Judgments

Decision Information

Shibamoto & Co. v. Western Fish Producers, Inc. (C.A.)

Collection Judgments
Date 1989-11-14
Report citation [1990] 1 F.C. 542
File numbers A-454-89
Subjects Constitutional Law
Federal Court Jurisdiction

Decision Content

A-454-89
Shibamoto & Company Ltd. and Ocean Fisheries Ltd. (Appellants) (Plaintiffs)
v.
Western Fish Producers, Inc., C.N. Holding, Inc., Jorn Nordmann, S.M. Properties Ltd. and The Ship Nicolle N (Respondents) (Defendants)
INDEXED AS: SHIBAMOTO & CO. V. WESTERN FISH PRO DUCERS, INC. (CA.)
Court of Appeal, Iacobucci C.J., Mahoney and MacGuigan JJ.A.—Vancouver, October 12; Ottawa, November 14, 1989.
Constitutional law — Distribution of powers — Whether counterclaim alleging breach of contract coming under Federal Court jurisdiction in action for damages arising out of agree ment to purchase and process fish on high seas — Trial Division Judge correct in finding issues integrally connected to maritime law — All requirements essential to Federal Court jurisdiction met.
Federal Court jurisdiction — Contract requiring use of ship — Canadian maritime law including law of contracts and torts to extent required, essential to disposition of case — Maritime law coming under s. 91(10) Constitution Act, 1867, "Naviga- tion and Shipping" power — S. 22(2)(i) as applied also falling under Navigation and Shipping power.
This litigation arises from a contract whereby the respondent Western, a floater/processor vessel operator, would purchase and process on the high seas salmon and salmon roe for the plaintiff Shibatomo, which would fund the operation. Ocean Fisheries would act as Shibamoto's North American agent. The respondent was to determine the price paid for the fish subject to a ceiling price set by Shibamoto's representative on board when it reached a level that would yield a loss at resale. Shortly after operations had commenced, the representative decided that the ceiling of non-profitability had been reached and terminated the contract. The plaintiffs' action concerned own ership of the fish on board, funds not yet expended, expenses and the discretion to suspend purchasing. The defendants advanced a counterclaim based on breach of contract, fraud, deceit and conspiracy to induce breach of contract. This is an appeal from the order of Rouleau J. who permitted the amend ment of the statement of defence by addition of the counter claim on the basis that the Court had jurisdiction to entertain it.
Held, the appeal should be dismissed.
All three requirements, as set out in ITO—International Terminal Operators Ltd. v. Miida Electronics Inc., for jurisdic-
tion in the Federal Court have been met. (1) The requirement of a statutory grant of jurisdiction by the Parliament is met by paragraph 22(2)(i) of the Federal Court Act, since the contract specifies and requires the use of a ship even though the use on the facts was less than total use. (2) The second requirement is met since Canadian maritime law, an existing body of federal law, is essential to the disposition of the case and nourishes the statutory grant of authority and since the laws of contract and torts fall under Canadian maritime law, to the extent required. (3) The requirement of constitutionality is met since Canadian maritime law has been upheld by the ITO decision under subsection 91(10) of the Constitution Act, 1867, (the federal power over "Navigation and Shipping") and since paragraph 22(2)(i) as applied to the use of a ship for fishing purposes also falls under the Navigation and Shipping power.
Though a number of recent Supreme Court of Canada decisions have established a very stringent test for Federal Court jurisdiction by finding the relevant words defining the Court's jurisdiction to be "Administration of the Laws of Canada" as found in section 101 of the Constitution Act, 1867, none of them dealt in any way with maritime law. It remains that section 22 of the Federal Court Act cannot therefore be given a construction beyond the scope of that expression. The Supreme Court decision in the ITO case, however, confirms the trend of upholding Federal Court jurisdiction in maritime law matters.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Constitution Act, 1867, 30 & 31 Vict., c. 3 (U.K.) (as am. by Canada Act, 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1) [R.S.C., 1985, Appendix II, No. 5], ss. 91(10),(12), 101.
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, ss. 2, 22.
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; 68 N.R. 241; 34 B.L.R. 251.
DISTINGUISHED:
Kuhr v. The Friedrich Busse, [1982] 2 F.C. 709; (1982), 134 D.L.R. (3d) 261 (T.D.); Dome Petroleum Ltd. v. Hunt International Petroleum Co., [1978] 1 F.C. 11, (T.D.).
