Herrenknecht Tunnelling Systems USA Inc. v. Canadian Pacific Railway Co., 2002 FCT 1089

Date: 20021021

Docket: T-2216-01

Neutral citation: 2002 FCT 1089

BETWEEN:

                               HERRENKNECHT TUNNELLING SYSTEMS USA INC.

                                                  and DANZAS INC. doing business as

                                                DANZAS AEI INTERCONTINENTAL

                                            (PREVIOUSLY DANZAS (CANADA) LTD.)

                                                                                                                                     Applicants/Plaintiffs

                                                                              - and -

                                       CANADIAN PACIFIC RAILWAY COMPANY,

                                           CANADIAN PACIFIC RAILWAY LIMITED

                                                        and RAILINK CANADA LTD.

                                                                                                                           Respondents/Defendants

                                                            REASONS FOR ORDER

GIBSON J.

Introduction

[1]                 By Notice of Motion filed the 11^th of September 2002, the plaintiffs sought the following reliefs:

1.              advice and directions for the further conduct of this Action and an Order that the Federal Court of Canada has jurisdiction;

2.             such further and other relief as this Honourable Court may deem just; and

3.             an Order that costs be in the cause.                                                                                                                                                      [emphasis added]

[2]                 The essence of the relief sought was a determination that this Court has jurisdiction to entertain this action. While not identified as such on the face of the material before the Court, I was satisfied that the motion was, in essence, a motion before trial to request that this Court determine a question of law relevant to this action. Such a motion falls within the ambit of Rule 220 of the Federal Court Rules, 1998^[1] which contemplates a two-stage procedure.

[3]                 The motion first came on for hearing before me at Vancouver on the 16^th of September, 2002. At that time, only counsel for the plaintiffs appeared before me. After hearing representations from counsel for the plaintiffs, I informally ordered that the question of jurisdiction would be determined. I directed counsel for the plaintiffs first, to ensure that the defendants notified the Court in writing of their positions on the motion, and secondly, to extend his written material to address an earlier decision of the Federal Court of Appeal that I considered relevant. Finally, I fixed the time and place for argument of the question as the 23^rd of September, 2002, at Vancouver.

[4]                 Counsel for the defendants Canadian Pacific Railway Company and Canadian Pacific Railway Limited (collectively "C.P.R.") advised the Court in writing, through counsel for the plaintiffs, that, on behalf of their clients, they took no position on the motion. That being said, they confirmed that they had agreed to the Statement of Agreed Facts on which the plaintiffs based their motion. Counsel for the defendant RaiLink Canada Ltd. advised the Court, once again through counsel for the plaintiffs, that they were in agreement that the jurisdiction question could be determined in their absence. They further advised the Court that, from their review of motion materials put before the Court on behalf of the plaintiffs, including the Statement of Agreed Facts, they were of the view that the Court had sufficient material before it to properly determine the jurisdiction question.

[5]                 In the result, when consideration of the jurisdiction question was taken up on the 23^rd of September, 2002, the defendants were not represented before the Court and had filed no written materials, although the Statement of Agreed Facts filed on behalf of the plaintiffs was effectively adopted on behalf of the defendants.

[6]                 Following the hearing on the 23^rd of September, 2002, I issued an Order in the following terms:

This Court finds that it has jurisdiction to entertain this action against the named Defendants under section 23 of the Federal Court Act, subsections 113(1) and 116(5) of the Canada Transportation Act and head 10(a) in section 92 of the Constitution Act, 1867.

Costs of the motion are in the cause.

Reasons will follow.

Background

[7]                 The following allegations are derived from the plaintiffs' Statement of Claim.

[8]                 The plaintiff, Herrenknecht Tunnelling Systems USA, Inc. ("Herrenknecht"), is a company incorporated under the laws of Washington State in the United States of America with an address for service in Canada in care of its solicitors in this action.

[9]                 The Plaintiff Danzas Inc. doing business as Danzas AEI Intercontinental (formally known as Danzas (Canada) Ltd.), ("Danzas"), is a company incorporated under the laws of Canada also with an address for service in care of its solicitors in this action.

