T-1467-75
Quebec and Ontario Transportation Company
(Plaintiff)
v.
The Ship Incan St. Laurent and Mean Ships Lim
ited (Defendants)
Trial Division, Walsh J.—Vancouver, April 14;
Ottawa, May 5, 1978.
Jurisdiction — Maritime law — Contracts — Joint venture
contract for construction of vessel, together with prior and
subsequent related documents entailing further obligations —
Half-interest in vessel not assigned to plaintiff as required by
joint venture contract, but obligations in related agreement not
fulfilled — Plaintiff seeking one-half of profits earned by
vessel, and one-half of proceeds from its sale, as well as an
accounting — Whether or not Court has jurisdiction to enter
tain the action, and if so, whether or not an action lies in rem
— Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, ss. 2,
22(1),(2)(a),(b), 42.
Plaintiff and defendant Incan contractually agreed that
defendant ship is beneficially owned by them in equal shares,
and that while the agreement for the construction of the ship
was in defendant Inean's name, the rights of Incan in and to the
ship are held by it equally for itself and plaintiff. Inean would
assign 50% of such rights to plaintiff at the earliest possible
date. Plaintiff paid Inean for its one-half share of payments
made on account of the ship's construction. In addition to this
contract, however, both an earlier document, entitled "Heads of
Agreement", and a subsequent agreement existed and set out
related construction obligations on the parts of both plaintiff
and defendant Incan. Defendant Incan refused to assign the
50% interest in the ship, apparently because of plaintiffs
non-completion of these obligations, and registered Incan as
owner of 64 shares of the ship. Plaintiff seeks an order that it
be registered as owner of one-half interest of the ship, one-half
share of the profits earned by it, and one-half of the proceeds
from its sale, together with an accounting for those earnings
and proceeds. This Court is to determine if the Federal Court
has jurisdiction to entertain plaintiffs claim, and if so, whether
or not an action lies in rem.
Held, the action is dismissed. Although plaintiff is attempt
ing to base its action entirely on the contract, which is a joint
venture agreement for the construction of the vessel, it is clear
that this agreement is inseparable from the earlier "Heads of
Agreement" document, and a subsequent agreement. While
plaintiff has a claim to ownership it has not yet acquired this
ownership, but in fact is seeking to have the Court enforce this
agreement so as to recognize this right. The Court is unable to
distinguish the facts of the present case from those in the
Capricorn case by which it is bound, and therefore must
conclude that the Federal Court does not have jurisdiction to
entertain the present claim. Furthermore, since it has been
established that the Federal Court does not have jurisdiction to
entertain an action for résiliation of agreements and damages,
it would be difficult to conclude that this Court has jurisdiction
to entertain a claim to enforce the agreements and claim the
benefits of ownership arising from them.
Quebec North Shore Paper Co. v. Canadian Pacific Ltd.
[1977] 2 S.C.R. 1054, applied. The "Capricorn" v.
Antares Shipping Corp. [1978] 2 F.C. 834, followed.
Intermunicipal Realty & Development Corp. v. Gore
Mutual Insurance Co. [1978] 2 F.C. 691, referred to. R. v.
Canadian Vickers Ltd. [1978] 2 F.C. 675, referred to.
ACTION.
COUNSEL:
J. Cunningham and G. Nesbitt for plaintiff.
M. S. Bistrisky and B. Hoeschen for
defendants.
SOLICITORS:
Macrae, Montgomery, Spring & Cunning-
ham, Vancouver, for plaintiff.
Law Department, Canadian Pacific Ltd.,
Montreal and Vancouver, for defendants.
The following are the reasons for judgment
rendered in English by
WALSH J.: By order of Mr. Justice Collier dated
January 25, 1978, as varied by order of April 10,
1978, the following questions of law were set down
for determination by the Court.
1. Does the Federal Court of Canada have juris
diction to entertain the plaintiff's claim?
2. If this question is answered in the affirmative
does an action in rem lie?
