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Holt Cargo Systems Inc.
v. ABC Containerline N.V. (Trustees of) |
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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 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. 438; 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 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; 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), Part III [ad. 1997, c. 12, s. 118], 268(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) [am.
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 March 2000, release
81).
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,
2001.
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.
Solicitors for the
appellants: Brisset Bishop, Montréal.
Solicitors for the
respondent: McInnes Cooper & Robertson, Halifax, Nova
Scotia.
CITATION
Before publication in the
S.C.R., this judgment should be cited using the neutral citation: Holt Cargo
Systems Inc. v. ABC Containerline N.V., 2001 SCC 90. Once the
judgment is published in the S.C.R., the neutral citation should be used as a
parallel citation: Holt Cargo Systems Inc. v. ABC Containerline
N.V., [2001] x S.C.R. xxx, 2001 SCC 90.
BINNIE J. --
1 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, Re Antwerp Bulkcarriers, N.V., 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, In re 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" (emphasis added) the Belgian bankruptcy order.
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 17, 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 17, 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
19Federal 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
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 (2nd 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 Balster 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.), at
p. 150, per Scott L.J.). 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 fly 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 U.S. $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 for the respondent
appeared to consider it dispositive of the appeal to characterize the issue
before us as concerning "maritime law" as opposed to "bankruptcy law". The facts
here present both aspects, and in my view, with respect, the issue before the
Federal Court was one of finding the proper balance of relevant factors on the
stay application as opposed to trying to preempt further debate with a "pith and
substance" characterization of the nature of the proceeding.
33 Thirdly, a Canadian bankruptcy
court has a responsibility to consider the interests of the litigants before it
and other affected parties in this country as well as the desirability of
international cooperation and other relevant circumstances. Its function is not
simply to rubber stamp commands issuing from the foreign court of the primary
bankruptcy. Thus the exigencies of international cooperation were significant to
both the Federal Court and the Canadian bankruptcy court, but they were not a
factor that necessarily trumped all other factors.
34 Fourthly, the Canadian
bankruptcy court derives its authority from Canadian law. When called upon to
lend assistance to foreign bankruptcy courts, Canadian law requires our courts
to consider as one of the relevant circumstances the juridical advantage
which those disadvantaged by deferral to the foreign court would enjoy in a
Canadian court. I appreciate that over-emphasis on juridical advantage as a
factor would lead to enthronement of the "Grab Rule" because claimants in the
Canadian court will inevitably have a good reason why they do not wish to take
their chances in the general bankruptcy in the court of the bankrupt's domicile.
Nevertheless, all of the relevant factors must be weighed in a stay application
and the nature and extent of juridical advantage for the various parties was
clearly an important factor to throw into the balance.
35 Fifthly, the public policy
expressed in our own bankruptcy laws is a relevant consideration. Bankruptcy
usually signals at least a temporary "cease fire" against the bankrupt's estate.
However, if this had been a Canadian bankruptcy, the statutory stay of a
creditor's action would have been of little practical relevance because
s. 69.3 of the Act exempts from the statutory stay (with exceptions not
relevant here) proceedings by secured creditors to realize on their security.
Section 69.3(2)(a) would have authorized the Canadian bankruptcy court to
order a postponement of no more than six months. The effect of the Canadian
bankruptcy court's order in this case was a permanent stay of proceedings for
realization of the security of the Ship in Canada.
36 I now turn to the more
detailed submissions of the parties.
C. Issues Raised by the Present
Appeal
37 It is common ground that
ordinarily the Federal Court, Trial Division, would have jurisdiction to arrest
the Ship, to entertain Holt's claim for debts incurred on the Ship's behalf, to
assess the validity of Holt's claim to a maritime lien, to order the appraisal
and sale of the Ship and to see the successful secured claimants paid out of the
proceeds of sale.
38 The Trustees advance three
broad submissions in support of their position that once the shipowner was
declared bankrupt on April 5, 1996, the Federal Court was "bound to act in
comity with the direction" given by the Belgian bankruptcy court, whose edicts
were recognized and accepted by the Canadian bankruptcy court. Firstly, as
already mentioned, they say that Canadian courts should follow a "universalist"
rather than a "territorial" approach to bankruptcy. Secondly, they say that a
Canadian court exercising admiralty jurisdiction (the Federal Court) must defer
to or at least cooperate with (which in their eyes seems to amount to the same
thing) the Canadian court exercising bankruptcy jurisdiction (the Quebec
Superior Court). Thirdly, the Trustees say that the response of Canadian courts
should be "uniform" by which they appear to mean the Federal Court should have
acceded to the request of the Belgian court because the Quebec Superior Court
sitting in Bankruptcy had already done so.
39 In light of these preliminary
observations, I think the Trustees' arguments may be conveniently addressed
under the following headings:
1 Did the respondent Holt possess
a valid claim to a maritime lien under Canadian law against the M/V "Brussel"
prior to the Belgian bankruptcy of the owners on April 5, 1996?
