A-319-89
Northern Sales Company Limited (Appellant)
(Defendant)
v.
Compania Maritima Villa Nova S.A. (Respondent)
(Plaintiff)
INDEXED AS: COMPAN/A MAR/MIA VILLA NOVA SA. V.
NORTHERN SALES CO. (CA.)
Court of Appeal, Heald, Mahoney and Stone,
JJ.A.—Winnipeg, November 4; Ottawa, November
20, 1991.
Maritime law — Foreign maritime arbitral awards — Car
riage by sea — Charterparty providing for settlement of dis
putes in London — Dispute over demurrage charges settled by
arbitration there — Application in Federal Court for enforce
ment of award — Appeal from Trial Division determination of
points of law: (1) Award enforceable in Canada notwithstand
ing plaintiff's failure to enforce demurrage claim against
receiver; (2) Plaintiff's failure to enforce claim for demurrage
against receiver not depriving arbitrators of jurisdiction pur
suant to reference; (3)1985 arbitral award enforceable in Fed
eral Court of Canada under 1986 United Nations Foreign
Arbitral Awards Convention Act; (4) Enforceability of award in
Canada not affected by fact plaintiff's original cause of action
statute barred under laws of England when action commenced
in Canada — Act not ultra vires Parliament — Nature of arbi
tration award at common law.
Constitutional law — Distribution of powers — United
Nations Foreign Arbitral Awards Act intra vires Parliament as
Act valid federal legislation for enforcement in Canada of for
eign arbitral awards having federal character in constitutional
sense — Act not overly broad in view of presumption statutes
not intended to exceed jurisdiction — Enforcement of award
herein falling within federal legislative competence over navi
gation and shipping.
Federal Court jurisdiction — Trial Division — Creation of
cause of action for enforcement of foreign maritime arbitral
awards legitimate Canadian maritime law within Federal
Court Act, s. 2 — Enforcement of award within federal legisla
tive competence over navigation and shipping.
Conflict of laws — Foreign maritime arbitral awards —
Charterparty calling for settlement of disputes in London —
Time limitation for bringing action in Canadian court for
enforcement of arbitral award governed by Canadian law.
The appellant entered into a charterparty agreement in Janu-
ary 1978 with the respondent as owner of the Grecian Isles for
the carriage of a cargo of grain from Vancouver to Bombay,
India. The charterparty contained an arbitration clause provid
ing that disputes would be referred to arbitrators in London,
England. A dispute over demurrage was settled by arbitration
in May 1985. An action for the enforcement of the arbitral
award was instituted in the Trial Division in May 1987. This
was an appeal from the affirmative answers given by Strayer J.
to the following questions put to the Court by the parties on
points of law: (1) Was the award enforceable in Canada under
the provisions of the United Nations Foreign Arbitral Awards
Convention Act? (2) Could the award be enforced in Canada
even if the original cause of action was statute-barred under
the laws of England when action was commenced in Canada?
(3) Could the award be enforced in Canada even if the plaintiff
failed to enforce its claim for demurrage against the receiver of
the goods? (4) Did the failure of the plaintiff to enforce its
claim against the receiver of the goods deprive the arbitrators
of jurisdiction? Upon this appeal the appellant also raised a
constitutional question as to whether the United Nations For
eign Arbitral Awards Convention Act was ultra vires Parlia
ment by reason of its encroachment on provincial jurisdiction.
Held, the constitutional question should be answered in the
negative, the answers given by the Motions Judge should be
confirmed and the appeal dismissed.
The argument against the enforceability of the award was
without foundation as a failure by the respondent to enforce its
claim against the receiver would not preclude a determination
by arbitrators that the appellant was liable for a portion of the
respondent's claim. Nor did that alleged failure deprive the
arbitrators of any jurisdiction pursuant to the reference. The
contested liability of the appellant for demurrage was the very
matter they were authorized to decide and did decide. The
appellant's real complaint was that the arbitrators did not take
into account a particular defence which it had advanced.
There was no doubt that Parliament did possess the power to
adopt the Act as valid federal legislation for the recognition
and enforcement in Canada of foreign arbitral awards having a
federal character in a constitutional sense. Whether a particular
award is one whose enforcement falls within the proper ambit
of the legislation may, however, have to be determined in indi
vidual cases. Secondly, express language limiting the operation
of the Act to awards falling within the federal legislative
sphere was not necessary. There is a presumptio furls as to the
existence of the bona fide intention of a legislative body to
confine itself to its own sphere and a presumption of similar
nature that general words in a statute are not intended to
extend its operation beyond the territorial authority of the leg
islature. Thirdly, the kind of award with which the Court was
here concerned—having regard to its origin in a charterparty
agreement, an undoubted maritime contract, and to the under
lying claim for demurrage, an undoubted maritime claim—fell
within "Canadian maritime law" as this term is now under
stood, and such law rests on the legislative competence of Par
liament under subsection 91(10) of the Constitution Act, 1867.
It was important to bear in mind the nature of an arbitration
award at common law. It is the award coupled with the implied
promise to pay it which creates a fresh cause of action.
