Norrail Transport Inc. v. Canadian Pacific Ltd., docket T-900-95

Date: 19980414

Docket: T-900-95

BETWEEN:

NORRAIL TRANSPORT INC., DONALD GOODWIN,

DEBORAH CHALLIS, PAUL POWER, STEPHEN KERR

and CHARLES FREEMAN-ATTWOOD

Plaintiffs

- and -

CANADIAN PACIFIC LIMITED and

J.D. IRVING LIMITED,

Defendants

     REASONS FOR ORDER

TEITELBAUM J.

INTRODUCTION

[1]      On May 1, 1995, the plaintiffs filed into the Federal Court Registry in Montreal, Quebec, a Statement of Claim in which the plaintiffs ask that the defendants Canadian Pacific Limited and J.D. Irving Ltd. "be condemned, jointly and severally, to pay the plaintiffs the amount of $8,750,000., the whole with interest and the legal indemnity provided by Section 1619 of the Civil Code (of Quebec) including the costs of expertise" (see Statement of Claim dated April 10, 1995).

[2]      From a reading of the Statement of Claim and accepting the allegations as stated, it appears that the plaintiffs wished to purchase from the defendant Canadian Pacific Limited (hereinafter C.P.) an "operating railway consisting of ownership of trackright, rights of way and the appurtenant stations, buildings, structures and adjacent lands on the rail line from Sherbrooke, Quebec to Vanceboro, Maine and Canadian Pacific Railways operation on leasehold interest of Saint John to McAdam, including the west Saint John Spur, the Fredericton and Subdivision and yard trackage in Saint John, McAdam to St. Stephen, including the Milltown Spur, McAdam to Vanceboro and Grand Falls to Cyr Junction".

[3]      C.P. wished to sell this property as C.P. obtained an Order from the National Transportation Agency of Canada dated February 24, 1993 granting C.P. authority to abandon its Canadian operations as described above. C.P. obtained equivalent authorization from the Interstate Commerce Commission of the United States.

[4]      In paragraphs 4 and 5 of the Statement of Claim, plaintiffs state:

4. THAT at all material times, the purchase of the said railway operation was subject to the National Transportation Agency under the act giving its power in respect to the purchase and abandonment of canadian railways, and as such was the ultimate authority for the approval of any purchase of the railway line by another railway company prior to the date of the abandonment;

5. THAT at all material times, the section of the railway from the Saint John to Maine serviced the port of Saint John and as such formed part of the shipping facility of Saint John, New Brunswick;

[5]      According to the allegations in the Statement of Claim, commencing on April 15, 1993, one or more of the plaintiffs commenced to negotiate with C.P. the purchase of the above described railway line. In order to do so, the plaintiffs "put together a corporation and prepared detailed particulars in respect of expenses and revenues, number of employees including remuneration, legal parameters of offer of a price ..." (see paragraph 9, Statement of Claim).

[6]      At the beginning of November, 1993, C.P. required "in writing, an urgent offer" and plaintiffs ( I believe this should be defendant C.P.) "proposed the purchase of the line for $58,000,000. which proposal included both the purchase of equipment and the railway". On May 31, 1994, the plaintiffs "made a firm offer for 29.5 million dollars".

[7]      For the reasons given in the Statement of Claim, and after much negotiation between plaintiffs and C.P., C.P. sold the property (railway line, etc.) to the defendant J.D. Irving Ltd. (Irving) or to "the Irving Group" (see paragraphs 27, 28 and 29 of the Statement of Claim).     

[8]      As a result of the alleged conduct of the defendant C.P. and Irving, the plaintiffs state in paragraphs 30, 31, 32 and 33 of the Statement of Claim:

30. THAT Defendant, Canadian Pacific is responsible to plaintiffs for damages suffered through its faulty acts, imprudence, neglect and want of skill in that:

a) it induced Plaintiffs to put together a purchase offer and obtain financing such that details in connection with the purchase of the railway were considered and solved by Plaintiffs;

b) it had represented and warranted that it had the authority to deal with the railway lines itself, without the intervention of any party;

c) it did not violate the confidentiality agreement in causing Plaintiffs to provide information to Defendant, Irving, so that the subsequent agreement was probably concluded with the information developed by Plaintiffs;

d) it conducted negotiations imprudently with neglect and want of skill in regard to the foregoing;

e) promised to enter into a contract and beached this contrary to the Civil Code, rending it liable therein in damages;

f) it terminated negotiations when it saw that it had perhaps a better buyer without giving Plaintiff an opportunity to proceed any further whatsoever in the matter;

g) it negotiated thereby in bad faith;

h) it failed to provide reasonable, adequate, and timely, internal information as to the costs, expenses and revenues of the line;

31. THAT as a direct result of the foregoing and the said acts, imprudence, neglect and want of skill, Plaintiffs have suffered damages amounting to $3,750,000 consisting of time and expenses of $750,000.00 and loss of future revenue of $3,000,000;