2 Did Holt thereby enjoy a
juridical advantage in Canada that would be in jeopardy if the Federal Court
proceedings were stayed in deference to the Belgian bankruptcy court?
3 Did the Federal Court err in
treating Holt as a "secured creditor" as that term is understood in Canadian
bankruptcy law?
4 Did the Belgian bankruptcy of
April 5, 1996 give the Belgian Trustees a valid claim to the Ship?
5 Did the Federal Court of Canada
lose jurisdiction to proceed as a result of the various orders of the Quebec
Superior Court sitting in Bankruptcy?
6 Even if the Federal Court
retained jurisdiction, ought it nevertheless to have deferred to the Belgian
bankruptcy court on the basis of "international comity" and the need for an
integrated "universalist" approach to the bankruptcy?
7 In light of the foregoing, did
the Federal Court err in the exercise of its discretion to deny the Trustees'
application for a stay of proceedings?
40 I will address each of these
issues in turn.
1 Did the Respondent Holt
Possess a Valid Claim to a Maritime Lien Under Canadian Law Against the M/V
"Brussel" Prior to the Belgian Bankruptcy of the Owners of April 5,
1996?
41 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": The Strandhill v. Walter W. Hodder
Co., [1926] S.C.R. 680, per Newcombe J., at p. 685. The
theory is that "if a maritime lien exists it cannot be shaken off by changing
the location of the res": Todd Shipyards Corp. v. Altema Compania
Maritima S.A., [1974] S.C.R. 1248, at p. 1252.
42 Under U.S. law, as stated, the
respondent Holt acquired a maritime lien against the Ship at the moment when
services were rendered in U.S. ports. All such services were rendered prior to
March 30, 1996. The Ship thus arrived in Canadian waters burdened with a
maritime lien. A maritime lien would not have arisen under Canadian law for
similar stevedoring services rendered to a ship at a port in Canada, but the
proper law giving rise to the debt was U.S. law, not Canadian law.
43 It is Canadian law, once it
recognizes the right, that grants the remedy and sets the priorities. At
Canadian law, a maritime lien ranks ahead of a ship's mortgage (i.e., the $68
million claim of SNCI). See Todd Shipyards, supra, at
p. 1259, and Marlex
Petroleum Inc. v. Har Rai (The), [1987] 1 S.C.R. 57, affirming [1984] 2
F.C. 345 (C.A.).
44 The appellant Trustees argue
that a "universalist" approach to trans-border bankruptcies is a domestic policy
opposable to recognition of the U.S. maritime lien in this case within the
meaning of the Standhill exception, but I do not think so.
Newcombe J. was looking to something offensive about the origin of the
right being asserted (as was the case in Laane and Baltser,
supra). There is nothing offensive about the origin of Holt's claim. If
stevedoring services had not been rendered, the Ship could not have unloaded its
cargo at Gloucester City, New Jersey. If Holt is to be defeated by
considerations of "universalism", it will be as a result of a balancing of
relevant factors under s. 50 of the Federal Court Act which
authorizes the court, in its discretion, to stay its own proceedings.
45 In my view, on the existing
state of the law, Holt was entitled to have its maritime lien recognized as such
by the Federal Court in these proceedings.
2 Did Holt Thereby Enjoy a
Juridical Advantage in Canada that Would be in Jeopardy if the Federal Court
Proceedings Were Stayed in Deference to the Belgian Bankruptcy Court?
46 There were clear advantages to
Holt in having its claim disposed of in Canada. Firstly, at the time the
Trustees intervened, Holt's in rem action was undefended and speeding to
a successful conclusion. According to the anticipated timetable, its claim would
be paid in full, plus expenses, within a matter of months. The Belgian
bankruptcy was still in the early stages of organization.
47 Secondly, and more
importantly, it seems clear that Holt's claim would not enjoy the same priority
in Belgium as it enjoyed under Canadian maritime law.
48 In an affidavit sworn in this
action on June 5, 1996, the appellant De Roy deposed that the applicable
Belgian law "prohibits the arrest or execution by creditors of the debtor's
property to enforce preferential/lien claims" (para. 26). De Roy
further deposed that Belgian maritime law "gives specific priorities to certain
types of claims" (para. 42) but declined to state whether such "priority"
claims included that of Holt and other maritime lien holders. In the hearing
before Guthrie J. of the Canadian bankruptcy court, Me Édouard Baudry, an
experienced admiralty law practitioner arguing for the intervener, SNCI, who
supported the appellant Trustees, expressed the common understanding of counsel
that Holt would likely be disadvantaged if required to take its claim to
Belgium:
Me ÉDOUARD BAUDRY
I would add, though, as my friend will no doubt
tell you, that the possibility of an American maritime lien being recognized by
Belgian Court is a . . .
