the financial affairs of OHTC and prepare and supervise a process for the sale of OHTC’s assets, subject to approval of the NSSC, and approved debtor-in-possession [DIP] financing by a company described as OpenHydro Group Limited [the DIP Lender] in the amount of $500,000.00 to support OHTC’s operations during the wind-down. The Initial Order also stayed all proceedings against OHTC or its property, until December 7, 2018, but, in the following paragraph, exempted from the stay the in rem Federal Court proceedings:
11A. In recognition that in rem proceedings are before the Federal Court in respect of the vessel, Scotia Tide, the OTC03 Turbine Control Centre, and the Cape Sharp Tidal Turbine as described in Federal Court Proceeding T-1578-18, this order shall not apply to those proceedings (including caveators) unless and to the extent the Federal Court may determine in the exercise of its own unfettered jurisdiction and discretion. This Court specifically requests the aid and recognition of the Federal Court in carrying out the terms of this order as required.
[16] Justice Wood also issued a Charging Order dated November 13, 2018, inter alia granting the DIP Lender a charge on OHTC’s assets in support of the DIP financing [the Charging Order].
[17] On December 6, 2018, OHTC appeared before the Honourable Justice C. Richard Coughlan of the NSSC to seek an order extending the stay of proceedings until the spring of 2019 and to increase the approved DIP financing from $500,000.00 to $750,000.00 to support its operations during the extended stay period. The Initial Order was continued by Justice Coughlan, such that it is now effective until March 6, 2019, and the increase in the DIP financing was approved. OHTC says that it has proceeded to arrange for securing, winterizing and maintaining the Vessel, in order to maintain its value, with a portion of the DIP financing to be used for this purpose.
[18] OHTC’s principal position in response to RMI’s motion for default judgment and sale of the Vessel is that the Court should exercise its discretion under s 50(1)(a) of the Federal Courts Act, RSC 1985, c F-7 to stay RMI’s in rem action against the Vessel and release it from arrest, in response to the request for assistance by the NSSC, as the use of the Vessel to retrieve the Turbine is essential to the viability of OHTC’s CCAA plan and it is in the interests of all creditors and other OHTC stakeholders to achieve an orderly wind-down and distribution of OHTC’s assets in accordance with that plan.
[19] In the alternative, OHTC takes the position that RMI’s Statement of Claim should be struck, and the Vessel released from arrest, on the basis that the Federal Court is without jurisdiction. It bases this position on a choice of jurisdiction clause in the Charterparty, which OHTC argues affords exclusive jurisdiction to the NSSC.
[20] Finally, in the event that it is unsuccessful in staying or striking RMI’s action, OHTC seeks an extension of time to file a Defence.
[21] While several claimants have filed caveats against the release of the Vessel in this action, only one caveator, DP World Saint John Inc. [DP World] filed written submissions and appeared at the hearing of these motions. DP World is the operator of the terminal in Saint John, New Brunswick at which the Vessel is presently berthed and at which it has been berthed since its arrest. DP World is claiming amounts owing to it for berthage and other services provided to the Vessel. DP World is also the plaintiff in Federal Court proceeding T-1480-18, in which it asserts its claims against OHTC and the Vessel in rem.
[22] DP World supports RMI’s motion for default judgment and sale of the vessel, although it proposes some modifications to the form of Order suggested by RMI, which modifications RMI has endorsed. DP World opposes the motions brought by OHTC.
III. Issues
[23] RMI submits that the issues to be determined on its motion for default judgment and sale of the Vessel are as follows:
Are the Defendants in default?
Should the Court grant default judgment against the Defendants and in what amount?
Should the Court grant an order for the sale of the Vessel?
Should RMI have its costs of this motion and, if so, on what basis?
[24] OHTC submits that the issues to be determined on its motion are as follows:
Should RMI’s action be stayed and the Vessel released?
In the alternative, should RMI’s claim be struck and the Vessel released?
In the alternative, should the Defendants be granted an extension of time to file a Defence?
[25] RMI’s written representations filed in response to OHTC’s motion raise an additional preliminary issue, whether certain affidavits included in OHTC’s Motion Record are admissible.
