A S G Industries Inc. v. Corporation Superseal, [1983] 1 SCR 781

Supreme Court of Canada

A S G Industries Inc. v. Corporation Superseal, [1983] 1 S.C.R. 781

Date: 1983-06-23

A S G Industries Inc. Appellant;

and

Corporation Superseal Respondent;

and

United States Fidelity and Guaranty Company Mis en cause.

File No.: 17077.

1983: March 17; 1983: June 23.

Present: Beetz, Estey, Mclntyre, Chouinard and Wilson JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC

Conflict of laws—International jurisdiction of Quebec courts—Incidental action in warranty—Extension of rules of domestic territorial jurisdiction—Article 71 C.C.P. applicable to foreign company—Code of Civil Procedure, arts. 71, 75—Civil Code, art. 27.

Respondent brought an incidental action in warranty against appellant—a U.S. company created under the laws of the State of Delaware—based on a contract for the manufacture of glass units. The contract was signed by appellant in the State of Tennessee and the product manufactured there also. Appellant had no domicile, residence, place of business or property in Quebec. The contract further provided that the laws of the State of Delaware would be applicable between the parties. Appellant contended that no Quebec court had jurisdiction to hear the action brought against it, and by its motion for a declinatory exception it asked that the action be dismissed. The Superior Court and the Court of Appeal dismissed the exception. Hence this appeal, to determine whether an alien domiciled outside of Quebec, who has entered into and performed a contract with a resident of Quebec, can be subject to the jurisdiction of our courts as a consequence of art. 71 C.C.P.

Held: The appeal should be dismissed.

Article 71 C.C.P. makes appellant subject to the jurisdiction of the Quebec courts. In private international law, it is well established that the international jurisdiction of the courts is defined by extension of the rules of domestic territorial jurisdiction. In Quebec, art. 71 C.C.P. sets forth a general rule applicable to any incidental action in warranty. Such an action must be taken before the court in which the principal action is pend-

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ing—the Superior Court for the Quebec City district, in the case at bar. This rule is not subject to any limitation.

Alimport (Empresa Cubana Importadora de Alime-tes) v. Victoria Transport Ltd., [1977] 2 S.C.R. 858; Trower and Sons, Ld. v. Ripstein, [1944] A.C. 254; L.S. Tarshis & Sons Ltd. v. Browning Manufacturing Co., [1971] R.P. 296, referred to; Wabasso Ltd v. National Drying Machinery Co., [1981] 1 S.C.R. 578; Cornwall Chrysler Plymouth Ltd. v. Lapolla, [1974] C.A. 490, distinguished.

APPEAL from a judgment of the Quebec Court of Appeal[1], affirming a judgment of the Superior Court which had dismissed appellant’s declinatory exception. Appeal dismissed.

Pierre Boyer, for the appellant.

Jean Lefrançois, for the respondent.

English version of the judgment of the Court delivered by

CHOUINARD J.—As appellant stated in its submission, this action was brought [TRANSLATION] “to determine whether an alien domiciled outside the province of Quebec, who has entered into and performed a contract with a resident of Quebec at the alien’s place of domicile, can be subject to the jurisdiction of our courts solely as a consequence of article 71 of the Code of Civil Procedure”:

71. The incidental action in warranty must be taken before the court in which the principal action is pending.

The facts necessary to determine the appeal are summarized as follows by Turgeon J.A. of the Court of Appeal in his reasons, concurred in by Montgomery J.A.:

[TRANSLATION] …Corporation Superseal brought an incidental action in warranty against A.S.G. Industries Inc., based on a contract for the manufacture of glass units, and plaintiff in warranty alleged defects in manufacture of the materials.

The contract between the parties was signed by A.S.G. Industries at Kingsport, Tennessee: A.S.G. is a corporation created under the laws of the State of Delaware, U.S.A. The proceedings were served on A.S.G. outside the province of Quebec, and it has no domicile, residence, place of business or property in

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Quebec. The contract concluded between the parties provides that the price will be payable in U.S. dollars, that the product will be shipped F.O.B. point of manufacture, namely in the State of Tennessee, that the laws of the State of Delaware will be applicable between the parties and that the supply and maintenance bonds required by the contract were executed at Kingsport, Tennessee.

Appellant contended that no court of the province of Quebec has jurisdiction to hear the action brought by it, and by its motion for a declinatory exception it asked that the action be dismissed.

