On 1 September 2016, the Korean Court issued orders commencing
rehabilitation proceedings for Hanjin and staying proceedings
against it and its assets (Korean Orders).
The purpose of the Korean proceeding is to rehabilitate the
insolvent debtor company, Hanjin, by restructuring its debts. The
debts are restructured according to a rehabilitation plan approved
by the creditors and the Korean Court. The aim is to protect Hanjin
while it trades out of its debt.
Foreign creditors should note that Canadian maritime law
recognizes foreign maritime liens, whatever the underlying claim,
and grants them the priority of a Canadian maritime lien in
Canadian proceedings. That said, the foreign maritime lien must
have arisen by application of the substantive law of the
jurisdiction most closely connected with the cause of action. Some
Hanjin creditors have commenced in rem proceedings against Hanjin
vessels in Canadian waters in the Federal Court of Canada. There
are currently several proceedings filed before the Federal Court.
This has resulted in the Federal Court issuing arrest warrants for
the Hanjin Vienna, Hanjin Marine and the
Hanjin Scarlet, and the filing of multiple caveats by
other foreign and domestic in rem claimants.
While it is within the Federal Court's discretion to stay
these proceedings, in essence, to give effect to the Korean Orders,
on 28 September, Hanjin filed a Petition in the Supreme Court of
British Columbia for recognition of the Korean Orders and ancillary
relief. Hanjin requested that the Court, amongst other things,
All proceedings taken or that might
be taken in Canada against Hanjin and its property are stayed;
Further proceedings in any Canadian
proceedings are restrained;
The commencement of any proceedings
in Canada against Hanjin and its property is prohibited; and
Hanjin is prohibited from selling or
disposing of its property in Canada outside of the ordinary course
of business, except with leave of the Court.
The Petition, opposed by various claimants, was heard on 30
September by The Honourable Mr. Justice Sigurdson. His ruling was
released on 3 October. Mr. Justice Sigurdson, in large part,
recognized the Korean rehabilitation order. He did not, however, do
so nunc pro tunc (with retroactive effect) as Hanjin had
requested. Hanjin is at liberty to seek a variance of the order in
that regard, on proper notice to claimants. As to the in rem
actions currently pending before the Federal Court regarding the
Hanjin Vienna, Hanjin Marine and Hanjin Scarlet,
the order does not apply to those proceedings, nor to the parties
in those proceedings (including caveators), unless and to the
extent the Federal Court may determine in the exercise of its own
It should be noted that the Supreme Court of Canada has held
that the Federal Court of Canada is not required to defer to the
bankruptcy courts of the debtor's home jurisdiction. Further,
the Federal Court does not lose its jurisdiction because of the
bankruptcy, and has discretion to determine whether to stay any
proceedings before it. The Supreme Court of Canada has also
rejected an argument that bankruptcy vests in the
Trustee-in-bankruptcy a valid claim to a ship. While bankruptcy
operates as an assignment of the bankrupt's property to the
Trustee, it remains subject to any existing charges.
The Canadian bankruptcy regime was designed with two key purposes in mind – provide options to ‘honest but unfortunate' debtors struggling with an unmanageable financial load and create an orderly means for creditors to recover amounts owed them.
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