Monk Corp. v. Island Fertilizers Ltd.

Monk Corp. v. Island Fertilizers Ltd.
Collection
Supreme Court Judgments
Date
1991-04-18
Report
[1991] 1 SCR 779
Case number
21647
Judges
Lamer, Antonio; La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Gonthier, Charles Doherty; Cory, Peter deCarteret; McLachlin, Beverley; Stevenson, William; Iacobucci, Frank
On appeal from
Federal Court of Appeal
Subjects
Courts
Maritime law
Notes
SCC Case Information: 21647
Decision Content
Monk Corp. v. Island Fertilizers Ltd., [1991] 1 S.C.R. 779
The Monk CorporationAppellant and Cross-Respondent
v.
Island Fertilizers LimitedRespondent and Cross-Appellant
indexed as: monk corp. v. island fertilizers ltd.
File No.: 21647.
1991: January 30; 1991: April 18.
Present: Lamer C.J. and La Forest, L'Heureux-Dubé, Sopinka, Gonthier, Cory, McLachlin, Stevenson and Iacobucci JJ.
on appeal from the federal court of appeal
Maritime law ‑‑ Jurisdiction ‑‑ Federal Court ‑‑ Parties entering into contract for supply of product to be imported by ship ‑‑ Broker later bringing action for demurrage, delivery of excess cargo and cost of renting shore cranes ‑‑ Whether claims within Federal Court's jurisdiction over Canadian maritime law ‑‑ Federal Court Act, R.S.C., 1985, c. F-7, ss. 2 , 22 .
Courts ‑‑ Jurisdiction ‑‑ Federal Court ‑‑ Maritime law ‑‑ Parties entering into contract for supply of product to be imported by ship ‑‑ Broker later bringing action for demurrage, delivery of excess cargo and cost of renting shore cranes ‑‑ Whether claims within Federal Court's jurisdiction over Canadian maritime law ‑‑ Federal Court Act, R.S.C., 1985, c. F-7, ss. 2 , 22 .
Appellant entered into a contract for the supply of imported urea fertilizer to respondent. Following its delivery by ship, appellant brought an action against respondent claiming for excess product delivered, demurrage and the cost of renting shore cranes to discharge the ship. The Federal Court, Trial Division, found that it had jurisdiction to entertain the claims under s. 22(1) of the Federal Court Act , since they were integrally connected with Canadian maritime law, and awarded judgment in favour of appellant. A majority of the Federal Court of Appeal found that it had jurisdiction only with respect to the claim relating to demurrage and allowed the appeal in part.
Held (L'Heureux‑Dubé J. dissenting): The appeal should be allowed and the cross‑appeal dismissed.
Per Lamer C.J. and La Forest, Sopinka, Gonthier, Cory, McLachlin, Stevenson and Iacobucci JJ.: Appellant's claims are within the Federal Court's jurisdiction. The second part of the definition of "Canadian maritime law" in s. 2 of the Federal Court Act provides an unlimited jurisdiction in relation to maritime and admiralty matters which should not be historically confined or frozen, and "maritime" and "admiralty" should be interpreted within the modern context of commerce and shipping. Canadian maritime law is limited only by the constitutional division of powers in the Constitution Act, 1867 : in determining whether a particular case involves a maritime or admiralty matter, encroachment on what is in "pith and substance" a matter falling within s. 92 must be avoided. The test for determining whether the subject matter is within maritime law requires a finding that it is so integrally connected to maritime matters as to be legitimate Canadian maritime law within federal competence.
In this case many of the undertakings by the parties relate to a contract of carriage by sea, which is clearly a maritime matter within the scope of maritime law. Further, the specific claims advanced are integrally connected to maritime matters rather than to the sale of goods, and so are not governed by the provincial Sale of Goods Act. All three claims have as their source respondent's obligation to discharge the cargo, which finds its roots in the contract of carriage aspects of the agreement between the parties. The draft survey technique used is uniquely maritime and confirms the general maritime nature of the unloading of cargo from a ship, as do the rules relating to bills of lading set out in the Schedule to the Carriage of Goods by Water Act. As discharge of cargo is a maritime matter, so is a breach of an obligation to discharge cargo.
Respondent assumed a maritime obligation ‑‑ the discharge of cargo ‑‑ in connection with the sale and purchase of the goods. Appellant's claims are maritime in nature and are not in any way an encroachment of what is in "pith and substance" a matter falling within s. 92 of the Constitution Act, 1867 .