IV. Analysis
A. Preliminary Issue
[26] OHTC’s motion relies principally upon the affidavit of Peter Wedlake, a Senior Vice President at Grant Thornton Limited, the Monitor. However, Mr. Wedlake’s affidavit attaches two other affidavits, the first sworn on October 23, 2018 by Laurent Schneider-Manoury, the sole director of OHTC [the Schneider-Manoury Affidavit], and the second sworn on November 28, 2018 by Michael MacAteer, a partner at Grant Thornton in Dublin, Ireland [the MacAteer Affidavit]. The Schneider-Manoury Affidavit was filed in the CCAA proceeding in the NSSC in support of the motion which resulted in the Initial Order and Charging Order. The MacAteer Affidavit was filed in that proceeding in support of the request for extension of the stay to March 6, 2019 and the increased DIP financing.
[27] However, both RMI and DP World take issue with the fact that neither the Schneider-Manoury Affidavit nor the MacAteer Affidavit has been independently filed as an affidavit in the present proceeding, as well as the fact that Mr. Wedlake does not in his own affidavit depose to his belief in the contents of the two affidavits he has attached.
[28] At the hearing of these motions, counsel for RMI and DP World advanced somewhat different positions in relation to that these affidavits. RMI took the position that they were inadmissible, while DP World took the position that they could be admitted but should be afforded little or no weight. However, OHTC’s counsel advised that OHTC was not intending to rely upon the Schneider-Manoury Affidavit or the MacAteer Affidavit for the truth of their contents. Rather, they were being introduced into evidence in order to demonstrate to the Federal Court the record that was before the NSSC when it made its decisions in the CCAA proceeding. OHTC referred the Court to AB Hassle v Apotex Inc., 2002 FCT 222 at para 29, in which the Federal Court, Trial Division declined to strike from evidence materials in an affidavit tendered not for the proof of the truth of their contents but rather to demonstrate the context in which a proceeding had developed. The Court noted that it was for the hearing judge to determine what weight to be given to this evidence.
[29] I understood counsel for RMI and DP World to acknowledge at the hearing that the Schneider-Manoury Affidavit and the MacAteer Affidavit were admissible for the purpose explained by the OHTC’s counsel, although also raising concern that components of OHTC’s written representations did rely upon the contents of those affidavits for their truth and maintaining the position that the Court should afford little or no weight to the evidence in those affidavits to the extent they were being relied upon in that manner. I advised the parties at the hearing that I would consider this concern in analysing the evidence to arrive at my decision in this matter. I identify in my Analysis below circumstances where I consider this concern to arise.
B. Jurisprudential Framework
[30] OHTC’s response to RMI’s motion relies entirely upon OHTC’s own motion, seeking to stay or strike RMI’s action or to obtain an extension of time to file a Defence. As such, the outcome of both motions before the Court turns significantly on whether OHTC succeeds in obtaining any of the relief it has requested.
[31] Turning therefore to OHTC’s principal position, that RMI’s action should be stayed and the Vessel released, I note first that all parties rely heavily on the decision of the Supreme Court of Canada in Holt Cargo Systems Inc. v ABC Containerline N.V. (Trustees of), 2001 SCC 90 [Holt] and the companion decision in Antwerp Bulkcarriers, N.V. (Re), 2001 SCC 91 [Antwerp]. These decisions arose in the context of the bankruptcy of a Belgian container line, which resulted in the arrest of one of its vessels, the “Brussel”, at the Port of Halifax through an in rem action in the Federal Court.
[32] Following the arrest, the shipowner was declared bankrupt by the Belgian bankruptcy court, and the trustees in bankruptcy obtained from the Québec Superior Court an order recognizing the judgment of the Belgian court and subsequently an order that the proceeds of sale of the vessel or the vessel itself be provided to the trustees for distribution through the Belgian bankruptcy [the Québec Superior Court Order]. This order was contrary to the ongoing procedural framework developed in the Federal Court for sale of the vessel and distribution of its proceeds. Relying in part on the Québec Superior Court Order, the trustees applied to the Federal Court for a stay of its proceedings and to have the proceeds of sale paid out to them. The Honourable Justice MacKay of the Federal Court ruled against the trustees [the Federal Court Order].
[33] Both the Québec Superior Court Order and the Federal Court Order were appealed, and the resulting appellate decisions were in turn considered by the Supreme Court of Canada. In Antwerp, which considered the appeal from the Québec Superior Court Order, the Supreme Court concluded (at paragraphs 37 and 40) that the Federal Court’s maritime jurisdiction, once properly engaged by the commencement of the in rem action and the arrest of the ship, was not lost as a result of the subsequent bankruptcy of the shipowner. The Supreme Court also explained (at paragraphs 37 and 45 to 47) that the bankruptcy court had no power to deal with the vessel, which had already been captured by a competent order of the Federal Court, and further concluded (at paragraphs 48 to 53) that the bankruptcy court’s issuance of what amounted to an anti-suit injunction improperly attempted to restrict the Federal Court’s ability to exercise its jurisdiction. The Supreme Court noted in conclusion (at paragraphs 54 to 55) that it was open to the Federal Court judge to enter a stay if he considered it appropriate to do so, or to decline to accede to the request of the trustees as he did, and that the circumstances would have been the same had the bankruptcy occurred in Canada rather than in Belgium.
