A-454-89
Shibamoto & Company Ltd. and Ocean Fisheries
Ltd. (Appellants) (Plaintiffs)
v.
Western Fish Producers, Inc., C.N. Holding, Inc.,
Jorn Nordmann, S.M. Properties Ltd. and The
Ship Nicolle N (Respondents) (Defendants)
INDEXED AS: SHIBAMOTO & CO. V. WESTERN FISH PRO
DUCERS, INC. (CA.)
Court of Appeal, Iacobucci C.J., Mahoney and
MacGuigan JJ.A.—Vancouver, October 12;
Ottawa, November 14, 1989.
Constitutional law — Distribution of powers — Whether
counterclaim alleging breach of contract coming under Federal
Court jurisdiction in action for damages arising out of agree
ment to purchase and process fish on high seas — Trial
Division Judge correct in finding issues integrally connected to
maritime law — All requirements essential to Federal Court
jurisdiction met.
Federal Court jurisdiction — Contract requiring use of ship
— Canadian maritime law including law of contracts and torts
to extent required, essential to disposition of case — Maritime
law coming under s. 91(10) Constitution Act, 1867, "Naviga-
tion and Shipping" power — S. 22(2)(i) as applied also falling
under Navigation and Shipping power.
This litigation arises from a contract whereby the respondent
Western, a floater/processor vessel operator, would purchase
and process on the high seas salmon and salmon roe for the
plaintiff Shibatomo, which would fund the operation. Ocean
Fisheries would act as Shibamoto's North American agent. The
respondent was to determine the price paid for the fish subject
to a ceiling price set by Shibamoto's representative on board
when it reached a level that would yield a loss at resale. Shortly
after operations had commenced, the representative decided
that the ceiling of non-profitability had been reached and
terminated the contract. The plaintiffs' action concerned own
ership of the fish on board, funds not yet expended, expenses
and the discretion to suspend purchasing. The defendants
advanced a counterclaim based on breach of contract, fraud,
deceit and conspiracy to induce breach of contract. This is an
appeal from the order of Rouleau J. who permitted the amend
ment of the statement of defence by addition of the counter
claim on the basis that the Court had jurisdiction to entertain
it.
Held, the appeal should be dismissed.
All three requirements, as set out in ITO—International
Terminal Operators Ltd. v. Miida Electronics Inc., for jurisdic-
tion in the Federal Court have been met. (1) The requirement
of a statutory grant of jurisdiction by the Parliament is met by
paragraph 22(2)(i) of the Federal Court Act, since the contract
specifies and requires the use of a ship even though the use on
the facts was less than total use. (2) The second requirement is
met since Canadian maritime law, an existing body of federal
law, is essential to the disposition of the case and nourishes the
statutory grant of authority and since the laws of contract and
torts fall under Canadian maritime law, to the extent required.
(3) The requirement of constitutionality is met since Canadian
maritime law has been upheld by the ITO decision under
subsection 91(10) of the Constitution Act, 1867, (the federal
power over "Navigation and Shipping") and since paragraph
22(2)(i) as applied to the use of a ship for fishing purposes also
falls under the Navigation and Shipping power.
Though a number of recent Supreme Court of Canada
decisions have established a very stringent test for Federal
Court jurisdiction by finding the relevant words defining the
Court's jurisdiction to be "Administration of the Laws of
Canada" as found in section 101 of the Constitution Act, 1867,
none of them dealt in any way with maritime law. It remains
that section 22 of the Federal Court Act cannot therefore be
given a construction beyond the scope of that expression. The
Supreme Court decision in the ITO case, however, confirms the
trend of upholding Federal Court jurisdiction in maritime law
matters.
STATUTES AND REGULATIONS JUDICIALLY
CONSIDERED
Constitution Act, 1867, 30 & 31 Vict., c. 3 (U.K.) (as
am. by Canada Act, 1982, 1982, c. 11 (U.K.),
Schedule to the Constitution Act, 1982, Item 1)
[R.S.C., 1985, Appendix II, No. 5], ss. 91(10),(12),
101.
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, ss.
2, 22.
CASES JUDICIALLY CONSIDERED
APPLIED:
ITO—International Terminal Operators Ltd. v. Miida
Electronics Inc. et al., [1986] 1 S.C.R. 752; (1986), 28
D.L.R. (4th) 641; 68 N.R. 241; 34 B.L.R. 251.
DISTINGUISHED:
Kuhr v. The Friedrich Busse, [1982] 2 F.C. 709; (1982),
134 D.L.R. (3d) 261 (T.D.); Dome Petroleum Ltd. v.
Hunt International Petroleum Co., [1978] 1 F.C. 11,
(T.D.).
CONSIDERED:
Quebec North Shore Paper Co. et al. v. Canadian Pacific
Ltd. et al., [1977] 2 S.C.R. 1054; (1976), 71 D.L.R. (3d)
111; 9 N.R. 471; McNamara Construction (Western)
Ltd. et al. v. The Queen, [1977] 2 S.C.R. 654; (1977), 75
D.L.R. (3d) 273; 13 N.R. 181; R. v. Thomas Fuller
Construction Co. (1958) Ltd. et al., [1980] 1 S.C.R. 695;
(1979), 106 D.L.R. (3d) 193; 30 N.R. 249; 12 C.P.C.