Parliament could invest the Trial Division with jurisdiction
to entertain this cause of action. The three requirements for the
existence of jurisdiction in the Trial Division (set by the
Supreme Court of Canada in ITO—International Terminal
Operators) were met in the case at bar. (I) The statutory grant
of jurisdiction was found in section 6 of the Act and in para
graph 22(2)(j) of the Federal Court Act. (2) The existing body
of federal law essential to the disposition of the case and nour
ishing the jurisdiction was found in Canadian maritime law,
which includes arbitral awards of this kind. (3) That law was
"a law of Canada".
With respect to the limitation of action question, it is well-
established in both Canadian and English law that limitation
statutes of this nature are procedural in character and the rele
vant provisions are those of the lex fori. Thus the matter of the
limitation period applicable to an action in a Canadian court to
enforce an award is governed by Canadian law—subsection
39(2) of the Federal Court Act which provides that the action
must be commenced within six years of the date that the cause
of action arose. In this case, the cause of action arose on the
date of the award: May 24, 1985, and the action was instituted
in the Trial Division in 1987, well within the six-year limita
tion period.
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), 92(13),(14),(16).
Federal Court Act, R.S.C., 1985, c. F-7, s. 2, 22(2)(i),
39(2).
Federal Court Rules, C.R.C., c. 663, RR. 474 (as am. by
SOR/79-57, s. 14), 1101.
Limitations Act 1980, 1980, c. 58 (U.K.), s. 7.
The International Commercial Arbitration Act, S.M.
1986-87, c. 32, C.C.S.M., C151.
United Nations Foreign Arbitral Awards Convention Act,
S.C. 1986, c. 21, ss. 3, 4(2), 6, Sch., Art. V 1(c), (d),
XI.
CASES JUDICIALLY CONSIDERED
APPLIED:
Di lorio et al. v. Warden of the Montreal Jail, [1978] 1
S.C.R. 152; (1976), 35 C.R.N.S. 57; 8 N.R. 361; Cana-
dian Broadcasting Corporation et al. v. Quebec Police
Commission, [1979] 2 S.C.R. 618; (1979), 101 D.L.R.
(3d) 24; 48 C.C.C. (2d) 289; 14 C.P.C. 60; 28 N.R. 541;
Doleman & Sons v. Ossett Corporation, [1912] 3 K.B.
257 (C.A.); Bloemen (F.J.) Pty. Ltd. v. City of Gold Coast
Council, [1973] A.C. 115 (P.C.); Agromet Motoimport v.
Maulden Engineering Co. (Beds.) Ltd., [1985] 1 W.L.R.
762 (Q.B.D.); Whitbread v. Walley, [1990] 3 S.C.R. 1273;
(1990), 77 D.L.R. (4th) 25; [1991] 2 W.W.R. 195; 52
B.C.L.R. (2d) 187; 120 N.R. 109; 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;
ITO—International Terminal Operators Ltd. v. Miida
Electronics Inc. et al., [1986] 1 S.C.R. 752; (1986), 28
D.L.R. (4th) 641; 34 B.L.R. 251; 68 N.R. 241; Monk
Corp. v. Island Fertilizers Ltd., [1991] 1 S.C.R. 779;
(1991), 80 D.L.R. (4th) 58: 123 N.R. 1: Seapearl (The
Ship MN) v. Seven Seas Dry Cargo Shipping Corporation
of Santiago, Chile, [1983] 2 F.C. 161; (1982), 139 D.L.R.
(3d) 669; 43 N.R. 517 (C.A.); Eurobulk Ltd. v. Wood
Preservation Industries, [1980] 2 F.C. 245; (1979), 106
D.L.R. (3d) 571 (T.D.); Atlantic Lines & Navigation Co.
Inc. v. Didymi (The), [1988] 1 F.C. 3; (1987), 39 D.L.R.
(4th) 399; 78 N.R. 99 (C.A.).
CONSIDERED:
Attorney-General for Canada v. Attorney-General for
Ontario, [1937] A.C. 326 (P.C.).
AUTHORS CITED
Mustill, Michael J. and Boyd, Stewart C. The Law and
Practice of Commercial Arbitration in England,
London: Butterworths, 1982.
Walton, Anthony and Victoria, Mary Russell on the Law
of Arbitration, 20th ed., London: Stevens & Sons,
1982.
COUNSEL:
Morse Silden and Mathew Bernard Nepon for
appellant (defendant).
Peter F. M. Jones for respondent (plaintiff).
Lewis E. Levy for intervenor.
SOLICITORS:
Kushner, Gordon & Silden, Winnipeg, for
appellant (defendant).
Paterson, MacDougall, Toronto, for respondent
(plaintiff).
Deputy Attorney General of Canada for inter-
venor.
The following are the reasons for judgment ren
dered in English by
STONE J.A.: This is an appeal from an order of the
Trial Division [(1989), 29 F.T.R. 136] made on June
12, 1989, responding to certain questions posed by
that Division by order of February 1, 1989, made pur
suant to Rule 474 of the Federal Court Rules
[C.R.C., c. 663 (as am. by SOR/79-57, s. 14)], in
response to a request for directions for the determina
tion of certain points of law raised in the pleadings.
