Quebec North Shore Paper v. C.P. Ltd., [1977] 2 SCR 1054

SUPREME COURT OF CANADA

Quebec North Shore Paper v. C.P. Ltd., [1977] 2 S.C.R. 1054

Date: 1976-06-29

Quebec North Shore Paper Company and Quebec and Ontario Transportation Company Limited (Defendants) Appellants;

and

Canadian Pacific Limited and Incan Ships Limited (Plaintiffs) Respondents.

1976: June 17; 1976: June 29.

Present: Laskin C.J. and Martland, Judson, Ritchie, Spence, Pigeon, Beetz and de Grandpré JJ.

ON APPEAL FROM THE FEDERAL COURT OF APPEAL

Courts — Jurisdiction of the Federal Court — Action for damages and resiliation of contracts — Claim for relief under applicable federal law — British North America Act, 1867, s. 101 — Federal Court Act, R.S.C. 1970, 2nd Supp„ c. 10, s. 23.

Appellants undertook by contract to build a marine terminal at Baie Comeau, Quebec, to transport newsprint to the United States. The building of this marine terminal, to be available by May 15, 1975, was a key term of the entire scheme. On March 14, 1975, since appellants had not fulfilled their obligations and had not commenced to build the marine terminal, respondents brought action for damages and for resiliation of the contracts in the Federal Court. The appellants chal­lenged the jurisdiction of the Federal Court. The Federal Court of Appeal affirmed the judgment of the Trial Division and held that the Federal Court had jurisdic­tion to entertain the action under s. 23 of the Federal Court Act.

Held: The appeal should be allowed.

The question of jurisdiction turns on the meaning and application of s. 23 of the Federal Court Act in the light of the contracts out of which the claims arose. Section 23 must be assessed under the terms of s. 101 of the British North America Act. The expression "remedy under an Act of Parliament of Canada or otherwise" in s. 23 cannot be given a construction that would take it beyond the scope of the expression "administration of the laws of Canada" in s. 101. There is no Act of the Parliament of Canada under which the relief sought in the action is claimed. The jurisdiction hinges therefore on the words "or otherwise" in s. 23 and one cannot say that because Quebec law applies to the claim for relief in this case, that law forms part of the laws of Canada when there is no federal reenactment or referential

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incorporation. If valid and applicable, as Quebec law obviously is in the present case (indeed, as being the law chosen by the parties to govern the agreement), it is not pro 'unto federal law, nor can it be transposed into federal law for the purposes of giving jurisdiction to the Federal Court.

Judicial jurisdiction of the Federal Court is not co-extensive with legislative jurisdiction of Parliament. Sec­tion 101 of the British North America Act 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" and the plural word "laws" both carry the requirement that there be applicable and existing federal law. Section 23 of the Federal Court Act requires that the claim for relief be one sought under such law. Since this requirement has not been met in the present case, the judgments from the lower Courts must be set aside.

Consolidated Distilleries Ltd. v. Consolidated Corpo­ration Ltd., [1930] S.C.R. 531; Consolidated Distiller­ies Ltd. v. The King, [1933] A.C. 508, rev'g [1932] S.C.R. 419, discussed; Canadian National Railway Co. v. NorMin Supplies Ltd., [1977] 1 S.C.R. 322; Johannesson v. West St-Paul, [1952] 1 S.C.R. 292; Campbell-Bennett Ltd, v. Comstock Midwestern Ltd., [1954] S.C.R. 207, referred to.

APPEAL from a decision of the Federal Court of Appeal[1] affirming a trial judgment of the Fed­eral Court and holding that the Federal Court had jurisdiction to entertain the action, Appeal allowed.

Peter M. Laing, Q.C., and Graham Nesbitt, for the appellants.

