Constitutional Issues in Maritime Law
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.
Constitutional Issues/Canadian Maritime Law
The cases under this topic consider the division of powers between the federal and provincial governments under the Constitution Act in relation to maritime matters. Such issues normally arise where a provincial law of general application purports to apply to a fact situation with a marine component or where a provincial law provides a different remedy than Canadian maritime law. (It should be noted that constitutional issues can arise in cases concerning the Admiralty jurisdiction of the Federal Court and, for this reason, cases digested under the topic Admiralty Jurisdiction may also be relevant and should be consulted.)
The analytical framework to be used in a division of powers analysis has changed significantly over the years and, in particular, since 2007. Prior to 2007, in division of powers disputes, the constitutional doctrine of interjurisdictional immunity was frequently applied to render provincial statutes inapplicable to matters within federal legislative jurisdiction. In Canadian Western Bank v. Alberta, 2007 SCC 22 (a non-marine case) and British Columbia (Attorney General) v. Lafarge Canada Inc., 2007 SCC 23, the Supreme Court of Canada was extremely critical of the interjurisdictional immunity doctrine finding that it unfairly favoured parliament over the provincial legislatures, created uncertainty and was not compatible with "flexible federalism". To rectify these perceived inequities, the Supreme Court modified the analytical framework to be used in division of powers disputes. The currently applicable analytical framework is as follows:
1. Pith and Substance: The first step is to analyze the pith and substance of the impugned legislation. This involves an inquiry into the true nature of the law in question to identify the "matter" to which it essentially relates. Two aspects of the law must be considered; the purpose of the enacting legislature in adopting it and the legal effect of the law. If the pith and substance analysis leads to the conclusion that the law is in relation to a matter coming within the legislative jurisdiction of the enacting body under the Constitution Act, then it is valid and the potential application of the interjurisdictional immunity and paramountcy doctrines must be considered. If the pith and substance analysis leads to the conclusion that the law is invalid, that is the end of the matter.
2. After the pith and substance analysis, the court should generally proceed to a consideration of the doctrine of paramountcy before interjurisdictional immunity. The potential application of the interjurisdictional immunity doctrine should generally be considered only where there is prior case law favouring its application to the subject matter at hand. The doctrine is of limited application and should generally be reserved for situations already covered by precedent.
3.Paramountcy: Paramountcy involves an inconsistency between the provincial enactment and the federal enactment. Where a provincial statute is inconsistent with a federal statute, the provincial law is inoperative to the extent of the inconsistency. The inconsistency can be actual conflict in operation such as where one statute says "yes" and the other "no". Inconsistency can also arise when the provincial statute has the effect of frustrating the purpose of the federal statute. The standard for frustration of purpose is high. A provincial statute will not be found to frustrate the purpose of a federal statute merely because it restricts a permissive federal statute.
4. Interjurisdictional Immunity: Prior to 2007, the interjurisdictional immunity doctrine was invoked whenever a provincial law "affects" a vital or essential part of a federal power or undertaking. The so-called "affects" test was modified in Canadian Western Bank v. Alberta and British Columbia (Attorney General) v. Lafarge Canada Inc. such that the doctrine now only applies when the provincial law "impairs", without necessarily sterilizing or paralyzing, the “basic, minimum and unassailable content” or “core” of the federal legislative power in question. "Impairs" implies that there must be adverse consequences. The "core" of a federal legislative power means “the minimum content necessary to make the federal power effective for the purpose for which it was conferred”.
The new analytical framework developed for division of powers disputes would appear to make it more likely that provincial laws of general application will apply to matters that are otherwise governed by Canadian maritime law. Recent examples include: R. v. Mersey Seafoods Ltd.,2008 NSCA 67 (occupational health and safety legislation); Jim Pattison Ent. v. Workers' Compensation Board, 2011 BCCA 3 (occupational health and safety legislation); and, Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44 (workers' compensation legislation). However, there are also many recent cases where provincial laws were held not to be applicable, including, British Columbia (Attorney General) v. Lafarge Canada Inc., Chalets St-Adolphe inc. v. St-Adolphe d'Howard (Municipalit de), 2011 QCCA 1491 and West Kelowna (District) v. Newcombe, 2015 BCCA 5, all of which concerned municipal by-laws.
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 41 case summaries relating to Constitutional Issues in Maritime Law. 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.
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Mortgage - Innocent Purchaser - Validity of Foreign Mortgage - Limitation Period Applicable
Lakeland Bank v. The Ship NEVER E NUFF, 2016 FC 1096
Précis: The Federal Court gave judgment in rem in favour of a U.S. mortgagee notwithstanding the sale of the vessel to an innocent purchaser. Provincial laws requiring registration of a mortgage have no application. Ship's mortgages are governed by Canadian maritime law.
No summary available.
Sale of Marine Crankshaft - Product Liability - Defects -Exclusion Clause - Application of Provincial Law
Transport Desgagnes Inc. v. Wartsila Canada Inc., 2015 QCCS 5514
Précis: The Quebec Superior Court held that the sale of a marine engine was governed by provincial law and that pursuant to such law the vendor's limitation clause could not be relied on.
Facts: The plaintiff purchased a new bedplate and reconditioned crankshaft from the defendant for installation in one of its vessels. The defendant assembled and mounted the crankshaft to the bedplate in November 2006 and delivered both items to the plaintiff at Halifax in February 2007. On 27 October 2009, after 13,653 running hours, the new crankshaft suffered a catastrophic failure. The plaintiff commenced this proceeding for damages in excess of $5.6 million. It was undisputed that the failure was caused by insufficient tightening of “the big end stud of the connecting rod of unit 5L”. The plaintiff alleged that the crankshaft was defective when delivered whereas the defendant alleged the plaintiff was responsible for the improper tightening during routine maintenance. The defendant also relied upon the terms of the sale contract between the parties which provided a six month limited warranty and a limitation of liability equivalent to approximately $80,000. The plaintiff argued that the limitation of liability was invalid in the circumstances and pursuant to the Civil Code of Quebec.
Decision: The plaintiff is entitled to judgment.
Held: The issues in the case are: (1) whether the transaction is governed by Canadian maritime law or Quebec civil law; and, (2) based on such governing law, is the defendant liable or entitled to limit its liability.
(1) With respect to the applicable law, this matter relates to a contract of sale and such contracts are not integrally connected to the pith and substance of Parliament’s jurisdiction over navigation and shipping. Although related to maritime activities, this matter is not integrally connected with same. Moreover, there is no practical necessity for a uniform federal law to prescribe the rules governing a seller’s obligations. The fact that such rules may vary by province does not hinder the efficient and coherent conduct of the activities of navigation and shipping. Therefore, as the contract of sale was formed in Quebec, it is the laws of Quebec that apply.
