A-245-78
Quebec and Ontario Transportation Company
Limited (Appellant) (Plaintiff)
v.
The Ship Incan St. Laurent and Incan Ships Lim
ited (Respondents) (Defendants)
Court of Appeal, Pratte and Le Dain JJ. and Hyde
D.J.—Montreal, May 8 and 11, 1979.
Jurisdiction — Maritime law — Contracts — Joint venture
contract, together with other contracts, relating to rail trans
porter project for newsprint and including contract for con
struction of ship — Action alleging appellant beneficial owner
of one-half interest in respondent ship and that respondent
company failed to make transfer of one-half of the rights to
appellant — Motion seeking registration of appellant's inter
ests, one-half of profits, and one-half of proceeds of sale,
together with accounting, dismissed for want of jurisdiction —
Whether or not Court has jurisdiction by virtue of s. 22(2)(a),
(b) of the Federal Court Act — Federal Court Act, R.S.C.
1970 (2nd Supp.), c. 10, s. 22(2)(a),(b).
This is an appeal from a judgment of the Trial Division
dismissing appellant's (plaintiff's) action for want of jurisdic
tion. The action is based on the provisions of a "Joint Venture
Agreement" which is one of three contracts relating to the rail
transporter project for the transportation of newsprint from
Baie -Comeau to the United States. The action alleges that
under the joint venture agreement, the appellant is beneficial
owner of one-half interest in the respondent ship and that
respondent company failed to transfer one-half of the rights in
the ship to appellant as required by the agreement. Appellant
(plaintiff) sought an order that it be registered as owner of
one-half interest in the ship and that it receive one-half of the
profits earned by it and one-half of the proceeds from the sale
of the ship. Appellant contends that its claims for relief are
made under Canadian maritime law and that the Federal Court
has jurisdiction to entertain the claims by virtue of section
22(2)(a),(b) of the Federal Court Act.
Held, the appeal is dismissed. This claim cannot be said to be
a claim based on Canadian maritime law, because of its
necessary relationship to the rights and obligations created by
the "Heads of Agreement". The rights and obligations created
by the joint venture agreement are inseparable from those
created from the heads of agreement to construct terminals at
Baie -Comeau and Quebec City. In the Quebec North Shore
Paper Company case, the Supreme Court held that an action
based on alleged failure to perform the obligation to construct
the terminal at Baie -Comeau and to set aside all three con
tracts relating to the rail transporter project was governed by
Quebec civil law and beyond the jurisdiction of the Federal
Court. The same must be true of an action based on certain
rights created by the joint venture agreement but necessarily
related to that same obligation. These contracts must be viewed
as a whole, and as such they are not matters which fall within
Canadian maritime law.
Quebec North Shore Paper Co. v. Canadian Pacific Ltd.
[1977] 2 S.C.R. 1054, followed. McNamara Construction
(Western) Ltd. v. The Queen [1977] 2 S.C.R. 654, fol
lowed. Tropwood A.G. v. Sivaco Wire & Nail Co. [1979]
2 S.C.R. 157, followed. The "Capricorn" v. Antares Ship
ping Corp. [1978] 2 F.C. 834, followed.
APPEAL.
COUNSEL:
Graham Nesbitt for appellant (plaintiff).
M. S. Bistrisky for respondents (defendants).
SOLICITORS:
Courtois, Clarkson, Parsons & Tétrault,
Montreal, for appellant (plaintiff).
Canadian Pacific Law Department, Montreal,
for respondents (defendants).
The following are the reasons for judgment
delivered orally in English by
LE DAIN J.: This is an appeal from a judgment
of the Trial Division [[1979] 1 F.C. 417] dismiss
ing an action for want of jurisdiction. The action is
based on the provisions of a "Joint Venture Agree
ment", which is one of three contracts relating to a
rail transporter project for the transportation in
connection with the Canadian Pacific Railway of
newsprint from Baie -Comeau, Quebec, to points in
the United States that was considered by the
courts in the Quebec North Shore Paper Company
case'. The three contracts are to be taken with the
statement of claim as establishing the facts for
purposes of the question of jurisdiction.
