T-838-75
Canadian Pacific Ltd. and bean Ships Limited
(Plaintiffs)
v.
Quebec North Shore Paper Company and Quebec
and Ontario Transportation Company Limited
(Defendants)
Trial Division, Addy J.—Montreal, June 2;
Ottawa, June 13, 1975.
Jurisdiction—Action for damages—Contract for construc
tion and operation of rail car marine terminal—Defendant
"Q&O" and plaintiff "I" contracting with plaintiff "CP" to
operate rail transporter for CP—Failure of defendant to con
struct within specified time—Action for breach of contract—
Application by defendant to strike out statement of claim for
want of jurisdiction—Whether purely local undertaking—
Railway Act, R.S.C. 1970, c. R-2, ss. 91, 94, 119(5), 124(3),
126(7) and 304—British North America Act, 1867, s.
92(10)(a)—Federal Court Act, ss. 22, 23.
Defendants contracted to construct and operate a rail car
marine terminal, to be ready by May 15, 1975. Defendant
"Q&O", and plaintiff "I", contracted to form a joint venture to
operate the transporter, and, by contract, defendant Q&O and
plaintiff I agreed with plaintiff CP to operate the transporter
for CP. All parties agree that the contracts should be con
sidered as part of a scheme in which they all were interested.
Plaintiffs claim damages, alleging default in failing to perform
within the time stipulated. Defendants maintain that the
subject-matter was only within Quebec, and thus, a local
undertaking. Defendants further allege that this was not a case
of extension of a railway line, but of extension of a railway line
by means of a shipping line which was purely local, and move
to strike out the statement of claim for want of jurisdiction.
Held, dismissing the motion, the Court has jurisdiction. The
words "works and undertakings ... extending beyond a limit of
a province ..." in section 23 of the Federal Court Act are
identical to those in section 92(10)(a) of the British North
America Act. Jurisdiction must be taken to have been granted
by Parliament to the Court. The Radio case has held that an
"undertaking" is "not a physical thing, but is an arrangement
under which ... physical things are used". In this light, it is
clear from the contracts that, in addition to references to the
general intention of the parties this was to be a joint venture to
transport newsprint from Baie Comeau to the United States;
the undertaking itself of its very nature was one extending
beyond provincial limits. General railway rates were to apply
throughout, and all newsprint and general cargo were to be
solicited by CP and carried on one standard CP through bill of
lading.
Luscar Collieries Limited v. McDonald [1927] A.C. 925
and British Columbia Electric Railway Company Limited
v. Canadian National Railway Company [1932] S.C.R.
161, considered. The Queen v. Board of Transport Com
missioners [1968] S.C.R. 118, distinguished. MacKenzie
Coach Lines v. S.M.T. (Eastern) Limited [1951] S.C.R.
887 and In re the Regulation and Control of Radio
Communication in Canada [1932] A.C. 304, followed.
MOTION.
COUNSEL:
C. R. O. Munro, Q.C., for plaintiffs.
L. A. Poitras for defendants.
SOLICITORS:
Gadbois, Joannette & Durand, Montreal, for
plaintiffs.
Laing, Weldon, Courtois, Clarkson, Parsons,
Gonthier & Tétrault, Montreal, for
defendants.
The following are the reasons for judgment
rendered in English by
ADDY J.: The defendants in this action (herein-
after referred to respectively as "QNS" and
"Q&O") had previously obtained leave to file a
conditional appearance and have now launched the
present application to strike out the statement of
claim for want of jurisdiction on the part of the
Federal Court of Canada to hear the action.
Although the notice of motion does not state so, I
am considering the notice of motion as amended to
include a request to dismiss the action since the
motion was argued by both parties on that
assumption.
The action is principally one for damages
amounting to approximately $36,000,000. The fol
lowing allegations were made by the plaintiffs
(hereinafter referred to respectively as "CP" and
"Incan Ships") in their statement of claim:
(a) that by contract in writing, dated January
22, 1974, as amended by letter of the same date,
defendants agreed, inter alia, to construct and
operate a rail car marine terminal at Baie
Comeau and to have the terminal available for
use by a rail transporter by May 15, 1975;
(b) that pursuant to the said contract, dated
January 22, 1974, defendant Quebec and
Ontario Transportation Company Limited and
plaintiff Incan Ships Limited agreed to form a
joint venture for the purpose, inter alia, of oper
ating the rail transporter for the transportation
of newsprint from Baie Comeau to the City of
Quebec;
(c) that by contract, dated February 13, 1974,
defendant Quebec and Ontario Transportation
Company Limited and plaintiff Incan Ships
Limited formed such a joint venture;
(d) that by contract in writing, dated March 26,
1974, defendant Quebec and Ontario Transpor
tation Company Limited and plaintiff Incan
Ships Limited agreed with plaintiff Canadian
Pacific Limited to operate such rail transporter
for and on behalf of plaintiff Canadian Pacific
Limited in accordance with the contract, dated
January 22, 1974.
