Commentaries are intended as an introduction or overview of the topic. The commentaries for some topics are more detailed than others but none of them should be taken as a complete and full recitation of the law applicable to the topic.
The cases under this title consider the Admiralty jurisdiction of the courts and which court has jurisdiction to hear a particular matter. More specifically, because the provincial superior courts have inherent jurisdiction, the cases usually concern the whether the Federal Court's admiralty jurisdiction is invoked. It is important to note that the Admiralty jurisdiction of the Federal Court is closely related to the definition, nature and scope of the body of law known as Canadian Maritime Law which is, in turn, partly dependant upon the constitutional division of powers between the federal and provincial governments. Therefore, the cases digested under the topic Constitutional Issues may also be relevant and should be consulted when addressing a jurisdiction issue.
The Admiralty Jurisdiction of Provincial Courts
The provincial superior court's have inherent jurisdiction which means that they have jurisdiction to hear all cases unless a statute specifically provides otherwise (see below for some examples of statutes that specifically provide otherwise). It is clear that they have admiralty jurisdiction, something which the Supreme Court of Canada confirmed in Ontario v Pembina Exploration
.,  1 SCR 206, at para. 15. Ontario v Pembina
also stands for the proposition that a provincial inferior court, such as a small claims court, also has jurisdiction to hear admiralty cases. However, with the exception of British Columbia, the provincial courts do not have in rem
actions or admiralty rules. Thus, as a practical matter, it is often prudent to commence admiralty cases in the Federal Court.
The Federal Court's Concurrent Admiralty Jurisdiction
The Federal Court is a statutory court and, as such, has only the jurisdiction specifically given to it. Section 22 of the Federal Courts Act is the primary source of the Federal Court's admiralty jurisdiction. Subsection 22(1) is a general grant of concurrent jurisdiction to hear and determine any case "in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law".
22. (1) The Federal Court has concurrent original jurisdiction, between subject and subject as well as otherwise, in all cases in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, except to the extent that jurisdiction has been otherwise specially assigned.
Subsection 22(2) of the Federal Courts Act
also enumerates 19 specific categories of claims over which the Federal Court has jurisdiction. The categories are:
(a) any claim with respect to title, possession or ownership of a ship or any part interest therein or with respect to the proceeds of sale of a ship or any part interest therein;
(b) any question arising between co-owners of a ship with respect to possession, employment or earnings of a ship;
(c) any claim in respect of a mortgage or hypothecation of, or charge on, a ship or any part interest therein or any charge in the nature of bottomry or respondentia for which a ship or part interest therein or cargo was made security;
(d) any claim for damage or for loss of life or personal injury caused by a ship either in collision or otherwise;
(e) any claim for damage sustained by, or for loss of, a ship including, without restricting the generality of the foregoing, damage to or loss of the cargo or equipment of, or any property in or on or being loaded on or off, a ship;
(f) any claim arising out of an agreement relating to the carriage of goods on a ship under a through bill of lading, or in respect of which a through bill of lading is intended to be issued, for loss or damage to goods occurring at any time or place during transit;
(g) any claim for loss of life or personal injury occurring in connection with the operation of a ship including, without restricting the generality of the foregoing, any claim for loss of life or personal injury sustained in consequence of any defect in a ship or in her apparel or equipment, or of the wrongful act, neglect or default of the owners, charterers or persons in possession or control of a ship or of the master or crew thereof or of any other person for whose wrongful acts, neglects or defaults the owners, charterers or persons in possession or control of the ship are responsible, being an act, neglect or default in the management of the ship, in the loading, carriage or discharge of goods on, in or from the ship or in the embarkation, carriage or disembarkation of persons on, in or from the ship;
(h) any claim for loss of or damage to goods carried in or on a ship including, without restricting the generality of the foregoing, loss of or damage to passengers’ baggage or personal effects;
(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;
(j) any claim for salvage including, without restricting the generality of the foregoing, claims for salvage of life, cargo, equipment or other property of, from or by an aircraft to the same extent and in the same manner as if the aircraft were a ship;
(k) any claim for towage in respect of a ship or of an aircraft while the aircraft is water-borne;
(l) any claim for pilotage in respect of a ship or of an aircraft while the aircraft is water-borne;
(m) any claim in respect of goods, materials or services wherever supplied to a ship for the operation or maintenance of the ship, including, without restricting the generality of the foregoing, claims in respect of stevedoring and lighterage;
(n) any claim arising out of a contract relating to the construction, repair or equipping of a ship;
(o) any claim by a master, officer or member of the crew of a ship for wages, money, property or other remuneration or benefits arising out of his or her employment;
(p) any claim by a master, charterer or agent of a ship or shipowner in respect of disbursements, or by a shipper in respect of advances, made on account of a ship;
(q) any claim in respect of general average contribution;
(r) any claim arising out of or in connection with a contract of marine insurance; and
(s) any claim for dock charges, harbour dues or canal tolls including, without restricting the generality of the foregoing, charges for the use of facilities supplied in connection therewith.
Because the Federal Court has jurisdiction to hear and determine any case "in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law", it is often necessary to determine the scope and content of "Canadian maritime law" in order to assess the full extent of the Federal Court's admiralty jurisdiction. Canadian maritime law is a separate and distinct body of law defined in section 2 of the Federal Courts Act and enacted by s. 42 of the Federal Courts Act.
“Canadian maritime law” means the law that was administered by the Exchequer Court of Canada on its Admiralty side by virtue of the Admiralty Act, chapter A-1 of the Revised Statutes of Canada, 1970, or any other statute, or that would have been so administered if that Court had had, on its Admiralty side, unlimited jurisdiction in relation to maritime and admiralty matters, as that law has been altered by this Act or any other Act of Parliament;
42. Canadian maritime law as it was immediately before June 1, 1971 continues subject to such changes therein as may be made by this Act or any other Act of Parliament.