THE COURT
Being maintained by the Antwerp Court is
slimmer than in here?
Me ÉDOUARD BAUDRY
... is a lot slimmer than here.
THE
COURT
I can understand that.
Me ÉDOUARD BAUDRY
I think we all ...
THE COURT
I think that is one of the reasons, if not the
major reason, why we're here.
49 Further, according to
endnote 5 of the judgment of the Federal Court of Appeal, counsel for both
parties conceded on the appeal that it was "unlikely that the
respondent's in rem rights could subsist in one form or another
under Belgian bankruptcy laws" (emphasis added).
50 While the onus was on the
appellant Trustees to establish the grounds for a stay of proceedings, it was up
to Holt to prove Belgian law if Holt wished to rely on any difference between
the expected treatment of its claim under Belgian law as opposed to Canadian
law. The trial judge noted the absence of evidence on this point. However, as
the parties were apparently in agreement that Belgian law would not recognize
Holt's maritime lien both before Guthrie J. in the Canadian bankruptcy
court, and subsequently in the present case before the Federal Court of Appeal,
I do not think we should interfere with the Federal Court of Appeal on this
factual point. As Guthrie J. pointed out, the reason "we're here" is that
Holt's claim enjoys a juridical advantage in the Federal Court of Canada that it
would not command in the Belgian bankruptcy court.
3 Did the Federal Court Err in
Treating Holt as a "Secured Creditor" as that Term is Understood in Canadian
Bankruptcy Law?
51 Canadian bankruptcy law takes
an expansive view of who is a secured creditor, as confirmed by the relevant
provisions in the Act. If Antwerp Bulkcarriers N.V. had declared bankruptcy in
Canada, there is no doubt that Holt would be considered "a person holding ... a
lien ... against the property of the debtor ... as security for a debt due"
within the definition of "secured creditor" in s. 2 of the Act. Once the
Federal Court had determined as a matter of Canadian maritime law that Holt's
claim was secured by a maritime lien on the Ship itself, the bankruptcy court
would be bound by that determination: Riordon Co. v. Danforth Co., [1923]
S.C.R. 319.
52 If this were a Canadian
bankruptcy, Holt would have been entitled to realize on its security
irrespective of the bankruptcy. As Gonthier J. said in Husky
Oil Operations Ltd. v. Minister of National Revenue, [1995] 3 S.C.R.
453, at p. 472, "the entire scheme of distribution is `[s]ubject to the
rights of secured creditors'". The opening words of s. 136 (under the
heading "Scheme of Distribution") establish the priority of claims against the
bankrupt's estate subject always "to the rights of secured creditors".
L. W. Houlden and G. B. Morawetz state that "[t]he policy of
the Act in the case of bankruptcy is not to interfere with secured creditors
except in so far as may be necessary to protect the estate as to any surplus on
the assets covered by the security" (The 2001 Annotated Bankruptcy and
Insolvency Act (2001), at p. 346). See also: L. M. LoPucki,
"Cooperation in International Bankruptcy: A Post-Universalist Approach" (1999),
84 Cornell L. Rev. 696.
53 I appreciate, of course, that
"universalism" will not work if every jurisdiction only defers to the law of the
primary bankruptcy where that law coincides precisely with the domestic law of
the deferring court. The fact remains, however, that Canadian public policy,
expressed through the Act, strongly supports the rights of claimants whom we
would regard as secured creditors. Our law considers it in the interests of
commercial activity generally that secured rights be protected. It seems to me
that MacKay J. correctly regarded Holt as a "secured creditor" in
bankruptcy terms, and in the exercise of his discretion under s. 50 of the
Federal Court Act, he was entirely justified in putting considerable
weight on that factor.
4 Did the Belgian Bankruptcy of
April 5, 1996 Give the Belgian Trustees a Valid Claim to the Ship?
54 Under the Belgian bankruptcy
court's order of April 5, 1996, the Trustees were given the duty and power to
take possession of the assets of the bankrupt wherever located. At that stage,
the Ship was no longer in the possession of the bankrupt shipowner. It was in
the possession of the Marshal of the Federal Court at Halifax and subject to
further orders of that court.
55 In Canada, the bankruptcy
order pronounced by the court of the domicile operated as an assignment by
operation of law of the moveable assets of the bankrupt shipowner located in
Canada, including its interest in the M/V "Brussel", but this assignment is
subject to any prior charges upon it recognized by Canadian law
(J.-G. Castel, Canadian Conflict of Laws (4th ed. 1997), at
pp. 564-65).
56 In this respect, our conflict
of laws rule is the same as the English rule set out by the editors of Dicey
and Morris on the Conflict of Laws (13th ed. 2000), at p. 1184:
The general principle of English law is that
bankruptcy, or any proceeding in the nature of bankruptcy, in a foreign country
whose courts have jurisdiction over a debtor operates as an assignment to the
trustee, assignees, curators, syndics or others, who under the law of that
country are entitled to administer his property, of all his movables in England,
if that is its effect under the foreign law.