248; Pacific Western Airlines Ltd. v. R., [1979] 2 F.C.
476; (1979), 105 D.L.R. (3d) 44; 13 C.P.C. 299 (T.D.).
REFERRED TO:
Tropwood A.G. et al. v. Sivaco Wire & Nail Co. et al.,
[1979] 2 S.C.R. 157; (1979), 99 D.L.R. (3d) 235; 10
C.P.C. 9; 26 N.R. 313; Antares Shipping Corporation v.
The Ship "Capricorn" et al., [1980] 1 S.C.R. 553;
(1979), 111 D.L.R. (3d) 289; 30 N.R. 104; Wire Rope
Industries of Canada (1966) Ltd. v. B.C. Marine Ship
builders Ltd. et al., [1981] 1 S.C.R. 363; (1981), 121
D.L.R. (3d) 517; 35 N.R. 288.
AUTHORS CITED
Evans, J. M. "Case Comment" ["Federal Jurisdiction—
A Lamentable Situation"] (1981), 59 Can. Bar Rev.
124.
Hogg, P. W. "Case Comment" ["Constitutional Law—
Limits of Federal Court Jurisdiction—Is there a Feder
al Common Law?"] (1977), 55 Can. Bar Rev. 550.
Jones, P. F. M. "Jurisdiction at Sea" (1982), 3 Supreme
Court L.R. 445.
Kerr, R. W. "Constitutional Limitations on the Admiral
ty Jurisdiction of the Federal Court" (1979), 5 Dal-
housie L.J. 568.
Laskin, J. B. and Sharpe, R. J. "Constricting Federal
Court Jurisdiction: A Comment on Fuller Construc
tion" (1980), 30 U.T. L.J. 283.
Rogers, D. N. "Admiralty Jurisdiction in Canada: Is
There a Need for Reform?" (1985), 16 J. Mar. L.&
Comm. 467.
Scott, S. A. "Canadian Federal Courts and the Constitu
tional Limits of their Jurisdiction" (1982), 27 McGill
L.J. 137.
Shorter Oxford English Dictionary, vol. II, 3rd rev. ed.
Oxford: Clarendon Press, 1975, "navigation".
COUNSEL:
David F. McEwen for appellants (plaintiffs).
J. W. Perrett for respondents (defendants).
SOLICITORS:
McEwen, Schmitt & Co., Vancouver, for
appellants (plaintiffs).
Campney & Murphy, Vancouver, for
respondents (defendants).
The following are the reasons for judgment
rendered in English by
MACGUIGAN J.A.: This is an appeal against an
order of Rouleau J. [T-1810-88, order dated
October 2, 1989, not yet published] allowing the
respondents' motion to amend their statement of
defence by adding, inter alia, a counterclaim to it.
The appellants challenge the decision of the
Motions Judge that the counterclaim is within the
jurisdiction of the Federal Court.
The dispute arises from a contract entered into
on May 16, 1988, between Shibamoto & Company
Ltd. ("Shibamoto"), Ocean Fisheries Limited
("Ocean") and Western Fish Producers Inc.
("Western"). The agreement recites that Western,
which operated the floater/processor vessel Nicolle
N ("the vessel"), wished to keep and process fish
in Alaska for a party with sufficient financial
strength to fund such an operation, that Shibamo-
to, a Japanese trading company, wished to acquire
salmon and salmon roe in Alaska for resale in
Japan, and that Ocean would act as Shibamoto's
North American agent, with all North American
transactions in its name. By the agreement
Shibamoto was, through its agent, to advance suf
ficient funds (ultimately U.S. $1.8 M) to purchase
some three million pounds of sockeye salmon to
Western, which agreed to purchase and process
salmon and salmon roe on the vessel on the high
seas through the 1988 salmon season. Western was
to determine the price paid for the fish subject to a
ceiling price set by Shibamoto's representative on
board the vessel when the price reached a level
which would result in a loss at resale. Also on
board the vessel were eight roe technicians pro
vided by Shibamoto to prepare the salmon and the
roe so as to meet the requirements of the Japanese
market. After purchasing, dressing and freezing
the fish, Western would off-load them onto tramp
steamers as quickly as possible. The agreement
provided that it "shall be governed and construed
in accordance with the laws of the Province of
British Columbia" (clause 8.01).
Within a short time after operations began
under the contract in June, 1988, the price of
salmon increased to the point where Shibamoto's
representative decided that the ceiling of non-prof
itability had been reached.
An action was begun by the appellants in the
British Columbia Supreme Court and subsequent
ly also in the Federal Court. The issues are as to
the ownership of the fish on board, the funds not
yet expended, the expenses involved in the process
ing and the appellants' discretion to suspend pur
chasing. The respondents were denied a stay of the
Federal Court action since one of the remedies in
the Federal Court action, i.e., a lien against the
vessel, was not available in the B.C. Court.
The counterclaim advanced by the respondents
alleges breach of contract and also fraud, deceit
and conspiracy to induce or compel breach of the
agreement (Appeal Book at pages 260-261).