Since at least ITO Terminal Operators Ltd. v Miida Electronics Inc.,  1 SCR 752, the test for a finding of jurisdiction in the Federal Court has required that three essential elements be established:
(1) that there is a statutory grant of jurisdiction to the Federal Court;
(2) that there is an existing body of federal law, essential to the disposition of the case, which nourishes the statutory grant of jurisdiction; and
(3) that 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.
The first element of the above test, that there be a statutory grant of jurisdiction to the Federal Court, is necessary but not sufficient, by itself, to give the Federal Court jurisdiction. This part of the test is usually satisfied, in relation to maritime matters, by referring to s. 22 of the Federal Courts Act.
The second element of the above test is that there be existing federal law to nourish the statutory grant of jurisdiction. In maritime matters the federal law nourishing the statutory grant is usually Canadian maritime law as enacted by s. 42 of the Federal Courts Act. There is a very large body of case law that explores the nature, scope and content of Canadian maritime law in relation to Federal Court jurisdiction. The more recent cases are digested on this site and, as well, there are papers listed below that address this issue in detail. In general, Canadian maritime law is the law that governs matters relating to navigation and shipping. It is federal law that is uniform throughout the country and is applied regardless of the court in which proceedings are commenced. It includes, but is not limited by, the rules and principles of English admiralty law as it was exercised in 1934. More specifically, it includes the laws relating to: carriage of goods by sea (Tropwood A.G. v Sivaco Wire & Nail Co); contracts relating to the sale of a ship (Antares Shipping Corp. v The “Capricorn); contracts for the repair of a ship or her equipment (Wire Rope Industries v B.C. Marine Shipbuilders Ltd); marine insurance (Triglav v Terrasses Jewellers Ltd); and stevedores (I.T.O. v Miida Electronics Ltd.). Canadian maritime law includes the common law principles of contract, tort, bailment and agency (Q.N.S. Paper Co. v Chartwell Shipping Ltd.) and tort liability (Whitbread v. Walley).
Finally, the third element in the above test, that the law must be a "law of Canada" within the meaning of s. 101 of the Constitution Act, requires that the nourishing law must be within federal legislative competence under s. 91(10) of the Constitution Act. This element of the test requires a constitutional analysis involving the division of powers under the Constitution Act between the federal and provincial governments. Again, the more recent cases considering these issues are summarized on this site but some are digested under the topic Constitutional Issues.
The three part test in ITO Terminal Operators Ltd. v Miida Electronics Inc. is somewhat easier to apply when one is addressing a matter that falls within one of the enumerated categories in ss. 22(2) of the Federal Courts Act. It has been held that claims within ss. 22(2) are necessarily nourished by Canadian maritime law and within the jurisdiction of the Federal Court. (Harry Sargeant III v. Al-Saleh, 2014 FCA 302, paras. 89-93; Siemens Canada Ltd. v. J. D. Irving Ltd., 2012 FCA 225 (CanLII), para. 35; Skaarup Shipping Corporation v. Hawker Industries Limited  2 F.C. 746)
The Federal Court's Exclusive Admiralty Jurisdiction
It is to be noted that the Federal Court's admiralty jurisdiction under section 22 is not exclusive but is concurrent. This means that, unless a specific statute provides otherwise, the provincial superior courts also have jurisdiction to hear and determine admiralty cases. Two statutes that provide otherwise are the Marine Liability Act and the Canada Shipping Act 2001. These statutes give the Federal Court exclusive jurisdiction in relation to the following matters, among others:
|Marine Liability Act
||The constitution and distribution of a limitation fund established under the LLMC Convention.
|Marine Liability Act
||The constitution and distribution of a limitation fund established under the CLC Convention.
|Marine Liability Act
||The constitution and distribution of a limitation fund established under the HNS Convention 2010, once it enters into force.
|Marine Liability Act
||Appeals from decisions by the Administrator of the Ship Source Oil Pollution Fund.
|Canada Shipping Act, 2001
||Claims for lien in respect of seamen's wages. (Note that such claims can be made in any court with an in rem procedure but only the Federal Court and the British Columbia Supreme Court have such procedures.)
For further background and a historical review of the important cases in this area please see the below papers but take note that the papers are not current and this area continues to develop.
Statutes and Regs
The database contains 39 case summaries relating to Admiralty Jurisdiction. The summaries are sorted in reverse date order with 20 summaries per page. If there are more than 20 summaries, use the navigation links at the bottom of the page.
Please note that to facilitate easier browsing and indentification of a relevant case on small devices, we have truncated the summaries which requires you to click "more" to view a full summary. If you wish to view these summaries without truncation, click here
Third Party Action - Indemnity - Jurisdiction of Federal Court
Certain Underwriters at Lloyd's and Soline Trading Ltd. v. Mediterranean Shipping Company S.A., 2017 FC 460 2017 FC 893
Précis: The Federal Court held it had no jurisdiction to adjudicate a third party claim for indemnity brought by the ocean carrier against a trucker who it alleged illegitimately obtained delivery of the cargo.
Summary not yet available
Practice - Interpleader Order - Concurrent Jurisdicition
Re: Bernard LLP v. , 2015 BCSC 2382
Précis: A law firm was entitled to interplead disputed funds notwithstanding that the Federal Court had ordered the funds paid to one of the claimants.
Facts:A yacht was ordered to be sold by the Federal Court with the proceeds of sale to be deposited into the trust account of the petitioner. Before the vessel was sold, CCAA proceedings were commenced in the British Columbia Supreme Court. In the CCAA proceedings an order was made appointing a “Vessel Construction Officer” and authorizing that officer to borrow funds to prepare a plan to complete the construction of the yacht. The “Vessel Construction Officer” borrowed $144,000 from an interested party, Sargeant, to perform this task. The Federal Court granted a first charge on the vessel for these borrowed funds. Sargeant then assigned his interest in the charge to BHT and brought an application in Federal Court to pay out the funds. That application was contested on the grounds that the assignment was fraudulent. The Federal Court ordered the funds to be paid to Sargeant. Sargeant then appealed on the grounds that the funds should have been made payable to BHT but did not obtain a stay of the order pending appeal. The petitioner then brought an application in the British Columbia Supreme Court for the right to interplead the funds and was granted such an order. Sargeant appealed.