See also I. F. Fletcher, Insolvency in
Private International Law (1999), at pp. 61-62.
As in Canada, the assignment by operation of
law of the debtor's property is subject to a number of limitations, one of which
as noted is that the property passes subject to existing charges recognized
under English law:
The property in England passes subject to any
existing charges upon it recognised by the law of England, even if these charges
would be postponed under the law of the place of bankruptcy to the claim of the
creditors, and even if under the English bankruptcy the charges would be
defeated by the title of the trustee in bankruptcy.
(Dicey and Morris on the Conflict of
Laws, supra, at pp. 1184-85)
57 An illustration of the
proposition that the trustee cannot obtain more of an interest than it was in
the power of the debtor to assign is in Galbraith v. Grimshaw, [1910]
A.C. 508. In that case, creditors had obtained judgment in Scotland against a
Scottish company and, having had the judgment extended to England, served a
garnishee order on an English firm that was indebted to the Scottish debtor. Two
weeks later, the Scottish debtor became bankrupt. The trustee sought to take
possession of the garnisheed debt, but was refused by the House of Lords on the
principle that the trustee "could not have it unless the bankrupt could himself
have assigned it" (p. 511). Accordingly, the trustee was not entitled to receive
the debt free of the garnishee order "because the bankrupt could only have
assigned it on November 12, subject to the garnishee order" (at p. 511). In
Anantapadmanabhaswami v. Official Receiver of Secunderabad, [1933] A.C.
394, the Privy Council extended the Galbraith analysis to debts that were
the subject of collection proceedings in progress provided that at the date of
the bankruptcy the bankrupt could not have assigned the debt clear of the
plaintiff's claim.
58 While such a rule may be
modified by statute, it has not been so modified in Canada in any way relevant
to the question of the foreign bankruptcy before us.
59 I conclude therefore that on
April 5, 1996, the Belgian Trustees acquired under Canadian law the interest of
the bankrupt shipowner in the M/V "Brussel" but that its interest was and
remained subject to the prior claim of the secured creditors, including the
maritime lienholders, who were seeking relief in the Federal Court Trial
Division.
5 Did the Federal Court of
Canada Lose Jurisdiction to Proceed as a Result of the Various Orders of the
Quebec Superior Court Sitting in Bankruptcy?
60 The Trustees argue that once
the Belgian bankruptcy court issued its order on April 5, 1996, or, at the very
latest, when the request for assistance was accepted by the Canadian bankruptcy
court, the matter before MacKay J. became one of bankruptcy and thus within
the exclusive jurisdiction of the Canadian bankruptcy court. I have
already rejected the Trustees' notion that once a foreign bankruptcy court is
activated it necessarily occupies the field in relation to matters pertaining to
the bankrupt in this country. I have also rejected the idea that "international
coordination" necessitates the rubber stamping of orders made by the foreign
bankruptcy court.
61 The appellant Trustees
nevertheless contend that the Federal Court lost jurisdiction because of the
combined operation of s. 183(1) of the Bankruptcy and Insolvency Act
and s. 17(6) of the Federal Court Act. Section 183(1) reads as
follows:
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;
(The Trustees commenced their proceedings in
Montreal, Quebec, because that was the place of business of the shipowner's
agents in Canada.)
62 Section 17(6) of the
Federal Court Act 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 has no jurisdiction to entertain
any proceeding in respect of the same matter unless the Act expressly confers
that jurisdiction on the Court.
63 The Trustees do not contend
that the arrest of the Ship and the adjudication of claims under maritime law
are bankruptcy matters. Their position is that the bankruptcy order of the
Belgian bankruptcy court, and the follow-up orders of the Canadian bankruptcy
court, transformed a maritime matter into one of bankruptcy. The corollary to
this argument is that the Federal Court, which has no bankruptcy jurisdiction,
thereby lost subject-matter jurisdiction in the case.
64 In my view MacKay J. was not
exercising original, ancillary or auxiliary jurisdiction in bankruptcy. If he
had, he would have been without jurisdiction and it would not be necessary to
have recourse to s. 17(6) of the Federal Court Act. This is because s.
17(6) presupposes that the Federal Court would have jurisdiction but for
that subsection. In ITO--International Terminal Operators Ltd. v. Miida
Electronics Inc., [1986] 1 S.C.R. 752, at p. 766, this Court concluded that
the Federal Court has jurisdiction only if certain conditions are satisfied,
including a statutory grant of jurisdiction by the federal Parliament. There has
been no such statutory grant of bankruptcy jurisdiction to the Federal
Court.