[10]            On or about the 1^st of October 1998, Herrenknecht purchased a Robbins Tunnel Boring Machine (the "TBM") . Herrenknecht was at all times material to this action the owner of the TBM. Herrenknecht contracted with Danzas to arrange for shipment of the TBM from De Beaujeu, Quebec to Tacoma, Washington, U.S.A. Danzas arranged shipment with CPR.

[11]            In its Statement of Defence, RaiLink Canada Ltd. ("RaiLink") indicates it has no knowledge of the allegations regarding the provenance of Herrenknecht and Danzas and their addresses for service or of any contract that might have been made between them regarding shipment of the TBM. It denies that Herrenknecht purchased and was at all material times the owner of the TBM.

[12]            In their Statement of Defence, Canadian Pacific Railway Company and Canadian Pacific Railway Limited deny all of the allegations just recited.

[13]            For the purposes of my determination regarding jurisdiction, and therefore for the purposes of these reasons, I will take the recited allegations as being true.

[14]            The following Statement of Agreed Facts was before the Court:

1.             The Defendant, CPR is a railway company operating in Canada and has been issued a Certificate of Fitness under section 92 of the Canada Transportation Act (the "Act").

2.             The Defendant RaiLink is a railway company operating in Canada and has been issued a Certificate of Fitness under section 92 of the Act. ...

3.             The Plaintiffs arranged shipment by rail with CPR. Evidence of these contracting arrangements is provided in two bills of lading dated December 17, 1998 and three bills of lading dated December 15, 1998. ...

4.             Pursuant to the contract of shipment ("Contract"), CPR transported the TBM on the Ottawa Valley RaiLink railway line (the "Ottawa Valley Line"), which includes a branch line from Mattawa, Ontario to Temiscaming, Quebec.

5.             At the time of derailment, the CPR train transporting the TBM was travelling on the Ottawa Valley Line.

6.             On route, the CPR train derailed near Mattawa, Ontario.

7.             The Plaintiffs claim that two railcars which were carrying part of the TBM were involved in the derailment. The Plaintiffs claim that the TBM was damaged during this derailment.

8.             The Ottawa Valley Line is leased and operated by the Defendant RaiLink under a long-term lease from the CPR (the "Lease"). ...

9.             The Ottawa Valley Line connects Ontario railway lines with Quebec, the Western Canadian Provinces and the United States.

10.           RaiLink operates and maintains the Ottawa Valley Line as set out and required under the Lease and provisions of the Act.

                                          [References to exhibits to the Statement of Agreed Facts omitted]

[15]            Each of the bills of lading indicates the "origin station" to be Du Beaujeu and the "destination station" to be Tacoma, Washington, U.S.A.

Statutory Background

[16]            The opening words of section 23 of the Federal Court Act^[2] and paragraph (c) of that section read as follows:

[17]            For the purposes of Part III of the Canada Transportation Act^[3], section 87 of that Act provides the following definitions:

[18]            Subsection 88(1), the opening words of subsection 88(2) and paragraph (b) of that subsection, subsections 88(3) and 90(1), the opening words of subsection 113(1) and paragraph (c) of that subsection and subsection 116(5), all within Part III of the Canada Transportation Act, read as follows:

[19]            The opening words of section 92 of the Constitution Act, 1867^[4] , head 10 of that section and paragraph (a) of that head and section 101 read as follows:

Analysis

1)         The Test for Jurisdiction

[20]            In ITO-International Terminal Operators Ltd. v. Miida Electronics Inc. et al.^[5], Mr. Justice McIntyre wrote for the majority at page 766:

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., ... and in McNamara Construction (Western) Ltd. v. The Queen, ... 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.                                                                                                 [citations omitted]

While ITO-International Terminal Operators Ltd. involved consideration of the extent of Canadian maritime law, I am satisfied that the foregoing statement applies equally to the facts of this matter.