The questions of law are to be determined on the
basis that (1) the allegations of fact in the state
ment of claim are for the purposes of the action
deemed to be true, (2) that the following contracts
between plaintiff and defendant shall be filed as
evidence (a) January 22, 1974, (b) February 13,
1974 and (c) March 26, 1974, and (3) that copies
of the bail bonds filed on May 28, 1975 and July
7, 1977 shall be filed together with the order of
Mr. Justice Collier of July 5, 1977, permitting the
substitution of the first bail bond. The order pro
vided that by agreement these will be all the facts
necessary to determine the questions and that no
further facts will be adduced, that if the determi
nation is adverse to the plaintiff then an order
dismissing the action will follow, and if the deter
mination of the questions is adverse to the defend
ants the jurisdictional question will not be raised
by defendants at trial.
Plaintiff's amended statement of claim declares
that by contract dated February 13, 1974, plaintiff
and defendant Incan, inter alia, agreed that the
defendant ship is beneficially owned by them in
equal shares. The contract further provided that
while the agreement between defendant Incan and
the ship builder for the construction of the ship
was in the name of the defendant Incan the rights
of said defendant in and to the defendant ship are
held by it equally for itself and plaintiff and the
defendant Incan would assign and transfer 50% of
such rights to the plaintiff at the earliest possible
date. Pursuant to the contract plaintiff has paid
defendant Incan sums totalling in excess of
$2,000,000 for its one-half share of payments
made on account of the said construction of the
ship to the ship builder. Defendant has refused to
assign and transfer 50% of defendant ship to the
plaintiff and instead on April 15, 1975, caused
defendant Incan to be registered as the owner of
64 shares in the defendant ship. Plaintiff seeks an
order that the plaintiff was on April 15, 1975,
entitled to be registered as the owner of one-half
interest of the defendant ship, that plaintiff is
entitled to one-half share of the profits earned by
said ship while registered in the name of defendant
Incan and to one-half of the proceeds from the sale
of the defendant ship by defendant Incan, together
with an order for accounting with respect to the
said earnings and proceeds, and judgment against
defendant Incan for the amounts declared due to
plaintiff on the said accounting together with in
terest and costs.
Defendants in contesting the jurisdiction of the
Court placed special reliance on the Supreme
Court case of Quebec North Shore Paper Com
pany et al. v. Canadian Pacific Limited et al.'
Although the names of the parties are different in
the case heading in the report the action concerned
the same parties, the "et al." in the headnote
referring to Quebec and Ontario Transportation
' [1977] 2 S.C.R. 1054.
Company Limited as a co-plaintiff with the
Quebec North Shore Paper Company and Incan
Ships Limited as a co-defendant with Canadian
Pacific Ltd. in the action which went to the
Supreme Court. In the Quebec North Shore Paper
Co. Ltd. case decided in the Supreme Court plain
tiff (respondent in the Supreme Court) had
claimed that the Federal Court had jurisdiction by
virtue of section 23 of the Federal Court Act,
R.S.C. 1970 (2nd Supp.), c. 10, on the basis that
the contracts between the parties constituted
"Works and Undertakings connecting the Province
with any other [province] . .. or extending beyond
the Limits of the Province". In rendering judg
ment Chief Justice Laskin stated at page 1056
that the obligations arose under a contract of
January 22, 1974, supplemented by contracts of
February 13, 1974 and March 26, 1974. He refers
to the contract of January 22, 1974 entitled
"Heads of Agreement" and states that it is a
comprehensive document providing for the opera
tion of ships to transport newsprint products by
Quebec North Shore Paper Company Limited at
Baie -Comeau for ultimate destination to points in
the United States. The building of a marine termi
nal at Baie -Comeau was a key term of the entire
scheme. Respondents alleged that they had ful
filled all their obligations under the contracts but
that the appellants were in default and had not
even commenced to build the marine terminal as
of March 14, 1975 when they brought action for
damages and asked for the résiliation of the con
tracts. The learned Chief Justice further stated at
pages 1065-66:
If independently valid and applicable, as Quebec law obviously
is in the present case (indeed, as being the law chosen by the
parties to govern the agreement), it is not federal law nor can it
be transposed into federal law for the purpose of giving juris
diction to the Federal Court. Jurisdiction under s. 23 follows if
the claim for relief is under existing federal law, it does not
precede the determination of that question.