C. R. O. Munro, Q.C., for the respondents.

The judgment of the Court was delivered by

THE CHIEF JUSTICE—The appellants before this Court are defendants in an action brought against them by the respondents in the Federal Court of Canada for damages for breach of a

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contractual obligation to build a rail car marine terminal at Baie Comeau in Quebec, such terminal to be available by May 15, 1975. The obligation arose under a contract of January 22, 1974, sup­plemented by contracts of February 13, 1974 and March 26, 1974. The contract of January 22, 1974, entitled "Heads of Agreement" opens as follows:

The following Heads of Agreement are set out as an agreement for the operation of rail transporters to transport newsprint of Quebec North Shore Paper Company between Baie Comeau, Quebec, and Quebec City, Quebec for furtherance to New York City, New York, and Chicago, Illinois, and other destinations, and to transport general cargo to and from points on the North Shore of the St. Lawrence, and to define the obligations and responsibilities of Quebec North Shore Paper Com­pany, Canadian Pacific Limited, Quebec & Ontario Transportation Company, Limited and Incan Ships Limited in the implementation of this project.

It is a comprehensive document providing, as the foregoing recital indicates, for the operation of ships to transport newsprint produced by Quebec North Shore Paper Company Limited at Baie Comeau for ultimate destination to points in the United States. The building of a marine terminal at Baie Comeau was a key term of the entire scheme. Alleging that they had fulfilled all their obligations under these contracts but that the appellants were in default and had not even com­menced to build the marine terminal as of March 14, 1975, the respondents brought action on that day for damages and added a claim for resiliation of the contracts.

The appellants challenged the jurisdiction of the Federal Court to entertain the action, contending that it should have been brought in the Quebec Superior Court, especially when the contracts pro­vided that they were to be interpreted and con­strued in accordance with the laws of Quebec, which is where they were entered into. Three of the four parties, one of the appellants and the two respondents have their head offices in Quebec; the second appellant, Quebec and Ontario Transporta­tion Company Limited, has its head office in Ontario. The challenge to jurisdiction was rejected

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by Addy J. of the Federal Court and his judgment was affirmed by the Federal Court of Appeal.

The question of jurisdiction turns on the mean­ing and application of s. 23 of the Federal Court Act, R.S.C. 1970, 2nd Supp., c. 101 in the light of the contracts out of which the claims for relief arose. Section 23 reads as follows:

23. The Trial Division has concurrent original jurisdiction as well between subject and subject as otherwise, in all cases in which a claim for relief is made or a remedy is sought under an Act of the Parliament of Canada or otherwise in relation to any matter coming within any following class of subjects, namely bills of exchange and promissory notes where the Crown is a party to the proceedings, aeronautics, and works and undertakings connecting a province with any other prov­ince or extending beyond the limits of a province, except to the extent that jurisdiction has been otherwise spe­cially assigned.

In the French version of this section there is a comma after the second "autrement" ("otherwise"), and I think that this clarifies its import as being connected with the words "Act of the Parlia­ment of Canada". I would observe that if the respondents' position is maintainable then, of course, it would be open to Parliament to vest exclusive jurisdiction within the terms of s. 23 in the Federal Court.

Section 23 must be assessed initially under the terms of s. 101 of the British North America Act because it is that provision which alone authorizes the Parliament of Canada to establish Courts of original and appellate jurisdiction in addition to authorizing the establishment of this Court. Sec­tion 101 reads as follows:

101. The Parliament of Canada may, notwithstand­ing anything in this Act, from Time to Time, provide for the Constitution, Maintenance, and Organization of a General Court of Appeal for Canada, and for the Estab­lishment of any additional Courts for the better Administration of the Laws of Canada.

The relevant words, for the purposes of the present case, are "administration of the laws of Canada". When s. 23 of the Federal Court Act speaks of a claim for relief or a remedy "under an Act of the Parliament of Canada or otherwise", it cannot be

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given a construction that would take it beyond the scope of the expression "administration of the laws of Canada" in s. 101.

