Canada: Canadian Maritime Law – Key Judgments – 2013

2013 has seen the usual variety of important Canadian maritime law decisions. The following is a sampling of those of greater significance that have arisen in various areas of admiralty practice.


Newfoundland (Workplace Health, Safety & Compensation Commission) v. Ryan Estate

The estates and widows of two Newfoundland fishers who drowned at sea sued the designer and builder of their fishing vessel for negligence and breach of contract, as well as the Attorney General of Canada, for alleged negligence in inspecting the vessel and testing its stability. The families of the deceased also obtained compensation from the provincial Workplace Health, Safety and Compensation Commission, under an arrangement contingent upon whether they were ultimately successful in their lawsuits. An internal review specialist with the Commission decided that their action against the defendants was barred by sect. 44 of the Workplace Health, Safety and Compensation Act. (the "WHSCA"). Sect. 44 removed all rights of action, statutory or otherwise, of workers and their dependents against employers or other workers resulting from injuries in respect of which compensation was payable, or arising in the course of the workers' employment. The Supreme Court of Newfoundland and Labrador, Trial Division, later reversed that ruling, resulting in an appeal to the provincial Court of Appeal by the Commission, the designer and the builder of the vessel and the federal Attorney General.

The Court of Appeal, applying the interjurisdictional immunity doctrine, held that sect. 44 impaired a core content of federal jurisdiction over navigation and shipping, because it purported to eliminate reliance on maritime negligence law to obtain compensation (by way of tort actions taken under the Marine Liability Act), for death or injury of Newfoundland and Labrador fishers arising from workplace accidents occurring in a maritime context. The provincial provision was also held inapplicable under the paramountcy doctrine, in that it was found to be incompatible with the federally-enacted right of dependents of deceased maritime workers to sue for damages in tort under subsect. 6(2) of the MLA and also frustrated the purpose of that federal legislation, denying dependents of deceased fishers access to the federal maritime tort regime to the same extent that the deceased would have had if they had not perished.

The Supreme Court of Canada disagreed. It found that the interjurisdictional immunity doctrine did not apply, because sect. 44, although it did affect, nevertheless did not impair, the integrity of federal maritime negligence law. The intrusion of sect. 44 on that body of federal law was held to be not significant or serious, considering the breadth of the federal power over navigation and shipping, the absence of impact of the Newfoundland provision on the uniformity of Canadian maritime law, and the historical application of workers' compensation schemes in the maritime context. In addition, the federal paramountcy doctrine had no application in this case, because the federal and provincial provisions, in the Court's view, could operate side by side without conflict. Nor did the WHSCA, establishing a no-fault regime to compensate for workplace-related injury, frustrate the purpose of subsect. 6(2) of the MLA. That provision was enacted to expand the range of claimants who could start an action in maritime negligence law. The WHSCA simply provided for a different (no-fault) regime for compensation that was distinct and separate from the regime of tort law.

The Supreme Court's decision suggests that provincial legislation is now being given a wider ambit of application to legal issues involving the maritime context and maritime workers.

9171-7702 Québec Inc. v. La Reine

This renewed deference to provincial law in matters that are arguably maritime in character is nowhere more obvious than in the decision of de Montigny J. in this case, involving a claim for the sale in Quebec of a fishing vessel that had been forfeited for drug offences and then sold by the federal government to the plaintiff. The plaintiff alleged that the model number of the vessel's engine had been misstated in the offer to purchase and the bill of sale, the stated model having greater horsepower than the vessel's actual engine. plaintiff therefore sued the Queen in Right of Canada, and the federal Crown cross-claimed against the company that had prepared the vessel's valuation surveys, from which the incorrect engine model number was copied into the offer to purchase. The Court expressed concern as to whether Canadian maritime law or the civil law of Quebec would govern this case and, in particular, the cross-claim.

De Montigny J. began by analyzing a host of classic Canadian constitutional law decisions and principles, on various points, including the constitutional limitation on the scope of Canadian maritime law found in the division of federal and provincial powers under the Constitution Act, 1867, the federal jurisdiction over navigation and shipping under that Act, the importance of uniformity in Canadian maritime negligence law, the applicability of provincial law to the federal Crown, the pith and substance theory, the incidental effects theory and the doctrines of federal paramountcy and interjurisdictional immunity. He observed that the latter doctrine had been narrowed so as to apply only where the impugned provincial enactment impaired, and not merely affected, the application of federal law. At the conclusion of this analysis, he decided that the applicable law governing the formation and performance of a contract for the sale of a ship, concluded in Quebec, was the Civil Code of Quebec and not Canadian maritime law. He found that provincial legislation on the contract of sale and its performance did not impair any core area of Canadian maritime law. In this connection, he cited recent decisions holding that provincial occupational health and safety legislation applied aboard ships, and concluded that the same principle must apply a fortiori to the sale of a ship, which is a matter even more remote from navigation and maritime law.