65 The subject matter of the
dispute before MacKay J. was the maritime lien asserted by Holt and the
claims of other creditors to security in the Ship. He was dealing with in
rem claims against the Ship, not in personam claims against the
shipowner. It was apparent from the SNCI's intervention that its mortgage claim
of $68 million would, if allowed, swallow whatever funds might be left after the
claims of the maritime lienholders had been satisfied. There was therefore no
realistic possibility of any residual funds to which the Trustees could properly
lay claim.
66 The bankruptcy was certainly
not irrelevant to the Federal Court proceedings. The Trustees rightly demanded
(and were accorded) rights of participation in the proceedings to protect the
interest of the bankrupt shipowner. There was a continuing bankruptcy aspect
throughout the Federal Court proceedings after April 5, 1996 which
MacKay J. acknowledged in his various orders. Nevertheless, having ruled
that he would recognize Holt's security interest as a matter of maritime law,
and having regard to the priority accorded to secured creditors in the order of
the Canadian bankruptcy court dated June 28, 1996, he rightly concluded that
there was no jurisdictional barrier to the Federal Court continuing to
adjudicate Holt's in rem action against the Ship.
6 Even If the Federal Court
Retained Jurisdiction, Ought It Nevertheless to Have Deferred to the Belgian
Bankruptcy Court on the Basis of "International Comity" and the Need for an
Integrated "Universalist" Approach to the Bankruptcy?
67 I should first of all address
the issue of "international comity" as it pertains to the present appeal and
then move on to consider some of the more specific approaches that have been
devised to solve problems arising from international bankruptcies. I will then
outline what I believe is the preferred approach in cases of this kind.
(a) The Role of International Comity
68 In Zingre v. The Queen,
[1981] 2 S.C.R. 392, Dickson J. (as he then was) commented at p. 401
that "the Courts of one jurisdiction will give effect to the laws and judicial
decisions of another jurisdiction, not as a matter of obligation but out of
mutual deference and respect".
69 Subsequently, in Spencer
v. The Queen, [1985] 2 S.C.R. 278, at p. 283, Estey J.
accepted as accurate the following definition of international comity:
"Comity" in the legal sense, is neither a
matter of absolute obligation, on the one hand, nor of mere courtesy and good
will, upon the other. But it is the recognition which one nation allows within
its territory to the legislative, executive or judicial acts of another nation,
having due regard both to international duty and convenience, and to the rights
of its own citizens or of other persons who are under the protection of its
laws: Hilton v. Guyot, 159 U.S. 113 (1895), at pp. 163-64.
70 The Canadian bankruptcy court
in this case did not have a monopoly in the determination of what level of
"deference and respect" was owed to the Belgian bankruptcy court. Within its own
bankruptcy jurisdiction, of course, it could and did make that determination.
Insofar as Holt's claim was "integrally connected to maritime matters", it lay
within the jurisdiction of the Federal Court (Ordon Estate v. Grail,
[1998] 3 S.C.R. 438, at para. 73) and it was for that court to decide
whether to defer to the Belgian bankruptcy court "having due regard both to
international duty and convenience, and to the rights of its own citizens or of
other persons who are under the protection of its laws".
71 In Morguard
Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, the
Court expanded on the definition of international comity by noting that the twin
objectives sought by private international law in general and the doctrine of
international comity in particular were order and fairness. This was reiterated
in Hunt
v. T&N PLC, [1993] 4 S.C.R. 289, at p. 325, and again in Tolofson
v. Jensen, [1994] 3 S.C.R. 1022, at p. 1058, where the Court gave
pre-eminence to the objective of order:
While, no doubt, as was observed in
Morguard, the underlying principles of private international law are
order and fairness, order comes first. Order is a precondition to justice.
72 It has been, of course, the
objective of international maritime law for centuries to create conditions of
order and fairness for those engaged in maritime commerce.
(b) The "Universalist" Approach
73 The Trustees argue that to
achieve the twin objectives of order and fairness in an international
insolvency, it is necessary to adopt the "universalist" approach because in
fairness "the claims of creditors can be finally determined only by the court of
the debtor's domicile in accordance with the law of that place" (Castel,
supra, p. 553). They advocate a "close networking between courts on
an international level" (factum, para. 36).
74 In the case at bar the
debtor's domicile was Belgium, and the Trustees contend that the Federal Court
erred in not requiring Holt and the other secured creditors to pursue their
claims in that country. The Trustees also argue that as the Quebec Superior
Court decided to come to the aid of the Belgian bankruptcy court, the Federal
Court ought, as a matter of "domestic" comity, to have deferred to that
decision.
