Judgments

[1997] 3 F.C. 601

A-343-96

Her Majesty the Queen in Right of Canada (Appellant) (Defendant)

v.

Greif Containers Ltd. (Respondent) (Third Party)

and

Pakistan National Shipping Corporation (Plaintiff)

and

Kuehne & Nagel International Ltd. (Defendant)

and

Hunter Drums Limited (Third Party)

Indexed as: Pakistan National Shipping Corp. v. Canada (C.A.)

Court of Appeal, Stone, Strayer and McDonald JJ.A. —Ottawa, April 8 and 30, 1997.

Maritime law — Carriage of goods — Appeal from Trial Division order striking out third party claim against respondent for want of jurisdiction — Claim in main action arising out of carriage of cargo of canola oil — Cargo damaged during voyage due to defective drums — Third party claim for negligent misrepresentation drums could withstand stresses of sea transport — Integrally connected to Court’s admiralty, maritime jurisdiction — Words “maritime”, “admiralty” to be interpreted within modern context of commerce, shipping.

Federal Court jurisdiction — Trial Division — Third party claim based on misrepresentations by respondent as to adequacy of plastic drums for carriage of canola oil by sea — Whether F.C.T.D. has jurisdiction over claim under Federal Court Act, s. 22 — Case law on Federal Court’s maritime jurisdiction reviewed — ITO case applied — That alleged misrepresentation made on land not sufficient to establish want of jurisdiction — Claim integrally connected to Court’s admiralty, maritime jurisdiction.

This was an appeal from a Trial Division order striking out the appellant’s third party claim against the respondent for want of jurisdiction. In the main action, the plaintiff, Pakistan National Shipping Corp., sued the appellant and Kuehne & Nagel International Ltd. for damages arising out of the carriage of a cargo of canola oil from Montréal to Karachi, Pakistan. It was alleged that the expenses and losses incurred by the plaintiff were due to the defective condition of the plastic drums containing the oil as the drums leaked, lost their contents and collapsed during the sea voyage. The appellant brought a third party claim against the suppliers of the drums, based upon misrepresentations as to the appropriateness and adequacy of said drums for the carriage by sea. In striking the third party claim, the Motions Judge relied upon the case of ITO— International Terminal Operators Ltd. v. Miida Electronics Inc. et al. and found that the subject-matter of the claim was not so integrally connected to maritime matters as to be legitimate Canadian maritime law within federal competence. The issue on appeal was whether the Trial Division has jurisdiction over the third party claim under section 22 of the Federal Court Act.

Held, the appeal should be allowed.

In ITO, the Supreme Court of Canada laid down the essential requirements for a claim to fall within the Federal Court’s admiralty and maritime jurisdiction. The first requirement, that is the statutory grant of jurisdiction by the federal Parliament, was found by the Court to be present in the broad language of subsection 22(1) of the Act. In discussing the definition of “Canadian maritime law”, the Supreme Court pointed out that it was important 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. The Court also stated that the words “maritime” and “admiralty” should be interpreted within the modern context of commerce and shipping. The claims asserted against the appellant in the main action were indisputably maritime matters. The appellant’s third party claim was in tort for negligent misrepresentation with respect to the suitability of the drums to withstand the stresses and strains of an ocean voyage. The fact that the alleged misrepresentation may have been made on land did not conclusively establish a want of jurisdiction. The cause of action in tort did not become crystallized until the loss or damage—if proven—occurred after some of the drums collapsed in the course of the voyage. The root of the claims in the main action for losses incurred by reason of the collapse of the plastic drums in stow during the voyage to Pakistan was the sufficiency of the drums themselves to withstand the conditions experienced by the ship. The third party claim, based on negligent misrepresentation by the respondent that the plastic drums manufactured by it would be sufficient for sea transport, is integrally connected to the Court’s admiralty and maritime jurisdiction. The allegations of negligence in the third party claim and the appellant’s affidavit evidence were sufficient for the purpose of determining the issue of jurisdiction.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Admiralty Act, 1891 (The), S.C. 1891, c. 29.

Admiralty Act, 1934 (The), S.C. 1934, c. 31.

Carriage of Goods by Water Act, R.S.C., 1985, c. C-27, s. 2, Sch., Art. IV, ss. 2(n), 3.

Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 22(2)(m),(n).

Federal Court Act, R.S.C., 1985, c. F-7, ss. 2(1) (as am. by S.C. 1990, c. 8, s. 1) “Canadian maritime law”, 22(1),(2)(i), 42.

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; 34 B.L.R. 251; 68 N.R. 241; Q.N.S. Paper Co. v. Chartwell Shipping Ltd., [1989] 2 S.C.R. 683; (1989), 62 D.L.R. (4th) 36; 26 Q.A.C. 81; 101 N.R. 1; 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; Monk Corp. v. Island Fertilizers Ltd., [1991] 1 S.C.R. 779; (1991), 80 D.L.R. (4th) 58; 123 N.R. 1; 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; H. Smith Packing Corp. v. Gainvir Transport Ltd. (1989), 61 D.L.R. (4th) 489; 99 N.R. 54 (F.C.A.).

REFERRED TO:

Pakistan National Shipping Corp. v. Canada (1991), 50 F.T.R. 24 (F.C.T.D.); Domestic Converters Corporation v. Arctic Steamship Line, [1984] 1 F.C. 211 (1980), 46 N.R. 195 (F.C.A.).

