Fraser Point Holdings Ltd. v. Vision Marine Technologies Inc.

Fraser Point Holdings Ltd. v. Vision Marine Technologies Inc.
Court (s) Database
Federal Court Decisions
Date
2023-05-25
Neutral citation
2023 FC 738
File numbers
T-1416-20
Decision Content
Date: 20230525
Docket: T-1416-20
Citation: 2023 FC 738
Ottawa, Ontario, May 25, 2023
PRESENT: The Honourable Madam Justice Rochester
BETWEEN:
FRASER POINT HOLDINGS LTD.
Plaintiff
and
VISION MARINE TECHNOLOGIES INC.
Defendant
ORDER AND REASONS
I. Overview [1] The Defendant brings the present motion to appeal Fraser Point Holdings Ltd v Vision Marine Technologies Inc, 2022 CanLII 134244 [Order], in which Associate Judge Alexandra Steele denied the Defendant’s motion to strike and concluded that the Federal Court has jurisdiction to hear the Plaintiff’s claim for the cost of repairs to a vessel it purchased from the Defendant.
[2] The central issue in the present appeal is what impact, if any, does the Supreme Court’s judgment in Desgagnés Transport Inc v Wärtsilä Canada Inc, 2019 SCC 58 [Wärtsilä] have in terms of the jurisdiction of the Federal Court to hear a dispute concerning the purchase of a vessel where the contract was entered into in Quebec. The contract at issue, for the sale of a pleasure boat, does not contain a governing law clause, nor does it contain a jurisdiction or forum selection clause.
[3] In Wärtsilä, the central issue was whether a manufacturer and supplier of marine engines was entitled to rely on the limitation of liability clause in its contract with the vessel owner, who had suffered loss and damage when the engine failed. The question on appeal was whether Canadian maritime law or the Civil Code of Québec, CQLR c CCQ-1991 [Civil Code] governed the vessel owner’s claim. The Supreme Court held that notwithstanding that the sale of marine engine parts for use on a commercial vessel is governed by Canadian maritime law, the Civil Code article pertaining to warranties in contracts of sale (article 1733) was also directed at the same factual situation, thereby giving rise to a double aspect scenario (para 5). The fact that Canadian maritime law extended to the matter at issue, did not mean that the overlapping provincial rule could also not validly govern the sale (paras 80-81). The Supreme Court ultimately concluded that the article on warranties of the Civil Code was operative and governed the dispute, prevailing over the Canadian non-statutory maritime law relied upon by the manufacturer (paras 103-106).
[4] The Defendant, the moving party, submits that the Supreme Court’s decision in Wärtsilä results in the Civil Code taking precedence over Canadian maritime law in cases such as the present. The effect, in the Defendant’s view, is that there is no longer an existing body of federal law which is essential to the disposition of the case. Consequently, the second branch of the three-part test for jurisdiction set out by the Supreme Court in International Terminal Operators Ltd v Miida Electronics Inc, [1986] 1 SCR 752 [ITO] is not satisfied, with the result that the Federal Court does not have jurisdiction to hear the present claim. While the subject matter of the contract of sale, and of the resulting dispute, is a vessel, the matter, in the Defendant’s submission, is governed in its entirety by the Civil Code. Canadian maritime law cannot resolve the matter or dispose of the case because the Civil Code is a complete body of law.
[5] The Defendant further submits that Associate Judge Steele erred in law when she determined that the test in ITO was satisfied and the Court has jurisdiction. She further erred, in the Defendant’s view, by finding that it is not the Court’s role to determine what law actually applies to the dispute on the motion to strike. Rather, at this stage, she concluded that “the Court must only decide whether it is plain and obvious that the Court is without jurisdiction to entertain the Plaintiff’s claim because the matter is not concerned with navigation or shipping.” In so finding, the Defendant pleads that Associate Judge Steele committed an error of law.
