Constitutional/Maritime Law: Division of Powers; Sale of Marine Parts

Desgagnés Transport Inc. v. Wärtsilä Canada Inc., 2019 SCC 58 (37873)

“In October 2006, an accident damaged the crankshaft and the bedplate of the main engine of a shipping company’s ship. The shipping company opted to purchase a reconditioned crankshaft from a supplier. The parties entered into a contract which was formed in Montréal, Quebec, the supplier’s place of business. It contained a six‑month warranty, and limited the supplier’s liability to €50,000. The choice of law clause in the agreement indicated that the contract was to be governed by the laws in force at the office of the supplier. Well after the warranty expired, the ship’s main engine suffered a major failure. The shipping company sued the supplier, founding its claim upon a latent defect in the engine parts purchased from the supplier.

The trial judge concluded that the crankshaft sold by the supplier contained a latent defect that caused the damage to the ship. She then determined that the dispute was governed by the Civil Code of Québec (“C.C.Q.”), rather than Canadian maritime law. She was of the view that while the dispute over the sale was related to maritime activities, it was not integrally connected to them. Accordingly, the limitation of liability clause in the parties’ contract was unenforceable and the supplier was liable for the full quantum of damages. The majority of the Court of Appeal allowed the appeal in part. It found that Canadian maritime law governed the dispute, and hence that the supplier was entitled to rely on the limitation of liability clause, which restricted its liability to €50,000. The shipping company appeals to the Court.”

The S.C.C. (9:0, with separate joint concurring reasons): appeal allowed; trial judge’s conclusions restored.

Justices Gascon, Côté and Rowe wrote as follows (at paras. 3-5, 80-81, 85, 87, 89, 104-106):

” To determine whether Canadian maritime law or the C.C.Q. applies in this case, we must determine whether the matter in dispute falls within the federal power over navigation and shipping, or the provincial power over property and civil rights, or both. This is accomplished through a division of powers analysis, which requires: (1) characterizing the relevant matter; and (2) classifying it according to the heads of legislative power enumerated in the Constitution Act, 1867 . As we will explain, the Canadian maritime law at issue in this proceeding is non-statutory. As a result, a modified pith and substance test must be applied at the characterization stage: one that looks at the substantive law at issue and to the particular fact situation, rather than to purpose and effect. At the classification stage, the integral connection test is the proper method for determining whether the matter is subject to the federal power over navigation and shipping enumerated at s. 91(10)  of the Constitution Act, 1867 , and, thus, would not come exclusively within provincial jurisdiction.

The Court made clear in Canadian Western Bank v. Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3, that the division of powers between the federal and provincial governments must be managed with a view to flexible federalism. Where possible, the Court has sought to maintain a role for the two orders of government in areas of overlapping jurisdiction. This approach does not simply disappear in the maritime context, notwithstanding the unique historical development of Canadian maritime law.

Parliament’s authority over navigation and shipping, and consequently the scope of Canadian maritime law, is broad. As we see it, the sale of marine engine parts intended for use on a commercial vessel is sufficiently connected to navigation and shipping so as to be validly governed by Canadian maritime law. However, there is also no doubt that art. 1733 C.C.Q. — pertaining to warranties in contracts of sale — is a validly enacted provincial law that, in pith and substance, concerns a matter of property and civil rights pursuant to s. 92(13)  of the Constitution Act, 1867 . In this case, the sale of marine engine parts thus gives rise to a double aspect scenario: a non-statutory body of federal law and a provincial law both validly directed at the same fact situation overlap. However, art. 1733 C.C.Q. remains applicable and operative. Neither interjurisdictional immunity nor federal paramountcy ousts the application of art. 1733 C.C.Q.: interjurisdictional immunity is inapplicable because contractual issues surrounding the sale of marine engine parts are not at the core of navigation and shipping, and federal paramountcy cannot be triggered by Canadian non-statutory maritime law. Left with two applicable bodies of law, art. 1733 C.C.Q. is ultimately the law governing this dispute; since it is a legislative enactment, Canadian non-statutory maritime law does not prevail over it.


