A-344-75
Quebec North Shore Paper Company and Quebec
and Ontario Transportation Company (Appel-
lants) (Defendants)
v.
Canadian Pacific Limited and Incan Ships Lim
ited (Respondents) (Plaintiffs)
Court of Appeal, Thurlow, Ryan and Le Dain
JJ.—Montreal, November 21, 1975; Ottawa,
December 22, 1975.
Jurisdiction—Damages--Contract for construction and
operation of rail car marine terminal—Appellant "Q and O"
and respondent 'I" contracting with respondent "CP" to oper
ate rail transporter for "CP"—Failure of appellants to con
struct within specified time—Action for breach of contract—
Application by appellants to strike out statement of claim for
want of jurisdiction—Whether purely local undertaking—
Motion dismissed—Appeal—Whether Court has jurisdiction
under s. 23 of Federal Court Act—Federal Court Act, ss. 2, 3,
23—British North America Act, 1867, ss. 91(29), 92(10)(a),
101.
Appellants contracted to construct and operate a rail car
marine terminal to be ready by May 15, 1975. Appellant Q and
O and respondent I contracted to form a Joint Venture to
operate the transporter, and, by contract, appellant Q and O
and respondent I agreed with respondent CP to operate the
transporter for CP. All parties agree that the contracts should
be considered as part of a scheme in which they all were
interested. Respondents claimed damages, alleging default in
failing to perform within the time stipulated. Appellants main
tained that the subject matter was only within Quebec, and
thus, a local undertaking. Appellants further alleged that this
was not a case of extension of a railway line, but of extension of
a railway line by means of a shipping line which was purely
local, and appellants moved to strike out the statement of claim
for want of jurisdiction. The Trial Division found that the
Court had jurisdiction, and dismissed the motion. Appellants
appealed.
Held, dismissing the appeal, the Court has jurisdiction. The
subject matter of the action is the Heads of Agreement con
tract and the Joint Venture and Ship Operating contracts,
taken as a whole. The obligation of QNS and Q and O to
construct the terminal and facilities and make then available by
May 15, 1975, is not a separate agreement. It is part of the
consideration of the obligation of CP to transport newsprint of
QNS from on board the rail transporter at Baie Comeau to
New York and Chicago and of the obligation of I to construct
terminal facilities at Quebec City and to operate the terminal
under the Joint Venture. The overall objective is the transporta
tion of newsprint by CP from Baie Comeau to New York and
Chicago using the rail transporter between Baie Comeau and
Quebec City and the CP extraprovincial railway undertaking
beyond Quebec City. As far as CP is concerned, the Heads of
Agreement is a long-term contract for the international trans
portation of goods, to be performed in part by its extraprovin-
cial railway undertaking. Such a contract is a vital part of the
operating of such an undertaking, and as such, falls within the
exclusive legislative jurisdiction of Parliament—a matter
coming within the class of subject "works and undertakings
connecting a province with any other province, or extending
beyond the boundaries of a province."
Also, per Thurlow J.: The contractual arrangements between
I and CP, I and QNS, and I and Q and O are all incidental to
and necessary for the effective carrying out of the central
purpose of the arrangements, and thus can be seen as matters
falling within the class of subject, etc., because they are inci
dents of and necessary to the carrying out of contractual
obligations falling within the class of subject, "works and
undertakings ...., etc.
Reference as to the Validity of the Industrial Relations
and Disputes Investigation Act [1955] S.C.R. 529 and
Toronto v. The Bell Telephone Company of Canada
[1905] A.C. 52, distinguished. Commission du Salaire
Minimum v. The Bell Telephone Company of Canada
[1966] S.C.R. 767, applied.
APPEAL.
COUNSEL:
P. M. Laing, Q.C., and G. Nesbitt for
appellants.
C. R. O. Munro, Q.C., for respondents.
SOLICITORS:
Laing, Weldon, Courtois, Clarkson, Parsons
& Tétrault, Montreal, for appellants.
Law Department, Canadian Pacific • for
respondents.
The following are the reasons for judgment
rendered in English by
THURLOW J.: I agree with Mr. Justice Le Dain,
and for the reasons given by him, that on the facts
before us the Court has jurisdiction to entertain
and enforce the claim of Canadian Pacific Limited
against both defendants for breach of the contract.
