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, order that:
- 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 unfettered discretion.
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.