A-155-74
McNamara Construction (Western) Limited and
Fidelity Insurance Company of Canada (Appel-
lants) (Defendants)
v.
The Queen (Respondent) (Plaintiff)
and
J. Stevenson and Associates and Stevenson,
Raines, Barrett, Hutton, Seaton & Partners
(Respondents) (Defendants)
and
Lockerbie & Hole Western Limited (Respondent)
(Third Party)
Court of Appeal, Thurlow and Ryan JJ. and
Smith D.J.—Toronto, September 16, 1975;
Ottawa, November 10, 1975.
Jurisdiction—Crown claiming damages arising from failure
of underground piping and electrical system in an institution
constructed for Canadian Penitentiary Service—Whether sub
ject matter within legislative power of Parliament Whether
enforcement of rights of the Crown arising under a contract for
the construction of a penitentiary within expression "Adminis-
tration of the laws of Canada" in s. 101 of the British North
America Act—Federal Court Act, ss. 17, 20, 22, 23, 25
Federal Court Rules 1726, 1730—B.N.A. Act, ss. 91(1A),(28),
10! Exchequer Court Act, s. 30(d)—Financial Administra
tion Act, R.S.C. 1970, c. F-10.
This is an appeal from an order of the Trial Division (a)
dismissing an application by appellants to strike statement of
claim; (b) striking out a notice issued by appellants claiming
indemnity against respondents (defendants), and, (c) striking
out a third party notice issued by appellants claiming indemnity
against respondent (Third party).
The Crown claims damages resulting from failure of the
underground piping and electrical system of a Young Offenders
Institution allegedly constructed for the Canadian Penitentiary
Service. Appellants claim the Court lacks jurisdiction to enter
tain the claim based on an ordinary construction contract not
governed by any "law of Canada" as used in section 101 of the
British North America Act, and that if one gives to section
17(4) of the Federal Court Act an interpretation broad enough
to extend to matters within provincial jurisdiction and which
have not been the subject of valid federal legislation, the section
is beyond the powers of Parliament under section 101.
It was also submitted that if "laws of Canada" in section 101
includes some laws potentially, but not actually, within Domin-
ion competence, it is only laws with respect to matters within
exclusive federal competence, and not laws regarding matters
primarily within provincial competence but which might be
dealt with as a mere incident of federal legislation.
Held, the appeals are dismissed. As to (a), the power of
Parliament is at least broad enough to permit the establishment
of courts for the administration of laws with respect to matters
within federal competence, perhaps broader. However, federal
legislative competence with respect to the subject matter is
sufficient. As to whether the subject matter, rights and liabili
ties of the Crown under a contract for construction of a
penitentiary fall within Dominion legislative competence, there
are three bases on which legislation, if enacted, might be
justified.
(1) It would fall within the power to make laws for the peace,
order and good government of Canada. This is not the reason
for the conclusion herein.
(2) It would fall within the exclusive power of Parliament
under section 91(1A) of the B.N.A. Act to make laws respect
ing the public debt and property. In exercising that authority,
Parliament has enacted the Financial Administration Act. It
could go further, and prescribe what are the rights and reme
dies under contracts with the Crown for payment of money by
the Crown, or for construction of public works.
(3) It would fall within exclusive Parliamentary power to
establish penitentiaries under section 91(28). Legislation might
be validly enacted under the section with respect to rights and
liabilities inter se of the Crown and other parties for construc
tion of a penitentiary.
The suggested limitation of the power under section 101 to
laws which, if enacted, would fall within exclusive Parliamen
tary competence, as opposed to laws which Parliament may
enact as incidental to the exercise of exclusive powers, is not
supported. It was, and is, then, within Parliament's competence
to confer on the Trial Division jurisdiction over the Crown's
claims on the contracts in question. Even if section 17(4) of the
Federal Court Act is limited to civil proceedings in respect of
subject matters with Parliamentary competence, the subsection
is intra vires and the Crown's claim falls well within it.
As to (b) and (c), the notices were given under Rules 1730
and 1726. What is sought to have enforced are rights inter se of
subject and subject arising from their relationship to one
another in connection with a contract for construction. Despite
the association of the claim for indemnity with the claim of the
Crown, it remains a claim by one subject against another
founded on the general laws of property and civil rights appli
cable. Rules 1726 and 1730 are infra vires, but do not increase
the jurisdiction of the Court as defined by the Federal Court
Act. They are merely Rules by which the jurisdiction may be
invoked when the Court has jurisdiction. Section 17(4)(a)
refers only to proceedings in which the Crown claims relief, and
while these claims are closely related to those of the Crown,
convenience in disposing of related matters cannot invest the
Court with a jurisdiction it does not have, or influence the
interpretation of section 17(4)(a) to bring about that result.
Nor can the Court entertain these claims for the purpose of
binding the parties to the conclusion reached by the Court.
In re The Board of Commerce Act, 1919 [1922] 1 A.C.
198; Consolidated Distilleries Limited v. Consolidated
Exporters Corporation Ltd. [1930] S.C.R. 531; Con
solidated Distilleries Limited v. The King [1932]
S.C.R. 419, [1933] A.C. 508; Dominion Building Corpo
ration v. The King [1933] A.C. 533; The Queen v. Murray
[1965] 2 Ex.C.R. 663, [1967] S.C.R. 262; Logan v. The
King [1938] 3 D.L.R. 145; Bank of Montreal v. Royal
Bank of Canada [1933] S.C.R. 311; The Robert Simpson
Montreal Limited v. Hamburg-Amerika Linie Nord-
deutscher [1973] F.C. 1356; Re Privy Council Appeals
[1940] S.C.R. 49 and The Queen v. J. B. & Sons Ltd.
[1970] S.C.R. 220, applied. City of Ottawa v. Shore &
Horwitz Construction Co. Ltd. (1960) 22 D.L.R. (2d) 247;
R. v. Loblaw Groceterias Co. Ltd. (1969) 6 D.L.R. (3d)
225 and Paul Papp Ltd. v. Fitzpatrick [1967] 1 O.R. 565,
discussed.