Jurisdiction over the counterclaim depends on
the interpretation to be given to section 22 of the
Federal Court. Act [R.S.C. 1970 (2nd Supp.),
c. 10] ("the Act") and also on the constitutional
division of legislative power.
The relevant part of section 22 is as follows:
22. (1) The Trial Division has concurrent original jurisdic
tion as well between subject and subject 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 claim or question arising out of
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 her operation or maintenance
including, without restricting the generality of the foregoing,
claims in respect of stevedoring and lighterage;
The definition of "Canadian maritime law" in
section 2 of the Act is also relevant:
2....
"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 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 mari
time and admiralty matters, as that law has been altered by
this or any other Act of the Parliament of Canada.
The most relevant part of the learned Trial
Judge's reasons [Shibamoto & Co. v. Western
Fish Producers, Inc., order dated October 2, 1989,
Federal Court—Trial Division, T-1810-88, not yet
reported] for order is as follows (Appeal Book at
pages 271-274):
One of the leading cases in which the Federal Court's
jurisdiction was analyzed and which is of significant impor
tance is the ITO—International Terminal Operators Ltd. v.
Miida Electronics Inc. et al., a decision of the Supreme Court
of Canada reported in [1986] 1 S.C.R. 752; (1986), 28 D.L.R.
4th 641. At page 774 S.C.R. Maclntyre J. wrote, and I
paraphrase: In order to determine if a particular case involves
maritime or admiralty law, we must be satisfied to avoid
encroachment on what is of local concern involving property
and civil rights or matters which are of essential, exclusive
provincial jurisdiction. At page 774 S.C.R. he goes on, that the
issue must be integrally connected to maritime matters as to be
legitimate Canadian maritime law within federal legislative
competence.
In analyzing disputes of this nature, one must look to the
substance of the claim being asserted and the relief sought. We
are dealing with the engaging of a processing ship, financing
and fish processing at sea. One must determine the actual
underpinnings of the dispute. The essence of the arrangement
between the plaintiff and the defendant in this particular
transaction was for the plaintiff to provide funds to the defend
ants and they in turn made available the Nicolle N for the
acquisition and processing of salmon and salmon roe at sea.
The defendants submit that the Court can assume the juris
diction of the issues raised in the counterclaim by virtue of its
authority of subsection 22 and subparagraph 22(2)(0(m) of the
Federal Court Act.
I much prefer the reasoning of Mr. Justice Addy in Kuhr v.
The Friedrich Busse, [1982] 2 F.C. 709 (T.D.). The facts of
that case are somewhat similar and it was resolved by finding
that the Court had jurisdiction. There the defendant owned a
fish processing vessel and the plaintiffs alleged that the defend
ant was in breach of a contract to supply fish at sea to the
defendant vessel which was to remain within a specified fishing
area and was to receive delivery and pay for the fish. Similarly
to this case, the defendant ship was arrested at the request of
the plaintiffs. In a motion to strike arguments were submitted
alleging that the Court had no jurisdiction, that no action was
maintainable because the supply of fish under a contract did
not fall within any of the paragraphs of subsection 22(2) of the
Federal Court Act and more particularly within paragraphs (i)
and (m); further that the substance of the matter did not fall
within maritime jurisdiction. Mr. Justice Addy at page 714
wrote:
I agree that a contract for the supplying of fish to a vessel,
merely by reason of the fact that the vessel is processing the
fish and is thus using the fish supplied, cannot fairly be
construed as an "agreement relating to ... the use ... of a
ship" as contemplated by paragraph (i). When the word
"use" is considered in that context it seems clear that the use
referred to is use of the ship by a party other than the owner:
an agreement for use and an ordinary contract for hiring
would be ejusdem generis.
However, the question as to whether paragraph (m)
applies is not nearly so clear. It might well be that the word
"operation" in that paragraph does not refer only to the
actual navigation of a ship over the water but to its operation
generally where it has another function such as receiving
delivery of fish on the high seas and processing same, even
though the actual processing might well be the same as the
operation carried on by a fish processing factory situated
ashore.
Justice Addy went on to say that although the sections do not
specifically enumerate what should be construed as necessaries
for a ship, there is no doubt that once it falls into such a
category it comes within the jurisdiction of the Federal Court.
Mr. Justice Addy refers also to the case of Western Nova
Scotia Bait Freezers Limited v. The Ship "Shamrock", [1939]
Ex. C.R. 53. It dealt with a vessel engaged in the fishing
business and the contract was to supply bait and ice which were
determined to be necessaries.
It was argued that money, in this particular circumstance,
cannot be considered a necessary since we are dealing exclu
sively with financial underwriting. That may be argued but I
have great doubts that it is supported by the facts. The
underpinning, the agreement called for retaining the services of
a ship for the processing of fish brought about by the financial
arrangement. The contract between the parties was for the
Nicolle N to proceed on the high seas to acquire fish in a
specified fishing area and receive, process and deliver same. If
one looks to the reasoning of the Supreme Court of Canada in
the ITO case supra I think the analysis referred to at page 775
S.C.R. wherein the Court considered the proximity of a termi
nal to the operations at sea sufficient to bring it within mari
time law, I am satisfied that I am by no means exceeding the
bounds of jurisdiction conferred on this Court and the issues
are integrally connected to maritime law.
