A-607-80
McAllister Towing & Salvage Ltd. (Plaintiff)
(Respondent)
v.
General Security Insurance Company of Canada
(Defendant) (Appellant)
Court of Appeal, Pratte and Ryan JJ. and Lalande
D.J.—Montreal, June 18 and 19, 1981.
Practice — Motion to strike pleadings — Appeal from Trial
Division decision striking out a third party notice — Maritime
law — Defendant contracted with plaintiff to salvage cargo
which belonged to third party — Third party cause of action
based on fact that no contract of insurance existed between
defendant and third party — Trial Division held that the third
party claim did not arise out of a contract of marine insurance
— Whether the Court has jurisdiction pursuant to s. 22(2)(r)
of the Federal Court Act — Federal Court Act, R.S.C. 1970
(2nd Supp.), c. 10, ss. 2, 22(1), 22(2)(j),(r) — The Admiralty
Act of 1891, S.C. 1891, c. 29, s. 4 — Federal Court Rule
1729(2).
Appeal from a judgment of the Trial Division which struck
out a third party notice filed by the defendant against the
owner of a salvaged cargo. The main action was brought by
plaintiff to enforce an award for salvage of cargo and is
directed against the defendant because of the latter's failure to
honour its undertaking to pay for the salvage services as
determined by the award. The defendant had issued a policy on
this cargo but it was held in litigation that the owner of the
cargo was not insured under that policy. The Trial Division
held that the third party cause of action, if any, was not within
the Court's jurisdiction since it did not arise out of a contract of
marine insurance. The question is whether the Court has
jurisdiction pursuant to section 22(2)(r) of the Federal Court
Act.
Held, the appeal is dismissed. The third party claim is not a
claim "arising out" of a contract of marine insurance or "in
connection with" such a contract. The only relation that can be
detected between the claim and marine insurance is that the
claim arises from the fact that the defendant misinterpreted the
effect of an insurance certificate it had issued. Furthermore,
the claim cannot be regarded as a claim for salvage within the
meaning of section 22(2)(j) of the Federal Court Act since it
arises from facts which took place a long time after the salvage.
Per Lalande D.J. dissenting: The expression "in connection
with" has a wide implication. In this case, it embraces the
contextual relationship between the policy of marine insurance
issued by the defendant at the request of the third party and the
undertaking to pay the salvage award that the defendant gave
to the plaintiff for the benefit of the third party (i.e. the owner
of the cargo). Furthermore, this Court's jurisdiction falls under
the general maritime jurisdiction conferred on it by section
22(1) of the Federal Court Act.
Green Forest Lumber Ltd. v. General Security Insurance
Co. of Canada [1977] 2 F.C. 351; affd. [1978] 2 F.C.
773; [1980] 1 S.C.R. 176, referred to. Tropwood A.G. v.
Sivaco Wire & Nail Co. [1979] 2 S.C.R. 157, referred to.
APPEAL.
COUNSEL:
Jean Brisset, Q.C. for plaintiff (respondent).
Vincent M. Prager for defendant (appellant).
William V. Sasso for third party (respond-
ent).
SOLICITORS:
Brisset, Bishop, Davidson & Davis, Montreal,
for plaintiff (respondent).
Stikeman, Elliott, Tamaki, Mercier & Robb,
Montreal, for defendant (appellant).
Rose, Persiko, Arnold, Gleiberman, Toronto,
for third party (respondent).
The following are the reasons for judgment
delivered orally in English by
PRATTE J.: This is an appeal from a judgment
of the Trial Division [[1981] 1 F.C. 758] striking
out a third party notice on the ground that its
subject-matter is not within the jurisdiction of the
Court.
In 1974, McAllister Towing & Salvage Ltd.
(McAllister) salved the ship Elarkadia and its
cargo. It thereafter retained the cargo so as not to
lose its salvor's lien. That cargo belonged to Green
Forest Lumber Limited (Green Forest). In March
1975, following discussions between that company,
McAllister and General Security Insurance Com
pany of Canada (General Security), McAllister
agreed to surrender the cargo to Green Forest in
consideration of the undertaking of General Secu
rity to pay the salvage remuneration that would be
determined by arbitration. General Security gave
that undertaking because it believed, like all other
parties concerned, that it was the insurer of Green
Forest's cargo and, as such, bound to secure its
release. It was later discovered, however, following
the decisions rendered by the Trial Division, this
Court and the Supreme Court of Canada in the
case of Green Forest Lumber Limited v. General
Security Insurance Company of Canada,' that
General Security had never insured the cargo
belonging to Green Forest and that, as a conse
quence, it had never been under any obligation to
obtain its release. For that reason, General Secu
rity did not honour its undertaking and refused to
pay McAllister the salvage remuneration that had
been awarded by the arbitrator. McAllister sued
General Security for the amount of the salvage
award and General Security served a third party
notice on Green Forest. In that notice, the nature
of the claim of General Security against Green
Forest is described in the following terms:
The said Defendant claims to be indemnified by you for any
liability which they may have towards the Plaintiff, by reason
of the fact that the salvage services would have been secured by
the Defendant only on the basis that the Defendant had insured
your said cargo, which has now turned out not to be the case. In
that regard, by judgment of the Supreme Court of Canada,
Green Forest Lumber Limited v. General Security Insurance
Company of Canada, A-88-77, rendered on February 14, 1980,
the Court concluded that the cargo was at all material times
owned by you and at your risk, but that the Defendant General
Security Insurance of Canada was not the insurer of the cargo
carried on the "ELARKADIA" and had no obligation whatsoever
to effect payment for damages to said cargo. Since Defendant
General Security Insurance Company of Canada had no inter
est in the said cargo any agreement to guarantee the salvage
services of the Plaintiff was without any consideration.
