INAMINKA MARINE SERVICES LIMITED, a body corporate Plaintiff v. CANADA FLUORSPAR (NL) INC,, 2023 FC 574

Date: 20230420 Docket: T-279-22 Citation: 2023 FC 574 Ottawa, Ontario, April 20, 2023 PRESENT: The Honourable Mr. Justice Zinn ADMIRALTY ACTION IN REM AND IN PERSONAM BETWEEN: INAMINKA MARINE SERVICES LIMITED, a body corporate Plaintiff and CANADA FLUORSPAR (NL) INC, a body corporate Defendants ( In personam ) and THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP, “BARGE H-404” Defendants ( In Rem ) ORDER AND REASONS [ 1 ] This is an action by Inaminka Marine Services Limited [IMS] in personam against Canada Fluorspar (NL) Inc. [CFI] and in rem against the Ship “Barge H-404” [the Barge].

IMS claims amounts owing for services alleged to have been provided to these Defendants. [ 2 ] CFI moved, pursuant to 50(1) of the Federal Courts Act , RSC 1985, c F-7 [ Act ], for an Order staying IMS’s action and, under Rule 488 of the Federal Courts Rules , SOR/98-106 [ Rules ], releasing the Barge from arrest.

That motion was in the context of proceedings under the Companies’ Creditors Arrangement Act , RSC 1985, c C-36 [ CCAA ] in the Supreme Court of Newfoundland and Labrador in Bankruptcy and Insolvency [the Bankruptcy Court] arising out of the insolvency of CFI, in which the Bankruptcy Court has issued a stay of proceedings against CFI. [ 3 ] Justice Southcott, by Order dated October 5, 2022, granted the requested relief: Inaminka Marine Services Limited v Canada Fluorspar (NL) Inc. , 2022 FC 1375 . His Order [the Stay Order] reads in relevant part, as follows: 1.

The Plaintiff’s action is stayed, effective until October 17, 2022, or any later date to which the stay issued by the Supreme Court of Newfoundland and Labrador in Bankruptcy and Insolvency may be extended. 2. The Plaintiff shall have leave to apply to have the stay of its action lifted at an earlier time in the event of any material change in circumstances. 3.

The Defendant Ship is released from arrest. [ 4 ] Before the Court is a motion by IMS to have the stay of its action lifted and reinstating the Order arresting the Barge. [ 5 ] The material facts are not in dispute and those prior to September 28, 2022, are recited fully in the reasons of Justice Southcott. The following is a brief

summary of the facts prior to the Stay Order and those since the Stay Order that are relied on by IMS. [ 6 ] CFI operates a fluorspar mine in St. Lawrence, Newfoundland and Labrador. CFI is the owner of the Barge and obtained it to facilitate the loading of fluorspar from the mine to cargo ships at its loading pier at the Blue Beach Terminal. [ 7 ] In this action, IMS claims for consultation and design services that allowed the safe and effective utilization of the Barge by CFI in inclement weather. The cost of these services remain owing by CFI. [ 8 ] IMS commenced its action against CFI on February 16, 2022.

IMS obtained a Warrant for the arrest of the Barge, which was effected on February 18, 2022 [the Arrest]. [ 9 ] Pursuant to an order dated February 22, 2022 [the Interim Receivership Order], Grant Thornton Limited [GTL] was appointed interim receiver [Monitor] of all of the current and future assets, undertakings and properties of every nature and kind whatsoever, and wherever situate, including all proceeds thereof, save and except for the Excluded Property (as defined therein) of Canada Fluorspar Inc. and CFI. [ 10 ] The Interim Receivership Order stated that no proceeding against or in respect of CFI was to be commenced or continued except with the written consent of the Monitor or leave from the SCNL and that any and all proceedings underway against or in respect of CFI, were stayed pending further order of the SCNL.

[ 11 ] Pursuant to an initial order dated March 11, 2022, which was subsequently amended and restated on March 18, 2022 [the CCAA Order], the Supreme Court of Newfoundland and Labrador in Bankruptcy and Insolvency [Bankruptcy Court] appointed GTL as the Monitor for Canada Fluorspar Inc., CFI and Newspar (a General Partnership) pursuant to the CCAA . [ 12 ] The CCAA Order stayed all proceedings against CFI or its property until July 10, 2022.

The Bankruptcy Court stated that CFI and the Monitor were at liberty and authorized and empowered to apply to any court, tribunal, regulatory or administrative body for the recognition of the CCAA Order and for assistance in carrying out the CCAA Order. [ 13 ] Pursuant to an order dated March 18, 2022, the Bankruptcy Court approved a Sale and Investment Solicitation Process [SSIP] of CFI assets. [ 14 ] The Monitor received multiple bids on CFI’s assets. The Monitor made a recommendation on the bids received.