[6] The Plaintiff submits that jurisdiction was not an issue in Wärtsilä, rather the sole issue was the governing law. The Plaintiff pleads that the Supreme Court did not reduce or detract anything from the Federal Court’s jurisdiction as understood prior to Wärtsilä, but rather broadened the applicable law to include matters, such as the sale of goods, which have, constitutionally, a double aspect. While the Supreme Court in Wärtsilä concluded that non-statutory Canadian maritime law did not take precedence over the provisions of the Civil Code, this does not deprive the Federal Court of jurisdiction with respect to a maritime matter. The Plaintiff argues that the present dispute is integrally connected to maritime matters, namely the sale and delivery of an unseaworthy vessel. The Plaintiff submits, therefore, that on the basis of the Tropwood AG et al v Sivaco Wire & Nail Co et al, [1979] 2 SCR 157 [Tropwood] the Federal Court has jurisdiction even if the governing law is not Canadian maritime law, but that of another jurisdiction – in this case Quebec.
[7] The Plaintiff pleads that Associate Judge Steele did not err in concluding that this Court has jurisdiction to hear its claim. The Plaintiff highlights numerous authorities where the Federal Court had jurisdiction over disputes in connection with the sale of a vessel. The Plaintiff submits that this case is integrally connected to maritime matters, raising such issues as the winterization of the vessel, its preparation for transport, its seaworthiness, and the costs of repairs to the engine and the vessel. The Plaintiff underscores that the Statement of Claim invokes remedies available under Canadian maritime law along with certain articles of the Civil Code, and pleads that the Associate Judge correctly determined that (i) federal power over navigation and shipping, and the Court’s jurisdiction over matters coming under Canadian maritime law, are not ousted by the fact that valid provincial legislation may also govern the sale of a ship, and (ii) it is not plain and obvious that Canadian maritime law does not apply to all or part of the claim or that only the Civil Code should apply to the case.
[8] This matter is a challenging one that speaks to the heart of the Federal Court’s jurisdiction should a matter arise in or have a connection with Quebec, following the decision by the Supreme Court in Wärtsilä. Indeed, while the present dispute arose in the context of the sale of a vessel – the ramifications of this case for this Court’s jurisdiction in the context of maritime matters, and matters involving non-statutory federal law, go far beyond that.
[9] I thank counsel for the Plaintiff and the Defendant, who are experienced members of the maritime bar, for their thoughtful and considered arguments on the issue of this Court’s jurisdiction. As noted by counsel during the hearing, this is the first case where the impact of Wärtsilä in this respect is being considered.
II. Background [10] The Defendant is a company located in Boisbriand, Quebec, that manufactures and sells pleasure boats. The Plaintiff is a British Columbia holding company that acts as a trustee for the Potter family, located in West Vancouver. On November 23, 2017, the Plaintiff purchased a demonstrator (demo) twenty-two foot 2016 Bruce model boat, together with a demo trailer for $55,000 plus taxes. The sale was on a cost, insurance, and freight basis for delivery in Mill Bay, British Columbia, meaning the costs of delivering the vessel to the destination, including the insurance costs, were for the Defendant’s account. As noted above, the contract does not contain a governing law clause, nor does it contain a jurisdiction or forum selection clause.
[11] The vessel was inspected at the Defendant’s premises by a representative of the Plaintiff. The Plaintiff alleges that at the time of the sale, given the winter conditions in Western Quebec, the Defendant’s representatives confirmed to the Plaintiff that all the necessary winterizing and preparation for variations in temperature during the transport of the vessel had been performed. The Plaintiff relies, among other things, upon a clause in the contract that provides for the vessel and trailer to be secured, readied, protected and covered, at the Defendant’s cost, for on deck truck transportation.
[12] In December 2017, the vessel and the trailer were transported by truck from Quebec to British Columbia. Receipt in Mill Bay was acknowledged on January 5, 2018. The Plaintiff alleges that the vessel remained covered and was immediately placed into storage for the remainder of the winter.
[13] The Plaintiff alleges that once the vessel was brought out of storage, in July 2018, the engine would not function having been irremediably damaged by the presence of fluids within the tubing and engine structure at freezing temperatures, as a result of the Defendant’s failure to drain the engine. The Plaintiff further alleges that there were substantial cracks in the deck, finish, fibreglass, and wood inlay, resulting from inadequate preparation of the vessel for transport. The Plaintiff submits that these defects affected the seaworthiness of the vessel.
[14] Initially, the Plaintiff sought to have the sale cancelled and obtain a refund. The Defendant refused, and thus the Plaintiff proceeded to have the engine replaced and the vessel repaired at a cost of approximately $110,000.
