Monk Corp. v. Island Fertilizers Ltd., [1991] 1 S.C.R.

779

The Monk Corporation Appellant and

Cross-Respondent

v.

Island Fertilizers Limited R es pondent and

Cross-Appellant

indexed as: monk corp. v. island fertilizers ltd.

File No.: 21647.

1991: January 30; 1991: April 18.

Present: Lamer C.J. and La Forest, L'Heureux-Dubé, Sopinka, Gonthier, Cory,

McLachlin, Stevenson and Iacobucci JJ.

on appeal from the federal court of appeal

Maritime law -- Jurisdiction -- Federal Court -- Parties entering into

contract for supply of product to be imported by ship -- Broker later bringing action

for demurrage, delivery of excess cargo and cost of renting shore cranes -- Whether

claims within Federal Court's jurisdiction over Canadian maritime law -- Federal

Court Act, R.S.C., 1985, c. F-7, ss. 2, 22.

Courts -- Jurisdiction -- Federal Court -- Maritime law -- Parties entering

into contract for supply of product to be imported by ship -- Broker later bringing action
 -2-

for demurrage, delivery of excess cargo and cost of renting shore cranes -- Whether

claims within Federal Court's jurisdiction over Canadian maritime law -- Federal Court

Act, R.S.C., 1985, c. F-7, ss. 2, 22.

Appellant entered into a contract for the supply of imported urea fertilizer

to respondent. Following its delivery by ship, appellant brought an action against

respondent claiming for excess product delivered, demurrage and the cost of renting

shore cranes to discharge the ship. The Federal Court, Trial Division, found that it

had jurisdiction to entertain the claims under s. 22(1) of the Federal Court Act, since

they were integrally connected with Canadian maritime law, and awarded judgment

in favour of appellant. A majority of the Federal Court of Appeal found that it had

jurisdiction only with respect to the claim relating to demurrage and allowed the

appeal in part.

Held (L'Heureux-Dubé J. dissenting): The appeal should be allowed and

the cross-appeal dismissed.

Per Lamer C.J. and La Forest, Sopinka, Gonthier, Cory, McLachlin,

Stevenson and Iacobucci JJ.: Appellant's claims are within the Federal Court's

jurisdiction. The second part of the definition of "Canadian maritime law" in s. 2 of

the Federal Court Act provides an unlimited jurisdiction in relation to maritime and

admiralty matters which should not be historically confined or frozen, and

"maritime" and "admiralty" should be interpreted within the modern context of

commerce and shipping. Canadian maritime law is limited only by the constitutional

division of powers in the Constitution Act, 1867: in determining whether a particular

 -3-

case involves a maritime or admiralty matter, encroachment on what is in "pith and

substance" a matter falling within s. 92 must be avoided. The test for determining

whether the subject matter is within maritime law requires a finding that it is so

integrally connected to maritime matters as to be legitimate Canadian maritime law

within federal competence.

In this case many of the undertakings by the parties relate to a contract

of carriage by sea, which is clearly a maritime matter within the scope of maritime

law. Further, the specific claims advanced are integrally connected to maritime

matters rather than to the sale of goods, and so are not governed by the provincial

Sale of Goods Act. All three claims have as their source respondent's obligation to

discharge the cargo, which finds its roots in the contract of carriage aspects of the

agreement between the parties. The draft survey technique used is uniquely

maritime and confirms the general maritime nature of the unloading of cargo from

a ship, as do the rules relating to bills of lading set out in the Schedule to the

Carriage of Goods by Water Act. As discharge of cargo is a maritime matter, so is a

breach of an obligation to discharge cargo.

Respondent assumed a maritime obligation -- the discharge of cargo --

in connection with the sale and purchase of the goods. Appellant's claims are

maritime in nature and are not in any way an encroachment of what is in "pith and

substance" a matter falling within s. 92 of the Constitution Act, 1867.

Per L'Heureux-Dubé J. (dissenting): While this Court has generally

construed the Federal Court's jurisdiction narrowly, it has pursued an expansive

 -4-

method of interpretation with regard to Federal Court jurisdiction over maritime law.

In determining whether a particular case involves a maritime matter, however, the

court must avoid encroachment on what is in "pith and substance" a matter within

exclusive provincial jurisdiction. It is therefore important to establish that the

subject matter is so integrally connected to maritime matters as to be legitimate

Canadian maritime law within federal legislative competence.

In characterizing the claims raising the issue of jurisdiction, one must

look at the essence of the arrangement between the parties. In this case the maritime

or shipping aspects of the arrangement were incidental to a contract for the sale of

goods, which is the dominant feature of the relationship between the parties. While

certain terms of a maritime nature were used, the contract in fact operated merely to

further the primary goal of the parties -- the sale and delivery of goods. Quite

independently of its contract with respondent, appellant entered into a contract for

the carriage of the goods by sea. The fact that respondent undertook to pay a price

that included the cost of freight and insurance and undertook to pay demurrage and

the expense of discharge in no way alters the nature of the contract between the

parties. Respondent undertook no obligation as to the actual carriage by sea. The

contract entered into between the parties does not embody either a contract of

carriage or a contract for insurance nor are the terms of these distinct relationships

at issue in this case.

Appellant's claim is inseparable from the contract of sale. Even assuming

that the discharge of cargo from a ship is a maritime matter, the claim here revolves

around the contract price of the goods, not their discharge, and is in pith and
 -5-

substance a claim within provincial jurisdiction. The parties are properly

characterized as acting in the respective capacities of buyer and seller, and there is

no integral connection sufficient to pull matters within the Federal Court's

jurisdiction over maritime law.

Cases Cited

By Iacobucci J.

Applied: ITO--International Terminal Operators Ltd. v. Miida

Electronics Inc., [1986] 1 S.C.R. 752; referred to: Q.N.S. Paper Co. v. Chartwell

Shipping Ltd., [1989] 2 S.C.R. 683; Roberts v. Canada, [1989] 1 S.C.R. 322;

Whitbread v. Walley, [1990] 3 S.C.R. 1273; Robert Simpson Montreal Ltd. v.

Hamburg-Amerika Linie Norddeutscher, [1973] F.C. 1356.

By L'Heureux-Dubé J. (dissenting)

ITO--International Terminal Operators Ltd. v. Miida Electronics Inc., [1986]

1 S.C.R. 752; Quebec North Shore Paper Co. v. Canadian Pacific Ltd., [1977] 2 S.C.R.

1054; McNamara Construction (Western) Ltd. v. The Queen, [1977] 2 S.C.R. 654;

Roberts v. Canada, [1989] 1 S.C.R. 322; Ontario (Attorney General) v. Pembina

Exploration Canada Ltd., [1989] 1 S.C.R. 206; R. v. Thomas Fuller Construction Co.

(1958) Ltd., [1980] 1 S.C.R. 695; Tropwood A.G. v. Sivaco Wire & Nail Co., [1979] 2

S.C.R. 157; The Queen v. Canadian Vickers Ltd., [1978] 2 F.C. 675; Domestic

Converters Corp. v. Arctic Steamship Line, [1984] 1 F.C. 211; Reference re Industrial
 -6-

Relations and Disputes Act, [1955] S.C.R. 529; Sumitomo Shoji Canada Ltd. v. The

"Juzan Maru", [1974] 2 F.C. 488; Kuhr v. The "Friedrich Busse", [1982] 2 F.C. 709;

Triglav v. Terrasses Jewellers Inc., [1983] 1 S.C.R. 283.

Statutes and Regulations Cited

Carriage of Goods by Water Act, R.S.C., 1985, c. C-27, Schedule, Arts. I, II, V, VI, VII.

Constitution Act, 1867, ss. 91(10), 92(13).

Federal Court Act, R.S.C., 1985, c. F-7, ss. 2 "Canadian maritime law", 22.

Sale of Goods Act, R.S.P.E.I. 1974, c. S-1, ss. 3(1), 27, 30, 32, 37, 49, 59.

Authors Cited

Braën, André. "L'arrêt ITO-International Terminal Operators Ltd. c. Miida Electronics Inc.,
ou comment écarter l'application du droit civil dans un litige maritime au
Québec" (1987), 32 McGill L.J. 386.

Carver, Thomas Gilbert. Carver's Carriage by Sea, 13th ed. By Raoul Colinvaux. London:
Stevens, 1982.

Evans, John M. and Brian Slattery. "Federal Jurisdiction -- Pendent Parties -- Aboriginal
Title and Federal Common Law -- Charter Challenges -- Reform
Proposals: Roberts v. Canada" (1989), 68 Can. Bar Rev. 817.

Evans, John M. "Comments on Legislation and Judicial Decisions -- Federal Jurisdiction --

A Lamentable Situation" (1981), 59 Can. Bar Rev. 124.

Glenn, H. Patrick. "Maritime Law -- Federal Court Jurisdiction -- Canadian Maritime Law
-- Relationship to Civil and Common Law: ITO -- International Terminal
Operators Ltd. v. Miida Electronics Inc." (1987), 66 Can. Bar Rev. 360.

Hogg, Peter W. "Constitutional Law -- Limits of Federal Court Jurisdiction -- Is There a

Federal Common Law?" (1977), 55 Can. Bar Rev. 550.

Laskin John B. and Robert J. Sharpe. "Constricting Federal Court Jurisdiction: A Comment
on Fuller Construction" (1980), 30 U.T.L.J. 283.
 -7-

Payne, William. Payne and Ivamy's Carriage of Goods by Sea, 11th ed. By E. R. Hardy
Ivamy. London: Butterworths, 1979.

Reif, Linda C. "A Comment on ITO Ltd. v. Miida Electronics Inc. -- The Supreme Court of
Canada, Privity of Contract and the Himalaya Clause" (1988), 26 Alta.
L. Rev. 372.

Scott, Stephen A. "Canadian Federal Courts and the Constitutional Limits of Their
Jurisdiction" (1982), 27 McGill L.J. 137.

Scrutton, Thomas Edward, Sir. Scrutton on Charterparties and Bills of Lading. 19th ed. By
Sir Alan Abraham Mocatta, Sir Michael J. Mustill and Stewart C. Boyd.
London: Sweet & Maxwell, 1984.

Tetley, William. "Maritime Law Judgments in Canada -- 1979" (1981), 6 Dalhousie L.J.
676.

Tetley, William. "The Buenos Aires Maru -- Has the Whole Nature of Canadian Maritime
Law Been Changed?" (1988), 10 Sup. Ct. L. Rev. 399.

APPEAL and cross-appeal from a judgment of the Federal Court of

Appeal (1989), 97 N.R. 384 reversing in part a judgment of the Federal Court, Trial

Division (1988), 19 F.T.R. 220 allowing appellant's claim against respondent.

Appeal allowed and cross-appeal dismissed, L'Heureux-Dubé J. dissenting.

David F. H. Marler, for the appellant.

David G. Colford, for the respondent.