The Debtor-in- Possession [DIP] lenders agreed with the Monitor’s recommendation and the successful bidder [the Initial Successful Bidder] was notified on August 18, 2022. [ 15 ] The Stay Order of Justice Southcott stayed IMS’s action until October 17, 2022 or any later date to which the stay issued by the Bankruptcy Court was extended, subject to the right to seek leave to lift the stay in the event of any material change in circumstances. [ 16 ] The Initial Successful Bidder failed to top up the agreed upon deposit as required by the SSIP and therefore failed to meet the deadline requirement of the SSIP.

As a result, the agreement was terminated. [ 17 ] As of January 26, 2023, CFI claims that the DIP lenders have approved a new successful bidder [New Successful Bidder] and the Monitor entered into a binding letter of intent with the New Successful Bidder on February 13, 2023. [ 18 ] Pursuant to an order dated February 21, 2023, the Bankruptcy Court extended the stay of proceedings against CFI to May 31, 2023. [ 19 ] In addressing the motion before the Court to lift the stay, the Court must first determine whether there has been a material change in circumstances since the Stay Order issued.

If there has been a material change in the circumstances, then the Court must determine if it should exercise its discretion to lift the stay. [ 20 ] It is agreed that when determining whether there has been a material change in the circumstances, the Court is to be guided by the Supreme Court of Canada judgment in LMP v LS , 2011 SCC 64 [ LMP ]. There it was held that if there is a change, which if known at the time, would likely have resulted in different terms to the order, then that is a material change in circumstances.

The onus is on the party seeking a variation to establish such a change: see LMP at paras 31-33 . [ 21 ] IMS submits that individually or collectively, the following constitutes a material change in circumstances: (1) the sale to the Initial Successful Bidder which was before the Court when the Stay Order issued, subsequently failed, (2) distributing the assets through a Reverse Vesting Order [RVO] rather than the direct sale of the assets as initially contemplated when the Stay Order issued, and (3) the lack of maintenance to the Barge, diminishing its value since the issuance of the Stay Order.

Failure of Sale to Initial Bidder [ 22 ] IMS submits that the failure of the sale of CFI assets to the Initial Successful Bidder is a material change. It submits that this failure may result in the CCAA proceeding reverting to proceedings under the Bankruptcy and Insolvency Act , RSC 1985, c B-3 [ BIA ]. Under the BIA proceeding, it submits that it risks losing its priority claim and therefore, not being paid. [ 23 ] CFI submits that given the New Successful Bidder, the recovery potential for creditors has not changed because of the default of the Initial Successful Bidder.

It submits that even if the Initial Successful Bidder had completed that transaction, the unsecured creditors would not have recovered anything and other creditors with possible priority claims, such as the maritime lien claimed by IMS, would be addressed through the application for distribution process. [ 24 ] I agree with CFI. The failure of the sale to the Initial Successful Bidder is not a material change in the circumstances. I understand the concern of IMS that the proceeding may revert to a BIA proceeding and that under the BIA there may not be sufficient funds to pay IMS.

However, IMS has not provided sufficient evidence to demonstrate that the CCAA proceeding will revert to the BIA proceeding. It is at best a hypothetical. Given the New Successful Bidder, CFI’s submission that this is the best offer, and there being no indication that this new sale is likely to fail, IMS is in a similar position to that when Justice Southcott rendered the Stay Order. The change in sale from the Initial Successful Bidder to the New Successful Bidder is not a material change in the circumstances.

Reverse Vesting Order [ 25 ] IMS submits that selling the CFI assets through a RVO structure is a material change in the circumstances.

The Respondent explains that the RVO structure of the " “proposed transaction involves the vesting out of certain of the CFI liabilities and excluded assets to ResidualCo.” " [ 26 ] IMF submits that " “the Monitor made it clear that none of the creditors of the Companies would receive payment pursuant to the RVO” " and that " “IMS will have no opportunity under a RVO to present to the SCNL that it has a maritime lien and priority position against the Barge and the sale proceeds thereof.” " [ 27 ] I am unable to accept this submission.

First, the Monitor did not make it clear that the creditors would not receive payment pursuant to the RVO, the Monitor stated that unsecured creditors would receive nothing and that the secured creditors would suffer a substantial loss. This does not translate to none of the creditors receiving payment pursuant to the RVO. It does not appear to the Court to be any

different a situation vis-à-vis IMS than had the Initial Successful Bidder agreement been completed. [ 28 ] Second, the Monitor considered the possibility of other creditors with possible priority claims.

He stated that creditors with priority claims " “will have an opportunity to advance a priority claim through the application for distribution process.” " This contemplates IMS’s position that they have a priority claim against the Barge and the sale proceeds thereof, and allows it to make an application to the Bankruptcy Court to assert its claim in the CCAA proceeding. [ 29 ] IMS also says that the Monitor has not fully explained how the RVO structure will not result in any material prejudice to the creditors nor how it will not impair any of the creditors’ rights they had under the original asset sale.