75 There is much to be said for
the proposition that primary insolvency proceedings having been instituted in
Belgium, other jurisdictions where the bankrupt possessed assets should
cooperate to the extent permitted by their respective laws with the Belgian
courts. The need for such international cooperation in bankruptcy and insolvency
has been evident for a very long time, though the ever-continuing ascendency of
multi-national enterprises and acceleration towards a global economy have made
the underlying problems more acute. As long ago as 1883, in the case of
Canada Southern Railway Co. v. Gebhard, 109 U.S. 527 (1883), the United
States Supreme Court said, at p. 539:
Unless all parties in interest, wherever they
reside, can be bound by the arrangement which it is sought to have legalized the
scheme may fail. All home creditors can be bound. What is needed is to bind
those who are abroad. Under these circumstances the true spirit of international
comity requires that schemes of this character, legalized at home, should be
recognized in other countries.
76 The essence of the
universalist approach advocated by the Trustees is that there ought to be a
primary bankruptcy proceeding, title to assets locally situated should be vested
in the foreign representative of the bankrupt estate, creditors should not be
permitted to realize on a foreign debtor's assets in the local courts outside
the framework of the primary bankruptcy, and orders made in foreign bankruptcy
proceedings should be recognized and enforced elsewhere.
77 Professor J. Ziegel
contrasts the "universalist" approach to the "territorialist" approach, earlier
referred to as the "Grab Rule", and concludes that most jurisdictions exhibit
elements of both approaches:
International insolvency jurists have long
classified countries and their conflict of laws rules according to their
willingness to recognize and give effect to foreign insolvency orders and
judgments. Those regimes that are hospitable to extending such recognition are
labelled universalist; those that deny such recognition are classified as
territorialist. Common law countries are often described as belonging among the
universalist families, while civil law systems are believed to be
territorialist.
However, the pigeonholing is misleading. Common
law countries differ as widely in their international insolvency rules as do
civil law jurisdictions. On closer examination it will be found that some of the
jurisdictions that claim to be universalist only practise a very diluted form of
universalism while countries labelled as territorialist in fact extend varying
measures of recognition to foreign insolvency orders and foreign insolvency
representatives.
("Ships at Sea, International Insolvencies, and
Divided Courts" (1998), 53 C.B.R. (3d) 310. See also In re Treco,
supra, and Castel, supra, at pp. 553-54.)
78 Traditionally, only some of
the key components of the universalist approach have been reflected in Canadian
law. While our courts generally favour a process of universal distribution and
recognize a foreign trustee's title to property, they also permit concurrent
bankruptcies and protect the vested rights of what we regard as secured
creditors under Canadian law. With respect to the latter, the usual Canadian
position has been that a foreign trustee in bankruptcy should have no higher
claim on the secured assets of a bankrupt than if the bankruptcy had
occurred here. In a true universalist system the question of encumbrances would
be settled by the law of the place of the bankruptcy (which may, as in this
case, produce a result contrary to Canadian maritime law).
79 Further, Canadian law has
always recognized that initiation of foreign bankruptcy proceedings does not
prevent concurrent insolvency proceedings in Canada: see Castel, supra,
at p. 565; Allen v. Hanson (1890), 18 S.C.R. 667; Re Breakwater
Co. (1914), 33 O.L.R. 65 (H.C. Div.), and Re E. H. Clarke &
Co., [1923] 1 D.L.R. 716 (Ont. S.C.). The existence of two sets of
proceedings obviously raises the spectre of conflicting decisions or approaches,
although as noted in 1890 by the Chief Justice of this Court in Allen,
supra, at p. 674, it is "the duty of the courts of both countries to see
no conflict should arise". Conflict avoidance can take many forms, including
dismissing or staying Canadian proceedings. Subsection 43(7) of the
Bankruptcy and Insolvency Act permits the court to dismiss a petition if
it has "sufficient cause". This requirement may be satisfied if the debtor has
been declared bankrupt elsewhere. In fact, the courts have stayed liquidation
proceedings where bankruptcy proceedings are on foot in a foreign jurisdiction:
Re Stewart & Matthews, Ltd. and The Winding-Up Act (1916), 10 W.W.R.
154 (Man K.B.). Similarly, in an appropriate case, the Federal Court can avoid
conflict by staying its proceedings pursuant to s. 50 of the Federal
Court Act.
80 In short, Canada has adhered
to a middle position (dignified by the name "plurality approach") which
recognizes that different jurisdictions may have a legitimate and concurrent
interest in the conduct of an international bankruptcy, and that the interests
asserted in Canadian courts may, but not necessarily must, be subordinated in a
particular case to a foreign bankruptcy regime. The general approach reflects a
desire for coordination rather than subordination, with deference being accorded
only after due consideration of all the relevant circumstances rather than
automatically accorded because of an abstract "universalist" principle. As
pointed out by Professor Castel, supra, at pp. 554-55:
Under the doctrine of plurality which prevails
in Canada, each country has the right, if it deems it advisable, to allow
bankruptcy proceedings to begin in its territory by virtue of its bankruptcy
law. The court applies its own substantive law. Thus, bankruptcies may be
initiated in a number of countries with respect to the same debtor. In Canada,
this rigid doctrine is partially tempered by close cooperation with foreign
courts.