It seems to me that the contract is one made by
Canadian Pacific Limited in the course of carrying
on its existing railway transportation system and is
thus a matter falling within the class of subjects,
namely, works and undertakings connecting a
province with any other province or extending
beyond the limits of a province, within the mean
ing of section 23 of the Federal Court Act.
I have had more difficulty in understanding how
the claim of Incan Ships Limited for damages
which it alleges it has sustained in respect of the
same breach of the same contract and for annul
ment of the contract is a claim for relief in relation
to a matter falling within the same class of subject.
Viewed by themselves I cannot see how the con
tractual obligations and rights of Incan fit the
description. However, the facts are open to the
view that the contractual arrangements between
Incan and Canadian Pacific, between Incan and
Quebec North Shore Paper Company and between
Incan and Quebec and Ontario Transportation
Company Limited are all incidental to and neces
sary for the effective carrying out of the central
purpose of the arrangements, that is to say, the
carriage of newsprint from Baie Comeau over
provincial and international boundaries to New
York and Chicago. On this basis it seems to me
that they can be regarded as matters falling within
the class of subject, etc., because they are incidents
of and necessary to the carrying out of contractual
obligations which are matters that fall within the
class of subject, works and undertakings, etc.
Having regard to the judgments of the Supreme
Court in the Stevedoring case', Commission du
Salaire Minimum v. Bell Telephone Co. of
Canada' and Kootenay and Elk Railway Co. v.
Canadian Pacific Railway Co. 3 this appears to me
to be the better view. It seems to me to be of
particular importance that under the arrangements
Mean and Quebec and Ontario Transportation
Company are to carry out on behalf of Canadian
Pacific a portion of the international carriage of
newsprint which Canadian Pacific contracts with
Quebec North Shore Paper Company to carry
from Baie Comeau to New York and Chicago. I
therefore concur in the dismissal of the appeal.
* * *
The following are the reasons for judgment
rendered in English by
LE DAIN J.: This is an appeal from a judgment
of the Trial Division 4 dismissing an application to
have the statement of claim struck out and the
1 [1955] S.C.R. 529.
2 [1966] S.C.R. 767.
3 [1974] S.C.R. 955.
4 [1976] 1 F.C. 405.
action dismissed for want of jurisdiction.
The action is one for breach of contract in which
the respondents claim from the appellants dam
ages totalling $35,987,385 and declarations to set
the contracts aside. There are three contracts
involved: the principal contract, dated January 22,
1974, which is referred to as the Heads of Agree
ment contract, and two accessory contracts, dated
February 13, 1974, and March 26, 1974, and
referred to respectively as the Joint Venture and
the Ship Operating contracts. It is agreed that
these contracts are to be considered as forming
part of a single, overall project in which all of the
parties are interested.
The project is described in the preamble to the
Heads of Agreement contract as follows:
The following Heads of Agreement are set out as an agreement
for the operation of rail transporters to transport newsprint of
Quebec North Shore Paper Company between Baie Comeau,
Quebec, and Quebec City, Quebec, for furtherance to New
York City, New York, and Chicago, Illinois, and other destina
tions, and to transport general cargo to and from points on the
North Shore of the St. Lawrence, and to define the obligations
and responsibilities of Quebec North Shore Paper Company,
Canadian Pacific Limited, Quebec & Ontario Transportation
Company, Limited and Incan Ships Limited in the implemen
tation of this project.
The contracts contemplate the operation of a
special form of water transportation consisting of a
self-propelled railcar barge (referred to as a "rail
transporter") capable of carrying 26 newsprint
boxcars and making 175 round trip voyages annu
ally between Baie Comeau and Quebec City; the
construction and operation of related terminal
facilities at Baie Comeau and Quebec City; and
the through transportation by Canadian Pacific
Limited (hereinafter referred to as "CP") of the
newsprint of Quebec North Shore Paper Company
(hereinafter referred to as "QNS") from on-board
the rail transporter at Baie Comeau to New York
and Chicago, using the rail transporter from Baie
Comeau to Quebec City, and CP rail and connect
ing carriers thereafter.
The rail transporter is to be owned and operated
by a Joint Venture consisting of Quebec and
Ontario Transportation Company (hereinafter
referred to as "Q&O") and Incan Ships Limited
(hereinafter referred to as "Incan").