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 administra
tion 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. Section 23 requires that the
claim for relief be one sought under such law. This requirement
has not been met in the present case and I would, accordingly,
allow the appeal, set aside the judgments below and declare
that the Federal Court is without jurisdiction to entertain the
claims of respondents.
Plaintiff in contending that the Federal Court
has jurisdiction in the present case states that it
does not arise out of the contracts in question but
rather by virtue of the maritime jurisdiction of the
Court under section 22(2)(a) and (b) of the Fed
eral Court Act reading:
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 claim or question arising out of
one or more of the following:
(a) any claim as to title, possession or ownership of a ship or
any part interest therein or with respect to the proceeds of
sale of a ship or any part interest therein;
(b) any question arising between co-owners of a ship as to
possession, employment or earnings of a ship;
Reference was also made to section 22(1) read
ing as follows:
22. (1) The Trial Division has concurrent original jurisdic
tion as well between subject and subject as otherwise, in all
cases in which a claim for relief is made or a remedy is sought
under or by virtue of Canadian maritime law or any other law
of Canada relating to any matter coming within the class of
subject of navigation and shipping, except to the extent that
jurisdiction has been otherwise specially assigned.
and to the definition of Canadian maritime law in
section 2 of the Act which reads:
2....
"Canadian maritime law" means the law that was administered
by the Exchequer Court of Canada on its Admiralty side by
virtue of the Admiralty Act or any other statute, or that
would have been so administered if that Court had had, on
its Admiralty side, unlimited jurisdiction in relation to mari
time and admiralty matters, as that law has been altered by
this or any other Act of the Parliament of Canada.
and to section 42 of the Act which reads:
42. Canadian maritime law as it was immediately before the
1st day of June 1971 continues subject to such changes therein
as may be made by this or any other Act.
In the case of The Queen v. Canadian Vickers
Limited 2 Associate Chief Justice Thurlow traced
the history of Admiralty law in Canada and I do
2 [1978] 2 F.C. 675.
not propose to repeat his conclusions here. It is
sufficient to say that as a Court of Admiralty the
Exchequer Court from 1891 to 1934 had, but was
not restricted to, jurisdiction comparable to that of
the Admiralty jurisdiction of the High Court of
Justice in England as of the year 1890. Following
the Statute of Westminster, 1931, The Admiralty
Act, 1891 was replaced by S.C. 1934, c. 31 by
virtue of which the Exchequer Court continued as
a Court of Admiralty for Canada and was given
jurisdiction co-extensive with that of the Admiral
ty jurisdiction of the High Court of Justice in 1925
and somewhat wider jurisdiction in some matters.
In the case of Associated Metals & Minerals
Corporation v. The "Evie W" [1978] 2 F.C. 710,
Chief Justice Jackett stated that he was happy to
adopt the review of the nature and history of
Admiralty contained in the judgment of the
Associate Chief Justice in The Queen v. Canadian
Vickers Limited as supplemented by additional
material contained in the judgment of Gibson J. in
Intermunicipal Realty & Development Corpora
tion v. Gore Mutual Insurance Company [1978] 2
F.C. 691. In finding that the Court did have
jurisdiction over contracts for claims arising out of
any agreement relating to the carriage of goods in
the ship the learned Chief Justice also examined in
detail the Quebec North Shore Paper Company
case and the other leading case on the jurisdiction
of this Court, that of McNamara Construction
(Western) Limited v. The Queen'. He stated [at
pages 714-715]:
In the light of the 1976 and 1977 decisions of the Supreme
Court of Canada, it becomes apparent that the general provin
cial law is not subject to be "altered" by Parliament but is
merely subject to being made inoperative to such extent and for
such time as there is an operative inconsistent law of Parlia
ment in relation to the particular federal class of legislative
subject matter.
