Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of)

Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of)
Collection
Supreme Court Judgments
Date
2001-12-20
Neutral citation
2001 SCC 90
Report
[2001] 3 SCR 907
Case number
27290
Judges
McLachlin, Beverley; L'Heureux-Dubé, Claire; Gonthier, Charles Doherty; Iacobucci, Frank; Major, John C.; Bastarache, Michel; Binnie, William Ian Corneil; Arbour, Louise; LeBel, Louis
On appeal from
Federal Court of Appeal
Subjects
Courts
Notes
SCC Case Information: 27290
Decision Content
Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of), [2001] 3 S.C.R. 907, 2001 SCC 90
Frans G. A. De Roy and Thierry Van Doosselaere, as Trustees in
Bankruptcy of ABC Containerline N.V., the Owners, Charterers and
all others interested in the Ship “Brussel”, and the Ship “Brussel” Appellants
v.
Holt Cargo Systems Inc. Respondent
Indexed as: Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of)
Neutral citation: 2001 SCC 90.
File No.: 27290.
2001: March 20; 2001: December 20.
Present: McLachlin C.J. and L’Heureux‑Dubé, Gonthier, Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel JJ.
on appeal from the federal court of appeal
Courts ‑‑ Jurisdiction ‑‑ Federal Court of Canada ‑‑ Maritime law ‑‑ Stay of proceedings ‑‑ U.S. creditor bringing maritime law action against Belgian ship in Federal Court ‑‑ Belgian shipowner subsequently adjudged bankrupt in Belgium ‑‑ Quebec Superior Court making orders purporting to dispose of ship and proceeds of sale ‑‑ Whether Federal Court erred in exercise of its discretion to deny trustees’ application for stay of proceedings ‑‑ Federal Court Act, R.S.C. 1985, c. F‑7, s. 50 .
In late March 1996, a Belgian ship was arrested at Halifax in connection with an in rem action commenced by the respondent Holt, a U.S. company, in the Federal Court claiming a maritime lien for stevedoring services provided in the U.S. The ship’s Belgian owner was subsequently adjudged bankrupt by the Belgian bankruptcy court and the appellants were appointed the trustees in bankruptcy. In May the appellant trustees obtained an order of the Quebec Superior Court, Civil Chamber that “recognized and declared executory in Quebec” the Belgian bankruptcy order. Their application to the Federal Court, Trial Division for an adjournment of the in rem proceedings against the ship was denied, and in default of defence, judgment was awarded to Holt against the ship, with leave to the trustees to challenge the precise quantum of the judgment if done promptly. The Federal Court ordered the ship appraised and laid down the procedure for its sale. The trustees then requested a stay of proceedings from the Federal Court “pending final disposition of the matter by the Superior Court”. They produced various orders from the Quebec Superior Court sitting in bankruptcy one of which purported to dispose of the ship and the proceeds of sale. The Federal Court, Trial Division declined to give effect to the orders of the Canadian bankruptcy court or to stay its own proceedings. The Federal Court of Appeal upheld that decision.
Held: The appeal should be dismissed.
A maritime lien validly created under foreign law will be recognized and given the same priority in Canada as would be given to a maritime lien created in Canada under Canadian maritime law unless opposed to some rule of domestic policy or procedure which prevents the recognition of the right. Holt was entitled to have its maritime lien recognized by the Federal Court in these proceedings.
The Federal Court did not lose jurisdiction to proceed as a result of the various orders of the Quebec Superior Court sitting in bankruptcy. The Federal Court trial judge was not exercising original, ancillary or auxiliary jurisdiction in bankruptcy, but was dealing with in rem claims against the ship. Having ruled that he would recognize Holt's security interest as a matter of maritime law, the trial judge rightly concluded that there was no jurisdictional barrier to the Federal Court continuing to adjudicate Holt's in rem action against the ship. Insofar as Holt's claim was integrally connected to maritime matters, it lay within the jurisdiction of the Federal Court and it was for that court to decide whether or not to defer to the Belgian bankruptcy court having due regard both to international comity and convenience and to the rights of its own citizens or other persons who are under the protection of our laws.
