Facts: The plaintiff mortgagee arrested the defendant ship in Quebec in 2021 as a result of arrears on the mortgage over the same. The defendant filed a Statement of Defence and denied the mortgage was in arrears based on an Italian law which granted a moratorium on the payment of debts as a result of the COVID-19 pandemic. Shortly after the arrest the defendant commenced bankruptcy and restructuring proceedings in Italy and a recognition order was entered in the Superior Court of Quebec recognizing the Italian proceedings as the foreign main proceeding pursuant to the Companies’ Creditors Arrangements Act. The defendants then brought this motion seeking to stay proceedings in the within action based on the Italian proceedings and Quebec recognition order, and release of the ship without bail.
Decision: Motion dismissed.
Held: As the defendants filed a Statement of Defence in the action which engaged upon the merits of the claim, the jurisdiction of the Court could not be challenged as a result. The Court held there was insufficient evidence to permit a finding as to the interpretation and application of the Italian law to the present motion for stay and release of the defendant ship from arrest without security. The Court further held that the recognition order issued by the Quebec court did not apply to the within proceedings before the Federal Court in respect of the defendant ship, and the plaintiff was entitled to pursue its claim as it was within the jurisdiction of the Federal Court. The Court rejected the defendant’s argument that posting security for release of the ship would violate the Italian bankruptcy order prohibiting payment of creditors, finding that the defendant had been paying unsecured creditors and that the posting of security is not equivalent to paying a debt.