Decision: Appeal dismissed.
Held: The central complaint is that this court should not make an interpleader order when there is an order of the Federal Court which has determined who is entitled to the funds. However, the Federal Court itself recognizes that it has limited jurisdiction to address the fraudulent allegations regarding the assignment and has further recognized that this court has jurisdiction to hear the interpleader application. The Federal Court order is not a final determination of who is entitled to the funds in these circumstances. This is a proper case for an interpleader order.
Judicial Review of Truck Licencing Decision by Port Authority - Jurisdiction of Federal Court
ATL Trucking Ltd. v. Vancouver Fraser Port Authority, 2015 FC 420
Précis: The Federal Court held that it did have jurisdiction to hear a judicial review application appealing a decision by a Port Authority denying trucking licences to the Applicants.
The Port of Metro Vancouver had been plagued with labour issues relating to the drayage of containers to and from the port for many years. In an effort to resolve the issues, the licencing system was changed to, inter alia, decrease the number of trucks used to service the Port’s requirements. The Port evaluated the licence applications received based upon various published criteria but the applications were processed in batches rather than at a single time. The Port did not advise that applications were to be evaluated in this way. The result was that some of the applications that were processed at a later point in time were denied licences even though those applicants had higher scores than applicants who had been processed earlier. A number of the applicants who were denied licences brought this proceeding for judicial review.The Port then filed this application to strike the proceeding on the basis that the Port's decision was not subject to judicial review by the Federal Court.
Decision: Motion dismissed.
Held: The Port is a “federal board, commission or tribunal” and its decision was subject to judicial review by the Federal Court.
Comment: See also Goodrich Transport Ltd. v. Vancouver Fraser Port Authority, 2015 FC 520 where the application for judicial review was allowed.
Cancellation of Ferry Service - Jurisdiction Clause - Whether the Federal Court or Provincial Courts have Jurisdiction
Demers v. Marine Atlantic Inc., 2015 QCCQ 1793
Précis: The Quebec Small Claims Court refused to give effect to a jurisdiction clause in passenger ferry ticket in favour of the Federal Court.
Facts: The plaintiffs had purchased tickets on a ferry that was scheduled to leave from the Port of Argentia but was changed to Port aux Basques, both located in Newfoundland. The plaintiffs commenced this claim in the Quebec Small Claims Court alleging that they suffered additional expenses as a result of this change. The ticket contained a jurisdiction clause that provided the Federal Court in either Newfoundland or Nova Scotia was to have exclusive jurisdiction. The defendant sought to have the case dismissed on the basis of the jurisdiction clause.
Decision: Action dismissed.
Held: The Federal Court would not have jurisdiction to hear this dispute as the claim is based on the law of contract and there is no federal law to nourish the jurisdiction of the Federal Court. The parties cannot by agreement confer jurisdiction on the Federal Court. However, the courts of Quebec are also without jurisdiction pursuant to Art. 3148 of the Civil Code which provides the courts have no jurisdiction where the parties have agreed to refer the matter to a foreign court. The appropriate court to hear the dispute is the small claims court of either Newfoundland or Nova Scotia.
Comment: This decision is clearly wrongly decided. Although most of the reported cases involving carriage of passengers by sea are decisions of provincial superior courts, the law that is applied is, almost without exception, Canadian maritime law including, where applicable, the Athens Convention. Therefore, pursuant to s. 22(1) of the Federal Courts Act, the Federal Court would have concurrent jurisdiction. (Regrettably, as with many Quebec decisions, this decision is reported only in French and the summary is based upon a translation that may be imperfect.)
Damage to Yacht while being re-positioned - Is the contract one of carriage? - Jurisdiction of Quebec Courts
St. Paul Fire & Marine Insurance Company v. Vallée, 2015 QCCQ 1891
Précis: The Court of Quebec held that a contract to deliver a yacht by sea was a services contract and not a contract of carriage.
Facts: The plaintiff was the insurer of a yacht that was damaged while being re-positioned. The yacht owner contracted with the defendant to transport the yacht from Quebec City to the State of New York. The transportation involved the defendant taking possession of the vessel and sailing it to the destination. During the voyage the yacht was damaged. The plaintiff fully indemnified its insured and commenced these subrogation proceedings against the defendant. The defendant then brought this application to dismiss the action on the basis that: (1) the Quebec courts were without jurisdiction: and, (2) no notice of claim was provided within 60 days of delivery as required by art. 2050 of the Quebec Civil Code.
Decision: Application dismissed.
Held: (1) The Quebec Court has jurisdiction in admiralty and s. 22 of the Federal Courts Act does not operate to restrict that jurisdiction. (2) The contract was not a contract of carriage but a service contract and art. 2050 does not apply. In any event, notice is not required where, as here, the carrier notifies the property owner of the damage.
Comment: Although the plaintiff in this action was the insurer of the vessel, in the common law provinces it is not usual for an insurer to be named as the plaintiff in subrogation proceedings. In the common law provinces the insured is normally the named plaintiff.
Arrest of Cargo by Unpaid Seller Set Aside - Insolvency of Buyer - s. 69 Bankruptcy Act Stays - Jurisdiction of Federal Court
LF Centennial Pte. Ltd. v. TRLU7228664 et al (Containers), 2015 FC 214
Précis: An in rem plaintiff has no right to commence proceedings and arrest in Federal Court when there are ongoing insolvency proceedings in a provincial superior court and an outstanding order under the Bankruptcy and Insolvency Act staying all proceedings.