May I add that it would seem illogical that a plaintiff could
assert the right of bringing an action in the Federal Court of
Canada, claim a Maritime lien and arrest a ship on the basis of
United States law and then successfully reject a counterclaim
affirming damages arising out of the same breach of contract
involving the same ship. Perhaps the relief sought by the
defendants in the counterclaim could as well give rise to a
Maritime lien under United States law. I say this without
having the benefit of any assistance either to support the
assertion made by the plaintiffs in their pleading or my
independent knowledge as to what may give rise to a lien in
U.S. jurisdictions.
The jurisdiction of the Federal Court of Canada as
set forth in the Act must be assessed initially
under the terms of section 101 of the Constitution
Act, 1867 [30 & 31 Vict., c. 3 (U.K.) (as am. by
Canada Act, 1982, 1982, c. 11 (U.K.), Schedule to
the Constitution Act, 1982, Item 1) [R.S.C., 1985,
Appendix II, No. 5]] because that provision alone
authorizes Parliament to establish such a Court.
Section 101 provides that:
101. The Parliament of Canada may, notwithstanding any
thing in this Act, from Time to Time, provide for the Constitu
tion, Maintenance, and Organization of a General Court of
Appeal for Canada, and for the Establishment of any addition
al Courts for the better Administration of the Laws of Canada.
The relevant words of section 101 for defining the
Court's jurisdiction have been considered by the
Supreme Court of Canada in a number of recent
cases to be "Administration of the Laws of Cana-
da." Section 22 cannot, therefore, be given a con
struction beyond the scope of this expression.
The earliest of these Supreme Court decisions
was Quebec North Shore Paper Co. et al. v.
Canadian Pacific Ltd. et al., [1977] 2 S.C.R.
1054; (1976), 71 D.L.R. (3d) 111; 9 N.R. 471.
The effect of this case is perhaps best summarized
by Laskin C.J.C. (who delivered the unanimous
judgments of the Court in both cases) in
McNamara Construction (Western) Ltd. et al. v.
The Queen, [1977] 2 S.C.R. 654; (1977), 75
D.L.R. (3d) 273; 13 N.R. 181, at pages 658-659
S.C.R.:
In Quebec North Shore Paper Company v. Canadian Pacific
Limited, ... this Court held that the quoted provisions of s.
101, make it a prerequisite to the exercise of jurisdiction by the
Federal Court that there be existing and applicable federal law
which can be invoked to support any proceedings before it. It is
not enough that the Parliament of Canada have legislative
jurisdiction in respect of some matter which is the subject of
litigation in the Federal Court. As this Court indicated in the
Quebec North Shore Paper Company case, judicial jurisdiction
contemplated by s. 101 is not co-extensive with federal legisla
tive jurisdiction. It follows that the mere fact that Parliament
has exclusive legislative authority in relation to ... [subsection
91(1A) and 91(28) of the Constitution Act, 1867], and that the
subject matter of the construction contract may fall within
either or both of these grants of power, is not enough to support
a grant of jurisdiction to the Federal Court to entertain the
claim for damages made in these cases. [Emphasis added.]
The Court went on to hold that there was neither a
federal statutory nor a federal common law basis
for the Crown's suit against a third party for
damages for breach of contract.
Despite the fact that dicta in McNamara sug
gested that the result would have been different if
what were at stake were the Crown's liability to a
third party, the Court was not prepared in R. v.
Thomas Fuller Construction Co. (1958) Ltd. et
al., [1980] 1 S.C.R. 695; (1979), 106 D.L.R. (3d)
193; 30 N.R. 249; 12 C.P.C. 248 (Martland J.
dissenting) to allow the Crown to issue a third
party notice claiming indemnity in contract and
contributory negligence, even though the Crown
would have had its own liability established on the
basis of federal law before it could succeed in its
third party claim. Pigeon J., writing for the
majority, said in relation to the Crown's claim in
contract (at page 711 S.C.R.):
The question in the present case is, as I see it, "Does federal
law embrace the issues on the third party notice?" In my view
it does not. The Crown Liability Act deals only with the
liability which is asserted in the main action. While without
such liability there would be no claim over, such claim does not
arise out of this liability but only out of the contract and of the
[sic] Negligence Act. [R.S.O. 1970, c. 296] .... In the present
case the objection to the jurisdiction is not founded on the
construction of the statute, but arises out of the constitutional
restriction of Parliament's power which, as concerns the
Canadian judicature, restricts it to the establishment of
"Courts for the better Administration of the Laws of Canada".
In the present case the laws on which the third party notice is
founded are not those of Canada but those of the Province of
Ontario.
With respect to the claim in negligence Pigeon
J. wrote (at pages 712-713 S.C.R.):
Even if I had to accept the view taken by the Ontario Court
of Appeal of the effect of the Negligence Act [viz., that no
contribution could be recovered from a party where it was not
claimed before judgment on the main action], I would not
agree that this could justify a conclusion that the Crown must
be allowed to institute third party proceedings in the Federal
Court so as not to be deprived of the benefit of the [sic]
Negligence Act. It must be considered that the basic principle
governing the Canadian system of judicature is the jurisdiction
of the Superior Courts of the Provinces in all matters federal
and provincial. The federal Parliament is empowered to dero
gate from this principle by establishing additional Courts only
for the better administration of the laws of Canada. Such
establishment is not therefore necessary for the administration
of these laws. Consequently, I fail to see any basis for the
application of the ancillary power doctrine which is limited to
what is truly necessary for the effective exercise of Parliament's
legislative authority. If it is considered desirable to be able to
take advantage of provincial legislation on contributory negli
gence which is not meant to be exercised outside the Courts of
the Province, the proper solution is to make it possible to have
those rights enforced in the manner contemplated by the gener
al rule of the Constitution of Canada, that is before the
superior court of the province.