APPEAL.
COUNSEL:
J. J. Robinette, Q.C., and D. Brown for
appellants.
G. W. Ainslie, Q.C., and I. G. Whitehall for
respondent, The Queen.
J. H. Waite for Lockerbie & Hole Western
Limited.
D. G. Bogdasavich for Attorney General of
Saskatchewan.
SOLICITORS:
Davies, Ward & Beck, Toronto, for
appellants.
Deputy Attorney General of Canada for
respondent, The Queen.
Harradence and Company, Calgary, for
Lockerbie & Hole Western Limited.
Macdonald, Affleck, Ottawa, for Attorney
General of Saskatchewan.
The following are the reasons for judgment
rendered in English by
THURLOW J.: This appeal is from an order of
the Trial Division which
(a) dismissed an application by the appellants
for an order striking out the statement of claim;
(b) struck out a notice issued by the appellants
claiming indemnity against the respondents
(defendants) J. Stevenson & Associates and Ste-
venson, Raines, Barrett, Hutton, Seaton & Part
ners; and
(c) struck out a third party notice issued by the
appellants claiming indemnity against the
respondent (third party) Lockerbie & Hole
Western Limited.
The Court heard, at the same time, an appeal by
the respondents, J. Stevenson & Associates and
Stevenson, Raines, Barrett, Hutton, Seaton &
Partners against part (a) of the above mentioned
order which also dismissed an application by them
for an order striking out the statement of claim.
Besides hearing counsel appearing for the several
parties at the argument, the Court also heard
argument by counsel for the Attorney General of
Saskatchewan who supported the quest of the
appellants for an order striking out the statement
of claim but made no representation with respect
to the subject matter of parts (b) or (c) of the
order under appeal.
In what follows I shall for convenience refer to
the several parties by the first word or words of
their names.
With respect to all three parts of the order
under appeal, the question raised is whether the
Court has jurisdiction to entertain the particular
proceeding. The appellants' initial position is that
the Court does not have jurisdiction to entertain
the Crown's action. Failing that, its position is that
the Court has jurisdiction to entertain the indem
nity claims referred to in parts (b) and (c) of the
order against the other defendants in the action
and the third party, respectively, and should
restore the notices.
The Crown's claim as set out in the statement of
claim is asserted against all the defendants and is
for damages of $1,100,000 arising from the failure
of the underground piping system and the under
ground electrical distribution system of a Young
Offenders Institution alleged to have been con
structed for the Canadian Penitentiary Service
between 1965 and 1969. The basis of claim alleged
against Stevenson and Stevenson, Raines is their
failure to perform a contract with the Crown for
services as consulting architect and engineers in
designing the institution and supervising its con
struction. The Crown claims against McNamara
for its alleged failure to perform a contract for the
construction of the institution and against the
same defendant and Fidelity upon a surety bond
allegedly given to secure the due performance by
McNamara of the construction contract.
The claim for contribution or indemnity asserted
by McNamara and Fidelity against Stevenson and
Stevenson, Raines by notice under Rule 1730 is
based on alleged negligence on the part of Steven-
son and Stevenson, Raines in preparing plans,
drawings and specifications for the construction
contract which were not fit for the job knowing
that the defendant, McNamara, would rely on
them, and on alleged implied covenant by Steven-
son and Stevenson, Raines, to indemnify that com
pany for any damages caused by improper specifi
cations and plans. The notice includes the
following paragraph:
1 I. These defendants claim to be indemnified by the defend
ants, Stevenson and Stevenson, Raines, against liability in
respect to the said construction contract or in breach thereof on
the ground that it was negligently prepared by the defendants,
Stevenson and Stevenson, Raines, on your behalf and on the
behalf of the plaintiff whose agent you were at all material
times.
and it goes on to claim contribution or relief over
against Stevenson and Stevenson, Raines in
respect of the relief claimed by the Crown.
The claim of McNamara and Fidelity asserted
by the third party notice against Lockerbie is
based on alleged negligence or failure on the part
of Lockerbie in carrying out a sub-contract for
installation of plumbing, heating and ventilation in
the institution. The claim is for contribution or
relief over in respect of any liability of McNamara
for damage the Crown may have suffered in rela
tion to the alleged failure of the underground
piping system.
With respect to the claim of the Crown, the
position taken by the appellants both in this appeal
and in that of Stevenson and Stevenson, Raines
was that as a matter of interpretation of the
Federal Court Act, and in particular subsection
17(4) thereof, Parliament has not conferred on the
Federal Court jurisdiction to entertain a claim of
the Crown based on an ordinary construction con
tract not governed by any "law of Canada" as that
expression is used in section 101 of The British
North America Act, 1867, and that if one gives to
subsection 17(4) an interpretation broad enough to
extend to matters governed by laws within the
legislative competence of the province and which
have not been, though they might conceivably be,
the subject of valid federal legislation, the subsec
tion goes beyond the powers of Parliament under
section 101, the provision of subsection 17(4)
being in that case not one "for the better adminis
tration of the laws of Canada" within the meaning
of section 101.
Alternatively, it was submitted that if the
expression "laws of Canada" in section 101
includes some laws potentially within the legisla
tive competence of Parliament but in respect of
which no federal legislation has been passed, it is
only laws with respect to matters within exclusive
federal legislative competence which are included
within the expression "laws of Canada" in section
101 and not laws in respect to matters primarily
within provincial legislative competence but which
might be dealt with as a mere incident of valid
federal legislation. In this connection, as I under
stood the position taken, it was conceded that
Parliament might, by properly framed legislation
applicable to the establishment of penitentiaries,
provide for contracts for their construction but
that that would be incidental, it would not be the
exercise of an exclusive power, and in the mean
time the provinces have dealt with contracts gener
ally and their laws apply to penitentiary contracts.
Counsel for the Attorney General of Saskatche-
wan adopted the first position taken by the appel
lants but submitted with respect to the second that
Parliament does not have power to legislate with
respect to penitentiary contracts.
I shall turn first to the constitutional question.