Facts: The plaintiff is a buying agent on behalf of garment retailers and had acted as buying agent for Mexx. In December 2014 Mexx became insolvent. A stay of proceeding under the Bankruptcy and Insolvency Act was put in place and various insolvency related orders were made by the Quebec superior court. On 23 December 2014 the plaintiff commenced this in rem” proceeding against various shipments and had the cargo arrested. The plaintiff did not obtain leave from the Quebec superior court before commencing the proceeding. The plaintiff alleged it was an unpaid seller exercising its right of stoppage in transit. Mexx and its receiver brought this application to quash the arrest and strike the statement of claim.
At first instance, the Prothonotary held the plaintiff had no right to bring this proceeding without first obtaining leave from the Quebec superior court. In reaching this conclusion the Prothonotary distinguished Holt Cargo Systems Inc v ABC Containerline NV (Trustees of), 2001 SCC 90 on the basis that in Holt the ship had been arrested and sold before the bankruptcy proceedings had been commenced. The plaintiff appealed.
Decision: Appeal dismissed.
Held: Section 188(2) of the Bankruptcy and Insolvency Act is prescriptive and mandatory. It requires all courts to act in aid of the bankruptcy/insolvency court. The Prothonotary had no discretion and was bound to come to the aid of the superior court to ensure the stay was respected. The plaintiff did not obtain leave before commencing this proceeding and the proceeding is therefore ineffective. The Prothonotary correctly distinguished the Supreme Court’s decision in Holt as nowhere in that decision is there a consideration of the s. 69 stay of proceedings. A more fundamental distinction between this case and Holt is that Holt concerned bankruptcy proceedings and secured creditors whereas this matter concerns insolvency proceedings. In bankruptcy proceedings secured creditors are not affected by the stay of proceedings but the stay does apply to secured creditors in insolvency proceedings. Additionally, the plaintiff’s claim flows exclusively from a commercial contract of sale with no maritime component. The mere fact the garments were carried on a ship does not establish a sufficient connection to make it subject to maritime law. The underlying claim does not relate to shipping and navigation and does not fall within the court’s admiralty jurisdiction.
Redelivery of chartered ship with excessive bunkers - Jurisdiction of Federal Court
Aquavita International S.A. v. M/V Pantelis (Ship), 2015 FC 180
Précis: The Federal Court held that it did have jurisdiction over a claim by a sub-charterer for excessive bunkers on board the ship when re-delivered at the conclusion of the sub-charter.
Facts: The plaintiff was the sub-sub time charterer of the defendant vessel “Pantelis”. The plaintiff commenced this proceeding alleging that when it re-delivered the vessel there were bunkers aboard belonging to it and that these bunkers were consumed the defendants. The plaintiff arrested the “Pantelis”. The defendants brought this motion to strike the action and set aside the arrest on the grounds that the court was without jurisdiction.
Decision: Motion dismissed.
Held: The owners argue that s. 22(2)(m) of the Federal Courts Act has no application as the plaintiff was not a bunker supplier. However, a claim need not fall within one of the categories in s. 22(2) to be within the court’s admiralty jurisdiction. It is sufficient if a claim falls within s. 22(1) which is coextensive with Parliament’s jurisdiction over navigation and shipping What is at issue in this case “is fuel on board a ship, which fuel was allegedly used to propel her over the ocean blue. Nothing could be more maritime.”
Jurisdiction - In Rem Proceedings - Constructive Trust - Whether Alleged Proceeds of Fraud used to Construct Vessel Support In Rem Action
Harry Sargeant III v. Al-Saleh, 2014 FCA 302
Précis: The Federal Court of Appeal held that a foreign fraud judgment in a non-maritime matter could not support a claim in rem and was outside the jurisdiction of the Federal Court.
Facts: Sargeant and Worldspan entered into an agreement for the construction of a vessel by Worldspan. Sargeant advanced funds to build the vessel which were secured by a builder’s mortgage. Sargeant advanced approximately $11 million towards the construction and then entered into a loan agreement with Comerica to finance the completion of the building. Sargeant’s interest in the construction agreement was assigned to Comerica. Comerica advanced an additional $9 million towards the construction. A dispute then arose concerning the costs of construction and construction was halted. The vessel was arrested in Federal Court and Worldspan filed a petition in the British Columbia Supreme Court seeking relief under the Companies Creditors Arrangement Act (“CCAA”) of British Columbia. Pursuant to the process adopted in the two courts, in rem claims against the vessel were to be decided in the Federal Court and all other claims were to be decided in the British Columbia CCAA proceedings. Al-Saleh sought an order for leave to file an in rem claim to enforce a judgement obtained from the Florida Circuit Court. The judgment was in the amount of US$28 million and was for fraud and conspiracy to commit fraud in relation to a business scheme that had nothing to do with maritime matters. Al-Saleh alleged some of the monies of which he was defrauded were paid to Worldspan and used in the construction of the vessel and that this gave rise to an in rem claim. Sargeant opposed the application and by its own motion requested that the Al-Saleh claim be dismissed.
At first instance (unreported), the Prothonotary granted the motion of Al-Saleh, held the court had jurisdiction to adjudicate the in rem claim, recognized the Florida judgment and dismissed the motion of Sargeant. Sargeant and Comerica appealed and were successful, in part. On appeal (2013 FC 1204) the appeal Judge held that: (a) the court had jurisdiction to adjudicate the in rem claim; (b) the Sargeant motion should be dismissed; and, (c) the Florida judgment should not be recognized and enforced. With respect to the Florida Judgment, the appeal Judge held that the relief granted in that judgment did not fall within the Federal Court’s jurisdiction pertaining to Canadian maritime law and therefore could not be recognized and enforced. Sargeant and Comerica further appealed on points (a) and (b).