The action of respondent Superseal is in contract only, the latter alleging defects of manufacture and delivery delays.

Relying both on art. 71 C.C.P. and on an earlier decision of the Court of Appeal, L.S. Tarshis & Sons Ltd. v. Browning Manufacturing Co., [1971] R.P. 296, the Superior Court and the Court of Appeal dismissed appellant’s declinatory exception.

In his reasons Turgeon J.A. wrote:

[TRANSLATION] Furthermore, it can be presumed from article 27 of the Civil Code that the rules of jurisdiction of the Code of Civil Procedure apply both to residents of Quebec and to aliens unless the contrary is clearly intended.

Article 27 of the Civil Code provides:

27. Aliens, although not resident in Lower Canada, may be sued in its courts for the fulfilment of obligations contracted by them in foreign countries.

In private international law, it is well established that the international jurisdiction of the courts is defined by extension of the rules of domestic territorial jurisdiction.

In his work Droit international privé québécois, Toronto, Butterworths, 1980, Professor J.-G. Castel wrote at pp. 664-65:

[TRANSLATION] SECTION II. SOURCES OF INTERNATIONAL JURISDICTION.

As there are not many direct sources, the courts of Quebec have been obliged to apply the domestic rules of territorial jurisdiction after adapting them to the international nature of the relationships in question.

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1. PROVINCIAL RULES.

The Civil Code contains only two provisions on international judicial jurisdiction: articles 27 and 28, which reproduce in part articles 14 and 15 of the Code Napoléon.

The Code of Civil Procedure contains a group of domestic rules of territorial jurisdiction which have been extended by the courts to cover international situations.

Finally, certain provincial statutes contain rules of territorial jurisdiction to which an international application has been given.

The cases referred to by Professor Castel are Trower and Sons, Ld. v. Ripstein, [1944] A.C. 254, and Alimport (Empresa Cubana Importadora de Alimentos) v. Victoria Transport Ltd., [1977] 2 S.C.R. 858.

In the latter case, Alimport, the provisions of the Code of Civil Procedure requiring that lack of jurisdiction ratione personae should be raised within the five-day period defined in art. 161 were applied to a foreign company sued in the Superior Court by another foreign company pursuant to a contract concluded abroad. The declinatory exception made several months after the action was brought was dismissed as tardy.

In the course of his reasons Pigeon J., at p. 867, delivering the unanimous judgment of the Court, referred to the dissenting reasons of Mayrand J.A. of the Court of Appeal, where the latter cited the following passage from Solus et Perrot, Droit judiciaire privé, 1933, No. 393, at p. 447:

[TRANSLATION] Issues arising between aliens

In accordance with the tradition of the old law, the courts early in the nineteenth century laid down the rule that issues arising between aliens were not within the jurisdiction of the French courts: the right to bring an action at law was regarded as a civil right, which in principle was reserved for French citizens. This solution, which resulted from a narrow and increasingly obsolete strictness, has been progressively discarded for various situations; it has now been completely abandoned.

In one of its recent judgments, consolidating the changes begun in the middle of the last century, the Court of Cassation stated firmly that “the foreign nationality of the parties does not preclude the jurisdiction of French courts”.

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Pigeon J. cites the following further passage from the same text, No. 394, p. 448:

[TRANSLATION] The prevailing opinion is that the problem of special jurisdiction is usually considered only from the point of view of domestic territorial jurisdiction, since in this view it is by an extension of the rule regarding domestic territorial jurisdiction that international jurisdiction may be determined.

Pigeon J. goes on to say:

In the Dalloz 1963, Jurisprudence, p. 109, there is reported a decision of the Court of Cassation of October 30, 1962, containing the following:

[TRANSLATION] …whereas the foreign nationality of the parties is not a cause of the lack of jurisdiction of the French courts, whose international jurisdiction is moreover determined by extension of the rules governing domestic and territorial jurisdiction;

Pigeon J. then refers to Trower and Sons, Ld. v. Ripstein (supra) and concludes:

In short, the Privy Council held, like the Court of Cassation, albeit in other terms, that international jurisdiction may be determined by extension of the rules governing domestic territorial jurisdiction (at p. 264).

I will return to the latter case below.