These cases establish a very stringent test for
Federal Court jurisdiction,' and would seem as a
first consequence to invalidate the view taken by
the Motions Judge in the final paragraph of his
reasons for decision set out above. The mere fact
that a plaintiff can assert an action against a ship
in the Federal Court does not found a counter
claim for damages even if they arise "out of the
same breach of contract involving the same ship."
A counterclaim would appear to be in the same
position as an action against a third party, that is,
a substantive proceeding and not a mere incident
of the principal action. However, I accept the
argument made by the respondent that this para
graph of the Judge's reasoning is an obiter dictum,
his essential reasoning having concluded at the end
of the preceding paragraph when he wrote: "I am
satisfied that I am by no means exceeding the
bounds of jurisdiction conferred on this Court and
the issues are integrally connected to Maritime
law."
' In Pacific Western Airlines Ltd. v. R., [1979] 2 F.C. 476;
(1979), 105 D.L.R. (3d) 44; 13 C.P.C. 299 (T.D.), at p. 490,
Collier J. characterized the jurisdictional situation following
the limitations imposed by the Supreme Court in these cases as
"lamentable." The commentators have been uniformly critical
of the Court's reasoning. Professor Peter W. Hogg, Case
Comment ["Constitutional Law—Limits of Federal Court
(Continued on next page)
None of the foregoing Supreme Court decisions
dealt in any way with maritime law, and, when
confronted with problems in that area the Court
upheld the jurisdiction of the Federal Court in
Tropwood A.G. et al. v. Sivaco Wire & Nail Co. et
al., [1979] 2 S.C.R. 157; (1979), 99 D.L.R. (3d)
235; 10 C.P.C. 9; 26 N.R. 313; Antares Shipping
Corporation v. The Ship "Capricorn" et al.,
[1980] 1 S.C.R. 553; (1979), 111 D.L.R. (3d)
289; 30 N.R. 104; Wire Rope Industries of
Canada (1966) Ltd. v. B.C. Marine Shipbuilders
Ltd. et al., [1981] 1 S.C.R. 363; (1981), 121
D.L.R. (3d) 517; 35 N.R. 288. That trend has
most recently been confirmed in ITO—Interna-
tional Terminal Operators Ltd. v. Miida Elec
tronics Inc. et al., [1986] 1 S.C.R. 752; (1986), 28
D.L.R. (4th) 641; 68 N.R. 241; 34 B.L.R. 251, a
(Continued from previous page)
Jurisdiction—Is there a Federal Common Law?"] (1977), 55
Can. Bar Rev. 550, at p. 555 has written that "the only
workable and principled test for a law of Canada is the test of
federal legislation competence which prevailed before Quebec
North Shore and McNamara Construction." Professors John
B. Laskin and Robert J. Sharpe, "Constricting Federal Court
Jurisdiction: A Comment on Fuller Construction" (1980), 30
U.T.L.J. 283, at p. 286 have contrasted the American solution:
"Faced with a similar predicament—federal courts with consti
tutionally limited jurisdiction and cases with emanations
beyond it—American courts have developed concepts of 'ancil-
lary' and `pendent' jurisdiction to permit a federal court to
resolve all aspects of a dispute the principal part of which it
may properly hear." Professor Stephen A. Scott, "Canadian
Federal Courts and the Constitutional Limits of their Jurisdic
tion" (1982), 27 McGill L.J. 137, at p. 161 refers to "The
Constitutional Requirement of an Elusive Substantive `Federal
Law'." Professor J. M. Evans, Case Comment ["Federal Juris-
diction—A Lamentable Situation"] (1981), 59 Can. Bar Rev.
124, at pp. 132-3 writes: "To limit the jurisdiction that Parlia
ment can confer upon the Federal Court so narrowly that it
makes even those parts that are clearly valid so practically
defective that drastic legislative reform becomes necessary,
seems a remarkable arrogation of power."
4-3 decision of the Supreme Court. 2
On the facts of the ITO case, the marine carrier
agreed in a contract evidenced by a bill of lading
to carry cartons of electric calculators from Japan
to Montréal for delivery to the consignee. On
arrival in Montréal the goods were picked up and
stored by ITO, a stevedoring and terminal opera
tor. Before delivery could be made to the consignee
thieves broke into the terminal transit shed and
stole the majority of the cartons. The Supreme
Court treated the case on the basis that the loss by
theft occurred through ITO's negligence. The con-
signee brought proceedings in the Federal Court
against both the carrier and the terminal
operators.
The Court ultimately held that the consignee
had no cause of action against the carrier, because
of an express limitation of liability in the contract
that it found to govern even in the presence of
negligence, and that that limitation of liability
extended also to the terminal operator.