He concluded with respect to the matter before
him [at page 716]:
(a) that there is, in Canada, a body of substantive law known
as admiralty law, the exact limits of which are uncertain but
which clearly includes substantive law concerning contracts for
the carriage of goods by sea;
He also stated [at page 717]:
(c) that admiralty law and the various bodies of "provincial"
law concerning property and civil rights co-exist and overlap
and, in some cases at least, the result of litigation concerning a
3 [1977] 2 S.C.R. 654.
dispute will differ depending on whether the one body of law or
the other is invoked; ...
In the present proceedings reference was also
made to the Court of Appeal judgment in the case
of Blanchette v. Canadian Pacific Limited [1978]
2 F.C. 299, which sustained the judgment of Mar-
ceau J. in the Trial Division of November 18,
[1977] 2 F.C. 431, the case of Sivaco Wire & Nail
Company v. Atlantic Lines & Navigation Com
pany, Inc., 4 recently confirmed in appeal, the case
of Skaarup Shipping Corporation v. Hawker
Industries Limited [1978] 2 F.C. 361, a judgment
of Mr. Justice Mahoney in the Trial Division
dated September 26, 1977, which followed the
Vickers case (supra) and refused jurisdiction to
the Federal Court with respect to a contract for
repair of the ship, and the case of Intermunicipal
Realty & Development Corporation v. Gore
Mutual Insurance Company (supra), a judgment
of Mr. Justice Gibson dated December 13, 1977,
which maintained the jurisdiction of the Court
over a contract for marine insurance which he
found to be a maritime contract under British
maritime law which was incorporated into Canadi-
an maritime law. After carefully examining the
relevant statutes and jurisprudence he stated [at
pages 702-703]:
As a consequence, it should be noted that when Parliament
re-enacted in 1970 its substantive and jurisdictional federal
Canadian maritime law, its enabling legislative power had
increased substantial:.: and it exercised this increased legislative
power and assigned jurisdiction so that now the substantive
body of federal Canadian maritime law assigned to the Federal
Court of Canada includes not only (1) "the law that was
administered by the Exchequer Court of Canada on its Admi
ralty side by virtue of the Admiralty Act or any other statute,"
but also (2) the substantive law "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 or any other Act of
the Parliament of Canada".
A large body of substantive admiralty law, much of it
non-statutory in its original source, was thus incorporated by
reference into federal Canadian maritime law and the Federal
Court of Canada was invested with jurisdiction over actions
and suits in relation to the subject matter of it under the
legislative authority of head 10 of section 91 of The British
North America Act of "Navigation and Shipping" (cf Kerwin
J. (as he then was) in An Act to Amend the Supreme Court
Act, ([1940] S.C.R. 49 at 108); and see also Laskin's Canadian
Constitutional Law, Fourth Edition, 1973 at 796) and section
101 of The British North America Act.
4 [1978] 2 F.C. 720.
Accordingly, because there is this large body of substantive
applicable federal law passed pursuant to the enabling power
under head 10 of section 91 of The British North America Act
relating to "Navigation and Shipping", there is a valid premise
for the jurisdiction of the Federal Court of Canada in Canadian
maritime law matters; and the principle enunciated in the cases
of Quebec North Shore Paper Company v. Canadian Pacific
Limited ([19771 2 S.C.R. 1054) and McNamara Construction
(Western) Limited v. The Queen ([1977] 2 S.C.R. 654) in
relation to the proposition that there must "be applicable and
existing federal law, whether under statute or regulation or
common law," is fulfilled in that in respect to Canadian
maritime law there is "judicial jurisdiction ... co-extensive
with [federal] legislative jurisdiction".
Finally reference was made to the case of The
Queen v. Canadian Vickers Limited (supra) in
which plaintiff contended that the Trial Division
had jurisdiction by virtue of section 22(2)(n)
which reads:
22. (2) ...