Per L'Heureux‑Dubé J. (dissenting): While this Court has generally construed the Federal Court's jurisdiction narrowly, it has pursued an expansive method of interpretation with regard to Federal Court jurisdiction over maritime law. In determining whether a particular case involves a maritime matter, however, the court must avoid encroachment on what is in "pith and substance" a matter within exclusive provincial jurisdiction. It is therefore important to establish that the subject matter is so integrally connected to maritime matters as to be legitimate Canadian maritime law within federal legislative competence.
In characterizing the claims raising the issue of jurisdiction, one must look at the essence of the arrangement between the parties. In this case the maritime or shipping aspects of the arrangement were incidental to a contract for the sale of goods, which is the dominant feature of the relationship between the parties. While certain terms of a maritime nature were used, the contract in fact operated merely to further the primary goal of the parties ‑‑ the sale and delivery of goods. Quite independently of its contract with respondent, appellant entered into a contract for the carriage of the goods by sea. The fact that respondent undertook to pay a price that included the cost of freight and insurance and undertook to pay demurrage and the expense of discharge in no way alters the nature of the contract between the parties. Respondent undertook no obligation as to the actual carriage by sea. The contract entered into between the parties does not embody either a contract of carriage or a contract for insurance nor are the terms of these distinct relationships at issue in this case.
Appellant's claim is inseparable from the contract of sale. Even assuming that the discharge of cargo from a ship is a maritime matter, the claim here revolves around the contract price of the goods, not their discharge, and is in pith and substance a claim within provincial jurisdiction. The parties are properly characterized as acting in the respective capacities of buyer and seller, and there is no integral connection sufficient to pull matters within the Federal Court's jurisdiction over maritime law.
Cases Cited
By Iacobucci J.
Applied: ITO‑‑International Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752; referred to: Q.N.S. Paper Co. v. Chartwell Shipping Ltd., [1989] 2 S.C.R. 683; Roberts v. Canada, [1989] 1 S.C.R. 322; Whitbread v. Walley, [1990] 3 S.C.R. 1273; Robert Simpson Montreal Ltd. v. Hamburg‑Amerika Linie Norddeutscher, [1973] F.C. 1356.
By L'Heureux‑Dubé J. (dissenting)
ITO‑‑International Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752; Quebec North Shore Paper Co. v. Canadian Pacific Ltd., [1977] 2 S.C.R. 1054; McNamara Construction (Western) Ltd. v. The Queen, [1977] 2 S.C.R. 654; Roberts v. Canada, [1989] 1 S.C.R. 322; Ontario (Attorney General) v. Pembina Exploration Canada Ltd., [1989] 1 S.C.R. 206; R. v. Thomas Fuller Construction Co. (1958) Ltd., [1980] 1 S.C.R. 695; Tropwood A.G. v. Sivaco Wire & Nail Co., [1979] 2 S.C.R. 157; The Queen v. Canadian Vickers Ltd., [1978] 2 F.C. 675; Domestic Converters Corp. v. Arctic Steamship Line, [1984] 1 F.C. 211; Reference re Industrial Relations and Disputes Act, [1955] S.C.R. 529; Sumitomo Shoji Canada Ltd. v. The "Juzan Maru", [1974] 2 F.C. 488; Kuhr v. The "Friedrich Busse", [1982] 2 F.C. 709; Triglav v. Terrasses Jewellers Inc., [1983] 1 S.C.R. 283.
Statutes and Regulations Cited
Carriage of Goods by Water Act, R.S.C., 1985, c. C‑27, Schedule, Arts. I, II, V, VI, VII.
Constitution Act, 1867, ss. 91(10) , 92(13) .
Federal Court Act, R.S.C., 1985, c. F‑7, ss. 2 "Canadian maritime law", 22.
Sale of Goods Act, R.S.P.E.I. 1974, c. S‑1, ss. 3(1), 27, 30, 32, 37, 49, 59.
Authors Cited
Braën, André. "L'arrêt ITO‑International Terminal Operators Ltd. c. Miida Electronics Inc., ou comment écarter l'application du droit civil dans un litige maritime au Québec" (1987), 32 McGill L.J. 386.
Carver, Thomas Gilbert. Carver's Carriage by Sea, 13th ed. By Raoul Colinvaux. London: Stevens, 1982.
Evans, John M. and Brian Slattery. "Federal Jurisdiction ‑‑ Pendent Parties ‑‑ Aboriginal Title and Federal Common Law ‑‑ Charter Challenges ‑‑ Reform Proposals: Roberts v. Canada" (1989), 68 Can. Bar Rev. 817.