In the present case there is no Act of the Parliament of Canada under which the relief sought in the action is claimed. The question of jurisdiction of the Federal Court hinges therefore on the words in s. 23 "or otherwise", and this apart from the additional and sequential question wheth­er the claim is in relation to any matter coming within any of the classes of subjects specified in the latter part of s. 23. The contention on the part of the respondents, which was in effect upheld in the Federal Courts, was that judicial jurisdiction under s. 101 is co-extensive with legislative jurisdiction under s. 91 and, therefore, s. 23 must be construed as giving the Federal Court jurisdiction in respect of the matters specified in the latter part of the section, even in the absence of existing legislation, if Parliament has authority to legislate in relation to them. The contention is complemented by the assertion that there is applicable law to govern the claims for relief, pending any legisla­tion by Parliament, and that it is the law of the Province which must, pro tanto, be regarded as federal law. This contention suggests a comprehen­sive incorporation or referential adoption of pro­vincial law to feed the jurisdiction of the Federal Court under s. 23.

Counsel for the respondents submitted, in the alternative, that the Railway Act, R.S.C. 1970, c. R-2 provides a specific legislative basis in federal law to cover the issues in the action in this case. I cannot agree. Nothing in that Act touches ques­tions of contract for the construction of a facility such as the one involved here. The question of the Federal Court's jurisdiction must be determined on the larger issue raised herein as set out above.

It is common ground that the two authorities which call for particular consideration are the judgment of this Court in Consolidated Distiller­ies Limited v. Consolidated Exporters Corporation Ltd[2].

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and the judgment of the Privy Council in Consolidated Distilleries Limited v. The King,[3] setting aside the judgment of this Court[4]. The judgments relate to different issues arising out of the same matter, namely, whether the appellant Consolidated Distilleries Limited and two others were liable to the Crown in right of Canada on certain bonds given in respect of the export of liquors on which excise duty had not been paid. The Crown sued on the bonds in the Exchequer Court and a question was raised as to the jurisdic­tion of that Court to entertain the action.

The judgment in the first case was given by this Court on the validity of a third party notice by the defendant Consolidated Distilleries Limited claim­ing indemnity against Consolidated Exporters Cor­poration Ltd. under an agreement between them. The third party notice was set aside by Audette J. of the Exchequer Court and this was affirmed by this Court on appeal, Newcombe J. dissenting. Speaking for the other members of this Court, Anglin C.J.C. considered the scope of s. 101 and whether it authorized Parliament to give the Exchequer Court jurisdiction over a contract between subject and subject which was the effect of the third party notice. He said this (at p. 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, "the laws of Canada," must signify laws enacted by the Dominion Parliament and within its competence. If they should be taken to mean laws in force anywhere in Canada, which is the alterna­tive suggested, s. 101 would be wide enough to confer jurisdiction on Parliament to create courts empowered to deal with the whole range of matters within the exclusive jurisdiction of the provincial legislatures, including "property and civil rights" in the provinces,

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When the matter came on for hearing on the merits the Exchequer Court held that the Crown was entitled to recover on the bonds. This Court affirmed the judgment and gave further consider­ation to the question of the jurisdiction of the Exchequer Court. Anglin C.J.C., speaking for himself, said (at p. 421):

I never entertained any doubt whatever as to the jurisdiction of the Exchequer Court in these cases to hear these appeals.

If authority to hear and determine such claims as these is not something which it is competent for the Dominion, under s. 101 of the British North America Act, to confer upon a court created by it for "the better administration of the laws of Canada," I would find it very difficult to conceive what that clause in the B.N.A. Act was intended to convey.

That the Dominion Parliament intended to confer such jurisdiction on the Exchequer Court in my opinion, is clear beyond argument, the case probably falling within clause (a); but, if not, it certainly is clearly within clause (d) of s. 30 of the Exchequer Court Act.

