Federal Court Addresses Maritime Lien Issues In OW Group Bankruptcy Proceedings

In a recent decision, the Federal Court of Appeal had occasion to consider a claim at the crossroads of bankruptcy and maritime law (ING Bank N.V. v. Canpotex Shipping Services Limited et al., 2017 FCA 47). Normally in Canada, bankruptcy cases are adjudicated in the superior courts of the respective provinces. This case was unusual because, although also a bankruptcy case, it fell under the Federal Court's jurisdiction over admiralty matters.

The case arose out of the bankruptcy of the OW Group, which was, prior to the bankruptcy, the world's largest supplier of marine bunker fuel. The OW Group collapsed following an accounting scandal, which ultimately sent it into receivership. This case is one of many hundreds of actions going on around the world involving the OW Group bankruptcy. Similar actions have been pursued by way of arbitration and at all levels of court, in places as far afield as England, the USA, Singapore, Chile and India. Many of these cases continue to be litigated or are under appeal.

When large cargo ships need gas, it can cost half a million dollars or more to fill up the tank. OW was in the business of contracting with vessels and their charterers to arrange fill ups in many ports around the world, including Vancouver. To meet its obligation to supply the fuel, OW would typically engage a local supplier in each port, often through a lengthy chain of supply. When the OW Group went bankrupt, the physical suppliers were left unpaid and both they and the OW receiver demanded payment from the customers. At issue in all these cases is who, as between OW and the suppliers that were engaged, is entitled to that payment from the customer.

The customer does not usually care who gets paid, as long as it does not have to pay twice. In this case, like many others, the customer (a charterer of the vessels) paid the money into court, relying on a process called "interpleader." In an interpleader action, a debtor who faces competing claims and acknowledges liability may make the payment into court and leave it to the competing claimants to sort out between themselves who has the better claim to the funds in court.

A proper interpleader occurs where the claimant is facing competing claims in respect of a single debt, however. The problem in this case was that the customer was facing multiple sources of liability that it was seeking to extinguish in the one action: it had contracted directly with OW, but it also faced a lien claim...