Evans, John M. "Comments on Legislation and Judicial Decisions ‑‑ Federal Jurisdiction ‑‑ A Lamentable Situation" (1981), 59 Can. Bar Rev. 124.
Glenn, H. Patrick. "Maritime Law ‑‑ Federal Court Jurisdiction ‑‑ Canadian Maritime Law ‑‑ Relationship to Civil and Common Law: ITO -- International Terminal Operators Ltd. v. Miida Electronics Inc." (1987), 66 Can. Bar Rev. 360.
Hogg, Peter W. "Constitutional Law ‑‑ Limits of Federal Court Jurisdiction ‑‑ Is There a Federal Common Law?" (1977), 55 Can. Bar Rev. 550.
Laskin John B. and Robert J. Sharpe. "Constricting Federal Court Jurisdiction: A Comment on Fuller Construction" (1980), 30 U.T.L.J. 283.
Payne, William. Payne and Ivamy's Carriage of Goods by Sea, 11th ed. By E. R. Hardy Ivamy. London: Butterworths, 1979.
Reif, Linda C. "A Comment on ITO Ltd. v. Miida Electronics Inc. ‑‑ The Supreme Court of Canada, Privity of Contract and the Himalaya Clause" (1988), 26 Alta. L. Rev. 372.
Scott, Stephen A. "Canadian Federal Courts and the Constitutional Limits of Their Jurisdiction" (1982), 27 McGill L.J. 137.
Scrutton, Thomas Edward, Sir. Scrutton on Charterparties and Bills of Lading. 19th ed. By Sir Alan Abraham Mocatta, Sir Michael J. Mustill and Stewart C. Boyd. London: Sweet & Maxwell, 1984.
Tetley, William. "Maritime Law Judgments in Canada ‑‑ 1979" (1981), 6 Dalhousie L.J. 676.
Tetley, William. "The Buenos Aires Maru ‑‑ Has the Whole Nature of Canadian Maritime Law Been Changed?" (1988), 10 Sup. Ct. L. Rev. 399.
APPEAL and cross‑appeal from a judgment of the Federal Court of Appeal (1989), 97 N.R. 384 reversing in part a judgment of the Federal Court, Trial Division (1988), 19 F.T.R. 220 allowing appellant's claim against respondent. Appeal allowed and cross‑appeal dismissed, L'Heureux‑Dubé J. dissenting.
David F. H. Marler, for the appellant.
David G. Colford, for the respondent.
//Iacobucci J.//
The judgment of Lamer C. J. and La Forest, Sopinka, Gonthier, Cory, McLachlin, Stevenson and Iacobucci JJ. was delivered by
Iacobucci J. -- The main question in this appeal and cross-appeal centres on the jurisdiction of the Federal Court of Canada in maritime matters. In particular, the issue is whether the appellant's action is simply one under an agreement for the sale of goods, in which case no jurisdiction in the Federal Court would attach; or whether the action can be characterized as that of a shipper against a consignee under a contract of carriage, in which case the claim is within the scope of Canadian maritime law and therefore within the jurisdiction of the Federal Court. To resolve this issue requires a consideration of the extent of "Canadian maritime law" as defined in s. 2 of the Federal Court Act, R.S.C., 1985, c. F-7 , and the breadth of the Federal Court's jurisdiction under s. 22 of the Federal Court Act to entertain the claim.
Facts
The appellant/plaintiff, The Monk Corporation (Monk), is an international resource commodities broker which specializes in supplying fertilizer materials. It entered into a contract for the supply of urea, a type of fertilizer, to the respondent/defendant, Island Fertilizers Limited (Island), a Prince Edward Island corporation that specializes in the purchase and sale of fertilizers.
On October 4, 1985, the parties commenced telephone negotiations for the sale and purchase of urea fertilizer to be shipped from the U.S.S.R. on consignment to Island for discharge in three eastern seaports in Canada. The negotiations were largely conducted via telephone and telex. They resulted in an agreement, the essential terms of which were found by the trial judge to be contained in a telex, dated October 11, 1985, sent by Monk to Island. The content of that telex is as follows:
islandfertchtn
our msg nbr 62/72
oct 11,85
att: mr. john scales
re: urea in bulk
we confirm having concluded transaction n sale:
product: urea
qnty: 11,000 +-5pct mt.
dly:oct/latest dec1,85 3-port discharge/yr confirmation tlx. on a self geared vessel. buyer guarantee 3,000mt discharge wwdshexuu.
demmurage[sic]/dispatch/c.p.
product specs:46pct min n.