I would add to the foregoing citations the following taken from an analysis by Professor Gérard Couchez, entitled “Les nouveaux textes de la procédure civile et la compétence internationale”, contained in Travaux du comité français de droit international privé, 1977‑1979, at p. 125:

[TRANSLATION] In these circumstances, matters of international judicial jurisdiction must in principle be decided in accordance with the rules governing domestic territorial jurisdiction (“extended” or “transposed”); these rules should only be disregarded in two cases:

—first, those in which a statutory enactment excludes the application of these rules;

—and second, those in which the imperatives of international relations require a departure from the said rules.

Article 71 C.C.P. provides that an incidental action in warranty must be taken before the court in which the principal action is pending. Applying the principles stated above, this rule of domestic

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territorial jurisdiction must be extended to the international situation. It accordingly follows that art. 71 applies to appellant’s case, and that the incidental action in warranty brought against it must be brought in the Superior Court for the district of Quebec, where the principal action is pending.

I note that the solution I am proposing in respect of art. 71 is the one accepted in France, and I quote Niboyet, Traité de droit international privé français, t. VI, 1949, p. 467, no. 1845:

[TRANSLATION] Following their usual method, the French courts have used these provisions in international relations, but have done so unilaterally only, that is, to extend French jurisdiction to the guarantor, but never to compel him to submit to the jurisdiction of a foreign court. The consequence is that a French court will be competent in respect of a defendant in the case of an incidental action, even though it would not have been on the principal action. This happens when the guarantor has no domicile or residence in France, and on the principal action the rule actor sequitur would be a bar to French jurisdiction.

The following arguments raised by appellant must now be considered.

First, appellant cited Trower and Sons (supra).

This was an action in which Trower and Sons, a British company, was sued in the Superior Court with two co-defendants from the district of Montreal. As we have seen, the Privy Council held that international jurisdiction is determined by an extension of the rules of territorial jurisdiction, and applying the provisions of the old art. 94 C.C.P. (now art. 68 of the present Code) it held that the declinatory exception of Trower and Sons was valid.

However, plaintiff further relied on art. 103 which, in its submission, allowed a foreign defendant to be joined in an action against two Montreal-based defendants. The first paragraph of art. 103 in effect at the time read:

103. In matters purely personal, if there are several defendants in the same action residing in different districts, they may all be brought before the court of the

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district in which one of them has been summoned, provided that such summons be not made with the intention of withdrawing the real parties from the courts which would otherwise have jurisdiction.

The Privy Council held that the word “district” applies only to a judicial district of Quebec, and that accordingly, in this version the article did not allow an alien to be summoned in Quebec courts by means of summoning a resident co-defendant.

In the new Code of Civil Procedure which came into effect in 1966, art. 103 became art. 75:

75. An action against several defendants domiciled in different districts, if it is a personal or mixed action, may be instituted in the court before which any of them may be summoned; but if it is a real action, it must be instituted in the court of the place where the object of the dispute is situated.

Over the years this article has had a turbulent judicial and legislative history, reviewed by Deschênes C.J. of the Superior Court while he was at the bar, in an article entitled “Le mystère de l’article 75 du Code de procédure civile”, (1966) 26 R. du B. 565.

In view of the wording of the new art. 75, Trower and Sons, to use the words of Deschênes C.J. in the aforesaid article, [TRANSLATION] “is once again the beacon which must guide our courts in their interpretation of the law”.

What should be noted is the fundamental difference between this article and art. 71, which is at issue here.

Article 71 does not refer to “districts”, and that is the fundamental difference. Article 71 sets forth a general rule applicable to any incidental action in warranty, which must be taken before the court in which the principal action is pending. There is no limitation.

The same principles of private international law apply to the entire chapter on the “Place of Instituting Actions”, which takes in arts. 68 to 75, and it should be noted that the situation can vary from one rule to another according as they are worded at a particular time. Thus, the fundamental rules of art. 68 apply to an alien:

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68. Subject to the provisions of articles 70, 71, 74 and 75, and notwithstanding any agreement to the contrary, a purely personal action may be instituted:

1. Before the court of the defendant’s real domicile or, in the cases contemplated by article 85 of the Civil Code, before that of his elected domicile.

If the defendant has no domicile in Québec but resides or possesses property therein, he may be sued before the court of his ordinary residence, before the court of the place where such property is situated, or before the court of the place where the action is personally served upon him;

2. Before the court of the place where the whole cause of action has arisen; or, in an action for libel published in a newspaper, before the court of the district where the plaintiff resides if the newspaper has circulated therein;

3. Before the court of the place where the contract which gives rise to the action was made.

A contract giving rise to an obligation to deliver, negotiated through a third party who was not the representative of the creditor of such obligation, is deemed to have been made at the place where the latter gave his consent.