Decision: The appeal is allowed and the in rem claim of Al-Saleh (the “Respondent”) is dismissed.
Held: Both the Prothonotary and the appeal Judge were clearly wrong when they decided the Federal Court had jurisdiction to entertain the Respondent’s claim. The claim does not relate to any subject matter over which the court has jurisdiction. It cannot succeed and must be dismissed. The Respondent alleges that the funds of which he was defrauded were used to finance the construction of the vessel and that he therefore has an interest in the vessel. He also asserts that the doctrines of constructive trust and unjust enrichment support his claim. He finally adds that he can trace his property to the vessel. In essence, the Respondent alleges that his claim is one for an ownership interest in a ship pursuant to s. 22(2)(a) of the Federal Courts Act. The Appellant argues that a claim of an ownership interest is not sufficient to support jurisdiction. That is not correct. “There can be no doubt whatsoever that once a claim is held to fall within one of the heads found in subsection 22(2) of the Act, there is necessarily substantive maritime law to support the claim.” However, the question is, does the Respondent’s claim fall within s. 22(2)? The Respondent could not have brought in Federal Court the claim that he brought in the Florida court as it has nothing to do with maritime law. This is why the appeal Judge correctly refused to recognize the Florida judgment. There must be a body of federal law essential to the disposition of the case before the Federal Court has jurisdiction. There is no such federal law here. Further, the Respondent’s claims are not “so integrally connected to maritime matters as to be legitimate Canadian maritime law within federal competence”. Rather the claim raises issues that are within the exclusive legislative jurisdiction of the provinces.
Comment: Perhaps the most interesting point made in this decision is the statement that where a claim falls within s. 22(2) of the Federal Courts Act there is necessarily substantive maritime law to support it.
Jurisdiction - FOB Contract of Sale - Liability of Vendor/Shipper to Indemnify Purchaser/Charterer for Demurrage and other Expenses
Arcelormittal Mines Canada Inc. v. AK Steel Corporation, 2014 FC 118 2014 FCA 287
Précis: The Federal Court of Appeal confirmed the trial judgment holding that the sale of cargo to be transported by ship was a matter of navigation and shipping, and within the jurisdiction of the Federal Court and further confirming the judgment for indemnity obtained by the purchaser of a cargo of iron ore pellets against the vendor of the pellets on the basis that the pellets delivered had excessive moisture content.
Facts: The plaintiff was the purchaser of a cargo of iron ore pellets and the voyage charterer of the “Rt. Hon. Paul J. Martin”, a self-unloading bulk carrier and the ship that was to carry the pellets. The defendant was the vendor of the pellets. The cargo was sold FOB ship’s hold. The terms of sale specified the cargo was to have a maximum moisture content of 2.5% (to prevent freezing) and required the vendor to indemnify the purchaser for additional costs incurred in the event the pellets were frozen. The cargo of iron ore pellets was loaded in very cold weather, about -18 degrees Celsius, at Port Cartier, Quebec. The “Rt. Hon. Paul J. Martin” then sailed to Toledo, Ohio where it was to discharge the cargo. Upon discharge it was discovered that the cargo was frozen and, as a consequence, the plaintiff was required to pay to the ship owner demurrage, additional loading costs and costs to repair damage to the ship during the unloading. The plaintiff brought this indemnity action against the defendant alleging that the moisture content of the cargo was in excess of that required by the contract of sale. The defendant argued that it was not in breach of its contract with the plaintiff, that the cause of the loss was the failure of the carrier to properly load, carry and discharge the cargo and that it had not been given timely notice of the alleged breach of contract.
At trial (2014 FC 118), the Judge addressed two issues; whether the Federal Court had jurisdiction; and whether the defendant was liable. On the first issue, the trial Judge held that the claim was really about the suitability or fitness of the cargo for transport, a matter of navigation and shipping, and therefore within the maritime jurisdiction of the Federal Court. On the second issue the trial Judge held that the cause of the freezing was the excessive moisture content of the pellets and was not due to any fault on the part of the carrier. The Judge further held the defendant was aware of the breach before the plaintiff and did not require notice. Accordingly, judgment was rendered for the plaintiff. The defendant appealed the substantive finding that it was liable (but apparently not the decision concerning the jurisdiction of the Federal Court).
Decision: Appeal dismissed.
Held: The appellant challenges the trial Judge’s findings on liability, reasonable notice, and spoliation. These are, however, questions of fact or mixed fact and law and the appellant must show the Judge committed a palpable and overriding error. The appellant has failed to meet this threshold. The Judge’s findings are supported by the evidence.
Action Against Insurance Broker - Applicability of Canadian Maritime Law - Jurisdiction of Federal Court
Coastal Float Camps Ltd. v. Jardine Lloyd Thompson Canada Inc., 2014 FC 906
Précis: The Federal Court refused to strike a claim for negligence against a marine broker as it was not “plain and obvious” the court was without jurisdiction.
Facts: The plaintiff’s vessel capsized and sank on 5 November 2009. The plaintiff’s insurer denied coverage on the grounds of material non-disclosure and misrepresentation. The plaintiff commenced this action against the insurer for a declaration that the loss was covered. The plaintiff later amended the statement of claim to include a claim against its marine broker for negligence and breach of contract. The broker then brought this application to strike the allegations against it on the grounds that the Federal Court had no jurisdiction in respect of those claims.
Decision: Application dismissed.
Held: The applicable test on a motion to strike is whether it is plain and obvious the claim discloses no reasonable cause of action. The fact that a claim is novel or difficult is not sufficient. “The burden on the defendant is very high and the Court should exercise its discretion to strike only in the clearest of cases.” The broker relies upon the decision in Intermunicipal Realty & Development Corp v Gore Mutual Insurance Co,  2 FC 691 where it was held the Federal Court did not have jurisdiction over a marine insurance broker in agency and misrepresentation. However, the plaintiff cites a number of authorities that show the law concerning the jurisdiction of the Federal Court has evolved considerably since Intermunicipal Realty was decided and that it may no longer be good law. In the circumstances, it is not plain and obvious the plaintiff’s claim cannot succeed.