The claim therefore involves three contracts, one
of the 22nd of January 1974 (hereinafter referred
to as the "heads of agreement" contract) between
all parties to the present action, a second contract
of the 13th of February 1974 (hereinafter referred
to as the "joint venture agreement" contract) be
tween Q&O and Incan Ships and, finally, the
contract of the 26th of March 1974 between both
parties to the joint venture agreement as parties of
the first part and CP as party of the second part.
It was common ground between counsel at the
hearing that, for the purposes of this motion, the
contracts were not to be considered as severable
but should be considered as forming part of a
whole scheme or enterprise in which all the parties
were interested. The plaintiffs, in addition to dam
ages as aforesaid, claim that the defendants are in
default by reason of their failure to perform their
obligations within the time mentioned in the heads
of agreement contract and that all three contracts
must be considered as annulled, voided and ter
minated by reason of the alleged default.
Counsel for the defendants applicants argued
that the whole scheme involved only transportation
of railway cars by water to carry newsprint and
general cargo between two points on the North
Shore of the St. Lawrence River, that is, between
Baie Comeau and Quebec City. The argument was
that the scheme, as agreed upon in the contracts,
was essentially one for the construction of a termi
nal, of warehouse facilities and of general cargo
and maintenance facilities at Baie Comeau and for
a terminal at Quebec City and for the crewing and
operation of the rail transporter, between the two
cities, for the purpose of transporting the above-
mentioned cargo. In other words, it was urged
upon the Court that the entire subject-matter was
situated strictly within the limits of the Province of
Quebec and that it constituted in its entirety a
local undertaking, solely within the jurisdiction of
the Province of Quebec, and that as a result, the
Canadian Parliament itself would not have juris
diction over the matter and, therefore, could not
grant it to the Federal Court even if it purported
to do so.
Finally, counsel for the defendants insisted that
this was not a case of the extension of a railway
line but rather the case of the extension of a
railway by means of a shipping line, which line
was purely local.
Counsel agreed that CP had not obtained per
mission. by Act of Parliament to extend its service
by rail east of Quebec and the north shore of the
St. Lawrence River, and also that it would be
obliged to obtain such authorization before doing
so. It is clear, however, that no such authorization
is required for CP to furnish transportation service
by water either alone or jointly with others to any
place and that, if the place is within Canada, then,
pursuant to section 304 of the Railway Act' the
provisions of that Act respecting tolls and tariffs
would apply to such transportation. Section 304
reads as follows:
304. The provisions of this Act, in respect of tolls, tariffs and
joint tariffs, so far as deemed applicable by the Commission,
extend and apply to the traffic carried by any railway company
by sea or by inland water, between any ports or places in
Canada, if the company owns, charters, uses, maintains or
works, or is a party to any arrangement for using, maintaining
or working vessels for carrying traffic by sea or by inland water
between any such ports or places.
The defendants insisted that the sole reason for
the scheme of extending service by means of a
R.S.C. 1970, c. R-2.
marine rail transporter was to allow the tariffs and
tolls of the Railway Act to extend to the shipping
line. The plaintiffs stated that they were not rely
ing in any way on the navigation and shipping
powers of the British North America Act or on
section 22 of the Federal Court Act pertaining to
its admiralty jurisdiction, but would rely entirely
on section 23 of the Federal Court Act and on the
constitutional basis that the undertaking consti
tutes an undertaking extending beyond the limits
of the Province as contemplated by section
92(10)(a) of the British North America Act.
As to this particular aspect of the case the
defendants maintained by reason of sections 91,
94, 119(5), 124(3) and 126(7) of the Railway Act
that, unless the railway line is authorized (which is
not the case here) by Special Act to construct
beyond its established terminus or to amalgamate
with, lease or acquire another railway undertaking
or unless running rights are obtained under section
94, the railway cannot be considered as extended
at law and that, as a result in the present case, the
railway must therefore be envisaged as terminat
ing at Quebec on the north shore of the St. Law-
rence River.
Counsel for the applicant argued that this case
was not one where a branch railway line forms
part of a railway system connecting one province
with another as was the situation in the case of
Luscar Collieries Limited v. McDonald 2 but that
the mere fact that the shipping line made physical
connection with CP at Quebec was not sufficient
to bring the marine transporter, or any portion of
it, within the jurisdiction of Parliament and cited
in support of this argument the case of The British
Columbia Electric Railway Company Limited v.