//Iacobucci J.//

The judgment of Lamer C. J. and La Forest, Sopinka, Gonthier, Cory,

McLachlin, Stevenson and Iacobucci JJ. was delivered by

 -8-

IACOBUCCI J. -- The main question in this appeal and cross-appeal centres

on the jurisdiction of the Federal Court of Canada in maritime matters. In particular,

the issue is whether the appellant's action is simply one under an agreement for the

sale of goods, in which case no jurisdiction in the Federal Court would attach; or

whether the action can be characterized as that of a shipper against a consignee under

a contract of carriage, in which case the claim is within the scope of Canadian

maritime law and therefore within the jurisdiction of the Federal Court. To resolve

this issue requires a consideration of the extent of "Canadian maritime law" as

defined in s. 2 of the Federal Court Act, R.S.C., 1985, c. F-7, and the breadth of the

Federal Court's jurisdiction under s. 22 of the Federal Court Act to entertain the

claim.

Facts

The appellant/plaintiff, The Monk Corporation (Monk), is an

international resource commodities broker which specializes in supplying fertilizer

materials. It entered into a contract for the supply of urea, a type of fertilizer, to the

respondent/defendant, Island Fertilizers Limited (Island), a Prince Edward Island

corporation that specializes in the purchase and sale of fertilizers.

On October 4, 1985, the parties commenced telephone negotiations for

the sale and purchase of urea fertilizer to be shipped from the U.S.S.R. on

consignment to Island for discharge in three eastern seaports in Canada. The

negotiations were largely conducted via telephone and telex. They resulted in an

agreement, the essential terms of which were found by the trial judge to be contained
 -9-

in a telex, dated October 11, 1985, sent by Monk to Island. The content of that telex

is as follows:

ISLANDFERTCHTN
OUR MSG NBR 62/72
OCT 11,85

ATT: MR. JOHN SCALES

RE: UREA IN BULK

WE CONFIRM HAVING CONCLUDED TRANSACTION N SALE:

PRODUCT: UREA
QNTY: 11,000 +-5PCT MT.
DLY: OCT/LATEST DEC1,85 3-PORT DISCHARGE/YR CONFIRMATION
TLX. ON A SELF GEARED VESSEL. BUYER GUARANTEE 3,000MT
DISCHARGE WWDSHEXUU.
DEMMURAGE[sic]/DISPATCH/C.P.
PRODUCT SPECS: 46PCT MIN N.
1PCT MAX BIURET
0.5PCT MAX MOISTURE
PRILLED-GRANULATION MIN 90PCT 1-
3MM SIZE
PRICE: 107.50USD/MT CIF-FO TERMS.

IT HAS BEEN A PLEASURE DO [sic] DO BUSINESS WITH YOU.

WORKING TO OBTAIN CAN-2,500 MT. WL ADVISE.

REGDS,
RUBIN SAIGAL
THE MONK CORP.

As this telex was found by the learned trial judge to contain the essential

terms of the agreement between Monk and Island, it may be helpful to explain some

of the specified terms and abbreviations, which highlight the nature and extent of the

arrangement between the parties.

The reference to "MT" is to "metric tonnes". The phrase "3-PORT

DISCHARGE/YR CONFIRMATION TLX" refers to the fact that the ports of

 - 10 -

discharge were to be determined by Island and confirmed by a subsequent telex. The

terms "DLY" and "SELF GEARED VESSEL" describe the obligation of the seller

to provide delivery on a ship which is not self-discharging of bulk cargo, but which

is fitted with derricks that can be utilized to discharge packages. In order to

discharge bulk cargo, such as urea, shore cranes and clam buckets are required. The

code "WWDSHEXUU" relates to the guaranteed discharge rate which was to be

3,000 metric tonnes per day. The code itself means "Weather Working Days,

Sundays and Holidays Excluded Unless Used". The initials "C.P." stand for

"Charter-Party" in the context of demurrage and dispatch. Finally, the terms "CIF-

FO" represent "Cost Insurance and Freight - Free-Out". The first three initials signify

that the stated price, which was US$107.50 per metric tonne, includes the cost of the

goods as well as that of insuring and carrying them to the agreed ports of discharge.

The last term, "Free-Out", refers to the fact that the cost and expense of discharging

the vessel upon arrival at the ports of discharge is the responsibility of the

consignee/purchaser, Island. It should be noted that the meaning of the terms "SELF

GEARED VESSEL" and "FO" were agreed to by the parties by admissions filed with

this Court.

It should be noted that Monk stated that its claims arose because Island

contended at trial that the telex of October 11, 1985 (stipulating a self geared vessel)

had been altered by subsequent discussions and agreements between the parties to

the effect that Monk would use a self-discharging ship. The trial judge rejected

Island's evidence in this respect and found that the telex of October 11, 1985 was not

modified subsequently by the parties.

 - 11 -

In order to carry out its part of the agreement, Monk entered into an

agreement with the owners of the vessel Super Spirit for the carriage of the urea.

Under the terms of the charter-party, Monk was to be responsible for any demurrage

at points of delivery and for the costs of unloading the urea. The ship sailed from the

U.S.S.R. on November 11, 1985, and arrived at her first port, Saint John, New

Brunswick, on November 29, 1985. Unloading difficulties ensued. They were

occasioned by the fact that the urea was loaded into railway cars in order to facilitate

Island's sale to one of its customers. As a result, the ship remained in port until

December 5, 1985. The next day, the ship arrived at Halifax and remained there

from the 6th to the 7th of December. From Halifax, she next went to Charlottetown

where she stayed from the 9th to the 11th of December. Finally, she proceeded to

her last port of call, Belledune, to discharge the balance of her cargo.

Following delivery of the fertilizer Monk claimed that it was owed

money for excess product delivered, for demurrage at the port of Saint John, and for

the cost of renting shore cranes used to unload the urea. In furtherance of those

claims, Monk commenced an action against Island in the Federal Court of Canada,

Trial Division.

Issues

The issue which is before the Court in this appeal and cross-appeal

concerns the question of Federal Court jurisdiction. Specifically, does the Trial

Division of the Federal Court have jurisdiction to hear Monk's claims for demurrage,

delivery of excess cargo and the cost of the shore cranes used to unload the cargo at
 - 12 -

the ports of discharge? This question turns not only upon the meaning of the relevant

sections of the Federal Court Act, but also upon the characterization of the true nature

of the matters in dispute between Monk and Island.

Section 22 of the Federal Court Act specifies the jurisdiction of the

Federal Court and in so doing refers, inter alia, to "Canadian maritime law" which

is defined in s. 2 of the Act. These provisions provide as follows:

22. (1) The Trial Division 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.

(2) Without limiting the generality of subsection (1), it is hereby

declared for greater certainty that the Trial Division has jurisdiction with
respect to any one or more of the following:

...

(i) any claim arising out of any agreement relating to the carriage of
goods in or on a ship or to the use or hire of a ship whether by
charter party or otherwise;

...

(m) any claim in respect of goods, materials or services wherever

supplied to a ship for the operation or maintenance of the ship,
including, without restricting the generality of the foregoing, claims
in respect of stevedoring and lighterage;

2. In this Act,

...
 - 13 -

"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;

Judgments of the federal Court

A. Federal Court of Canada, Trial Division (1988), 19 F.T.R. 220

In addressing the question of jurisdiction, McNair J. of the Federal Court,

Trial Division, considered the reasoning of earlier cases dealing with the question of

maritime jurisdiction, including the leading case of this Court in ITO -- International

Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752, and

concluded (at p. 226)

...on the facts of the present case that the claims for relief made and the
remedies sought relate to and are integrally connected with matters of
Canadian maritime law in the modern context of commerce and shipping.
In my opinion, the subject matter falls within the ambit of s. 22(1) of the
Federal Court Act with the result that the court has jurisdiction to
entertain the claims.

If it were necessary to decide the point, I would be inclined to the

view that the three claims are as well part and parcel of activities
essential to the carriage of goods by sea and the operations flowing
therefrom by which the parties agreed to be bound, so as to fall within
the jurisdictional head of s. 22(2)(i) of the Federal Court Act. The
contract between the parties incorporated by reference the terms of
charterparty between the plaintiff and the owners of the vessel and
clearly stipulated that the defendant was liable to pay for all discharging
costs and expenses.
 - 14 -

As a result, McNair J. awarded judgment in favour of Monk on all three claims in the

amount of $89,515.06, plus costs and interest, compounded annually.

B. Federal Court of Appeal (1989), 97 N.R. 384

Island's appeal against the decision of McNair J. to the Federal Court of

Appeal was allowed in part. The Court of Appeal was divided over the issue of

whether the contract between Monk and Island was maritime in nature and therefore

fell within the Federal Court's jurisdiction. Hugessen J.A. agreed with McNair J. that

the contract was one of a maritime nature and therefore the court had jurisdiction to

hear all claims. Pratte J.A. held that only the claim for demurrage could be

entertained. Desjardins J.A. was of the view that there was no jurisdiction to hear any

of the claims as the contract's true characterization was really one of purchase and

sale falling within civil matters and not maritime jurisdiction.

Hugessen J.A. was of the view that the telex that confirmed the

arrangement between the parties was "in fact ... an agreement to conclude a number

of contracts and, while the most important of those is unquestionably the contract of

sale (without it there would be no agreement at all), there are others which are also

essential to the bargain made by the parties" (p. 390). He had no difficulty

characterizing the arrangement between the parties as a maritime matter, falling

within the scope of maritime law as "[v]irtually everything about the contract relates

to the sea and maritime activities" (p. 390). Hugessen J.A. next considered whether

Monk's claims related solely to the agreement for the purchase and sale of the urea,

in which case the law of contract would apply, or whether the claims flowed from
 - 15 -

maritime law. He was of the opinion that the claim for the overage flowed "directly

from the maritime nature of the contract of carriage" because it was Island which

undertook to "discharge the vessel and, therefore by implication, not to discharge

more than he was entitled to" (p. 391). Likewise, the rental of the cranes was

necessary for Island to meet its obligation to discharge the cargo. Finally, Hugessen

J.A. was of the view that there could be no dispute that the claim for demurrage was

clearly one relating to maritime law. Accordingly, he would have dismissed the

appeal.

Although Pratte J.A. concurred with Hugessen J.A.'s view that the claim

for demurrage fell within the Federal Court's maritime jurisdiction, he was of the

opinion that the claim for excess cargo was, in fact, a claim "for the price of goods

sold and delivered". Even though the goods were to be delivered by ship, and the

quantity was measured by "draft survey" (described to this Court as a maritime

application of the principle of Archimedes used by marine surveyors in the unloading

of bulk cargo from ships), the contract was not thereby imbued with a maritime

quality. Similarly he did not "see anything that could impart a maritime character"

to the claim for the rental of the shore cranes.

Desjardins J.A. adopted the facts as stated in the reasons of Hugessen

J.A., but disagreed with his characterization of the nature of the contract. She was

of the opinion that the fact that Island took more urea than it was entitled to, because

of the problems inherent in maritime carriage relating to weight and measure, did not

make the claims for the excess a maritime contract. She was also of the view that the
 - 16 -

claims for demurrage and the rental of the cranes were civil matters relating to the

sale of goods and that the Federal Court had no jurisdiction to hear any of the claims.