Applying Article 1716 of the Civil Code, de Montigny J. then held that the federal Crown had not breached its warranty to deliver a vessel of the quality specified in the offer to purchase simply because the model number of the vessel's engine was incorrectly recorded in the sale documents. The plaintiff had also been negligent in not verifying the model number as it could have done, and in not becoming aware of the "as is-where is" non-responsibility clause of the contract, a provision valid at civil law and common law alike. The action was therefore dismissed, which caused the cross-claim to be pointless.

One suspects that this decision will be appealed, on the important constitutional point of whether provincial sale of goods legislation or federal maritime law governs the conclusion and performance of ship sale contracts occurring in the provinces or territories of Canada.


SDV Logistiques (Canada) Inc. v. "Dieselgenset" (The)

The Export Development Corporation ("EDC") loaned money to two hotel companies to complete construction of two vessels at the Davie shipyard in Quebec. The loan was secured by a first priority mortgage on the hulls under construction, as well as all appurtenances of each of them, including machinery and equipment. EDC also registered a hypothec on the appurtenances under Quebec's Register of Personal and Movable Real Rights. Four diesel generators were to be installed on these vessels during their construction, as well as a lifting device. The shipyard hired the plaintiff ("SDV") to pick up that machinery in Germany and ship it to Canada. The generators and lifting device were picked up in Kiel and delivered to storage in the Port of Hamburg, but were never shipped to Canada. The Davie shipyard company later ceased operations, but its successor company continued to pay monthly storage fees on the goods stored in Hamburg, while operating under the Companies' Creditors Arrangement Act. A new company later purchased Davie's assets, but ceased to make payments to SDV (amounting to $234,000.) for storing and warehousing the equipment. The two hotel companies defaulted on their loan agreement with EDC, resulting in EDC seeking to sell the unfinished hulls under the Canada Shipping Act, 2001.

A warrant for the arrest of the generators and lifting device was issued by SDV but was never served in rem. SDV released its warrant and amended its action against EDC, turning it into a suit in personam for payment of the storage charges. SDV applied to the Federal Court for an order to allow the sale of the generators and the lifting device, under Rule 379 of the Federal Courts Rules, which provision authorizes the Court to order the sale of perishable or deteriorating property. SDV's motion was dismissed by Prothonotary Morneau on the grounds that the Court lacked jurisdiction to make the order sought, resulting in an appeal to a Federal Court judge.

Scott, J. upheld Morneau, P.'s judgment, emphasizing that discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge, unless they are clearly wrong or raise questions vital to the final issue of the case. The question of jurisdiction in this case was one of law, attracting a standard of correctness, but (contrary to EDC's pretensions) the judge applying that standard was obliged to set aside the findings in first instance and conduct his own analysis.

While it was clear that the Federal Court had in personam jurisdiction over cases dealing with navigation and shipping, including claims for warehousing arising out of the carriage of goods by sea, in this case, SDV had no contract for the storage concerned with the new operator of the Davie shipyard or with EDC, the sole in personam defendant. For the Federal Court to order the judicial sale of cargoes which have never been in Canada, there must be a statutory provision granting the Court power to force such a sale. Such a provision was found in the Canada Shipping Act, 2001, sect. 69, with respect to mortgaged property not located in Canada, but SDV, unlike EDC, was not the mortgagee of the equipment concerned. No equivalent provision in the statute granted power to issue an order of sale in favour of SDV for the outstanding storage charges, so that its action against EDC was now a purely in personam proceeding. The Court therefore lacked jurisdiction to order the relief sought. In addition, there was no evidence that the cargoes concerned were actually in peril, as was required to support an order of sale under Rule 379 of the Federal Courts Rules, on the sale of perishable or deteriorating property. SDV's appeal was therefore dismissed with costs.

Her Majesty the Queen in Right of the Province of Alberta v. Toney

This long, but fascinating, judgment addresses the question of whether the Federal Court has in personam jurisdiction over the government of a Canadian province in a maritime death claim. The Toney family sued the Province of Alberta in the Federal Court, alleging that the negligent operation of a rescue boat owned and operated by the Province of Alberta had caused the death of their five-year-old daughter in a boating accident on an Alberta lake. The trial judge upheld the Federal Court's in personam jurisdiction against Alberta over the objections of the Province, which then appealed the ruling to the Federal Court of Appeal.