The issues in this appeal centre on the enactment
of the United Nations Foreign Arbitral Awards Con
vention Act [S.C. 1986, c. 21], (the "Act"), a federal
statute, which was assented to June 17, 1986, and
was proclaimed in force August 10, 1986. Scheduled
to and approved in section 3 of the Act is the "Con-
vention on the Recognition and Enforcement of For
eign Arbitral Awards" (the "Convention") which was
adopted by the United Nations Conference on an
International Commercial Arbitration at New York
June 10, 1958. Canada acceded to that Convention
May 12, 1986. We were told that uniform legislation
has been enacted by all of the provinces of Canada as
well as by the Yukon and Northwest Territories for
implementation of the Convention. In the Province of
Manitoba, the implementing legislation has taken the
form of The International Commercial Arbitration
Act, S.M. 1986-87, c. 32, C.C.S.M., C151.
By subsection 4(2) of the Act, the Convention is to
apply to "arbitral awards and arbitration agreements
whether made before or after the coming into force
of this Act".
The appellant company, which carries on business
as a buyer, seller and supplier of grains, entered into
a charterparty agreement on January 17, 1978, with
the respondent as owner of the vessel Grecian Isles,
for carriage of a cargo of grain from the port of Van-
couver to the port of Bombay, India. Clauses 10 and
17 of the charterparty are relevant. They read:
10. "CENTROCON" ARBITRATION CLAUSE
All disputes from time to time arising out of this contract shall,
unless the parties agree forthwith on a single Arbitrator, be
referred to the final arbitrament of two Arbitrators carrying on
business in London who shall be members of the Baltic and
engaged in the Shipping and/or Grain Trades, one to be
appointed by each of the parties, with power to such Arbitra
tors to appoint an Umpire. Any claim must be made in writing
and Claimant's Arbitrator appointed within 9 (nine) months of
final discharge and where this provision is not complied with
the claim shall be deemed to be waived and absolutely barred.
No award shall be questioned or invalidated on the ground that
any of the Arbitrators is not qualified as above, unless objec
tion to his acting be taken before the award is made.
17. Demurrage and/or despatch at loading port to be settled
between Owners and Charterers. Demurrage and/or despatch at
discharging port to be settled Between Owners and Receivers.
Charterers will remain responsible for settlement of demurrage
but in any case such settlement to be effected not later than
sixty days from completion of discharge, provided demurrage
calculations have been agreed by all parties.
The Motions Judge, Strayer J., at page 138, set out
the following additional facts:
The defendant states that discharge of the cargo was completed
on May 20, 1978, and that, in accordance with paragraph 17 as
quoted above, any claim for demurrage which the plaintiff
might have had against the defendant charterer would have
arisen on July 20, 1978, sixty days after completion of dis
charge of cargo. It is apparent that the defendant disputed its
liability to pay demurrage. The parties do not allege in their
pleadings, nor did they indicate in court any agreement, as to
when this dispute was referred to arbitration. They do, how
ever, agree that it was so referred, that a hearing took place in
London, England on May 13, 1985, at which the plaintiff was
represented but at which the defendant made only a written
submission, and that the award was released by the arbitrators
on May 24, 1985. The claim presented by the plaintiff owner
for demurrage was in the amount of (U.S.) $150,392.25. The
arbitrators awarded the owner (U.S.) $53,168.40 together with
interest and costs. •
The action was instituted in the Trial Division on
May 19, 1987, for enforcement of this arbitral award.
The pleadings in that action gave rise to the points of
law which were formulated as questions by the order
of February 1, 1989, being namely:.
(a) [l]s the Arbitration Award ("the Award") referred to in
paragraph 5 of the statement of claim herein enforceable or
maintainable in Canada under the provisions of the United
Nations Foreign Arbitral Award[s] [Convention] Act, Stat.
Canada 1986, c. 21?
(b) [C]an the Award be enforced or maintained in Canada if
the plaintiff's original cause of action is statute barred under
the laws of England?
(c) [C]an the Award be enforced or maintained in Canada if
the plaintiff has failed to enforce its claim for demurrage
under the Charter Party ("the Charter Party") dated the 17th
day of January, 1978 against the receiver of the goods car
ried on board the Grecian Isle!s]?
(d) [D]id the Plaintiff's failure to enforce its claim for
demurrage under the Charter Party against the receiver of
the goods carried on board the Grecian Isles] deprive the
arbitrators of jurisdiction?
After discussing the respective positions of the par
ties and expressing his views thereon, Strayer J.
answered these four questions at pages 143-144 as
follows:
(a) The award is enforceable in Canada and in this court pur
suant to the provisions of the United Nations Foreign Arbi-
tral Award Act:
(b) the enforceability of the award in Canada would not be
affected by the fact that the plaintiff s original cause of
action was statute—barred under the laws of England when
action was commenced in Canada for enforcement, provided
that it would be open to a Canadian court to refuse recogni
tion or enforcement of the award if the defendant provides
proof that the arbitration was commenced (as defined in the
U.K. Limitation Act, 1980) in England after the expiration
of the relevant limitation period as defined by English law,
and that the defendant pleaded or raised the limitation
defence before the arbitrators;
(c) the award can be enforced and maintained in Canada
notwithstanding the plaintiff's failure to enforce its claim for
demurrage against the receiver; and
(d) the plaintiff's failure to enforce its claim for demurrage
against the receiver did not deprive the arbitrators of juris
diction.