Submissions Before this Court

Monk argued that there was only one issue to be resolved, and that

concerned the sort of activity that would fall within the jurisdiction of the Federal

Court in maritime matters. In this regard, Monk submitted that the leading case

remains this Court's decision in ITO -- International Terminal Operators Ltd. v. Miida

Electronics Inc., supra, and that it ought to be applied to the case at bar.

In relation to the characterization of the agreement between Monk and

Island, Monk made a number of submissions in support of its main contention that

the agreement was maritime in substance and that the Federal Court had properly

exercised its jurisdiction. Monk submitted that this Court's jurisprudence has been

instrumental in determining the extent of the Federal Court of Canada's maritime

jurisdiction, and cited in this regard Q.N.S. Paper Co. v. Chartwell Shipping Ltd.,

[1989] 2 S.C.R. 683, as well as ITO, supra. Both cases were cited by Monk for the

proposition that the words "maritime" and "admiralty" should be interpreted within

the modern context of commerce and shipping. Accordingly, a rather broad and

liberal interpretation ought to pertain when considering the nature of the activity and

the accompanying claim being made.

Monk argued that the determination of whether or not an activity is

maritime in nature depends upon an examination of the activity in question. If it is

 - 17 -

clear that the activity in question is maritime, then other factors such as sale of goods

are extraneous. Monk conceded that the only caveat to this scheme is that the court

must, according to ITO, avoid encroaching upon an area that is in "pith and

substance" one of property and civil rights or any other matter that touches upon

exclusive provincial jurisdiction as provided for by s. 92 of the Constitution Act,

1867. Such a situation could arise, Monk submitted, where the maritime aspect was

so peripheral that it could not be given separate status, which, they argued, was not

the case here. Applying this test to the case at bar, Monk invited this Court to

conclude that the sale of goods aspect was not relevant to the issues being litigated,

which relate solely to the carriage and discharge of cargo, both of which were

maritime in nature. While Monk admitted that the sale of goods was integrally bound

up with the maritime aspect of the contract between Monk and Island, Monk drew

attention to the fact that under the terms of the contract Island undertook a maritime

activity, i.e. the discharge of cargo, and that as a consequence, all of Monk's claims

flowed from the breach of that maritime undertaking.

With regard to the Federal Court's jurisdiction, Monk submitted that s.

22(1) in combination with s. 2 of the Federal Court Act was sufficient to establish

jurisdiction. In the alternative, Monk submitted that its claims are specifically listed

in s. 22(2)(i) of the Federal Court Act, if one accepted that the maritime aspects of the

agreement could be severable from the purchase/sale aspects.

Island's submissions were premised upon an argument which stressed the

civil, i.e. contractual, nature of the relationship between Island and Monk which

would thereby characterize the agreement as being one related to property and civil
 - 18 -

rights. In doing so, Island emphasized that the true maritime nature of the transaction

was properly between Monk and the owners of the Super Spirit, Superchart I/S, with

whom Monk had a charter-party.

In advancing its argument, Island reviewed in this Court much of the

evidence placed before the trial judge in order to characterize what was, in their

submission, the true nature of the claims. At a substantive level, Island argued that

the trial judge, as well as Pratte and Hugessen JJ.A., had ignored McIntyre J.'s caveat

in ITO, supra, at p. 774, that a court,

... in determining whether or not any particular case involves a maritime

or admiralty matter, must avoid encroachment on what is in "pith and
substance" a matter of local concern involving property and civil rights
or any other matter which is in essence within exclusive provincial
jurisdiction under s. 92 of the Constitution Act, 1867.

It was Island's contention that, if this caveat were properly applied to the

facts of the case, there could be no mistaking the civil character of the parties'

relationship and the ensuing conclusion that the claims are better characterized as

being, in "pith and substance", civil in nature. Accordingly, the Federal Court lacked

jurisdiction to hear the case and the claims ought to be adjudicated according to the

Sale of Goods Act of Prince Edward Island, R.S.P.E.I. 1974, c. S-1.

Island further submitted that Monk's alternative ground relating to s.

22(2)(i) of the Federal Court Act amounted to a misconstruction of the Act and that

the section applies only to the seller and to the owner of a ship in which the goods

are being carried and not to the buyer of those goods. As a result, Island by its cross-
 - 19 -

appeal contended that the Federal Court has no jurisdiction to entertain any of

Monk's claims.

Analysis

The jurisdiction of the Federal Court, Trial Division to hear Monk's

claims against Island must be found in s. 22(1) of the Federal Court Act cited above,

which in turn leads to the definition of "Canadian maritime law" as set forth in s. 2

of the Act. A consideration of the scope and application of that definition

necessitates a review of this Court's decision in ITO, supra, which has been followed

in a number of recent decisions of the Court. See: Roberts v. Canada, [1989] 1 S.C.R.

322; Q.N.S. Paper Co. v. Chartwell Shipping Ltd., supra, and Whitbread v. Walley,

[1990] 3 S.C.R. 1273, December 20, 1990. (For helpful commentary, see: H. Patrick

Glenn, "Maritime Law -- Federal Court Jurisdiction -- Canadian Maritime Law --

Relationship to Civil and Common Law: ITO -- International Terminal Operators Ltd.

v. Miida Electronics Inc." (1987), 66 Can. Bar Rev. 360; André Braën, "L'arrêt ITO-

International Terminal Operators Ltd. c. Miida Electronics Inc., ou comment écarter

l'application du droit civil dans un litige maritime au Québec" (1987), 32 McGill L.J.

386; Linda Reif, "A Comment on ITO Ltd. v. Miida Electronics Inc. - The Supreme

Court of Canada, Privity of Contract and The Himalaya Clause" (1988), 26 Alta. L.

Rev. 372; William Tetley, "The Buenos Aires Maru -- Has the Whole Nature of

Canadian Maritime Law Been Changed?" (1988), 10 Sup. Ct. L. Rev. 399; and John

Evans and Brian Slattery, "Federal Jurisdiction -- Pendent Parties -- Aboriginal Title

and Federal Common Law -- Charter Challenges -- Reform Proposals: Roberts v.

Canada" (1989), 68 Can. Bar Rev. 817.)

 - 20 -

In ITO, Mitsui, a marine carrier, transported electronic calculators by sea

from Japan to Montreal where Miida was to take delivery. Mitsui had arranged for

the calculators, on arrival, to be picked up and stored for a short term by the

defendant ITO, a stevedoring and terminal operating company. Many cartons of

calculators were stolen from the defendant ITO's shed as a result of the alleged

negligence of ITO. Miida sued Mitsui and ITO, and the issue, in so far as it concerns

us in this case, was whether the action against ITO could be brought in the Federal

Court, Trial Division. This depended on whether ITO's liability was to be decided

pursuant to the civil law of Quebec where the loss of cartons took place or under the

common law of bailment which has been incorporated into Canadian maritime law.

McIntyre J., writing for the majority, concluded that the claim against

ITO was not within the meaning of the first branch of the definition of Canadian

maritime law, i.e. the law that was administered by the Exchequer Court of Canada

on its Admiralty side by virtue of the Admiralty Act, 1970, or any other statute, but

went on to decide that the claim against ITO fell within the second branch of the

definition in s. 2, namely:

...[the law] that would have been so administered if [the Exchequer]

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;

Reduced to their essentials for purposes of this appeal, the reasoning and

conclusions of McIntyre J. were as follows (at pp. 774-76):

 - 21 -

(1) The second part of the s. 2 definition of Canadian maritime law

provides an unlimited jurisdiction in relation to maritime and admiralty

matters which should not be historically confined or frozen, and

"maritime" and "admiralty" should be interpreted within the modern

context of commerce and shipping.

(2) Canadian maritime law is limited only by the constitutional division

of powers in the Constitution Act, 1867, such that, in determining whether

or not any particular case involves a maritime or admiralty matter,

encroachment on what is in pith and substance a matter falling within s.

92 of the Constitution Act is to be avoided.

(3) The test for determining whether the subject matter under

consideration is within maritime law requires a finding that the subject

matter is so integrally connected to maritime matters as to be legitimate

Canadian maritime law within federal competence.

(4) The "connecting factors" with maritime law were the proximity of the

terminal operation to the port of Montreal, the connection between the

terminal operator in activities within the port area and the contract of

carriage by sea, and the fact that the storage in issue in the case was short

term pending final delivery to the consignee, Miida.

McIntyre J. then concluded that the claims of Miida were within the

Federal Court's jurisdiction.

 - 22 -

Applying the principles and approach of ITO to the case at bar, one must

begin by asking whether the claims made by Monk are so integrally connected to

maritime matters as to be legitimate Canadian maritime law within federal

competence. To answer this question, it is important first to focus on the agreement

between the parties in order to ascertain the nature and context of the claims in

question, and second, to ascertain whether the claims are maritime under the ITO

analysis.

The agreement between Monk and Island is set forth in the telex of

October 11, 1985, which contained, as found by the trial judge, "the essential terms

of the contract". Upon close examination, the telex clearly has, in my view, two

distinguishable aspects: one sale of goods, and the other maritime. With respect, I

cannot agree with the finding of Hugessen J.A. that the telex contained several

contracts. It seems to me that the telex and the consideration flowing between the

parties support only one contract which includes a number of different obligations

or undertakings related to that one contract. I prefer to say that the telex contained

many undertakings or terms, some of which relate to the sale of goods aspects of the

contract, and others of which relate to the contract of carriage which constitute the

maritime nature of the agreement between the parties.

With respect to the undertakings or terms relating to the sale of goods,

one can point to the provisions of the telex dealing with the type of goods sold, the

quality and quantity, the price, and the time for delivery. But at the same time, many

of the undertakings in the telex relate to a number of matters that are clearly

maritime in nature. For example, Monk agreed to obtain marine insurance and there
 - 23 -

is no doubt that any claim ensuing from such insurance would be governed by

Canadian maritime law. Equally so are the undertakings in the telex that relate to a

contract of carriage by sea. Monk was obliged to arrange for the chartering of a "self

geared vessel" which was to sail to three destinations as determined by Island.

Island, by the F.O. or free-out term, agreed to unload the urea upon delivery with a

specified rate of discharge. This undertaking was reinforced by Island agreeing to

assume responsibility for any demurrage and being entitled to take the benefit of any

dispatch, in each case according to rates determined in the charter-party. In my

view, these undertakings are terms that would be found in a contract of carriage by

sea which is clearly a maritime matter within the scope of maritime law as defined

by ITO.