(n) any claim arising out of a contract relating to the
construction, repair or equipping of a ship;
Associate Chief Justice Thurlow stated at page
687:
On the face of it, these words are broad enough to include the
claim of an owner against a builder for damages for breach of a
contract for building or equipping a ship. But it seems to me
that the paragraphs of subsection (2), in their description of
categories of claims enforceable in the Court, must be read as
subject to the limitation that the claims are enforceable in the
Court only when they are founded on Canadian maritime law
or other federal law, whether such as is mentioned in subsection
22(1) or otherwise.
After quoting the definition of "Canadian mari
time law" in section 2 (supra) he then stated:
By section 42, which is a substantive provision, it is provided
that:
42. Canadian maritime law as it was immediately before
the 1st day of June 1971 continues subject to such changes
therein as may be made by this or any other Act.
In the Capricorn case [1978] 2 F.C. 834, a
judgment of the Court of Appeal dated February
24, 1978, in which I understand leave to appeal to
the Supreme Court has been granted, Le Dain J.
after pointing out that the trial judgment had held
[[1973] F.C. 955 at p. 958]:
In other words, the jurisdiction of this Court in maritime
matters under section 22(1) is co-extensive with the legislative
power of Parliament over "navigation and shipping"; it is not
limited to the matters coming within that subject on which
Parliament has actually legislated.
said [at page 838]:
As a result of the judgments of the Supreme Court of
Canada in the Quebec North Shore Paper Company and
McNamara Construction cases, the conclusion of the Trial
Division on the question of jurisdiction can no longer be
supported on the ground that was relied on by the learned Trial
Judge, namely, that the subject matter of the action falls within
the legislative competence of the Parliament of Canada. The
Supreme Court has held in these cases that in order for the
Federal Court to have jurisdiction a case must involve the
application of some "existing federal law, whether statute or
regulation or common law".
In the exercise of its admiralty jurisdiction under section 22
of the Federal Court Act the Federal Court administers
"Canadian maritime law" as defined by section 2 of the Act
and affirmed as continuing substantive law by section 42
thereof.
He too therefore makes a distinction between sec
tion 42 which is a substantive section and section
22 which is a procedural section, giving the Court
jurisdiction but only if the claim is one with
respect to which there is applicable federal law,
whether under statute, regulation, or common law.
While the Quebec North Shore Paper Company
v. Canadian Pacific Ltd. case in the Supreme
Court (supra) dealt with section 23 of the Federal
Court Act and that is not the section with which
we have to deal in the present case, nevertheless
the decision must depend on whether paragraphs
(a) and (b) (supra) reaffirm claims which previ
ously existed under prior statutes or the common
law, for if not they should be dealt with as Associ
ate Chief Justice Thurlow dealt with paragraph
(n) and Mr. Justice Marceau, confirmed by the
Court of Appeal, dealt with section 23 in the
Blanchette case (supra) in concluding that these
sections do not by themselves give jurisdiction to
the Court.
In the Capricorn case (supra) a company called
Delmar had entered into a contract to sell the ship
to Antares which had paid part of the purchase
price. The action sought a declaration that a sale
from Delmar to Portland was null and void, that a
contract for sale had been concluded between
Antares and Delmar, that Antares had performed
its obligation with respect to the necessary deposit,
and sought specific performance of the contract of
sale between Delmar and Antares by the delivery
of the ship to Antares and transfer of legal title to
it by execution of the bill of sale together with
damages for breach of contract. As Mr. Justice Le
Damn points out the contract of sale was not
intended to transfer the property of the ship and
was therefore not a sale but an agreement to sell
and that Antares seeks to establish the ownership
of Delmar so that it may obtain a legal title from
the latter by bill of sale. He reviews the American
jurisprudence and concludes that the American
Courts of Admiralty have long held that they have
jurisdiction with respect to petitory and possessory
actions but that they do not have the power to
order specific performance of a contract or to
enforce equitable interests. It has further been
concluded in the American courts that a contract
for the sale of a ship is not a maritime matter
within the jurisdiction of admiralty nor is a claim
for damages for breach of contract. He states that
this rests in part on the analogy of a contract for
the sale of a ship to a contract for the building of a
ship and the notion that neither is nearly enough
related to any rights and duties pertaining to
commerce and navigation. He states that the issue
is whether section 22(2)(a) should be construed as
contemplating only petitory and possessory actions
strictly speaking, or whether it should be construed
as including an action for the specific performance
of a contract of sale. Turning to the Canadian law
he states that actions of possession were within the
inherent jurisdiction of the Court of Admiralty
and had as one of their purposes to restore the
possession of a ship to one who had been wrongful
ly deprived of it. After dealing with the provisions
of the Admiralty Court Act, 1840 (3 & 4 Vict. c.