QNS or Q&O is to construct, own and operate
the necessary terminal facilities at Baie Comeau,
and Incan is to construct, own and operate the
necessary terminal facilities at Quebec City. The
obligation of QNS or Q&O in this respect, for the
alleged non-fulfilment of which the present action
is brought, is provided for by clause 6.02 of the
Heads of Agreement contract as follows:
Q&O or QNS shall purchase or lease the required land and
construct and operate a rail car marine terminal facility, altera
tions to warehouse facilities and general cargo transit facilities
at Baie Comeau, which facilities are to be available for May
15, 1975.
With respect to the agreement by CP to carry
the newsprint of QNS, clause 4.01 of the Heads of
Agreement contract provides as follows:
CP undertakes and agrees to carry a minimum of 310,000 tons
of newsprint shipped by QNS from on-board the rail transport
er at Baie Comeau to the New York pressrooms in Manhattan
and Brooklyn, New York City, and to the Chicago Tribune's
rail siding in Chicago, during each year of a 15-year period
commencing on the Commencement Date, subject to the provi
sions of 7.02, Section 10 and 11.01 hereof. CP also undertakes
to carry general cargo to and from points on the North Shore
during the same period.
The contract fixes the through rates to be paid
by QNS to CP for the transportation of newsprint
from Baie Comeau to New York and Chicago.
Such rates are to be water competitive and subject
to approval by the appropriate regulatory bodies.
The contract also fixes the charge to be paid by
CP to the Joint Venture for its part in the through
transportation, such charge being broken down
into components allocated to the Baie Comeau
terminal, the rail transporter operation, and the
Quebec City terminal.
The Joint Venture is to lease the necessary
newsprint rail cars "in sufficient numbers to trans
port efficiently 310,000 tons of newsprint per
annum from Baie Comeau to New York City and
Chicago combined". The cost to the Joint Venture
of leasing such cars is to be charged, up to a
certain maximum amount, to QNS, and any cost
in excess of that amount is to be reimbursed to the
Joint Venture by CP.
The Ship Operating contract provides further
for the relationship between the Joint Venture and
CP in clauses 1 and 3 as follows:
I. CP hereby retains Q&O and Incan operating as a joint
venture to carry newsprint from Baie Comeau to Quebec City
for furtherance to New York City and Chicago and general
cargo via the rail transporter as an extension of CP's rail
system, the whole in accordance with and in the manner
provided for in the Heads of Agreement and Q&O and Incan
agree to operate the rail transporter for and on behalf of CP in
accordance with and in the manner provided for in the Heads
of Agreement.
3. All newsprint and general cargo carried on the rail trans
porter shall be solicited by CP and carried on a standard CP
through bill of lading.
In their action the respondents allege that they
have complied with their obligations under the
Heads of Agreement contract but that the appel
lants have failed to perform their obligation to
construct the rail car marine terminal at Baie
Comeau and by their delay have rendered the
performance of such obligation impossible. CP
claims for loss of profits that it would have earned
during the life of the contract and for loss in
connection with other arrangements called for by
the contract. Incan claims for expenses incurred in
the construction of the terminal at Quebec City,
the leasing of rail cars, and the purchase of the rail
transporter, and for loss of profits which would
have been earned during the life of the contract.
The appellants further conclude that the contracts
be annulled, voided and terminated à toutes fins
que de droit.
The issue on appeal is whether the Federal
Court of Canada has jurisdiction to entertain the
action by virtue of section 23 of the Federal Court
Act, which reads as follows:
23. The Trial Division has concurrent original jurisdiction as
well between subject and subject as otherwise, in all cases in
which a claim for relief is made or a remedy is sought under an
Act of the Parliament of Canada or otherwise in relation to any
matter coming within any following class of subjects, namely
bills of exchange and promissory notes where the Crown is a
party to the proceedings, aeronautics, and works and undertak
ings connecting a province with any other province or extending
beyond the limits of a province, except to the extent that
jurisdiction has been otherwise specially assigned.
The question to be determined, therefore, is
whether the claim for relief in this case relates to a
matter coming within the class of subjects "works
and undertakings connecting a province with any
other province or extending beyond the limits of a
province".