[34] In Holt, which considered the appeal from the Federal Court Order, the Supreme Court held (at paragraphs 41 to 44) that, pursuant to applicable Canadian conflict of laws principles, the plaintiff, which had arrested the vessel in the Federal Court, was entitled to have its maritime lien status, conferred under the law of the United States where the plaintiff provided stevedoring services to the vessel, recognized in the Federal Court proceeding. It further concluded (at paragraphs 46 to 50) that, by virtue of its maritime lien, the plaintiff enjoyed a juridical advantage in Canada that would be in jeopardy if the Federal Court proceedings were stayed in deference to the Belgian bankruptcy court. This was because Belgian law would not recognize the plaintiff’s maritime lien status under US law. At paragraphs 51 to 53, the Supreme Court concluded that the plaintiff’s maritime lien conferred upon it status as a secured creditor for purposes of the bankruptcy and that Justice MacKay was justified in putting considerable weight on this factor in making his discretionary decision under s 50 of the Federal Courts Act whether to stay the Federal Court proceeding at the request of the trustees.
[35] Consistent with the decision in Antwerp, the Supreme Court noted in Holt (at paragraphs 60 to 66) that the Federal Court did not lose jurisdiction as a result of orders issued by the Québec Superior Court sitting in bankruptcy. The Supreme Court then considered whether the Federal Court should nevertheless have deferred to the Belgian bankruptcy court on the basis of international comity, concluding (at paragraphs 85 to 87) that international coordination was an important, but not necessarily a controlling, factor. The Federal Court was required to be mindful of the difficulties presented by international bankruptcies, including the desirability of minimizing the multiplicity of proceedings and potentially inconsistent decisions, as well as the need to do justice to the particular litigants before it. No single consideration was to be elevated to a controlling position in the exercise of the Federal Court Court’s discretion whether to stay its own proceedings.
[36] Finally, in considering (at paragraphs 80 to 98) whether the Federal Court erred in the exercise of its discretion to deny the trustees’ motion for a stay of proceedings, the Supreme Court noted that the principles on which the discretion should be exercised in this type of matter were authoritatively settled in Amchem Products Inc. v British Columbia (Workers’ Compensation Board), [1993] 1 SCR 897. That case explained that the relevant question was whether there was a more appropriate jurisdiction based on the relevant factors and that the existence of a more appropriate forum must be clearly established to displace the forum selected by the plaintiff. After noting the public policy considerations applicable in the context of an international bankruptcy, the Supreme Court described (at paragraph 91 of Holt) the factors to be considered in making a discretionary decision as follows:
The “natural forum” is the one to which the action has the most real and substantial connection (Amchem, at pp. 916 and 935). Relevant circumstances include not only issues of public policy (as in this case) but also the potential loss to the plaintiff of a juridical advantage sufficient to work an injustice if the proceedings were stayed, the place or places where the parties carry on their business, the convenience and expense of litigating in one forum or the other, and the discouragement of forum shopping. In short, within the overall framework of public policy, any injustice to the plaintiff in having its action stayed must be weighed against any injustice to the defendant if the action is allowed to proceed. What is required is that these factors be carefully weighed in the balance.
[37] The Supreme Court concluded that the Federal Court had considered the relevant factors in arriving at its decision. Justice MacKay had acknowledged the importance of comity and international coordination in a proper case but placed primary emphasis on the fact that he was dealing with an in rem action by secured creditors against the vessel which, at the time of the bankruptcy, the Federal Court had already arrested and, at the time of the interventions of the Canadian bankruptcy court, he had already ordered appraised and sold. The Supreme Court rejected the trustees’ argument that the plaintiff was forum shopping by arresting the vessel in Canada and acknowledged that Justice MacKay had appropriately given weight to the juridical advantage afforded to the plaintiff in Canada through recognition of the secured status of its maritime lien.