Indeed, I agree with Hugessen J.A. when he said that the "connecting

factors", as I have called them, to maritime law in this case are stronger than they

were in ITO itself. I also agree with Hugessen J.A. when he stated at pp. 390-91:

Virtually everything about the contract relates to the sea and maritime
activities. It does not become less maritime because it is dependent upon
the making of the agreement for purchase and sale. Why should it?
There is nothing very startling about what has happened here.
Underlying most contracts of carriage by sea (usually evidenced by a bill
of lading) is an ordinary commercial contract of sale. People do not ship
goods across the seas for the pleasure of the thing but from the
commercial necessity of delivering them to customers or receiving them
from suppliers. Questions relating to the performance of the contract of
carriage are governed by maritime law, whatever may be the law
governing the sale. A buyer whose title to the goods derives from the
endorsement of a bill of lading is vested with the rights and subject to the
liabilities of the contract of carriage. (See Bills of Lading Act, R.S.C.
1985, c. B-5).
 - 24 -

To conclude on this first point, many of the undertakings in the telex

relate to a contract of carriage, which is, in my view, clearly a maritime matter

within the scope of maritime law. However, under the ITO reasoning of McIntyre

J., it is not enough to show that maritime undertakings are involved, rather it must

be shown that the specific claims advanced are integrally connected to maritime

matters because if they are so connected to the sale of goods, they will be governed,

as Island argues, by the provisions of the Sale of Goods Act of Prince Edward Island.

The claims of Monk include money owed for excess product delivered,

demurrage at the port of Saint John, and the cost of renting cranes used to unload the

urea. Put briefly, the claims cannot properly be viewed as relating to questions

encompassed by sale of goods issues such as capacity of the parties to contract,

price, quality and so on. All of Monk's claims have as their source the obligation of

Island to discharge the cargo as expressed in the telex by the F.O. term, which is

normally associated with a contract of carriage by sea.

The claim for excess product delivered relates directly to the obligation

of Island to discharge the cargo. In effect, the claim asserts that Island discharged

improperly because it took more than it should have. Put another way, the

underlying activity to which the claim for excess product delivered relates is the

discharge of cargo, which finds its roots in the contract of carriage undertakings

between the parties and not in the contract of sale aspects of the telex. Some added

support for this view is found when one looks to the draft survey technique used to

discharge the cargo. This method is uniquely maritime in nature and serves to
 - 25 -

confirm the general maritime nature of the activity involved in unloading cargo from

a ship.

Similarly with the claim for demurrage, its maritime character, as Pratte

J.A. found, cannot be denied. Demurrage relates directly to the discharge of a

vessel's cargo, again in this case finding its source in the contract of carriage aspects

of the agreement entered into between the parties. The nature and scope of

demurrage is clearly a topic that is defined and informed by maritime law

considerations.

With respect to the renting of the cranes, Monk seeks reimbursement for

the costs of the rental on the basis of the obligation of Island to be responsible for the

discharge of the cargo. As the trial judge found, the parties agreed in their telex to

have a self-geared vessel transport the cargo; and this kind of ship could not

discharge the cargo unaided. Therefore the use of shore cranes was necessary to

fulfill the discharge of cargo obligation agreed upon in the telex between the parties.

In my view, the activity of employing shore cranes to discharge a ship's cargo has

even more of a proximity with a contract of carriage and maritime matters than the

short-term storage of goods was found to have by McIntyre J. in ITO.

In short, the underlying activity to which the claims of Monk relate was

the discharge of cargo, which was an obligation on Island arising from the contract

of carriage aspects of the agreement between the parties and which had a maritime

character.
 - 26 -

That discharge of cargo is properly a maritime matter is emphasized

when one examines the Rules relating to bills of lading as set out in the Schedule to

the Carriage of Goods by Water Act, R.S.C., 1985, c. C-27. Many of the provisions

of those Rules specifically mention "discharge of goods" and in doing so clearly

import the maritime nature of that activity. For example, the definition of "carriage

of goods" in Article I is stated as covering the period from the time when the goods

are loaded on to the time when they are discharged from the ship. Article II dealing

with "Risks" provides:

Subject to the provisions of Article VI, under every contract of

carriage of goods by water the carrier, in relation to the loading,
handling, stowage, carriage, custody, care and discharge of such goods,
shall be subject to the responsibilities and liabilities and entitled to the
rights and immunities hereinafter set forth. [Emphasis added.]

Other articles also refer to "discharge". (See Article V, Surrender of Rights and

Immunities, and Increase of Responsibilities and Liabilities; Article VI, Special

Conditions; and Article VII, Limitations on the Application of the Rules). In

addition, a perusal of some of the major works on maritime law reveals the

essentially maritime nature of discharge of cargo: see Carver's Carriage by Sea (13th

ed. 1982), Vol. 2, at pp. 1061 to 1109; Payne and Ivamy's Carriage of Goods by Sea

(11th ed. 1979), at pp. 122 to 152; and Scrutton on Charterparties (19th ed. 1984), at

pp. 292 to 304. (See also the views of Jackett C.J. to the effect that discharge of

cargo from a ship is part of the activities essential to the carriage of goods by sea and

falls within Navigation and Shipping in s. 91(10) of the Constitution Act, 1867: Robert

Simpson Montreal Ltd. v. Hamburg-Amerika Linie Norddeutscher, [1973] F.C. 1356

 - 27 -

(C.A.), at p. 1363.) As discharge of cargo is a maritime matter, so must be a breach

of an obligation to discharge cargo.

The maritime character of the claims is not diminished by the fact that

Monk was the seller of the urea and Island was the purchaser with no privity between

Island and the owners of the vessel Super Spirit. Island assumed a maritime

obligation -- the discharge of cargo -- in connection with the sale and purchase of the

urea. It is that maritime obligation that is the foundation for the claims by Monk.

Parties can assume maritime obligations governed by maritime law even though they

may not formally be parties to a charter-party or even a contract of carriage by sea.

What is important for purposes of maritime law jurisdiction is that their claim be

integrally connected with maritime matters.

Finally, I would say that the claims of Monk are maritime in character

and are not in any way an encroachment of what is in "pith and substance" a matter

falling within s. 92 of the Constitution Act, 1867. The claims here advanced do not

in my view have as their foundation or source sale of goods elements of the telex

arrangement between Monk and Island and therefore are not within the provincial

scope of property and civil rights or within any other heading of s. 92.

I should also like to add that the approach I have taken in this matter

corresponds with McIntyre J.'s urging that the terms "maritime" and "admiralty"

should be interpreted within the modern context of commerce and shipping and

should not be static or frozen. Such terms should rather be capable of adjusting to
 - 28 -

evolving circumstances unencumbered by rigid doctrinal categorization and

historical straitjackets.

Because of the conclusion I have reached, it is not necessary for me to

discuss Monk's alternative argument, namely, that its claims are within s. 22(2)(i) of

the Federal Court Act.

Conclusion

I would allow the appeal, dismiss the cross-appeal, and restore the

judgment of McNair J. in the Federal Court, Trial Division, with costs here and in

both divisions of the Federal Court.

//L'Heureux-Dubé J.//

The following are the reasons delivered by

L'HEUREUX-DUBÉ J. (dissenting) -- This case originates in Prince Edward

Island where Island Fertilizers Limited (Island) entered into an agreement for the

purchase of urea fertilizer from The Monk Corporation (Monk). In order to fill that

order, Monk had to import the fertilizer from Russia by ship. Claiming that a

balance of the purchase price was owing, Monk instituted proceedings against Island

in the Federal Court.

 - 29 -

The sole issue in this appeal concerns the jurisdiction of the Federal

Court to entertain the claim of Monk. While the trial division of the Federal Court

allowed the claim, the majority of the Court of Appeal reversed the decision in part,

allowing the claim only in part, and declined jurisdiction as to the balance.

My colleague, Justice Iacobucci, concludes that the whole of Monk's

claim falls within the jurisdiction of the Federal Court as being within the confines

of Canadian maritime law. I cannot agree with his reasons nor with the result he

reaches. In my view, the claim falls squarely within provincial jurisdiction over

property and civil rights, and is therefore a matter to be dealt with by the courts of

each province. In this, I agree with the reasons of Desjardins J.A., concurring in part

in the Federal Court of Appeal, and, I agree as well, in part, with the reasons of

Pratte J.A.

I readily admit that the matter is not without difficulty and that its

resolution depends, on the one hand, on how one characterizes the claim at issue and,

on the other, on one's vision of the nature, scope and extent of the body of law called

Canadian maritime law.

For a better comprehension of what follows, I will briefly restate the facts

pertinent to the resolution of this appeal.

Facts
 - 30 -

The plaintiff, appellant and cross-respondent in this Court, Monk, is an

international resource commodities broker, located in Montreal, which specializes

in the sale of fertilizer. The defendant, respondent and cross-appellant in this Court,

Island, is a Prince Edward Island corporation that buys various types of fertilizer on

the world market and then mixes them for the purpose of sale to farmers in the

Maritimes.

Monk and Island entered into negotiations for the sale and purchase of

a quantity of urea, a type of fertilizer, to be delivered to three ports: Saint John, New

Brunswick, Halifax, Nova Scotia, and Charlottetown, Prince Edward Island. The

ship Super Spirit, chartered by Monk under a charter-party entered into with the

disponent owners, Superchart I/S, sailed from Russia with a cargo of urea and was

to deliver Island's cargo at the above three ports.

The negotiations between the parties took place over a period of time and

involved a number of long-distance phone calls and telex exchanges. On October

11, 1985, Island requested that Monk, by telex, indicate its acceptance and confirm

Island's order. The telex response by Monk is pivotal to the case in that McNair J.,

at trial, determined that it contained all of the essential terms of the contract between

the parties, and because it is out of this contract between the parties that Monk's

claim arises. It reads:

ATT: MR. JOHN SCALES

RE: UREA IN BULK

WE CONFIRM HAVING CONCLUDED TRANSACTION N SALE:

PRODUCT: UREA
QNTY: 11,000 +-5PCT MT.
 - 31 -

DLY: OCT/LATEST DEC1,85 3-PORT DISCHARGE/YR CONFIRMATION

TLX. ON A SELF GEARED VESSEL. BUYER GUARANTEE 3,000MT
DISCHARGE WWDSHEXUU.

DEMMURAGE[sic]/DISPATCH/C.P.
PRODUCT SPECS: 46PCT MIN N.
1PCT MAX BIURET
0.5PCT MAX MOISTURE
PRILLED-GRANULATION MIN 90PCT 1-
3MM SIZE
PRICE: 107.50USD/MT CIF-FO TERMS.

IT HAS BEEN A PLEASURE DO [sic] DO BUSINESS WITH YOU.

WORKING TO OBTAIN CAN-2,500 MT. WL ADVISE.

As to the specific terms of the telex and their meaning, it is uncontested

that Monk agreed to sell to Island 11,000 metric tonnes of fertilizer, with a margin

of 5% in either direction, to be delivered within the time frame specified, to the three

ports listed previously. The discharge of the vessel was to be at a rate of not less

than 3,000 metric tonnes per day. Demurrage, a penalty payable to Monk in the

event that the ship was discharged at a slower rate, and dispatch, a sum payable to

Island in the event that discharge was carried out at a faster rate, are payable in

accordance with the rates set out in the agreement between Monk and its carrier

(C.P.).

The price, $107.50 per metric tonne, in U.S. funds, was to be paid on

CIF-FO terms, meaning that the price covers the cost of the goods (C), the cost of

the insurance, to be arranged for by Monk (I), and the cost of carriage or freight (F).