[15] On November 20, 2020, the Plaintiff instituted proceedings in this Court seeking compensation for the cost of the repairs. In its Statement of Claim, the Plaintiff invokes all rights and remedies under Canadian maritime law together with those available under articles 1726 and 1729 of the Civil Code.
[16] The Defendant then sought to have the Statement of Claim stuck without leave to amend pursuant to Rule 221 of the Federal Courts Rules, SOR/98-106 [Rules] for want of jurisdiction. The Defendant, relying on Wärtsilä, submitted that the Statement of Claim clearly relates to a matter of property and civil rights which is exclusively within provincial jurisdiction. The Defendant highlighted that in the past, this Court has determined that the law governing the sale of a pleasure boat is not intrinsically related to maritime law and is therefore a matter of provincial legislative competence.
[17] The Plaintiff opposed the motion to strike, pleading that the sale of a ship is clearly a matter covered by Canadian maritime law and/or integrally connected to shipping and navigation such that this Court has jurisdiction. The Plaintiff argued that Wärtsilä does not oust or constrain this Court’s jurisdiction over maritime matters - in fact, Wärtsilä was not concerned with the issue of jurisdiction, rather with determining the applicable or operative law, which is a question for the merits, especially since the contract at issue in this case does not specifically identify the applicable law(s).
[18] Associate Judge Steele considered the requirements of this Court’s jurisdiction as set out in ITO, along with the Federal Courts Act, RSC 1985, c F-7 [Federal Courts Act], pursuant to which this Court has broad and concurrent jurisdiction in all cases in which a claim for relief is made or a remedy is sought under Canadian maritime law or any other law of Canada coming within the class of subject of navigation and shipping (ss 22(1) of the Federal Courts Act). The test as set out by the Supreme Court in ITO at page 766 is:
1. There must be a statutory grant of jurisdiction by the federal Parliament.
2. There must be an existing body of federal law which is essential to the disposition of the case and which nourishes the statutory grant of jurisdiction.
3. The law on which the case is based must be "a law of Canada" as the phrase is used in s. 101 of the Constitution Act, 1867.
[19] Associate Judge Steele noted that in Wärtsilä, the Supreme Court found that the sale of a vessel, as well as the sale of equipment required to operate the vessel, is integrally connected to shipping and navigation such that Canadian maritime law may validly extend and apply to such sales (Order at para 30; Wärtsilä at paras 74-77).
[20] In response to the Defendant’s argument that the claim does not pertain to “title, possession or ownership of a ship or any part interest therein or with respect to the proceeds of sale of a ship or any part interest therein” pursuant to paragraph 22(2)(a) of the Federal Courts Act, thus the Court has no jurisdiction, Associate Judge Steele found that neither subsection 22(1) nor section 22 are as limitative or narrow as the Defendant suggested. The Associate Judge decided that “it would be illogical for the Federal Court to have jurisdiction over matters of breach of contract, warranties and damages relating to a ship’s equipment, but not to those same matters as they relate to the sale of the ship itself.” (Order at para 33).
[21] Associate Judge Steele concluded that the three-part test in ITO was satisfied, namely: (1) there is a statutory grant of jurisdiction to the Court through the Federal Courts Act; (2) there is an existing body of federal law, Canadian maritime law, that is entirely able to resolve matters such as those at issue in this case; and (3) Canadian maritime law and the Federal Courts Act are undoubtedly laws of Canada (at paras 36, 41). The Associate Judge further concluded, relying on Wärtsilä, that if this Court “can apply foreign law when exercising its maritime jurisdiction, then surely the Federal Court can apply provincial law under the [Civil Code] in the exercise of such maritime jurisdiction” (Order at para 38).
[22] The Associate Judge ultimately concluded that the Defendant had failed to discharge its burden of demonstrating that it is plain and obvious on the face of the pleading that this Court has no jurisdiction (Order at paras 42-44).
III. Standard of Review [23] Decisions made on motions to strike are discretionary in nature (Feeney v Canada, 2022 FCA 190 at para 4) [Feeney]). The applicable standard of review for an appeal under Rule 51 of a discretionary order of an Associate Judge is set out in Hospira Healthcare Corporation v Kennedy Institute of Rheumatology, 2016 FCA 215 [Hospira] at paragraphs 64, 66 and 79. Such orders are to be reviewed on the civil appellate standard (Housen v Nikolaisen, 2002 SCC 33 [Housen]) and “should only be interfered with when such decisions are incorrect in law or are based on a palpable and overriding error in regard to the facts” (Hospira at para 64). Questions of mixed fact and law are subject to the palpable and overriding error standard while questions of law, and mixed questions where there is an extricable question of law, are subject to the standard of correctness (Worldspan Marine Inc v Sargeant III, 2021 FCA 130 at para 48).