AUTHORS CITED

Branch, Alan E. The Elements of Shipping. London: Chapman and Hall, 1977.

Coquillette, Daniel R. The Civilian Writers of Doctors Commons London, Berlin: Dunckee & Humblot, 1988.

Levack, Brian P. The Civil Lawyers in England, 1603-1641, Oxford: Clarendon Press, 1973.

Linden, Allen M. Canadian Tort Law, 5th ed. Toronto: Butterworths, 1993.

Owen, David R. and Michael C. Tolley. Courts of Admiralty in Colonial America, Durham, N.C.: Carolina Academic Press, 1995.

Tetley W. “The General Maritime Law—The Lex Maritima” (1994), 20 Syracuse J. Intl. L. and Com. 105.

Tetley, William. Marine Cargo Claims, 3rd ed. Montréal: Éditions Yvon Blais Inc., 1988.

Wiswall, F. L. The Development of Admiralty Jurisdiction and Practice since 1800, Cambridge University Press, 1970.

APPEAL from a Trial Division order striking out the appellant’s third party claim against the respondent for want of jurisdiction. Appeal allowed.

COUNSEL:

Robert B. Carter for appellant (defendant).

David R. Rothwell for respondent (third party).

Andrew Deere for Hunter Drums Limited.

SOLICITORS:

Deputy Attorney General of Canada for appellant (defendant).

Beard, Winter, Toronto, for respondent (third party).

David F. H. Marler, Law Office, Montréal, for Hunter Drums Limited.

The following are the reasons for judgment rendered in English by

Stone J.A.: This is an appeal from an order of the Trial Division of April 15, 1996, by which a motion to strike the appellant’s third party claim against the respondent was granted on the ground that it did not come within the Court’s admiralty and maritime jurisdiction.

The Claim in the Main Action

The claim against the respondent in the main action arose in the following circumstances. By its statement of claim filed November 26, 1990, Pakistan National Shipping Corp. brought suit against the appellant and Kuehne & Nagel International Ltd., in which it claimed damages, interest and costs arising out of the carriage of a cargo of refined rapeseed (canola) oil on board its ship M.V. Islamabad from Montréal to Karachi, Pakistan. The respondent manufactures and distributes plastic containers from its facility in Ontario. It is apparent that some of the drums in which the oil was shipped were supplied by the respondent to the vendors of the oil, and that no contractual relationship existed between the appellant and the respondent in that regard. References are made in the statement of claim to a charter party between Kuehne & Nagel and the Department of Supply and Services and to a bill of lading said to have been issued on behalf of the Master of the ship after completion of the loading at the Port of Montréal on November 26, 1989, in which the shippers were described to be the Government of Canada and the Canadian International Development Agency (CIDA). Neither of these documents is before the Court. According to the pleading, the bill of lading includes the following clauses:

1. This Bill of Lading shall have effect subject to the provisions of the Water Carriage of Goods Act, 1936, enacted by the Parliament of the Dominion of Canada, which shall be deemed to be incorporated herein, and nothing herein contained shall be deemed a surrender by the Carrier of any of its rights and immunities or an increase of any of its responsibilities or liabilities under said Act. If any term of this Bill of Lading be repugnant to said act to any extent, such term shall be void to that extent but not further.

…

This Bill of Lading is subject to the terms, conditions and exceptions of the Governing Charterparty and should any conflict or ambiguity arise between the Bill of Lading and the Charterparty, the terms, conditions and exceptions of the Charterparty shall prevail.

The statement of claim also alleges that in September 1989, the plaintiff, through its agent Lillis Marine Agencies Ltd., was invited to quote a freight rate on full liner terms for carriage of the subject cargo, and that the cargo “would be in drums of high molecular weight high density polyethyline [sic] resin each weighing 444.5 lb. gross, dimensions 94 cm (37 inches) high by 59 cm (23 inches) diameter”. The statement of claim alleges as follows:

20. The M.V. “Islamabad” sailed from Montreal on November 29, 1989, due diligence having been exercised to make the said vessel in all respects seaworthy and properly manned, equipped and supplied, and to make her holds and all other parts of the ship in which cargo was carried fit and safe for the reception, carriage and preservation of the said cargo;

21. On December 3, 1989, while in the North Atlantic, the “Islamabad” began to encounter heavy weather which increased steadily in force. In order to reduce the effects of the heavy weather the vessel changed course and reduced speed but nevertheless began to roll and pitch;

22. The canola oil drums were subjected to the stresses and strains caused by the vessel’s rolling and pitching and drums began to leak, collapse and lose their contents, thus creating gaps or void spaces in the stow, which led to a collapse or shift of stow in the holds;

23. In consequence of the above the canola oil drums were displaced laterally in the holds, adversely affecting the ship’s stability and causing the ship to develop a severe list that placed her in peril;

24. Because of her unstable and perilous condition the “Islamabad” was forced to seek refuge at Norfolk, Virginia until the heavy weather abated. The vessel then proceeded to Charleston, South Carolina, where she arrived on December 6, 1989. Thereafter the Plaintiff took all such measures as were necessary to restow and resecure the Defendants’ cargo and to put the vessel into a condition that would permit her to continue the voyage. These measures caused the Plaintiff to incur substantial expenses and losses;

25. When the vessel completed her voyage and arrived at Karachi it was observed that more drums had leaked and collapsed, and the Plaintiff incurred additional expenses at Karachi as a result of the extra handling required to discharge these defective drums, as well as for the cost of removing canola oil residues from the vessel and cleaning the holds.