Pleadings - Striking - In Rem Actions - Arrest - Shareholder Dispute - Federal Court Jurisdiction
General MPP Carriers Ltd. v. SCL Bern AG, 2014 FC 571
Précis: The Federal Court has no jurisdiction over a shareholders dispute even though the company was a “one ship company”.
Facts: The plaintiff loaned the first defendant US$5 million for a 40% interest in the defendant ship "SCL Bern". The loan was secured by a shareholders agreement granting the plaintiff 40% of the shares of the second defendant, the owner of the "SCL Bern". The remaining 60% of the shares were owned by the first defendant. The shareholders agreement included provisions concerning a right of first refusal and prohibiting the disposal of shares. In particular, the plaintiff was prohibited from disposing of its shares to third parties but could require the second defendant to purchase its shares at a specified price upon the giving of notice. The plaintiff alleged that it gave the appropriate notice but the second defendant refused to purchase the shares. The plaintiff commenced proceedings in Switzerland and obtained judgement against the second defendant, which was under appeal. The plaintiff then commenced these proceedings and arrested the "SCL Bern". The plaintiff alleged it was a part owner of the "SCL Bern" and that it had suffered damages as a result of the defendant's breach of the shareholders agreement. In the alternative, the plaintiff alleged that the $5 million loaned was secured by a mortgage or charge on the "SCL Bern". The defendants brought this motion to strike the in rem action and set aside the arrest on the basis that the Federal Court had no jurisdiction.
Decision: The in rem action is struck and the arrest set aside.
Held: The test for striking pleadings is whether it is plain and obvious the claim discloses no reasonable cause of action. The onus on the party seeking to strike pleadings is a heavy one. The evidence discloses that the registered owner of the "SCL Bern" is the second defendant and there is no mortgage or charge registered against the vessel. The plaintiff acquired an interest in the shares of the second defendant, not an ownership interest in the vessel. It is quite clear that the plaintiff's claims arise from alleged breaches of the shareholders agreement concerning the sale of shares. The dispute is therefore one of corporate law not maritime law. The subject matter is not so integrally connected to maritime matters as to fall within maritime law.
Insolvency Proceedings - Judicial Sale of Ship -Competing Jurisdiction of Federal Court and Provincial Superior Court
Roynat Inc v. Phoenix Sun Shipping Inc, 2013 ONSC 7308
Précis: The Ontario Superior Court referred applications concerning the sale of a ship to the Federal Court on the grounds that deference had to be paid to the Federal Court Proceedings.
The ship “Phoenix Sun” was arrested in Federal Court proceedings by two creditors. The mortgagee subsequently commenced proceedings in the Ontario Superior Court and obtained an order for the appointment of a receiver over the assets of the ship owner. The mortgagee also obtained a very detailed sales order from the Federal Court that, among other things, appointed the receiver as “Acting Admiralty Marshall” to sell the ship and set up a priorities claims process. The receiver found a buyer for the ship and now brought applications in the Ontario Superior Court for an order approving the sale and for directions regarding the disposition of the sale proceeds.
Decision: The applications should not be brought in the Ontario Superior Court but in the Federal Court.
Held: Although the provincial superior courts and the Federal Court have overlapping jurisdiction in maritime law matters, a creditor must take great care that it sets up a process by which one court will have primary carriage of the realization proceedings. Once in rem proceedings are commenced in the Federal Court the provincial superior court should pay due regard or deference to the Federal Court proceedings. Considering the extensive order made by the Federal Court, it is not appropriate for the Ontario Superior Court to exercise any of its jurisdiction and the motion should be brought before the Federal Court. Any residual matters the Federal Court cannot deal with can then be brought in the Ontario Superior Court.
Federal Court Jurisdiction- Crown Immunity - Federal Court Has No Jurisdiction Over Province
Alberta (Canada) v. Toney, 2012 FC 1412 2013 FCA 217
Précis: The Federal Court of Appeal held that the Federal Court had no in personam jurisdiction over the Province of Alberta.
This was an in rem and in personam action against both the federal and provincial crowns and a vessel owned by the Alberta government. The action concerned a fatal accident that occurred on an Alberta lake. The plaintiffs alleged that the defendants were negligent in their performance of search and rescue duties. The Province of Alberta objected to the jurisdiction of the Federal Court over it and initially brought a motion to strike the statement of claim. That application was dismissed (see: Canada v Toney, 2011 FC 1440 and 2012 FCA 167). The parties then agreed that the issue of the in personam jurisdiction of the Federal Court over the Province of Alberta should be determined as a question of law and Alberta brought this application for such a determination. Alberta argued that the doctrine of Crown immunity applied and that it could not be bound by a federal statute. The motions Judge disagreed and held (at 2012 FC 1412) that the Federal Court did have in personam jurisdiction. In reaching this decision the motions Judge noted that the Federal Court had subject matter jurisdiction and further noted that s. 3 of the Marine Liability Act and s. 43(7) of the Federal Courts Act both permitted actions against a province. The Province of Alberta appealed.
Decision: Appeal allowed.