Section 91, heads lA and 28, and section 101 of
The British North America Act, 1867, to which
references were made, read as follows:
Powers of the Parliament
91. It shall be lawful for the Queen, by and with the Advice
and Consent of the Senate and House of Commons, to make
Laws for the Peace, Order, and good Government of Canada,
in relation to all Matters not coming within the Classes of
Subjects by this Act assigned exclusively to the Legislatures of
the Provinces; and for greater Certainty, but not so as to
restrict the Generality of the foregoing Terms of this Section, it
is hereby declared that (notwithstanding anything in this Act)
the exclusive Legislative Authority of the Parliament of
Canada extends to all Matters coming within the Classes of
Subjects next herein-after enumerated; that is to say,—
IA. The Public Debt and Property.
28. The Establishment, Maintenance, and Management of
Penitentiaries.
And any Matter coming within any of the Classes of Subjects
enumerated in this Section shall not be deemed to come within
the Class of Matters of a local or private Nature comprised in
the Enumeration of the Classes of Subjects by this Act assigned
exclusively to the Legislatures of the Provinces.
101. The Parliament of Canada may, notwithstanding any
thing in this Act, from Time to Time provide for the Constitu
tion, Maintenance, and Organization of a General Court of
Appeal for Canada, and for the Establishment of any addition
al Courts for the better Administration of the Laws of Canada.
The problem, as I see it, is essentially one of
determining what is embraced in the expression
"for the better Administration of the Laws of
Canada" in section 101, or more particularly
whether the enforcement of rights of the Crown
arising under a contract for the construction of a
penitentiary falls within the expression "Adminis-
tration of the Laws of Canada" in that section.
In discussing the breadth of the power conferred
on Parliament by section 101, in In re The Board
of Commerce Act, 1919, and The Combines and
Fair Prices Act, 1919', Viscount Haldane said:
For analogous reasons the words of head 27 of s. 91 do not
assist the argument for the Dominion. It is one thing to
construe the words "the criminal law, except the constitution of
courts of criminal jurisdiction, but including the procedure in
criminal matters," as enabling the Dominion Parliament to
exercise exclusive legislative power where the subject matter is
one which by its very nature belongs to the domain of criminal
jurisprudence. A general law, to take an example, making
incest a crime, belongs to this class. It is quite another thing,
first to attempt to interfere with a class of subject committed
[ 1922] I A.C. 191 at pages 198-199.
exclusively to the Provincial Legislature, and then to justify this
by enacting ancillary provisions, designated as new phases of
Dominion criminal law which require a title to so interfere as
basis of their application. For analogous reasons their Lord
ships think that s. 101 of the British North America Act, which
enables the Parliament of Canada, notwithstanding anything in
the Act, to provide for the establishment of any additional
Courts for the better administration of the laws of Canada,
cannot be read as enabling that Parliament to trench on
Provincial rights, such as the powers over property and civil
rights in the Provinces exclusively conferred on their Legisla
tures. Full significance can be attached to the words in question
without reading them as implying such capacity on the part of
the Dominion Parliament. It is essential in such cases that the
new judicial establishment should be a means to some end
competent to the latter.
This appears to me to be a general expression of
opinion that the scope of the power is limited to
matters within federal legislative competence. A
further expression of opinion as to limits of the
power under section 101 is found in the following
passage from the judgment of Anglin C.J.C. in
Consolidated Distilleries Limited y. Consolidated
Exporters Corporation Ltd. 2 :
While there can be no doubt that the powers of Parliament
under s. 101 are of an overriding character, when the matter
dealt with is within the legislative jurisdiction of the Parliament
of Canada, it seems equally clear that they do not enable it to
set up a court competent to deal with matters purely of civil
right as between subject and subject. While the law, under
which the defendant in the present instance seeks to impose a
liability on the third party to indemnify it by virtue of a
contract between them, is a law of Canada in the sense that it is
in force in Canada, it is not a law of Canada in the sense that it
would be competent for the Parliament of Canada to enact,
modify or amend it. The matter is purely one of exclusive
provincial jurisdiction, concerning, as it does, a civil right in
some one of the provinces (s. 92(13)).
It would, therefore, in our opinion, be beyond the power of
Parliament to legislate directly for the enforcement of such a
right in the Exchequer Court of Canada, as between subject
and subject, and it seems reasonably clear that Parliament has
made no attempt to do so.
I do not find in the later case of Consolidated
Distilleries v. The King' any further limitation or
narrower scope attributed to the section. Lord
Russell of Killowen said:
The question of jurisdiction depends upon a consideration of
the British North America Act, 1867, and the Exchequer Court
Act (R.S. Can., 1927, c. 34). The matters in regard to which
the Provincial legislatures have exclusive power to make laws
include, under the British North America Act, s. 92, head 13—
"Property and civil rights in the province"—and s. 92, head
2 [1930] S.C.R. 531 at pages 535-536.
3 [1933] A.C. 508 at page 520.
14—"The administration of justice in the province, including
the constitution, maintenance and organisation of provincial
courts, both of civil and of criminal jurisdiction, and including
procedure in civil matters in those courts." Sect. 101, however,
provides that: "The Parliament of Canada may, notwithstand
ing anything in this Act, from time to time provide for the ...
establishment of any additional courts for the better adminis
tration of the laws of Canada."
The Exchequer Court of Canada was constituted in the year
1875 in exercise of this power. It was conceded by the appel
lants (and rightly, as their Lordships think) in the argument
before the Board, that the Parliament of Canada could, in
exercising the power conferred by s. 101, properly confer upon
the Exchequer Court jurisdiction to hear and determine actions
to enforce the liability on bonds executed in favour of the
Crown in pursuance of a revenue law enacted by the Parlia
ment of Canada. The point as to jurisdiction accordingly
resolves itself into the question whether the language of the
Exchequer Court Act upon its true interpretation purports to
confer the necessary jurisdiction.
Counsel for the appellants relied on a particular
passage earlier in the judgment of Anglin C.J.C. in
Consolidated Distilleries Limited v. Consolidated
Exporters Corporation Ltd. 4 as indicating a fur
ther limitation on the power under section 101.