After this appeal was launched, the appellant gave
notice of the following constitutional question pursu
ant to Rule 1101 of the Federal Court Rules:
Is the United Nations Foreign Arbitral Awards Convention Act,
S.C. 1986, c. 21 ultra vires The Parliament of Canada by rea
son of its violation of Sections 92(13), 92(14), 92(16) of the
Constitution Act, 1867?
This notice was served on the Attorney General of
Canada and on the Attorney General of Manitoba. It
led the Attorney General of Canada, with leave of the
Court, to intervene in this appeal, to file a memoran
dum of facts and law and to appear by counsel. The
Attorney General of Manitoba has not intervened.
In its written argument, the appellant attacks all
four answers of the learned Motions Judge but
restricted its oral submissions to answers (a) and (b)
without abandoning its attacks on answers (c) and
(d). I am able to deal with these two attacks shortly.
Article V 1(c) and (d) of the Convention were in
question in relation to answers (c) and (d). They read:
Article V
1. Recognition and enforcement of the award may be
refused, at the request of the party against whom it is invoked,
only if that party furnishes to the competent authority where
the recognition and enforcement is sought, proof that:
(e) The award deals with a difference not contemplated by
or not falling within the terms of the submission to arbitra
tion, or it contains decisions on matters beyond the scope of
the submission to arbitration, provided that, if the decisions
on matters submitted to arbitration can be separated from
those not so submitted, that part of the award which contains
decisions on matters submitted to arbitration may be recog
nized and enforced; or
(d) The composition of the arbitral authority or the arbitral
procedure was not in accordance with the agreement of the
parties, or, failing such agreement, was not in accordance
with the law of the country where the arbitration took place;
or
The learned Motions Judge stated, at pages 142-
143:
I will deal with these questions together because I believe they
involve essentially the same issue. Like counsel for the defen
dant, I believe the permissible grounds to refuse recognition
and enforcement must be found in Article V of the Conven
tion. He relies on paragraph 1(c) of that article with respect to
both of these questions, arguing in effect that if, as he alleges,
the plaintiff owner should have settled the demurrage with the
receiver as stated in paragraph 17 of the charterparty, then the
determination by the arbitrators partially in favour of the plain
tiff must not have given effect to the requirements of paragraph
17 and therefore, in the words of paragraph V 1(c) of the Con
vention
"[t]he award deals with a difference not contemplated by or
not falling within the terms of the submission to arbitration,
or it contains decisions on matters beyond the scope of the
submission to arbitration, ... "
I am unable to conclude that if the plaintiff failed to enforce its
claim for demurrage against the receiver paragraph V 1(c)
would prevent the enforceability of the award. It appears to me
that the "difference" contemplated by the submission to arbi
tration was the contested liability of the defendant to pay
demurrage by virtue of paragraph 17 of the charterparty. What
the defendant complains of instead is that a particular defence
which it feels it had was not adequately taken into account by
the arbitrators in the settlement of the "difference" which was
referred to them. No authority has been cited to me, nor does it
appear reasonable to conclude, that the failure, real or hypo
thetical, of the plaintiff to enforce its claim against the receiver
precluded any determination by the arbitrators that the defen
dant was liable for a portion of the plaintiffs claim. It appears
to me that the arbitrators decided the very "difference", namely
the existence and extent of the defendant's liability under the
charterparty for demurrage, which was referred to them by the
parties. It was for them to decide what effect if any the plain
tiffs failure to settle demurrage should have on the defendant's
liability.
For the same reason I am unable to conclude that this
alleged failure of the plaintiff to enforce demurrage against the
receiver deprived the arbitrators of any jurisdiction pursuant to
the reference. The jurisdictional argument must also be justi
fied, if at all, under Article V 1(c) of the Convention on the
basis that the determination of liability of the defendant not
withstanding the plaintiffs failure was a matter not referred to
the arbitrators in the submission. The terms of the submission
must be taken to have been in accordance with paragraph 10 of
the charterparty, quoted above, which was to govern "all dis
putes from time to time arising out of this contract". The con
tested liability of the defendant for demurrage was surely the
"dispute" referred to the arbitrators: that was the very matter
they were authorized to decide and did decide. The defendant's
real complaint is that the arbitrators did not take into account a
particular defence which it feels it had. That is not a basis for
refusing recognition within the language of Article V of the
Convention.
I am in respectful agreement with these views.
I turn now to the issues which arise out of answers
(a) and (b). The issue in relation to the first of these
answers is the constitutional question which I shall
repeat here for the sake of convenience:
Is the United Nations Foreign Arbitral Awards Convention Act,
S.C. 1986, c. 21 ultra vires The Parliament of Canada by rea
son of its violation of Sections 92(13), 92(14), 92(16) of the
Constitution Act, 1867?