65) under this heading which jurisdiction was
replaced and expressed in somewhat different lan
guage by section 22(1)(a)(i) of the Supreme Court
of Judicature (Consolidation) Act, 1925, 15 & 16
Geo. 5, c. 49, he states that this was the jurisdic
tion that was exercised by the Exchequer Court of
Canada under The Admiralty Act, 1934 (S.C.
1934, c. 31, s. 18(2) and Schedule A). He con
cludes that "in effect, the jurisdiction with respect
to actions of possession was still derived from the
inherent jurisdiction of the Court of Admiralty,
with specific statutory authority to determine
questions of title or ownership arising in such
actions. He goes on to state [at page 844] that:
By section 1(1)(a) of the Administration of Justice Act,
1956, 4 & 5 Eliz. 2, c. 46, (U.K.) this particular head of
admiralty jurisdiction of the High Court in England was
changed to cover "any claim to the possession or ownership of a
ship or to the ownership of any share therein".
He concludes that it is likely that section 22(2)(a)
of the Federal Court Act was inspired by this
change, the effect of which was to make it clear
that a claim to ownership or title may now be
brought independently of and separately from a
claim to possession. He does not consider however
that section 22(2)(a) was intended to enlarge the
jurisdiction in admiralty formerly possessed in
respect to questions of ownership and possession.
The judgment refers to a number of British
cases pointing out however that they were cases in
which the right to possession was based on an
alleged ownership or title. In particular reference
is made to The "Rose" 5 in which a purchaser of a
ship from mortgagees had been refused registra
tion of his bill of sale and brought an action in rem
to be declared the owner and given possession, and
to the Canadian case of Robillard v. The "St.
Roch" 6 which was an action in rem claiming
ownership and possession of the defendant vessel
and praying that the transfer of it to the interve-
nant be set aside. The plaintiff claimed as benefi
cial owner of the vessel under a title held by others
for him as prête-nom and under which he had
been in possession of the vessel and the intervenant
claimed title under a registered bill of sale. The
Exchequer Court held the bill of sale to the
intervenant to be null and void and declared the
plaintiff to be the owner of the vessel and entitled
to registration as such and ordered that possession
be delivered to him. The learned Justice then made
the distinction which was crucial to the decision
stating [at page 845]:
I recognize that Antares may be considered to be asserting an
equitable right to the ship arising from the agreement to sell,
but in view of the clear intention that the property is to pass by
bill of sale, it would not be entitled to a declaration of owner
ship. What it seeks is an order that the ship be delivered to it
and that ownership be transferred to it by a bill of sale, and
that, failing compliance with such an order, the judgment avail
as a deed of sale. In my opinion a claim as to ownership or title
5 (1873) L.R. 4 A.&E. 6.
6 (1921) 21 Ex.C.R. 132.
is a claim to have one's ownership or title confirmed or
recognized by the Court. In the present case the claim that
Delmar be declared to be owner is such a claim but it is not the
foundation of the action; it can only exist by virtue of the rights
arising from the agreement between Delmar and Antares. The
action viewed as a whole is an action to enforce that agreement.
He goes on to state that the Court was not referred
to any cases in which an action for the specific
performance of a contract for the sale of a ship
was recognized as falling within admiralty juris
diction. He states [at page 846]:
The Admiralty Court in England and the Federal Court have,
of course, the power to order specific performance and to
enforce equitable interests, and this may appear sufficient to
distinguish the American law in respect of the issues in this
appeal, but it does not follow merely from the existence of this
power in appropriate cases that an action for the specific
performance of an agreement to sell, in which there is a clear
intention that the property is to pass by subsequent bill of sale,
should be considered to be a claim as to ownership within the
meaning of section 22(2)(a).