In addressing the issue of a stay, the trial judge acknowledged the importance of comity and international coordination in bankruptcy matters. Having done so, he went on to place primary emphasis on the fact he was dealing with an in rem action by secured creditors against a ship 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 appellants’ strongest argument is that the parties and the subject matter of the dispute are but weakly connected to Canada. However, lack of substantive connection to any particular jurisdiction, including their home port, is a feature of ships engaged in international maritime commerce. The trial judge considered the relevant factors in reaching his conclusion that the Federal Court was the appropriate forum to resolve Holt's secured claim against the ship. He committed no error in principle and did not refuse to take into consideration any major element appropriate for the determination of the case. In the absence of such error, the exercise of his discretion should be affirmed.
Cases Cited
Referred to: Antwerp Bulkcarriers, N.V. (Re), [2001] 3 S.C.R. 951, 2001 SCC 91; Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897; In re Treco, 240 F.3d 148 (2001); Laane and Baltser v. Estonian State Cargo & Passenger Steamship Line, [1949] S.C.R. 530; Q.N.S. Paper Co. v. Chartwell Shipping Ltd., [1989] 2 S.C.R. 683; The Tolten, [1946] P. 135; Olympia & York Developments Ltd. v. Royal Trust Co. (1993), 20 C.B.R. (3d) 165; Re Cadillac Fairview Inc. (1995), 30 C.B.R. (3d) 17; Roberts v. Picture Butte Municipal Hospital (1998), 64 Alta. L.R. (3d) 218; Re Walker (1998), 5 C.B.R. (4th) 123; Re Babcock & Wilcox Canada Ltd. (2000), 18 C.B.R. (4th) 157; Federal Business Development Bank v. Quebec (Commission de la santé et de la sécurité du travail), [1988] 1 S.C.R. 1061; The Strandhill v. Walter W. Hodder Co., [1926] S.C.R. 680; Todd Shipyards Corp. v. Altema Compania Maritima S.A., [1974] S.C.R. 1248; Marlex Petroleum Inc. v. Har Rai (The), [1987] 1 S.C.R. 57, aff’g [1984] 2 F.C. 345; Riordon Co. v. Danforth Co., [1923] S.C.R. 319; Husky Oil Operations Ltd. v. Minister of National Revenue, [1995] 3 S.C.R. 453; Galbraith v. Grimshaw, [1910] A.C. 508; Anantapadmanabhaswami v. Official Receiver of Secunderabad, [1933] A.C. 394; ITO--International Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752; Zingre v. The Queen, [1981] 2 S.C.R. 392; Spencer v. The Queen, [1985] 2 S.C.R. 278; Hilton v. Guyot, 159 U.S. 113 (1895); Ordon Estate v. Grail, [1998] 3 S.C.R. 437; Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077; Hunt v. T&N PLC, [1993] 4 S.C.R. 289; Tolofson v. Jensen, [1994] 3 S.C.R. 1022; Canada Southern Railway Co. v. Gebhard, 109 U.S. 527 (1883); Allen v. Hanson (1890), 18 S.C.R. 667; Re Breakwater Co. (1914), 33 O.L.R. 65; Re E. H. Clarke & Co., [1923] 1 D.L.R. 716; Re Stewart & Matthews, Ltd. and The Winding‑Up Act (1916), 10 W.W.R. 154; Antares Shipping Corp. v. The Ship “Capricorn”, [1977] 2 S.C.R. 422; The Atlantic Star, [1973] 2 All E.R. 175; Harelkin v. University of Regina, [1979] 2 S.C.R. 561; Friends of the Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3.
Statutes and Regulations Cited
Bankruptcy and Insolvency Act, R.S.C. 1985, c. B‑3, ss. 2 “secured creditor”, 43(7), 69.3 [ad. 1992, c. 27, s. 36], 136(1), 183(1)(b), Part XIII [ad. 1997, c. 12, s. 118], 268(2), (3), (6) [idem], 269 [idem], 271(1) [idem].
Commercial Instruments and Maritime Liens Act, 46 U.S.C. § 31342.
Federal Court Act, R.S.C. 1985, c. F‑7, ss. 3 , 17(6) [rep. & sub. 1990, c. 8, s. 3], 22(1), 50(1).