1pct max biuret
0.5pct max moisture
prilled-granulation min 90pct 1-3mm size
price:107.50usd/mt cif-fo terms.
it has been a pleasure do [sic] do business with you.
working to obtain can-2,500 mt. wl advise.
regds,
rubin saigal
the monk corp.
As this telex was found by the learned trial judge to contain the essential terms of the agreement between Monk and Island, it may be helpful to explain some of the specified terms and abbreviations, which highlight the nature and extent of the arrangement between the parties.
The reference to "MT" is to "metric tonnes". The phrase "3-PORT DISCHARGE/YR CONFIRMATION TLX" refers to the fact that the ports of discharge were to be determined by Island and confirmed by a subsequent telex. The terms "DLY" and "SELF GEARED VESSEL" describe the obligation of the seller to provide delivery on a ship which is not self-discharging of bulk cargo, but which is fitted with derricks that can be utilized to discharge packages. In order to discharge bulk cargo, such as urea, shore cranes and clam buckets are required. The code "WWDSHEXUU" relates to the guaranteed discharge rate which was to be 3,000 metric tonnes per day. The code itself means "Weather Working Days, Sundays and Holidays Excluded Unless Used". The initials "C.P." stand for "Charter-Party" in the context of demurrage and dispatch. Finally, the terms "CIF-FO" represent "Cost Insurance and Freight - Free-Out". The first three initials signify that the stated price, which was US$107.50 per metric tonne, includes the cost of the goods as well as that of insuring and carrying them to the agreed ports of discharge. The last term, "Free-Out", refers to the fact that the cost and expense of discharging the vessel upon arrival at the ports of discharge is the responsibility of the consignee/purchaser, Island. It should be noted that the meaning of the terms "SELF GEARED VESSEL" and "FO" were agreed to by the parties by admissions filed with this Court.
It should be noted that Monk stated that its claims arose because Island contended at trial that the telex of October 11, 1985 (stipulating a self geared vessel) had been altered by subsequent discussions and agreements between the parties to the effect that Monk would use a self-discharging ship. The trial judge rejected Island's evidence in this respect and found that the telex of October 11, 1985 was not modified subsequently by the parties.
In order to carry out its part of the agreement, Monk entered into an agreement with the owners of the vessel Super Spirit for the carriage of the urea. Under the terms of the charter-party, Monk was to be responsible for any demurrage at points of delivery and for the costs of unloading the urea. The ship sailed from the U.S.S.R. on November 11, 1985, and arrived at her first port, Saint John, New Brunswick, on November 29, 1985. Unloading difficulties ensued. They were occasioned by the fact that the urea was loaded into railway cars in order to facilitate Island's sale to one of its customers. As a result, the ship remained in port until December 5, 1985. The next day, the ship arrived at Halifax and remained there from the 6th to the 7th of December. From Halifax, she next went to Charlottetown where she stayed from the 9th to the 11th of December. Finally, she proceeded to her last port of call, Belledune, to discharge the balance of her cargo.
Following delivery of the fertilizer Monk claimed that it was owed money for excess product delivered, for demurrage at the port of Saint John, and for the cost of renting shore cranes used to unload the urea. In furtherance of those claims, Monk commenced an action against Island in the Federal Court of Canada, Trial Division.
Issues
The issue which is before the Court in this appeal and cross-appeal concerns the question of Federal Court jurisdiction. Specifically, does the Trial Division of the Federal Court have jurisdiction to hear Monk's claims for demurrage, delivery of excess cargo and the cost of the shore cranes used to unload the cargo at the ports of discharge? This question turns not only upon the meaning of the relevant sections of the Federal Court Act , but also upon the characterization of the true nature of the matters in dispute between Monk and Island.
Section 22 of the Federal Court Act specifies the jurisdiction of the Federal Court and in so doing refers, inter alia, to "Canadian maritime law" which is defined in s. 2 of the Act. These provisions provide as follows:
22. (1) The Trial Division has concurrent original jurisdiction, between subject and subject as well as otherwise, in all cases in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, except to the extent that jurisdiction has been otherwise specially assigned.
(2) Without limiting the generality of subsection (1), it is hereby declared for greater certainty that the Trial Division has jurisdiction with respect to any one or more of the following:
. . .
(i) any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise;
. . .