In the course of coming to that decision, how
ever, the Court set forth the jurisdiction of the
Federal Court in admiralty. McIntyre J. recapitu
lated the essential requirements to support a find
ing of jurisdiction in the Federal Court as follows
(at page 766 S.C.R.):
2 Professor Robert W. Kerr, "Constitutional Limitations on
the Admiralty Jurisdiction of the Federal Court" (1979), 5
Dalhousie L.J. 568, foresaw the possibility that admiralty
jurisdiction might escape the constitutional limitations of the
Quebec North Shore and McNamara Construction cases
because of the historical development of a federal common law
of admiralty. P.F.M. Jones, "Jurisdiction at Sea" (1982), 3
Supreme Court L.R. 445 at p. 451 concluded, following the
B.C. Marine case, that "one can conclude that the admiralty
jurisdiction of the Federal Court is not subject to the `proper
solution' philosophy of the Supreme Court of Canada as
expressed in Fuller, viz., that the rights ought to be enforced
before the superior court of the province." David N. Rogers,
"Admiralty Jurisdiction in Canada: Is There a Need for
Reform?" (1985), 16 J. Mar. L.& Comm. 467 preferred the
approaches taken by the Federal Court of Appeal to that taken
by the Supreme Court up to that time (i.e., before ITO).
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.
The majority found it immediately obvious that
subsection 22(1) of the Act satisfied the first
requirement of jurisdiction, and turned to the
question whether Canadian maritime law was
essential to the disposition of the case and nour
ished the statutory grant of jurisdiction (at page
769 S.C.R.):
Canadian maritime law, as defined in s. 2 of the Federal
Court Act, can be separated into two categories. It is the law
that:
(1) was administered by the Exchequer Court of Canada on its
Admiralty side by virtue of the Admiralty Act or any other
statute; or
(2) would have been so administered if that court had had on
its admiralty side unlimited jurisdiction in relation to mari
time and admiralty matters.
The first category embraces English admiralty
jurisdiction and law as it existed in 1934, the date
of the first Canadian admiralty legislation after
the Statute of Westminster. However, since Eng-
lish maritime law as of 1934 was confined to torts
committed within the ebb and flow of the tide and
excluded land-based torts, that would not cover the
negligence in this case. It was therefore necessary
to turn to an analysis of the second category of
Canadian maritime law (at pages 774-776
S.C.R.):
I would agree that the historical jurisdiction of the admiralty
courts is significant in determining whether a particular claim
is a maritime matter within the definition of Canadian mari
time law in s. 2 of the Federal Court Act. I do not go so far,
however, as to restrict the definition of maritime and admiralty
matter only to those claims which fit within such historical
limits. An historical approach may serve to enlighten, but it
must not be permitted to confine. In my view the second part of
the s. 2 definition of Canadian maritime law was adopted for
the purpose of assuring that Canadian maritime law would
include an unlimited jurisdiction in relation to maritime and
admiralty matters. As such, it constitutes a statutory recogni
tion of Canadian maritime law as a body of federal law dealing
with all claims in respect of maritime and admiralty matters.
Those matters are not to be considered as having been frozen
by the Admiralty Act of 1934. On the contrary, the words
"maritime" and "admiralty" should be interpreted within the
modern context of commerce and shipping. In reality, the
ambit of Canadian maritime law is limited only by the constitu-
tional division of powers in the Constitution Act, 1867. I am
aware in arriving at this conclusion 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 is important, therefore, to establish that the
subject-matter under consideration in any case is so integrally
connected to maritime matters as to be legitimate Canadian
maritime law within federal legislative competence.
Turning to Miida's claim against ITO, it can be seen that it
involves the negligence of a stevedore-terminal operator in the
short-term storing of goods within the port area pending deliv
ery to the consignee.
It is clear, in my view, that such incidental storage by the
carrier itself or by a third party under contract to the carrier is
also a matter of maritime concern by virtue of the "close,
practical relationship of the terminal operation to the perform
ance of the contract of carriage" (per Le Damn J. in the Court
of Appeal [at p. 41]). It may then be concluded that cargo-han
dling and incidental storage before delivery and before the
goods pass from the custody of a terminal operator within the
port area is sufficiently linked to the contract of carriage by sea
to constitute a maritime matter within the ambit of Canadian
maritime law, as defined in s. 2 of the Federal Court Act.
At the risk of repeating myself, I would stress that the
maritime nature of this case depends upon three significant
factors. The first is the proximity of the terminal operation to
the sea, that is, it is within the area which constitutes the port
of Montreal. The second is the connection between the terminal
operator's activities within the port area and the contract of
carriage by sea. The third is the fact that the storage at issue
was short-term pending final delivery to the consignee. In my
view, it is these factors, taken together, which characterize this
case as one involving Canadian maritime law.