(2) Pursuant to the Civil Code of Quebec: a seller of property is required to warrant that the property to be sold is free of latent defects (art. 1726); in the case of a sale of property by a “professional seller”, a defect is presumed to have existed at the time of sale if the property malfunctions or deteriorates prematurely (art. 1729); and, a seller may not exclude or limit liability unless the defects of which he was aware or could not have been unaware are disclosed (art. 1733). These provisions apply here. The defect is presumed to have existed at the time of sale and this presumption has not been rebutted on the balance of probabilities. The defendant, as a professional seller, is presumed to have known of the existence of a defect at the time of sale and is deemed to be acting in bad faith. This has the effect of rendering any exclusion or limitation clause invalid unless the seller rebuts the presumption of bad faith. Evidence of the seller’s good faith or ignorance of the defect or honest belief in the adequacy of the product sold is not enough. The seller must either demonstrate that the buyer or a third person caused the defect or that only scientific or technological discoveries made after the product was sold would have permitted discovery of the defect at the time of sale.
Comment: The constitutional analysis in this case is deficient but the result may be correct. There would seem to be relatively little doubt that the sale of a piece of equipment installed on a ship, such as a crankshaft, is subject to federal Canadian maritime law, as has been held in a number of cases. However, the provinces also have prima facie jurisdiction over such a sale. The real constitutional issue is whether the doctrines of paramountcy or inter jurisdictional immunity apply to render the provincial law inoperative or ineffective.
Constitutional Law - Validity of Municipal By-law restricting motor boats on lake
Marcoux v. St-Charles-de-Bellechasse (Municipalité de), 2015 CanLII 59742
Précis: A municipal bylaw restricting the types of vessels that could be operated on a lake was held to be invalid.
Facts: The appellants were convicted of violating a municipal by-law that prohibited the use of certain watercraft on a lake. The appellants challenged the constitutional validity of the by-law on the grounds that it concerned navigation and shipping, a federal power. The municipality justified the by-law on the basis that it was part of a multifaceted strategy to protect the environment and was therefore valid under the ancillary powers doctrine. At first instance, the trial judge agreed with the municipality and held the by-law to be valid. The appellants appealed.
Decision:The appeal is allowed and the appellants are acquitted.
Held:The protection of the environment is a shared jurisdiction between the provinces and Federal Government and both levels of government should take a cooperative and coordinated approach to such matters. The legal analysis should be undertaken with these considerations in mind. The first part of the analysis is to identify the pith and substance, the primary purpose or dominant characteristic, of the impugned legislation. Once the matter has been classified the second step is to classify it under one of the heads of power in the Constitution Act.
The municipality admits that the pith and substance of the by-law is navigation which is within federal jurisdiction but says it is saved by the ancillary powers doctrine. The ancillary powers doctrine recognizes that a degree of jurisdictional overlap is inevitable. Under the doctrine an otherwise invalid law can be saved “where it is an important part of a broader legislative scheme that is within the jurisdiction of the enacting level of government”. However, the municipality has not proven the existence of a complex regulatory scheme which would permit the application of the doctrine. Moreover, the seriousness of the intrusion of the impugned measure must be assessed relative to its degree of integration in the scheme. A serious intrusion requires a high degree of integration. The by-law here is a serious intrusion into the federal power over navigation and shipping and, if such intrusion was allowed, would have the effect of eviscerating the federal power. The by-law is therefore invalid and not saved by the ancillary powers doctrine. Additionally, the interjurisdictional immunity doctrine applies and the by-law is inapplicable. Control of navigation on lakes is at the core of the federal power over navigation. Finally, if the by-law was valid and applicable, it would deprive the federal government of its power to decide navigational restrictions under the Vessel Operation Restriction Regulations. This would be an operational conflict giving rise to the paramountcy doctrine and rendering the by-law inoperative.
Fire Damage to Vessel While Being Repaired – Applicable Law - Direct Action Against Insurer – Liability of Repairer
Langlois v. Great American Insurance Company, 2015 QCCS 791
Précis: The Quebec Superior Court held that there was a right of direct action against the insurer of a ship repair yard under the provisions of the Civil Code.
Facts: The plaintiff’s fishing boat was damaged by fire while it was being repaired/welded at a ship yard. The plaintiff’s boat was insured by the defendant, GAIC, who was also the liability insurer of the shipyard. GAIC assigned an adjuster who obtained several quotes to repair the damage caused by the fire but no agreement was reached between the plaintiff and GAIC as to the extent of the damage and necessary repairs. The plaintiff later hired his own surveyor whose estimate of damage and repairs was approximately twice that of GAIC’s adjuster. GAIC then retained another surveyor for yet another estimate and submitted a cheque to the plaintiff in the amount of $781,000 “as full and final payment”. The plaintiff commenced this action against both GAIC and the shipyard.
Decision: Judgment for the plaintiff.
Held: The first issue is whether the applicable law is Canadian maritime law or the Quebec Civil Code. As was held in Triglav v. Terrasses Jewellers Inc,  1 SCR 283, Canadian maritime law applies to contracts of marine insurance and, therefore, the Civil Code is not applicable to that part of the claim against GAIC. However, as to the claim against the ship yard and GAIC as its insurer, the applicable law is the Civil Code because the repairs were being done on dry land and there were no navigation or maritime operations involved. The plaintiffs therefore have a direct cause of action against GAIC as the liability insurer of the shipyard pursuant to articles 2501 & 2628 of the Civil Code. With respect to the amount the plaintiff is entitled from GAIC under his own insurance policy, the plaintiff is entitled to an additional $69,000. With respect to the liability claim, there is a strong presumption that the shipyard is liable given the fire started while welding was being done and this presumption has not been rebutted.
Comment: (1) This decision is reported in French only and the summary is based upon a translation that may be imperfect. (2) The holding that the liability claim against the ship yard is not subject to Canadian maritime law is doubtful. Since Wire Rope Industries v B.C. Marine Shipbuilders,  1 S.C.R. 363, there has been no doubt that contracts and torts involving ship repair are subject to Canadian maritime law. However, this would not necessarily mean that articles 2501 and 2628 of the Civil Code would not apply. They may well apply incidentally pursuant to the double aspect doctrine.
Application of Municipal By-law prohibiting mooring - By-law In applicable - Interjurisdictional Immunity - Public Right of Navigation - Right to Anchor
West Kelowna (District) v. Newcombe, 2013 BCSC 2299 2015 BCCA 5
Précis: The British Columbia Court of Appeal affirmed the decision of the Trial Judge (2013 BCSC 1411) that anchoring/mooring was a core element of Federal jurisdiction over navigation and shipping and a municipal by-law prohibiting mooring was constitutionally inapplicable pursuant to the doctrine of interjurisdictional immunity to the extent it prohibited temporary moorage.
Facts: The plaintiff, the District of West Kelowna, passed a bylaw in 2009 that permitted only “temporary boat moorage accessory to the use of the immediately abutting upland parcel”. The defendant/respondent, who did not own any “upland parcel”, moored his house boat in an area governed by the bylaw until he was issued a notice to relocate. He then moved his house boat to another anchorage that was also within the area governed by the bylaw. The plaintiff then brought these proceedings for an injunction against the defendant and any other person with notice of the order. The defendant challenged the constitutional validity of the bylaw.