26. The Plaintiff’s expenses and losses were entirely due to the defective condition of Defendants’ drummed cargo and more particularly because the drums had leaked, lost their contents and collapsed when exposed to conditions encountered during the ocean voyage which, although severe, were not unusual or unforeseeable considering the time of year and the areas through which the vessel must navigate on a voyage from Montreal to Karachi;

27. At the commencement of the voyage the Plaintiff was unaware of, and had no reasonable way of discerning, the defective condition of the drums that led to the breakdown in stow and put the vessel in peril as aforesaid;

28. As evidenced by the Bill of Lading, the Defendant Her Majesty the Queen in Right of Canada was and is the shipper and supplier of the aforesaid cargo, or in any event the party at interest in the cargo, and as such is responsible to PNSC for the damages claimed by virtue of Canadian maritime law.

…

30. The Defendants knew, or ought to have known, of the defective condition of the drums and are, in any event, responsible to Plaintiff for the expenses and losses that Plaintiff sustained as a consequence thereof;

The pleading then asserts various heads of damages in respect of both “expenses and losses” and “loss of use” of the ship.

In due course, on February 27, 1991, the appellant filed a statement of defence and counterclaim in which, for the most part, she denied the various allegations contained in the statement of claim, and claimed for a quantity of cargo said to have been “shortlanded” at Karachi. She denied in particular “that the drums were defective” (paragraph 25). Paragraphs 37-39 of this pleading read as follows:

37. On or about September 25, 1989, the Co-Defendant Kuehne & Nagel International Ltée entered into a Charterparty with the Department of Supply and Services for the carriage of a part cargo of approximately 6,464 to 6,855 Net Metric Tonnes of drummed refined rapeseed oil from the Port of Montreal to the Port of Karachi in Pakistan.

38. On or about November 29, 1989, the Plaintiff through its authorized agents issued Bill of Lading no. 48 for the loading “clean on board” of 34,019 Plastic Drums Refined Rapeseed (Canola) Oil on board the M.V. “Islamabad” in Montreal.

39. The drums used to carry the Canola oil were Reusable Molded Polyethylene Containers which met the Canadian Transport Commission Specification 34 issued in accordance with the requirements of the International Maritime Dangerous Goods Code for the carriage of dangerous goods and consequently, a fortiori, were more than adequate for the carriage of Canola oil by sea.

The Third Party Claim

On May 14, 1991, the appellant filed the third party claim against the respondent as well as against Hunter Drums Ltd., the supplier of the remaining drums that were carried on the ship. Paragraphs 1 and 2 of that pleading read:

1. As appears from the record, Plaintiff’s claim against the Defendants is for alleged loss or damage incurred as a result of the carriage by sea of a part cargo of drummed refined rapeseed oil loaded on board the Plaintiff’s vessel M.V. “Islamabad” in Montreal on or about November 17, 1989 and discharged in Karachi, Pakistan on or about January 26, 1990. It is alleged that the Plaintiff incurred expenses and losses due to the defective condition of the drummed cargo and more particularly because the drums leaked, lost their contents and collapsed during the sea voyage between Montreal and Karachi.

2. The Defendant Her Majesty the Queen disputes Plaintiff’s claim on the grounds appearing in Her Defence, but in the event of Her being found liable to the Plaintiff, the Defendant claims indemnity or alternatively contribution or full relief over from Third Parties on the following grounds:

(a) at all material times the Defendant relied upon the Third Parties’ representations pertaining to the qualities and capacities of the plastic drums as appropriate, adequate and safe containers for the carriage of oil by sea;

(b) furthermore, at all material times the Defendant relied upon the Third Parties’ advice and representations to the effect that the plastic drums could be shipped loose in the hold of a cargo ship, stacked four high without damage;

(c) the Defendant relied on these negligent misrepresentations to stipulate Her requirements to Her various sub-contractors.

The respondent filed a defence to the third party claim on December 23, 1991, paragraph 5 of which reads:

5. This Third Party states and the fact is that its drums were manufactured in accordance with CIDA Specification #6 and that its drums passed all required testing procedures performed in accordance with CTC Specification 34 and were up to the accepted standard in all respects and fit for the purpose intended when they left the manufacturer.

The Motion to Strike

On June 1, 1995, the respondent launched the motion to strike the third party statement of claim on the ground that the Court “has no jurisdiction ratione materiae, under Section 22 of the Federal Court Act in respect of the Claim against it.” In granting that motion, the learned Motions Judge recited the following in her order of April 15, 1996:

UPON CONSIDERATION that Her Majesty the Queen is claiming damages for misrepresentations against the Third Party Greif Containers in that they knew that CIDA intended to use the manufactured drums by ship and in that they expressly represented that their drums met the necessary requirements and standards for carriage of oil by sea;

AND UPON CONSIDERATION of ITO—International Terminal Operators Limited v. Miida Electronics Inc., which determined that for the Court to have jurisdiction over the subject matter under consideration, the subject matter must be found to be so integrally connected to maritime matters as to be legitimate Canadian maritime law within federal competence. [Footnote omitted.]