This analysis having yielded the result that the
negligence claim fell within the scope of Canadian
maritime law, the next question was as to the
substantive content of that law (at pages 776-777
S.C.R.):
Canadian maritime law, as a body of substantive law, encom
passes the principles of English maritime law as they were
developed and applied in the Admiralty Court of England (The
Queen v. Canadian Vickers Ltd., supra, and authorities cited
therein, pp. 683-84. [[1978] 2 F.C. 675; (1977), 77 D.L.R. (3d)
241 (per Thurlow A.C.J., as he then was)]. In 1934 when, as
has been noted, a body of admiralty law from England was
incorporated into Canadian law., the Admiralty side of the
High Court of Justice had jurisdiction in cases of contract and
tort which were considered to be admiralty matters. In dealing
with such cases, the court applied the necessary common law
principles of tort and contract in order to resolve the issues.
Common law rules of negligence, for example, were applied in
collision cases: ("Cuba" (The) v. McMillan (1896), 26 S.C.R.
651 at pp. 661-62, and E. Mayers, Admiralty Law and Practice
in Canada (1916), at p. 146). Bailment principles were applied
in loss of cargo cases ("Winkfield" (The), [1902] P. 42 (C.A.))
Thus, the body of admiralty law, which was adopted from
England as Canadian maritime law, encompassed both special
ized rules and principles of admiralty and the rules and princi
ples adopted from the common law and applied in admiralty
cases as these rules and principles have been, and continue to
be, modified and expanded in Canadian jurisprudence. (See,
for example, the judgment of this Court in Wire Rope Indus
tries of Canada (1966) Ltd. v. B.C. Marine Shipbuilders Ltd.,
[1981] 1 S.C.R. 363, in which common law principles of
negligence and contract law were employed to resolve the
appeal.)
Canadian maritime law then is the existing body of federal
law which is essential to the disposition of this case and which
nourishes the jurisdiction granted to the Federal Court in s. 22
of the Federal Court Act. Thus the second requirement for a
finding of jurisdiction in the Federal Court is established.
Canadian maritime law, it is therefore clear,
encompasses not only the specialized rules and
principles of admiralty but the common law of tort
and contract as currently interpreted by the Courts
(assuming always, of course, that the claim in
question falls within the scope of maritime law).
Lest the point be left in doubt, the Court went
on to consider whether, in utilizing the common
law, the Federal Court is to be thought as applying
provincial law (at page 779 S.C.R.):
It is my view, as set out above, that Canadian maritime law
is a body of federal law encompassing the common law princi
ples of tort, contract and bailment. I am also of the opinion that
Canadian maritime law is uniform throughout Canada, a view
also expressed by Le Dain J. in the Court of Appeal who
applied the common law principles of bailment to resolve
Miida's claim against ITO. Canadian maritime law is that
body of law defined in s. 2 of the Federal Court Act. That law
was the maritime law of England as it has been incorporated
into Canadian law and it is not the law of any Province of
Canada.
And further (at pages 781-782 S.C.R.):
The Federal Court is constituted for the better administra
tion of the laws of Canada. It is not, however, restricted to
applying federal law in cases before it. Where a case is in "pith
and substance" within the court's statutory jurisdiction, the
Federal Court may apply provincial law incidentally necessary
to resolve the issues presented by the parties; ...
It is argued that in the absence of a special Admiralty rule or
provision the law enforced in the locality of the proceedings
applies. This is the result, it is contended, of the adoption of an
incomplete body of law from a unitary state into a federal
system. Since the common law of negligence and bailment may
be incidentally applied in Admiralty cases, so also may the
Civil Code be incidentally applied in cases arising in the
Province of Quebec. The answer to this argument may be
shortly stated. Canadian maritime law as adopted in Canada
historically, and as finally brought into Canadian law by s. 2 of
the Federal Court Act, includes common law principles as they
are applied in Admiralty matters. Thus, as discussed above,
common law principles so incorporated are federal law and not
an incidental application of provincial law.
In conclusion then it may be said that the common law
principles of negligence and bailment have become part of
Canadian maritime law by adoption from England.
In the light of this powerful statement, I believe
there can be no room for doubt that Canadian
maritime law includes the common law of tort and
contract, and that as so included it is federal law.
It cannot, therefore, be decisive in the case at bar
that the parties provided for the application of
British Columbia law.
It is important to note that, although on some
occasions McIntyre J. referred to the incorporated
provincial common law of torts in terms of negli
gence alone, that is obviously only because that
was the only part of the law of torts that was
relevant in the ITO case. Hence in the final sen
tence quoted above he referred only to the "com-
mon law principles of negligence and bailment"
because that is the issue in ITO. Earlier he stated
baldly that "Canadian maritime law is a body of
federal law encompassing the common law princi
ples of tort, contract and bailment."
Finally, in the ITO case the Court found the
third requirement for Federal Court jurisdiction as
easily established as the first (at page 777 S.C.R.):
The third requirement that the law in question must be a law of
Canada, as that expression is used in s. 101 of the Constitution
Act, 1867, is also met because Canadian maritime law and
other laws dealing with navigation and shipping come within s.
91(10) of the Constitution Act, 1867, thus confirming federal
legislative competence.
I would, therefore, conclude that the Federal Court has
jurisdiction to entertain the claims of Miida [the consignee]
against both Mitsui [the marine carrier] and ITO [the terminal
operator].
Thus enlightened by the ITO case, it is now possi
ble to turn to the case at bar to determine whether
the three essential requirements for Federal Court
jurisdiction over the counterclaim have been met.