(m) any claim in respect of goods, materials or services wherever supplied to a ship for the operation or maintenance of the ship, including, without restricting the generality of the foregoing, claims in respect of stevedoring and lighterage;
2. In this Act,
. . .
"Canadian maritime law" means the law that was administered by the Exchequer Court of Canada on its Admiralty side by virtue of the Admiralty Act, chapter A-1 of the Revised Statutes of Canada, 1970, or any other statute, or that would have been so administered if that Court had had, on its Admiralty side, unlimited jurisdiction in relation to maritime and admiralty matters, as that law has been altered by this Act or any other Act of Parliament;
Judgments of the federal Court
A. Federal Court of Canada, Trial Division (1988), 19 F.T.R. 220
In addressing the question of jurisdiction, McNair J. of the Federal Court, Trial Division, considered the reasoning of earlier cases dealing with the question of maritime jurisdiction, including the leading case of this Court in ITO -- International Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752, and concluded (at p. 226)
...on the facts of the present case that the claims for relief made and the remedies sought relate to and are integrally connected with matters of Canadian maritime law in the modern context of commerce and shipping. In my opinion, the subject matter falls within the ambit of s. 22(1) of the Federal Court Act with the result that the court has jurisdiction to entertain the claims.
If it were necessary to decide the point, I would be inclined to the view that the three claims are as well part and parcel of activities essential to the carriage of goods by sea and the operations flowing therefrom by which the parties agreed to be bound, so as to fall within the jurisdictional head of s. 22(2) (i) of the Federal Court Act . The contract between the parties incorporated by reference the terms of charterparty between the plaintiff and the owners of the vessel and clearly stipulated that the defendant was liable to pay for all discharging costs and expenses.
As a result, McNair J. awarded judgment in favour of Monk on all three claims in the amount of $89,515.06, plus costs and interest, compounded annually.
B. Federal Court of Appeal (1989), 97 N.R. 384
Island's appeal against the decision of McNair J. to the Federal Court of Appeal was allowed in part. The Court of Appeal was divided over the issue of whether the contract between Monk and Island was maritime in nature and therefore fell within the Federal Court's jurisdiction. Hugessen J.A. agreed with McNair J. that the contract was one of a maritime nature and therefore the court had jurisdiction to hear all claims. Pratte J.A. held that only the claim for demurrage could be entertained. Desjardins J.A. was of the view that there was no jurisdiction to hear any of the claims as the contract's true characterization was really one of purchase and sale falling within civil matters and not maritime jurisdiction.
Hugessen J.A. was of the view that the telex that confirmed the arrangement between the parties was "in fact ... an agreement to conclude a number of contracts and, while the most important of those is unquestionably the contract of sale (without it there would be no agreement at all), there are others which are also essential to the bargain made by the parties" (p. 390). He had no difficulty characterizing the arrangement between the parties as a maritime matter, falling within the scope of maritime law as "[v]irtually everything about the contract relates to the sea and maritime activities" (p. 390). Hugessen J.A. next considered whether Monk's claims related solely to the agreement for the purchase and sale of the urea, in which case the law of contract would apply, or whether the claims flowed from maritime law. He was of the opinion that the claim for the overage flowed "directly from the maritime nature of the contract of carriage" because it was Island which undertook to "discharge the vessel and, therefore by implication, not to discharge more than he was entitled to" (p. 391). Likewise, the rental of the cranes was necessary for Island to meet its obligation to discharge the cargo. Finally, Hugessen J.A. was of the view that there could be no dispute that the claim for demurrage was clearly one relating to maritime law. Accordingly, he would have dismissed the appeal.
Although Pratte J.A. concurred with Hugessen J.A.'s view that the claim for demurrage fell within the Federal Court's maritime jurisdiction, he was of the opinion that the claim for excess cargo was, in fact, a claim "for the price of goods sold and delivered". Even though the goods were to be delivered by ship, and the quantity was measured by "draft survey" (described to this Court as a maritime application of the principle of Archimedes used by marine surveyors in the unloading of bulk cargo from ships), the contract was not thereby imbued with a maritime quality. Similarly he did not "see anything that could impart a maritime character" to the claim for the rental of the shore cranes.
Desjardins J.A. adopted the facts as stated in the reasons of Hugessen J.A., but disagreed with his characterization of the nature of the contract. She was of the opinion that the fact that Island took more urea than it was entitled to, because of the problems inherent in maritime carriage relating to weight and measure, did not make the claims for the excess a maritime contract. She was also of the view that the claims for demurrage and the rental of the cranes were civil matters relating to the sale of goods and that the Federal Court had no jurisdiction to hear any of the claims.