[21]            This test was more recently affirmed by the Supreme Court of Canada where, in the context of an administrative law issue and after reciting the foregoing test, Mr. Justice Bastarache, for the majority, at paragraphs 34 and 35 of his reasons in Canada (Human Rights Commission) v. Canadian Liberty Net^[6] stated:

These are the historical and constitutional factors which led to the development of the notion of inherent jurisdiction in provincial superior courts, which to a certain extent has been compared and contrasted to the more limited statutory jurisdiction of the Federal Court of Canada. But in my view, there is nothing in this articulation of the essentially remedial concept of inherent jurisdiction which in any way can be used to justify a narrow, rather than a fair and liberal, interpretation of federal statutes granting jurisdiction to the Federal Court. The legitimate proposition that the institutional and constitutional position of provincial superior courts warrants the grant to them of a residual jurisdiction over all federal matters where there is a "gap" in statutory grants of jurisdiction, is entirely different from the proposition that federal statutes should be read to find "gaps" unless the words of the statute explicitly close them. The doctrine of inherent jurisdiction raises no valid reasons, constitutional or otherwise, for jealously protecting the jurisdiction of provincial superior courts as against the Federal Court of Canada.   

In my view, the doctrine of inherent jurisdiction operates to ensure that, having once analysed the various statutory grants of jurisdiction, there will always be a court which has the power to vindicate a legal right independent of any statutory grant. The court which benefits from the inherent jurisdiction is the court of general jurisdiction, namely, the provincial superior court. The doctrine does not operate to narrowly confine a statutory grant of jurisdiction; indeed, it says nothing about the proper interpretation of such a grant. As noted by McLachlin J. in Brotherhood, ..., it is a "residual jurisdiction". In a federal system, the doctrine of inherent jurisdiction does not provide a rationale for narrowly reading federal legislation which confers jurisdiction on the Federal Court.             [citation omitted]

[22]            Further, I am satisfied that it is beyond doubt that this Court may apply provincial laws incidentally necessary to resolve issues presented before the Court in a matter which is within this Court's jurisdiction^[7].

[23]            I turn then to the three-part test for jurisdiction in this Court.

2)         A Statutory Grant of Jurisdiction to this Court by the Federal Parliament

[24]            Paragraph 23(c) of the Federal Court Act, quoted above, vests jurisdiction in the Trial Division of this Court, unless such jurisdiction has been otherwise specially assigned, 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 works and undertakings connecting a province with any other province or extending beyond the limits of a province.

[25]            I take judicial notice of the fact that C.P.R. operates trains and carries railway traffic interprovincially. Similarly, RaiLink maintains and operates a line of railway connecting a province with any other province or extending beyond the limits of a province. As acknowledged in the Statement of Agreed Facts before me, both C.P.R. and RaiLink are "railway companies" within the meaning of the Canada Transportation Act and, as also acknowledged in the Statement of Agreed Facts, they have both been issued Certificates of Fitness under section 92 of that Act. In the result, I am satisfied both are undertakings, if not works, connecting a province with any other province or extending beyond the limits of a province within the meaning of paragraph 23(c) of the Federal Court Act.

[26]            On the facts before me, I am satisfied that paragraph 23(c) of the Federal Court Act constitutes a statutory grant of jurisdiction to this Court by the Federal Parliament.

3)         An Existing Body of Federal Law Which is Essential to the Disposition of the Case and Which Nourishes the Statutory Grant of Jurisdiction

[27]            In Watt & Scott Inc. v. Chantry Shipping S.A.^[8], an action in negligence against a railway company flowing from infection of a cargo of nuts during shipment, Justice Joyal found that this Court had jurisdiction to hear the negligence action pursuant to the predecessor of section 23 of the Federal Court Act because the railway company there at issue was a federal work or undertaking connecting a province with any other province or extending beyond the limits of a province. He concluded at page 552:

The claim before me, however, is clearly founded on a breach of the duty of care imposed on a railway company under paragraph 262(1)(c) [of the Railway Act].