At first instance (2013 BCSC 2299), the trial Judge held that, although constitutionally valid, the bylaw had to be read down so as not to prohibit temporary moorage which was within the protected core of exclusive federal constitutional jurisdiction over “navigation and shipping”. The trial Judge nevertheless held that the defendant was in breach of the bylaw as his moorage was not temporary. Both parties appealed.
Decision: Appeal dismissed.
Held: The trial Judge correctly held that the purpose and pith and substance of the impugned bylaw were to regulate land use including land use of the foreshore. “Land use” is inherently local and within the constitutional jurisdiction of a province under s. 92(13) [Property and Civil Rights] and s. 92(16) [Matters of a merely local or private Nature] of the Constitution Act. But the double aspect doctrine is also applicable. The trial Judge was correct in addressing “the ambit of moorage rights incidental to navigation as part of the interjurisdictional immunity analysis” and correctly read down the impugned provisions. The defendant relies upon Ordon v Grail,  3 S.C.R 437, for the proposition that it is constitutionally impermissible for a validly enacted provincial statute of general application to affect matters coming within the exclusive jurisdiction of Parliament. However, Ordon v Grail was overturned by the Supreme Court in Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44.
Comment: It might not be entirely correct to say, as the Court of Appeal did, that Ordon v Grail was overturned by Marine Services International Ltd. v. Ryan Estate. Although the analysis and tests used in Ordon v Grail have clearly been modified by Ryan Estate (and Canadian Western Bank v. Alberta, 2007 SCC 22 and British Columbia (Attorney General) v. Lafarge Canada Inc., 2007 SCC 23) the Supreme Court of Canada has been careful to not expressly overturn the holding in Ordon v Grail that maritime negligence law is subject to interjurisdictional immunity.
Athens Convention - Limitation Period - Provincial Limitation Laws not Applicable - Change in legislation not given retrospective effect - No Discretion to Extend Limitation Period - Choice of Provincial Law in Contract
Malcolm v. Shubenacadie Tidal Bore Rafting Park Limited, 2014 NSSC 217
Précis: The Nova Scotia Supreme Court held that the limitation period applicable to a river rafting accident that occurred prior to the 2009 amendments to the Marine Liability Act, was the two year limit in the Athens Convention which could not be extended even though the plaintiff was an infant.
Facts: In August 2008 a twelve year old boy fell out of a zodiac owned and operated by the defendant while participating in a rafting excursion on the Shubenacadie River. Although the boy suffered immediate personal injuries which required treatment, this action in the Nova Scotia Supreme Court was not commenced by his litigation guardian until 23 May 2013. The defendant brought this motion to strike the statement of claim on the basis that the limitation period had expired. The plaintiff argued: (1) that the Nova Scotia Limitation of Actions Act applied; (2) that the amendments made to the Marine Liability Act in 2009 exempting adventure tourism activities from the Athens Convention ought to be given retrospective effect; (3) that any limitation period ought to be postponed as the plaintiff was an infant at the time of the accident: and (4) that the "Waiver" signed by the plaintiff, which provided for Nova Scotia law, had the effect of making the claim subject to the law of Nova Scotia and not Canadian maritime law.
Decision: Order granted. The action is dismissed.
(1) Any question of the limitation period applicable to this claim is settled as being the two year limitation period in Article 16 of the Athens Convention attached as Schedule 2 to the Marine Liability Act, S.C. 2011, c.6. The decision of the Supreme Court of Canada in Marine Services International v Ryan Estate, 2013 SCC 44, which reframed the constitutional test for determining when provincial laws can apply to maritime matters does not undermine the rationale for the earlier decisions applying the Athens Convention to these types of claims. "The important objective of uniformity in Canadian maritime law and in the international community of maritime states should not be undermined by the application of individual, and different, provincial statutory regimes."
(2) The fact that the Marine Liability Act was amended in 2009 to exempt adventure tourism activities from the application of the Athens Convention is not relevant. Limitation periods are substantive, not procedural, and the 2009 change in the Marine Liability Act is not to be given retrospective effect. The substantive law governing this claim at the time of the injury, including the limitation period, is the Marine Liability Act as it existed at the time.
(3) Section 4 of the Nova Scotia Limitation of Actions Act, which provides for the suspension of limitation periods for claims by infants, has no application as it is not part of federal maritime law. The Athens Convention and the Marine Liability Act contain no provisions postponing limitation periods for infants and without such a provision there is no basis for the Court to do so. Further there is no general discretion to suspend or postpone the limitation period. Under the Athens Convention the two year limitation period commences to run from a fixed event, the disembarkation of the passenger, and the discoverability principle has no operation. The only provision in the Athens Convention permitting suspension or interruption of the limitation period is Art.16 s.3, which allows for a maximum extension of up to 3 years from the date of disembarkation.
(4) With respect to the "Waiver", it merely says that the laws of Nova Scotia shall apply. Nova Scotia law includes federal law. The "Waiver" incorporates rather than excludes Canadian maritime law.
Comment: It is arguable that this case is correctly decided but for the wrong reasons. Specifically, the holding that limitation provisions are always substantive and will never be given retrospective effect is questionable. As discussed in St. Jean v Cheung, 2008 ONCA 815, a decision by the Ontario Court of Appeal, limitation provisions may be classified as procedural or substantive and may have retrospective application depending on their effect. The changes to the Marine Liability Act in 2009 had the effect of exempting adventure tourism activities from the two year limitation period contained in Athens Convention and substituted the three year period contained in s.140. For this action, at the time the changes to the Marine Liability Act came into force on 21 September 2009, the two year period under the Athens Convention had not expired and the effect of s. 140 was to extend the time within which the plaintiff could bring its action to August 2011. In such circumstances, under the approach discussed in St. Jean v Cheung, the amendments arguably should have been given retrospective effect and the limitation period would have expired in or about August 2011.
Marine Insurance - Ship Repairer's Legal Liability - Application of Provincial Laws - "Faulty Design" Exception - Notice of Loss Requirement
Verreault Navigation Inc. v. The Continental Casualty Company, 2014 QCCS 2879
Précis: The Quebec Superior Court held that a claim against underwriters for indemnity under ship repairer liability policies was governed by Canadian maritime law and not the civil law of Quebec and where the court further held that the underwriters were not liable based on a “faulty design” exclusion in the policy and a notice/reporting provision.
Facts: The plaintiff ship repairer sued its primary liability underwriter (Continental) and its excess liability underwriter (Lombard Insurance Company of Canada) to recover costs incurred to correct certain deficiencies in the heating, ventilating and air conditioning (HVAC) system of a passenger ferry it had repaired for the Government of Canada. The actual defective work had been done by a subcontractor of the plaintiff. The underwriters denied liability on two grounds: first, that the policies contained a "faulty design" exception which applied in the circumstances; and, second, that both policies excluded losses not discovered and reported within one year of delivery of the vessel to the customer.