Although this question was not before the Trial Divi
sion, some argument was addressed to the learned
Motions Judge as to the competence of Parliament to
adopt the Act. The views he expressed were in the
context of Article XI of the Convention, which he
referred to as a "federal state clause". That Article
reads:
Article XI
In the case of a federal or non-unitary State, the following
provisions shall apply:
(a) With respect to those articles of this Convention that
come within the legislative jurisdiction of the federal author
ity, the obligations of the federal Government shall to this
extent be the same as those of Contracting States which are
not federal States;
(b) With respect to those articles of this Convention that
come within the legislative jurisdiction of constituent states
or provinces which are not, under the constitutional system
of the federation, bound to take legislative action, the federal
Government shall bring such articles with a favourable rec
ommendation to the notice of the appropriate authorities of
constituent states or provinces at the earliest possible
moment;
(c) A federal State Party to this Convention shall, at the
request of any other Contracting State transmitted through
the Secretary-General of the United Nations, supply a state
ment of the law and practice of the federation and its constit
uent units in regard to any particular provision of this Con
vention, showing the extent to which effect has been given
to that provision by legislative or other action.
The learned Judge expressed himself as follows on
the question of Parliament's competence, at page
140:
Section 6 of the 1986 Act says that an application to enforce
awards pursuant to the Convention "may be made to the Fed
eral Court". As for the jurisdiction of Parliament to so provide,
consistently with the "federal state clause" of the Convention
Parliament must be taken to have legislated those aspects of
the Convention which are within its jurisdiction. "Navigation
and shipping" is a head of jurisdiction assigned to Parliament.
There is ample jurisprudence to the effect that maritime law in
a very broad sense is within that assignment of legislative
power and that such laws can be considered "laws of Canada"
within the meaning of s. 101 of the Constitution Act, 1867.
The settlement of disputes over charterparties must be taken to
be within "navigation and shipping".
This means that Parliament had jurisdiction to give the Con
vention the force of law in areas within its authority such as
"navigation and shipping", and that the Federal Court has juris
diction because there has been a specific statutory grant of
authority to it by Parliament to decide claims arising out of a
law of Canada. [Footnote omitted.]
The vires of the Act is brought into question
because it purports to deal with the enforcement of
"foreign arbitral awards" simpliciter, not being lim
ited in its scope to awards falling under heads of fed
eral legislative competence. Section 6 provides the
legal mechanism by which enforcement may be
achieved. It reads:
6. For the purpose of seeking recognition and enforcement
of an arbitral award pursuant to the Convention, application
may be made to the Federal Court or any superior, district or
county court.
The appellant advances three arguments for declar
ing the Act to be ultra vires. First, as a foreign arbi-
tral award originates in contract its enforcement in
Canada falls within provincial competence under one
or more of subsections 92(13), (14) or (16) of the
Constitution Act, 1867 [30 & 31 Vict., c. 3 (U.K.) (as
am. by Canada Act 1982, 1982, c. 11 (U.K.), Sched
ule to the Constitution Act, 1982, Item 1) [R.S.C.,
1985, Appendix II, No. 5]] as a matter of: "Property
and Civil Rights", "The Administration of Justice" or
"a merely local or private Nature". Secondly, and in
the alternative, the Act is ultra vires because it is
overly broad in that it is not limited to matters falling
within federal competence. Because of this, it runs
afoul of the decision of the Privy Council in Attor-
ney-General for Canada v. Attorney-General for
Ontario [Labour Conventions Case], [1937] A.C.
326 (P.C.). Thirdly, and as a corollary to this last
argument, while the Parliament of Canada may have
legislative competence to enact laws for the recogni
tion and enforcement of foreign arbitral awards, it
may only do so by appropriate language that restricts
the cause of action to enforcement of awards arising
out of matters within federal legislative competence.
Such language, it is said, is absent from the Act.
As for the first point, both the respondent and the
intervenor submit that not all contracts fall within
provincial competence although many clearly do so.
Other contracts are governed by federal law and the
Trial Division may be invested by Parliament with
jurisdiction in relation to them. Section 6, they say, is
to be read as creating a federal cause of action for the
recognition and enforcement of foreign arbitral
awards falling within federal legislative competence.
This becomes all the more evident, it is contended,
when it is seen that the provincial and territorial leg
islatures at the request of the Government of Canada
have enacted corresponding legislation for the recog
nition and enforcement of awards falling within their
respective fields of competence. What they are say
ing, in effect, is that by adopting the Act Parliament
has done no more than honour Canada's federal leg
islative obligation in Article XI of the Convention.
I am persuaded by these submissions. In my view,
Parliament did possess the power to adopt the Act as
valid federal legislation for the recognition and
enforcement in Canada of foreign arbitral awards
having a federal character in a constitutional sense.
Questions will no doubt arise in individual cases as to
whether a particular award is one whose enforcement
falls within the proper ambit of the legislation.
The second attack upon the vires of the Act is that
it is overly broad given the generality of section 6
and the Convention itself which is for the enforce
ment of literally any "foreign arbitral award". Section
6, as the appellant points out, is not expressly limited
to the recognition and enforcement of awards falling
within the federal legislative sphere. The result, it is
said, is that Parliament has not done that which the
Privy Council required of it in the Labour Conven-
tions Case, supra, where Lord Atkin stated, at page
352:
It follows from what has been said that no further legislative
competence is obtained by the Dominion from its accession to
international status, and the consequent increase in the scope
of its executive functions. It is true, as pointed out in the judg
ment of the Chief Justice, that as the executive is now clothed
with the powers of making treaties so the Parliament of
Canada, to which the executive is responsible, has imposed
upon it responsibilities in connection with such treaties, for if it
were to disapprove of them they would either not be made or
the Ministers would meet their constitutional fate. But this is
true of all executive functions in their relation to Parliament.