Paragraph 262(1)(c) of the Railway Act was identical to paragraph 113(1)(c) of the Canada

Transportation Act.

[28]            I am satisfied that the provisions of the Canada Transportation Act quoted earlier in these reasons constitute a body of federal law, essential to the disposition of this action, which nourishes the statutory grant of jurisdiction.

[29]            The question still remains however, has the jurisdiction in relation to C.P.R. and RaiLink that would otherwise vest in this Court by virtue of paragraph 23(c) of the Federal Court Act been "otherwise specially assigned" as provided in the opening words of section 23, in a manner that would oust the jurisdiction of this Court? I am satisfied that such jurisdiction has not been "otherwise specially assigned".

[30]            Once again in Watt & Scott Inc. v. Chantry Shipping S.A., supra, Justice Joyal addressed this question by reference to provisions of the Railway Act^[9], a predecessor to the Canada Transportation Act. The Railway Act, like subsection 116(5) of the Canada Transportation Act, earlier quoted, provided a right of "action" against persons aggrieved by any neglect or refusal of a railway company to fulfil its service obligations. Like the Canada Transportation Act, the Railway Act also vested certain specific responsibilities in the Canadian Transport Commission, the predecessor to the Canadian Transportation Agency. Justice Joyal wrote at page 550 in his reasons in Watt & Scott Inc., supra,:

Of further relevance is subsection 262(7) [the predecessor to subsection 116(5) of the Canada Transportation Act] where a right of action is conferred on any person aggrieved by any neglect or refusal of the company to comply with the requirements of section 262 from which action the company is not relieved by any notice, condition or declaration if the damage arises from any negligence or omission of the company or of its servant. I cannot think of a statutory right of action more clearly expressed.

Much might be made of the other provisions of section 262 where a prior determination by the Canadian Transport Commission might be required before an action in damages might be claimed. I would refer specifically to the Commission's authority under subsections 262(3), (5), (6) and (8) with respect to accommodation, to facilities, to the ordering of specific works or to imposing charges for demurrage. None of these, in my view, limits the scope of the right of action conferred for want of due care in receiving, carrying and delivering traffic as provided in paragraph 262(1)(c) of the statute.

[31]            Based on the forgoing, Justice Joyal concluded at page 553:

I conclude therefore that the Federal Court has jurisdiction to entertain a claim against Burlington Northern under section 262 of the Railway Act and that the limitation clause in the concluding words of section 23 of the Federal Court Act is no bar to the Court proceeding with it.

The closing words to which Justice Joyal refers are "...except to the extent that jurisdiction has been otherwise specially assigned", words carried forward into the current version of section 23 of the Federal Court Act.

[32]            I reach precisely the same conclusion in relation to the responsibilities of the Canadian Transportation Agency by contrast with the right of action conferred by subsection 116(5) of the Canada Transportation Act where a railway company is alleged to be in default of its obligations under subsection 113(1)(c) of that Act to "...without delay, and with due care and diligence, receive, carry and deliver traffic [offered for carriage on the railway]."

[33]            Justice Joyal considered and distinguished an earlier decision of the Federal Court of Appeal in Kiist v. Canadian Pacific Railway Co.^[10] Justice Joyal's analysis in distinguishing Kiist is reflected in the following paragraphs from his reason at page 552:

The case before Le Dain J. was under paragraph 262(1)(a) where the duty on a railway company is to furnish adequate and suitable accommodation "for the receiving and loading of all traffic offered for carriage upon the railway". After reviewing extensive case law as to public policy considerations and which a regulatory body must apply in these standards of duty, considerations which a Court would be loath to enter into, he concluded... as follows:

For these reasons I am of the opinion that the determination of whether the respondent railway furnished adequate and suitable accommodation for the carriage of grain for the Board during the crop years 1977-1978 and 1978-1979 has been specially assigned to the Commission, and that in the absence of such a determination by the Commission the Federal Court is without jurisdiction to entertain the appellants' claim for damages.