The words "matter coming within any following
class of subjects" in section 23 would appear to be
used in a sense that corresponds to that in which
the words "Matters coming within the Classes of
Subjects" are used in sections 91 and 92 of the
British North America Act and to be subject to
the same approach to interpretation. The French
version of these words in section 23 of the Federal
Court Act—en matière de—is not quite the same
as the French translation of the corresponding
words in the B.N.A. Act—matières tombant dans
les catégories de sujets—but I do not think any
particular significance is to be attached to this
difference. It is reasonable to conclude that section
23 contemplates that where Parliament has legisla
tive jurisdiction to make laws in relation to a
matter because it falls within the class of subjects
described in section 92(10) (a) of the B.N.A. Act—
"Lines of Steam or other Ships, Railways, Canals,
Telegraphs, and other Works and Undertakings
connecting the Province with any other or others
of the Provinces, or extending beyond the Limits of
the Province"—this Court has jurisdiction in a
case in which the claim for relief relates to such a
matter.
The claim for relief must be made or the remedy
sought under an Act of the Parliament of Canada
"or otherwise". By the words "or otherwise" I
understand any other law that can be considered to
form part of the "Laws of Canada" within the
meaning of section 101 of the B.N.A. Act, since
Parliament only has legislative competence by
virtue of that section to confer jurisdiction on the
Court to administer the laws of Canada. This
limitation is reflected in section 3 of the Federal
Court Act, which refers to the Court as "an addi
tional court for the better administration of the
laws of Canada" and in section 2 of the Act, which
provides that " 'laws of Canada' has the same
meaning as those words have in section 101 of The
British North America Act, 1867." The expression
"laws of Canada", within the meaning of section
101 of the B.N.A. Act, includes not only existing
federal statutes but also any law that Parliament
can validly enact, amend or repeal. Consolidated
Distilleries Limited v. The King [1933] A.C. 508.
In this case the respondents' claim for relief is
based not on federal statute law but on the Quebec
civil law of contract. The contracts in issue all
contain a provision that they and any disputes
arising thereunder are to be interpreted and con
strued in accordance with the laws of the Province
of Quebec. In so far as the civil law of Quebec
applies to a matter within federal legislative juris
diction with respect to an extraprovincial under
taking contemplated by section 92(10)(a) of the
B.N.A. Act, it forms part of the laws of Canada
within the meaning of section 101 of the B.N.A.
Act since it could be enacted, amended or repealed
by the Parliament of Canada. In other words,
Parliament could validly enact contract law to
apply to matters falling within its jurisdiction with
respect to such undertakings. Laskin's Canadian
Constitutional Law, Revised Fourth Edition, 1975,
page 793.
In my view, the matter in relation to which the
claim for relief is made, or the subject-matter of
the action in the present case, is the Heads of
Agreement contract, and the accessory Joint Ven
ture and Ship Operating contracts, taken as a
whole. It is these contracts which are the basis of
the respondents' claims for damages and which
they seek to have set aside. The obligation of the
QNS and Q&O to construct a rail car marine
terminal and related facilities at Baie Comeau and
to make them available by May 15, 1975, is not a
separate or severable agreement. It is part of the
cause or consideration of the obligation of CP to
transport newsprint of QNS from on-board the rail
transporter at Baie Comeau to New York and
Chicago and of the obligation of Incan to con
struct terminal facilities at Quebec City and to
operate the rail transporter under the Joint Ven
ture. The respondents' claims for damages include
expenses incurred in the performance of their obli
gations under these contracts and loss of profits
that would have been earned during the life of the
Heads of Agreement contract.
The further question, then, is whether the Heads
of Agreement and related contracts constitute a
matter coming within the class of subjects "works
and undertakings connecting a province with any
other province or extending beyond the limits of a
province". Do the contracts relate to an undertak
ing within the meaning of section 23 in such a
manner as to give the Court jurisdiction?