The Motions Judge did not file separate reasons for her decision.

At this stage of the proceedings we ought not to enter into a consideration of the merits of either the principal or the third party claim. Nonetheless, it is appropriate to have some regard to the affidavit evidence which was filed both for and against the motion to strike. This accords with the approach that was taken by Strayer J. (as he then was) in Pakistan National Shipping Corp. v. Canada (1991), 50 F.T.R. 24 (F.C.T.D.), at page 27.

The evidence suggests that during the first part of the last decade, the Government of Canada embarked on a project to develop a performance standard for the packaging of dangerous goods for transport in containers. To that end, the Canadian and General Standards Board (the Board) was retained to develop the standard, which was to be compatible with international standards for the transportation by various modes including by ship. These international standards included the United Nations “Chapter 9 and the International Maritime Dangerous Goods (hereinafter, MDG) Codes”.[1] According to the record, the General Manager and a long-term employee of the respondent, Lowell Watson, attended meetings of a sub-committee of the Board which was given the mandate of developing the standard. Indeed, Mr. Watson became Chairman of the sub-committee at its third meeting on October 23, 1981. In December 1987, the Board issued standard CAN/CGSB-43.55-M87, titled “Drums, Polyethylene, Reusable, Non-Removable Head, without Overpack (TC-34)”. The “scope” of the standard is set forth in paragraph 1.1 as follows:

1.1 This standard applies to reusable polyethylene containers used to transport dangerous goods. It states their required capacity, materials, construction, performance, and marking.

The affidavit of Jozef Tadeusz Lukaszewicz, who was Chief of Transportation in the Procurement Branch of CIDA at the time, was filed in opposition to the motion to strike. Paragraphs 3-7 of that affidavit read:

3. My first introduction to plastic drums was through Mr. Lowell Watson of Greif Containers, who approached me in 1985. At the time, CIDA was forwarding approximately one million metric tons of food aid per year to remote recipient countries. CIDA had one annual shipment of approximately 20,000 metric tonnes of vegetable oil which was shipped in steel drums to Karachi. We were experiencing heavy losses as the steel drums arrived at destination punctured, dented and leaking. Mr. Watson became aware of these difficulties as a result of his working relationship with Andrew Debicki who was a standards officer at the time with the Canadian General Standards Board. Mr. Watson made representations to the effect that the plastic drums which were manufactured by Greif Containers were an improved package over steel drums because they met the standards accepted by the United Nations for the transport of dangerous goods.

4. On the basis that plastic drums met the United Nations requirements for transporting dangerous goods, CIDA became interested in changing its packaging for the transport of vegetable oil from steel to plastic drums. The three known drum manufacturers at the time, namely Hunter Drums Ltd., Greif Containers Inc. and Anchor Plastics Ltd. were invited to and did participate in meetings, discussions and tests with CIDA. Anchor Plastics’ involvement was limited as compared to that of Hunter and Greif, who were active throughout the developmental stage.

5. The purpose of the meetings was to alleviate concerns CIDA had pertaining to the stowage of plastic drums. We discussed drum specifications, and more particularly, dimensions, availability, stacking, sturdiness and ease of use from a transportation viewpoint, and price. The intention was to develop a standard that the industry could meet.

6. We were particularly concerned with the production capability of the manufacturers. Our annual shipment required a large number of drums which exceeded the drum manufacturers’ existing capability at the time. Sufficient lead time was required for the manufacturers to increase their combined existing production capacity and deliver the drums in a timely way to meet the ship’s loading time. The lead time required by the manufacturers would determine the timing for issuing the transportation tender by DSS.

7. The first meeting took place on September 17, 1985, which was attended by all three drum manufacturers referred to above. Attached to this my Affidavit as Exhibit A is a copy of the letter dated September 9, 1985 together with an Agenda which was forwarded to all three drum manufacturers. At that meeting, and throughout the various discussions with the drum manufacturers, it was very clear that the drums were required to be fit and appropriate to be transported by ship to remote destinations. Otherwise, there would be no point for CIDA in changing from steel to plastic drums.

The affiant goes on in paragraph 8 to state that CIDA retained a consultant “to raise specific queries, compile information and assist in drafting the CIDA specification”. In its letter of September 9, 1985, inviting drum manufacturers to the meeting of September 17, 1985, CIDA indicated that “the time is right to get together and discuss details to ensure the highest possible uniformity of packaging of future shipments”. A letter dated November 25, 1985, “Re: Plastic Drums for CIDA”, sent by the CIDA consultant to the drum manufacturers stated, inter alia:

We would like to know more about other important features viz:

(a) how many drums could be stacked upon each other without risking buckling and/or splitting of the drum, for how long and under what temperatures,

…

(c) how to ship the plastic drums if different from the metal.

Paragraphs 18-20 of the Lukaszewicz affidavit read as follows:

18. CIDA Specification no. 6 was adopted by CIDA in 1987 as a packaging specification for oil, as a result of the representations made by the drum manufacturers. The specification incorporates by reference Canadian Transport Commission (CTC) Specification 34, which is a design standard for plastic drums. In addition, the drums are expected to meet the performance standard of Canadian General Standards Board (hereinafter “CGSB”) CAN/CGSB 43.55-M87. Attached to this my Affidavit as Exhibit H are copies of CTC 34 and CAN/CGSB 43.55-M87.