Authors Cited
Benedict, Erastus Cornelius. Benedict on Admiralty, vol. 1, 7th ed. New York: M. Bender, 1974 (loose‑leaf updated April 2001, release 84).
Castel, J.‑G. Canadian Conflict of Laws, 4th ed. Toronto: Butterworths, 1997.
Dicey and Morris on the Conflict of Laws, vol. 2, 13th ed. Under the general editorship of Lawrence Collins. London: Sweet & Maxwell, 2000.
Fletcher, Ian F. Insolvency in Private International Law: National and International Approaches. Oxford: Clarendon Press, 1999.
Honsberger, John D. “Canadian Recognition of Foreign Judicially Supervised Arrangements” (1990), 76 C.B.R. (N.S.) 204.
Houlden, L. W., and Geoffrey B. Morawetz. The 2001 Annotated Bankruptcy and Insolvency Act. Scarborough, Ont.: Carswell, 2000.
LoPucki, Lynn M. “Cooperation in International Bankruptcy: A Post‑Universalist Approach” (1999), 84 Cornell L. Rev. 696.
Tetley, William. Maritime Liens and Claims, 2nd ed. Montréal: Yvon Blais, 1998.
Ziegel, Jacob S. “Ships at Sea, International Insolvencies, and Divided Courts” (1998), 50 C.B.R. (3d) 310.
APPEAL from a judgment of the Federal Court of Appeal (1999), 173 D.L.R. (4th) 493, 239 N.R. 114, [1999] F.C.J. No. 337 (QL), affirming a judgment of the Trial Division, [1997] 3 F.C. 187, 127 F.T.R. 244, 146 D.L.R. (4th) 736, 46 C.B.R. (3d) 169, [1997] F.C.J. No. 409 (QL). Appeal dismissed.
David G. Colford, for the appellants.
Thomas E. Hart and Jane O’Neill, for the respondent.
The judgment of the Court was delivered by
1 Binnie J. -- The problems of international bankruptcies have excited much recent judicial and academic commentary. In this appeal, we are required to determine whether a maritime law proceeding by a U.S. creditor against a Belgian ship in a Canadian court ought to have been stayed in deference to a Belgian court dealing with the subsequent bankruptcy of its Belgian shipowner. Deference to the Belgian bankruptcy court, it is argued, was required by the principles of international comity. Despite the obvious benefits of international coordination of bankruptcies that spread their financial wreckage across multiple jurisdictions, the Federal Court of Canada declined to stay its proceedings under Canadian maritime law. The present appeal is from its decision. The companion case, Antwerp Bulkcarriers, N.V. (Re), [2001] 3 S.C.R. 951, 2001 SCC 91, released at the same time, deals with the appeal from the Quebec Court of Appeal on the bankruptcy side of the concurrent and interconnected proceedings.
2 The history of this litigation, in brief summary, is as follows. On March 30, 1996, the M/V “Brussel” (the “Ship”) was arrested in Canadian waters near the entrance to Halifax harbour by order of the Federal Court of Canada. A week later, its Belgian owner made an assignment in bankruptcy at Antwerp with debts vastly exceeding its assets. The U.S. creditor, Holt Cargo Systems Inc. (“Holt”), persisted with its in rem action. Four months later, after a storm of motions and applications in the Federal Court and the Superior Court of Quebec sitting in Bankruptcy, with periodic interventions by the Eleventh Chamber of the Commercial Court of the Judicial District of Antwerp (the “Belgian bankruptcy court”) and a related order by a U.S. bankruptcy court, the Ship was sold over the objection of the trustees in bankruptcy. The Federal Court ruled that the proceeds of the sale are eventually to be distributed to secured creditors, including the respondent, depending on the outcome of this appeal.
3 The Superior Court of Quebec sitting in Bankruptcy (the “Canadian bankruptcy court”) played a potentially important role in responding to the request for assistance from the Belgian Commercial Court exercising Belgian bankruptcy jurisdiction. However, I believe the trustees asked for more assistance from the Canadian bankruptcy court than could lawfully be given, and that the Federal Court did not err in principle in refusing a stay of the maritime law proceedings.