There is no existing constitutional ground for stretching the
competence of the Dominion Parliament so that it becomes
enlarged to keep pace with enlarged functions of the Dominion
executive. If the new functions affect the classes of subjects
enumerated in s. 92 legislation to support the new functions is
in the competence of the Provincial Legislatures only. If they
do not, the competence of the Dominion Legislature is
declared by s. 91 and existed ab origine. In other words, the
Dominion cannot, merely by making promises to foreign coun
tries, clothe itself with legislative authority inconsistent with
the constitution which gave it birth.
The appellant contends that limiting words to the
effect that the Act "shall only apply so far as this Par
liament has jurisdiction to so enact", were required in
order to save it from being declared ultra vires.
In my opinion, the Act should not be regarded as
overly broad. The Supreme Court of Canada has
made it clear that legislation which may, arguably, be
ultra vires because of its generality is not to be auto
matically so viewed. In Di Iorio et al. v. Warden of
the Montreal Jail, [1978] 1 S.C.R. 152, Dickson J. (as
he then was) stated, at page 200:
It is a well-recognized rule of construction that if words in a
statute are fairly susceptible of two constructions of which one
will result in the statute being intra vires and the other will
have the contrary result the former is to be adopted: McKay et
al. v. The Queen ([1965] S.C.R. 798), at p. 804. We should not
lightly decide that enabling legislation is beyond the constitu
tional competence of the enacting body.
This same principle was re-stated by Beetz J. in
Canadian Broadcasting Corporation et al. v. Quebec
Police Commission, [1979] 2 S.C.R. 618, at page
641. His words are most instructive. He said:
Many statutes are drafted in terms so general that it is possible
to give them a meaning which makes them ultra vires. It is
then necessary to interpret them in light of the Constitution,
because it must be assumed the legislator did not intend to
exceed his authority:
There is a presumptio furls as to the existence of the bona fide
intention of a legislative body to confine itself to its own
sphere and a presumption of similar nature that general words
in a statute are not intended to extend its operation beyond the
territorial authority of the Legislature.
(Fauteux J.—as he then was—in Reference re The Farm Prod
ucts Marketing Act ([1957] S.C.R. 198), at p. 255.)
In order to give effect to this principle a court may, in keep
ing with the Constitution, limit the apparently general scope of
an enactment, even when the constitutionality of the provision
has not been disputed and the Attorney General has not been
impleaded. That is what this Court did in McKay v. The Queen
([1965] S.C.R. 798).
I am satisfied that this principle applies to the case at
bar. Express language for limiting the operation of
the Act was not necessary in the circumstances.
The appellant does not seriously contend that Par
liament cannot provide by legislation for the enforce
ment of an award of the kind made May 24, 1985. I
myself have no difficulty in this regard. Nevertheless,
I should add here a few words on why it is that I am
of this view. That award, as we have seen, was made
pursuant to a clause in a charterparty agreement. The
parties chose to provide in that agreement for resolu
tion of disputes by binding arbitration in London pur
suant to clause 10. A submission to arbitration was
made by the respondent when the claim for demur-
rage was not settled within the 60-day time limit pro
vided for in clause 17.
It is important to bear in mind the nature of an
arbitration award at common law. In Doleman &
Sons v. Ossett Corporation, [1912] 3 K.B. 257
(C.A.), at page 267, Fletcher Moulton L.J., had this to
say in that connection:
A complainant by taking out a writ can cause his opponent to
be ordered to appear before the Court, and the parties must
accept its decision. But it has long been a practice in certain
classes of contracts for the contracting parties to name a pri
vate tribunal to whom contractually they give authority to set
tle disputes under that particular contract. If a dispute has been
brought before the private tribunal thus constituted, and an
award made, that award is binding on both parties and con
cludes them as to that dispute. In effect the parties have agreed
that the rights of the parties in respect of that dispute shall be
as stated in the award, so that in essence it partakes of the char
acter of "accord and satisfaction by substituted agreement."
The original rights of the parties have disappeared, and their
place has been taken by their rights under the award.
Such an award is not, of course, self-executing.
Clause 17 of the charterparty provides no mechanism
for collecting the award. On the other hand, the
courts have had no difficulty in finding that parties to
an arbitration submission impliedly agree to honour
an award and that this agreement affords a foundation
for enforcing the award in the ordinary courts. The
award coupled with the implied promise to pay it cre
ates a fresh cause of action. This was recognized in
Bloemen (F.J.) Pty. Ltd. v. City of Gold Coast Coun
cil, [1973] A.C. 115 (P.C.), where Lord Pearson
stated, at page 126:
It is true—as the cases above referred to show—that when an
arbitrator fixes a sum to be paid by one party to the submission
by way of damages for breach of contract the award creates a
fresh cause of action superseding that arising out of the breach.