Duff J., speaking for himself and two other mem­bers of the Court (Newcombe J. having died before delivery of judgment) made the following observations (at p. 422):

I find no difficulty in holding that the Parliament of Canada is capable, in virtue of the powers vested in it by section 101 of the British North America Act, of endow­ing the Exchequer Court with authority to entertain such actions as these. I do not doubt that "the better administration of the laws of Canada," embraces, upon a fair construction of the words, such a matter as the enforcement of an obligation contracted pursuant to the provisions of a statute of that Parliament or of a regula­tion having the force of statute. I do not think the point is susceptible of elaborate argument, and I leave it there.

As to the jurisdiction of the Exchequer Court, in so far as that depends upon the construction of the Exchequer Court Act, something might be said for the view that these cases are not within the class of cases contem­plated by subsection A of section 30; but that is immaterial because they are plainly within subsection D.

The reference by both Anglin C.J.C. and by Duff J. to s. 30 of the Exchequer Court Act, R.S.C. 1927, c. 34 is relevant to the reasons later given by the Privy Council on further appeal, and

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it will be convenient to reproduce that section at this point. It reads as follows:

30. The Exchequer Court shall have and possess concurrent original jurisdiction in Canada

(a) in all cases relating to the revenue in which it is sought to enforce any law of Canada, including actions, suits and proceedings by way of information to enforce penalties and proceedings by way of infor­mation in rem, and as well in qui tam suits for penalties or forfeiture as where the suit is on behalf of the Crown alone;

(b) in all cases in which it is sought at the instance of the Attorney General of Canada, to impeach or annul any patent of invention, or any patent, lease or other instrument respecting lands;

(c) in all cases in which demand is made or relief sought against any officer of the Crown for anything done or omitted to be done in the performance of his duty as such officer; and

(d) in all other actions and suits of a civil nature at common law or equity in which the Crown is plaintiff or petitioner.

The Privy Council reversed the Courts below on the enforceability of the bonds but upheld the jurisdiction of the Exchequer Court to entertain the Crown's action on them. Lord Russell of Kil­lowen, in dealing with the question of jurisdiction, noted that it depended upon a consideration of the British North America Act and the Exchequer Court Act and went on to assess s. 101 of the . former and s. 30 of the latter. He said this (at pp. 520-1):

... It was conceded by the appellants (and rightly, as their Lordships think) in the argument before the Board, that the Parliament of Canada could, in exercising the power conferred by s. 101, properly confer upon the Exchequer Court jurisdiction to hear and determine actions to enforce the liability on bonds executed in favour of the Crown in pursuance of a revenue law enacted by the Parliament of Canada. The point as to jurisdiction accordingly resolves itself into the question whether the language of the Exchequer Court Act upon its true interpretation purports to confer the necessary jurisdiction. The relevant section is s. 30 .. .

The learned President held that the Exchequer Court had jurisdiction, inasmuch as the bonds were required to be given by a law enacted by the Parliament of Canada in respect of a matter in which it had undoubted jurisdiction.

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The subject-matter of the actions directly arose from legislation of Parliament in respect of excise.

The Chief Justice thought that the cases fell clearly within s. 30(d), and probably also within s. 30(a). Duff J., while suggesting a possible doubt as to the applica­tion of sub-s. (a), held that the cases were plainly within sub-s. (d).

Their Lordships are anxious to avoid expressing any general views upon the extent of the jurisdiction con­ferred by s. 30, beyond what is necessary for the decision of this particular case. Each case as it arises must be determined in relation to its own facts and circum­stances. In regard to the present case their Lordships appreciate that a difficulty may exist in regard to sub-s. (a). While these actions are no doubt "cases relating to the revenue," it might perhaps be said that no law of Canada is sought to be enforced in them. Their Lordships, however, have come to the conclusion that these actions do fall within sub-s. (d). It was suggested that if read literally, and without any limitation, that sub-sec­tion would entitle the Crown to sue in the Exchequer Court and subject defendants to the jurisdiction of that Court, in respect of any cause of action whatever, and that such a provision would be ultra vires the Parlia­ment of Canada as one not covered by the power conferred by s. 101 of the British North America Act. Their Lordships, however, do not think that sub-s. (d), in the context in which it is found, can properly be read as free from all limitations. They think that in view of the provisions of the three preceding sub-sections the actions and suits in sub-s. (d) must be confined to actions and suits in relation to some subject-matter, legislation in regard to which is within the legislative competence of the Dominion. So read, the sub-section could not be said to be ultra vires, and the present actions appear to their Lordships to fall within its scope. The Exchequer Court accordingly had jurisdiction in the matter of these actions.