Decision: Action dismissed.
Held: The claim is subject to uniform Canadian maritime law and not Quebec civil law. The "faulty design" exception of the two policies applies since the HVAC equipment installed on the ferry was inadequate and defective. At the time of its installation, the equipment did not comply with applicable state-of-the-art standards for such systems on passenger vessels operating in Canada. In addition, the notice of loss was given more than 12 months after the redelivery the ferry to the Government, contrary to the requirements of both policies. This was a violation of the assured's obligation of utmost good faith under s. 20 of the Marine Insurance Act.
Pleasure Craft Accident – Personal Injury – Applicable Limitation Period – Date From Which s.140 MLA Limitation Period Runs - Application of Provincial Laws
G.B. v. L. Bo, 2014 QCCS 18
Précis: The Quebec Superior Court held, in respect of an event that occurred before s. 140 of the Marine Liability Act was enacted, that the three year limitation period under that section commenced to run on the date s.140 came into force.
Facts: The plaintiff was injured on 4 July 2008 while surf skiing behind his own boat which was being driven by the first defendant. At the time, the plaintiff and first defendant were living together. On 13 June 2012, almost four years after the accident, and one year after the couple separated, the plaintiff commenced these proceedings against the first defendant and against the plaintiff’s own insurance broker, the second defendant. The defendants brought these motions to dismiss the proceedings on the grounds, inter alia, that the limitation period had expired.
Decision: Motions dismissed.
Held: The issue of the applicable law governing limitation periods in a case such as this is a difficult one. In Frugoli v Services aeriens des Cantons de l’Est inc., 2009 QCCA 1246, the Quebec Court of Appeal affirmed that the two year limitation period in s. 14(1) of the Marine Liability Act applied to a claim by dependants of two passengers who were drowned when their boat capsized on a lake in Northern Quebec. On the basis of this case, it is concluded that Canadian maritime law governs the limitation period in the present case. However, as this is neither a claim by dependants nor an accident arising out of a collision between two vessels, ss. 14 and 23 of the Marine Liability Act have no application. The relevant section would be s. 140 which provides a period of three years “after the day on which the cause of action arises”. But, s. 140 was not enacted until 23 June 2009 and became law on 21 September 2009. Therefore, there was no limitation period in effect during the period from the date of the accident, 4 July 2008 to 21 September 2009. The three year period under s. 140 did not begin to run until 21 September 2009 and did not expire until 21 September 2012. This action was therefore commenced within the limitation period.
Comment: The approach adopted by the Quebec Superior Court in this case is different from what is arguably the more traditional approach as discussed in St. Jean v Cheung, 2008 ONCA 815, a decision by the Ontario Court of Appeal. The more traditional analysis distinguishes between retroactive and retrospective statutes. If the new limitation provision extinguishes an existing claim, it is retroactive and will not apply. However, if the new provision merely abridges (or extends) the time left to bring a claim, it is retrospective and will apply. If this approach had been followed in this case, s. 140, which came into force on 21 September 2009, should have been given retrospective effect since it did not extinguish the claim on its coming into force but merely created a new three year limitation period expiring on 4 July 2011. As the plaintiff did not commence proceedings by 4 July 2011, the claim was out of time.
Canadian Maritime Law - Application of Provincial Statutes - Workers Compensation
Marine Services International Ltd. v. Ryan Estate, 2011 NLCA 42 2013 SCC 44
Précis: The Supreme Court of Canada held that the bar to litigation in a workers compensation statute was constitutionally valid and applicable to fatal injuries involving crew of a vessel. In so doing the Supreme Court has clarified the constitutional analysis required when dealing with Canadian maritime law and expanded the opportunities for provincial statutes to apply to maritime law matters.
This was a judicial review of a decision of the Workplace Health, Safety and Compensation Commission of Newfoundland. The issue was whether the Workplace Health, Safety and Compensation Act (“WHSA”) of Newfoundland prohibited an action under s. 6(2) of the Marine Liability Act (“MLA”) by the estates and dependents of two crew members who lost their lives when their fishing vessel sank. It was undisputed that the deceased crew members had been “workers” under the WHSA and that the defendants were “employers” under the WHSA. At first instance, the trial Judge noted that questions of liability in a marine context “clearly and obviously fall within federal jurisdiction” and said that the issue was whether the statutory bar in the WHSA was “merely casual or incidental” such that it would not give rise to the doctrine of interjurisdictional immunity. The trial Judge noted that the interjurisdictional immunity doctrine would be invoked where a provincial statute intrudes on the “core” of a federal power to the extent that it “impairs” that power. The trial Judge further said “there can be no greater level of impairment of the power to sue than to bar the exercise of that power” and held that the WHSA must be read down so as not to apply. Although this was sufficient to dispose of the case, the trial Judge also considered the paramountcy doctrine and held that it was also applicable.
On appeal, the Newfoundland Court of Appeal upheld the judgement of the trial Judge but with one dissent. The majority began its analysis by applying the pith and substance doctrine and had no difficulty finding that the WHSA was valid provincial legislation. It then considered the interjurisdictional immunity doctrine noting that this involved answering two questions: (i) does the provincial law trench on the core of a federal power and (ii) is the provincial law’s effect on the federal power sufficiently serious (i.e. does it impair and not merely affect the federal power). Relying heavily upon the Supreme Court of Canada’s decision in Ordon v Grail,  3 SCR 437, the majority held that the doctrine of interjurisdictional immunity applied and the statute should be read down. The majority also considered and applied the paramountcy doctrine holding that “if a maritime claimant wishes to avail of the right to sue, he or she will be precluded from doing so. He or she cannot comply with the federal law without violating the provincial law. The two provisions cannot, in an operative sense, co-exist.” The dissenting Justice would have held: that the WHSA was in pith and substance a no fault insurance scheme and not maritime negligence law; that there was no operational conflict under the paramountcy doctrine as the federal law did not compel claimants to make claims; and the interjurisdictional immunity doctrine did not apply because the core of the federal power was not engaged. A further appeal was launched to the Supreme Court of Canada.
The issues addressed by the Supreme Court were:
(1) Does the WHSA apply to the facts?
(2) Is the WHSA constitutionally inapplicable by reason of interjurisdictional immunity or inoperative by reason of paramountcy?
Decision: Appeal allowed. The bar to actions in the WHSA applies.
(1) The WHSA and the similar schemes in other provinces, as well as the federal Government Employees Compensation Act and Merchant Seamen Compensation Act, establish a no-fault compensation scheme for workplace related injuries that are distinct from and do not interact with any tort regimes. Disregarding the constitutional issues, the first question is whether the WHSA applies to the facts. The statutory bar in the WHSA benefits not only the “employer” of the injured employee but any employer that contributes to the scheme so long as the injury occurred in the course of employment and “occurred . . . in the conduct of the operations usual in or incidental to the industry carried on by the employer”. There is no dispute the deaths arose in the course of employment. The Commission found that the deaths “occurred . . . in the conduct of the operations usual in or incidental to the industry carried on by the employer” and their decision is entitled to deference. Therefore, absent the constitutional issues, the statutory bar in the WHSA applies.