Held: The four basic principles are: first, the Crown (both federal and provincial) is prima facie immune from legislation; second, where Parliament (the federal Crown) has the authority to legislate in an area, a provincial Crown will be bound where Parliament so chooses; third, in order for a provincial Crown to be sued in the Federal Court, there must be some legislative provision permitting it; and fourth, the Federal Court must have jurisdiction over both the subject matter and the parties. The question is whether there is a legislative provision indicating a clear intent by Parliament to bind the province. The possibilities are ss. 22 and 19 of the Federal Courts Act and the Alberta Proceedings Against the Crown Act. Section 22 of the Federal Courts Act (granting jurisdiction “between subject and subject as well as otherwise”) does not contain a clear expression of intention to bind a Province. Section 19 of the Federal Courts Act (intergovernmental disputes) does not apply to claims by a private citizen and is therefore of no assistance. Finally, even though the Alberta Proceedings Against the Crown Act does not expressly reserve jurisdiction to the courts of Alberta, it also does not expressly grant jurisdiction to the Federal Court. In result, the appeal is allowed and the Federal Court has no in personam jurisdiction over the Province of Alberta.
Jurisdiction - Sale of Property not in Canada
SDV Logistiques (Canada) Inc. v. Dieselgenset Type 8M 25, Engine No. 45085 EX the Barge Andrea, 2013 FC 671
Précis: The court held that it had no jurisdiction to sell property that was not located in Canada.
The plaintiff, at the request of a ship builder, arranged for the pick-up and storage of generators at the Port of Hamburg. The generators were intended to be installed in two vessels being built by the builder. The builder originally paid the storage charges but ran into financial difficulties and ceased to make payments leaving the plaintiff with a debt owing of in excess of $200,000. The plaintiff brought these proceedings in personam against the successor of the builder and the mortgagee of the vessels and also brought in rem proceedings against the generators and other cargo. A Warrant of Arrest was issued but was never served with the result that the action proceeded solely as an in personam action. The plaintiff, nevertheless, brought a motion pursuant to Rule 379 for an order that the generators be sold. At first instance, the Prothonotary refused the order. The plaintiff appealed.
Decision: Appeal dismissed.
Held: Rule 379 cannot be applied because the generators are not and have never been in Canada and there is no evidence the generators are likely to deteriorate. Further, for the court to order the sale of property outside of the jurisdiction, there must be some enabling statutory provision and there is none. Consequently, the court has no jurisdiction to issue the order requested.
Federal Court Jurisdiction over Provincial Crown – Practice – Pleadings - Motion to Strike
Ship Source Oil Pollution Fund v. British Columbia (Finance), 2012 FC 725
Précis: The admiralty jurisdiction of the Federal Court was held to include jurisdiction in actions against a provincial crown. (This is probably no longer good law. See the "Comment" in the summary.
This action by the plaintiff was pursuant to the Marine Liability Act to recover costs it paid to clean up oil pollution from a vessel that sank in Brittania Bay, British Columbia. The defendant was the Crown in right of the Province of British Columbia who had allegedly became the “owner” of the vessel when its registered and beneficial owner was dissolved under the Society Act of British Columbia. The BC Crown brought this application to strike the claim on various grounds including that the Federal Court does not have in personam jurisdiction against it or, alternatively, that that Federal Court is without subject matter jurisdiction because the issue of ownership depended on provincial law.
Decision: Application dismissed.
Held: The test on a motion to strike for lack of jurisdiction is whether it is plain and obvious the claim discloses no reasonable cause of action. For the purpose of the application, the allegations of fact in the pleadings are accepted as proved unless patently ridiculous or incapable of proof. The onus is on the party moving to strike the pleading. The BC Crown is asking the Federal Court to engage in a complex exercise of statutory interpretation to justify the “draconian” measure of striking the Statement of Claim. “A motion to strike is not the proper forum to make a final determination on such weighty matters.” Alberta v Toney, 2012 FCA 167, is dispositive of the issue and, in any event, it is not plain and obvious the Federal Court is without jurisdiction. Jurisdiction is based on a three part test: there must be a statutory grant of jurisdiction; there must be an existing body of federal law essential to the disposition of the case that nourishes the statutory grant; and, the law on which the case is based must be “a law of Canada” within the meaning of s.101 of the Constitution Act. Section 22(2)(d) of the Federal Courts Act grants jurisdiction with respect to “damage done by a ship” and the sinking of a ship resulting in pollution is arguably damage within the meaning of s. 22(2)(d). There is case authority that the Federal Court has jurisdiction over a claim against a province as owner of a vessel where the claim is a maritime claim. Section 43(7) of the Federal Courts Act also suggests the Federal Court has in rem jurisdiction against a ship owned by a province. Section 3 of the Marine Liability Act also expressly provides that act is binding on a province. At the very least it is not plain and obvious the Federal Court does not have personal jurisdiction over the BC Crown. The fact that the ownership issue may require the application by the Federal Court of provincial law does not matter. The ancillary application of provincial law does not affect the jurisdiction of the Federal Court.
Comment: It is now clear that the Federal Court does not have jurisdiction over a province as decided in Alberta (Canada) v. Toney, 2013 FCA 217.
Federal Court Jurisdiction - Action vs Provincial Crown - In Rem Proceedings
Canada v. Toney, 2011 FC 1440 2012 FCA 167
This was an in rem and in personam action against both the federal and provincial crowns and a vessel owned by the Alberta government. The action concerned a fatal accident that occurred on an Alberta lake. The plaintiffs alleged that the defendants were negligent in their performance of search and rescue duties. The Alberta defendants moved to strike the in rem action on the basis that the vessel had been sold prior to the commencement of the action and also moved to strike the in personam action against them on the basis that actions against a provincial crown should be commenced in the provincial courts. The federal defendants also moved to stay the action or to have it struck as an abuse of process. At first instance, the trial Judge allowed the motions only with respect to the action in rem. The trial Judge held that the sale of the vessel prior to the commencement of the action did defeat the action in rem but it did not affect the action in personam. The trial Judge (2011 FC 40) held that the fact one of the defendants was a provincial crown was irrelevant as the action (and the Federal Court’s jurisdiction) was not grounded in s. 17 of the Federal Courts Act (which governs actions against the Federal Crown) but in s.6 and following of the Marine Liability Act. The Alberta defendants appealed.
Decision: Appeal dismissed.