4 I would therefore dismiss the appeal.
I. Facts
5 The Ship was arrested at Halifax under a warrant of arrest issued at the instance of Holt, a U.S. company incorporated under the laws of New Jersey. The warrant for arrest was issued in connection with an in rem action commenced by Holt the same day in the Federal Court of Canada against the “owners, charterers and all others interested in the ship”, and the Ship itself. The M/V “Brussel” was owned by Antwerp Bulkcarriers N.V. which, with other interrelated companies, carried on the business of international carriage of goods by sea.
6 Holt’s action was for unpaid fees and charges for stevedoring and other related services provided to the Ship at Gloucester City, New Jersey, in the United States between 1994 and 1996 inclusive. No part of the debt was incurred in Canada and neither the Ship nor its creditors were ordinarily resident here.
7 Following the arrest of the Ship, cargo and container owners, shippers, suppliers, insurers and others also filed claims in the Federal Court. In total, statements of claim were filed in 27 separate actions. Moreover, notices of claim were filed in Holt’s in rem action against the Ship by more than 20 claimants in response to the Federal Court’s order, discussed below, that the Ship be appraised and sold.
8 On April 5, 1996, a week after the Ship’s arrest, the shipowner was adjudged bankrupt by the Belgian bankruptcy court, which appointed the appellants, T. Van Doosselaere and F. De Roy, as trustees in bankruptcy (the “Trustees”). Under Belgian law, the Trustees were required to take possession of all assets of the bankrupt holding company and its bankrupt affiliated companies, wherever situated. The major assets of the group of bankrupt companies were six cargo vessels, and at the time of the bankruptcy order at least five of these were under arrest in ports in Israel, Singapore, New Zealand, the Bahamas and, as stated, Canada. Other assets owned or leased by the debtors, including unpaid freight and shipping containers, had also been arrested, detained or threatened with seizure at various locations throughout the world. The Trustees filed applications in jurisdictions where proceedings had been commenced against the debtors seeking the release of the bankrupts’ assets from arrest, preventing further seizure and arrest of their assets, and directing the submission of all claims against them to the bankruptcy proceedings in Belgium.
9 Faced with these difficult circumstances, the appellant Trustees urged on the Federal Court on several occasions the need for international cooperation in the resolution of bankruptcies and insolvencies that cross national boundaries. The effect of these arguments was to advocate deference to the Belgian courts, being the courts of the bankrupts’ domicile. Adherence to what is sometimes called the “Grab Rule”, in which each national court takes charge of assets in its own jurisdiction for the benefit of creditors who win the race to its courthouse, was said to be destructive of international order and fairness. (As will be seen, there is much merit in these submissions.)
10 The “universalist” position advocated by the appellant Trustees was put forward in a series of motions and applications before the courts of Quebec and the Federal Court of Canada. A detailed summary of the complicated procedural history of this dispute is set out in an Appendix to the judgment in the companion case, Antwerp Bulkcarriers, N.V., supra. What follows is a summary of the motions and applications most relevant to this appeal:
May 3, 1996
The appellant Trustees appear before MacKay J. of the Federal Court, Trial Division, to support moving the Ship to a “safe berth” at Halifax and to “remain under arrest” at its new location “until further orders are given by this Court”. Order granted. The Ship was moved and remained there until its sale closed on August 1, 1996.
May 9, 1996
The appellant Trustees move ex parte before the Quebec Superior Court, Civil Chamber (i.e., not specified to be sitting in bankruptcy) and obtain an order which “recognized and declared executory in Quebec” the Belgian bankruptcy order (emphasis added).
May 13, 1996
The appellant Trustees apply to the Federal Court to have the in rem proceedings against the Ship adjourned for four weeks to enable them to make further inquiries about the claims and assets of the bankrupt estate. They do not undertake to file a defence in the action, or indeed suggest that a valid defence exists. MacKay J. expresses concern that the Ship has been under arrest for six weeks and that dock charges and other expenses are mounting. He concludes that he is exercising a maritime law jurisdiction, not a bankruptcy jurisdiction. The adjournment is denied.
May 14, 1996
In default of defence, judgment is awarded to Holt against the Ship for $572,128.06, with leave to the Trustees to challenge the precise quantum of the judgment if done promptly.