32. THAT these damages were incurred directly due to the faulty actions of Defendant, Canadian Pacific and Plaintiffs have in addition, suffered damages of $3,000,000.00 in respect of loss of reputation and financial difficulties causing inconvenience and suffering, and the amount of $2,000,000 for a further $5,000,000 which is due as of the bad faith negotiations under law;

33. THAT Defendant, J.D. Irving has been unjustly enriched by the information developed by Plaintiffs and as, in effect, there was a conspiracy commencing in sometime before August, 1994. Defendant, Canadian Pacific and J.D. Irving Ltd. are jointly and severally responsible towards Plaintiff for their joint faulty actions and tort and the damages of $8,750,000;

[9]      Clearly, paragraphs 30 to 33 indicate plaintiffs' cause of action, and that is, damages for inducing plaintiffs to make a purchase offer and obtaining financing, for making misleading or incorrect representations, for failure to enter into a contract with plaintiffs after allegedly promising to do so and that C.P. negotiated in bad faith.

[10]      It is important to note that the plaintiffs state in paragraph 30(e) that damages are being claimed for breach of contract "this contrary to the Civil Code" (of Quebec).

[11]      After the issuance of the Statement of Claim by the plaintiffs, the defendant, C.P., on May 17, 1995, served and filed a Notice of Motion for leave to file a Conditional Appearance for the purpose of objecting to the jurisdiction of the Federal Court and for an application for an Order staying the proceedings pursuant to Rule 401(c) of the Federal Court Rules and section 50(1) of the Federal Court Act.

Rule 401. A defendant may, by leave of the Court, file a conditional appearance for the purpose of objecting to      ... (c) the jurisdiction of the Court, and an order granting such leave shall make provision for any stay of proceedings necessary to allow such objection to be raised and disposed of.	Règle 401. Un défendeur peut, avec la permission de la Cour, déposer un acte de comparution conditionnelle en vue de soulever une objection      ... c) quant à la compétence de la Cour, et une ordonnance accordant cette permission doit prévoir toute suspension d'instance nécessaire pour permettre de soulever cette objection et de statuer à son sujet.
50. (1) The Court may, in its discretion, stay proceedings in any cause or matter,	50. (1) La Cour a le pouvoir discrétionnaire de suspendre les procédures dans toute affaire:
(a) on the ground that the claim is being proceeded with in another court or jurisdiction; or	(a) au motif que la demande est en instance devant un autre tribunal;
(b) where for any other reason it is in the interest of justice that the proceedings be stayed.	(b) lorsque, pour quelque autre raison, l'intérêt de la justice l'exige.

[12]      The grounds, as stated by C.P. in their Notice of Motion, are:

a)      There is no statutory grant of jurisdiction by the Federal Parliament, neither in the Federal Court Act, nor in some other federal enactment.

b)      There is no existing body of federal law which is essential to the disposition of the case and nourishes the statutory grant of jurisdiction, the causes of action and the remedy sought by the Plaintiffs taking their sources solely in the provincial law.

c)      The law on which the action is based is not "a law of Canada" as the phrase is used in Section 101 of the Constitution Act, 1867.

d)      According to several decisions, particularly [1977] 2 S.C.R. 1054">Quebec North Shore Paper Co. et al. v. Canadian Pacific Limited [1977] 2 S.C.R. 1054, [1977] 2 S.C.R. 654">McNamara Construction (Western) Ltd. et al. v. The Queen [1977] 2 S.C.R. 654 and ITO - International Terminal Operators Ltd. v. Miida Electronics Inc. et al. [1986] 1 S.C.R. 752, the requirements described hereabove in paragraphs 3a), 3b) and 3c) are essential to support a finding of jurisdiction in the Federal Court.

[13]      On May 29, 1995, McGillis J. granted leave to file a conditional appearance and stayed the proceedings "pending the resolution of the jurisdictional objection".

[14]      On January 11, 1996, the defendant Irving filed a Notice of Motion for an order granting Irving leave to file a conditional appearance pursuant to Rule 401(c) of the Federal Court Rules. The grounds for the motion, as stated in the Notice of Motion, are:

... that this Honourable Court does not have jurisdiction in the present action under either a statutory grant of jurisdiction by the Federal Parliament; an existing body of Federal Law; or the "Law of Canada" as that phrase is used in section 101 of the Constitution Act, 1867.

[15]      This application was allowed on or about February 9, 1996.

[16]      The hearing on the jurisdiction issue came before me in Montreal on the 31st day of March 1998.

[17]      The submissions of C.P. and Irving are straightforward. Both defendants state that by a simple reading of the Statement of Claim it is obvious that the plaintiffs' action is based on "tort" and "breach of contract". Counsel for defendants point to paragraphs 2 and 3 of the Statement of Claim and state that these paragraphs show that what is at issue is nothing more than a question of contractual fault which is governed by the Quebec Civil Code. The defendants point to paragraph 6 of the Statement of Claim and state that the plaintiffs agree that it is the Quebec Civil Code and the articles relating to contract of the Quebec Civil Code that applies. Defendants also submit that a reading of the entire Statement of Claim makes it obvious that the action is based on contract and fault and the damages resulting from same. They also submit that it is only the Quebec Superior Court that his jurisdiction over the issues, in that, there is no federal law applicable to the cause of action. They also submit that if any federal law is applicable, it is only incidental to the proceedings.