[24] An exercise of discretion by an Associate Judge involves applying legal standards to the facts as found. For the purposes of the Housen framework, exercises of discretion are questions of mixed fact and law (Mahjoub v Canada (Citizenship and Immigration), 2017 FCA 157 at para 72 [Mahjoub]). Such questions of mixed fact and law, including exercises of discretion, can be set aside only on the basis of palpable and overriding error unless an error on an extricable question of law or legal principle is present (Mahjoub at para 74). The Federal Court of Appeal explains the notion of an extricable question of law by way of the following example in Mahjoub:
[74] … So, for example, if an appellate court can discern some error in law or principle underlying the first-instance court’s exercise of discretion, it can reverse the exercise of discretion on account of that error. Another way of putting this is whether the discretion was “infected or tainted” by some misunderstanding of the law or legal principle: Housen at para. 35.
[25] The palpable and overriding error standard is a highly deferential one (Feeney at para 4). “Palpable” means an error that is obvious, while “overriding” means an error that goes to the very core of the outcome of the case (Canada v South Yukon Forest Corporation, 2012 FCA 165 at para 46 [South Yukon]). When arguing palpable and overriding error, it is not enough to pull at leaves and branches and leave the tree standing, rather the entire tree must fall (South Yukon at para 46; Mahjoub at para 61).
[26] The Defendant submits that the standard of correctness applies because Associate Judge Steele erred in law when she determined that (i) the three-part test in ITO was satisfied in the present case, and (ii) she did not need to determine, at this stage and based on the record before her, the applicable law of the contract. The Defendant further submits that the Associate Judge committed an error of mixed fact and law where there is an extricable question of law, to which the standard of correctness applies, when she found that it was not plain and obvious that Canadian maritime law does not apply to all or a part of the Plaintiff’s claim.
[27] In the present case, there is no doubt – and this is not disputed by the parties – that Associate Judge Steele applied the correct legal test, namely the ITO test, when asking herself whether it is plain and obvious that this Court has no jurisdiction to hear the Plaintiff’s claim (Order at para 23). In my view, the Defendant’s submissions are in effect aimed at Associate Judge Steele’s application of the ITO test to the facts in the present case. In this regard, I find the comments of Justice Cecily Y. Strickland in Del Ridge Homes Inc v Ledgemark Homes Inc, 2022 FC 566 to be instructive:
[27] Legal questions are questions about what the correct legal test is; factual questions are questions about what actually took place between the parties; and, mixed questions are questions about whether the facts satisfy the legal tests, or, put otherwise, whether they involve applying a legal standard to a set of facts (Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 [Teal Cedar] at para 43). The application of a legal test to a set of facts is a mixed question. However, if in the course of that application the underlying legal test may have been altered – for example by failing to consider a required element of the test – then a legal question arises. This is an extricable question of law (Teal Cedar at para 44). However, "[c]ourts must be vigilant in distinguishing between a party alleging that a legal test may have been altered in the course of its application (an extricable question of law; Sattva, at para. 53), and a party alleging that a legal test, which was unaltered, should have, when applied, resulted in a different outcome (a mixed question)" (Teal Cedar at para 45).
[28] Having considered the Defendant’s submissions, I do not find that the standard of correctness applies to the present appeal. That being said, even if I had found that the standard of correctness applies to one or more of the alleged errors, my decision would have ultimately been the same.
IV. Analysis [29] The test with respect to striking out pleadings under Rule 221(1)(a) is whether it is “plain and obvious” that the claim discloses no reasonable cause of action (R v Imperial Tobacco Ltd, 2011 SCC 42, at paragraph 17 [Imperial]). As per the Supreme Court in Imperial, and as recently restated by the Federal Court of Appeal in Feeney, motions to strike must be used with care, however, they are a valuable tool when utilized to unclutter the docket by weeding out hopeless claims while nevertheless ensuring that those claims that have some chance of success go on to trial (Imperial at para 9; Feeney at para 8).