After citing section 101, Anglin C.J.C. had said:
It is to be observed that the "additional courts", which Parlia
ment is hereby authorized to establish, are courts "for the
better administration of the laws of Canada." In the collocation
in which they are found, and having regard to the other
provisions of the British North America Act, the words, "the
laws of Canada," must signify laws enacted by the Dominion
Parliament and within its competence. If they should be taken
to mean laws in force anywhere in Canada, which is the
alternative suggested, s. 101 would be wide enough to confer
jurisdiction on Parliament to create courts empowered to deal
with the whole range of matters within the exclusive jurisdic
tion of the provincial legislatures, including "property and civil
rights" in the provinces, although, by s. 92(14) of the British
North America Act,
The administration of justice in the province, including the
constitution, maintenance, and organization of provincial
courts, both of civil and of criminal jurisdiction, and includ
ing procedure in civil matters in those courts
is part of the jurisdiction conferred exclusively upon the provin
cial legislatures. [Underlining added.]
It appears to me that the sentence which I have
underlined is not free from ambiguity, as it seems
to be capable of being read as meaning both laws
enacted by Parliament and laws that it would be
4 [1930] S.C.R. 531 at pages 534-535.
competent for Parliament to enact. Indeed, that
meaning appears to me to be more in harmony
with the sentence already quoted from the same
judgment at page 535 which reads:
While the law, under which the defendant in the present
instance seeks to impose a liability on the third party to
indemnify it by virtue of a contract between them, is a law of
Canada in the sense that it is in force in Canada, it is not a law
of Canada in the sense that it would be competent for the
Parliament of Canada to enact, modify or amend it.
However, assuming that the meaning attributed
to the passage by counsel for the appellants is
correct, it appears to me that what was being
considered was a choice between two views, one
more restrictive and the other much broader than
the view expressed by Viscount Haldane in The
Board of Commerce case. This should, I think, be
attributed to the fact that what was under con
sideration was a claim between subject and subject
and it may have been considered necessary to
adopt a view as broad as the alternative suggested
by counsel in that case (see the portion underlined
in the previous passage from the judgment) in
order to uphold the jurisdiction of the Court to
entertain such a claim.
Two years later, when Consolidated Distilleries
Limited v. The Kings came before the Supreme
Court, the claim being not one between subject
and subject but a claim by the Crown on bonds
given by the appellant, Anglin C.J.C. said:
I never entertained any doubt whatever as to the jurisdiction
of the Exchequer Court in these cases to hear these appeals.
1f authority to hear and determine such claims as these is not
something which it is competent for the Dominion, under s. 101
of the British North America Act, to confer upon a court
created by it for "the better administration of the law of
Canada," I would find it very difficult to conceive what that
clause in the B.N.A. Act was intended to convey.
That the Dominion Parliament intended to confer such juris
diction on the Exchequer Court, in my opinion, is clear beyond
argument, the case probably falling within clause (a); but, if
not, it certainly is clearly within clause (d) of s. 30 of the
Exchequer Court Act.
In the same case, Duff J. (as he then was) said at
page 422:
I find no difficulty in holding that the Parliament of Canada
is capable, in virtue of the powers vested in it by section 101 of
[1932] S.C.R. 419 at page 421.
the British North America Act, of endowing the Exchequer
Court with authority to entertain such actions as these. I do not
doubt that "the better administration of the laws of Canada,"
embraces, upon a fair construction of the words, such a matter
as the enforcement of an obligation contracted pursuant to the
provisions of a statute of that Parliament or of a regulation
having the force of statute. I do not think the point is suscept
ible of elaborate argument, and I leave it there.
When the case reached the Privy Council, the
precise problem resolved was the interpretation to
be put on subsection 30(d) of the Exchequer Court
Act, but what Lord Russell said with regard to it
appears to me to involve necessarily the position
that legislative potential or legislative competence
in relation to the subject matter of the action is the
test of constitutional power under section 101
rather than actual federal legislation validly enact
ed with respect to the subject matter. There was a
revenue statute which referred to bonds, and regu
lations, as well, which referred to bonds, but what
it was sought to enforce was not, as I read the
case, the statute itself or the regulations but the
bonds. Lord Russell said at pages 520-522:
The relevant section is s. 30, which is in the following terms:
"30. The Exchequer Court shall have and possess concurrent
original jurisdiction in Canada (a) in all cases relating to the
revenue in which it is sought to enforce any law of Canada,
including actions, suits and proceedings by way of information
to enforce penalties and proceedings by way of information in
rem, and as well in qui tam suits for penalties or forfeiture as
where the suit is on behalf of the Crown alone; (b) in all cases
in which it is sought at the instance of the Attorney-General of
Canada, to impeach or annul any patent of invention, or any
patent, lease or other instrument respecting lands; (c) in all
cases in which demand is made or relief sought against any
officer of the Crown for anything done or omitted to be done in
the performance of his duty as such officer; and (d) in all other
actions and suits of a civil nature at common law or equity in
which the Crown is plaintiff or petitioner. R.S., c. 140, s. 31."
By virtue of s. 2(a) the Crown means the Crown in right or
interest of the Dominion of Canada.
The learned President held that the Exchequer Court had
jurisdiction, inasmuch as the bonds were required to be given
by a law enacted by the Parliament of Canada in respect of a
matter in which it had undoubted jurisdiction. The subject-
matter of the actions directly arose from legislation of Parlia
ment in respect of excise.
The Chief Justice thought that the cases fell clearly within s.
30(d), and probably also within s. 30(a). Duff J., while suggest
ing a possible doubt as to the application of sub-s. (a), held that
the cases were plainly within sub-s. (d).
Their Lordships are anxious to avoid expressing any general
views upon the extent of the jurisdiction conferred by s. 30,
beyond what is necessary for the decision of this particular
case. Each case as it arises must be determined in relation to its
own facts and circumstances. In regard to the present case their
Lordships appreciate that a difficulty may exist in regard to
sub-s. (a). While these actions are no doubt "cases relating to
the revenue," it might perhaps be said that no law of Canada is
sought to be enforced in them. Their Lordships, however, have
come to the conclusion that these actions do fall within sub-s.