CONSIDERED:
Quebec North Shore Paper Co. et al. v. Canadian Pacific Ltd. et al., [1977] 2 S.C.R. 1054; (1976), 71 D.L.R. (3d)
111; 9 N.R. 471; McNamara Construction (Western) Ltd. et al. v. The Queen, [1977] 2 S.C.R. 654; (1977), 75 D.L.R. (3d) 273; 13 N.R. 181; R. v. Thomas Fuller Construction Co. (1958) Ltd. et al., [1980] 1 S.C.R. 695; (1979), 106 D.L.R. (3d) 193; 30 N.R. 249; 12 C.P.C. 248; Pacific Western Airlines Ltd. v. R., [1979] 2 F.C. 476; (1979), 105 D.L.R. (3d) 44; 13 C.P.C. 299 (T.D.).
REFERRED TO:
Tropwood A.G. et al. v. Sivaco Wire & Nail Co. et al., [1979] 2 S.C.R. 157; (1979), 99 D.L.R. (3d) 235; 10 C.P.C. 9; 26 N.R. 313; Antares Shipping Corporation v. The Ship "Capricorn" et al., [1980] 1 S.C.R. 553; (1979), 111 D.L.R. (3d) 289; 30 N.R. 104; Wire Rope Industries of Canada (1966) Ltd. v. B.C. Marine Ship builders Ltd. et al., [1981] 1 S.C.R. 363; (1981), 121 D.L.R. (3d) 517; 35 N.R. 288.
AUTHORS CITED
Evans, J. M. "Case Comment" ["Federal Jurisdiction— A Lamentable Situation"] (1981), 59 Can. Bar Rev. 124.
Hogg, P. W. "Case Comment" ["Constitutional Law— Limits of Federal Court Jurisdiction—Is there a Feder al Common Law?"] (1977), 55 Can. Bar Rev. 550. Jones, P. F. M. "Jurisdiction at Sea" (1982), 3 Supreme Court L.R. 445.
Kerr, R. W. "Constitutional Limitations on the Admiral ty Jurisdiction of the Federal Court" (1979), 5 Dal- housie L.J. 568.
Laskin, J. B. and Sharpe, R. J. "Constricting Federal Court Jurisdiction: A Comment on Fuller Construc tion" (1980), 30 U.T. L.J. 283.
Rogers, D. N. "Admiralty Jurisdiction in Canada: Is There a Need for Reform?" (1985), 16 J. Mar. L.& Comm. 467.
Scott, S. A. "Canadian Federal Courts and the Constitu tional Limits of their Jurisdiction" (1982), 27 McGill L.J. 137.
Shorter Oxford English Dictionary, vol. II, 3rd rev. ed. Oxford: Clarendon Press, 1975, "navigation".
COUNSEL:
David F. McEwen for appellants (plaintiffs). J. W. Perrett for respondents (defendants).
SOLICITORS:
McEwen, Schmitt & Co., Vancouver, for appellants (plaintiffs).
Campney & Murphy, Vancouver, for respondents (defendants).
The following are the reasons for judgment rendered in English by
MACGUIGAN J.A.: This is an appeal against an order of Rouleau J. [T-1810-88, order dated October 2, 1989, not yet published] allowing the respondents' motion to amend their statement of defence by adding, inter alia, a counterclaim to it. The appellants challenge the decision of the Motions Judge that the counterclaim is within the jurisdiction of the Federal Court.
The dispute arises from a contract entered into on May 16, 1988, between Shibamoto & Company Ltd. ("Shibamoto"), Ocean Fisheries Limited ("Ocean") and Western Fish Producers Inc. ("Western"). The agreement recites that Western, which operated the floater/processor vessel Nicolle N ("the vessel"), wished to keep and process fish in Alaska for a party with sufficient financial strength to fund such an operation, that Shibamo- to, a Japanese trading company, wished to acquire salmon and salmon roe in Alaska for resale in Japan, and that Ocean would act as Shibamoto's North American agent, with all North American transactions in its name. By the agreement Shibamoto was, through its agent, to advance suf ficient funds (ultimately U.S. $1.8 M) to purchase some three million pounds of sockeye salmon to Western, which agreed to purchase and process salmon and salmon roe on the vessel on the high seas through the 1988 salmon season. Western was to determine the price paid for the fish subject to a ceiling price set by Shibamoto's representative on board the vessel when the price reached a level which would result in a loss at resale. Also on board the vessel were eight roe technicians pro vided by Shibamoto to prepare the salmon and the roe so as to meet the requirements of the Japanese market. After purchasing, dressing and freezing the fish, Western would off-load them onto tramp steamers as quickly as possible. The agreement provided that it "shall be governed and construed in accordance with the laws of the Province of British Columbia" (clause 8.01).