[30] Where an alleged lack of jurisdiction is the basis for a motion to strike, the plain and obvious test remains the correct test to use when determining whether the claim should be struck (Hodgson v Ermineskin Indian Band No 942, (2000) 180 FTR 285, aff’d [2000], 267 NR 143 (FCA); Windsor City v Canadian Transit Co, 2016 SCC 54 at para 24 [Windsor City]; Apotex Inc. v Ambrose, 2017 FC 487 at para 39 [Ambrose]; Black & White Merchandising Co Ltd v Deltrans International Shipping Corporation, 2019 FC 379 at paras 32-33 [Deltrans]).
[31] Where the question is one of jurisdiction, the parties may adduce evidence to support the alleged lack of jurisdiction (Deltrans at para 33). In the present matter, the Defendant filed the affidavit of the Defendant’s Director of Operations, Patrick Bobby, to which the contract between the parties was appended. As such, Associate Judge Steele had the alleged facts contained in the Statement of Claim, the affidavit of Mr. Bobby, and the contract of sale, before her when rendering her decision.
[32] With respect to the test on a motion to strike for want of jurisdiction, I find that Associate Judge Steele correctly identified the applicable test and jurisprudence.
[33] With respect to the test for determining whether the Federal Court has jurisdiction, Associate Judge Steele correctly identified the three-part ITO test, quoted in Section II of this Order and Reasons above. Associate Judge Steele also correctly identified that the first step in the jurisdictional analysis is to determine the essential nature or character of the claim (Windsor City at para 25-26; Deltrans at para 38). When determining the essential character of the claim, this Court has interpreted this exercise to mean simply identifying the material facts needed to assess whether the claim falls within the statutory grant of jurisdiction identified in the first step of the ITO test (Ambrose at para 48; Deltrans at para 38).
[34] I find that Associate Judge Steele considered each of the required elements of the three-part ITO test, along with the initial step of determining the essential character of the claim, and applied the test to the facts before her. There is no extricable question of law, as the Associate Judge did not alter the ITO test or fail to consider any of its parts. The issue to be resolved in this appeal then is whether her conclusion that it is not plain and obvious that this Court has no jurisdiction to hear the Plaintiff’s claim is legally defensible on a standard of “palpable and overriding error”. In my view, it is.
[35] Given that the application of Canadian maritime law, and the resulting impact on this Court’s jurisdiction, are at issue, it is helpful to define it. Associate Judge Steele spent several paragraphs defining Canadian maritime law, referencing section 2 of the Federal Courts Act and Wärtsilä (Order at paras 25-26). I recently provided a detailed explanation on the question of what is Canadian maritime law in Duval v Seapace (Ship), 2022 FC 575 [Duval]:
[34] The Supreme Court in Wärtsilä reaffirmed that “Parliament’s authority over navigation and shipping, and consequently the scope of Canadian maritime law, is broad” (para 5). The majority confirmed that Canadian maritime law is a comprehensive body of federal law, uniform throughout Canada, that deals with all claims in respect of maritime and admiralty matters, subject only to the scope of federal power over navigation and shipping under subsection 91(10) of the Constitution Act, 1867 (para 9), while also acknowledging that a valid provincial enactment will be permitted to have incidental effects on a federal head of power such as navigation and shipping, unless either interjurisdictional immunity or federal paramountcy is found to apply (paras 87-88).
[35] […] it is helpful to briefly expand on the definition of Canadian maritime law in the preceding paragraph. Canadian maritime law is a broad and comprehensive body of federal law. As noted by the Supreme Court, Canadian maritime law is the progeny of English maritime law as administered by the High Court of Admiralty in England until 1874 and then the High Court of Justice thereafter (Wärtsilä at para 11). Although reference tends to be made to the Admiralty Courts and admiralty jurisdiction, contemporary Canadian maritime law (and the term maritime law in general) is significantly broader in scope than the areas traditionally addressed by admiralty law (Chircop A. et al., Canadian Maritime Law, 2nd Ed (2016) Irwin, at 1 [Canadian Maritime Law]).