(d). It was suggested that if read literally, and without any
limitation, that sub-section would entitle the Crown to sue in
the Exchequer Court and subject defendants to the jurisdiction
of that Court, in respect of any cause of action whatever, and
that such a provision would be ultra vires the Parliament of
Canada as one not covered by the power conferred by s. 101 of
the British North America Act. Their Lordships, however, do
not think that sub-s. (d), in the context in which it is found, can
properly be read as free from all limitations. They think that in
view of the provisions of the three preceding sub-sections the
actions and suits in sub-s. (d) must be confined to actions and
suits in relation to some subject-matter, legislation in regard to
which is within the legislative competence of the Dominion. So
read, the sub-section could not be said to be ultra vires, and the
present actions appear to their Lordships to fall within its
scope. The Exchequer Court accordingly had jurisdiction in the
matter of these actions. [Emphasis added.]
Reference may also be made to the discussion in
the appendix to the reasons of Jackett C.J. in The
Robert Simpson Montreal Limited v. Hamburg-
Amerika Linie Norddeutscher 6 , as well as to the
reasons of Duff C.J.C. in Reference as to the
legislative competence of Parliament, etc. (Re
Privy Council Appeals) 7 and those of Pigeon J. in
The Queen v. J. B. & Sons Ltd.'
These authorities appear to me to support the
view that the power of Parliament under section
101 is at least broad enough to permit the estab
lishment of courts for the administration of laws
with respect to matters within federal legislative
competence. It appears to me that the power may
be even broader, for a law such as, for example,
The British North America Act, 1867, which in
some respects at least it is not within the compe
tence of Parliament to alter, is plainly a law of
Canada. For present purposes, however, it appears
to me to be unnecessary to go further than to
express my adherence to the view that federal
legislative competence with respect to the subject
matter is sufficient.
6 [1973] F.C. 1356 at page 1364.
[1940] S.C.R. 49 at page 61.
8 [1970] S.C.R. 220 at page 232.
The next question is whether the subject matter
of the rights and liabilities of the Crown under a
contract for the contruction of a penitentiary falls
within the legislative power of Parliament.
On this aspect of the matter there appear to me
to be three bases on which legislation by Parlia
ment, if enacted, might be justified.
The first of these is that it would fall within the
power to make laws for the peace, order and good
government of Canada to make laws prescribing
the rights and liabilities of the Crown in right of
Canada under contracts to which the Crown in
right of Canada is a party. The Crown in right of
Canada is in no sense a provincial concept or
institution. Its property is the property of Canada
as a whole, its rights arising from its contracts
with subjects are rights of Canada as a whole and
its liabilities therefrom are liabilities of Canada as
a whole. They are not matters of a local or private
nature in any province and specific legislation in
respect to them is not within the competence of
any provincial legislature. This is a different thing
from saying that the rights of the Crown in right
of Canada cannot be affected by provincial legisla
tion and must be distinguished therefrom. In cases
such as Dominion Building Corporation v. The
King 9 and The Queen v. Murray 10 the rights of the
Crown in right of Canada have undoubtedly been
affected by valid provincial legislation applicable
generally to the subject matter. But that, as I see
it, is not because Parliament does not have author
ity to legislate in relation to the rights of the
Crown in right of Canada, but because in each
instance Parliament had not legislated in relation
to the rights of the Crown in the particular kind of
situation and the only law on which the Crown's
rights could be founded or by which they could be
determined was the general law relating to the
subject matter of the province in which the matter
arose.
I incline to the view that Parliament has the
authority under the peace, order and good govern
ment power to legislate in respect of the contracts
of the Crown in right of Canada and the rights and
liabilities of the Crown arising under them, but as
this is perhaps the broadest basis of legislative
power that might be invoked and was but suggest
9 [1933] A.C. 533.
10 [1965] 2 Ex.C.R. 663; [1967] S.C.R. 262.
ed in the memorandum of argument of the Attor
ney General of Canada and not further developed
in the course of argument by counsel, I shall not
base my conclusion on it and shall express no
concluded opinion.
The second basis on which legislation might be
justified is that it would fall within the exclusive
power of Parliament under head lA of section 91
to make laws respecting the public debt and prop
erty. In the exercise of that authority Parliament
has enacted the Financial Administration Act,
which provides inter alia (1) for the establishment
of the Consolidated Revenue Fund, consisting of
the aggregate of all public monies that are on
deposit to the credit of the Receiver General; (2)
that payments shall not be made therefrom with
out the authority of Parliament; (3) that no con
tract or other arrangement providing for the pay
ment of money by Her Majesty shall be entered
into or have any force or effect unless a deputy
head or other authorized person certifies that
funds are available; and (4) that the Governor in
Council may make regulations with respect to the
conditions under which contracts may be entered
into and on whose authority and with respect to
the security to be given to Her Majesty to secure
their due performance. I do not think any of these
provisions is open to serious challenge as not being
intra vires as legislation relating to the public
property, that is to say, the Consolidated Revenue
Fund. But it appears to me as well that Parlia
ment, if it saw fit, could go further in legislating in
relation to the public property and prescribe what
are the rights of the parties under contracts with
the Crown calling for the payment of money by
the Crown, or contracts for the construction of
public works, belonging to the Crown in right of
Canada, as well as the remedies of the Crown and
the contractor for the enforcement of such rights
whether by way of damages for breach of such
contracts or otherwise.
The third basis on which legislation might be
justified is that it would fall within the exclusive
power of Parliament under head 28 of section 91
to legislate in relation to the establishment of
penitentiaries. On this it seems to me that Parlia
ment could validly enact that a penitentiary to be
established should conform to prescribed specifica
tions, that a contract entered into by the Crown
for the construction of such a penitentiary should
bind the Crown and the contractor according to
any known system of law or rule specifically pro
vided therefor and what remedies might be pur
sued by either party for breach of the contract.