Within a short time after operations began under the contract in June, 1988, the price of salmon increased to the point where Shibamoto's representative decided that the ceiling of non-prof itability had been reached.
An action was begun by the appellants in the British Columbia Supreme Court and subsequent ly also in the Federal Court. The issues are as to the ownership of the fish on board, the funds not yet expended, the expenses involved in the process ing and the appellants' discretion to suspend pur chasing. The respondents were denied a stay of the Federal Court action since one of the remedies in the Federal Court action, i.e., a lien against the vessel, was not available in the B.C. Court.
The counterclaim advanced by the respondents alleges breach of contract and also fraud, deceit and conspiracy to induce or compel breach of the agreement (Appeal Book at pages 260-261).
Jurisdiction over the counterclaim depends on the interpretation to be given to section 22 of the Federal Court. Act [R.S.C. 1970 (2nd Supp.), c. 10] ("the Act") and also on the constitutional division of legislative power.
The relevant part of section 22 is as follows:
22. (1) The Trial Division has concurrent original jurisdic tion as well between subject and subject 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 claim or question arising out of 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;
(m) any claim in respect of goods, materials or services wherever supplied to a ship for her operation or maintenance including, without restricting the generality of the foregoing, claims in respect of stevedoring and lighterage;
The definition of "Canadian maritime law" in section 2 of the Act is also relevant:
2....
"Canadian maritime law" means the law that was administered by the Exchequer Court of Canada on its Admiralty side by virtue of the Admiralty Act 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 mari time and admiralty matters, as that law has been altered by this or any other Act of the Parliament of Canada.
The most relevant part of the learned Trial Judge's reasons [Shibamoto & Co. v. Western Fish Producers, Inc., order dated October 2, 1989, Federal Court—Trial Division, T-1810-88, not yet reported] for order is as follows (Appeal Book at pages 271-274):
One of the leading cases in which the Federal Court's jurisdiction was analyzed and which is of significant impor tance is the ITO—International Terminal Operators Ltd. v. Miida Electronics Inc. et al., a decision of the Supreme Court of Canada reported in [1986] 1 S.C.R. 752; (1986), 28 D.L.R. 4th 641. At page 774 S.C.R. Maclntyre J. wrote, and I paraphrase: In order to determine if a particular case involves maritime or admiralty law, we must be satisfied to avoid encroachment on what is of local concern involving property and civil rights or matters which are of essential, exclusive provincial jurisdiction. At page 774 S.C.R. he goes on, that the issue must be integrally connected to maritime matters as to be legitimate Canadian maritime law within federal legislative competence.
In analyzing disputes of this nature, one must look to the substance of the claim being asserted and the relief sought. We are dealing with the engaging of a processing ship, financing and fish processing at sea. One must determine the actual underpinnings of the dispute. The essence of the arrangement between the plaintiff and the defendant in this particular transaction was for the plaintiff to provide funds to the defend ants and they in turn made available the Nicolle N for the acquisition and processing of salmon and salmon roe at sea.
The defendants submit that the Court can assume the juris diction of the issues raised in the counterclaim by virtue of its authority of subsection 22 and subparagraph 22(2)(0(m) of the Federal Court Act.
I much prefer the reasoning of Mr. Justice Addy in Kuhr v. The Friedrich Busse, [1982] 2 F.C. 709 (T.D.). The facts of that case are somewhat similar and it was resolved by finding that the Court had jurisdiction. There the defendant owned a fish processing vessel and the plaintiffs alleged that the defend ant was in breach of a contract to supply fish at sea to the defendant vessel which was to remain within a specified fishing
area and was to receive delivery and pay for the fish. Similarly to this case, the defendant ship was arrested at the request of the plaintiffs. In a motion to strike arguments were submitted alleging that the Court had no jurisdiction, that no action was maintainable because the supply of fish under a contract did not fall within any of the paragraphs of subsection 22(2) of the Federal Court Act and more particularly within paragraphs (i) and (m); further that the substance of the matter did not fall within maritime jurisdiction. Mr. Justice Addy at page 714 wrote:
I agree that a contract for the supplying of fish to a vessel, merely by reason of the fact that the vessel is processing the fish and is thus using the fish supplied, cannot fairly be construed as an "agreement relating to ... the use ... of a ship" as contemplated by paragraph (i). When the word "use" is considered in that context it seems clear that the use referred to is use of the ship by a party other than the owner: an agreement for use and an ordinary contract for hiring would be ejusdem generis.