Canadian National Railway Company 3 where
Smith J. stated at page 170:
The mere fact that the Central Park line makes physical
connection with two lines of railway under Dominion jurisdic
tion would not seem to be of itself sufficient to bring the
Central Park line, or the portion of it connecting the two
federal lines, within Dominion jurisdiction.
2 [1927] A.C. 925.
3 [1932] S.C.R. 161.
Counsel also relied on the statement in the case
of The Queen v. Board of Transport
Commissioners 4 for the proposition that jurisdic
tion depends entirely on the character of the line
and not on the character of the service. I do not
feel, however, that this case is authority for the
proposition that jurisdiction depends entirely on
the character of the line. The statement at page
127 of the report is quite illuminating:
In the present case, the constitutional jurisdiction depends on
the character of the railway line not on the character of a
particular service provided on that railway line. The fact that
for some purposes the Commuter Service should be considered
as a distinct service does not make it a distinct line of railway.
From a physical point, of view the Commuter Service trains are
part of the overall operations of the line over which they run. It
is clearly established that the Parliament of Canada has juris
diction over everything that physically forms part of a railway
subject to its jurisdiction.
This case is authority for the simple proposition
that the mere fact that a commuter service may be
considered as a distinct service does not make it
necessarily a distinct line of railway.
The British Columbia Electric case (supra)
stands for the proposition that the mere fact that a
company operates a line which might form part of
a system over which the Parliament of Canada
would have jurisdiction does not make that com
pany subject to the jurisdiction of the Parliament
of Canada for another line which is not part and
parcel of an interprovincial system and the British
Columbia Electric case must be read with this in
mind.
The words "... works and undertakings ...
extending beyond a limit of a province ..." as used
in section 23 of the Federal Court Act, are exactly
the same words as used in subsection 92(10) (a) of
the British North America Act and therefore if
Parliament by that subsection does have jurisdic
tion in the present case, it is evident that the
jurisdiction must be taken to have been granted by
Parliament to the Federal Court since the former
chose to use the precise words on which its legisla
tive power is founded.
The case of MacKenzie Coach Lines v. S.M.T.
4 [1968] S.C.R. 118.
(Eastern) Limited' deals quite specifically with the
meaning of the word "undertaking" in section
92(1)(a) of the British North America Act. In this
regard, Grant J. at page 921 of the report stated:
What is an "undertaking"? The early use of the word was in
relation to services of various kinds of which that of the carrier
was prominent. He would take into his custody or under his
care either goods or persons, and he was said then to have
"assumed" or "undertaken", on terms, their carriage from one
place to another; to that might be added the obligation to
accept and carry, drawn on himself by a public profession: and
the service, together with the means and organization, con
stituted the undertaking. This is generalized for the purposes of
head 10 by Lord Dunedin in the Radio case: " `Undertaking' is
not a physical thing but is an arrangement under which of
course physical things, are used", language used by way of
contrasting "works" with "undertakings". But it is or can be of
an elastic nature and the essential consideration in any case is
its proper scope and dimensions.
One characteristic of carriage is the entirety of the individual
service; that is to say, from point A to point B: to be broken
down at provincial boundary lines destroys it and creates
something quite different: even a transprovincial movement is
an inseverable part of a larger entity.
Estey J., at page 934, stated:
In the Radio case [1932] A.C. 304 at 315, Viscount Dune-
din, in referring to s. 92(10)(a), stated:
"Undertaking" is not a physical thing, but is an arrange
ment under which of course physical things are used.
The appellant's organization under which he operates his bus
service is, within the foregoing, an arrangement connecting
New Brunswick and Nova Scotia. This arrangement, together
with his equipment, constitutes a works and undertaking within
the meaning of s. 92(10)(a).
While Locke J., at page 938 of the same report,
said:
The word "undertaking" is, in the absence of a statutory
definition, and there is none, to be given its commonly accepted
meaning as being a business undertaking or enterprise and, in
my opinion, it is beyond doubt that the appellant's business
falls within this description. I think it equally clear that it
connects the province of New Brunswick with another of the
provinces and extends beyond the limits of the province. It is
not a physical connection that is referred to (In re the Regula
tion and Control of Radio [1932] A.C. 304 at 315).
In the light of these principles, one must now
consider the specific provisions of the three
agreements.
[1951] S.C.R. 887.