May 17, 1996
The Federal Court orders the Ship appraised and lays down the procedure for its sale. The Trustees appeal. They also seek review and reconsideration of the orders of appraisal and sale of the Ship.
June 14, 1996
The appellant Trustees request a stay of proceedings from the Federal Court “pending final disposition of the matter by the [Quebec] Superior Court”. The Trustees produce an ex parte order dated June 11, 1996 obtained from the Quebec Superior Court sitting in Bankruptcy that purports to dispose of the Ship and the proceeds of sale. Despite the Trustees’ participation in the Federal Court proceedings over the previous six weeks, no notice of the application in Montreal was given to the Federal Court litigants. It subsequently emerges that the Quebec judge hearing the ex parte application was not told that the Ship has been arrested and ordered sold by the Federal Court. The stay is denied for reasons eventually issued on April 9, 1997. In MacKay J.’s view, this is still a maritime law case.
July 9, 1996
The appellant Trustees return before the Federal Court seeking to have the proceeds paid to them if the sale goes ahead, as ordered, on July 12. They are now armed with a further order dated June 28, 1996 of the Quebec Superior Court sitting in Bankruptcy, in which Guthrie J. confirmed with variations the ex parte order of June 11, after notice to all interested parties and a full hearing on the merits. It is the June 28, 1996 order that is the centrepiece of the appellants’ argument. I therefore reproduce its relevant portions below:
. . . THE COURT:
. . .
RECOGNIZES the Trustees as trustees in the bankruptcy of Antwerp Bulkcarriers, N.V., with the duty and power to take possession of, realise upon and confirm the assets of the Bankrupt situated anywhere in Canada, subject however to the rights, if any, of any creditors with claims secured under the laws of Canada, as by law provided;
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”; . . . [Emphasis added.]
11 It is clear from the order of June 28, 1996 that the Canadian bankruptcy court is now asserting control over the Ship and the related proceedings. It “permits” the sale ordered by MacKay J. to proceed, but only if it is completed by July 12. The proceeds of sale are to go to the appellant Trustees, not to the secured claimants who are litigating in the Federal Court. If the sale is not completed by July 12, the Ship is to be turned over to the Trustees irrespective of the orders of the Federal Court. The Supreme Court of Nova Scotia is requested to “aid” in giving effect to these directions.
12 As of July 1996, it will be noted, default judgment had been signed in the in rem action, the Ship had been appraised, and bids were being invited from potential purchasers. MacKay J. eventually ruled that the Trustees could obtain the proceeds of sale only if they posted security to answer the claims of the secured creditors. This was never forthcoming. His reasons were compendiously explained in a subsequent judgment of April 9, 1997, as will now be described.
II. Judicial History
A. Federal Court, Trial Division, [1997] 3 F.C. 187
13 MacKay J. said he accepted the principle of comity of nations but pointed out that “the Court is urged to respect jurisdiction claimed by others and to forego considering claims to relief in proceedings long established in maritime law” (para. 45). The Trustees alleged that Holt was forum shopping, but MacKay J. said he was “not persuaded it did more than seek recovery of its claim against the vessel where the ship was located” (para. 46).
14 MacKay J. “found no persuasive grounds . . . [for the Court] 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” (para. 47). He was “not persuaded that matters before this Court were those of bankruptcy” nor had it been “suggested that any bankruptcy would be based in or administered by any court in Canada” (para. 47). “[T]he 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” (para. 48). Accordingly, the stay was refused.
15 The claim of the appellant Trustees to the proceeds of the sale of the Ship was based on their view that once the matter was before the bankruptcy court in Quebec, “it alone had jurisdiction over the assets of the bankrupt” (para. 72). MacKay J. disagreed. On the contrary, he ruled “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, [are not] proceedings in bankruptcy” (para. 74). Therefore, in his view, the involvement of the Canadian bankruptcy court did not divest the Federal Court of jurisdiction.
16 As to the Trustees’ argument that the Federal Court, even if it had jurisdiction, should in any event defer to the order for the distribution of the proceeds approved by the Quebec Superior Court sitting in Bankruptcy, MacKay J. held that Canadian law “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” (para. 80). A maritime lien is a secured claim. Accordingly, “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” (para. 83). MacKay J. thus concluded that Holt and the other secured creditors should have their secured claims paid out of the proceeds of sale in priority to the Trustees. (In the end, the fund was exhausted by the secured claims.)