He concludes [at page 847]:
In the result I have come to the conclusion that the claim for
specific performance of the contract of sale, the related and
dependent claim to have the sale from Delmar to Portland set
aside and Delmar declared owner, and the claim for damages
do not come within the jurisdiction of the Federal Court under
section 22(2)(a). Nor do I feel that the action, which viewed as
a whole is one for breach of contract, should be held to be a
maritime matter so as to fall within the general grant of
jurisdiction in section 22(1).
and later states:
It is one thing to have a jurisdiction to determine questions of
title, ownership and possession, including questions arising
under the shipping laws respecting registration and transfer; it
is another thing to have a jurisdiction for breach of contract.
On the second point in issue the learned Justice
states that had he reached the conclusion that the
Court had jurisdiction he would have concluded
that it could be exercised by an action in rem
which is a proper proceeding to assert claims to
possession and ownership.
In the present case plaintiff's counsel in argu
ment laid considerable stress on the wording of
paragraph 4 of the amended statement of claim,
all the allegations of fact which are for present
purposes deemed to be true. This paragraph pro-
vided that by contract in writing on February 13,
1974, plaintiff and defendant Incan had agreed the
defendant ship "is beneficially owned" by the
plaintiff and Incan in equal shares. This paragraph
must be read and interpreted however in conjunc
tion with other paragraphs of the said amended
statement of claim which must be given equal
weight. Paragraph 5 goes on to state that the
contract provided that while the agreement be
tween the defendant Incan and the ship builder for
the construction of the defendant ship was in the
name of the defendant Incan the rights of the
defendant Incan in and to the defendant ship are
held by defendant Incan "equally for itself and the
Plaintiff and that the Defendant Incan would
assign and transfer 50% of such rights to the
Plaintiff at the earliest possible date". Paragraph 7
provides that defendant Incan has refused to
assign and transfer 50% of the defendant ship to
the plaintiff and instead, on April 15, 1975, caused
defendant Incan to be registered as the owner of
64 shares in the defendant ship. It appears evident
that while plaintiff has a claim to ownership it has
not yet acquired this ownership but is in fact
seeking to have the Court enforce the agreement
so as to recognize this right.
Plaintiff is attempting to base its action entirely
on the contract dated February 13, 1974, which is
the joint venture agreement for construction and
operation of a rail transporter (the defendant
vessel) but it is clear that this agreement is insepa
rable from the heads of agreement document dated
January 22, 1974, and the subsequent agreement
of March 26, 1974. All the Courts have so found,
including the Supreme Court in the Quebec North
Shore Paper Company v. Canadian Pacific Lim
ited (supra). Frequent references in the contract
of February 13, 1974, are made to the heads of
agreement for example in paragraphs 1.2, 1.3 and
in particular 6.1 which reads:
The present Agreement is intended to supplement the Heads
of Agreement and not to replace any part thereof, and all the
terms and conditions of the Heads of Agreement, including
without limitation those relating to the Joint Venture, shall
remain in full force and effect.
Paragraph 1.02 of the heads of agreement pro
vided for construction of the Baie -Comeau termi
nal and alterations to warehouse facilities and a
general cargo transit facility costing $3,500,000
and Quebec City terminal $2,000,000. Paragraph
1.03 had provided that Quebec and Ontario and
Quebec North Shore would construct and own the
Baie -Comeau terminal and Incan ships would con
struct and own the Quebec City terminal. It pro
vided further that since it was intended that
Quebec and Ontario and Quebec North Shore on
one hand and Mean Ships on the other hand
should contribute equally to the total equity
required for the terminal facilities and rail trans
porter, therefore Mean Ships would make a great
er contribution toward the equity in the rail trans
porter than Quebec and Ontario so that this
equality would be realized. In the event the Baie -
Comeau terminal was not completed so the agree
ments were not carried out, and I am given to
understand that it was on this basis that defendant
Incan Ships has now refused to transfer 50% own
ership in the ship to Quebec and Ontario Trans
portation Company as required by the February
13, 1974, agreement, if read alone. This is a
matter for eventual decision on the merits however
and has nothing to do with the jurisdiction of this
Court to hear the proceedings.