Submissions Before this Court
Monk argued that there was only one issue to be resolved, and that concerned the sort of activity that would fall within the jurisdiction of the Federal Court in maritime matters. In this regard, Monk submitted that the leading case remains this Court's decision in ITO -- International Terminal Operators Ltd. v. Miida Electronics Inc., supra, and that it ought to be applied to the case at bar.
In relation to the characterization of the agreement between Monk and Island, Monk made a number of submissions in support of its main contention that the agreement was maritime in substance and that the Federal Court had properly exercised its jurisdiction. Monk submitted that this Court's jurisprudence has been instrumental in determining the extent of the Federal Court of Canada's maritime jurisdiction, and cited in this regard Q.N.S. Paper Co. v. Chartwell Shipping Ltd., [1989] 2 S.C.R. 683, as well as ITO, supra. Both cases were cited by Monk for the proposition that the words "maritime" and "admiralty" should be interpreted within the modern context of commerce and shipping. Accordingly, a rather broad and liberal interpretation ought to pertain when considering the nature of the activity and the accompanying claim being made.
Monk argued that the determination of whether or not an activity is maritime in nature depends upon an examination of the activity in question. If it is clear that the activity in question is maritime, then other factors such as sale of goods are extraneous. Monk conceded that the only caveat to this scheme is that the court must, according to ITO, avoid encroaching upon an area that is in "pith and substance" one of property and civil rights or any other matter that touches upon exclusive provincial jurisdiction as provided for by s. 92 of the Constitution Act, 1867 . Such a situation could arise, Monk submitted, where the maritime aspect was so peripheral that it could not be given separate status, which, they argued, was not the case here. Applying this test to the case at bar, Monk invited this Court to conclude that the sale of goods aspect was not relevant to the issues being litigated, which relate solely to the carriage and discharge of cargo, both of which were maritime in nature. While Monk admitted that the sale of goods was integrally bound up with the maritime aspect of the contract between Monk and Island, Monk drew attention to the fact that under the terms of the contract Island undertook a maritime activity, i.e. the discharge of cargo, and that as a consequence, all of Monk's claims flowed from the breach of that maritime undertaking.
With regard to the Federal Court's jurisdiction, Monk submitted that s. 22(1) in combination with s. 2 of the Federal Court Act was sufficient to establish jurisdiction. In the alternative, Monk submitted that its claims are specifically listed in s. 22(2) (i) of the Federal Court Act , if one accepted that the maritime aspects of the agreement could be severable from the purchase/sale aspects.
Island's submissions were premised upon an argument which stressed the civil, i.e. contractual, nature of the relationship between Island and Monk which would thereby characterize the agreement as being one related to property and civil rights. In doing so, Island emphasized that the true maritime nature of the transaction was properly between Monk and the owners of the Super Spirit, Superchart I/S, with whom Monk had a charter-party.
In advancing its argument, Island reviewed in this Court much of the evidence placed before the trial judge in order to characterize what was, in their submission, the true nature of the claims. At a substantive level, Island argued that the trial judge, as well as Pratte and Hugessen JJ.A., had ignored McIntyre J.'s caveat in ITO, supra, at p. 774, that a court,
... in determining whether or not any particular case involves a maritime or admiralty matter, must avoid encroachment on what is in "pith and substance" a matter of local concern involving property and civil rights or any other matter which is in essence within exclusive provincial jurisdiction under s. 92 of the Constitution Act, 1867 .
It was Island's contention that, if this caveat were properly applied to the facts of the case, there could be no mistaking the civil character of the parties' relationship and the ensuing conclusion that the claims are better characterized as being, in "pith and substance", civil in nature. Accordingly, the Federal Court lacked jurisdiction to hear the case and the claims ought to be adjudicated according to the Sale of Goods Act of Prince Edward Island, R.S.P.E.I. 1974, c. S-1.
Island further submitted that Monk's alternative ground relating to s. 22(2) (i) of the Federal Court Act amounted to a misconstruction of the Act and that the section applies only to the seller and to the owner of a ship in which the goods are being carried and not to the buyer of those goods. As a result, Island by its cross-appeal contended that the Federal Court has no jurisdiction to entertain any of Monk's claims.
