PEM-Air Aircraft Dispute Resolved

Ohio-based National Flight Services, Inc., served on July 18, 2002, an urgent application seeking, among other relief, to seize a turbine engine off a Jetstream aircraft, which was then in the possession of Fliteline Services Kitchner Inc. The aircraft was owned by Pembroke, Ontario-based PEM-Air Limited. National asserted various contractual and PPSA claims over the engine in question and another engine that was being held by National. Fliteline in turn asserted PPSA claims and possessory and storage liens over the aircraft for debts owed by PEM-Air to Fliteline. Other secured creditors, including CitiCapital Limited, also had PPSA registrations over PEM-Air assets.

On July 19, 2002, Justice Arthur Gans of the Ontario Superior Court of Justice, ordered on consent that the engine and the aircraft remain in Fliteline’s possession on an interim basis and pending the return of National’s application. The proceedings were settled on September 26, 2002, on the basis that the engine, still in National’s possession, would be swapped with one of the engines on the aircraft, the aircraft would then be sold to Alberta-based Swanberg Air Inc., and the proceeds from the sale would be used to pay the secured creditors of PEM-Air including Fliteline.

National was represented by Roger Jaipargas and Craig Hill of Borden Ladner Gervais LLP in Toronto. Fliteline was represented by Berkley Sells (litigation) of Fasken Martineau DuMoulin LLP in Toronto, and by Robert Livingstone, Q.C., (commercial) in London. PEM-Air was represented by Delbert O’Brien, Q.C., of Huckabone Shaw, O’Brien, Instance in Pembroke, Ontario, assisted by John Haralovich of KPMG LLP in Ottawa. CitiCapital was represented by Alan Whiteley in Picton, Ontario. Swanberg Air was represented by Lyle Carlstrom of Kay, Shipley, McVey & Smith LLP in Grande Prairie, Alberta.