The action alleges that by virtue of the provi
sions of the joint venture agreement the appellant
is the beneficial owner of a one-half interest in the
respondent ship Incan St. Laurent, and that the
respondent Incan Ships Limited, the other party to
the joint venture agreement, has failed to transfer
one-half of the rights in the ship to the appellant
as required by the agreement, but instead regis
tered all 64 shares of the vessel in its own name on
I Quebec North Shore Paper Company v. Canadian Pacific
Limited [1977] 2 S.C.R. 1054; [1976] 1 F.C. 646 (F.C.A.);
[1976] 1 F.C. 405 (F.C.T.D.).
April 15, 1975. The appellant claims "as the
owner of one-half interest in the Defendant ship"
for an order declaring that (a) it was on April 15,
1975 entitled to be registered as the owner of
one-half interest in the ship, (b) it is entitled to a
one-half share of the profits earned by the ship
while registered in the name of the respondent and
(c) it is entitled to one-half the proceeds from the
sale of the ship by the respondent; and for an order
for an accounting with respect to the said earnings
and proceeds.
The appellant contends that its claims for relief
are made under Canadian maritime law and that
the Federal Court has jurisdiction to entertain the
claims by virtue of section 22 of the Federal Court
Act, R.S.C. 1970 (2nd Supp.), c. 10, and particu
larly paragraphs (a) and (b) of subsection 22(2)
thereof, which read:
22. (2) ...
(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;
The Trial Division held that the Court lacked
jurisdiction on the basis of section 22 of the Feder
al Court Act because the claim with respect to
ownership was indistinguishable in its essential
nature from that which was asserted in the
Capricorn case 2 and was held by this Court not to
be a claim as to ownership within the meaning of
section 22(2)(a) of the Act. The Trial Division
held that the claim was based on alleged failure to
perform an obligation to transfer ownership and
made particular reference to clause 2.2 of the joint
venture agreement, which, referring to an agree
ment dated November 6, 1973 between the
respondent and Burrard Dry Dock Company Lim
ited for the construction of the rail transporter,
provides:
2.2 Incan acknowledges that while the Agreement dated
November 6, 1973 with Burrard is in the name of Incan, the
rights and obligations of Incan under such Agreement and the
rights of Incan in and to the rail transporter are held by Incan
equally for itself and Q&O, the rail transporter is beneficially
owned by Q&O and Incan in equal shares, and Incan will
2 The "Capricorn" (alias the "Alliance") v. Antares Ship
ping Corporation [1978] 2 F.C. 834.
assign and transfer 50% of such rights and obligations to Q&O
at the earliest possible date. Until such assignment and transfer
has been made, Mean will continue to make payments to
Burrard as provided for in the Agreement dated November 6,
1973 and will invoice Q&O for its share of such payments.
In order for the Court to have jurisdiction in this
case the claims for relief must be of a kind recog
nized by and founded on so much of the existing
and applicable federal law referred to in section 22
of the Federal Court Act as "Canadian maritime
law" as lies within federal legislative competence
with respect to navigation and shipping. This
requirement of jurisdiction results from the deci
sions of the Supreme Court of Canada in the
Quebec North Shore Paper Company, McNamara
Construction 3 and Tropwood 4 cases. In the last of
these cases the Supreme Court affirmed that there
was a body of maritime law that had been intro
duced into Canada as part of the law of Canada
within the meaning of section 101 of The British
North America Act, 1867, [R.S.C. 1970, Appen
dix II] and Laskin C.J.C., delivering the unani
mous judgment of the Court, held that there are
two questions to be asked with respect to a claim
for relief that purports to be based on Canadian
maritime law: first, whether the claim is of a kind
that is within the scope of the admiralty or mari
time law that was incorporated into the law of
Canada; and secondly, whether such a claim falls
within federal legislative jurisdiction with respect
to navigation and shipping.