B. Federal Court of Appeal (1999), 173 D.L.R. (4th) 493
17 Noël J.A. observed, at para. 4, that Holt would “derive a distinct legal advantage” from having its claim determined by the Federal Court. Relying on this Court’s decision in Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897, he acknowledged that juridical advantage is but one factor to consider when determining whether a Canadian court should stay its proceedings in favour of a foreign court. However, this factor takes on “considerable significance” (para. 4) when it arises in the normal course of litigation and not as a result of forum shopping. Here there had been a finding that no such forum shopping had occurred. “Having arrested the ship where it was found, the respondent could legitimately expect that Canadian maritime law would apply” (para. 5). Using the words of this Court in Amchem, supra, Noël J.A. found that Holt’s “claim had a ‘real and substantial connection’ with Canadian maritime law and there was a ‘reasonable expectation’ that the rights arising thereunder would be enforced” (para. 5). Accordingly, he concluded, MacKay J. did not err in exercising his discretion against a stay.
18 With respect to the intervention of the Quebec Superior Court sitting in Bankruptcy, Noël J.A. said “comity also extends to domestic courts” (para. 10). In his view, it was “significant that domestically at least, the secured nature of maritime liens has always been maintained in the context of bankruptcy proceedings without the need for either of the two jurisdictions to supersede one another” (para. 10). By seeking an ex parte order from the Quebec Superior Court for the release of the Ship, “the appellants launched what is in effect a collateral attack on MacKay J.’s decision” (para. 12). In Noël J.A.’s view, the proper approach would have been to seek “the assistance of the Federal Court which is the only Court that had jurisdiction over the arrested ship and the respondent’s in rem claim” (para. 13). The appeal was accordingly dismissed.
III. Relevant Statutory Provisions
19 Federal Court Act, R.S.C. 1985, c. F-7
3. The court of law, equity and admiralty in and for Canada now existing under the name of the Federal Court of Canada is hereby continued as an additional court for the better administration of the laws of Canada and shall continue to be a superior court of record having civil and criminal jurisdiction.
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 has no jurisdiction to entertain any proceeding in respect of the same matter unless the Act expressly confers that jurisdiction on the Court.
22. (1) The Trial Division has concurrent original jurisdiction, between subject and subject as well as otherwise, in all cases in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, except to the extent that jurisdiction has been otherwise specially assigned.
50. (1) The Court may, in its discretion, stay proceedings in any cause or matter,
(a) on the ground that the claim is being proceeded with in another court or jurisdiction; or
(b) where for any other reason it is in the interest of justice that the proceedings be stayed.
Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3
2. In this Act,
. . .
“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;
Stay of Proceedings
69.3 (1) Subject to subsection (2) and sections 69.4 and 69.5, on the bankruptcy of any debtor, no creditor has any remedy against the debtor or the debtor’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy, until the trustee has been discharged.
(2) Subject to sections 79 and 127 to 135 and subsection 248(1), the bankruptcy of a debtor does not prevent a secured creditor from realizing or otherwise dealing with his security in the same manner as he would have been entitled to realize or deal with it if this section had not been passed, unless the court otherwise orders . . . .
Scheme of Distribution
136. (1) Subject to the rights of secured creditors, the proceeds realized from the property of a bankrupt shall be applied in priority of payment as follows: . . .
Jurisdiction of Courts
183. (1) The following courts are invested with such jurisdiction at law and in equity as will enable them to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act during their respective terms, as they are now, or may be hereafter, held, and in vacation and in chambers:
. . .
(b) in the Province of Quebec, the Superior Court;
IV. Analysis
20 In this appeal we are urged to adopt a “universalist approach” to bankruptcies and insolvencies that affect more than one jurisdiction. I accept at the outset that bankruptcies that engage multiple jurisdictions may not be administered effectively if each national court goes its own way with the assets that happen physically to be within its control. The chaotic fact situation faced by the Trustees in this case, from Singapore to the Bahamas and Israel to New Zealand, is eloquent testimony to the need for judicial cooperation and international comity.