The claim before me, however, is clearly founded on a breach of the duty of care imposed on a railway company under paragraph 262(1)(c) and my prior analysis or interpretation of the whole of section 262 has led me to conclude that it is not the kind of duty which faced the Federal Court of Appeal and where the jurisdiction of the Federal Court under section 23 of its statute would be suspended if not ousted.

[34]            Once again, I am satisfied that precisely the same might be said here in contrasting the duties of a railway company under paragraph 113(1)(a) of the Canada Transportation Act, the successor to paragraph 262(1)(a) of the Railway Act, and those under paragraph 113(1)(c) of the Canada Transportation Act, the successor to paragraph 262(1)(c) of the Railway Act.

4)         The Law on which the Case is Based Must Be "A Law of Canada" as the Phrase is Used in Section 101 of the Constitution Act, 1867

[35]            Section 101 of the Constitution Act, 1867, is quoted earlier in these reasons.

[36]            By reference to the words "additional Courts" in section 101 of what is now the Constitution Act, 1867, in Consolidated Distilleries Limited v. Consolidated Exporters Corporation Ltd.^[11], Chief Justice Anglin, for the majority, wrote at page 534:

It is to be observed that the "additional courts", which Parliament is hereby authorized to establish, are courts "for the better administration of the laws of Canada." In the collocation in which they are found, and having regard to the other provisions of the British North America Act, the words, "laws of Canada," must signify laws enacted by the Dominion Parliament and within its competence.       

This position was affirmed in Quebec North Shore Company et al v. Canadian Pacific Limited et al^[12] where Chief Justice Laskin, for the Court, wrote at pages 1065-6:

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 administration of the laws of Canada". The word "administration" is as telling as the plural words [sic] "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.   

Against the foregoing authorities, I am satisfied that, to constitute "a law of Canada" as that phrase is used in section 101 of the Constitution Act, 1867, there must exist applicable law, and that law must have been validly enacted by Parliament, or validly pursuant to a law validly enacted by Parliament, or, if common law, could validly have been enacted by Parliament.

[37]            This action is brought pursuant to subsection 116(5) of the Canada Transportation Act for breach of the duty imposed on railway companies by paragraph 113(1)(c) of that Act. I am satisfied that it is beyond question that each of those provisions is, and indeed the whole of the Canada Transportation Act read as a comprehensive scheme is, "a law of Canada" as the phrase is used in section 101 of the Constitution Act, 1867.

Conclusion

[38]            Based upon the foregoing brief analysis, I determined that this Court has jurisdiction to entertain this action against the named defendants under section 23 of the Federal Court Act, subsections 113(1) and 116(5) of the Canada Transportation Act and head 10(a) in section 92 of the Constitution Act, 1867. As noted earlier in these reasons, an order to that effect issued on the 23^rd of September, 2002, following the hearing of the motion giving rise to these reasons.

_______________________

    J. F.C.C.

Ottawa, Ontario

October 21, 2002

                          FEDERAL COURT OF CANADA

                                       TRIAL DIVISION

    NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                 T-2216-01

STYLE OF CAUSE: HERRENKNECHT TUNNELLING SYSTEMS USA

ET AL v. CANADIAN PACIFIC RAILWAY ET AL

PLACE OF HEARING:         Vancouver, British Columbia

DATE OF HEARING:           September 23, 2002

REASONS FOR ORDER OF the Honourable Mr. Justice Gibson:

DATED:                                   October 21, 2002

APPEARANCES:                   

Mr. Todd R. Davies                                                          FOR PLAINTIFF

Mr. Matthew Heemskerk

SOLICITORS OF RECORD:

Alexander Holburn Beaudin & Lang                                 FOR PLAINTIFF

Vancouver, BC

Whitelaw Twining                                                              FOR DEFENDANT

Vancouver, BC                                                                 (Railink Canada Ltd.)

Fasken Martineau DuMoulin LLP                                    FOR DEFENDANT

Vancouver, BC                                                                 (Canadian Pacific Railway Company and Canadian Pacific Railway Ltd.)