However, the question as to whether paragraph (m) applies is not nearly so clear. It might well be that the word "operation" in that paragraph does not refer only to the actual navigation of a ship over the water but to its operation generally where it has another function such as receiving delivery of fish on the high seas and processing same, even though the actual processing might well be the same as the operation carried on by a fish processing factory situated ashore.
Justice Addy went on to say that although the sections do not specifically enumerate what should be construed as necessaries for a ship, there is no doubt that once it falls into such a category it comes within the jurisdiction of the Federal Court.
Mr. Justice Addy refers also to the case of Western Nova Scotia Bait Freezers Limited v. The Ship "Shamrock", [1939] Ex. C.R. 53. It dealt with a vessel engaged in the fishing business and the contract was to supply bait and ice which were determined to be necessaries.
It was argued that money, in this particular circumstance, cannot be considered a necessary since we are dealing exclu sively with financial underwriting. That may be argued but I have great doubts that it is supported by the facts. The underpinning, the agreement called for retaining the services of a ship for the processing of fish brought about by the financial arrangement. The contract between the parties was for the Nicolle N to proceed on the high seas to acquire fish in a specified fishing area and receive, process and deliver same. If one looks to the reasoning of the Supreme Court of Canada in the ITO case supra I think the analysis referred to at page 775 S.C.R. wherein the Court considered the proximity of a termi nal to the operations at sea sufficient to bring it within mari time law, I am satisfied that I am by no means exceeding the bounds of jurisdiction conferred on this Court and the issues are integrally connected to maritime law.
May I add that it would seem illogical that a plaintiff could assert the right of bringing an action in the Federal Court of
Canada, claim a Maritime lien and arrest a ship on the basis of United States law and then successfully reject a counterclaim affirming damages arising out of the same breach of contract involving the same ship. Perhaps the relief sought by the defendants in the counterclaim could as well give rise to a Maritime lien under United States law. I say this without having the benefit of any assistance either to support the assertion made by the plaintiffs in their pleading or my independent knowledge as to what may give rise to a lien in U.S. jurisdictions.
The jurisdiction of the Federal Court of Canada as set forth in the Act must be assessed initially under the terms of section 101 of the Constitution Act, 1867 [30 & 31 Vict., c. 3 (U.K.) (as am. by Canada Act, 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1) [R.S.C., 1985, Appendix II, No. 5]] because that provision alone authorizes Parliament to establish such a Court. Section 101 provides that:
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 relevant words of section 101 for defining the Court's jurisdiction have been considered by the Supreme Court of Canada in a number of recent cases to be "Administration of the Laws of Cana- da." Section 22 cannot, therefore, be given a con struction beyond the scope of this expression.
The earliest of these Supreme Court decisions was Quebec North Shore Paper Co. et al. v. Canadian Pacific Ltd. et al., [1977] 2 S.C.R. 1054; (1976), 71 D.L.R. (3d) 111; 9 N.R. 471. The effect of this case is perhaps best summarized by Laskin C.J.C. (who delivered the unanimous judgments of the Court in both cases) in McNamara Construction (Western) Ltd. et al. v. The Queen, [1977] 2 S.C.R. 654; (1977), 75 D.L.R. (3d) 273; 13 N.R. 181, at pages 658-659 S.C.R.:
In Quebec North Shore Paper Company v. Canadian Pacific Limited, ... this Court held that the quoted provisions of s. 101, make it a prerequisite to the exercise of jurisdiction by the Federal Court that there be existing and applicable federal law which can be invoked to support any proceedings before it. It is not enough that the Parliament of Canada have legislative jurisdiction in respect of some matter which is the subject of litigation in the Federal Court. As this Court indicated in the Quebec North Shore Paper Company case, judicial jurisdiction
contemplated by s. 101 is not co-extensive with federal legisla tive jurisdiction. It follows that the mere fact that Parliament has exclusive legislative authority in relation to ... [subsection 91(1A) and 91(28) of the Constitution Act, 1867], and that the subject matter of the construction contract may fall within either or both of these grants of power, is not enough to support a grant of jurisdiction to the Federal Court to entertain the claim for damages made in these cases. [Emphasis added.]
The Court went on to hold that there was neither a federal statutory nor a federal common law basis for the Crown's suit against a third party for damages for breach of contract.