21 Moreover, it must also be freely acknowledged that the connection between this litigation and Canada is relatively weak. None of the parties (including the Ship) resides here. The debt was incurred in the United States. The shipowner resides in Belgium. There are no bankruptcy proceedings in Canada other than those initiated by the appellant Trustees for recognition of various orders of the Belgian bankruptcy court.
22 Canadian courts have become seized with the dispute only because the vagaries of maritime commerce carried the M/V “Brussel” into Canadian waters on March 30, 1996. It was certainly open to the Federal Court to defer in these matters to the bankruptcy court of the bankrupt’s domicile. The question is whether, as contended by the appellant Trustees, the Federal Court was obliged to do so. If not, did the Federal Court nevertheless commit an error in the exercise of its discretion not to stay the in rem action in deference to the Belgian bankruptcy court?
23 For present purposes, I accept the following convenient definitions of the “universalist approach” and the “territorialist approach” (sometimes referred to as the “Grab Rule”):
. . . courts and commentators have identified two general approaches to distributing assets in such proceedings. Under the “territoriality” approach, or the “Grab Rule,” the court in each jurisdiction where the debtor has assets distributes the assets located in that jurisdiction pursuant to local rules. Under the “universality” approach, a primary insolvency proceeding is instituted in the debtor's domiciliary country, and ancillary courts in other jurisdictions -- typically in jurisdictions where the debtor has assets -- defer to the foreign proceeding and in effect collaborate to facilitate the centralized liquidation of the debtor’s estate according to the rules of the debtor's home country.
(In re Treco, 240 F.3d 148 (2d Cir. 2001), at p. 153)
24 The Federal Court was clearly of the view that it was not in this case choosing between the “universalist” approach and the “Grab Rule”. It was making a choice between the conflicting demands of two international systems of commercial dispute resolution, namely the rules of maritime law, with long historical roots in the practicalities of ocean shipping, and more recent legal initiatives to establish coherent rules for the administration of international bankruptcies and insolvencies. In its view, I think correctly, the choice was dictated not by some abstract rule of “universalism” but by what the Federal Court understood to be the specific circumstances and justice of this particular case.
A. Maritime Law
25 Shipping was one of the earliest activities that required international cooperation in the regulation of the rights and obligations of its participants. “For the cradle of our maritime law we must turn to the Mediterranean Sea where the sea commerce has had a continuous history for nearly five thousand years”: Benedict on Admiralty (7th ed. (loose-leaf)), vol. 1, at p. 1-4; and see generally W. Tetley, Maritime Liens and Claims (2nd ed. 1998), at pp. 7-8. Maritime lawyers were forced to confront the need for rules to govern international commerce centuries before the “universalist approach” became a key issue in bankruptcy. Seamen, salvors, ship chandlers, repairers and other suppliers of essential goods and services to the ship in foreign ports required some assurance of payment. They looked to the ship. Common rules were essential because suppliers dealt with ships from many countries and the Masters found themselves in distant ports in an age when communications with ship owners were slow and unreliable. In maritime commerce, “rules of practical convenience commanding general assent are a virtual necessity”: Laane and Baltser v. Estonian State Cargo & Passenger Steamship Line, [1949] S.C.R. 530, per Rand J., at p. 545. See also: Q.N.S. Paper Co. v. Chartwell Shipping Ltd., [1989] 2 S.C.R. 683, at p. 695. Practicality required an in rem proceeding against the ship as distinguished from an in personam action against the shipowner. The need for predictability and uniformity was so strong that even the common law courts, ever protective of their own ways, ceded jurisdiction to specialized courts of admiralty applying a largely international law of maritime commerce. As Professor Tetley, supra, writes, at p. 56:
[M]aritime law as we know it today is civilian in nature, finding its source in the lex maritima (the law maritime) which is a part of the lex mercatoria (the law merchant). Maritime law was codified, international law and, in England, it was apart from, and opposed to, its nearly mortal enemy, the common law.