19. At all material times, the drum manufacturers, including Greif Containers and Hunter Drums, were well aware of the intended use of the drums by CIDA, and more particularly knew that the drums would be used primarily to transport oil by ship.

20. At all material times I, on behalf of CIDA, as well as other CIDA officials relied entirely on the knowledge, expertise and past experience of the drum manufacturers to advise us of the suitability of the drums for transport by sea.

Paragraphs 1, 3 and 4 of the “CIDA Specification No. 6”, titled “Packaging/Packing Specification (CIDA) for Oil Edible (Canola)” of January 1987, are relevant. They read:

1. Packaging

In 208-220 litre capacity (rated) drums made of High Molecular Weight-High Density Polyethylene resin (see NOTE below), Tight Head type with an injection-molded lifting and handling ring at the top of the drum; colour Resco White No. M350 (Refer to Resco Standard Colour Chart), or a matching equivalent.

Drums to comply in all respects with Canadian Transport Commission (CTC) Specification 34 for Reusable Molded Polyethylene Container, complete with two (2) 5 cm (2”) tamperproof plugs; one NPT, and one buttress thread with a 19 mm (3/4”) centre insert; steel capseals applied to each closure.

Drum dimensions Height 92.0±1.5 cm (36½±½”), Diameter 58.5± 1.0 cm (23±½”).

NOTE minimum 80% Canadian Contents is required on raw materials.

…

3. Pallets

Notched Stringer (Figure 1), 4-way entry, Single Trip, hard wood pallets, size 122 x 122 cm (48 x 48”).

…

4. Palletizing

Drums on pallets to be banded together just below the top ring of drums with 19 mm (3/4”) strap, nylon or equivalent. Drum overhang is NOT acceptable.[2]

In his own affidavit, Mr. Watson denies making the representation attributed to him or to the respondent during the period that CIDA Specification No. 6 was being developed and, particularly, that at no time “did Greif or I hold ourselves out as experts to anyone relating to the carriage of goods and especially concerning the carriage of plastic drums”. He admits having participated in two meetings with CIDA on behalf of the respondent, but states that the respondent’s participation was “solely on a voluntary basis”, that it was “asked to attend since it had expertise in the manufacture of plastic drums”, and that its and his own participation “was limited and related exclusively to the design and manufacture of plastic drums and no other subject”.

Statutory Provisions

Whether the Trial Division has jurisdiction over the third party claim in the above circumstances depends upon the interpretation of various sections of the Federal Court Act, R.S.C., 1985, c. F-7) (the Act) that confer admiralty and maritime jurisdiction upon the Court. Subsection 22(1) and paragraph 22(2)(i) read:

22. (1) The Trial Division has concurrent original jurisdiction, between subject and subject as well as otherwise, in all cases in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, except to the extent that jurisdiction has been otherwise specially assigned.

(2) Without limiting the generality of subsection (1), it is hereby declared for greater certainty that the Trial Division has jurisdiction with respect to any one or more of the following:

…

(i) any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise;

The term “Canadian maritime law” is defined in subsection 2(1) [as am. by S.C. 1990, c. 8, s. 1] of the Act as follows:

2. (1) In this Act,

…

“Canadian maritime law” means the law that was administered by the Exchequer Court of Canada on its Admiralty side by virtue of the Admiralty Act, chapter A-1 of the Revised Statutes of Canada, 1970, or any other statute, or that would have been so administered if that Court had had, on its Admiralty side, unlimited jurisdiction in relation to maritime and admiralty matters, as that law has been altered by its Act or any other Act of Parliament;

Section 42 of the Act provides:

42. Canadian maritime law as it was immediately before June 1, 1971 continues subject to such changes therein as may be made by this Act or any other Act of Parliament.

JURISPRUDENCE

In the leading case of ITO—International Terminal Operators Ltd. v. Miida Electronics Inc. et al., [1986] 1 S.C.R. 752, involving a claim for goods stolen from a storage shed following their discharge from a ship at the Port of Montréal, the Supreme Court of Canada laid down three essential requirements to be satisfied in order to support a finding that a claim falls within the Federal Court’s admiralty and maritime jurisdiction. These appear at page 766:

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 Supreme Court found the statutory grant of jurisdiction to be present in the broad language of subsection 22(1) of the Act. In dealing with the second of the three requirements, McIntyre J., speaking for the majority, stated at page 769:

To decide if the second requirement is met, it must be determined whether Canadian maritime law or any other law of Canada relating to any matter coming within the class or subject of navigation and shipping is essential to the disposition of the case and nourishes the statutory grant of jurisdiction.

He divided the definition of “Canadian maritime law” into two categories, namely, the law that [at page 769]:

(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 maritime and admiralty matters.

He went on, at pages 769-772, to state that the first part of the definition included the law which was received in Canada from England in 1891 when The Admiralty Act, 1891, S.C. 1891, c. 29 was enacted, and that which was received in 1934 when The Admiralty Act, 1934, S.C. 1934, c. 31 was enacted. In discussing the second part of the definition, McIntyre J. stated, at page 774:

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 maritime 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 matters 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 recognition 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, 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 constitutional 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. [Emphasis added.]