[36] While Canadian maritime law is rooted in English maritime law, to simply equate it to common law would not be accurate (Wärtsilä at para 12). English maritime law developed in an English context since the 14th century, however, “the law was heavily civilian in nature, despite strong influences from the common law” (Canadian Maritime Law at 168). The law that was administered by the High Court of Admiralty was distinct from the general common law of England, and civil law sources and comparative law played a significant role in the development of maritime law (QNS Paper Co v. Chartwell, 1989 CanLII 35 (SCC), [1989] 2 SCR 683 [Chartwell] at 715, per Justice L’Heureux-Dubé in concurring reasons). Indeed, until 1858, pleading before the Admiralty Court in England was restricted to doctors of civil law (Canadian Maritime Law at 168).
[37] The body of law that is Canadian maritime law is derived from a long international tradition that draws in large part from both the common law and the civil law (Chartwell at 691-692, per Justice McLachlin in concurring reasons; See also Wärtsilä at para 19; Ordon Estate v. Grail, 1998 CanLII 771 (SCC), [1998] 3 SCR 437 [Ordon Estate] at para 71). It is also international in nature and ought to be interpreted within the modern context of commerce and shipping (Chartwell at 691-692, per Justice McLachlin in concurring reasons). The importance of uniformity between jurisdictions in maritime matters has long been recognized (Ordon Estate at paras 71 and 79; Wärtsilä at paras 55-56).
[38] Ultimately, there is no simple answer to the question of what is Canadian maritime law. The sources of Canadian maritime law have been summarized in Canadian Maritime Law at p. 173, and include:
· Federal statutes, including the Federal Courts Act, the Admiralty Act 1890, and the Admiralty Act 1934, and any other maritime law statute enacted by the Parliament of Canada, such as the Canada Shipping Act 2001 and the Marine Liability Act 2001;
· Caselaw, namely, jurisprudence of English courts until 1934, the jurisprudence of Canadian courts before 1934 and since then, both federal and provincial;
·Principles of civil law and the common law as may be determined as applicable through a comparative methodology in a maritime law setting by the courts;
· International maritime law conventions.
[39] In Ordon Estate and Wärtsilä, the Supreme Court highlighted that Canadian maritime law has sources that are both statutory and non-statutory, national and international, common law and civilian, and such sources include but are not limited to the specialized rules and principles of admiralty, and the rules and principles applied in admiralty cases, first as administered in England, and since then as amended by the Canadian Parliament and developed by judicial precedent to date (Wärtsilä at para 21; Ordon Estate at para 75).
[36] I turn now to the Supreme Court’s decision in Wärtsilä. This decision forms the basis for much of the Defendant’s submissions, and as such it is worthwhile discussing the judgment in detail. The landscape of constitutional analysis in terms of Canadian maritime law (and non-statutory federal law) has shifted somewhat following Wärtsilä (Duval at para 33). The Plaintiff submits that the approach in terms of applicable law has changed in that there is no longer only one applicable law, rather both federal and provincial laws may apply – being the double aspect. In a maritime matter where both apply and regardless of which one prevails, in the Plaintiff’s view, this Court’s jurisdiction remains unaffected. The Defendant submits that it is this double aspect and the finding that the Civil Code prevailed which results in this Court no longer having jurisdiction to hear the matter.
[37] As noted above, in Wärtsilä, the central issue was whether a manufacturer and supplier of marine engines was entitled to rely on the limitation of liability clause in its contract with the vessel owner, who had suffered loss and damage when the engine failed. The question on appeal was whether Canadian maritime law or the Civil Code governed the vessel owner’s claim. The choice of law clause in the contract provided for the “laws in force at the registered office of the Supplier”, which the trial judge interpreted as the manufacturer’s place of business in Montréal, Quebec (at para 6).
[38] The Supreme Court held that notwithstanding that the sale of marine engine parts for use on a commercial vessel is governed by Canadian maritime law, the Civil Code article pertaining to warranties in contracts of sale was also directed at the same factual situation, thereby giving rise to a double aspect scenario (para 5). The fact that Canadian maritime law extended to the matter at issue, did not mean that the overlapping provincial rule could also not validly govern the sale (paras 80-81).
[39] The majority highlighted that “a valid provincial enactment will be allowed to have incidental effects on a federal head of power – in this case navigation and shipping – unless either interjurisdictional immunity or federal paramountcy is found to apply” (para 87). The majority found that the contractual issue raised in the case was not at the core of navigation and shipping, with the result that the doctrine of interjurisdictional immunity was not applied so as to render the relevant article of the Civil Code inapplicable to the matter (paras 5, 94, 97). In considering the issue of interjurisdictional immunity, the majority provided the example of issues of maritime negligence as being at the core of federal power because it is essential to establish a consistent, uniform body of specialized rules to regulate the behaviour of those who engage in marine activities (para 96).