(2) The first step in the resolution of the constitutional issue is an analysis of the “pith and substance” of the impugned legislation. This is an inquiry into the true nature of the law in question for the purpose of identifying the “matter” to which it essentially relates. Two aspects of the law are analyzed: the purpose of the enacting body and the legal effect of the provision. In this case, the constitutional validity of the WHSA is not challenged and a full pith and substance is not required.
Interjurisdictional immunity protects the “basic, minimum and unassailable content” or core of federal jurisdiction under ss. 91 and 92 of the Constitution Act, 1867. A broad application of the doctrine is inconsistent with a flexible and pragmatic approach to federalism. The doctrine is of limited application and should be reserved for situations already covered by precedent. There is prior precedent favouring its application to the subject matter of this appeal, namely, the decision in Ordon v Grail where it was held that maritime negligence law is part of the core of the federal power over “Navigation and Shipping”. Like Ordon v Grail the present appeal involves the application of a provincial law to a maritime negligence action. The test to trigger the application of the interjurisdictional immunity doctrine is two pronged. The first step is to determine if the provincial law trenches on the protected core of a federal competence. If it does, the second step is to determine if the effect is sufficiently serious to invoke the doctrine. The impugned legislation must “impair” the core rather than merely affect it. “Impair” implies adverse consequences, a significant and serious intrusion.
Maritime negligence law is indeed at the core of the federal power over navigation and shipping, as stated in Ordon v Grail. The WHSA precludes the dependants of the deceased crew members from bringing proceedings under the MLA and does, therefore trench on the core of the federal power over navigation and shipping. The first prong of the test is therefore met. However, the effect of the intrusion is not sufficiently serious to satisfy the second branch of the test. Although Ordon v Grail held that interjurisdictional immunity applied, that decision predated the jurisprudence that set out the two step test and established the necessary levels of impairment. The level of intrusion of the WHSA is not significant or serious when one considers the breadth of the federal power over navigation and shipping, the absence of an impact on the uniformity of Canadian maritime law and the historical application of workers compensation schemes in the marine context.
The paramountcy doctrine applies where there is inconsistency between a valid federal enactment and an otherwise valid provincial enactment. Where there is such conflict, the federal enactment prevails and the provincial enactment is inoperative to the extent of the incompatibility. Paramountcy does not apply to an inconsistency between the common law and a valid enactment. The inconsistency required to invoke the paramountcy doctrine can be of two types. The first is an actual operational conflict in the sense that one enactment says “yes” and the other “no”. The second form of conflict is when the provincial enactment frustrates the purpose of the federal enactment but the standard is high. The fact that Parliament has legislated in respect of a subject does not lead to a presumption that Parliament intended to rule out any possible provincial action in respect of that subject. The federal statute should be interpreted, if possible, so as not to interfere with the provincial statute. The purpose of s. 6(2) of the MLA, which provides dependants with a right of action where the deceased had such an action, was to fill a gap in maritime tort law identified in Ordon v Grail. Section 6, when properly interpreted, accommodates the bar to actions in the WHSA. The words of s. 6 are permissive, “may”, which suggests there are situations where dependants may not bring a claim, such as where the action is barred by a workers compensation scheme. The deceased crew members would have had no cause of action because of the operation of the WHSA and, therefore, their dependants also have no cause of action. On this reading, there is no conflict between the statutes.
Two additional factors demonstrate that the MLA and workers compensation schemes do not conflict. First, an interpretation of the MLA that does not conflict with the WHSA ensures consistency with the federal workers compensation schemes in the Government Employees Compensation Act and the Merchant Seamen Compensation Act. Under these schemes, covered employees and their dependants cannot bring a claim under the MLA. If it was to be concluded that s. 6(2) of the MLA did not accommodate the bar to claims, it would equally be that s. 6(2) does not accommodate the statutory bars in the Government Employees Compensation Act and the Merchant Seamen Compensation Act. This would be contrary to the presumption that parliament does not enact related statutes that are inconsistent. Second, the WHSA and MLA are distinct in purpose and nature. The WHSA is a comprehensive no-fault insurance benefits scheme that removes compensation for workplace injury from the tort system of which the MLA is a part. The WHSA does not frustrate the purpose of the MLA which was to expand the range of claimants who could start an action in maritime negligence law. The WHSA merely provides for a different regime of compensation that is distinct and separate from tort.
Comment: This is a very important decision but one which was not unexpected given the decisions of the Supreme Court of Canada in Canadian Western Bank v Alberta,  2 S.C.R. 3, British Columbia (Attorney General) v Lafarge Canada Inc.,  2 S.C.R. 86, Quebec v Canadian Owners and Pilots Association, 2010 SCC 39, and Tessier Ltee. v Quebec, 2012 SCC 23. The effect of this decision will undoubtedly be to seriously circumscribe the precedential value of Ordon v Grail and to increase the circumstances where provincial statutes will apply to maritime matters. The tests applied by the court are the same as those adopted in the decisions following Canadian Western Bank. However, the comment that the paramountcy doctrine does not apply where there is a conflict between common law and a provincial enactment is of particular interest. This is so because much of Canadian maritime law is common law that is continued by s. 42 of the Federal Courts Act. Until now it was an open question as to whether the maritime common law continued by s. 42 might be invoked under the paramountcy doctrine. This now seems unlikely.
Canadian Maritime Law - Application of Provincial Statutes - Sale of Vessel - Misrepresentation
9171-7702 Quebec Inc. v. Canada, 2013 FC 832
Précis: The Federal Court surprisingly held that the sale of a vessel in Quebec was governed by the Quebec Civil Code.
The plaintiff purchased a vessel from the defendant, Her Majesty the Queen in Right of Canada, and later discovered that the model of the engine in the vessel was not as had been described by the defendant. The plaintiff therefore commenced these proceedings against the defendant for breach of contract. The defendant denied breaching the contract but also commenced proceedings against the surveyor who was allegedly responsible for the erroneous description. The error in the description was a single digit in the model number. The offer to purchase described the engine as a model 3612 whereas it was, in fact, a model 3512, which was about four times heavier and produced three times the horsepower of the 3612 model. Notably, the offer to purchase and the sale documents correctly identified the horsepower of the engine. The terms of sale also provided that the sale was “as is, on the spot” and that there were no warranties of quantity, nature, character, quality, weight, size or description.
The issues in the case were characterized as follows:
(1) What is the applicable law?
(2) Did the defendant breach the contract?
(3) If the defendant did breach the contract, is the surveyor liable?
Decision: Action dismissed.