81 The question is whether, as
argued by the appellant Trustees, this orientation in Canada ought now to be
changed to a more "universalist" approach.
(c) The 1997 Amendments to the Act
82 In April 1997 Parliament
enacted Part XIII of the Bankruptcy and Insolvency Act, entitled
"International Insolvencies". It applies only to bankruptcy proceedings
initiated after September 30, 1997, and thus has no direct application here.
Nevertheless, it is worth noting that Parliament has continued the diluted
universalism (or "plurality approach") adopted by Canadian courts under the
common law. There is now, under Part XIII, specific authority to come to
the aid of foreign courts and "foreign representatives" in the administration
and adjudication of insolvencies that have international dimensions. There is
also authority for Canadian courts, under s. 271(1), to request "the aid
and assistance of a court, tribunal or other authority in a foreign proceeding".
The objective of these provisions is to facilitate the coordination of foreign
and domestic insolvency proceedings. Nevertheless, there is no rule requiring
Canadian courts to refrain from entertaining concurrent proceedings. On the
contrary, concurrent proceedings are anticipated as Canadian courts are given
authority under s. 268(3) to make orders that will result in a
coordination of domestic and foreign proceedings, not the
elimination of one in preference to the other. By authorizing a Canadian
court under subsection (2) to limit the domestic trustee's authority to property
situated in Canada, Parliament obviously anticipated that in certain cases a
territorial approach would be acceptable. The amendments provide specifically
that a court is not compelled to enforce any order made by a foreign court:
s. 268(6).
83 Moreover, s. 269
explicitly denies extraterritorial reach to foreign stay orders. It says that a
foreign stay of proceedings "does not apply in respect of creditors who reside
or carry on business in Canada with respect to property in Canada unless the
stay of proceedings is the result of proceedings taken in Canada".
84 It thus appears that Canadian
public policy, expressed as recently as 1997 by Parliament, endorses the
plurality approach developed over the years by the courts.
(d) The Preferred Approach
85 Given the almost infinite
variations in circumstances that can occur in an "international bankruptcy", the
pragmatism of the "plurality" approach continues to recommend itself.
International coordination is an important factor, but it is not necessarily a
controlling factor.
86 Where a stay is sought of
Canadian proceedings in deference to a foreign bankruptcy court, the Canadian
court before which the stay application is made (in this case the Federal Court)
ought to be mindful of the difficulties confronting the bankruptcy trustees in
the fulfilment of their public mandate to bring order out of financial disorder
and the desirability of maximizing the size of the bankrupt estate. These
objectives are furthered by minimizing the multiplicity of proceedings, and the
attendant costs, and the possibility of inconsistent decisions in relation to
the same claims or assets.
87 Nevertheless, courts must have
regard to the need to do justice to the particular litigants who come before
them as well as to the public interest in the efficient administration of
bankrupt estates. It would be inappropriate to elevate any one consideration to
a controlling position in the exercise of a bankruptcy court's discretion to
dismiss a petition under s. 43(7) or to stay proceedings under Part
XIII of the Act or in the Federal Court's decision to stay proceedings
under s. 50 of the Federal Court Act. Discretion should not be thus
predetermined. The desirability of international coordination is an important
consideration. In some cases, it may be the controlling consideration. The
courts nevertheless have to exercise their discretion to stay or not to stay
domestic proceedings according to all of the relevant facts of a particular
case.
7 In Light of the Foregoing,
Did the Federal Court Err in the Exercise of its Discretion to Deny the
Trustees' Application for a Stay of Proceedings?
88 The dollars and cents issue in
this case should not be obscured entirely by the scholarly debate between
universalists, pluralists and territorialists. The Trustees advocate a
"universalist" approach because it is in their interest, acting on behalf of all
creditors, to take the proceeds of sale of the Ship home to Belgium for
distribution according to Belgian law. It is clearly not in the respondent's
interest, because it appears that Holt's claim would not enjoy under Belgian law
the priority it has under Canadian law. If Holt is obliged to defend variations
of the "territorialist" position, it is because it seems that is the only way
its claim will be paid in full on a timely basis or perhaps at all.
89 The Federal Court's authority
to stay proceedings is found, as noted, in s. 50 of the Federal Court
Act:
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.
The principles on which the discretion should
be exercised in this type of case were authoritatively settled in Amchem,
supra. Sopinka J., speaking for the Court, posed the question at
p. 920, "is there a more appropriate jurisdiction based on the relevant
factors", to which he added at p. 921, "the existence of a more appropriate
forum must be clearly established to displace the forum selected by the
plaintiff" (emphasis in original).