Despite the fact that dicta in McNamara sug gested that the result would have been different if what were at stake were the Crown's liability to a third party, the Court was not prepared in R. v. Thomas Fuller Construction Co. (1958) Ltd. et al., [1980] 1 S.C.R. 695; (1979), 106 D.L.R. (3d) 193; 30 N.R. 249; 12 C.P.C. 248 (Martland J. dissenting) to allow the Crown to issue a third party notice claiming indemnity in contract and contributory negligence, even though the Crown would have had its own liability established on the basis of federal law before it could succeed in its third party claim. Pigeon J., writing for the majority, said in relation to the Crown's claim in contract (at page 711 S.C.R.):
The question in the present case is, as I see it, "Does federal law embrace the issues on the third party notice?" In my view it does not. The Crown Liability Act deals only with the liability which is asserted in the main action. While without such liability there would be no claim over, such claim does not arise out of this liability but only out of the contract and of the [sic] Negligence Act. [R.S.O. 1970, c. 296] .... In the present case the objection to the jurisdiction is not founded on the construction of the statute, but arises out of the constitutional restriction of Parliament's power which, as concerns the Canadian judicature, restricts it to the establishment of "Courts for the better Administration of the Laws of Canada". In the present case the laws on which the third party notice is founded are not those of Canada but those of the Province of Ontario.
With respect to the claim in negligence Pigeon J. wrote (at pages 712-713 S.C.R.):
Even if I had to accept the view taken by the Ontario Court of Appeal of the effect of the Negligence Act [viz., that no contribution could be recovered from a party where it was not claimed before judgment on the main action], I would not agree that this could justify a conclusion that the Crown must be allowed to institute third party proceedings in the Federal Court so as not to be deprived of the benefit of the [sic] Negligence Act. It must be considered that the basic principle governing the Canadian system of judicature is the jurisdiction of the Superior Courts of the Provinces in all matters federal and provincial. The federal Parliament is empowered to dero gate from this principle by establishing additional Courts only for the better administration of the laws of Canada. Such establishment is not therefore necessary for the administration of these laws. Consequently, I fail to see any basis for the application of the ancillary power doctrine which is limited to what is truly necessary for the effective exercise of Parliament's legislative authority. If it is considered desirable to be able to take advantage of provincial legislation on contributory negli gence which is not meant to be exercised outside the Courts of the Province, the proper solution is to make it possible to have those rights enforced in the manner contemplated by the gener al rule of the Constitution of Canada, that is before the superior court of the province.
These cases establish a very stringent test for Federal Court jurisdiction,' and would seem as a first consequence to invalidate the view taken by the Motions Judge in the final paragraph of his reasons for decision set out above. The mere fact that a plaintiff can assert an action against a ship in the Federal Court does not found a counter claim for damages even if they arise "out of the same breach of contract involving the same ship." A counterclaim would appear to be in the same position as an action against a third party, that is, a substantive proceeding and not a mere incident of the principal action. However, I accept the argument made by the respondent that this para graph of the Judge's reasoning is an obiter dictum, his essential reasoning having concluded at the end of the preceding paragraph when he wrote: "I am satisfied that I am by no means exceeding the bounds of jurisdiction conferred on this Court and the issues are integrally connected to Maritime law."
' In Pacific Western Airlines Ltd. v. R., [1979] 2 F.C. 476; (1979), 105 D.L.R. (3d) 44; 13 C.P.C. 299 (T.D.), at p. 490, Collier J. characterized the jurisdictional situation following the limitations imposed by the Supreme Court in these cases as "lamentable." The commentators have been uniformly critical of the Court's reasoning. Professor Peter W. Hogg, Case Comment ["Constitutional Law—Limits of Federal Court
(Continued on next page)
None of the foregoing Supreme Court decisions dealt in any way with maritime law, and, when confronted with problems in that area the Court upheld the jurisdiction of the Federal Court in Tropwood A.G. et al. v. Sivaco Wire & Nail Co. et al., [1979] 2 S.C.R. 157; (1979), 99 D.L.R. (3d) 235; 10 C.P.C. 9; 26 N.R. 313; Antares Shipping Corporation v. The Ship "Capricorn" et al., [1980] 1 S.C.R. 553; (1979), 111 D.L.R. (3d) 289; 30 N.R. 104; 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. That trend has most recently been confirmed in ITO—Interna- tional Terminal Operators Ltd. v. Miida Elec tronics Inc. et al., [1986] 1 S.C.R. 752; (1986), 28 D.L.R. (4th) 641; 68 N.R. 241; 34 B.L.R. 251, a
(Continued from previous page)
Jurisdiction—Is there a Federal Common Law?"] (1977), 55 Can. Bar Rev. 550, at p. 555 has written that "the only workable and principled test for a law of Canada is the test of federal legislation competence which prevailed before Quebec North Shore and McNamara Construction." Professors John B. Laskin and Robert J. Sharpe, "Constricting Federal Court Jurisdiction: A Comment on Fuller Construction" (1980), 30 U.T.L.J. 283, at p. 286 have contrasted the American solution: "Faced with a similar predicament—federal courts with consti tutionally limited jurisdiction and cases with emanations beyond it—American courts have developed concepts of 'ancil- lary' and `pendent' jurisdiction to permit a federal court to resolve all aspects of a dispute the principal part of which it may properly hear." Professor Stephen A. Scott, "Canadian Federal Courts and the Constitutional Limits of their Jurisdic tion" (1982), 27 McGill L.J. 137, at p. 161 refers to "The Constitutional Requirement of an Elusive Substantive `Federal Law'." Professor J. M. Evans, Case Comment ["Federal Juris- diction—A Lamentable Situation"] (1981), 59 Can. Bar Rev. 124, at pp. 132-3 writes: "To limit the jurisdiction that Parlia ment can confer upon the Federal Court so narrowly that it makes even those parts that are clearly valid so practically defective that drastic legislative reform becomes necessary, seems a remarkable arrogation of power."
