These cases address the issue of the apparent conflict between the law and procedures of bankruptcy and Canadian Maritime Law. They arose out of the arrest of the ship “Brussel” at Halifax by the Respondent, a maritime lien holder. Shortly after the arrest the Belgium owner was declared a bankrupt and a Trustee in bankruptcy was appointed by the courts of Belgium with the mandate to realize upon the assets of the bankrupt worldwide. The Trustee brought an application before the Quebec Superior Court for an order recognizing the judgment of Belgium court and “declaring it executory in Quebec”. The Quebec Superior Court recognized the judgment and ordered that the property of the bankrupt be vested in the trustee subject to the rights of any secured creditors. The Trustee then applied to the Federal Court to adjourn the judicial sale of the “Brussel”. When this was unsuccessful, the Trustee returned to the Quebec Superior Court and obtained an order from that court directing the Federal court to pay the proceeds from the sale of the “Brussel” to the Trustee or, if the sale did not proceed, to deliver up the ship to the Trustee. The Trustee then applied to the Federal Court for an order staying the Federal Court proceedings and for payment of the proceeds of sale. The Federal Court declined the stay application and declined to pay the proceeds from the sale to the Trustee. The Trustee appealed to the Federal Court of Appeal. The Federal Court of Appeal dismissed the appeal holding that a legitimate legal advantage would accrue to the Respondent if its claim was adjudicated in the Federal Court since it was unlikely the Belgium courts would recognise the Respondent’s in rem claim. Further, the Federal Court of Appeal held that there was a "real and substantial connection" with Canada as Canada was where the ship was arrested. The Federal Court of Appeal was also critical of the Appellant’s use of the Quebec Superior Court to obtain an order against the Federal Court. Meanwhile, the Respondent appealed the order of the Quebec Superior Court directing that the proceeds from the sale of the ship be paid to the Trustee. This appeal was allowed by the Quebec Court of Appeal. The Quebec Court of Appeal held that even if the matter was properly characterized as one of bankruptcy and not maritime law, the Superior Court did not have any jurisdiction to make an order against the Federal Court. Both the judgment of the Federal Court of Appeal and the judgment of the Quebec Court of Appeal were appealed to the Supreme Court of Canada.
With respect to the appeal from the Federal Court of Appeal, the Supreme Court of Canada held that the Federal Court of Canada was not obliged to defer to the bankruptcy courts of the bankrupt’s domicile and did not lose its jurisdiction by reason of the bankruptcy. The Supreme Court further held that the Federal Court had a discretion to decide whether to stay the Canadian proceedings. The Court noted that the Trial Judge addressed the relevant factors in determining whether to stay the proceedings and committed no error in principle. In particular, the Supreme Court held that the Trial Judge was justified in putting considerable weight on the fact the Respondent would not enjoy the same priority in Belgium as in Canada. The Supreme Court also considered and rejected an argument that the bankruptcy gave the Trustee a valid claim to the ship. The Court held that the bankruptcy operates as an assignment of the bankrupt’s property to the trustee but is subject to any existing charges.
With respect to the appeal from the Quebec Court of Appeal, the Supreme Court of Canada held, in addition to the above, that once the Quebec Superior Court recognized the Federal Court had maritime jurisdiction to deal with the “Brussel” it should have directed the Trustee to apply to the Federal Court for a stay and should not have issued what amounted to an anti-suit injunction.