He added the following, at page 776:

Having found that Miida’s claim against ITO falls within the scope of Canadian maritime law, the question then arises as to the substantive content of that law. Canadian maritime law, as a body of substantive law, encompasses 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). 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 specialized rules and principles of admiralty and the rules and principles 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 Industries 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.)

On the basis of this analysis, McIntyre J. found the second and third requirement to be satisfied, concluding at page 777:

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. 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.

The significance of McIntyre J.’s views in ITO, supra, were underscored by La Forest J., for the majority, in Q.N.S. Paper Co. v. Chartwell Shipping Ltd., [1989] 2 S.C.R. 683 and, for the Court, in Whitbread v. Walley, [1990] 3 S.C.R. 1273, and by Iacobucci J., for the majority, in Monk Corp. v. Island Fertilizers Ltd., [1991] 1 S.C.R. 779. In Chartwell, supra, at pages 695-697, La Forest J. offered these insights into the content of “Canadian maritime law”:

There is no doubt that the development of English admiralty law, from which Canadian maritime law in considerable measure derives, owes much to the civilian tradition. The common law in its early period was ill-equipped to deal with commercial and maritime matters and the courts of admiralty, when called upon to decide maritime disputes, applied principles developed on the continent. Indeed, admiralty courts were presided over by civilians. It must be kept in mind, however, that the admiralty courts, like other specialized courts in England, continually had to struggle to resist the growing strength of the common law courts, and their jurisdiction over ordinary civil matters became extremely narrowed and curtailed; in particular, they had no jurisdiction in these matters within the realm; see Mersey Docks Harbour Board v. Turner (The “Zeta”), [1893] A.C. 468 (H.L.), at pp. 481 et seq. These matters, though concerned with questions of a maritime nature, were largely dealt with by the common law courts. With the rationalization of the English court system in the late 19th century, admiralty jurisdiction was transferred to the admiralty division of the High Court, but all divisions of that court may exercise jurisdiction over admiralty matters; see Administration of Justice Act, 1928 (U.K.), 18 & 19 Geo. 5, c. 26, s. 6.

It is this amalgam that was incorporated into Canadian maritime law. McIntyre J. in ITO has discussed in detail the process by which the Exchequer Court and later the Federal Court applied the common law principles of contract, tort and bailment in the resolution of admiralty matters (see in particular p. 776) as well as the jurisdiction now assigned to the Federal Court, and I do not propose to repeat it. Suffice it to say that he particularly relied on s. 2 of the Federal Court Act, which defines “Canadian maritime law” as including not only law formerly administered by the Exchequer Court on its admiralty side, but also “the law that … would have been so administered if that court had had on its Admiralty side, unlimited jurisdiction in relation to maritime and admiralty matters” (p. 769). The latter portion of the definition would include all claims dealing with maritime matters and was not frozen by pre-existing admiralty jurisdiction. It incorporated as a uniform body of federal law the maritime law of England (p. 779).

It was in the light of this examination that the majority of this Court in ITO concluded that Canadian maritime law encompassed the common law principles of tort, contract and bailment. To these I would add, if indeed it is an addition, agency. For nowhere does it become more obvious that the law is a seamless web than when one considers the interplay between contract, agency and tort, to say nothing of bailment. In fact, the case here is an action in contract, the issue being whether the agent is bound by the contract. Many of the cases cited by my colleague in elaborating the common law position regarding the specific problem that arises in the present case arose in maritime matters. Scarcely surprising, because as mentioned these maritime matters have, for hundreds of years, come within the jurisdiction of the common law courts. The laws elaborated in those cases have now become part of the uniform federal or Canadian maritime law. [Emphasis added.]

The extent to which the development of English admiralty law was influenced by continental civil law principles and by ancient sea codes, customs and usages of seafarers and seafaring nations, is also reflected in various modern works.[3]

Monk, supra, involved a claim by the supplier of goods carried on a ship against the purchaser for excess product delivered to the purchaser, for demurrage and for the renting of cranes used to discharge the cargo. No privity of contract existed between the defendant and the ocean carrier. The claims were based on a telex agreement of October 11, 1985, between the supplier and purchaser with respect to a shipment of fertilizer which was carried to Canada aboard the ship in November 1985 under a contract of carriage. Iacobucci J. noted, at page 796, that the telex agreement included “undertakings … that relate to a contract of carriage by sea”, namely, the supplier arranging for a “self geared vessel” and the purchaser agreeing to unload the cargo and assuming responsibility for demurrage. However, he went on to state at page 797, that it was “not enough to show that maritime undertakings are involved”, and that “it must be shown that the specific claims advanced are integrally connected to maritime matters”. It was his view that, as stated at page 799, “the underlying activity to which the claims … relate was the discharge of cargo, which was an obligation … arising from the contract of carriage aspects of the agreement between the parties and which had a maritime character”. At page 800, he added:

The maritime character of the claims is not diminished by the fact that Monk was the seller of the urea and Island was the purchaser with no privity between Island and the owners of the vessel Super Spirit. Island assumed a maritime obligation—the discharge of cargo—in connection with the sale and purchase of the urea. It is that maritime obligation that is the foundation for the claims by Monk. Parties can assume maritime obligations governed by maritime law even though they may not formally be parties to a charter-party or even a contract of carriage by sea. What is important for purposes of maritime law jurisdiction is that their claim be integrally connected with maritime matters. [Emphasis added.]