In sum, we are of the view that the sale of marine engine parts intended for use on a commercial vessel is integrally connected to navigation and shipping so as to come within federal legislative authority. It follows that Canadian maritime law extends to that matter. This does not mean, however, that there is no provincial law that can also validly govern such a sale.

 

In our view, the Quebec Court of Appeal erred when it disposed of this case after concluding that the matter at issue was integrally connected to navigation and shipping. Indeed, a finding that Canadian maritime law can validly regulate a dispute does not end the analysis in the presence of an overlapping provincial rule. Although Canadian maritime law is nourished by deep historical roots, the division of powers analysis that unfolds from the modern conception of federalism expressed in Canadian Western Bank applies to the overlap between navigation and shipping and provincial heads of power, just as it does for other classes of subjects under the Constitution Act, 1867 . The Court of Appeal therefore should have considered whether the provincial law — in this case, art. 1733 C.C.Q.  was valid, applicable and operative. Applying the relevant constitutional doctrines, we conclude that the rule expressed in the C.C.Q. governs the matter.

In the present case, the sale of marine engine parts for use on a commercial vessel — as a fact situation — presents a double aspect. It can be addressed both from the broad perspective of regulating the sale of goods, which constitutes an exercise of the provincial power over property and civil rights, and from the narrower perspective of the exercise of the federal power over navigation and shipping. Put differently, both the Quebec legislature and Parliament have a “compelling interest” in enacting legal rules over different aspects of the same activity or matter (see Lafarge, at para. 4). The two sets of contract rules and principles are thus valid. This means that the C.C.Q. can govern this sale of marine engine parts unless an issue of applicability or operability arises.

…the federal power over navigation and shipping is not “watertight”…

…the doctrines of interjurisdictional immunity and federal paramountcy must be applied to navigation and shipping in the same way as in all division of powers cases. As we will explain below, we find that neither the doctrine of interjurisdictional immunity nor that of federal paramountcy is triggered on the facts of this case. Consequently, the rule expressed by art. 1733 C.C.Q. is applicable and operative with respect to the case at hand. In our view, this approach reflects a proper relationship between federal and provincial authority.

…The effect of s. 2  is to describe the substantive content of Canadian maritime law, much of which is non-statutory and in continuing evolution. This cannot have the effect of making Canadian maritime law as a whole paramount to provincial legislation.
First, we cannot infer from the exercise of Parliament’s jurisdiction in a particular area the intention to occupy the entire field exclusively, absent very clear statutory language (Canadian Western Bank, at para. 74; Bank of Montreal v. Marcotte, 2014 SCC 55, [2014] 2 S.C.R. 725, at para. 72). Here, nothing in the language of s. 2  of the F.C.A.  suggests that the intention of Parliament was to oust the operation of valid provincial legislation. Second, and perhaps more fundamentally, s. 2  does not change the nature of the non-statutory rules it identifies as part of Canadian maritime law and for that reason, it cannot trigger the doctrine of paramountcy in the way that Wärtsilä suggests. In other words, the paramount position of federal legislative intent over provincial legislative intent in certain circumstances cannot be extended, by the operation of a provision like s. 2  of the F.C.A. , to the law developed by courts who exercise admiralty jurisdiction in Canada. As a result, the doctrine of federal paramountcy does not apply here.

Article 1733 C.C.Q. is therefore operative and governs the dispute between TDI and Wärtsilä as it prevails over Canadian non-statutory maritime law following the principle of the primacy of a legislative enactment. The analysis would have been different if Parliament had enacted a valid law or regulation to regulate the matter pursuant to its legislative authority over navigation and shipping. In such case, the courts would have needed to apply the doctrine of federal paramountcy and determine whether there was a conflict between the federal and provincial rules. But in the absence of a valid federal law or regulation that seeks to regulate this claim, we find no basis to prevent the operation of the C.C.Q., or any other provincial statute.”

Full decision