Indeed it seems to me that it would be perfectly
competent for Parliament to enact, if it saw fit, a
complete code of law relating to contracts between
the Crown and any person or corporation for the
construction of a penitentiary and the security to
be given for due performance thereof and by such
code to define and prescribe the rights and liabili
ties of both arising under such a contract and
under the security required therefor. Whether or
not such a code could validly prescribe the rights
inter se of subjects who are parties to such a
contract or the rights inter se of several subjects
arising out of situations where both had separately
entered into contracts with the Crown for the
performance of separate parts of the required con
struction, it is unnecessary to decide, but it seems
to me that with respect to rights and liabilities
inter se of the Crown and other parties to con
tracts for the construction of a penitentiary coun
sel for the appellants was correct in conceding that
legislation might validly be enacted by Parliament
under head 28.
It appears to me as well that the suggested
limitation of the power under section 101 to laws
which, if enacted, would fall within the exclusive
competence of Parliament, as opposed to laws
which Parliament may enact as incidental to the
exercise of exclusive powers, is not supported by
the authorities. The Consolidated Distilleries case
itself is, as it seems to me, a situation in which the
legislative competence of Parliament in respect of
customs bonds was but an incident of the enact
ment of customs legislation in the exercise of the
power under head 3 of section 91 to raise money
by any mode or system of taxation.
I am accordingly of the opinion that it was and
is within the competence of Parliament to confer
on the Trial Division of this Court jurisdiction over
the Crown's claims on the contracts in question. It
remains to consider whether Parliament has done
so.
Section 17 of the Federal Court Act provides as
follows:
JURISDICTION OF TRIAL DIVISION
17. (1) The Trial Division has original jurisdiction in all
cases where relief is claimed against the Crown and, except
where otherwise provided, the Trial Division has exclusive
original jurisdiction in all such cases.
(2) Without restricting the generality of subsection (1), the
Trial Division has exclusive original jurisdiction, except where
otherwise provided, in all cases in which the land, goods or
money of any person are in the possession of the Crown or in
which the claim arises out of a contract entered into by or on
behalf of the Crown, and in all cases in which there is a claim
against the Crown for injurious affection.
(3) The Trial Division has exclusive original jurisdiction to
hear and determine the following matters:
(a) the amount to be paid where the Crown and any person
have agreed in writing that the Crown or that person shall
pay an amount to be determined by
(i) the Federal Court,
(ii) the Trial Division, or
(iii) the Exchequer Court of Canada;
(b) any question of law, fact, or mixed law and fact that the
Crown and any person have agreed in writing shall be
determined by
(i) the Federal Court,
(ii) the Trial Division, or
(iii) the Exchequer Court of Canada; and
(c) proceedings to determine disputes where the Crown is or
may be under an obligation, in respect of which there are or
may be conflicting claims.
(4) The Trial Division has concurrent original jurisdiction
(a) in. proceedings of a civil nature in which the Crown or
the Attorney General of Canada claims relief; and
(b) in proceedings in which relief is sought against any
person for anything done or omitted to be done in the
performance of his duties as an officer or servant of the
Crown.
(5) The Trial Division has exclusive original jurisdiction to
hear and determine every application for a writ of habeas
corpus ad subjiciendum, writ of certiorari, writ of prohibition
or writ of mandamus, in relation to any member of the
Canadian Forces serving outside Canada.
This section bears little similarity to section 30
of the Exchequer Court Act which was under
consideration in the Consolidated Distilleries case
and in the reasons of Kerwin J. (as he then was) in
Logan v. The King". That section contained three
paragraphs lettered (a), (b) and (c), the common
feature of which was that the subject matter of
each was within federal legislative competence. In
this context the fourth paragraph lettered (d), the
broad wording of which was not expressly limited,
was construed to refer only to actions or suits at
common law or in equity in respect of matters of
the same kind, that is to say, matters in respect of
which Parliament had legislative competence.
I see but little, if any, use for the interpretation
put upon that section as an aid to interpreting
section 17 of the Federal Court Act and in particu
lar subsection (4) of that section. But it appears to
me that even if subsection (4) is limited, as I think
it is, to proceedings of a civil nature in respect of
subject matter within the legislative competence of
Parliament, whether such an interpretation is
reached by a process of reasoning similar to that of
the Consolidated Distilleries case, or because of
the wording of section 3 of the Act and the
definition of "laws of Canada" in section 2, or for
any other reason, the subsection is intra vires and
the claim of the Crown in the present case falls
well within it.
The appeals against part (a) of the order of the
Trial Division in my opinion therefore fail.
I turn next to the attacks on parts (b) and (c) of
the order under appeal. It appears to me that they
can be dealt with together. The notices to which
parts (b) and (c) refer were given under Rules
1730 and 1726 respectively. These rules provide:
Rule 1730. Where a defendant claims to be entitled to contri
bution or indemnity against any other defendant to the action,
a notice may be issued and the same procedure shall be
adopted, for the determination of such questions between such
defendants, as would be issued and taken against such other
defendant, if he were a third party.
Rule 1726. (I) Where a defendant claims to be entitled to
contribution or indemnity from, or to relief over against, any
person not a party to the action (hereinafter called the "third
party"), he may file a third party notice. (Form 54).
" [1938] 3 D.L.R. 145.
(2) The notice together with a copy of the statement of
claim or declaration shall be served personally on the third
party within the time limited for filing the defence.
The only difference in the nature of the claims
involved in the notices referred to in parts (b) and
(c) appears to be that the claim involved in the
notice to Stevenson and Stevenson, Raines sounds
in tort or implied contract between McNamara
and Stevenson and Stevenson, Raines, while that
involved in the notice to Lockerbie sounds in con
tract between McNamara and Lockerbie. In both
instances, however, what it is sought to have
enforced are the rights inter se of subject and
subject arising from their relationship to one
another in connection with a contract or contracts
for construction work. In both cases the claim for
indemnity is closely associated with or interrelated
to the claim of the Crown in the action, but despite
this association or relationship it remains a claim
by one subject against another founded on the
general laws of property and civil rights applicable
in the circumstances.