The same view was expressed in Agromet
Motoimport v. Maulden Engineering Co. (Beds.) Ltd.,
[1985] 1 W.L.R. 762 (Q.B.D.). Otton J. discussed the
effect of an arbitral award in the light of the decided
cases, and then added, at page 772:
In my judgment, the action on the award and the action to
enforce an award is an independent cause of action. It is dis
tinct from and in no way entangled with the original contract
or the breach occurring from it, as reflected in the award. I
have come to the conclusion that there is nothing repugnant in
implying such a term into the contract .... In my view, there
fore, there is such an implied term that an award will be
honoured when it is made. That implied term is, of course, in
the original agreement ... and the implied term continues,
that if the award is not honoured, there is then a breach of that
implied term ... .
See also Mustill and Boyd, The Law and Practice of
Commercial Arbitration in England (London, 1982),
at pages 568-569; Walton and Victoria, Russell on the
Law of Arbitration, 20th ed., (London, 1982), at
pages 357-358; 382-385.
It is well established that Parliament possesses
broad power in respect of "Navigation and Shipping"
under subsection 91(10) of the Constitution Act,
1867: Whitbread v. Walley, [ 1990] 3 S.C.R. 1273. As
was pointed out by La Forest J. in that case, when a
court is called upon to determine whether impugned
provisions are in pith and substance legislation in
respect of the body of uniform federal law known as
"Canadian maritime law" it is to have regard to the
decided cases dealing with the scope and content of
the Trial Division's jurisdiction in respect of mari
time and admiralty matters. In the course of his judg
ment, La Forest J. was at pains to point out that such
cases have a bearing on the scope of Parliament's
legislative jurisdiction over navigation and shipping.
At pages 1289-1290 he stated:
On the contrary, it must be remembered that the inquiry as to
the validity and scope of the jurisdiction over maritime and
admiralty matters granted to the Federal Court by s. 22 of the
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, has been
conducted, in accordance with this Court's decisions in Que-
bec North Shore Paper Co. v. Canadian Pacific Ltd., [1977] 2
S.C.R. 1054, and McNamara Construction (Western) Ltd. v.
The Queen, [1977] 2 S.C.R. 654, with reference to s. 101 of
what is now the Constitution Act, /867. That provision pro
vides for the establishment by Parliament of a "General Court
of Appeal for Canada, and for the Establishment of any addi
tional Courts for the better Administration of the Laws of
Canada". As pointed out by Laskin C.J. in Quebec North Shore
Paper Co. and McNamara (at pp. 1065-66 and p. 658 respec
tively), these words mean that a grant of jurisdiction to the
Federal Court (or to any other court created under s. 101) will
only be valid and effective if some "applicable and existing
federal law" is necessary to its exercise. Put the other way
round, s. 101 requires that any jurisdiction granted to the Fed
eral Court be supported or nourished by an existing body of
law that is subject to Parliament's legislative jurisdiction.
In the case of the Federal Court's jurisdiction over maritime
and admiralty matters, that body of law is referred to in s. 22 of
the Federal Court Act as "Canadian maritime law". As already
explained, this Court has ruled that such a body of law does
exist. It has also found that it is federal law that comes within
Parliament's power to legislate in respect of navigation and
shipping under s. 91(10) of the Constitution Act, 1867: see
ITO, at p. 777. It follows that an inquiry as to the scope and
substantive content of the Federal Court's jurisdiction over
Canadian maritime law is simultaneously an inquiry as to the
scope and content of an important aspect of Parliament's
exclusive jurisdiction over navigation and shipping.
The definition of "Canadian maritime law" in sec
tion 2 of the Federal Court Act [R.S.C., 1985, c. F-7]
reads:
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, chapter A-1 of the Revised Stat
utes 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.
Its content has been the subject of several recent deci
sions of the Supreme Court of Canada: Tropwood
A.G. et al. v. Sivaco Wire & Nail Co. et al., [1979] 2
S.C.R. 157; ITO—International Terminal Operators
Ltd. v. Miida Electronics Inc. et al., [1986] 1 S.C.R.
752; Monk Corp. v. Island Fertilizers, Ltd. [199111
S.C.R. 779. In Monk, supra, Iacobucci J. speaking for
a majority, summarized the reasons and conclusions
of McIntyre J. in ITO, supra, in so far as they are
relevant to the present discussion, at page 795 as fol
lows:
(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 con
fined or frozen, and "maritime" and "admiralty" should be
interpreted within the modern context of commerce and ship
ping.
(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 mar
itime or admiralty matter, encroachment on what is in pith and
substance a matter falling within section 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 compe
tence.
The maritime and admiralty law of Canada, though
in many respects traditional and of ancient origins, is
not to be cribbed and confined to the law which was
administered by the Exchequer Court of Canada on
its Admiralty side and which is recognized in the first
part of the "Canadian maritime law" definition but,
as the second part of that definition indicates, it has
potential for growth albeit within acknowledged con
stitutional constraints. This was recognized in ITO,
supra, and was the subject of the following additional
observations of Iacobucci J. in Monk, supra, at pages
800-801:
Finally, I would say that the claims of Monk are maritime in
character and are not in any way an encroachment of what is in
pith and substance a matter falling within s. 92 of the Constitu
tion Act, 1867.. .
