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A-607-80
McAllister Towing & Salvage Ltd. (Plaintiff) (Respondent)
v.
General Security Insurance Company of Canada (Defendant) (Appellant)
Court of Appeal, Pratte and Ryan JJ. and Lalande D.J.—Montreal, June 18 and 19, 1981.
Practice — Motion to strike pleadings — Appeal from Trial Division decision striking out a third party notice — Maritime law — Defendant contracted with plaintiff to salvage cargo which belonged to third party — Third party cause of action based on fact that no contract of insurance existed between defendant and third party — Trial Division held that the third party claim did not arise out of a contract of marine insurance — Whether the Court has jurisdiction pursuant to s. 22(2)(r) of the Federal Court Act — Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, ss. 2, 22(1), 22(2)(j),(r) — The Admiralty Act of 1891, S.C. 1891, c. 29, s. 4 — Federal Court Rule 1729(2).
Appeal from a judgment of the Trial Division which struck out a third party notice filed by the defendant against the owner of a salvaged cargo. The main action was brought by plaintiff to enforce an award for salvage of cargo and is directed against the defendant because of the latter's failure to honour its undertaking to pay for the salvage services as determined by the award. The defendant had issued a policy on this cargo but it was held in litigation that the owner of the cargo was not insured under that policy. The Trial Division held that the third party cause of action, if any, was not within the Court's jurisdiction since it did not arise out of a contract of marine insurance. The question is whether the Court has jurisdiction pursuant to section 22(2)(r) of the Federal Court Act.
Held, the appeal is dismissed. The third party claim is not a claim "arising out" of a contract of marine insurance or "in connection with" such a contract. The only relation that can be detected between the claim and marine insurance is that the claim arises from the fact that the defendant misinterpreted the effect of an insurance certificate it had issued. Furthermore, the claim cannot be regarded as a claim for salvage within the meaning of section 22(2)(j) of the Federal Court Act since it arises from facts which took place a long time after the salvage.
Per Lalande D.J. dissenting: The expression "in connection with" has a wide implication. In this case, it embraces the contextual relationship between the policy of marine insurance issued by the defendant at the request of the third party and the undertaking to pay the salvage award that the defendant gave to the plaintiff for the benefit of the third party (i.e. the owner of the cargo). Furthermore, this Court's jurisdiction falls under the general maritime jurisdiction conferred on it by section 22(1) of the Federal Court Act.
Green Forest Lumber Ltd. v. General Security Insurance Co. of Canada [1977] 2 F.C. 351; affd. [1978] 2 F.C. 773; [1980] 1 S.C.R. 176, referred to. Tropwood A.G. v. Sivaco Wire & Nail Co. [1979] 2 S.C.R. 157, referred to.
APPEAL.
COUNSEL:
Jean Brisset, Q.C. for plaintiff (respondent). Vincent M. Prager for defendant (appellant).
William V. Sasso for third party (respond- ent).
SOLICITORS:
Brisset, Bishop, Davidson & Davis, Montreal, for plaintiff (respondent).
Stikeman, Elliott, Tamaki, Mercier & Robb, Montreal, for defendant (appellant).
Rose, Persiko, Arnold, Gleiberman, Toronto, for third party (respondent).
The following are the reasons for judgment delivered orally in English by
PRATTE J.: This is an appeal from a judgment of the Trial Division [[1981] 1 F.C. 758] striking out a third party notice on the ground that its subject-matter is not within the jurisdiction of the Court.
In 1974, McAllister Towing & Salvage Ltd. (McAllister) salved the ship Elarkadia and its cargo. It thereafter retained the cargo so as not to lose its salvor's lien. That cargo belonged to Green Forest Lumber Limited (Green Forest). In March 1975, following discussions between that company, McAllister and General Security Insurance Com pany of Canada (General Security), McAllister agreed to surrender the cargo to Green Forest in consideration of the undertaking of General Secu rity to pay the salvage remuneration that would be determined by arbitration. General Security gave that undertaking because it believed, like all other parties concerned, that it was the insurer of Green Forest's cargo and, as such, bound to secure its release. It was later discovered, however, following the decisions rendered by the Trial Division, this Court and the Supreme Court of Canada in the case of Green Forest Lumber Limited v. General
Security Insurance Company of Canada,' that General Security had never insured the cargo belonging to Green Forest and that, as a conse quence, it had never been under any obligation to obtain its release. For that reason, General Secu rity did not honour its undertaking and refused to pay McAllister the salvage remuneration that had been awarded by the arbitrator. McAllister sued General Security for the amount of the salvage award and General Security served a third party notice on Green Forest. In that notice, the nature of the claim of General Security against Green Forest is described in the following terms:
The said Defendant claims to be indemnified by you for any liability which they may have towards the Plaintiff, by reason of the fact that the salvage services would have been secured by the Defendant only on the basis that the Defendant had insured your said cargo, which has now turned out not to be the case. In that regard, by judgment of the Supreme Court of Canada, Green Forest Lumber Limited v. General Security Insurance Company of Canada, A-88-77, rendered on February 14, 1980, the Court concluded that the cargo was at all material times owned by you and at your risk, but that the Defendant General Security Insurance of Canada was not the insurer of the cargo carried on the "ELARKADIA" and had no obligation whatsoever to effect payment for damages to said cargo. Since Defendant General Security Insurance Company of Canada had no inter est in the said cargo any agreement to guarantee the salvage services of the Plaintiff was without any consideration.