In my view, the same is true of art. 69:

69. Notwithstanding any agreement to the contrary, an action based upon a contract of insurance and taken against the insurer may in all cases be instituted before the court of the domicile of the insured; in the case of insurance of property, it may also be instituted before the court of the place where the loss occurred.

On the other hand, the rule relating to co-defendants will not by itself make it possible to summon an alien in a Quebec court, in view of the presence of the word “districts” in art. 75 (Trower and Sons (supra)).

This Court is not required to consider the reasons why the legislator established rules differing in this way, although a possible explanation has been suggested in respect of arts. 75 and 71. Article 103, which was replaced by art. 75, attached the following condition to the summoning of a co-defendant: “… provided that such summons be not made with the intention of withdrawing the real parties from the courts which would otherwise have jurisdiction”. No such risk exists in the case of an incidental action in warranty, as it is hard to see how a litigant would bring about an action against himself solely in order to implead

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his guarantor in a Quebec court. This is the explanation suggested by Montgomery J.A. of the Court of Appeal in the case at bar:

I regard article 75, governing actions against several defendants, as a special case. It is easy to understand that there might be cases where a person wishing to sue a foreigner might implead a local person on some pretext for the sole purpose of giving the local courts jurisdiction. It is unlikely that a local person would, in order to gain jurisdiction over a foreigner, arrange for himself to be sued locally so that he could bring an action in warranty.

Appellant further relied on a decision of the Court of Appeal, Cornwall Chrysler Plymouth Ltd. v. Lapolla, [1974] C.A. 490. This decision concerned art. 75 C.C.P., regarding co-defendants, as Trower and Sons related to its predecessor, art. 103. For the reasons stated above, these decisions do not support appellant’s arguments regarding art. 71, which concerns the incidental action in warranty.

Appellant further cited the following passage from Wabasso Ltd. v. National Drying Machinery Co., [1981] 1 S.C.R. 578, at p. 583:

The solution applied would have the following consequences in the case at bar: if what has been called the contractual observance rule must be applied, the cause of action will be based on the breach of a contractual duty, and the Court must conclude, as Mayrand J.A. did, that the action should be brought in the court of respondent’s real domicile or in that of the place where the contract was concluded, and in either case this would be the Philadelphia court.

In Wabasso there was a direct action, not an incidental action in warranty. The passage cited does not apply to the case at bar.

Appellant based a further argument on the earlier provisions, from which the present art. 71 is derived. This article originated in a provision of 1801, 41 Geo. III, c. 7, s. VI:

VI. And be it further enacted by the authority aforesaid, that in every case of Garantie, as well of Garantie formelle as of Garantie simple, where the Garant lives out of the District of that Court, in which the original Action or Suit was instituted, there may issue a Writ from the Court where such Suit/Action was instituted, which Writ being first indorsed by the Signature of any

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of His Majesty’s Judges for such District, may be directed to the Sheriff of the District, where such Garant lives, to summon the said Garant, to appear before the Court where the Suit was instituted, to answer to the Demande en Garantie of said Defendant in such original Action, and to await the Judgment of the said Court, and the service of such Writ upon the return of the Sheriff of the District, where the Garant resides, to the Court where the Suit was instituted, shall have the same force and effect, as if the said service had been made upon the said Garant in the District of the said Court, where the Suit was instituted. And in all Causes or Suits, the Plaintiff may, in like manner, summon his Garant, if any such he has, to intervene, and the Court give Judgment, as well against the Garant of the Plaintiff, as against that of the Defendant, as the case may require.

This provision was replaced in 1861 by s. 31 of c. 82, C.S.L.C. 1861:

31. In every case of garantie, as well of garantie formelle as of garantie simple, where the garant lives out of the district or circuit, in which the original action was instituted, there may issue a Writ from the Court at the place where the action was instituted, directed to the Sheriff or to a Bailiff of the district where such garant lives, (according as such Sheriff or Bailiff is by law empowered to serve the same,) to summon the said garant to appear before the Court at the place where the action was instituted, to answer to the demande en garantie of the defendant in such original action, and to await the judgment of the Court;—and the service of such Writ, (without its being first endorsed by the signature of one of the Judges of the Superior Court,) and the return of the Sheriff or a Bailiff for the district where the garant resides, to the Court at the place where the action was instituted, shall have the same force and effect as if the service had been made upon the garant in the district where the action was instituted; And in all causes or actions, the plaintiff may, in like manner, summon his garant, if any such he has, to intervene, and the Court may give judgment, as well against the garant of the plaintiff as against that of the defendant, as the case requires.