Therefore, it says, IMS will be prejudiced by this new arrangement as the Barge will be sold to a different entity. IMS submits that if the new third-party purchaser sold the Barge to another third-party buyer or removed the Barge from the jurisdiction, then IMS would have a very difficult time establishing its position to the Bankruptcy Court of being a secured creditor of CFI and holding a maritime lien. [ 30 ] I find this latter point to be mere speculation.

Speculation of what the purchaser may or may not do with the Barge is insufficient to constitute a material change warranting the lifting of the Stay Order. [ 31 ] I am also not convinced by its first point, that because the Monitor has " “not fully explained” " that the RVO structure will not result in any material prejudice to the creditors nor impact their rights, IMS will therefore be materially prejudiced. Simply stating that the Monitor has not fully explained the RVO structure amounts to material prejudice is not sufficient.

The onus is on IMS to demonstrate how the lack of a full explanation amounts to a material prejudice to them. It has not done so. [ 32 ] In any event, I am not convinced that IMS will be worse off under the RVO structure than what was contemplated prior to the issuance of the Stay Order. [ 33 ] For this Court to determine that IMS will be worse off under the RVO structure compared to other viable alternatives requires the Court to assess whether the RVO is appropriate under the present circumstances.

Without a careful consideration of the RVO and viable alternatives, the Court is not in a position to make that decision. Since this consideration of the RVO and viable alternatives is to be determined by the Bankruptcy Court, I cannot conclude that selling the CFI assets by the RVO structure is a material change. Diminution of the Value of the Barge [ 34 ] IMS purports to have demonstrated that the Barge is losing value and that the Monitor is not taking care of it.

IMS has not provided evidence that shows the Barge is losing value, a picture of a list attached to the affidavit in support of this motion is not sufficient. [ 35 ] During the cross-examination of the Monitor, he stated that he was aware of the list identified in the affidavit since May 2022 and found it not to be of concern.

The Monitor asserts that there has been a weekly check of the Barge since the list was first discovered in May 2022. [ 36 ] IMS asserting that the Barge has not been " “moved, used, maintained nor its engines started” " since at least January 2022 and therefore, the Barge is deteriorating and losing market value is insufficient to demonstrate that the Barge is actually losing value. Mere assertions without evidence are insufficient to find a material change in circumstances. [ 37 ] Moreover, the onus is on IMS to demonstrate that the diminishing value is a material change from the Stay Order.

The only evidence that IMS has provided are pictures of a list, a list that CFI claims to have been aware of since May 2022, months prior to the Stay Order. I cannot make a determination on the diminishing value of the Barge being a material change because, based on the evidence, I am unable to determine whether the list that IMS has noted developed prior to or after the Stay Order. And even if I could determine that the list developed after the Stay Order, there is insufficient evidence to determine that the list has resulted in a loss of value that amounts to a material change.

Conclusion [ 38 ] For these reasons, this motion must be dismissed. The parties agreed that the successful party would be awarded costs of $5,000.00. [ 39 ] At the hearing, Mr. Spellacy expressed some frustration with the Court process and the delay in recovery his unpaid claim. I understand that he thinks that he would be in a better position had the Federal Court action proceeded and his maritime lien been established. The reality however, is that the owner of the Barge, the sale of which he wishes to realize his debt, is in bankruptcy. That has affected his ability to pursue his claims in this Court.

Regrettably, the fact of bankruptcy affects all creditors, secured or not. ORDER in T-279-22 THIS COURT ORDERS that the motion is dismissed, and the Plaintiff shall pay the Defendant, Canada Fluorspar (NL) Inc., costs of this motion in the all-inclusive amount of $5,000.00. "Russel W. Zinn" Judge

FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-279-22 STYLE OF CAUSE: INAMINKA MARINE SERVICES LIMITED, a body corporate v CANADA FLUORSPAR (NL) INC, a body corporate AND THE OWNERS AND ALL OTHERS INTERESTED IN THE SHIP, “BARGE H-404” PLACE OF HEARING: HELD BY VIDEOCONFERENCE DATE OF HEARING: MARCH 21, 2023 ORDER AND REASONS: ZINN J. DATED: april 20, 2023 APPEARANCES : Deborah L.J. Hutchings, K.C. For The Plaintiff William T. Cahill For The Defendants, CANADA FLUORSPAR (NL) INC, a body corporate SOLICITORS OF RECORD : MacNab, Fagan & Murphy Barristers and Solicitors St.

John's, Newfoundland and Labrador For The Plaintiff Cox & Palmer Barristers and Solicitors St. John's, Newfoundland and Labrador For The Defendants, CANADA FLUORSPAR (NL) INC, a body corporate