The first requirement is a statutory grant of
jurisdiction by the Federal Parliament. In my view
that is found in subsection 22(1) and more particu
larly in paragraph 22(2)(i):
22. (2) ...
(1) any claim arising out of any agreement relating to ... the
use ... of a ship whether by charter party of otherwise,
The Motions Judge's analysis of the essence of
the contract was as follows: "The essence of the
arrangement between the plaintiff and the defen
dant in this particular transaction was for the
plaintiff to provide funds to the defendants and
they in turn made available the Nicolle N for the
acquisition and processing of salmon and salmon
roe at sea." And again: "The contract between the
parties was for the Nicolle N to proceed on the
high seas to acquire fish in a specified fishing area
and receive, process and deliver same." In other
words, the contract specified and required the use
of a ship.
It was argued by the appellant that paragraph
(i) could not be so applied in the light of that part
of the decision of Addy J. in Kuhr v. The Friedrich
Busse, [1982] 2 F.C. 709; (1982), 134 D.L.R. (3d)
261 (T.D.) at page 714 F.C. where he said:
I agree that a contract for the supplying of fish to a vessel,
merely by reason of the fact that the vessel is processing the
fish and is thus using the fish supplied, cannot fairly be
construed as an "agreement relating to ... the use ... of a
ship" as contemplated by paragraph (i). When the word "use"
is considered in that context it seems clear that the use referred
to is use of the ship by a party other than the owner: an
agreement for use and ordinary contract for hiring would be
ejusdem generis.
Assuming, without deciding that the learned Judge
was correct in holding that the use referred to in
paragraph (i) is use of the ship by a party other
than the owner, the instant case is distinguishable
on the facts. Not only was Shibamoto's representa
tive on board the vessel at all material times for
purposes of price determination, but, more impor
tant, the contract also provided for eight roe tech
nicians to be placed on board by Shibamoto to
prepare the fish and the roe for the Japanese
market. In my view, although this is less than the
total use of a ship, it is nevertheless a clear use of
the ship by Shibamoto for contract purposes, and
is sufficient to satisfy paragraph (i).
This result is also distinguishable from Dome
Petroleum Ltd. v. Hunt International Petroleum
Co., [1978] 1 F.C. 11 (T.D.) at page 14 where
Dubé J. stated:
The issue in a nutshell is whether or not Dome's claim is one
which arises out of an agreement relating to the carriage of
goods by ship, or the use or hire of a ship, within the framework
of section 22 as a whole which deals with navigation and
shipping.
The agreement referred to in the statement of claim and
served ex juris on Hunt with that pleading makes no reference
to the carriage of goods by ship, or to the use or hire of a ship,
or to a ship. It deals with the drilling of a test well. [Emphasis
added.]
Based on that finding of fact, the agreement itself
in that case, unlike here, did not support a claim of
Federal Court jurisdiction.
Since in my view the jurisdiction of the Federal
Court is supportable under paragraph 22(2)(i) it is
not necessary to consider whether it can also be
justified under paragraph (m), as held by the
Motions Judge on authority of the Kuhr case.
The first jurisdictional requirement is therefore
satisfied.
In my opinion the second jurisdictional require
ment is easily met in the light of the ITO case.
Here one looks, not to the essence of the arrange-
ment, as in the first requirement, but as the appel
lants argued, to the cause of action in the
counterclaim.
However, the appellants' contention that the
respondent's counterclaim for the destruction of a
fish processing business by fraud, deceit, conspir
acy and breach of contract is a matter of provin
cial law rather than of Canadian maritime law is
completely unsustainable in the light of ITO. Since
the law of contract and of torts falls under Canadi-
an maritime law, to the extent that it is required, it
cannot be maintained that certain parts of those
bodies of law are not matters of maritime law. On
the authority of ITO Canadian maritime law is the
existing body of federal law which is essential to
the disposition of the case and which nourishes the
statutory grant of authority.
The third jurisdictional requirement is constitu
tionality. Obviously the contract could be said to
fall under subsection 91(12) of the Constitution
Act, 1867, the federal power over sea coast fisher
ies. But what has to be upheld under the third
requirement is not the contractual arrangement
itself but rather Canadian maritime law and also
paragraph 22(2)(i) of the Act as I have utilized it.
Canadian maritime law has already been upheld
by ITO under subsection 91(10) of the Constitu
tion Act, 1867, the federal power over "Navigation
and Shipping".
Paragraph 22(2)(i) as applied to the use of a
ship for fishing purposes also falls under the Navi
gation and Shipping power. Even if "shipping"
were to be so restricted as to mean only the
transportation of goods, the use of ships for fishing
purposes would still fall under the definition of
navigation, the first meaning of which in the
Shorter Oxford English Dictionary [vol. II, 3rd
rev. ed. Oxford: Clarendon Press, 1975] is:
Navigation ... 1. The action of navigating; the action or
practice of passing on water in ships or other vessels ...
The passing on water that occurs in coastal fishing
must therefore be without question, it seems to me,
navigation.
Since in my view all three requirements for
jurisdiction over the counterclaim in the Federal
Court have been met, I would therefore dismiss the
appeal with costs in any event of the cause.
IACOBUCCI C.J.: I agree.
MAHONEY J.A.: I agree.
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.