(1) The applicable law could be Canadian maritime law or the law of the Province of Quebec, where the sale took place. The Supreme Court of Canada has not specifically ruled on the question of whether contracts for the sales of vessels are governed by Canadian maritime law. There is no close connection between the transfer of ownership of a vessel and maritime law and nothing to indicate that the objectives of uniformity or compliance with international conventions require the ouster of provincial law. This is one reason why various cases have in the past applied provincial law to property disputes. The decision of the Supreme Court of Canada in Canadian Western Bank v Alberta provides a new approach to interjurisdictional immunity and paramountcy. The application of provincial law would not impair federal jurisdiction over navigation and shipping. The applicable law is therefore the Civil Code of Quebec.
(2) Turning to the issue of whether the defendant had breached the contract, art. 1716 of the Civil Code contains implied warranties of ownership and quality but these were not breached as the vessel was adequately described overall. The result might have been different if the plaintiff had advised the defendant that the model number was an essential component. Further, absent fraud or misrepresentation, the conditions of sale being “as is, on the spot” and without warranties were a complete defence.
(3) The liability of the surveyor need not be addressed but, given the finding of the applicable law, the Federal Court probably has no jurisdiction to deal with the claim against the surveyor.
Comment: Given the recent decision of the Supreme Court of Canada in Marine Services International Ltd. v Ryan Estate, 2013 SCC 44, the holding that the Quebec Civil Code applied to a sale of a vessel may well be correct. However, any implication that the sale was solely governed by provincial law would not be correct. Sales of vessel are clearly also governed by Canadian maritime law, at least in part, as any review of Part 2 of the Canada Shipping Act, 2001 will confirm.
Constitutional Law - Division of Powers - Labour Relations - Stevedoring Activities
Tessier Ltee. v. Quebec, 2012 SCC 23
Précis: The Supreme Court of Canada addressed whether and when stevedoring activities are governed by provincial occupational health and safety legislation. Notably, the court said that shipping activities undertaken solely within a province are subject to provincial law.
The plaintiff was engaged in the business of renting heavy equipment, including cranes, and also in the business of equipment repair and road transportation. All of its activities were conducted in the Province of Quebec. Approximately 14% - 20% of its activities involved crane rentals for stevedoring services but the employees involved in these services were also involved in other activities. Because of its stevedoring activities, the plaintiff sought a declaration that it was subject to federal jurisdiction and not to Quebec's occupational health and safety legislation.
Decision: The plaintiff was subject to provincial law.
Held: The Supreme Court of Canada began its analysis by noting that legislation respecting labour relations is presumptively a provincial matter since it engages the provinces’ authority over property and civil rights. The Court further noted that the federal government has jurisdiction to regulate employment in two circumstances: when the employment relates to a work, undertaking, or business within the legislative authority of Parliament; or when it is an integral part of a federally regulated undertaking. Although it was recognized that s.91(10) of the Constitution Act gives Parliament exclusive jurisdiction over navigation and shipping, the court said it did not give Parliament absolute authority. Section 91(10) had to be read in light of s. 92(10) which gives the provinces jurisdiction over local works and undertakings. Shipping undertakings within a province are subject to provincial jurisdiction. Therefore jurisdiction in a particular case depends on the territorial scope of the shipping activities in question. Moreover, since stevedoring is not a transportation activity that crosses provincial boundaries, it cannot come within federal jurisdiction under s. 91(10) but can only be subject to federal jurisdiction if it is integral to a federal undertaking. The test is met when the services provided to the federal undertaking form the exclusive or principal part of the related work’s activities or when the services provided to the federal undertaking are performed by employees who form a functionally discrete unit that can be constitutionally characterized separately from the rest of the related operation. The plaintiff’s stevedoring activities formed a relatively minor part of its overall operations which were local in nature and the stevedoring operations were integrated with its other activities and did not form a functionally discrete unit.
Carriage of Passengers - Application of Provincial Laws
Croisières Charlevoix Inc. v. Quebec, 2012 QCCS 1646
Précis: The court held that intra-provincial carriage of passengers was subject to provincial law.
The appellant was a shipbuilder and tourist boat operator based in La Malbaie, Quebec, with offices in Quebec City and Saint-Siméon. It primarily provided tourist excursions for watching whales and marine mammals on the St. Lawrence River in Quebec. In each of 2005 and 2006, the appellant made one excursion between Quebec and Ontario. In 2007 and 2008, the appellant organized three interprovincial cruises. The appellant was found guilty and fined for having operated as a carrier of passengers by water without the permit required by ss. 36 and 74.1 of Quebec's Transport Act, R.S.Q., c. T-12, and sect. 1 of its Regulation respecting the transport of passengers by water, R.R.Q., c. T-12, r. 15. The appellant appealed to the Quebec Superior Court, arguing that its operations were within exclusive federal jurisdiction and that it was not bound by the provincial statute and regulations. The appellant also argued that its tourist excursions did not constitute "transport" within the meaning of Quebec's Transport Act. Quebec’s Transport Act applies to the "transport of persons... by... water from one place to another... by ship" . The appellant argued the Act did not apply because the tourists transported on the cruises concerned embarked and disembarked at the same "place".
Decision: Appeal dismissed and conviction upheld.
Held: The appellate Judge held that ss. 91(29) and 92(10)(a) and (b) of the Constitution Act, when read together, exclude marine transport operations carried on within the boundaries of a single province from the jurisdiction of Parliament. Where some operations of a marine carrier are carried on intraprovincially and others extraprovincially, the business becomes subject to federal legislation exclusively, but only if the extraprovincial operations are "regular and continuous” and not where such activities are merely "occasional or exceptional". The appellate Judge also rejected the appellant’s argument that the provincial Transport Act did not apply holding that the appellant’s interpretation was far too restrictive and one that would not coincide with the intention of the legislator. Moreover, the definition of “lieu” in Le Petit Robert dictionary (2000) was wide enough to include the site visited and the area travelled, as well as the points of embarkation and disembarkation.
Comment: Regrettably this decision is reported only in French. Therefore, this summary is based on a translation provided by Robert Wilkins of Borden Ladner Gervais, Montreal.
Constitutional Law - Validity of Municipal Bylaws
Chalets St-Adolphe inc. v. St-Adolphe d'Howard (Municipalité de), 2011 QCCA 1491
This case concerned the validity of a municipal bylaw which restricted the use of a municipal boat ramp and a lake to residents. The bylaw was challenged by a local businessman who had a small cottage rental business and used the municipal boat ramp to launch his customers’ boats. At first instance the validity of the bylaw was upheld, on the basis of the double aspect doctrine with the Trial Judge holding that the dominant aspect of the impugned bylaw was protection of the environment. On appeal, the Quebec Court of Appeal held that the pith and substance of impugned provisions encroached upon the basic, minimum and unassailable core of the exclusive jurisdiction of Parliament over navigation and shipping. (Note: Regrettably, this decision appears to be reported only in French and the author has only a limited understanding of the French language.)