4-3 decision of the Supreme Court. 2
On the facts of the ITO case, the marine carrier agreed in a contract evidenced by a bill of lading to carry cartons of electric calculators from Japan to Montréal for delivery to the consignee. On arrival in Montréal the goods were picked up and stored by ITO, a stevedoring and terminal opera tor. Before delivery could be made to the consignee thieves broke into the terminal transit shed and stole the majority of the cartons. The Supreme Court treated the case on the basis that the loss by theft occurred through ITO's negligence. The con- signee brought proceedings in the Federal Court against both the carrier and the terminal operators.
The Court ultimately held that the consignee had no cause of action against the carrier, because of an express limitation of liability in the contract that it found to govern even in the presence of negligence, and that that limitation of liability extended also to the terminal operator.
In the course of coming to that decision, how ever, the Court set forth the jurisdiction of the Federal Court in admiralty. McIntyre J. recapitu lated the essential requirements to support a find ing of jurisdiction in the Federal Court as follows (at page 766 S.C.R.):
2 Professor Robert W. Kerr, "Constitutional Limitations on the Admiralty Jurisdiction of the Federal Court" (1979), 5 Dalhousie L.J. 568, foresaw the possibility that admiralty jurisdiction might escape the constitutional limitations of the Quebec North Shore and McNamara Construction cases because of the historical development of a federal common law of admiralty. P.F.M. Jones, "Jurisdiction at Sea" (1982), 3 Supreme Court L.R. 445 at p. 451 concluded, following the B.C. Marine case, that "one can conclude that the admiralty jurisdiction of the Federal Court is not subject to the `proper solution' philosophy of the Supreme Court of Canada as expressed in Fuller, viz., that the rights ought to be enforced before the superior court of the province." David N. Rogers, "Admiralty Jurisdiction in Canada: Is There a Need for Reform?" (1985), 16 J. Mar. L.& Comm. 467 preferred the approaches taken by the Federal Court of Appeal to that taken by the Supreme Court up to that time (i.e., before ITO).
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 majority found it immediately obvious that subsection 22(1) of the Act satisfied the first requirement of jurisdiction, and turned to the question whether Canadian maritime law was essential to the disposition of the case and nour ished the statutory grant of jurisdiction (at page 769 S.C.R.):
Canadian maritime law, as defined in s. 2 of the Federal Court Act, can be separated into two categories. It is the law that:
(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 mari time and admiralty matters.
The first category embraces English admiralty jurisdiction and law as it existed in 1934, the date of the first Canadian admiralty legislation after the Statute of Westminster. However, since Eng- lish maritime law as of 1934 was confined to torts committed within the ebb and flow of the tide and excluded land-based torts, that would not cover the negligence in this case. It was therefore necessary to turn to an analysis of the second category of Canadian maritime law (at pages 774-776 S.C.R.):
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 mari time 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 matter 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 recogni tion 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 of 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 constitu-
tional 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.
Turning to Miida's claim against ITO, it can be seen that it involves the negligence of a stevedore-terminal operator in the short-term storing of goods within the port area pending deliv ery to the consignee.
It is clear, in my view, that such incidental storage by the carrier itself or by a third party under contract to the carrier is also a matter of maritime concern by virtue of the "close, practical relationship of the terminal operation to the perform ance of the contract of carriage" (per Le Damn J. in the Court of Appeal [at p. 41]). It may then be concluded that cargo-han dling and incidental storage before delivery and before the goods pass from the custody of a terminal operator within the port area is sufficiently linked to the contract of carriage by sea to constitute a maritime matter within the ambit of Canadian maritime law, as defined in s. 2 of the Federal Court Act.