[40] The majority distinguished the contractual issues raised by the shipowner from issues of maritime negligence. The majority noted that sophisticated parties to a sale contract for marine equipment could have determined in advance that the “federal body of rules tailored for the practical realities of commercial actors in the maritime sector” (i.e., Canadian maritime law) applied to their contract (para 97). Similarly, “had the parties referred explicitly to the CCQ in the clause dealing with the choice of law, there would be no question that it would govern the dispute and therefore no division of powers analysis to undertake” (at para 97). The majority explained its reasoning as follows:
[97] … As Laskin C.J. wrote in Tropwood, it is indeed possible that, in the exercise of its concurrent jurisdiction over maritime matters, the Federal Court might apply foreign law as elected by contract (pp. 166-67). In our view, this is a clear indication that, contrary to what was necessary for maritime negligence, it is not essential for the exercise of federal competence over navigation and shipping that only one body of law — Canadian maritime law — regulate such contracts.
[41] Having found that interjurisdictional immunity did not apply, the majority considered the issue of federal paramountcy. The majority found that “it would run contrary to the purpose of the federal paramountcy doctrine to declare that the non-statutory rules of Canadian maritime law can prevail over valid provincial legislation.” (at para 103). The majority declined the manufacturer’s invitation to render the provision of the Civil Code inoperative based on a conflict with the rule expressed in the Sale of Goods Act, 1893 (UK), 56 & 57 Vict, c 71, that allows for the limitation of the seller’s liability, and which had been subsequently applied by Canadian and English admiralty courts (para 103). The majority further rejected the manufacturer’s argument that section 2 of the Federal Courts Act, describing the substantive content of Canadian maritime law, much of which is non-statutory, had the effect of rendering Canadian maritime law as a whole paramount to provincial legislation (para 104). The majority concluded that the provision of the Civil Code was operative and governed the dispute between the parties as they found that it prevailed over Canadian non-statutory maritime law, in line with the principle of the primacy of a legislative enactment (at para 106).
[42] In summary, the majority found that both Canadian maritime law and the Civil Code validly governed the dispute, but ultimately the Civil Code applied with respect to the contractual warranty since Canadian non-statutory maritime law did not prevail over a legislative enactment. The majority reinforced that the federal power over navigation and shipping, and consequently the scope of Canadian maritime law, is broad. The majority’s reasoning is summarized in the following introductory paragraph of the decision:
[5] Parliament’s authority over navigation and shipping, and consequently the scope of Canadian maritime law, is broad. As we see it, the sale of marine engine parts intended for use on a commercial vessel is sufficiently connected to navigation and shipping so as to be validly governed by Canadian maritime law. However, there is also no doubt that art. 1733 C.C.Q. — pertaining to warranties in contracts of sale — is a validly enacted provincial law that, in pith and substance, concerns a matter of property and civil rights pursuant to s. 92(13) of the Constitution Act, 1867. In this case, the sale of marine engine parts thus gives rise to a double aspect scenario: a non-statutory body of federal law and a provincial law both validly directed at the same fact situation overlap. However, art. 1733 C.C.Q. remains applicable and operative. Neither interjurisdictional immunity nor federal paramountcy ousts the application of art. 1733 C.C.Q.: interjurisdictional immunity is inapplicable because contractual issues surrounding the sale of marine engine parts are not at the core of navigation and shipping, and federal paramountcy cannot be triggered by Canadian non-statutory maritime law. Left with two applicable bodies of law, art. 1733 C.C.Q. is ultimately the law governing this dispute; since it is a legislative enactment, Canadian non-statutory maritime law does not prevail over it.
[43] What is clear from the Supreme Court’s judgment is that the matter was sufficiently connected to navigation and shipping to be validly governed by Canadian maritime law. The majority in Wärtsilä emphasized the comprehensive nature of Canadian maritime law as espoused in ITO, QNS Paper Co v Chartwell Shipping Ltd, 1989 CanLII 35 (SCC), [1989] 2 SCR 683, and Bow Valley Husky (Bermuda) Ltd v Saint John Shipbuilding Ltd, 1997 CanLII 307 (SCC), [1997] 3 SCR 1210, such that it is a “seamless web of law that exists in parallel to the common law and that is capable of resolving any dispute falling within the scope of its application [and]…[i]n this way, there are no ‘gaps’ in Canadian maritime law…” (Wärtsilä at para 17).