The appeal was allowed in a split decision (2 to 1). Near J.A., speaking for the majority, and applying the standard of correctness, first recalled four basic principles: a) Parliament and the provincial legislatures have adopted the premise that the Crown is prima facie immune from legislation (as expressed in both the federal and Alberta Interpretation Acts); b) where Parliament has authority to legislate in an area, a provincial Crown will be bound if Parliament so chooses; c) there must be some legislative provision in order for provincial Crowns to be sued in the Federal Court;and d) the Federal Court must have jurisdiction over both the subject-matter of the dispute and the parties. The majority noted that the Crown was presumed not to be bound by legislation, unless it was expressly named therein, or was bound by necessary implication, or unless it had waived its immunity from suit.

As to express binding, sect. 22 of the Federal Courts Act, granting the Federal Court concurrent Admiralty jurisdiction "between subject and subject as well as otherwise" (emphasis added) did not, in the opinion of the majority, sufficiently express Parliament's intention to bind the provinces or to confer on the Federal Court in personam jurisdiction over the provincial Crowns, nor was such a proposition supported by the case law, which had construed those final words of sect. 22 to mean that a general description of the subject-matter of concurrent jurisdiction was insufficient to displace the provincial Crown's traditional immunity from suit in the Federal Court.

Although sect. 19 of the Federal Courts Act did confer in personam jurisdiction on the Federal Court over provincial Crowns in cases of intergovernmental controversies, if the particular province involved had (like Alberta) adopted legislation accepting such jurisdiction, that provision nevertheless did not contemplate suits against provincial governments being instituted in Federal Court by private citizens or companies.

Nor did the majority accept the argument for Federal Court jurisdiction based on Alberta's Proceedings Against the Crown Act ("APACA"),which had been interpreted so as to require any such suits to be instituted in an Alberta court.

The majority disagreed that the Federal Court had in personam jurisdiction over the provincial Crowns by necessary implication and that the Court`s jurisdiction would be wholly frustrated if Alberta were not bound (especially since a remedy against the Province could be sought in the Alberta Court of Queen's Bench). Alberta had not waived its immunity by past conduct, since the case law invoked in support of that argument involved suits against certain particular corporations that were treated as if they were private parties.

Sharlow J.A., in a vigorous dissent, held that the Federal Court's jurisdiction in this matter depended solely on federal (not Alberta) legislation, namely the Marine Liability Act (with respect to substantive matters) and the Federal Courts Act regarding procedural questions. Sect. 17 of the federal Interpretation Act provided for the immunity of the Crown from any enactment "except as mentioned or referred to in the enactment". In Oldman River, the Supreme Court of Canada had held that, under sect. 17, the Crown (federal or provincial) was bound by a federal statute if the statute so stated or if a "purposive and contextual analysis of the statute discloses a clear parliamentary intention to bind the Crown" or if the statute's purpose would be wholly frustrated unless the Crown were bound by it. The Federal Court`s jurisdiction in actions "between subject and subject as well as otherwise" (emphasis added), enacted by sect. 23 of the Federal Courts Act, had been held to refer to an action against a public authority, and therefore should also be construed, under the similar wording of sect. 22, so as to include a claim against a province.

The claim relating to the death of the Toney girl was clearly founded on Canadian maritime law (under the Marine Liability Act) and within the Federal Court's concurrent maritime jurisdiction, under the Federal Courts Act, paragraphs 22(2)(d) and (g). The jurisdiction of the Federal Court over sect. 22 matters was enforceable in personam under subsect. 43(1) of the Act "in all cases" and was broad enough to include a claim in personam for damages caused by a ship or its operation where the ship was owned by a province. The fact that paragraph 43(7)(b) of the Act precluded an action in rem in the Federal Court against any ship owned or operated by Canada or a province where the ship was engaged on government service, would make no sense if the Federal Court lacked jurisdiction to consider a claim in personam against a ship owner that was a province.

Accordingly, Sharlow J.A. found that sects. 22 and 43 of the Federal Courts Act, read as a whole and in context, intended to give the Federal Court complete and comprehensive jurisdiction in all Marine Liability Act claims against Alberta, thus meeting the "purposive and contextual analysis" test for the application of the second branch of sect. 17 of the Interpretation Act (disclosing a clear Parliamentary intention to bind the Crown).

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