26 The in rem interest in ships took many forms, some created by statute, others by mortgage, still others by possession. One of the most ancient and effective forms of security was (and is) the maritime lien. In this action, Holt claims a maritime lien for stevedoring services pursuant to the U.S. Commercial Instruments and Maritime Liens Act, 46 U.S.C. § 31342. Broadly speaking, a maritime lien arises without registration or other formality when debts of a specific nature are incurred by or on behalf of a ship. The lien creates a charge which “goes with the ship everywhere, even in the hands of a purchaser for value without notice, and has a certain ranking with other maritime liens, all of which take precedence over mortgages” (The Tolten, [1946] P. 135 (C.A.), per Scott L.J., at p. 150). It may be described, in that sense, as a “secret lien”.
27 The reason for this privileged status for maritime lien holders is entirely practical. The ship may sail under a flag of convenience. Its owners may be difficult to ascertain in a web of corporate relationships (as indeed was the case here, where initially Holt named the wrong corporation as ship owner). Merchant seamen will not work the vessel unless their wages constitute a high priority against the ship. The same is true of others whose work or supplies are essential to the continued voyage. The Master may be embarrassed for lack of funds, but the ship itself is assumed to be worth something and is readily available to provide a measure of security. Reliance on that security was and is vital to maritime commerce. Uncertainty would undermine confidence. The appellant Trustees’ claim to “international comity” in matters of bankruptcy must therefore be weighed against competing considerations of a more ancient and at least equally practical international system -- the law of maritime commerce.
B. Foreign Bankruptcy Orders
28 The appellant Trustees take the position that once the Canadian bankruptcy court was activated on this file, its power and authority occupied the field in relation to matters pertaining to the bankrupt, so to speak, to the exclusion of courts not possessing bankruptcy jurisdiction. This proposition is, in my view, too broad.
29 I propose to make a few preliminary observations about the appellant Trustees’ position. More detailed consideration follows.
30 The first preliminary observation is that Antwerp Bulkcarriers, N.V. was not placed in bankruptcy under the laws of Canada. The only proceedings before a Canadian bankruptcy court were for the recognition and implementation of the orders of the Belgian bankruptcy court. Part XIII of the Bankruptcy and Insolvency Act (the “Act ”), entitled “International Insolvencies”, was not yet in force at the time of these events. Nevertheless, Canadian bankruptcy courts have long exercised a jurisdiction to come to the aid of foreign bankruptcy courts where it has been in their power to do so. Part XIII put the stamp of parliamentary approval on an initiative supported by judges and scholarly practitioners, both before and after enactment of Part XIII: see Olympia & York Developments Ltd. v. Royal Trust Co. (1993), 20 C.B.R. (3d) 165 (Ont. Ct. (Gen. Div.)), at p. 167; Re Cadillac Fairview Inc. (1995), 30 C.B.R. (3d) 17 (Ont. Ct. (Gen. Div.)); Roberts v. Picture Butte Municipal Hospital (1998), 64 Alta. L.R. (3d) 218 (Q.B.), at pp. 224 and 226; Re Walker (1998), 5 C.B.R. (4th) 123 (Ont. Ct. (Gen. Div.)); Re Babcock & Wilcox Canada Ltd. (2000), 18 C.B.R. (4th) 157 (Ont. S.C.); and see generally J. D. Honsberger, “Canadian Recognition of Foreign Judicially Supervised Arrangements” (1990), 76 C.B.R. (N.S.) 204.
31 My second preliminary observation is that the bankruptcy courts in Belgium and Canada had (and have) a legitimate interest in the in rem action in the Federal Court. On May 9, 1996, when the Trustees obtained the order of recognition of the Belgian judgment, title to the M/V “Brussel”, however heavily encumbered, was still registered in the name of the bankrupt. It is true that the market value of the Ship (ultimately sold for US$4.6 million) was a mere fraction of the first mortgage (about $68 million) held by the Belgian state bank, Société Nationale de Crédit à l’Industrie S.A. (“SNCI”). It is also true that there were maritime liens and statutory charges that ranked ahead of the first mortgage. The bankrupt company nevertheless retained legal title, and to that extent the Ship constituted part of the property of the bankrupt, at least as that term is understood in Canadian law: Federal Business Development Bank v. Quebec (Commission de la santé et de la sécurité du travail), [1988] 1 S.C.R. 1061.
32 Counsel f