[44] What differs between Wärtsilä and the three Supreme Court cases cited above is that at the time the older cases were rendered, notably ITO, there was the view that once the subject matter under consideration is found to be integrally connected to maritime matters so as to fall within the scope of Canadian maritime law, this operates so as to exclude the application of provincial law. Later, in British Columbia (Attorney General) v Lafarge Canada Inc, 2007 SCC 23 [Lafarge], the Supreme Court noted that the realities of an active shipping industry, combined with commercial and residential development along the waterfront in Vancouver “pose[s] a challenge to the venerable ‘watertight compartments’ division of federal legislative jurisdiction over navigation and shipping, on the one hand, and provincial jurisdiction over property and civil rights on the other.” (Lafarge at para 1].
[45] By the time of Wärtsilä, the compartmentalized view and the notion of “watertight compartments” had become a relic of the past. The Supreme Court was clear that, when applying constitutional doctrines, it “has preferred a flexible approach that in many instances allows both orders of government room to act instead of creating ‘watertight compartments’” (Wärtsilä at para 86). The Supreme Court specified that “the federal power over navigation and shipping is not ‘watertight’ and remains subject to this flexible understanding of the division of powers” (Wärtsilä at para 87). The Supreme Court further highlighted how more recent cases have “displaced prior jurisprudence on the interaction between the rules of Canadian maritime law and provincial statutes” (Wärtsilä at para 88).
[46] What does that mean for the present case? The Supreme Court in Wärtsilä concluded that a contractual dispute over the sale of marine engine parts for a vessel is integrally connected to navigation and shipping even though they ultimately concluded that the Civil Code governed the dispute (at para 30). Had Wärtsilä been decided at the time of ITO, prior to the movement away from a compartmentalized approach in favour of a flexible approach, one would have expected Canadian maritime law to govern the relationship between the parties given the Supreme Court’s finding that the matter was integrally connected to navigation and shipping. Similarly, had the present case been instituted at the time of ITO, one would equally have expected that the application of provincial law would not have been at issue.
[47] The debate over this Court’s jurisdiction now arises because of the double aspect scenario in the present case, namely two applicable bodies of law - non-statutory Canadian maritime law and the Civil Code. As found by Associate Judge Steele on the basis of Wärtsilä and the jurisprudence cited therein, and I see no reason to disturb this finding, a dispute arising from a sale of a ship is integrally connected to shipping and navigation such that Canadian maritime law may validly apply (Order at para 30; Wärtsilä at paras 74, 75, 77). Given the ruling in Wärtsilä, where non-statutory Canadian maritime law is applicable, it may not prevail over any applicable provisions of the Civil Code. In the Defendant’s view, there is no “existing body of federal law which is essential to the disposition of the case and which nourishes the statutory grant of jurisdiction”, thereby running afoul of the second limb of the ITO test. This issue would arguably not arise had this case come before the Court immediately following ITO in 1986.
[48] If one considers the ruling in Wärtsilä and the language of the second limb of the ITO test, namely that Canadian maritime law “is essential to the disposition of the case”, one can fully appreciate why the Defendant has advanced their argument. While at first blush there does appear to be some merit in the Defendant’s position, it is bound to fail. It simply cannot be that the combined effect of the ruling in Wärtsilä and the language used in the ITO test, decades ago at a time of “watertight compartments”, is the following: to deprive this Court and the Federal Court of Appeal of jurisdiction in maritime matters where (i) there are two bodies of applicable law, non-statutory Canadian maritime law and statutory provincial law, and (ii) the non-statutory Canadian maritime law does not prevail over the statutory provincial law.
[49] The Supreme Court recognized a broad understanding of the federal power over navigation and shipping and of Canadian maritime law, alongside a modern conception of federalism and overlapping heads of power (Wärtsilä at paras 5, 43, 81-82). The Federal Court is the successor of the Exchequer Court, to whom the Admiralty Act 1891, SC 1891, c 29 conferred the jurisdiction exercised by the English H