[38] As will be explained in the course of these Reasons, there are factors that distinguish the “Brussel” litigation from the circumstances in the case at hand. However, as I understand the parties to agree, Holt and Antwerp provide in significant measure the framework that governs the exercise of my discretion in considering OHTC’s motion for a stay under s 50 of the Federal Courts Act.
[39] One obvious factual difference is that the bankruptcy in the present case, at least insofar as it relates to OHTC, arises in a domestic context, not an international one. However, as in the “Brussel” litigation, this Court must consider the effect of an order of a provincial superior court issued in the context of an insolvency, which is an important but not necessarily a controlling factor. In that respect, I am also conscious of the decision issued by the Federal Court, in the context of a CCAA proceeding in a provincial superior court, in Always Travel Inc. v Air Canada, 2003 FCT 707 [Always Travel]. That case involved a proposed class action in the Federal Court against a number of airlines, including Air Canada, which, at the time, was the subject of an order from the Ontario Superior Court of Justice under the CCAA, protecting it against legal proceedings in the context of an intended restructuring. On that basis, Air Canada moved to have the Federal Court stay its proceedings.
[40] In Always Travel, the order of the Ontario Superior Court of Justice stayed all proceedings against Air Canada and expressly requested the aid and recognition of any Canadian court, including the Federal Court, in carrying out the terms of the order. Justice Hugessen of the Federal Court granted a stay of proceedings for three months, or until such earlier time as the stay by the Ontario Superior Court of Justice was lifted. In addressing the role of the Federal Court in considering a CCAA order from a provincial superior court, Justice Hugessen relied in part on the decisions in Holt and Antwerp in providing, at paragraphs 10 to 12, the following explanation:
[10] Superior courts do not order each other about or make orders interfering with each other's process. Rather, it is essential that they should cooperate. Conflicts between courts, or other bodies having ultimate judicial power, may well have serious results, including perhaps even loss of liberty. In Canada, superior courts do not compete with one another. They accord to one another "full faith and credit," as was said in Morguard Investments Ltd. v. De Savoye, and repeated in the Brussel decisions. Justice Farley's order specifically requests that this Court, in comity, and more than that, in recognition of the fact that both courts are engaged in a single legal system in the administration of Canadian justice, should lend its aid to the order of the Ontario Superior Court of Justice staying proceedings.
[11] It has been said to me this morning that I should not grant a stay order based on Justice Farley's orders first because I have no evidence before me and second because there has been no attempt to justify a stay in the terms of the classic three part test originally enunciated by the Supreme Court in Manitoba (Attorney General) v. Metropolitan Stores (MTS) Ltd., and subsequently in RJR MacDonald Inc. v. Canada (Attorney General). To that I say that this is not an ordinary stay and that a stay granted in comity does not need to meet the requirements of that test and does not need evidence; it is my view that the proper attitude of respectful cooperation which this Court should have and does have to judgments of the Ontario Superior Court of Justice will require that, as a matter of course, in virtually every case where an order is given by a provincial superior court in the exercise of its CCAA jurisdiction, and that order requests this Court’s aid, this Court will give such aid on proper application being made.
[12] That is not the end of the matter. If a party to proceedings in this Court thinks that a stay should not be granted in comity and in aid of a provincial superior court order, it is at liberty to oppose the stay or, if the stay is granted, apply to this Court to have it lifted. The plaintiffs would thus have been free to bring evidence today and make representations to me that for some reasons or other these proceedings ought not to be stayed, but matters did not develop in that way. Let me be quite clear. The burden is on a person seeking in this Court to avoid the consequences of this Court acting in aid of a provincial superior court exercising its jurisdiction under the CCAA. The burden is on that person to show this Court that it should not act in aid. Nothing that I say or do today forecloses the plaintiffs from making an application if they so wish. I say that simply because in the way in which these proceedings developed, it was agreed between counsel and the Court that we should deal with this matter today strictly on issues of law, matters of fact being left to another day, if necessary.
[Emphasis added]
[41] RMI seeks to distinguish Always Travel from the present case on the basis that the order of the Ontario Superior Court in Always Travel did not carve out any proceedings from the stay, in contrast with Justice Wood’s Initial Order which expressly carved out the Federal Court in rem proceedings.
[42] Before considering this argument, I observe that I find the proper attitude of respectful cooperation between courts described by Justice Hugessen to be consistent with the guidance of the Supreme Court of Canada in the “Brussel” litigation as to the importance of comity and cooperation, albeit applied by Justice Hugessen in a domestic rather than an international context. Noting Justice Hugessen’s reliance on the “Brussel” decisions, I am also conscious that Always Travel should not be interpreted as detracting from the discretion to be exercised by the Federal Court in considering a motion to stay its proceedings or from the requirement to consider the other guidance and factors identified in Holt.