It is not disputed that the term FO means "free-out", i.e. that Island would be

responsible for the whole cost and expense of discharging the vessel.
 - 32 -

Neither is it disputed that the term "self geared vessel" means a vessel

possessing derricks used in the discharge of packaged cargoes and thus, a vessel not

equipped to discharge a bulk cargo such as urea, in other words, not a self-

discharging vessel. Shore equipment would, therefore, be necessary to discharge the

cargo. Island, however, claims, and this is at the heart of the dispute between the

parties, that it did not agree to a self-geared vessel, and, in any event, that the

agreement was that Monk would arrange and pay for the shore equipment necessary

to enable Island to discharge the cargo in a manner similar to that of a self-

discharging vessel. Monk did in fact arrange and pay for the supply of shore cranes

and clam buckets. The equipment supplied by Monk was utilized by Island and by

the stevedores Island employed in the discharge of the cargo. The cargo destined for

the port of Saint John had been sold by Island to McCain Foods Ltd. and they too

had the benefit of the equipment supplied by Monk. Monk did not invoice Island for

the cost of the rental of this equipment, in the amount of $59,963.60, until the

commencement of its action, approximately nine months later. In light of the above,

Island refuses to pay for the cost of discharge of the vessel which, Monk presently

argues, is an expense Island is responsible for.

It is on the basis of this contract that Monk instituted proceedings against

Island. Monk claims $20,070.15 Cdn., an amount representing the excess urea

discharged over and above the amount agreed upon (the monetary amount

determined at trial on the basis of a finding by McNair J. regarding the amount, in

terms of metric tonnes, of the overage). Monk also claims for an amount

representing the demurrage incurred at Saint John, N.B., as the discharge of the ship

took significantly longer than stipulated in the contract ($9,481.31 Cdn.), and for the
 - 33 -

expenses associated with the rental of shore cranes and clam buckets needed in order

to discharge the ship ($59,963.60 Cdn.). In making its claim, Monk relies on the

contractual obligations allegedly undertaken by Island.

Legislative Framework

A good starting point in disputes over jurisdiction is the Constitution Act,

1867. We are concerned here with the division of powers between the federal and

provincial governments. Monk's claim will be within Federal Court jurisdiction if

it, among other things, comes within the federal power over Navigation and

Shipping, s. 91(10) of the Constitution Act, 1867.

On the other hand, should the claim be one for the sale of goods, it will

clearly be within provincial jurisdiction, falling under s. 92(13) of the Constitution

Act, 1867, Property and Civil Rights in the Province.

In my view, it is important to keep in mind these areas of respective

legislative competence, particularly when dealing with matters not defined with

precision, such as the jurisdiction of the Federal Court and the meaning of "Canadian

maritime law". McIntyre J. voiced the same concerns in ITO--International Terminal

Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752, wherein he stated at p.

774:

In reality, the ambit of Canadian maritime law is limited only by the

constitutional division of powers in the Constitution Act, 1867. I am
aware in arriving at this conclusion that a court, in determining whether
or not any particular case involves a maritime or admiralty matter, must
 - 34 -

avoid encroachment on what is in "pith and substance" a matter of local

concern involving property and civil rights or any other matter which is
in essence within exclusive provincial jurisdiction under s. 92 of the
Constitution Act, 1867. It is important, therefore, to establish that the
subject-matter under consideration in any case is so integrally connected
to maritime matters as to be legitimate Canadian maritime law within
federal legislative competence. [Emphasis added.]

The Federal Court Act, R.S.C., 1985, c. F-7, deals specifically with that

Court's jurisdiction over matters of a maritime nature. The relevant provisions are:

2. . . .

"Canadian maritime law" means the law that was administered by

the Exchequer Court of Canada on its Admiralty side by virtue of
the Admiralty Act, 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;

22. (1) The Trial Division 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.

I shall discuss these sections at more length later in these reasons.

Finally, the pertinent sections of the Sale of Goods Act of Prince Edward

Island, R.S.P.E.I. 1974, c. S-1, are:

3. (1) A contract of sale of goods is a contract whereby the seller

transfers or agrees to transfer the property in goods to the buyer for a
 - 35 -

money consideration called "the price"; there may be a contract of sale

between one part owner and another.

27. It is the duty of the seller to deliver the goods and of the buyer to
accept and pay for them in accordance with the terms of the contract of
sale.

30. (1) Where the seller delivers to the buyer a quantity of goods less
than he contracted to sell, the buyer may reject them; but if the buyer
accepts the goods so delivered, he must pay for them at the contract rate.

(2) Where the seller delivers to the buyer a quantity of goods larger
than he contracted to sell, the buyer may accept the goods included in the
contract and reject the rest or he may reject the whole; if the buyer
accepts the whole of the goods so delivered he must pay for them at the
contract rate.

32. (1) Where, in pursuance of a contract of sale, the seller is authorized

or required to send the goods to the buyer, delivery of the goods to a
carrier, whether named by the buyer or not, for the purpose of
transmission to the buyer is prima facie deemed to be a delivery of the
goods to the buyer.

(2) Unless otherwise authorized by the buyer, the seller must make
such contract with the carrier on behalf of the buyer as may be
reasonable, having regard to the nature of the goods and the other
circumstances of the case; if the seller omits so to do and the goods are
lost or damaged in the course of transit the buyer may decline to treat the
delivery to the carrier as a delivery to himself or may hold the seller
responsible in damages.

(3) Unless otherwise agreed, where goods are sent by the seller to the
buyer by a route involving sea transit under circumstances in which it is
usual to insure, the seller must give such notice to the buyer as may
enable him to insure them during their sea transit and if the seller fails to
do so the goods are deemed to be at his risk during such sea transit.

37. When the seller is ready and willing to deliver the goods and requests
the buyer to take delivery and the buyer does not within a reasonable
time after the request take delivery of the goods, he is liable to the seller
for any loss occasioned by his neglect or refusal to take delivery and also
for a reasonable charge for the care and custody of the goods; but nothing
in this section affects the rights of the seller where the neglect or refusal
of the buyer to take delivery amounts to a repudiation of the contract.

49. (1) Where, under a contract of sale, the property in the goods has
passed to the buyer and the buyer wrongfully neglects or refuses to pay
for the goods according to the terms of the contract, the seller may
maintain an action against him for the price of the goods.
 - 36 -

(2) Where, under a contract of sale, the price is payable on a day

certain, irrespective of delivery, and the buyer wrongfully neglects or
refuses to pay the price, the seller may maintain an action for the price,
although the property in the goods has not passed and the goods have not
been appropriated to the contract.

59. (1) The rules of the common law, including the law merchant, save
insofar as they are inconsistent with the express provisions of this Act
and in particular the rules relating to the law of principal and agent and
the effect of fraud, misrepresentation, duress or coercion, mistake or
other invalidating cause continue to apply to contracts for the sale of
goods.

It is against this constitutional and legislative framework that the issue

of the jurisdiction of the Federal Court over maritime law must be examined.

Proceedings and Judgments

Federal Court, Trial Division (1988), 19 F.T.R. 220

Objection was taken by Island to the jurisdiction of the Federal Court at

the outset of this case, culminating in the majority decision of the Federal Court of

Appeal that it had jurisdiction only with respect to that part of the claim related to

demurrage.

Given his conclusion that he had jurisdiction to deal with the whole

claim, McNair J., at trial in the Federal Court, considered the merits of the case. He

allowed Monk's claim and gave judgment in favour of Monk in the sum of

$89,515.06. In summarizing the proceedings and judgments below however, the

merits of the case and the findings of fact made by McNair J. will be of little
 - 37 -

significance since, in my view, the Federal Court had no jurisdiction to hear the

matter.

The jurisdiction of the Federal Court was first questioned by way of

preliminary motion to dismiss Monk's action. Rouleau J., of the Federal Court,

dismissed the application, holding that the application was premature in that Island

had failed to tender enough evidence to meet the heavy onus required in order to

strike the pleadings.

Island then applied for an order for the determination of a question of

law. The application was made before Jacques Lefebvre, the Senior Prothonotary

of the Federal Court. In dismissing the application, Lefebvre held that nothing

material had changed such that Rouleau J.'s conclusion on the matter should not

stand. In dismissing the appeal from the order of the Prothonotary, Pinard J., of the

Federal Court, concluded that "too many of the essential facts remain disputed", and

that "under the circumstances, [the determination of the issue of jurisdiction] ought

to be made in a factual context established at a trial". The matter thus proceeded to

trial in Charlottetown, P.E.I., before McNair J. in the Federal Court.

McNair J. concluded that the Federal Court had jurisdiction to consider

the whole claim arising out of the contract entered into by the parties. Relying

heavily upon this Court's earlier decision in ITO, supra, he concluded at p. 226:

I have no difficulty in concluding on the facts of the present case that

the claims for relief made and the remedies sought relate to and are
integrally connected with matters of Canadian maritime law in the
modern context of commerce and shipping. In my opinion, the subject
 - 38 -

matter falls within the ambit of s. 22(1) of the Federal Court Act with the
result that the court has jurisdiction to entertain the claims.

Federal Court of Appeal (1989), 97 N.R. 384

The Federal Court of Appeal experienced considerably more difficulty

in reaching a conclusion, a difficulty reflected in the fact that all three judges wrote

separate opinions, each reaching different conclusions as to the jurisdiction of the

Federal Court over the whole claim.

Pratte J.A. agreed with Hugessen J.A. that the demurrage item of the

claim fell within Federal Court jurisdiction. He concluded otherwise, however,

regarding the items relating to the excess product and reimbursement of expenses

with respect to the rental of equipment used in the unloading of the ship. With

regard to the excess product, he concluded that it "was a claim for the price of goods

sold and delivered" and, hence, based exclusively on the sale of goods, a matter

outside the jurisdiction of the Federal Court. He reached the same conclusion

regarding the reimbursement of expenses associated with the rental of shore

equipment, reasoning that it was based on a civil contract thus, again, a matter falling

outside the jurisdiction of the Federal Court.

As regards these last two items of the claim, Hugessen J.A. was of a

contrary opinion. At the outset he framed the issue in terms of "whether plaintiff's

action in the Trial Division should be characterized as a claim by a seller against a

buyer under an agreement for the sale of goods, or as a claim by a shipper against a

consignee under a contract of carriage" (p. 386). After considering the opinion of
 - 39 -

McIntyre J. for the majority in ITO, supra, Hugessen J.A. concluded that the contract

between the parties for the sale of urea comprised a number of other contracts, for

example, the contract of marine insurance that the seller was obliged to purchase.

Hugessen J.A. drew a distinction between terms of the bargain between the parties

going to the contract of carriage and, alternatively, terms better characterized as

going to the sale of goods (see pp. 390-91). Those terms going to the contract of

carriage were, in his view, governed by maritime law. Within this analytical

framework, Hugessen J.A. concluded that there were three claims all of which

flowed from the "contract of carriage" and were, therefore, properly within the

jurisdiction of the Federal Court.