Much of the appellants' argument on this issue
was directed to the contention that the rail car
marine terminal and related facilities to be con
structed and operated at Baie Comeau would not
form part of an undertaking of the kind contem
plated by section 23. The terminal, it was argued,
would not be an integral part of the rail transport
er undertaking, much less a part of the CP under
taking. The terminal was likened to a warehousing
facility. It was said that the shipper's warehousing
facility could not be considered to be a part of the
transportation undertaking which is to transport
his goods. The appellants further contended that
for a local undertaking to become an integral part
of an extraprovincial undertaking there must be
more than a mere physical connection and that it
must be owned or operated by the latter. Refer
ence was made to City of Montreal v. Montreal
Street Railway [1912] A.C. 333; Luscar Collier
ies, Limited v. McDonald [1927] A.C. 925; The
British Columbia Electric Railway Company
Limited v. Canadian National Railway Company
[1932] S.C.R. 161; Kootenay and Elk Railway
Co. v. Canadian Pacific Railway Co. [1974]
S.C.R. 955. Nor would it be sufficient in the
appellants' submission, that there be a contractual
relationship in which the operators of the local
undertaking are to carry out, as independent con
tractors, a functionally necessary part of the ser
vice which the operators of the extraprovincial
undertaking have contracted to provide. The
Stevedoring case,' in which the shipping and
stevedoring operations were carried on by different
companies, was distinguished on the ground that
the decision in that case was based on federal
jurisdiction with respect to navigation and ship
ping rather than on that with respect to undertak
ings within the meaning of section 92(10)(a) of
the B.N.A. Act.
Reference as to the Validity of the Industrial Relations and
Disputes Investigation Act [1955] S.C.R. 529.
The appellants further contended that in so far
as the terminal at Baie Comeau and the rail
transporter were concerned, there was as yet no
undertaking in fact or in law. Toronto Corporation
v. Bell Telephone Company of Canada [1905]
A.C. 52, was distinguished on the ground that in
that case the company had been incorporated by
federal statute with power to establish and operate
an interprovincial undertaking. It was a question
of provincial or municipal power to interfere with
the establishment of an undertaking that had been
authorized by Parliament in the exercise of its
legislative jurisdiction under section 92(10)(a) and
section 91(29) of the B.N.A. Act. In the present
case, it was said, there was merely a contract. It
created an obligation to establish an undertaking,
but it was not statutory authority to do so. For
jurisdiction under section 23 of the Federal Court
Act, it was contended, there must be an existing
extraprovincial undertaking to which the claim for
relief relates.
On the other hand, the respondents contended
that a contract for the interprovincial or interna
tional transportation of goods was by itself suffi
cient to give Parliament legislative jurisdiction,
and accordingly the Federal Court must have
jurisdiction. The respondents argued that no pro
vincial legislature could legislate with respect to
such a contract, and that since it would fall within
federal legislative competence this Court must
have jurisdiction with respect to an action to
enforce it. What this argument appears to amount
to, for purposes of section 23 of the Federal Court
Act, is that the Heads of Agreement and accessory
contracts contemplate the establishment and oper
ation of an international transportation service
that would constitute an undertaking within the
meaning of that section. Obviously, there are dis
tinctions to be drawn between a contract of car
riage or transportation and the transportation
undertaking by which it is to be performed.
In view of the conclusions to which I have come
concerning the nature of the Heads of Agreement
and accessory contracts, in relation to the extra-
provincial railway undertaking of CP, I do not find
it necessary to deal with these various contentions
of the appellants and the respondents.
There is no doubt that the contracts have several
facets. A principal objective of the contracts is the
establishment of a rail transporter service operat
ing between Baie Comeau and Quebec City, with
related terminal facilities at each of these points.
But the overall objective is the transportation of
newsprint by CP from Baie Comeau to New York
and Chicago, using the rail transporter between
Baie Comeau and Quebec City and the CP extra-
provincial railway undertaking beyond Quebec
City. That the extraprovincial railway undertaking
of CP is necessarily involved is conceded by the
appellants, who, in their memorandum of fact and
law, state:
Indubitably, Respondent Canadian Pacific by its railway
connects two and more provinces and extends beyond the limits
of the Province of Quebec and is classed as an undertaking
contemplated by Section 23 of the Federal Court Act and
Section 92(10)(a) of the British North America Act.
In so far, then, as CP is concerned, the Heads of
Agreement contract is a long-term contract for the
international transportation of goods, to be per
formed in part by its extraprovincial railway
undertaking. Such a contract is a vital part of the
operation of such an undertaking and as such falls
within the exclusive legislative jurisdiction of Par
liament under the test affirmed in Commission du
Salaire Minimum v. The Bell Telephone Com
pany of Canada [1966] S.C.R. 767. It is thus a
matter coming within the class of subject "works
and undertakings connecting a province with any
other province or extending beyond the limits of a
province" within the meaning of section 23 of the
Federal Court Act. Accordingly, the Court has
jurisdiction to entertain the action. I would dismiss
the appeal with costs.
* * *
RYAN J.: I concur.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.