Even taking the wording of the joint venture
agreement of February 13, 1974, by itself, it
appears that plaintiff cannot contend that it has at
present anything but beneficial ownership in the
vessel. Paragraph 1.3 of the agreement refers to
the operation of a rail transporter "to be owned
equally". Paragraph 1.5 states that all assets of the
joint venture, including the rail transporter "will
be deemed to be owned equally". Paragraph 2.2
states that bean will assign and transfer 50% "of
such rights and obligations" to Q & O and that
until such assignment and transfer is made Mean
will continue to make payments to Burrard (the
ship builders). Actually it was only on April 15,
1975, that Incan became the registered owner of
the 64 shares of the defendant ship so it is evident
that when the agreements were made it was not
itself the owner and could not have assigned a 50%
ownership interest to plaintiff even had it wished
to do so. Plaintiff cannot at any time be said to
have become owner of any interest in the ship.
On this basis I find myself unable to distinguish
the facts of the present case from those in the
Capricorn case by which I am bound and therefore
must conclude that the Federal Court does not
have jurisdiction to entertain the present claim.
Furthermore since the Supreme Court has already
concluded in the Quebec North Shore Paper Co. v.
Canadian Pacific Ltd. case (supra) that the Feder
al Court does not have jurisdiction to entertain an
action for résiliation of the agreements and dam
ages it would be difficult to conclude that this
Court has jurisdiction to entertain a claim to
enforce the agreements and claim the benefits of
ownership arising from them.
Two other issues were raised in argument and
may be dealt with briefly although a decision on
them is unnecessary for determination of the issue.
1. Defendants contended that paragraph 6.6 of the
agreement of February 13, 1974, required that any
disputes arising under it should be interpreted and
construed under the laws of the Province of
Quebec, and that a similar clause appears in para
graph 11.08 of the heads of agreement of January
22, 1974, and that therefore the matter should be
dealt with by the Quebec courts.
A similar argument was disposed of by Dubé J.
recently in the case of Santa Marina Shipping Co.
S.A. v. Lunham & Moore Ltd. [1979] 1 F.C. 24
dated February 10, 1978. That case dealt with a
charterparty containing a clause providing for
arbitration of disputes at London, England, and it
was contended that since the claim was based on a
charterparty to be governed by English law, there
would be no existing law of Canada and it could
not be entertained in the Federal Court. He stated
[at page 30]:
It being established that this Court has jurisdiction to enter
tain a claim relating to the use of a ship by charterparty, it has
jurisdiction so to do whatever particular law is to govern the
agreement itself. (It will be recalled that the defendant is a
Canadian corporation with office in Montreal, Quebec.) If the
agreement is to be construed according to English law, and I
am far from convinced that it is, then this Court will apply
English law to the agreement. The foreign law to be applied
then becomes a question of fact.
If defendants had been forced to rely on this
argument therefore they would not have succeed
ed.
2. On the second question defendants had con
tended that even if it were found that the Federal
Court had jurisdiction proceedings could not prop
erly be brought in rem. In view of the conclusion
reached on the question of jurisdiction, it is not
necessary to answer this question, but in any event
I believe the answer is apparent from section 43(2)
of the Federal Court Act which reads as follows:
43. ...
(2) Subject to subsection (3), the jurisdiction conferred on
the Court by section 22 may be exercised in rem against the
ship, aircraft or other property that is the subject of the action,
or against any proceeds of sale thereof that have been paid into
court.
Since, if the Court had jurisdiction it would
have been by virtue of section 22 it is apparent
that proceedings in rem would be an appropriate
procedure.
For the above reasons the question to be
answered may be answered as follows:
(1) No.
ORDER
Plaintiff's action is dismissed with costs.
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