I should also like to add that the approach I have taken in
this matter corresponds with McIntyre J.'s urging that the
terms "maritime" and "admiralty" should be interpreted within
the modern context of commerce and shipping and should not
be static or frozen. Such terms should rather be capable of
adjusting to evolving circumstances unencumbered by rigid
doctrinal categorization and historical straightjackets.
It thus seems to me to be entirely proper for a court,
faced with determining whether an award may be
recognized and enforced in accordance with the Act,
to have regard to its origin in a charterparty agree
ment, an undoubted maritime contract, and to the
underlying claim for demurrage, an undoubted mari
time claim, for it is that agreement and that claim
which allows for the award to be made and it is the
existence of the award which opens the way to its
enforcement by legal action.
In my opinion, the creation of a cause of action for
the recognition and enforcement of the foreign arbi-
tral award in issue, arising as it does from a breach of
the charterparty agreement for payment of demur-
rage, is a maritime matter or is so integrally con
nected to a maritime matter as to be legitimate Cana-
dian maritime law. The award derives indirectly from
the charterparty, and amounts, in reality, to a finding
of validity and proper quantification of the demurrage
claim. If that agreement had not called for submission
to arbitration, the respondent would have been enti
tled to sue on the original claim in the Trial Division
which, as we shall see, has been invested with
express jurisdiction over claims of that kind. So too
would the appellant be entitled to sue in the Trial
Division were the shoe on the other foot, in respect
of, say, a claim for despatch. Indeed, an arbitration
clause per se does not oust the jurisdiction of the
Trial Division although it does provide a basis, in the
interests of justice, for staying an action brought in
contravention of it: Seapearl (The Ship MN) v. Seven
Seas Dry Cargo Shipping Corporation of Santiago,
Chile, [1983] 2 F.C. 161 (C.A.). In my view, enforce
ment of the present award falls within federal legisla
tive competence over navigation and shipping.
I am similarly of the view that Parliament had
competence to invest the Trial Division with jurisdic
tion to entertain this cause of action. In Eurobulk Ltd.
v. Wood Preservation Industries, [1980] 2 F.C. 245
(T.D.), it was held that jurisdiction existed in the
Trial Division to enforce a foreign arbitral award
made pursuant to a charterparty agreement. See also
Atlantic Lines & Navigation Co. Inc. v. Didymi (The),
[1988] 1 F.C. 3 (C.A.). In ITO, supra, the Supreme
Court of Canada summarized the three requirements
for the existence of jurisdiction in the Trial Division
of this Court. Speaking for the Court, McIntyre J.
stated, at page 766, that to support such jurisdiction,
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 that phrase is used in s. 101 of the Constitution Act,
1867.
These requirements, in my view, are satisfied in
the case at bar. The statutory grant of jurisdiction by
the Parliament of Canada is found in section 6 of the
Act and in paragraph 22(2)(i) of the Federal Court
Act, which reads:
22....
(2) Without limiting the generality of subsection (I), 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;
The existing body of federal law essential to the dis
position of the case and nourishing the jurisdiction is
found in Canadian maritime law. That law is "a law
of Canada". To repeat, I have no doubt that the kind
of award with which we are here concerned falls
within "Canadian maritime law" as this term is now
understood, and that such law rests on the legislative
competence of Parliament under subsection 91(10) of
the Constitution Act, 1867.
In my opinion, the constitutional question should
be answered in the negative.
The final issue arises from the learned Motion
Judge's answer to question (b). The appellant con
tends that it was an error for the Judge to have held
that the time limitation for bringing the action in the
Trial Division is not governed by the laws of
England. Alternatively, it is argued that the action is
time barred by the laws of Canada.
Section 7 of the Limitations Act 1980, 1980, c. 58
(U.K.) is relied on by the appellant as laying down
the applicable limitation period. It reads:
7. An action to enforce an award, where the submission is
not by an instrument under seal, shall not be brought after the
expiration of six years from the date on which the cause of
action accrued.
The learned Motions Judge was of the opinion that
Canadian law rather than English law governs. At
page 141, he stated:
It is well-established in both Canada and English law that limi
tation statutes of this nature are procedural in character and the
relevant provisions are those of the lex fori. Thus Canadian
law governs the matter of the limitation period applicable to an
action in a Canadian court to enforce an award. [Footnotes
omitted.]
I respectfully agree with this view. The foreign
arbitral award, as I have already stated, gave rise to a
fresh cause of action which may be asserted in the
Trial Division. Even if the U.K. statute applied, it
provides a limitation for bringing an action to enforce
an award. But no such award can exist until after it is
made. It is only then that it may be enforced in the
courts.
Counsel submits, in the alternative, that the matter
of limitation is governed by the provisions of subsec
tion 39(2) of the Federal Court Act, which reads:
39....
(2) A proceeding in the Court in respect of a cause of action
arising otherwise than in a province shall be taken within six
years after the cause of action arose.
In my view, the "cause of action arose" on the date of
the award, May 24, 1985, at the earliest. The action
in the Trial Division was instituted well within the
six-year limitation period prescribed by the subsec
tion.
In summary, I would answer the constitutional
question in the negative, confirm the answers given
by the order of the Trial Division made June 12,
1989, and dismiss this appeal with costs to the
respondent. As the intervenor does not seek costs,
none should be allowed.
HEALD J.A.: 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.