Canadian Maritime Law - Application of Provincial Statutes - Occupational Health and Safety
Jim Pattison Ent. v. Workers' Compensation Board, 2011 BCCA 3
The central issue in this case was whether and to what extent the British Columbia Occupational Health and Safety Regulation (“OHSR”) of the Workers Compensation Act applied to commercial fishing vessels. It was argued that the OHSR was constitutionally invalid or inapplicable on the grounds that the safety of ships and crew is a matter within the sole jurisdiction of Parliament under its navigation and shipping power or, alternatively, that fishing is a federal work or undertaking. At trial (reported at 2009 BCSC 88
) the Trial Judge began by reviewing the history of occupational health and safety in British Columbia in relation to fishing and reviewed various federalprovincial agreements that had been entered into. The Trial Judge then turned to the constitutional issue beginning, predictably, with the recent Supreme Court of Canada decisions in Canadian Western Bank v. Alberta,  2 S.C.R. 3, 2007 SCC 22 and British Columbia
(Attorney General) v. Lafarge Canada Inc.,  2 S.C.R. 86, 2007 SCC 23. The Trial Judge noted that the doctrine of interjurisdictional immunity goes against the dominant tide of constitutional interpretation and should be applied with restraint. The Trial Judge further noted that the doctrine of interjurisdictional immunity does not apply except where the adverse impact of a law adopted by one level of government is such that the core competence of the other level of government (or the vital or essential part of an undertaking it duly constitutes) is placed in jeopardy. The Trial Judge then dealt with the pith and substance analysis and concluded that the pith and substance of the OHSR were the health and safety of workers which are matters within the legislative competence of the province. The Trial Judge then turned to the doctrine of paramountcy as there are many federal laws relating to the safety of ship and crew. The Trial Judge summarized the test as requiring the petitioners to establish either that: (a) it is impossible to comply with both laws; or (b) that to apply the provincial law would frustrate the purpose of the federal law. After reviewing the legislation, the Trial Judge concluded that there was considerable overlap and potential for confusion and that compliance with both regimes could be difficult and expensive, however, as it was not “impossible” to comply with both there was not operational incompatibility. The Trial Judge further found that the OHSR did not undermine the purpose of the federal statutes and therefore concluded that the doctrine of paramountcy was not operative. The Trial Judge then turned to the interjurisdictional immunity doctrine. The Trial Judge first considered whether fishing was afederal undertaking and held that it was not because the undertaking did not play any role in “connecting” British Columbia with any other province or country. The Trial Judge then considered whether the provincial law impaired or placed in jeopardy the core of federal competence over navigation and shipping and concluded that it did not.
Upon appeal, the British Columbia Court of Appeal began its analysis noting that the modern approach to Canadian federalism is “cooperative federalism”. It then turned to the pith and substance analysis and found the purpose and effect of the provincial legislation to be the
occupational health, safety and well-being of workers employed on fishing vessels, a matter of labour relations and, as such, coming within provincial jurisdiction over “property and civil rights”. The Court next considered whether the fishing operations at issue were a provincial or federal undertaking. The appellants argued that as the normal fishing activities of the concerned vessels were beyond the limits of the province their operations should be characterized as a federal undertaking. However, the Court found that the business of the appellants was exclusively intraprovincial and there was no operational connection to another jurisdiction. Accordingly, the Court held that the operational activities were a provincial and not a federal undertaking. Although not necessary, the Court did go on to consider the doctrines of interjurisdictional immunity and paramountcy but held that neither applied. The impugned provisions did not impair the core competence of federal jurisdiction over navigation and shipping and there was no evidence of operational conflict or frustration of the purpose of the federal legislation.
Constitutional Law – Division of Powers – Municipal Bylaw
R. v. Latouche, 2010 ABPC 166
In this case the applicants were charged with not wearing life jackets while floating on an inflatable raft down the Elbow River in Calgary contrary to a municipal bylaw. The applicants challenged the constitutional validity of the bylaw saying that the bylaw encroached on Parliament’s exclusive jurisdiction over navigation and shipping. It was conceded that Parliament had jurisdiction over navigation and shipping but was argued that the incidental application of local law was permissible. The Court found that the pith and substance of the impugned bylaw was the promotion of safety of Calgarians and that the bylaw did not impair an essential or vital element of a federal power over navigation and shipping. Further, the Court said there was no incompatibility between the bylaw and the federal legislation. Accordingly, the Court held the bylaw was valid. (Note: In the view of the author, this is a questionable decision. Even if there was no incompatibility between the federal regulations and local bylaw, the local bylaw still frustrates the purpose of the federal law (uniformity) and ought to attract the paramountcy doctrine.)
Constitutional Law - Application of Municipal by-Laws
Durham v. Todd, 2010 ONCJ 122
In this matter the defendant boat owner was charged with trespass under the Ontario Trespass to Property Act and with infractions of various municipal by-laws. The charges all related to anchoring in Port Whitby Harbour which was a harbour designated under the Fisheries and Recreational Harbours Act. The harbour was administered by the municipality pursuant to an agreement with the Department of Fisheries. The accused defended the charges on the grounds that the province and the municipality had no constitutional jurisdiction. The Court, however, found that the agreement between the municipality and the Department of Fisheries gave the municipality the requisite authority and rendered nugatory any issue of interjurisdictional immunity. (Note: Has the learned Judge in this case confused an agreement for the administration of a harbour with a delegation of legislative authority?)
Constitutional Law - Boating Restriction Regulations - Right to Anchor - Charter of Rights
R v. Lewis, 2009 BCPC 386
The issue in this case was the constitutional validity of the Boating Restrictions Regulations under the Canada Shipping Act. Specifically, the challenge was to restrictions imposed on anchoring in False Creek, Vancouver. The accused were charged with anchoring without a permit. The defence was that the Boating Restrictions Regulations was an attempt by the Federal Government to legislate in respect of property and civil rights, a provincial jurisdiction, and were contrary to the Charter of Rights. The Court first noted that there is a common law right to navigation which includes a right to anchor but said this was a right to anchor for a reasonable time, not permanently. The Court then considered the constitutional validity of the regulations which required a consideration of the pith and substance of the regulations having regard to both their purpose and effect. The Court had little difficulty in concluding the regulations were in pith and substance in relation to navigation and therefore valid. The Court next turned to the Charter of Rights. The argument was that the regulations were contrary to s. 7 of the Charter which provides that everyone has the right to life, liberty and security. Essentially, the accused argued that they needed to anchor in False Creek for reasons of safety and could not obtain anchorage elsewhere. The Court accepted that False Creek was a safe anchorage and that alternative moorage facilities were limited, however, the Court found that the accused anchored in False Creek for economic or lifestyle reasons, not for reasons of safety or shelter.