At the risk of repeating myself, I would stress that the maritime nature of this case depends upon three significant factors. The first is the proximity of the terminal operation to the sea, that is, it is within the area which constitutes the port of Montreal. The second is the connection between the terminal operator's activities within the port area and the contract of carriage by sea. The third is the fact that the storage at issue was short-term pending final delivery to the consignee. In my view, it is these factors, taken together, which characterize this case as one involving Canadian maritime law.
This analysis having yielded the result that the negligence claim fell within the scope of Canadian maritime law, the next question was as to the substantive content of that law (at pages 776-777 S.C.R.):
Canadian maritime law, as a body of substantive law, encom passes 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. [[1978] 2 F.C. 675; (1977), 77 D.L.R. (3d) 241 (per Thurlow A.C.J., as he then was)]. 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 special ized rules and principles of admiralty and the rules and princi ples 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 Indus tries 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.)
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.
Canadian maritime law, it is therefore clear, encompasses not only the specialized rules and principles of admiralty but the common law of tort and contract as currently interpreted by the Courts (assuming always, of course, that the claim in question falls within the scope of maritime law).
Lest the point be left in doubt, the Court went on to consider whether, in utilizing the common law, the Federal Court is to be thought as applying provincial law (at page 779 S.C.R.):
It is my view, as set out above, that Canadian maritime law is a body of federal law encompassing the common law princi ples of tort, contract and bailment. I am also of the opinion that Canadian maritime law is uniform throughout Canada, a view also expressed by Le Dain J. in the Court of Appeal who applied the common law principles of bailment to resolve Miida's claim against ITO. Canadian maritime law is that body of law defined in s. 2 of the Federal Court Act. That law was the maritime law of England as it has been incorporated into Canadian law and it is not the law of any Province of Canada.
And further (at pages 781-782 S.C.R.):
The Federal Court is constituted for the better administra tion of the laws of Canada. It is not, however, restricted to
applying federal law in cases before it. Where a case is in "pith and substance" within the court's statutory jurisdiction, the Federal Court may apply provincial law incidentally necessary to resolve the issues presented by the parties; ...
It is argued that in the absence of a special Admiralty rule or provision the law enforced in the locality of the proceedings applies. This is the result, it is contended, of the adoption of an incomplete body of law from a unitary state into a federal system. Since the common law of negligence and bailment may be incidentally applied in Admiralty cases, so also may the Civil Code be incidentally applied in cases arising in the Province of Quebec. The answer to this argument may be shortly stated. Canadian maritime law as adopted in Canada historically, and as finally brought into Canadian law by s. 2 of the Federal Court Act, includes common law principles as they are applied in Admiralty matters. Thus, as discussed above, common law principles so incorporated are federal law and not an incidental application of provincial law.
In conclusion then it may be said that the common law principles of negligence and bailment have become part of Canadian maritime law by adoption from England.
In the light of this powerful statement, I believe there can be no room for doubt that Canadian maritime law includes the common law of tort and contract, and that as so included it is federal law. It cannot, therefore, be decisive in the case at bar that the parties provided for the application of British Columbia law.
It is important to note that, although on some occasions McIntyre J. referred to the incorporated provincial common law of torts in terms of negli gence alone, that is obviously only because that was the only part of the law of torts that was relevant in the ITO case. Hence in the final sen tence quoted above he referred only to the "com- mon law principles of negligence and bailment" because that is the issue in ITO. Earlier he stated baldly that "Canadian maritime law is a body of federal law encompassing the common law princi ples of tort, contract and bailment."
Finally, in the ITO case the Court found the third requirement for Federal Court jurisdiction as easily established as the first (at page 777 S.C.R.):
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.
I would, therefore, conclude that the Federal Court has jurisdiction to entertain the claims of Miida [the consignee] against both Mitsui [the marine carrier] and ITO [the terminal operator].
Thus enlightened by the ITO case, it is now possi ble to turn to the case at bar to determine whether the three essential requirements for Federal Court jurisdiction over the counterclaim have been met.
The first requirement is a statutory grant of jurisdiction by the Federal Parliament. In my view that is found in subsection 22(1) and more particu larly in paragraph 22(2)(i):
22. (2) ...