Held: The Federal Court of Appeal Court noted that it was undisputed the plaintiffs’ claims fall within the subject of navigation and shipping and within the express terms of section 22 of the Federal Courts Act. It was not plain and obvious that the Federal Court was without jurisdiction.
Comment: In Toney v. Canada, 2012 FC 1412, the same point was brought to the court on a question of law (as opposed to the above case which was a motion to strike). At first instance the Federal Court held that it had jurisdiction in personam against a province in a maritime matter. However, on appeal, at 2013 FCA 217, the Federal Court of Appeal held that the Federal Court has no jurisdiction over a provincial crown.
Brokerage contract – Jurisdiction – Canadian Maritime Law
Alcan Primary Metal v. Groupe Maritime Verreault Inc, 2011 FCA 319
This case concerned whether the Federal Court had the jurisdiction to determine a dispute between the parties involving alleged breaches of a brokerage contract relating to tugs. The parties had entered into a contract whereby the plaintiff was to be paid a commission in the event that it found a tug or tugs that met the needs of the defendant. The plaintiff claimed it was owed commission under the contract and brought this action to recover the commission. The defendant responded by challenging the jurisdiction of the Federal Court. At first instance, the Motions Judge dismissed the motion finding that the contract was maritime in nature and fell within Canadian maritime law. The Federal Court of Appeal affirmed the Motions Judge. The Court did not accept that there was any distinction to be drawn between the purchase of a tug and brokerage services that enable the purchase. The Court held the two were inseparable.
Federal Court Jurisdiction - Dispute Between Shareholders over Funds in Court
JP Morgan Chase Bank v. Mystras Maritime Corporation, 2010 FC 1053
This matter concerned a dispute between two former shareholders and directors of the judgment creditor concerning who was entitled to the proceeds of an in rem action. The Court held that it was without jurisdiction to determine the dispute which was held not to be integrally connected to maritime matters.
Enforcement of Foreign Judgements – Proper Test – Attornment – Application of Provincial Statutes
Morgan v. Guimond Boats Ltd., 2006 FCA 401
In this matter the Plaintiff, a resident of Hawaii, commenced proceedings against the Defendant, a New Brunswick company, in Hawaii in relation to a contract for the design, manufacture and sale of a boat. The Defendant unsuccessfully contested the jurisdiction of the Hawaiian courts, filed a Statement of Defence to the action and participated in a pre-trial conference before withdrawing from the action. The Plaintiff subsequently obtained a default judgment against the Defendant and then brought this action and motion for summary judgement to enforce of the U.S. judgment. The Defendant contested the motion on the ground, inter alia, that the U.S. Court was without jurisdiction. At first instance, the motions Judge held that the appropriate test was whether there was a “real and substantial connection” with the foreign jurisdiction and noted that a fleeting or relatively unimportant connection will not be enough. The motions Judge further held that the connection with Hawaii was such a fleeting or unimportant connection given that the preliminary contract negotiations between the parties, the execution of the work, the delivery of the boat and the payment for the boat all occurred in New Brunswick and the contract was governed by the law of New Brunswick. The Plaintiff's main argument was that the Defendant had attorned to the jurisdiction of the Hawaiian courts. On this issue the motions Judge said that the law of attornment was in a state of flux and suggested that attornment could only bolster an otherwise real and substantial connection. In result, the motion for summary judgment was dismissed. On appeal to the Federal Court of Appeal, however, the Court of Appeal held that attornment to a foreign court was not simply a factor to take into account in determining whether there was a real and substantial connection with the foreign court but was determinative. The Court of Appeal further held that the Defendant had attorned to the Hawaiian courts by filing a defence and participating in settlement conferences. Accordingly, the Court of Appeal allowed the appeal and recognized the foreign judgment. (A noteworthy issue dealt with by the motions Judge but not addressed in the Court of Appeal was whether the Foreign Judgments Act of New Brunswick had any application. The motions Judge held that the statute, being a provincial statute, can have no application to Canadian maritime law, even in the absence of applicable federal legislation.)
Jurisdiction – Personal Injury During Boat Trailering - Limitation of Liability
Isen v. Simms, 2006 SCC 41
The Defendant was injured when a bungee cord that was being used to secure the engine cover of a small pleasure boat slipped from the hands of the Plaintiff shipowner and struck the Defendant in the eye. At the time of the incident the pleasure boat had just been removed from the lake and was on a trailer being prepared for road transportation. The Defendant commenced proceedings against the Plaintiff in the Ontario Supreme Court for damages in excess of $2,000,000. The Plaintiff commenced this action in the Federal Court to limit his liability to $1,000,000 and brought this application under Rule 220(1)(c) of the Federal Court Rules to determine a question of law, namely: whether the facts and circumstances constituted “claims arising on any distinct occasion involving a ship with a tonnage of less than 300 tons” pursuant to section 577(1) of the Canada Shipping Act. The Defendant contested both the jurisdiction of the Federal Court and the substantive relief sought. The Federal Court and the Federal Court of Appeal both held that the claim was a maritime law claim that was subject to the limitation of liability. On appeal to the Supreme Court of Canada, the Supreme Court held that the matter was governed by provincial law, that the Federal Court was without jurisdiction and that the limitation was not applicable. In reaching this conclusion Rothstein J. noted that Parliament did not have jurisdiction over pleasure craft per se and that the Court must look at the allegedly negligent acts “and determine whether that activity is integrally connected to the act of navigating the pleasurecraft on Canadian waterways such that it is practically necessary for Parliament to have jurisdiction over the matter”. Although he agreed with the Federal Court of Appeal that launching of pleasurecraft and their retrieval from the water would be within Parliament's jurisdiction over navigation, he did not agree that the securing of the engine cover with a bungee cord was part of the retrieval process. He stated that the securing of the engine cover had nothing to do with navigation and everything to do with preparing the boat to be transported on provincial highways.