That is the notice which was struck out by the judgment under appeal.
In so far as that notice discloses a cause of action, I share the view expressed by Mahoney J. that such a cause of action is not within the jurisdiction of the Court. Contrary to what was argued by Mr. Prager on behalf of General Secu rity, I am of opinion that this is not a claim described in paragraph 22(2)(r) of the Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10. The claim, as I see it, is not a claim "arising out" of a contract of marine insurance or "in connection with" such a contract. Indeed, the only relation that I can detect between the claim and marine insurance is that the claim arises from the fact that General Security misinterpreted the effect of an insurance certificate it had issued. I am also of opinion that the claim cannot be regarded as a claim for salvage within the meaning of paragraph
' [1977] 2 F.C. 351; [1978] 2 F.C. 773; [1980] 1 S.C.R. 176.
22(2)(j) since it arises from facts which took place a long time after the salvage.
For those reasons, I would dismiss the appeal with costs.
* * *
RYAN J. concurred.
* * *
The following are the reasons for judgment delivered orally in English by
LALANDE D.J. (dissenting): This is an appeal from a judgment of the Trial Division striking a third party notice filed by the defendant against Green Forest Lumber Limited, on the ground that the subject-matter of the claim against the third party was not within the jurisdiction of the Federal Court.
The main action was brought by a salvor to enforce an award for salvage of cargo on board the vessel Elarkadia and is directed against the defendant General Security Insurance Company of Canada because of the latter's undertaking to pay for the salvage services as determined by the award, an undertaking given for the salvor's release of the cargo from the maritime lien for salvage that had been exercised. Obviously, the undertaking was given for the benefit of the owner of the cargo on board the vessel, who was Green Forest Lumber Limited.
The defendant had issued a policy of insurance on this cargo and it has been determined in litiga tion that went to the Supreme Court of Canada that Green Forest Lumber Limited was not insured under that policy. 2
It had been urged upon the Trial Judge that this Court had jurisdiction in respect of the third party claim, under paragraph (2)(r) of section 22 of the Federal Court Act, because it was a claim "in connection with a contract of marine insurance".
The learned Trial Judge rejected this contention and held that the scope of the paragraph giving
2 [1977] 2 F.C. 351, affirmed by [1978] 2 F.C. 773 and [1980] 1 S.C.R. 176.
this specific maritime jurisdiction to the Court did not
... embrace a cause of action in which the existence of the contract of marine insurance is a mere background fact explaining how or why the cause of action arose but is entirely immaterial to its resolution. [Page 760.]
The expression "in connection with" has wide implication and in my reading of the circum stances of the litigation between the parties to this appeal it embraces the contextual relationship be tween the policy of marine insurance issued by the defendant at the request of the third party and the undertaking to pay the salvage award that the defendant gave to the plaintiff for the benefit of the third party.
In my view this Court has jurisdiction over the subject-matter of the third party claim also under the general maritime jurisdiction of the Court conferred by subsection 22(1) of the Federal Court Act.
The claim for relief in the third party notice can be said to be sought under "Canadian maritime law" as that expression is meant to be taken by section 2 of the Federal Court Act, that is to say the law that was administered by the Exchequer Court of Canada on its Admiralty side by virtue of section 4 of The Admiralty Act of 1891, S.C. 1891, c. 29. 3 Section 4 read:
4. Such jurisdiction, powers and authority shall be exercis- able and exercised by the Exchequer Court throughout Canada, and the waters thereof, whether tidal or non-tidal, or naturally navigable or artificially made so, and all persons shall, as well in such parts of Canada as have heretofore been beyond the reach of the process of any Vice-Admiralty court, as elsewhere therein, have all rights and remedies in all matters, (including cases of contract and tort and proceedings in rem and in personam), arising out of or connected with navigation, ship ping, trade or commerce, which may be had or enforced in any Colonial Court of Admiralty under "The Colonial Courts of Admiralty Act, 1890."
It appears to me, after reading the statement of claim in the main action and the judgments deliv ered in the litigation thus far between the defend ant and the third party, that the issue between these parties in respect of the salvage claim is connected with "navigation, shipping, trade or commerce".
3 Per Laskin C.J. for the Court in Tropwood A.G. v. Sivaco Wire & Nail Company [1979] 2 S.C.R. 157, at pages 162-163.
An alternative prayer in the third party's motion to strike was that the third party notice should be struck on the ground that it disclosed no reason able cause of action.
The notice seems to me to be not only deficient in setting out the cause of action but also confus ing. That can be cleared up in subsequent proceed ings under Rule 1729(2).
The appeal should be allowed with costs. There should be no costs in the Trial Division for the reason I have just stated.
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