Analysis
The jurisdiction of the Federal Court, Trial Division to hear Monk's claims against Island must be found in s. 22(1) of the Federal Court Act cited above, which in turn leads to the definition of "Canadian maritime law" as set forth in s. 2 of the Act. A consideration of the scope and application of that definition necessitates a review of this Court's decision in ITO, supra, which has been followed in a number of recent decisions of the Court. See: Roberts v. Canada, [1989] 1 S.C.R. 322; Q.N.S. Paper Co. v. Chartwell Shipping Ltd., supra, and Whitbread v. Walley, [1990] 3 S.C.R. 1273, December 20, 1990. (For helpful commentary, see: H. Patrick Glenn, "Maritime Law -- Federal Court Jurisdiction -- Canadian Maritime Law -- Relationship to Civil and Common Law: ITO -- International Terminal Operators Ltd. v. Miida Electronics Inc." (1987), 66 Can. Bar Rev. 360; André Braën, "L'arrêt ITO-International Terminal Operators Ltd. c. Miida Electronics Inc., ou comment écarter l'application du droit civil dans un litige maritime au Québec" (1987), 32 McGill L.J. 386; Linda Reif, "A Comment on ITO Ltd. v. Miida Electronics Inc. - The Supreme Court of Canada, Privity of Contract and The Himalaya Clause" (1988), 26 Alta. L. Rev. 372; William Tetley, "The Buenos Aires Maru -- Has the Whole Nature of Canadian Maritime Law Been Changed?" (1988), 10 Sup. Ct. L. Rev. 399; and John Evans and Brian Slattery, "Federal Jurisdiction -- Pendent Parties -- Aboriginal Title and Federal Common Law -- Charter Challenges -- Reform Proposals: Roberts v. Canada" (1989), 68 Can. Bar Rev. 817.)
In ITO, Mitsui, a marine carrier, transported electronic calculators by sea from Japan to Montreal where Miida was to take delivery. Mitsui had arranged for the calculators, on arrival, to be picked up and stored for a short term by the defendant ITO, a stevedoring and terminal operating company. Many cartons of calculators were stolen from the defendant ITO's shed as a result of the alleged negligence of ITO. Miida sued Mitsui and ITO, and the issue, in so far as it concerns us in this case, was whether the action against ITO could be brought in the Federal Court, Trial Division. This depended on whether ITO's liability was to be decided pursuant to the civil law of Quebec where the loss of cartons took place or under the common law of bailment which has been incorporated into Canadian maritime law.
McIntyre J., writing for the majority, concluded that the claim against ITO was not within the meaning of the first branch of the definition of Canadian maritime law, i.e. the law that was administered by the Exchequer Court of Canada on its Admiralty side by virtue of the Admiralty Act, 1970, or any other statute, but went on to decide that the claim against ITO fell within the second branch of the definition in s. 2 , namely:
...[the law] that would have been so administered if [the Exchequer] Court had had, on its Admiralty side, unlimited jurisdiction in relation to maritime and admiralty matters, as that law has been altered by this Act or any other Act of Parliament;
Reduced to their essentials for purposes of this appeal, the reasoning and conclusions of McIntyre J. were as follows (at pp. 774-76):
(1) The second part of the s. 2 definition of Canadian maritime law provides an unlimited jurisdiction in relation to maritime and admiralty matters which should not be historically confined or frozen, and "maritime" and "admiralty" should be interpreted within the modern context of commerce and shipping.
(2) Canadian maritime law is limited only by the constitutional division of powers in the Constitution Act, 1867 , such that, in determining whether or not any particular case involves a maritime or admiralty matter, encroachment on what is in pith and substance a matter falling within s. 92 of the Constitution Act is to be avoided.
(3) The test for determining whether the subject matter under consideration is within maritime law requires a finding that the subject matter is so integrally connected to maritime matters as to be legitimate Canadian maritime law within federal competence.
(4) The "connecting factors" with maritime law were the proximity of the terminal operation to the port of Montreal, the connection between the terminal operator in activities within the port area and the contract of carriage by sea, and the fact that the storage in issue in the case was short term pending final delivery to the consignee, Miida.
McIntyre J. then concluded that the claims of Miida were within the Federal Court's jurisdiction.
Applying the principles and approach of ITO to the case at bar, one must begin by asking whether the claims made by Monk are so integrally connected to maritime matters as to be legitimate Canadian maritime law within federal competence. To answer this question, it is important first to focus on the agreement between the parties in order to ascertain the nature and context of the claims in question, and second, to ascertain whether the claims are maritime under the ITO analysis.