Desjardins J.A. disagreed with both of her colleagues and held that none

of the claims, properly characterized, involved questions of maritime law. She, too,

considered ITO, supra, but held that the claims in the present case were primarily of

a civil nature. She concluded in this fashion at p. 392:

In my view, the telex of October 11, 1985, is essentially a contract

of sale of goods where the costs of the shipping arrangements have been
distributed as between the buyer and the seller. This is not a maritime
contract. The claims related to excess cargo, the rental of the shore
cranes and the demurrage costs are also claims of a civil nature and not
of a maritime nature. This Court has no jurisdiction.

This Court is, therefore, seized of an appeal by Monk against the majority

of the Federal Court of Appeal's decision that it was without jurisdiction to consider

its claim for reimbursement of the equipment costs and the claim for excess product.

It is also seized of a cross-appeal by Island against the Court of Appeal's conclusion

that it had jurisdiction to hear and dispose of the claim for demurrage.
 - 40 -

Canadian Maritime Law

Prior to a determination of the nature of the claim, relevant to the issue

of jurisdiction in this case, the nature and scope of the Federal Court's jurisdiction

over maritime law must be examined. Of paramount importance in this discussion

are the reasons of the majority of this Court in ITO, supra. McIntyre J., for the

majority, comprehensively examined the previous case law pertinent to this issue

and, more importantly, provided a guide to the interpretation of the latter part of the

definition of maritime law in s. 2 of the Federal Court Act. Prior to the decision of

this Court in ITO, supra, this aspect of the Federal Court's jurisdiction over maritime

law had remained unconstructed. As a consequence of the reasons in ITO, supra, the

jurisdiction of the Federal Court in maritime matters seems to incorporate many

matters that previously would have been held to have been outside of Federal Court

competence. Importantly, however, McIntyre J. articulated significant caveats to this

wide construction, caveats that have particular relevance in the present case.

The facts in ITO, supra, are relatively straightforward. The respondent,

Mitsui O.S.K. Lines Ltd., a marine carrier, entered into a contract for the shipment

of electronic calculators from Japan to Montreal. The other party to the contract was

Miida Electronics, also the owner and consignee of the goods. When the goods

arrived they were picked up by a stevedoring company and terminal operator, ITO,

which had agreed with Mitsui to unload the goods and store them until delivery to

Miida. Prior to delivery, the shed in which the goods were stored was broken into

and a significant portion of the goods was stolen. A security service, employed by

ITO, failed to check this shed at the scheduled time. If the scheduled inspection had
 - 41 -

occurred, the guard would have discovered that the padlock securing the shed had

not been attached. The arrival of the guard, some three hours late, interrupted the

theft.

The bill of lading excluded the liability of the carrier, Mitsui, and also

contained a Himalaya clause by which Mitsui sought to extend its exemption clauses

to those it employed in the performance of the contract of carriage. The stevedoring

contract between Mitsui and ITO also contained clauses of limitation.

Miida sued both Mitsui and ITO in the Federal Court. The claim against

ITO was based upon negligence. One of the issues addressed by this Court was

whether or not the Federal Court had jurisdiction to consider and decide the claim.

It is within the discussion of this issue that McIntyre J. considered the nature and

scope of the body of law known as "Canadian maritime law".

McIntyre J. began his analysis by setting out the three requirements

necessary to support jurisdiction in the Federal Court, requirements that had long

been accepted in the jurisprudence (at p. 766):

1. There must be a statutory grant of jurisdiction by the federal

Parliament.

2. There must be an existing body of federal law which is essential to the

disposition of the case and which nourishes the statutory grant of
jurisdiction.

3. The law on which the case is based must be "a law of Canada" as the
phrase is used in s. 101 of the Constitution Act, 1867.
 - 42 -

As to the first requirement, McIntyre J. found that it was satisfied by s.

22(1) of the Federal Court Act.

The important discussion for the purposes of this case, however, occurs

within McIntyre J.'s examination of the second requirement. Prior to the judgments

of this Court in Quebec North Shore Paper Co. v. Canadian Pacific Ltd., [1977] 2

S.C.R. 1054, and McNamara Construction (Western) Ltd. v. The Queen, [1977] 2

S.C.R. 654, it was commonly thought that "a federal court could be given jurisdiction

over any matter in relation to which the federal Parliament had legislative

competence" (P. Hogg, "Constitutional Law -- Limits of Federal Court Jurisdiction --

Is There a Federal Common Law?" (1977), 55 Can. Bar Rev. 550). In Quebec North

Shore, supra, Laskin C.J., for the Court, expressly disagreed with such a broad

interpretation of Federal Court jurisdiction, holding at pp. 1065-66:

It is also well to note that s. 101 does not speak of the establishment
of Courts in respect of matters within federal legislative competence but
of Courts "for the better administration of the laws of Canada". The
word "administration" is as telling as the plural word "laws", and they
carry, in my opinion, the requirement that there be applicable and
existing federal law, whether under statute or regulation or common law,
as in the case of the Crown, upon which the jurisdiction of the Federal
Court can be exercised. [Emphasis added.]

This requirement was reiterated in McNamara Construction, supra, and,

more recently, by Wilson J. in Roberts v. Canada, [1989] 1 S.C.R. 322, wherein she

remarked at p. 330, "the second element, as I understand it, requires a general body

of federal law covering the area of the dispute".

 - 43 -

The approach of this Court in these two cases has generally resulted in

the narrow construction of Federal Court jurisdiction. However, it is also clear that

this Court has not allowed the decisions in these two cases to stand in the way of a

broad interpretation of Federal Court jurisdiction over maritime law. The truth of

these propositions is demonstrated both by the line of cases from this Court

regarding Federal Court jurisdiction over maritime matters, which form the basis of

and culminate in ITO, supra, and by the case law from this Court that nevertheless

affirms the strict construction of Federal Court jurisdiction in general. The reasons

of La Forest J. in Ontario (Attorney General) v. Pembina Exploration Canada Ltd.,

[1989] 1 S.C.R. 206, note both the broad effect of ITO, supra, on Federal Court

jurisdiction over maritime law, and conversely, the strict manner in which grants of

jurisdiction to the Federal Court are to be construed. La Forest J. asserts at p. 212

that "[t]he Federal Court Act, in setting out that court's admiralty jurisdiction,

provides for a very extensive jurisdiction" and cites ITO, supra, in support. Then,

at p. 226, he states the first proposition in these words:

Those cases [McNamara Construction, supra, and Quebec North Shore,

supra] laid down stringent requirements for Parliament in exercising its
power to grant jurisdiction to a court established under s. 101 of the
Constitution Act, 1867. In so doing, the Court strongly asserted the
primarily unitary nature of our judicial system.

In addition, La Forest J. refers to the "strict tests" Parliament must meet

in conferring jurisdiction on federal courts, at p. 227.

In R. v. Thomas Fuller Construction Co. (1958) Ltd., [1980] 1 S.C.R. 695,

Pigeon J. articulated the same strict approach, at p. 713:

 - 44 -

It must be considered that the basic principle governing the Canadian

system of judicature is the jurisdiction of the superior courts of the
provinces in all matters federal and provincial. The federal Parliament
is empowered to derogate from this principle by establishing additional
courts only for the better administration of the laws of Canada.

That Federal Court jurisdiction over maritime law has nevertheless been

interpreted broadly is a matter often remarked upon in the academic literature (see

J. Laskin and R. Sharpe, "Constricting Federal Court Jurisdiction: A Comment on

Fuller Construction" (1980), 30 U.T.L.J. 283; J. M. Evans, "Comments on Legislation

and Judicial Decisions -- Federal Jurisdiction -- A Lamentable Situation" (1981), 59

Can. Bar Rev. 124; W. Tetley, "Maritime Law Judgments in Canada -- 1979" (1981),

6 Dalhousie L.J. 676; S. Scott, "Canadian Federal Courts and the Constitutional

Limits of Their Jurisdiction" (1982), 27 McGill L.J. 137; P. Glenn, "Maritime Law --

Federal Court Jurisdiction -- Canadian Maritime Law -- Relationship to Civil and

Common Law: ITO -- International Terminal Operators Ltd. v. Miida Electronics Inc."

(1987), 66 Can. Bar Rev. 360 and W. Tetley, "The Buenos Aires Maru -- Has the

Whole Nature of Canadian Maritime Law Been Changed?" (1988), 10 Sup. Ct. L.

Rev. 399).

In his examination of ITO, supra, Glenn, supra, comments on both the

effect of Quebec North Shore, supra, and upon the subsequent broad construction of

Federal Court jurisdiction over maritime matters. At pages 361-62:

As is well known, the Supreme Court of Canada decided in Quebec North

Shore Paper Co. v. Canadian Pacific Ltd., that these words [s. 101 of the
Constitution Act, 1867] require that there be applicable and existing
federal law upon which the jurisdiction of the Federal Court can be
exercised. Absent such existing federal law, no statutory grant of
jurisdiction to the Federal Court is valid, and the mere existence of
 - 45 -

federal legislative authority in a given field is not indicative of existing

federal law. . . . The decision in Quebec North Shore has been criticized
for its divisive effect on multi-party litigation but is important for its re-
affirmation of the fundamentally unitary character of the Canadian court
system . . . .

As to maritime matters, however, the Supreme Court subsequently

held in Tropwood A.G. v. Sivaco Wire & Nail Co. that there had been
legislative definition in section 2 of the Federal Court Act of a body of
"Canadian maritime law" upon which Federal Court jurisdiction can be
based. . . . The Federal Court was thus enabled to exercise a jurisdiction
in Admiralty of some importance . . . but which was limited by
restrictions inherent in English admiralty jurisdiction in 1934.

In the ITO decision the Supreme Court has now eliminated these
restrictions. . . . Federal Court jurisdiction is thus now co-extensive with
that which is maritime, a definition which would make it as broad as that
exercised by the English Admiralty Court in its most expansive period
. . . . Yet even this extensive English jurisdiction would not have
included a claim for a tort or delict committed on land . . . . McIntyre J.,
however, speaking for the majority of the court, refused to restrict the
definition of maritime and admiralty matters to claims fitting within such
historical limits. [Citations omitted; emphasis added.]

In distinction, then, to the generally strict construction of Federal Court

jurisdiction, this Court has, in the area of Federal Court jurisdiction over maritime

law, pursued an expansive method of interpretation. McIntyre J.'s analysis of the

second requirement for Federal Court jurisdiction, in the context of maritime law,

is, therefore, pivotal to the determination of the question before this Court in the

present case. It is thus to McIntyre J.'s words regarding this crucial second

requirement that I now turn.

McIntyre J. began by noting that the definition, found in s. 2 of the Act,

encompassed two different categories of maritime law, as law that (p. 769):

(1) was administered by the Exchequer Court of Canada on its

Admiralty side by virtue of the Admiralty Act or any other statute; or
 - 46 -

(2) would have been so administered if that court had had on its
Admiralty side unlimited jurisdiction in relation to maritime and
admiralty matters.

In defining the first category of maritime law, McIntyre J. relied

extensively upon an earlier decision of this Court, Tropwood A.G. v. Sivaco Wire &

Nail Co., [1979] 2 S.C.R. 157, and on the reasons of Thurlow A.C.J. in The Queen v.