That is the notice which was struck out by the
judgment under appeal.
In so far as that notice discloses a cause of
action, I share the view expressed by Mahoney J.
that such a cause of action is not within the
jurisdiction of the Court. Contrary to what was
argued by Mr. Prager on behalf of General Secu
rity, I am of opinion that this is not a claim
described in paragraph 22(2)(r) of the Federal
Court Act, R.S.C. 1970 (2nd Supp.), c. 10. The
claim, as I see it, is not a claim "arising out" of a
contract of marine insurance or "in connection
with" such a contract. Indeed, the only relation
that I can detect between the claim and marine
insurance is that the claim arises from the fact
that General Security misinterpreted the effect of
an insurance certificate it had issued. I am also of
opinion that the claim cannot be regarded as a
claim for salvage within the meaning of paragraph
' [1977] 2 F.C. 351; [1978] 2 F.C. 773; [1980] 1 S.C.R. 176.
22(2)(j) since it arises from facts which took place
a long time after the salvage.
For those reasons, I would dismiss the appeal
with costs.
* * *
RYAN J. concurred.
* * *
The following are the reasons for judgment
delivered orally in English by
LALANDE D.J. (dissenting): This is an appeal
from a judgment of the Trial Division striking a
third party notice filed by the defendant against
Green Forest Lumber Limited, on the ground that
the subject-matter of the claim against the third
party was not within the jurisdiction of the Federal
Court.
The main action was brought by a salvor to
enforce an award for salvage of cargo on board the
vessel Elarkadia and is directed against the
defendant General Security Insurance Company of
Canada because of the latter's undertaking to pay
for the salvage services as determined by the
award, an undertaking given for the salvor's
release of the cargo from the maritime lien for
salvage that had been exercised. Obviously, the
undertaking was given for the benefit of the owner
of the cargo on board the vessel, who was Green
Forest Lumber Limited.
The defendant had issued a policy of insurance
on this cargo and it has been determined in litiga
tion that went to the Supreme Court of Canada
that Green Forest Lumber Limited was not
insured under that policy. 2
It had been urged upon the Trial Judge that this
Court had jurisdiction in respect of the third party
claim, under paragraph (2)(r) of section 22 of the
Federal Court Act, because it was a claim "in
connection with a contract of marine insurance".
The learned Trial Judge rejected this contention
and held that the scope of the paragraph giving
2 [1977] 2 F.C. 351, affirmed by [1978] 2 F.C. 773 and
[1980] 1 S.C.R. 176.
this specific maritime jurisdiction to the Court did
not
... embrace a cause of action in which the existence of the
contract of marine insurance is a mere background fact
explaining how or why the cause of action arose but is entirely
immaterial to its resolution. [Page 760.]
The expression "in connection with" has wide
implication and in my reading of the circum
stances of the litigation between the parties to this
appeal it embraces the contextual relationship be
tween the policy of marine insurance issued by the
defendant at the request of the third party and the
undertaking to pay the salvage award that the
defendant gave to the plaintiff for the benefit of
the third party.
In my view this Court has jurisdiction over the
subject-matter of the third party claim also under
the general maritime jurisdiction of the Court
conferred by subsection 22(1) of the Federal
Court Act.
The claim for relief in the third party notice can
be said to be sought under "Canadian maritime
law" as that expression is meant to be taken by
section 2 of the Federal Court Act, that is to say
the law that was administered by the Exchequer
Court of Canada on its Admiralty side by virtue of
section 4 of The Admiralty Act of 1891, S.C.
1891, c. 29. 3 Section 4 read:
4. Such jurisdiction, powers and authority shall be exercis-
able and exercised by the Exchequer Court throughout Canada,
and the waters thereof, whether tidal or non-tidal, or naturally
navigable or artificially made so, and all persons shall, as well
in such parts of Canada as have heretofore been beyond the
reach of the process of any Vice-Admiralty court, as elsewhere
therein, have all rights and remedies in all matters, (including
cases of contract and tort and proceedings in rem and in
personam), arising out of or connected with navigation, ship
ping, trade or commerce, which may be had or enforced in any
Colonial Court of Admiralty under "The Colonial Courts of
Admiralty Act, 1890."
It appears to me, after reading the statement of
claim in the main action and the judgments deliv
ered in the litigation thus far between the defend
ant and the third party, that the issue between
these parties in respect of the salvage claim is
connected with "navigation, shipping, trade or
commerce".
3 Per Laskin C.J. for the Court in Tropwood A.G. v. Sivaco
Wire & Nail Company [1979] 2 S.C.R. 157, at pages 162-163.
An alternative prayer in the third party's motion
to strike was that the third party notice should be
struck on the ground that it disclosed no reason
able cause of action.
The notice seems to me to be not only deficient
in setting out the cause of action but also confus
ing. That can be cleared up in subsequent proceed
ings under Rule 1729(2).
The appeal should be allowed with costs. There
should be no costs in the Trial Division for the
reason I have just stated.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.