(1) any claim arising out of any agreement relating to ... the use ... of a ship whether by charter party of otherwise,
The Motions Judge's analysis of the essence of the contract was as follows: "The essence of the arrangement between the plaintiff and the defen dant in this particular transaction was for the plaintiff to provide funds to the defendants and they in turn made available the Nicolle N for the acquisition and processing of salmon and salmon roe at sea." And again: "The contract between the parties was for the Nicolle N to proceed on the high seas to acquire fish in a specified fishing area and receive, process and deliver same." In other words, the contract specified and required the use of a ship.
It was argued by the appellant that paragraph (i) could not be so applied in the light of that part of the decision of Addy J. in Kuhr v. The Friedrich Busse, [1982] 2 F.C. 709; (1982), 134 D.L.R. (3d) 261 (T.D.) at page 714 F.C. where he said:
I agree that a contract for the supplying of fish to a vessel, merely by reason of the fact that the vessel is processing the fish and is thus using the fish supplied, cannot fairly be construed as an "agreement relating to ... the use ... of a ship" as contemplated by paragraph (i). When the word "use" is considered in that context it seems clear that the use referred to is use of the ship by a party other than the owner: an
agreement for use and ordinary contract for hiring would be ejusdem generis.
Assuming, without deciding that the learned Judge was correct in holding that the use referred to in paragraph (i) is use of the ship by a party other than the owner, the instant case is distinguishable on the facts. Not only was Shibamoto's representa tive on board the vessel at all material times for purposes of price determination, but, more impor tant, the contract also provided for eight roe tech nicians to be placed on board by Shibamoto to prepare the fish and the roe for the Japanese market. In my view, although this is less than the total use of a ship, it is nevertheless a clear use of the ship by Shibamoto for contract purposes, and is sufficient to satisfy paragraph (i).
This result is also distinguishable from Dome Petroleum Ltd. v. Hunt International Petroleum Co., [1978] 1 F.C. 11 (T.D.) at page 14 where Dubé J. stated:
The issue in a nutshell is whether or not Dome's claim is one which arises out of an agreement relating to the carriage of goods by ship, or the use or hire of a ship, within the framework of section 22 as a whole which deals with navigation and shipping.
The agreement referred to in the statement of claim and served ex juris on Hunt with that pleading makes no reference to the carriage of goods by ship, or to the use or hire of a ship, or to a ship. It deals with the drilling of a test well. [Emphasis added.]
Based on that finding of fact, the agreement itself in that case, unlike here, did not support a claim of Federal Court jurisdiction.
Since in my view the jurisdiction of the Federal Court is supportable under paragraph 22(2)(i) it is not necessary to consider whether it can also be justified under paragraph (m), as held by the Motions Judge on authority of the Kuhr case.
The first jurisdictional requirement is therefore satisfied.
In my opinion the second jurisdictional require ment is easily met in the light of the ITO case. Here one looks, not to the essence of the arrange-
ment, as in the first requirement, but as the appel lants argued, to the cause of action in the counterclaim.
However, the appellants' contention that the respondent's counterclaim for the destruction of a fish processing business by fraud, deceit, conspir acy and breach of contract is a matter of provin cial law rather than of Canadian maritime law is completely unsustainable in the light of ITO. Since the law of contract and of torts falls under Canadi- an maritime law, to the extent that it is required, it cannot be maintained that certain parts of those bodies of law are not matters of maritime law. On the authority of ITO Canadian maritime law is the existing body of federal law which is essential to the disposition of the case and which nourishes the statutory grant of authority.
The third jurisdictional requirement is constitu tionality. Obviously the contract could be said to fall under subsection 91(12) of the Constitution Act, 1867, the federal power over sea coast fisher ies. But what has to be upheld under the third requirement is not the contractual arrangement itself but rather Canadian maritime law and also paragraph 22(2)(i) of the Act as I have utilized it. Canadian maritime law has already been upheld by ITO under subsection 91(10) of the Constitu tion Act, 1867, the federal power over "Navigation and Shipping".
Paragraph 22(2)(i) as applied to the use of a ship for fishing purposes also falls under the Navi gation and Shipping power. Even if "shipping" were to be so restricted as to mean only the transportation of goods, the use of ships for fishing purposes would still fall under the definition of navigation, the first meaning of which in the Shorter Oxford English Dictionary [vol. II, 3rd rev. ed. Oxford: Clarendon Press, 1975] is:
Navigation ... 1. The action of navigating; the action or practice of passing on water in ships or other vessels ...
The passing on water that occurs in coastal fishing must therefore be without question, it seems to me, navigation.
Since in my view all three requirements for jurisdiction over the counterclaim in the Federal Court have been met, I would therefore dismiss the appeal with costs in any event of the cause.
IACOBUCCI C.J.: I agree. MAHONEY J.A.: I agree.
 You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.