C. Interpretation of the NSSC Initial Order
[43] Having identified above the governing jurisprudential principles, I turn next to the particular terms of the Initial Order issued by Justice Wood. RMI argues, both in attempting to distinguish Always Travel and more generally, that the carve-out of the Federal Court proceedings contained in the Initial Order supports its position that the stay requested by OHTC should be denied. It is apparent from the respective written and oral submissions of the parties to the motion that RMI and DP World adopt an interpretation of the terms of the Initial Order that differs significantly from the interpretation advanced by OHTC. RMI and DP World argue that the intended effect of the Initial Order, evidenced by paragraph 11A (reproduced earlier in these reasons), was to allow RMI’s Federal Court action and the other Federal Court proceedings involving OHTC’s assets to proceed without being affected by the Initial Order or the CCAA proceeding. They explained that they advocated for such a result when they appeared before Justice Wood on OHTC’s initial CCAA motion.
[44] In contrast, OHTC takes the position that the intended effect of the Initial Order is to leave OHTC fully in possession and control of its assets including the Vessel, subject to the supervision of the Monitor and the NSSC, and therefore to achieve a stay of all proceedings against OHTC and its assets, including the Federal Court proceedings. OHTC submits that the carve-out language in paragraph 11A of the Initial Order is intended to recognize the principles governing the relationship between different Canadian courts, pursuant to which a court should ask for the assistance of another court with respect to matters within the latter court’s jurisdiction, rather than purporting to apply its own order to such matters. OHTC argues that the Initial Order is intended to give effect to the plan that OHTC presented to the NSSC when seeking that order, involving in particular the use of the Vessel to retrieve the Turbine from the floor of the Minas Basin, and that it would be entirely inconsistent with that intention for the Federal Court actions to proceed and effect sale of the Vessel prior to such plan been achieved.
[45] In my view, for the reasons explained below, the Initial Order can be understood only in the manner described by OHTC. In determining which interpretation of the Initial Order is to be preferred, it is helpful to consider the terms of the Initial Order itself, the nature of the motion that gave rise to issuance of the Initial Order, and the Decision of Justice Wood dated November 7, 2018, providing reasons in relation to the issuance of the Initial Order (see OpenHydro Technology Canada Ltd. (Re), 2018 NSSC 283) [Justice Wood’s Decision].
[46] Considering first the terms of the Initial Order, I note that paragraph 4 states as follows:
4. The Applicant shall remain in possession and control of its current and future assets, undertakings, and properties of every nature and kind whatsoever, and wherever situate including all proceeds thereof (the “Property”). Subject to further order of this Court, the Applicant shall continue to carry on business in a manner consistent with the preservation of its business (the “Business”) and Property. …
[47] Paragraph 11 of the Initial Order, which effects the stay of proceedings, applies to any proceeding against OHTC or the Monitor or affecting the Business or Property (as defined in paragraph 4). Of course, both paragraphs 4 and 11 are subject to paragraph 11A, which, for ease of reference, reads as follows:
11A. In recognition that in rem proceedings are before the Federal Court in respect of the vessel, Scotia Tide, the OTC03 Turbine Control Centre, and the Cape Sharp Tidal Turbine as described in Federal Court Proceeding T-1578-18, this order shall not apply to those proceedings (including caveators) unless and to the extent the Federal Court may determine in the exercise of its own unfettered jurisdiction and discretion. This Court specifically requests the aid and recognition of the Federal Court in carrying out the terms of this order as required.
[48] I appreciate the argument of RMI and DP World that paragraph 11A states that the Initial Order shall not apply to in the in rem proceedings before the Federal Court, and I agree that the effect of this paragraph is that the Initial Order does not itself stay the Federal Court proceedings. However, that paragraph also contemplates that the Initial Order may apply to the Federal Court proceedings, if the Federal Court were to exercise its discretion in that manner, and specifically requests the aid and recognition of the Federal Court in carrying out the terms of the Initial Order as required. In my view, that request can only be understood as an intention on the part of the NSSC that all proceedings cease, including those in the Federal Court, while recognizing that such a result could not be achieved without the assistance of the Federal Court by staying the proceedings within its own jurisdiction.