The same chapter contained s. 33:

33. In any action wherein the instance stands or is interrupted by the decease of any of the parties thereto, and the legal representative of any party deceased is domiciliated in any district or circuit in Lower Canada, other than that wherein the original suit was pending, there may issue from the Court in the district or circuit in which such suit is pending, a Writ of summons

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addressed to the Sheriff or to a Bailiff of the Superior Court, (according as such Writ may by law be served by a Sheriff or a Bailiff) for the district in which such a legal representative resides, which Writ, after a copy thereof has been served upon such representative, shall have the same force and effect as if the service had been made upon him or her, within the district or circuit wherein the original suit was so pending.

In the 1866 Code, these two sections, 31 and 33, were combined into one, art. 40, the forerunner of the present art. 71:

40. In actions in warranty and actions in continuance of suit, the defendants are summoned to the place where the principal action was brought, wheresoever their domicile may be.

Appellant’s argument rests exclusively on the following passage, at p. X of the 8th Report of the Commissioners, dated April 15, 1866:

The Commissioners have not felt called upon to frame a new code of procedure, but restricting themselves to a compliance with the requirements of the statute, they have stated the procedure such as it appears to be at present, merely suggesting such provisions as they deem necessary to supply deficiencies and to form as consistent and uniform a whole as possible…

…

After these preliminary remarks the Commissioners believe that it will be sufficient for them to explain the suggested amendments and the reasons which guided them in adopting rules upon doubtful or contested points.

Appellant argued that it should be concluded from the fact that, despite their stated intention, the Commissioners made no particular comment on the art. 40 which they were proposing, that they did not intend to modify the existing law, and that the new art. 40 should be interpreted as if it still contained the references to a district and circuit to be found in ss. VI, 31 and 33. This, it was argued, should be the basis for reasoning similar to that in Trower and Sons (supra), to exclude aliens from the application of art. 40 and the articles which succeeded it.

With respect, this argument is not correct. Whatever the intent of the Commissioners art. 40 must be considered in the form in which it was

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enacted, and the very points which were removed cannot be added to it. It is clear that since 1866 art. 71, and all those which preceded it, have contained no reference to a district, and in this respect they cannot be compared with art. 75.

The final argument of appellant which I consider should be dealt with relates to the constitutional question.

This argument was formulated as follows:

[TRANSLATION] This decision of the Court of Appeal, unlike the many decisions of our courts confirming the right of provincial legislatures to legislate on matters within provincial jurisdiction affecting aliens who are present in the province either personally, by their property or by the exercise of their rights, allows the Quebec courts to extend their reach outside the country to encompass an alien who is totally absent from the province in a case which is itself totally excluded from the province.

If such a power existed, it would have devolved on the federal Parliament under subsection 25 of s. 91, which gives the latter jurisdiction over “Naturalization and Aliens”.

…

Accordingly, in the submission of appellant, by giving article 71 of the Code of Civil Procedure an extraterritorial application, the Court of Appeal of Quebec assumed:

(a) that the Quebec legislator intended to exercise a power which devolved on the federal legislator under subsection 25 of section 91;

(b) that the Quebec legislator had adopted a text which was ultra vires.

This argument appears to me to be without foundation. In my view, this is not legislation regarding aliens, but a simple statement of a rule of domestic territorial law extended to private international law in accordance with the principles laid down by the courts. It should, moreover, be noted that this rule relates to an incidental action in warranty which is associated with a principal action already before the Court.

Further, the effect of art. 71 is not to make the judgment to be rendered executory in a foreign country. It only determines what cases a Quebec court can hear. As Montgomery J.A. of the Court of Appeal wrote:

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It may well be that any judgment that might be rendered in this case against Appellant would not be valid internationally, so that its execution would be difficult.

And he correctly added:

This is not a question with which we need concern ourselves at this stage.

For these reasons, I would dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Lafleur, Brown, de Grandpré, Montreal.

Solicitors for the respondent: Guy, Mercier, Bertrand, Bourgeois & Laurent, Montreal.