[18]      It is the submission of the defendants that for the Federal Court of Canada to have jurisdiction, the cause of action must be found in the federal law and it is defendants' submission that the plaintiffs' cause of action, breach of contract and fault, are based on the civil law of the Province of Quebec and cannot be found in any federal law.

[19]      It is plaintiffs' submission that the Federal Court of Canada is the proper forum for the hearing of the present action. Counsel for plaintiffs submits that since the defendant C.P. had to obtain an Order of the National Transportation Agency, a federal body, grating C.P. authority to abandon its Canadian operations between Sherbrooke, Quebec and Saint John, New Brunswick to Maine and that the sale and purchase was subject to the National Transportation Act, there is an existing "federal body of law" giving the Federal Court jurisdiction.

[20]      Furthermore, plaintiffs submit that pursuant to section 23(c) of the Federal Court Act, the Federal Court has jurisdiction over the matter in dispute as the proceedings involve "works and undertakings connecting a province with any other province or extending beyond the limits of a province".

23. Except to the extent that jurisdiction has been otherwise specially assigned, 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 an Act of Parliament or otherwise in relation to any matter coming within any of the following classes of subjects, namely,               ...      (c) works and undertakings connecting a province with any other province or extending beyond the limits of a province.

23. Sauf attribution spéciale de cette compétence par ailleurs, la Section de première instance a compétence concurrente, en première instance, dans tous les cas " opposant notamment des administrés " de demande de réparation ou d'autre recours exercé sous le régime d'une loi fédérale ou d'une autre règle de droit en matière:               ...      c) d'ouvrages reliant une province à une autre ou s'étendant au-delà des limites d'une province.

[21]      An excellent discussion as to the jurisdiction of the Federal Court of Canada is to be found in Federal Court Practice 1998 by David Sgayias, C.C., Meg Kinnear, Donald J. Rennie and Brian J. Saunders, Carswell, pages 1 to 23.

[22]      The Federal of Canada does not have inherent jurisdiction. In the case of [1980] 1 S.C.R. 695">R. v. Thomas Fuller Const. Co. (1958) Ltd. [1980] 1 S.C.R. 695 at 713, Mr. Justice Pigeon states:

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 .

[23]      Therefore, jurisdiction in the Federal Court cannot be presumed. In order for there to be jurisdiction in the Federal Court, it must be demonstrated by the party bringing the claim before the Court.

[24]      The Supreme Court of Canada in the case of ITO-International Terminal Operators Ltd. v. Miida Electronics Inc. et al [1986] 1 S.C.R. 752 at 766 (McIntyre J.) states:

The general extent of the jurisdiction of the Federal Court has been the subject of much judicial consideration in recent years. In Quebec North Shore Paper Co. v. Canadian Pacific Ltd., [1977]¸ 2 S.C.R. 1054, and in [1977] 2 S.C.R. 654">McNamara Construction (Western) Ltd. v. The Queen, [1977] 2 S.C.R. 654, the essential requirements to support a finding of jurisdiction in the Federal Court were established. They are:

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.

[25]      All three of the requirements must be present for the Federal Court to have jurisdiction.

[26]      It is apparent that from the facts of this case, as stated by the plaintiffs themselves in the Statement of Claim, they do not fulfil the three necessary requirements. Plaintiffs in the Statement of Claim admit this fact when they state in paragraph 6 of the Statement of Claim that the subject of the litigation is the law of contact of the Province of Quebec.

[27]      It is clear from a reading of the Statement of Claim that federal law is only ancillary to the actual cause of action which is that of contact and fault. Both causes of action are not to be found in federal law. Both of these causes of action are clearly found in the law of the Province of Quebec - Civil Code of Quebec.

CONCLUSION

[28]      In that, from the facts of this case as found in the Statement of Claim filed by the plaintiffs, there does not exist a body of federal law which is essential to the disposition of the case and which nourishes the statutory grant of jurisdiction, the Federal Court of Canada does not have the necessary jurisdiction to hear the case.

[29]      I have not reviewed the jurisprudence submitted by the plaintiffs as I am satisfied the jurisprudence submitted is not applicable and is easily distinguished (see, for example, Josephine E. Marshall v. The Queen et al [1986] 1 F.C. 437, Roberts v. Canada [1989] 1 S.C.R. 322 and The Queen v. Canadian Vickers Ltd. [1975] 55 D.L.R. (3d) 379).

[30]      The action is dismissed for the reason that this Court does not have the jurisdiction over the matter in issue.

[31]      Costs in favour of the defendants and which costs I fix at a maximum sum of $1,000. for each defendant.

                                 "Max M. Teitelbaum"

                                                              J.F.C.C.

OTTAWA, ONTARIO

April 14, 1998