Counsel for the Crown, arguing in support of
the restoration of the notice referred to in part (b)
of the order under appeal, submitted that the
matter of the rights of McNamara and Stevenson
and Stevenson, Raines inter se arising from con
tracts with the Crown for the construction of a
public work or a penitentiary could be the subject
of valid federal legislation, and he went on to
contend that the provision of subsection 17(4) of
the Federal Court Act was broad enough to
embrace such a claim and if not broad enough to
empower the Court to enforce it, was at least
broad enough to enable the Court to entertain the
claim for the purpose of binding the parties to it by
the Court's findings. He went on to submit that
Rules 1726 and 1730 are intra vires and permit
the Court to entertain the claims.
I think it is clear that Rules 1726 and 1730 are
intra vires, but they do not increase in any way the
jurisdiction of the Court as defined by the Federal
Court Act. They are merely Rules by which the
jurisdiction may be invoked when the Court has
jurisdiction. See Consolidated Distilleries Limited
v. Consolidated Exporters Corporation Ltd. 12 and
Bank of Montreal v. Royal Bank of Canada 13
Moreover, while section 17 of the Federal Court
Act differs widely from the former provisions of
the Exchequer Court Act, it appears to me that
the jurisdiction conferred on the Court is still
clearly distinguished as being in relation to pro
ceedings in which the Crown is involved as claim
ant or defendant or in which its interests may be
affected and proceedings between subject and sub
ject. When the Court is authorized to entertain
proceedings of the latter class, the statute express
ly says so. See sections 20, 22, 23 and 25. In my
view, subsection 17(4)(a) refers only to proceed
ings in which the Crown puts forward a claim for
relief and nothing in the wording of that subsec
tion extends to the claims of McNamara and
Fidelity against Stevenson and Stevenson, Raines,
or Lockerbie. Each of these claims is in my view a
separate claim from that of the Crown and a
proceeding to enforce it, whether by separate
action or by third party procedure under rules
permitting it, is a separate proceeding from that
brought by the Crown to enforce its claim. It may
be conceded that these claims are closely related to
or interwoven with the claims of the Crown in the
action. There is also a sense in which it can be said
that these claims arise out of the claims of the
Crown. These features suggest that it would be
convenient to have the matters arising on all the
claims disposed of at the same time following a
single trial of the issues common to all. But, while
convenience of this sort might have its place if
there were a discretion to be exercised whether to
entertain the claims or °not, in my opinion, it
cannot serve either to invest the Court with a
jurisdiction it does not have or to influence the
interpretation of subsection 17(4)(a) so as to bring
about that result.
With respect to the alternative submission that
the Court could entertain these claims for the
purpose of binding the parties to the conclusion
reached by the Court even if the Court cannot
12 [1930] S.C.R. 531.
13 [1933] S.C.R. 311.
enforce the claims, I know of no authority which
would support such a contention where the Court
is without jurisdiction to adjudicate upon and
enforce the claim of the one party against the
other, and I am not persuaded that Paul Papp Ltd.
v. Fitzpatrick: F. A. Woolworth Co. Ltd., Third
Party 14 , on which counsel relied, is authority that
a court would entertain the claim for such a
purpose alone when it has jurisdiction to adjudi
cate and enforce it as between the parties.
I would dismiss both appeals with costs.
* * *
The following are the reasons for judgment
rendered in English by
RYAN J.: The matters in respect of which this
appeal is brought are stated in the reasons for
judgment of my brother Thurlow J., in which he
also refers to the appeal by the respondents, J.
Stevenson & Associates and Stevenson, Raines,
Barrett, Hutton, Seaton & Partners which we
heard at the same time. Thurlow J. defines the
questions in issue in both appeals and summarizes
the relevant allegations set forth in the pleadings.
In these reasons, I will use the same method of
referring to the parties as he does.
I shall consider, first, the appeals in so far as
they relate to the dismissal of the applications for
an order striking out the statement of claim. There
was an application by the appellants, McNamara
and Fidelity, for an order striking out the state
ment of claim in so far as it relates to the claim by
the Crown in the right of Canada for damages
against McNamara for its alleged failure to per
form a contract for the construction of a Young
Offenders Institution for the Canadian Penitentia
ry Service and against McNamara and Fidelity on
a surety bond allegedly given to assure the due
performance by McNamara of the construction
project. There was also an application by Steven-
son and Stevenson, Raines for an order striking
out the statement of claim in so far as it relates to
the claim against Stevenson and Stevenson, Raines
for their alleged failure to perform a contract with
the Crown for services as consulting architects and
engineers in designing the Young Offenders Insti-
1^ [1967] 1 O.R. 565.
tution and in supervising its construction; the dis
missal of this application is the subject matter of
the other appeal which we heard at the same time.
The appellants McNamara and Fidelity submit
ted that the Trial Division of the Federal Court of
Canada lacks jurisdiction to entertain the action;
Stevenson and Stevenson, Raines made the same
submission in their appeal.
The action is maintainable, if maintainable at
all, by virtue of paragraph 17(4)(a) of the Federal
Court Act 15 , which reads:
(4) The Trial Division has concurrent original jurisdiction
(a) in proceedings of a civil nature in which the Crown or
the Attorney General of Canada claims relief .....
Under section 2 of the Act, " `Crown' means Her
Majesty in right of Canada".
It was submitted that paragraph 17(4)(a) falls
outside the scope of legislative authority vested in
Parliament by section 101 of the British North
America Act, 1867. Section 101 provides:
101. The Parliament of Canada may, notwithstanding any
thing in this Act, from Time to Time provide for the Constitu
tion, Maintenance, and Organization of a General Court of
Appeal for Canada, and for the Establishment of any addition
al Courts for the better Administration of the Laws of Canada.