[49] This interpretation is supported by the contents of the materials which OHTC submitted to Justice Wood in the motion seeking the Initial Order. It is evident from the Schneider-Manoury Affidavit and a Grant Thornton report dated October 23, 2018 (which forms an exhibit to Mr. Wedlake’s affidavit) that, while OHTC requested CCAA protection to pursue several objectives, including recovery of various categories of tax credits, one of its principal objectives was to allow it to use the Vessel to retrieve the Turbine from the Minas Basin before proceeding with sale of the Vessel. I find nothing in the terms of the Initial Order which indicates that, in granting the motion, the NSSC did not intend that the Initial Order facilitate that objective or, more accurately, afford OHTC the time contemplated by the Initial Order to pursue the development of a plan which included that objective.
[50] In my view, this interpretation is further supported by Justice Wood’s Decision. At paragraph 10, Justice Wood stated that he had reviewed the materials filed and was prepared to grant the Initial Order and Charging Order on the terms proposed, subject to his decision on the scope of the temporary stay. He stated that a stay of proceedings was appropriate, because OHTC had satisfied him that it should have a short period of time to consider whether a reasonable plan of arrangement might be developed. Justice Wood concluded that a 30 day stay would allow OHTC and the Monitor time to carry out an initial feasibility assessment and stated that whether the stay should be extended beyond that would require a further motion and evidentiary basis.
[51] In considering the positions of parties wishing to proceed in the Federal Court, and in arriving at the decision to include paragraph 11A in the Initial Order, Justice Wood analyzed the issue as follows:
[11] The respondents say that the Court should not issue an order which purports to stay the Federal Court in rem proceedings. If there is to be such a stay, they argue that it should be decided by the Federal Court on the motion of OpenHydro and not the Nova Scotia Supreme Court.
[12] The respondents rely on the companion decisions of the Supreme Court of Canada in Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustee of), 2001 SCC 90 (CanLII), and Antwerp Bulkcarriers, N.V. (Re), 2001 SCC 91 (CanLII). Those decisions arose out of the bankruptcy of a Belgian ship owner, whose vessels were arrested and subject to in rem proceedings in the Federal Court of Canada. In Holt the issue was whether the Federal Court should have deferred to the Quebec Superior Court (in Bankruptcy) and stayed the Federal Court proceedings. The Supreme Court held that Federal Court had jurisdiction to deal with the claims and, after carrying out a forum non conveniens analysis, concluded that the Federal Court was correct in not issuing the stay.
[13] In the Antwerp case, the Quebec Court issued an injunction restraining the Federal Court from proceeding in rem against the vessels. The Supreme Court concluded that the Quebec Court had no power to issue the order because the Federal Court had jurisdiction over the claims and the asset in question (i.e. the vessel) had been captured by the Federal Court orders.
[14] Although those cases dealt with the relationship between superior courts exercising bankruptcy jurisdiction and the Federal Court’s maritime law jurisdiction, I am satisfied that the principles apply to some extent in proceedings under the CCAA. On the basis of these decisions, it is clear that the Federal Court continues to have jurisdiction over the in rem claims advanced by the respondents. On the basis of the Antwerp decision, I am also satisfied that this Court should not issue the equivalent of an anti-suit injunction preventing the Federal Court from dealing with those claims.
[15] In deciding how to address the interaction between the CCAA proceeding and the Federal Court actions, I would take the approach found in two recent British Columbia Supreme Court decisions. In Sargeant III v. Worldspan Marine Inc., 2011 BCSC 767 (CanLII), the circumstances were virtually identical to those before me. The Court was dealing with a request for an Initial Order under the CCAA and the accompanying temporary stay. Creditors had started proceedings in the Federal Court and obtained in rem judgements against the company’s vessel. The Court concluded that it should not issue an order directing the Federal Court to take any particular action, but rather the courts should exercise their respective jurisdictions cooperatively. The Court explained the issue this way:
40 In my view, as a matter of comity between two Canadian superior courts each exercising its own jurisdiction, an order by this court directing the Federal Court to stay its proceedings is neither appropriate nor necessary.
41 In Antwerp Bulkcarriers, N.V. (Re), 2001 SCC 91 (CanLII), [2001] 3 S.C.R. 951 at para. 51, the Court referred to the faith and credit owed by Canadian courts to each other when acting appropriately within their respective jurisdictions.
42 In Always Travel Inc. v. Air Canada, 2003 FCT 707 (CanLII), 2003 F.C.J. No. 933, a case decided subsequent to Antwerp and its companion case, Holt Cargo Systems Inc.