Canadian Vickers Ltd., [1978] 2 F.C. 675. He traced the history of both English and

Canadian enactments to conclude that the effect of The Admiralty Act of 1934,

enacted by Parliament, "was to adopt as part of Canadian law, English admiralty

jurisdiction and law as it existed in 1934." (Emphasis added.) In conclusion as to

the extent of the first category of maritime law, McIntyre J. stated at p. 771:

I would be of the opinion then that the term `Canadian maritime law'
includes all that body of law which was administered in England by the
High Court on its Admiralty side in 1934 as such law may, from time to
time, have been amended by the federal Parliament, and as it has
developed through judicial precedent to date.

McIntyre J. concluded that, notwithstanding the breadth of the first

category, the claim of Miida against ITO was not comprehended by it, since English

maritime law of 1934 was confined to torts committed "within the ebb and flow of

the tide". Importantly, he noted that, even if the Act appeared to confer jurisdiction

under one of the heads of s. 22, this was not the end of the matter, since English

maritime law of 1934 could not, as explained above, without more, provide the

necessary body of federal law to nourish the statutory grant of jurisdiction. Thus,

whether or not the Act covered the particular claim in this case, recourse had to be

had to the second category of maritime law.

 - 47 -

The definition of the second category of maritime law formulated by

McIntyre J. was in part a response to the opinion of Le Dain J. in Domestic

Converters Corp. v. Arctic Steamship Line, [1984] 1 F.C. 211, at p. 244, that "[i]t

would be against the whole tradition of admiralty jurisdiction with respect to

maritime torts to hold that a tort or delict committed on land is a maritime matter",

a statement, however, that Le Dain J. later retracted.

As the construction of this second category of maritime law forms the

basis upon which the question in the present case must be examined, I will reproduce

McIntyre J.'s formulation in its entirety. At page 774 he wrote:

I would agree that the historical jurisdiction of the Admiralty courts

is significant in determining whether a particular claim is a maritime
matter within the definition of Canadian maritime law in s. 2 of the
Federal Court Act. I do not go so far, however, as to restrict the
definition of maritime and admiralty matters only to those claims which
fit within such historical limits. An historical approach may serve to
enlighten, but it must not be permitted to confine. In my view the second
part of the s. 2 definition of Canadian maritime law was adopted for the
purpose of assuring that Canadian maritime law would include an
unlimited jurisdiction in relation to maritime and admiralty matters. As
such, it constitutes a statutory recognition of Canadian maritime law as
a body of federal law dealing with all claims in respect of maritime and
admiralty matters. Those matters are not to be considered as having been
frozen by The Admiralty Act, 1934. On the contrary, the words
"maritime" and "admiralty" should be interpreted within the modern
context of commerce and shipping. In reality, the ambit of Canadian
maritime law is limited only by the constitutional division of powers in
the Constitution Act, 1867. I am aware in arriving at this conclusion that
a court, in determining whether or not any particular case involves a
maritime or admiralty matter, must avoid encroachment on what is in
"pith and substance" a matter of local concern involving property and
civil rights or any other matter which is in essence within exclusive
provincial jurisdiction under s. 92 of the Constitution Act, 1867. It is
important, therefore, to establish that the subject-matter under
consideration in any case is so integrally connected to maritime matters
as to be legitimate Canadian maritime law within federal legislative
competence. [Emphasis added.]
 - 48 -

In determining whether the claim of Miida properly fell within this

second category of maritime law, McIntyre J. emphasized the important role played

by stevedores in the area of shipping and cited Reference re Industrial Relations and

Disputes Act, [1955] S.C.R. 529, in support. He concluded at pp. 775-76 with these

words:

It is clear, in my view, that such incidental storage by the carrier itself or

by a third party under contract to the carrier is also a matter of maritime
concern by virtue of the "close, practical relationship of the terminal
operation to the performance of the contract of carriage". . . . It may then
be concluded that cargo-handling and incidental storage before delivery
and before the goods pass from the custody of a terminal operator within
the port area is sufficiently linked to the contract of carriage by sea to
constitute a maritime matter within the ambit of Canadian maritime law,
as defined in s. 2 of the Federal Court Act.

. . . I would stress that the maritime nature of this case depends upon
three significant factors. The first is the proximity of the terminal
operation to the sea, that is, it is within the area which constitutes the
port of Montreal. The second is the connection between the terminal
operator's activities within the port area and the contract of carriage by
sea. The third is the fact that the storage at issue was short-term pending
final delivery to the consignee. [Emphasis added.]

Having found the necessary body of existing federal law, McIntyre J.

determined that the third requirement was also met, as Canadian maritime law fell

within federal legislative competence under s. 91(10) of the Constitution Act, 1867.

As is obvious from the summary of these reasons, once one finds, at least in the

maritime context, that the claim falls within either category of maritime law, the

third requirement is easily met.

It is against this background that the claim in the present case must be

examined. As in ITO, supra, the claim here falls for consideration under the second
 - 49 -

category of maritime law, i.e. law that would have been so administered if the

Exchequer Court of Canada had had on its admiralty side unlimited jurisdiction in

relation to maritime and admiralty matters. This is largely the basis upon which the

lower courts approached the issue and upon which the parties presented their

arguments.

The Claim

Characterization

A number of things become evident on a reading of this Court's reasons

in ITO, supra. To begin with, McIntyre J. was careful, in his construction of the

broad body of law called Canadian maritime law, to remain cognizant of overarching

constitutional considerations and hence he articulated the caveat that "[i]t is

important, therefore, to establish that the subject-matter under consideration in any

case is so integrally connected to maritime matters as to be legitimate Canadian

maritime law within federal legislative competence" (p. 774). McIntyre J.'s caution

is also evident in his careful recital of the factors present in the circumstances of the

case which compelled him to reach the conclusion that such an integral connection

existed. It is therefore important, in a consideration of the issue before the Court in

the instant case, to ensure that the claim is examined within its total factual context

in order to determine its true nature. Any analysis must engage in such careful

scrutiny to ensure that each case does indeed fall within this body of law, however

broad it might be.

 - 50 -

In adopting this approach, I am in agreement with the statement of Collier

J. in the Federal Court in Sumitomo Shoji Canada Ltd. v. The "Juzan Maru", [1974] 2

F.C. 488, at p. 496, that in characterizing the claims raising the issue of jurisdiction,

one must look "at the essence of the arrangement" between the parties. This

approach was commented on and approved of in Kuhr v. The "Friedrich Busse",

[1982] 2 F.C. 709, wherein Addy J. stated at p. 717:

In that case [The Ship "Juzan Maru"] the Court declined jurisdiction, but
it was clearly on the basis that, on examining the true essence of the
contract in the light of all the circumstances and the particular facts of
the case, it appeared that the maritime or shipping aspects of the business
arrangement between the parties were minuscule or incidental . . . and
that the essence of the arrangement was not maritime. I fully agree with
that principle . . . .

This is a common-sense approach and an approach generally followed in

dealing with questions of this nature. Further, such an approach is inherent in any

inquiry into "what is in `pith and substance' a matter of local concern involving

property and civil rights or any other matter which is in essence within exclusive

provincial jurisdiction" (ITO, supra at p. 774). Therefore, in determining whether

or not the claim here falls within the jurisdiction of the Federal Court as a matter of

maritime law, I will pay particular heed to this method of analysis.

In my view, once one examines the nature of the relationship between the

parties, evidenced primarily by the contract between them, it becomes clear that "the

maritime or shipping aspects of the business arrangement between the parties were

minuscule or incidental", incidental, that is, to a contract for the sale of goods which

is the dominant feature of their relationship. As is evident from the face of the telex
 - 51 -

of October 11, 1985, the parties were concerned primarily with the conclusion of an

agreement for the sale and delivery of urea. Most of the terms of their bargain are

traditionally associated with contracts of sale, such as quality, quantity etc. Due,

however, to the contingencies facing the parties in the particular instance, certain

terms, of a more "maritime nature" it is argued, were used, such as the CIF-FO terms

going to price, and the demurrage and discharge terms. However, once one

examines the essence of the agreement between the parties taken as a whole, it

becomes evident that, despite the apparent maritime trappings of certain wording of

the contract, in reality it operated merely to further the primary goal of the parties,

being the sale and delivery of a quantity of urea. Navigation and shipping does not

comprehend the contract entered into by the parties here. It was not concerned with

the carriage of goods by sea nor was it concerned with stevedoring services. Monk's

contract with the carrier is separate and independent from the contract it concluded

with Island.

It is purely incidental, due only to the fact that Monk purchased the urea

in Russia, that the carriage had to be done by sea. It could, for that matter, have been

done by plane or by truck. Quite independently of its contract for the sale of the urea

to Island, Monk entered into a contract for the carriage of the goods. The fact that

Island was aware that the goods would be shipped in this fashion and that it

undertook to pay a price for the goods that comprehended the cost of freight and

insurance and undertook to pay demurrage and the expense of discharge in no way

alters the nature of the contract between Monk and Island. Island undertook no

obligation whatsoever as to the actual carriage by sea. Had the goods not been
 - 52 -

delivered, Island would have had no recourse against the carrier, but only a civil

recourse against Monk for breach of contract, a purely provincial matter.

While I agree with Hugessen J.A. that the problem lies in characterizing

the subject matter of the claim, I cannot agree that the contract evidenced by the

telex embodies a number of contracts, among others a contract of sale, a contract of

carriage and a contract for marine insurance entered into between Monk and Island.

While Monk had a contractual obligation to obtain insurance for the benefit of

Island, Island was not the contracting party, Monk was. Similarly, while Monk had

obligations regarding the payment of freight, it was toward the carrier, not Island, as

was similarly the case regarding the discharge of the cargo. The contract of

insurance and contract of carriage, to which Hugessen J.A. refers as conferring

jurisdiction upon the Federal Court, are, in my respectful opinion, contracts entered

into between Monk and the carrier, not between Monk and Island. While I would

have little difficulty in finding jurisdiction in the Federal Court if terms of the

contract of insurance between Monk and National Surety Corporation were in

dispute (clearly within Federal Court jurisdiction under the authority of Triglav v.

Terrasses Jewellers Inc., [1983] 1 S.C.R. 283) or if Monk, as the charterer under the

charter-party entered into with Superchart I/S, the owners of the Super Spirit,

disputed some of the terms relevant to that relationship; here, however, claims of

such undisputed maritime quality are not in issue.

When one examines Monk's claim in its entirety and in the factual

context in which it arose, one can only conclude that it is inseparable from the

contract of sale. The price of the goods was set taking into account the shipping
 - 53 -

arrangements made by Monk. Therefore, the price of the urea, an essential term of

the contract of sale, provides the appropriate focus for this dispute. In this

framework, it is not, in my opinion, possible to separate out individual claims and

allocate them to categories controlled by labels such as "contract of carriage terms".

McNair J., in my respectful opinion, makes a similar error in his reference to the

charter-party in some fashion being incorporated by the contract of sale between the

parties.