The relevant clause of the heads of agreement
contract reads as follows:
HEADS OF AGREEMENT
The following Heads of Agreement are set out as an agreement
for the operation of rail transporters to transport newsprint of
Quebec North Shore Paper Company between Baie Comeau,
Quebec, and Quebec City, Quebec, for furtherance to New
York City, New York, and Chicago, Illinois, and other destina
tions, and to transport general cargo to and from points on the
North Shore of the St. Lawrence, and to define the obligations
and responsibilities of Quebec North Shore Paper Company,
Canadian Pacific Limited, Quebec & Ontario Transportation
Company, Limited and Incan Ships Limited in the implemen
tation of this project.
1.01 The parties hereto have a common interest in the
implementation of rail transporters to transport newsprint of
QNS from Baie Comeau, Quebec to Quebec City, Quebec for
furtherance to New York City, New York and Chicago, Illinois
or other destinations which are mutually acceptable via CP and
its connecting carriers and to transport general cargo to. and
from Baie Comeau, Quebec and other points on the North
Shore.
2.01 Forthwith upon the execution of these Heads of Agree
ment Q&O and Incan Ships shall form a Joint Venture where
by each of them shall share equally all expenses and losses and
shall participate equally in all receipts and profits. All assets of
the Joint Venture will be deemed to be owned equally and in
undivided ownership by Q&O and Incan Ships.
4.01 CP undertakes and agrees to carry a minimum of 310,000
tons of newsprint shipped by QNS from on-board the rail
transporter at Baie Comeau to the New York News pressrooms
in Manhattan and Brooklyn, New York City, and to the
Chicago Tribune's rail siding in Chicago, during each year of a
15-year period commencing on the Commencement Date, sub
ject to the provisions of 7.02, Section 10 and 11.01 hereof. CP
also undertakes to carry general cargo to and from points on
the North Shore during the same period.
4.02 Rail routings beyond Quebec City to destinations in the
greater New York City, Chicago and other areas as provided in
7.02 shall be the responsibility of CP. Such routings must never
be detrimental to the efficient delivery of newsprint.
4.08 Until such time as the New York Daily News centralizes
its press operations at a location that can accept direct rail
delivery, CP will arrange, , for the benefit of QNS, for ware
housing in New York City of a minimum of 11,000 tons of
newsprint and for the unloading of rail cars and the cartage of
newsprint to the press buildings at Manhattan, Brooklyn and
Newspoint in New York City, all in a manner to satisfy the
requirements of QNS, including the maintenance of inventories
of 5000 tons of newsprint at each of the press buildings in
Manhattan and Brooklyn. The charge to QNS in the first
twelve months following the Commencement Date for such
services shall not exceed $4.25 per ton, as provided for in 8.05.
7.01 QNS undertakes and agrees to ship a minimum of 310,-
000 tons of newsprint by the rail transporter from Baie Comeau
to Quebec City for rail delivery beyond, during each year of a
15-year period commencing on the Commencement Date, sub
ject to the provisions of Section 10 and 11.01 hereof.
7.03 QNS shall pay a maximum of $29.83 per ton of newsprint
shipped from Baie Comeau to New York City in the first
twelve months after the Commencement Date, as follows:—
Net total to CP for transportation and warehous
ing and cartage in New York City, as detailed in
8.06 $27.20
To the Joint Venture for the use of rail cars as
provided in 2.06 (maximum) 2.63
$29.83
8.01 All newsprint rates under this Agreement shall be pub
lished in the appropriate railway tariffs as water competitive
rates from Baie Comeau to New York City and Chicago in
non-railway-owned equipment at 140,000 pounds minimum
weight.
11.01 The first twelve (12) months following the Commence
ment Date is recognized as a phase in period and consequently
the obligation on the part of QNS to ship minimum quantities
of newsprint shall be decreased to the extent that delays may
occur in any portion of the system from the Baie Comeau
warehouse to the press buildings in New York City or Chicago
and that shipments may be reduced through the depletion of
the inventories in New York City.
As to the joint venture agreement, the following
paragraphs are quite relevant, namely, paragraphs
1.3 and 6.1:
1.3 The purpose of the Joint Venture is to operate a rail
transporter, to be owned equally by Q&O and Incan, for the
transportation of rail cars carrying newsprint and general
cargo, as an extension of CP's rail system, as contemplated in
the Heads of Agreement, and do all things related or incidental
thereto.
6.1 The present Agreement is intended to supplement the
Heads of Agreement and not to replace any part thereof, and
all the terms and conditions of the Heads of Agreement,
including without limitation those relating to the Joint Venture,
shall remain in full force and effect.
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.