90Amchem was a purely private
piece of litigation involving product liability claims related to exposure to
asbestos. International bankruptcies have a public aspect, because it is in the
public interest to facilitate the speedy resolution of the fallout from a
financial collapse. This does not change the Amchem analysis. It is
simply to emphasize an important public aspect of this case that was not present
in the Amchem fact situation.
91 The "natural forum" is the one
to which the action has the most real and substantial connection (Amchem,
at pp. 916, 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.
92 In addressing the issue of a
stay, MacKay J. acknowledged the importance of comity and international
coordination in a proper case. 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 (June 11 and June 28, 1996) he had already ordered appraised
and sold. Moreover, the order dated June 28 had expressly made the interest of
the appellant Trustees subject "to the rights, if any, of any creditors with
claims secured under the laws of Canada, as by law provided".
93 The appellants' strongest
argument is that the dispute is but weakly connected to Canada. This Court,
however, in Antares Shipping Corp. v. The Ship "Capricorn", [1977] 2
S.C.R. 422, recognized that lack of substantive connections to any
particular jurisdiction, including its home port, is a feature of ships engaged
in international maritime commerce. In that case, the Court refused to stay
proceedings in rem in which three Liberian corporations contested in
Canada the ownership of a Liberian registered ship. Liberia, of course, is a
flag of convenience. Ships registered there may never have occasion to "go
home". In Antares Shipping, the only connection to Canada was that the
ship was arrested at the suit of one of the Liberian corporations while it was
in Canadian waters. Ritchie J., speaking for the majority, recognized that
ocean-going ships present a particular problem. At p. 453, he adopted the
following observations of Lord Simon, dissenting, in The Atlantic Star,
[1973] 2 All E.R. 175, at p. 197:
Ships are elusive. The power to arrest in any
port and found thereon an action in rem is increasingly required with the
custom of ships being owned singly and sailing under flags of convenience. A
large tanker may by negligent navigation cause extensive damage to beaches or to
other shipping: she will take very good care to keep out of the ports of the
`convenient' forum. If the aggrieved party manages to arrest her elsewhere, it
will be said forcibly (as the appellants say here): "the defendant has no sort
of connection with the forum except that she was arrested within its
jurisdiction". But that will frequently be the only way of securing justice.
Belgium is not a "flag of convenience" like
Liberia but the principle remains the same. The "real and substantial
connection" test must take into account the special lifestyle of ocean-going
freighters.
94 As to the appellants'
allegation that Holt was engaged in "forum shopping", the further observations
of Lord Simon quoted in Antares Shipping are also apposite:
"Forum-shopping" is, indeed, inescapably
involved with the concept of maritime lien and the action in rem. Every
port is automatically an admiralty emporium. This may be very inconvenient to
some defendants; but the system has unquestionably proved itself on the whole as
an instrument of justice.
95 With respect to juridical
advantage, the trial judge stated that "there simply was no evidence of the
comparative status of the plaintiff's claim under Belgian and Canadian law"
(para. 76). On appeal, as mentioned, the Federal Court of Appeal noted that
"both parties concede [that it was] unlikely that Holt's in rem rights
could subsist in one form or another under Belgian bankruptcy laws" (endnote 5).
The apparent concession at the hearing before the Federal Court of Appeal only
adds to the weight of the arguments earlier accepted by MacKay J. to allow
the in rem action to proceed.
96 If, contrary to the concession
in the Federal Court of Appeal, we were to assume in the Trustees' favour that
there was no juridical advantage to Holt or other secured creditors in keeping
alive the in rem action in Canada, it means that there would equally be
no advantage to the Trustees in moving the proceedings to Belgium. The same
secured creditors would (on that assumption) exhaust the proceeds of the sale of
the Ship, but pay the additional penalty of the cost of duplicative proceedings
in Belgium. To talk of the benefits of the "universalist" approach to
international bankruptcies in such circumstances is illusory.
97 The trial judge also placed
reliance on the convenience to the U.S. creditors of litigating in Canada rather
than Belgium. This factor is relevant (Amchem, supra, at
p. 917) but would not, I think, be of great weight if the appellant
Trustees had been able to show that justice required deference to the court of
the domicile of the bankrupt.
98 In summary, the trial judge
considered the relevant factors in reaching his conclusion that the Federal
Court was the appropriate forum to resolve the respondent's claim. He committed
no error of principle and did not refuse "to take into consideration a major
element for the determination of the case": Harelkin v. University of
Regina, [1979] 2 S.C.R. 561, at p. 588; Friends
of the Oldman River Society v. Canada (Minister of Transport), [1992] 1
S.C.R. 3, at p. 77. In the absence of error, we are not entitled to
interfere with the exercise of his discretion.
V. Conclusion
99 The appeal is dismissed with
costs.
Appeal dismissed with costs.
Solicitors for the
appellants: Brisset Bishop, Montréal.
Solicitors for the
respondent: McInnes Cooper & Robertson, Halifax, Nova
Scotia.
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