The Federal Court Act continued the "court of
law, equity and admiralty in and for Canada now
existing under the name of the Exchequer Court of
Canada ... under the name of the Federal Court
of Canada ...." 16 The Court was continued "as
an additional court for the better administration of
the laws of Canada", and, as my brother Thurlow
J. has indicated, the term "laws of Canada" is
defined in section 2 as having "the same meaning
as those words have in section 101 of the British
North America Act, 1867".
It was nonetheless argued that paragraph
17(4)(a) of the Federal Court Act is ultra vires
because, read literally, it seeks to confer upon the
Trial Division of the Court a jurisdiction in civil
actions that might not in some cases involve
15 R.S.C. 1970 (2d Supp.), c. 10.
16 R.S.C. 1970 (2d Supp.), c. 10, section 3.
administration of the laws of Canada, and it was
submitted that the section should be read in this
way. I have, however, no difficulty in reading
paragraph 17(4)(a) as being, by implication,,lim-
ited to proceedings of a civil nature for the better
administration of the laws of Canada. The para
graph must be construed in the light of section 3 of
the Act and the definition of "laws of Canada" in
section 2' 7 .
The critical question then is whether the causes
of action asserted in the statement of claim involve
administration of the laws of Canada and thus fall
within paragraph 17(4)(a) of the Act. It was said
that they are simply claims for breach of contract.
Recourse to federally enacted law is not, it was
argued, necessary for their decision, nor were the
contracts involved required by federal legislation.
The meaning of the words "laws of Canada", as
used in section 101 of the British North America
Act, 1867, was considered by the Privy Council in
Consolidated Distilleries Limited v. The King 18 .
Speaking with particular reference to paragraph
30(d) of the Exchequer Court Act, Lord Russell of
Killowen said at page 522:
Their Lordships, however, do not think that sub-s. (d), in the
context in which it is found, can properly be read as free from
all limitations. They think that in view of the provisions of the
three preceding sub-sections the actions and suits in sub-s. (d)
must be confined to actions and suits in relation to some subject
matter, legislation in regard to which is within the legislative
competence of the Dominion. So read, the sub-section could not
be said to be ultra vires, and the present actions appear to their
Lordships to fall within its scope.
In Logan v. The King 19 , Kerwin J. (as he then
was) said at page 155, with reference to Con
solidated Distilleries v. The King:
The effect of this judgment is that we are required to
determine in this appeal whether the case against the appellant
is in relation to some subject matter in regard to which
Parliament is empowered to legislate.
Kerwin J. dissented on the merits of that case, but
the force of the quoted passage, as it relates to the
point under present consideration, remains.
u See R. v. Loblaw Groceterias Co. Ltd. (1969) 6 D.L.R.
(3d) 225, particularly at page 233.
18 [1933] A.C. 508.
19 [1938] 3 D.L.R. 145.
The action by the Crown against McNamara is
an action asserting a claim arising out of a con
tract for the construction of a penitentiary: I have
no doubt that the Young Offenders Institution,
which was the subject matter of the contract, is a
penitentiary within the meaning of that word in
head 28 of section 91. Parliament has exclusive
jurisdiction under this head to legislate in relation
to "the establishment, maintenance, and manage
ment of penitentiaries". The construction of a
penitentiary is a stage in its establishment. Parlia
ment has jurisdiction to legislate in relation to this
aspect of penitentiary establishment, including
jurisdiction to legislate in relation to contracts for
the construction of penitentiaries. This jurisdiction
extends to fidelity bonds for the proper perform
ance of such contracts, including the sort of bond
involved in the claim by the Crown against
McNamara and Fidelity. It extends as well to
jurisdiction to legislate in relation to contracts for
architectural and engineering services in connec
tion with penitentiary construction.
Thus the action by the Crown against
McNamara, Fidelity, Stevenson, and Stevenson,
Raines is an action for the better administration of
the laws of Canada.
If I am in error in my view that the construction
of a penitentiary is an aspect of its establishment
as the term "establishment" is used in head 28 of
section 91, I am nonetheless of opinion that federal
legislative jurisdiction in relation to contracts for
the construction of penitentiaries would be sup
portable under head 1 A of section 91 as legislation
in relation to public property 20 .
For these reasons I agree that the appeals
against that part of the order of the Trial Division
dismissing the applications to strike out the state
ment of claim should fail.
I also agree with my brother Thurlow J. in
respect of the disposition of the appeal from the
order of the Trial Division in so far as it struck out
a notice issued by the appellants claiming indemni
ty against the respondents (defendants) Stevenson
and Stevenson, Raines, and also from that part of
the order which struck out a third party notice
20 See City of Ottawa v. Shore & Horwitz Construction Co.
Ltd. (1960) 22 D.L.R. (2d) 247.
issued by the appellants claiming indemnity
against the respondent (third party) Lockerbie,
and with his reasons.
The appeals should, I agree, be dismissed with
costs.
* * *
The following are the reasons for judgment
rendered in English by
SMITH D.J.: I have read the reasons for judg
ment of Thurlow J. and concur in his conclusions
that both appeals should be dismissed with costs.
I am also in complete agreement with the con
clusions of law enunciated in Thurlow J.'s reasons,
including his opinion "that it was and is within the
competence of Parliament to confer on the Trial
Division of this Court jurisdiction over the
Crown's claims on the contracts in question." 1
prefer however to rest my concurrence in this
opinion simply on the exclusive power given to
Parliament by head 28 of section 91 of the British
North America Act to legislate on all matters
relating to the "Establishment, Maintenance, and
Management of Penitentiaries". The legislative
power of Parliament under head 28 is, in my
opinion, quite clear, in relation to the Crown's
claims in this action, and is adequate for the
conclusion quoted above.
What I have said is not to be taken as indicating
that I disagree with what Thurlow J. said concern
ing the effect of the "Peace, Order, and Good
Government" provision in the opening words of
section 91 of the B.N.A. Act or head IA of that
section, which gives exclusive power to Parliament
to legislate on all matters relating to "The Public
Debt and Property". I am saying only that for my
part I should prefer not to rest my conclusion on
either of those provisions, leaving the scope of their
effect open for further consideration.
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.