Meaning of Ship - Constitutional Law – Application of Provincial Statutes - Land use By-Law
Salt Spring Island Local Trust Committee v. B & B Ganges Marina Ltd., 2008 BCCA 544 2009 BCCA 48
The issue in this case was whether a municipal bylaw limiting the size and height of buildings applied to an oil-tank barge that had been converted to a two storey floating camp. The Defendant marina argued the bylaw was constitutionally invalid or inapplicable which turned, in part, on whether the floating camp was a ship. The marina had originally been given a temporary permit allowing it to use the floating camp as an office but the permit was conditional on the redevelopment of the marina. The redevelopment did not proceed and the marina was eventually asked to remove the floating camp. The evidence disclosed that the floating camp had electrical, water and telephone connections with the land. At first instance, the motions Judge held that the floating camp was not a ship (although he recognized that it might in the future be used as a ship) and held that the bylaw applied. The Judge held that the paramountcy doctrine did not invalidate the bylaw because there was no conflicting federal legislation. The Judge further held that the interjurisdictional immunity doctrine did not invalidate the bylaw because land-use control is not “absolutely indispensable or necessary” to federal jurisdiction over shipping and navigation. The bylaw incidentally affected the federal power over navigation and shipping but did not impair or paralyze the core of the federal power. In result, the bylaw was valid. The marina appealed.
On appeal to the British Columbia Court of Appeal, two separate sets of Reasons were given. The majority agreed with the motions Judge that the floating camp in its present configuration and use was not a ship or vessel or boat. In fact, the majority suggested that once it was converted from an oil-tank barge to a floating camp it was no longer designed to be used in navigation and no longer a ship. The majority then declined to consider the constitutional issues saying that because the floating camp was not a ship the constitutional issue did not arise. The minority did consider the constitutional issues and agreed with the motions Judge that the doctrine of paramountcy did not apply. The minority held that paramountcy requires a direct collision between federal and provincial legislation and there was no such collision in this case. The minority also agreed that the interjurisdictional immunity doctrine did not apply, noting that the key consideration in the case was the “use” to which the floating camp was put. If an object is being used as a ship, that use may engage the federal power over navigation. If an object is not being used as a ship, the federal power over navigation is not engaged.
Mortgages - Priorities - Application of Provincial Statutes
Royal Bank v. 1132959 Ontario Ltd., 2008 CanLii 40231
This was an application by the Appellant bank (the “Bank”) for possession of a yacht pursuant to rights allegedly acquired through a general security interest. The application was opposed by the Respondent, who was registered as the owner of the yacht under the Canada Shipping Act (“CSA”), on the grounds that the bank’s interest was not registered under the CSA. The background facts are important. The Bank entered into a general security agreement dated 9 March 2001 with a numbered company (“Numbered Co.”) and registered its interest under the Ontario Personal Property Security Act (“PPSA”). On 17 April 2004 the Numbered Co. acquired title to the yacht and, although it is not entirely clear from the judgment, it appears that the yacht was registered under the CSA at that time. On 13 February 2008 the sole shareholder of the Numbered Co. made an assignment in bankruptcy. On 12 March 2008 the Numbered Co. entered into a security agreement with the Respondent, the brother of the company’s sole shareholder. The security agreement was allegedly to secure a prior debt owed to the Respondent. This security agreement was never registered under the PPSA. On 20 March 2008 the Respondent was given a marine mortgage over the yacht as further security for the debt allegedly owed between the brothers. This marine mortgage was registered under the CSA but not the PPSA. On 10 April 2008 the marine mortgage was discharged and the yacht was transferred to the Respondent in full payment of the debt allegedly owed. On these facts the Court held that there was no doubt that on 17 April 2004 the Bank acquired a perfected security interest in the yacht pursuant to the after acquired property clause in the security agreement. The Court further held that the Bank’s interest had priority over any interest the Respondent had pursuant to the agreement of 12 March 2008 since that agreement was not registered. However, the Court recognized that the real issue was whether a registered interest under the CSA could take priority over a prior interest registered under the PPSA. The Respondent alleged that the CSA provided a complete code and registry of all interests in vessels. The Court disagreed and held that the CSA created two types of registers; mandatory and voluntary. Pleasure craft are not required to be registered and fall within the voluntary registry. Therefore, the Court held the Bank was not required to register its interest under the CSA registry. In result, the Court held the Bank’s interest had priority.
(Note: This has been a vexing issue for years and has the potential to cause serious difficulties for both lenders and borrowers. Although the equities of this case certainly favoured the bank, the Court’s analysis does not withstand any serious scrutiny. The distinction between mandatory and voluntary registration is no more than descriptive and does not provide a legal basis for the decision. Also, the mandatory - voluntary distinction is probably not accurate in respect of a mortgagee. The prevailing view is that if the vessel is registered (whether voluntarily or mandatorily) then any mortgage or security interest must be registered. It is submitted that the Court should have done a proper constitutional analysis taking into account the dual aspect doctrine, interjurisdictional immunity and paramountcy. Also, one cannot help but think that if, after the constitutional analysis, Canadian maritime law applied, then equitable considerations would have played an important part in any ranking.)
Constitutional law- Application of Provincial Statutes - Occupational Health and Safety
R. v. Mersey Seafoods Ltd., 2008 NSCA 67
The accused in this case was a corporation that operated various factory fishing vessels. The accused was charged with offences under the Nova Scotia Occupational Health and Safety Act (“OHSA”). The charges were dismissed in the lower courts on grounds that the safety and operation of vessels was within the exclusive jurisdiction of the Federal Government and the OHSA was inapplicable. On appeal to the Nova Scotia Court of Appeal, the Court first considered whether, and had little difficulty in concluding that, the pith and substance of the OHSA was within a head of power granted to the provinces. The Court next considered whether the OHSA infringed Parliament’s constitutional powers in relation to navigation and shipping. The Court referred to and relied extensively on the Supreme Court of Canada’s decisions in Canadian Western Bank v. Alberta,  2 S.C.R. 3, 2007 SCC 22 and British Columbia (Attorney General) v. Lafarge Canada Inc.,  2 S.C.R. 86, 2007 SCC 23. The Court noted that under the revised test established in those cases a provincial statute will only attract federal interjurisdictional immunity when the statute “impairs” (rather than merely “affects”) either (1) the “core”of a federal competence or (2) a vital or essential part of a federal undertaking. The Court held that any impact of the OHSA on navigation and shipping was merely incidental. The Court therefore held that the interjurisdictional immunity doctrine did not apply to oust the application of the OHSA. The Court next considered the paramountcy doctrine and noted that for the doctrine to apply there must be both federal and provincial laws and that it must be impossible to comply with both laws or that to apply the provincial law would frustrate the federal law. The Court found that the only applicable federal law was the Canada Shipping Act but held that there was no “operational conflict” between the OHSA and the Canada Shipping Act and the OHSA did not frustrate the purpose of the Canada Shipping Act. Accordingly, the Court confirmed that the OHSA applied to vessels operated by the accused.