While the terms of the charter-party may have formed the reference point

for the setting of the discharge and demurrage rates, this can in no way be

determinative of the question of jurisdiction. In light of the caveats, discussed

previously, regarding the appropriate parameters of maritime law and in light of the

approach to characterization set out above, maritime trappings of this nature must be

viewed as inconclusive and reliance on them, in determining questions of

jurisdiction, ill-founded. Rather, I am in agreement with the manner in which

Desjardins J.A. at the Court of Appeal describes the context of the claim. At page

392 she states that:

The contract at issue was concluded exclusively by the appellant, the

buyer, and the respondent, the seller. The seller undertook to take
measures to have the cargo delivered CIF to the buyer who in turn took
as his responsibility the discharge of the cargo at specified ports of call,
hence the words FO for "free out" found in the contract. The seller then
signed a contract of carriage, the charter-party, with the owners of the
vessel. We are not concerned with that second contract which is a
maritime contract. [Emphasis added.]

I would add that the mere use of words such as "demurrage", "free-out"

in a contract cannot, without more, ground jurisdiction unless such words are used
 - 54 -

in a maritime contract. Further, even assuming, as my colleague Iacobucci J. asserts,

that the discharge of cargo from a ship is a maritime matter, it is clear that the claim

here is not properly comprehended by this characterization. In my view, an

examination of the relationship between the parties demonstrates that the claim in

the instant case revolves around the contract price of the goods and not their

discharge. That this is the proper view of the claim is discussed at greater length

below.

Nature

The above discussion was largely concerned with the proper framework

within which to characterize the claim before us and in setting out certain general

considerations pertinent on the facts of this case. I will now examine each of the

items of Monk's claim to show that an analysis at an increased level of specificity

does not detract from the general conclusion reached above, namely that the claim,

in its essence, flows from a contract for the sale of goods, a claim that, therefore,

falls outside the Federal Court's jurisdiction over maritime law.

Monk firstly claims that Island discharged more from the ship than

permitted under the terms of the contract and thus owes Monk for this overage.

There is little to be said about this item since it is so obviously, in my opinion, solely

related to the contract for the sale of urea and not in any way to any matter of a

maritime nature. As Pratte J.A. in the Federal Court of Appeal noted at p. 386, this

claim is simply one for the price of goods sold and delivered. It flows directly from

one of the essential terms of the contract of sale. The connection to maritime law,
 - 55 -

if any, is exceedingly remote and the connection goes little if any distance towards

establishing the integral connection articulated by McIntyre J. in ITO, supra. The

only possible connection to maritime law is found in the agreement between the

parties that the amount discharged was to be determined by way of draft survey, a

technique often resorted to in cases of goods of a bulk nature carried by ship. An

appropriate response to the contention that this suffices to stamp the claim with the

label "maritime" is found in the reasons of Desjardins J.A. at the Court of Appeal.

She dispenses with the argument in this fashion at p. 392:

Under the contract of sale, the buyer was not entitled to take more
than what he had asked for. That he took more because it was bulk cargo
and because of the difficulty of proper weighing, inherent to marine
carriage of this type, does not make the claim for excess a maritime
contract. As a matter of comparison, had the type of weighing retained
for the measurement of the cargo been done on land after the discharge
instead of by draft surveys, and had the scales been false or incorrect in
violation of the provisions of the Weights and Measures Act, R.S.C.
1985, c. W-6, would any excess claim, inherently resulting from the
operation, become federal because Weights and Measures are a federal
matter under s. 91, paragraph 17 of the Constitution Act, 1867?
Obviously not.

Pratte J.A., reached the same conclusion for similar reasons.

The dispute as to the excess amount of urea allegedly discharged,

consequently, does not ground jurisdiction in the Federal Court but, instead, falls

squarely within the domain of the provinces and their respective Sale of Goods Acts

and must be dealt with by the courts of the province.

The factual considerations relevant to the second and third items of

Monk's claim are, to some extent, similar, therefore I will discuss them together.
 - 56 -

They involve a demand by Monk for reimbursement of the money it expended in the

rental of shore equipment to unload the ship and for demurrage, consequent upon the

delay incurred at Saint John in unloading the ship.

These items are, again, properly characterized only upon an examination

of the entire set of circumstances within which they arise. Only by resorting to this

larger set of facts can the essence of the arrangement between the parties be

discovered. Like the excess product, these two items are inextricably linked to the

contract of sale between the two parties. The evidence shows that there was some

confusion and dispute between the parties as to the kind of vessel that was to be

chartered by Monk. Island argues that the vessel should have been capable of

discharging itself, whereas Monk argues that they had agreed to a self-geared vessel,

one not so equipped. A dispute as to the kind of vessel to be chartered by Monk

directly affected the contractual arrangements distributing the transportation costs

between the parties and, hence, price. The nature of the dispute is therefore one that

is tied to the larger agreement of sale. It is impossible then, in my view, in light of

the entire set of circumstances surrounding this transaction, to separate out these last

two items as being of a maritime nature. We do not have before us a claim by the

stevedores responsible for unloading the ship nor a claim going to the terms of the

charter-party between Monk and the owners of the Super Spirit, clearly matters of a

maritime nature. There is nothing here resembling the integral connection to things

maritime that would allow the Federal Court to assume jurisdiction. The words of

Desjardins J.A. at p. 392 bear repeating:

In my view, the telex of October 11, 1985, is essentially a contract

of sale of goods where the costs of the shipping arrangements have been
 - 57 -

distributed as between the buyer and the seller. This is not a maritime
contract. The claims related to excess cargo, the rental of the shore
cranes and the demurrage costs are also claims of a civil nature and not
of a maritime nature. This Court has no jurisdiction.

Any other interpretation would, in my opinion, run afoul of the caveats

articulated by McIntyre J. in ITO, supra. The claim here is, in its essence, or in "pith

and substance", a claim properly falling under provincial law for resolution. While

Monk acted in a number of different capacities for the purpose of effecting the

transaction, for example Monk was also a charterer and an insured under the marine

insurance policy in order to fulfill its obligation towards Island, the parties are

nevertheless properly characterized, as regards the claim in the instant case, as acting

in the respective capacities of buyer and seller. The integral connection McIntyre

J. envisioned, sufficient to pull matters within the jurisdiction of the Federal Court

over maritime law, is not present here, nor is there a sufficient connection with a

contract of carriage, a factor that McIntyre J. emphasized in coming to his conclusion

in ITO, supra. It is clear that McIntyre J., in his listing of the factors that were

important in the circumstances before him in ITO, supra, was both explaining his

conclusion and, importantly, indicating that, in contemplating this second category

of maritime law, one must clearly and carefully set out the considerations militating

for the conclusion that the claims are within the jurisdiction of the Federal Court in

order that matters of a purely provincial nature are not inadvertently subsumed.

McIntyre J. concluded that the claim before him, in the circumstances of that case,

was so integrally connected to maritime law as to fall within the jurisdiction of the

Federal Court over maritime law.

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The same careful examination and inquiry in this case necessarily results

in a different conclusion. For all of the reasons given above, the law governing this

contract is found in the applicable provisions of the Sale of Goods Act of Prince

Edward Island. Both of the parties in this case agree that, should this Court conclude

that the Federal Court does not have jurisdiction over the claim, recourse should be

had to this body of law. Further, in oral argument before this Court, there was no

disagreement as to Island's assertion that Monk was within time to proceed in the

Prince Edward Island courts.

Both McNair J. at trial, and Monk, the appellant in this Court, expressed

the view that the claim here falls within a specific head of jurisdiction under s. 22(2)

of the Federal Court Act, namely, s. 22(2)(i). For ease of reference I will reproduce

this subsection:

22. . . .

(2) Without limiting the generality of subsection (1), it is hereby

declared for greater certainty that the Trial Division has jurisdiction
with respect to any one or more of the following:

...

(i) any claim arising out of any agreement relating to the carriage
of goods in or on a ship or to the use or hire of a ship whether by
charter party or otherwise;

While the proper construction of this section is not strictly in issue, I tend

to favour the interpretation put forth by the respondent, Island. At page 31 of its

factum it sets forth the proper interpretation of this section:

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The agreement referred to in this subsection is the agreement between

the seller and the owner of the ship which will carry the goods sold; if a
dispute had arisen between SUPERCHARTS S/I and the Monk
Corporation under this charter, the Federal Court would have had
jurisdiction to entertain the matter assuming that the arbitration clause of
the charterparty had been waived or found not to be binding, but this
does not give a maritime character to the contract of sale itself . . .
[Citations omitted.]

If this section is construed to apply to claims in cases such as the present,

I would think that, in view of the nature of the first category of maritime law, as

discussed by McIntyre J. in ITO, supra, one would still have to proceed to an

examination of the second category of maritime law in order to find operative law

to nourish this grant of jurisdiction, a situation similar to the one facing this Court

in ITO, supra. Therefore, a simple assertion that this head would apply may be

insufficient. Nevertheless, it is my view that this head of jurisdiction has no

application here and nothing more need be said.

Finally, there was some concern expressed during oral argument

regarding the splitting of jurisdiction over Monk's claim. Due to my conclusion on

the issue, this concern is academic in the instant case. This being so, I will merely

repeat the words of Wilson J. in Roberts, supra, wherein she addresses the argument

that Canadian courts, in order to avoid the fragmentation of jurisdiction between the

Federal Court and the superior courts of the province, should adopt the concepts of

"pendent and ancillary jurisdiction" developed in the United States federal courts.

Her response, at pp. 333-34, is apposite here:

The concerns expressed by advocates of this more liberal approach to

Federal Court jurisdiction were addressed in the United States federal
courts through the development of the concept of "pendent and ancillary
 - 60 -

jurisdiction". Under this concept, if a plaintiff's claims are such that he

would ordinarily be expected to try them all in one judicial proceeding,
then, assuming that the federal issues are substantial, there is power in
the federal courts to hear all of the issues. In some ways this is an
attractive concept. However, it does not appear to find support in the
existing jurisprudence of this Court nor indeed in the wording of s. 101
of the Constitution Act, 1867 which requires the jurisdiction of any court
set up pursuant to that section . . . to be "for the better Administration of
the Laws of Canada". The fact that a claim resting on provincial law is
"intertwined" with or affected by another claim determinable according
to the "Laws of Canada" has been held not to bring the first claim with
the jurisdiction of the Federal Court: see The Queen v. Thomas Fuller
Construction Co. . . . [Emphasis added.]

Conclusion

Having concluded that the Federal Court has no jurisdiction to entertain

Monk's claim, since it does not fall within the parameters of Canadian maritime law

but rather squarely within provincial jurisdiction over property and civil rights, I

would, therefore, dismiss the appeal with costs and allow the cross-appeal with costs.

I would, as a consequence, dismiss the whole of Monk's claim against Island with

costs, reserving, if necessary, the right of the appellant to pursue its claim in the

courts of Prince Edward Island.

Appeal allowed and cross-appeal dismissed with costs, L'HEUREUX-DUBÉ

J. dissenting.

Solicitors for the appellant: Marler, Sproule & Pilotte, Montréal.

Solicitors for the respondent: Brisset Bishop, Montréal.

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