The agreement between Monk and Island is set forth in the telex of October 11, 1985, which contained, as found by the trial judge, "the essential terms of the contract". Upon close examination, the telex clearly has, in my view, two distinguishable aspects: one sale of goods, and the other maritime. With respect, I cannot agree with the finding of Hugessen J.A. that the telex contained several contracts. It seems to me that the telex and the consideration flowing between the parties support only one contract which includes a number of different obligations or undertakings related to that one contract. I prefer to say that the telex contained many undertakings or terms, some of which relate to the sale of goods aspects of the contract, and others of which relate to the contract of carriage which constitute the maritime nature of the agreement between the parties.
With respect to the undertakings or terms relating to the sale of goods, one can point to the provisions of the telex dealing with the type of goods sold, the quality and quantity, the price, and the time for delivery. But at the same time, many of the undertakings in the telex relate to a number of matters that are clearly maritime in nature. For example, Monk agreed to obtain marine insurance and there is no doubt that any claim ensuing from such insurance would be governed by Canadian maritime law. Equally so are the undertakings in the telex that relate to a contract of carriage by sea. Monk was obliged to arrange for the chartering of a "self geared vessel" which was to sail to three destinations as determined by Island. Island, by the F.O. or free-out term, agreed to unload the urea upon delivery with a specified rate of discharge. This undertaking was reinforced by Island agreeing to assume responsibility for any demurrage and being entitled to take the benefit of any dispatch, in each case according to rates determined in the charter-party. In my view, these undertakings are terms that would be found in a contract of carriage by sea which is clearly a maritime matter within the scope of maritime law as defined by ITO.
Indeed, I agree with Hugessen J.A. when he said that the "connecting factors", as I have called them, to maritime law in this case are stronger than they were in ITO itself. I also agree with Hugessen J.A. when he stated at pp. 390-91:
Virtually everything about the contract relates to the sea and maritime activities. It does not become less maritime because it is dependent upon the making of the agreement for purchase and sale. Why should it? There is nothing very startling about what has happened here. Underlying most contracts of carriage by sea (usually evidenced by a bill of lading) is an ordinary commercial contract of sale. People do not ship goods across the seas for the pleasure of the thing but from the commercial necessity of delivering them to customers or receiving them from suppliers. Questions relating to the performance of the contract of carriage are governed by maritime law, whatever may be the law governing the sale. A buyer whose title to the goods derives from the endorsement of a bill of lading is vested with the rights and subject to the liabilities of the contract of carriage. (See Bills of Lading Act, R.S.C. 1985, c. B-5).
To conclude on this first point, many of the undertakings in the telex relate to a contract of carriage, which is, in my view, clearly a maritime matter within the scope of maritime law. However, under the ITO reasoning of McIntyre J., it is not enough to show that maritime undertakings are involved, rather it must be shown that the specific claims advanced are integrally connected to maritime matters because if they are so connected to the sale of goods, they will be governed, as Island argues, by the provisions of the Sale of Goods Act of Prince Edward Island.
The claims of Monk include money owed for excess product delivered, demurrage at the port of Saint John, and the cost of renting cranes used to unload the urea. Put briefly, the claims cannot properly be viewed as relating to questions encompassed by sale of goods issues such as capacity of the parties to contract, price, quality and so on. All of Monk's claims have as their source the obligation of Island to discharge the cargo as expressed in the telex by the F.O. term, which is normally associated with a contract of carriage by sea.
The claim for excess product delivered relates directly to the obligation of Island to discharge the cargo. In effect, the claim asserts that Island discharged improperly because it took more than it should have. Put another way, the underlying activity to which the claim for excess product delivered relates is the discharge of cargo, which finds its roots in the contract of carriage undertakings between the parties and not in the contract of sale aspects of the telex. Some added support for this view is found when one looks to the draft survey technique used to discharge the cargo. This method is uniquely maritime in nature and serves to confirm the general maritime nature of the activity involved in unloading cargo from a ship.
Similarly with the claim for demurrage, its maritime character, as Pratte J.A. found, cannot be denied. Demurrage relates directly to the discharge of a vessel's cargo, again in this case finding its source in the contract of carriage aspects of the agreement entered into between the parties. The nature and scope of demurrage is clearly a topic that is defined and informed by maritime law considerations.
With respect to the renting of the cranes, Monk seeks reimbursement for the costs of the rental on the basis of the obligation of Island to be responsible for the discharge of the cargo. As the trial judge found, the parties agreed in their telex to have a self-geared vessel transport the ca