The claims in this case are based on the joint
venture agreement, but the latter is provided for in
detail in the "Heads of Agreement" as an aspect
of the over-all project. In effect, the joint venture
agreement implements and supplements the heads
of agreement. This is clear not only from the terms
of the heads of agreement itself but from the
several references to the heads of agreement in the
joint venture agreement, and in particular, from
clause 6.1 thereof which provides:
6.1 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.
3 McNamara Construction (Western) Limited v. The Queen
[1977] 2 S.C.R. 654.
4 Tropwood A.G. v. Sivaco Wire & Nail Company [1979] 2
S.C.R. 157.
Of particular relevance to the question that is
before us are clauses 1.02 and 1.03 of the heads of
agreement respecting the relationship between the
rail transporter and the terminal facilities to be
constructed at Baie -Comeau and Quebec City:
1.02 The parties hereto agree that the implementation of the
foregoing will initially require a terminal at Quebec City and a
terminal, alterations to warehouse facilities and general cargo
transit facility at Baie Comeau, and that the cost for these
facilities is estimated to be as follows:
Baie Comeau terminal, alterations to warehouse
facilities and general cargo transit facility $3,500,000
Quebec City terminal $2,000,000
TOTAL COST $5,500,000
1.03 Q&O, QNS and Incan Ships agree that for purposes of
determining the division of the Joint Venture charges in 9.01
and 9.02 herein, the facilities described in 1.02 herein will be
assumed to be financed on the basis of 80% debt and 20%
equity and they further agree that Q&O or QNS shall con
struct and own the Baie Comeau terminal, alterations to ware
house facilities and general cargo transit facility and that Incan
Ships shall construct and own the Quebec City terminal. It is
intended to have Q&O and/or QNS on the one hand and Incan
Ships on the other hand contribute equally to the total equity
required for the terminal facilities and rail transporter and,
therefore, Incan Ships agrees to make a greater contribution
towards the equity in the rail transporter than Q&O so that
this equality is realized and the charges dealing with the use of
terminal facilities as provided for in 9.01 and 9.02 herein have
been adjusted to reflect this contribution.
Clause 3.02 of the heads of agreement further
provides with respect to the cost of the rail
transporter:
3.02 The net cost of the rail transporter delivered to Quebec
City is estimated at $5,350,000. Q&O and Incan Ships agree
that, for the purpose of determining the division of the Joint
Venture charges in 9.01 and 9.02 herein, this cost will be
assumed to be financed on the basis of 20% equity and 80%
debt and that Incan will contribute $685,000 and Q&O $385,-
000 in accordance with the provisions of 1.03 to meet the equity
requirement of $1,070,000.
Whether or not the claim with respect to owner
ship in this case is distinguishable in its essential
nature from that which was asserted in the
Capricorn case, it cannot in my opinion, because of
its necessary relationship to the rights and obliga-
tions created by the heads of agreement, be said to
be a claim based on Canadian maritime law. The
rights and obligations created by the joint venture
agreement are inseparable from those created by
the heads of agreement, and in particular from the
obligation created by the heads of agreement to
construct terminals at Baie -Comeau and Quebec
City. This appears quite clearly from the provi
sions in the heads of agreement concerning the
respective contributions of the parties to the cost of
the terminals and the rail transporter. In the
Quebec North Shore Paper Company case the
Supreme Court of Canada held that an action
based on alleged failure to perform the obligation
to construct the terminal at Baie -Comeau and to
set aside all three contracts relating to the rail
transporter project was governed by the Quebec
civil law and beyond the jurisdiction of the Federal
Court. The same must be true in my opinion of an
action based on certain rights created by the joint
venture agreement but necessarily related to that
same obligation. These contracts must be viewed
as a whole, and as such they are not matters which
fall within Canadian maritime law. I would
accordingly dismiss the appeal.
* * *
PRATTE J. concurred.
* * *
HYDE D.J. concurred.
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