The earlier case of Wire Rope Industries of Canada (1966) Ltd. v. B.C. Marine Shipbuilders Ltd. et al., [1981] 1 S.C.R. 363, affords another example of a situation in which a third party claim was found to fall within the ambit of the Federal Court’s admiralty and maritime jurisdiction. It involved a claim by the defendant for indemnity arising out of the loss at sea of a log barge while under tow as a consequence of the towline parting and the barge being driven ashore. The evidence suggested that the towline had broken at the main towline socket. It was clear that the Federal Court had jurisdiction over the claims in the main action which arose out of a charter party agreement and a contract of towage, as those claims came within the ambit of “Canadian maritime law”. At issue was whether the third party claim based on an allegation that the socket failed because it had been damaged and weakened by the negligence of the third party in resocketing the towline was within the admiralty and maritime jurisdiction of the Federal Court. In deciding that it was, McIntyre J. observed, at page 377, that the “root” of the claims in the main action was the resocketing of the towline and that the towline was part of the tug’s equipment—“a seagoing vessel which was involved in the marine accident that gave rise to this action”. He noted that subsection 22(1) of the Act contained a general statement of jurisdiction, and that particular jurisdiction was conferred under paragraphs 22(2)(m) and (n) over a claim in respect of goods, materials or services supplied to a ship for her operation or maintenance, and over a claim arising out of a contract relating to the construction, repair or equipping of a ship. He then concluded, at page 379:

I am therefore of the view that the claims made against Wire Rope come within Canadian maritime law as defined in the Federal Court Act. There can be no doubt in my mind that the substantive law relating to these claims falls within federal legislative competence under s. 91.10 of the British North America Act, being in relation to navigation and shipping. There is therefore law of Canada relating to the issues arising in this case upon which the jurisdiction of the Federal Court may operate.

This Court, in H. Smith Packing Corp. v. Gainvir Transport Ltd. (1989), 61 D.L.R. (4th) 489, decided in favour of jurisdiction over a third party claim based on alleged negligent misrepresentations as to the conditions upon which the goods were carried by sea from Canada to Jamaica and the extent of insurance carried by the owners of the ship. Desjardins J.A., for the Court, expressed the view at page 494, that these representations “arose because of the existence of the contract of carriage by sea”, and that there would have been “no occasion for them to occur had there not been such a contract”. In doing so, she was guided by the three essential requirements for admiralty and maritime jurisdiction laid down by McIntyre J. in ITO, supra.

Analysis

It is not disputed that the claims asserted against the appellant in the main action are maritime matters. Those claims are based on the shipping by sea under a contract of carriage of the canola oil in drums that she knew or ought to have known were defective. The appellant’s third party claim is in tort for negligent misrepresentation with respect to the suitability of drums so used to withstand the stresses and strains of the ocean voyage.

I do not regard the circumstance that the alleged misrepresentation may have been made on land as conclusively establishing a want of jurisdiction. The cause of action in tort, if it can be made out, did not become crystallized until the loss or damage—if proven—occurred after some of the drums collapsed in the course of the ocean voyage.[4] In Whitbread, supra, at pages 1288-1289, in referring to the above quoted statement of principle of McIntyre J. in ITO, supra, at page 779, La Forest J. stated “that tortious liability which arises in a maritime context is governed by a body of maritime law within the exclusive legislative jurisdiction of Parliament”. He went on, at page 1292, to reject the notion that had been put forward by this Court in Domestic Converters Corporation v. Arctic Steamship Line, [1984] 1 F.C. 211 at page 244, that it “would be against the whole tradition of admiralty jurisdiction with respect to maritime torts to hold that a tort or delict committed on land is a maritime matter”.

The theory of the plaintiff’s case as pleaded is: that the losses claimed were sustained because the drums of canola oil “began to leak, collapse and lose their contents … creating gaps or void spaces in the stow” and leading to “a collapse or shift of stow” (paragraph 22), that this in turn allowed the drums to become displaced in the holds “causing the ship to develop a severe list that placed her in peril” (paragraph 23), that as shipper of the cargo, the appellant is responsible for the plaintiff’s damages “by virtue of Canadian maritime law” (paragraph 28) and, finally, that the appellant is liable in negligence because she “knew, or ought to have known, of the defective condition of the drums” (paragraph 30). The plaintiff’s whole case, it appears, is predicated on the allegation that the drums of canola oil carried on the ship were somehow defective.

As appears from the plaintiff’s pleading, the bill of lading that was issued by the carrier was to have effect subject to the Canadian statute referred to therein and to the terms of the “Governing Charterparty”. By section 2 of that statute the Rules in the schedule (the so-called “Hague Rules”) are to “have effect in relation to and in connection with the carriage of goods by water in ships carrying goods from any port in Canada to any other port, whether in or outside Canada”. As the appellant points out, Article IV, paragraph 2 of the Hague Rules exempts the carrier and the ship from responsibility for loss or damage arising or resulting from a number of circumstances including “insufficiency of packing”, and Article IV, Rule 3 thereof impliedly places responsibility on the shipper for “act, fault or neglect” of that party to a contract of carriage by sea.[5] The appellant relies on the “insufficiency of packing” exemption as reflecting the understanding of those involved in carriage of goods by sea of the role that packing plays in safe carriage. Not infrequently cargo consists of packaged goods, and when it does the shipper is obliged to pack them in a way that is normal or customary for the trade.[6] In A. E. Branch, The Elements of Shipping,[7] at pages 151-152, it is stated:

The method of packing depends primarily on the nature of the goods themselves and the method of transit for the anticipated voyage. Further subsidiary factors include the use to which the packing may be put when the goods reach their destination, the value of the goods (low value goods have less packing then those of high value); any Customs or statutory requirements that must be complied with; ease of handling (awkward-shaped cargo suitably packed in cartons or cases can facilitate handling); marketing requirements; general fragility; variation in temperature during the voyage; the size of the cargo and its weight, and, in particular, whether elaborate packing is likely to increase the freight to the extent that it may price the goods out of the market; facilities available at the ports (in some ports they may not have highly mechanized cargo-handling equipment or elaborate storage accommodation); type and size of container; and lastly, the desirability of affixing to the packing any suitable advertisement.

Packing, therefore, is not only designed as a form of protection to reduce the risk of the goods being damaged in transit, but also to prevent pilferage. It is, of course, essential to see not only that the right type of packing is provided, but also that the correct quality and form of container is used. [Emphasis added.]

In Monk, supra, Iacobucci J., agreeing with Hugessen J.A., found, at page 797, that what he referred to as “connecting factors” to maritime law in that case “are stronger than they were in ITO itself”. But to repeat, it was not enough to show that maritime undertakings were involved; “it must be shown that the specific claims advanced are integrally connected to maritime matters” rather than being so connected to the sale of goods. The claims for excess product delivered, for demurrage and for the renting of cranes were all related to the discharge of the cargo from the ship, which had found their “root”, “foundation” or “source” in the contract of carriage undertakings between the shipper and the purchaser. Also, in Wire Rope, supra, the “root” of the claims in the main action was the resocketing of the towline for use in the operation of the tug in performing towage services.

The present case revolves around a claim arising out of an agreement relating to the carriage of goods by sea. While the merits of the claim are not to be adjudged at this time, the record indicates that the respondent was not a party to that agreement nor even directly involved in the performance thereof. On the other hand, the record suggests that the respondent approached CIDA in 1985 after becoming aware of CIDA’s loss experience in annually shipping canola oil to Pakistan in steel drums, and that the respondent then represented to CIDA that its plastic drums were “an improved package over steel drums” because they met accepted international standards. The record further suggests that at all material times the respondent was “well aware of the intended use of the drums by CIDA, and more particularly … that the drums would be used primarily to transport oil by ship”. It also suggests that CIDA officials “relied entirely on the knowledge, expertise and past experience” of the respondent “to advise us of the suitability of the drums for transport by sea”. It would thus appear that the root of the claims in the main action for losses incurred by reason of the collapse of the plastic drums in stow during the voyage to Pakistan was the sufficiency of the drums themselves to withstand the conditions experienced by the ship. It should be noted that the third party claim is based on the negligent misrepresentation by the respondent that the plastic drums manufactured by it would be sufficient for sea transport. It is not based on the mere supplying of defective drums by the third party to the vendors of goods that were later carried in those drums on the ship. In my view, the third party claim is integrally connected to the Court’s admiralty and maritime jurisdiction. That jurisdiction, as McIntyre J. pointed out in ITO, supra, is not “frozen by The Admiralty Act, 1934” and that the words “maritime” and “admiralty” should be interpreted “within the modern context of commerce and shipping”. This view was echoed by Iacobucci J. in Monk, supra. where he stated, 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 Constitution Act, 1867. The claims here advanced do not in my view have as their foundation or source sale of goods elements of the telex arrangement between Monk and Island and therefore are not within the provincial scope of property and civil rights or within any other heading of s. 92.

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 straitjackets. [Emphasis added.]

Before disposing of this appeal, I should comment on two points that were raised by the respondent. The first was to the effect that no evidence exists in the record to support the alleged misrepresentation such as would allow this Court to determine the issue of jurisdiction. It seems to me, however, that the allegations of negligence in the third party claim and the appellant’s affidavit evidence are in themselves sufficient for the purpose. The affidavit evidence does not, in my view, clearly establish that the alleged misrepresentation was not made. The second is that the claim is not valid in any event because CIDA Specification No. 6, which incorporates the TC-34 standard of December 1987 to the extent indicated in paragraph 1 thereof, can only apply if the cargo was palletized prior to its carriage by sea, as required by paragraph 3 of the Specification. As this argument does not go directly to the issue of jurisdiction, it would be prudent not to offer a final view at this stage. That said, it is not altogether clear that Specification No. 6 is inapplicable to drums that are not palletized. Paragraph 4 thereof refers to “drums on pallets … banded together”. That language may arguably support the view that where drums are shipped on pallets they must be banded together, rather than the view that for Specification No. 6 to apply at all, goods must always be shipped on pallets. This is not an issue which can or should be resolved on this appeal, when the evidence may well be incomplete. It should await the trial and be determined by the Trial Judge in the light of all relevant evidence.

I would allow the appeal with costs and would set aside the order of the Trial Division.

Strayer J.A.: I agree.

McDonald J.A.: I agree.

---