Both Anglin C.J.C. in the first Consolidated Distilleries case and Duff J. in the second case spoke of "laws of Canada" in s. 101 as referring respectively to "laws enacted by Parliament" and to "enforcement of an obligation contracted pursu­ant to a statute of ... Parliament". So too, the Privy Council in the second Consolidated Distill­eries case spoke of the power given by s. 101 to confer jurisdiction on the Exchequer Court in actions on bonds executed in favour of the Crown "in pursuance of a revenue law enacted by the Parliament of Canada". Again, the Judicial Committee

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in dealing with the case before it indicated that it might be difficult to bring it within s. 30(a) of the Exchequer Court Act because although the actions were "cases related to the revenue" it might perhaps be said that no law of Canada is sought to be enforced in them. This is consistent with the observations of both Anglin C.J.C. and of Duff J., already quoted.

Stress is laid, however, on what the Privy Coun­cil said in discussing the application of s. 30(d) of the Exchequer Court Act, the provision giving jurisdiction to the Exchequer Court in civil actions where the Crown is plaintiff or petitioner. I do not take its statement that "sub-s. (d) must be confined to actions ... in relation to some subject matter legislation in regard to which is within the legislative competence of the Dominion" as doing anything more than expressing a limitation on the range of matters in respect of which the Crown in right of Canada may, as plaintiff, bring persons into the Exchequer Court as defendants. It would still be necessary for the Crown to found its action on some law that would be federal law under that limitation. It should be recalled that the law respecting the Crown came into Canada as part of the public or constitutional law of Great Britain, and there can be no pretence that that law is provincial law. In so far as there is a common law associated with the Crown's position as a litigant it is federal law in relation to the Crown in right of Canada, just as it is provincial law in relation to the Crown in right of a Province, and is subject to modification in each case by the competent Parlia­ment or Legislature. Crown law does not enter into the present case.

Addy J. did not deal with the effect of s. 101 of the British North America Act upon s. 23 of the Federal Court Act, and appeared to assume that he had jurisdiction if the enterprise contemplated by the agreement as a whole fell within federal legislative power. As I have already indicated, the question upon which he proceeded is not reached

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unless the claim for relief is found to be one made "under an Act of the Parliament of Canada or otherwise". In the Federal Court of Appeal, the majority judgment of LeDain J., which he deliv­ered for himself and Ryan J. and which was concurred in with additional reasons by Thurlow J. (as he then was), poses the issue in terms which also overlook the words just quoted. Thus, he says:

The question to be determined, therefore, is whether the claim for relief in this case relates to a matter coming within the class of subjects "works and undertakings connecting a province with any other province or extend­ing beyond the limits of a province."

However, LeDain J. does consider the import of the words "or otherwise" and goes on to say that he understands them to refer "to any other law that can be considered to form part of the 'laws of Canada' within the meaning of s. 101 of the B.N.A. Act". Then follows another passage upon which counsel for the respondents relies, and it is in these terms:

... The expression "laws of Canada", within the meaning of s. 101 of the B.N.A. Act, includes not only existing federal statutes but also any law that Parlia­ment can validly enact, amend or repeal. Consolidated Distilleries Limited v. The King, [1933] A.C. 508. In this case the respondents' claim for relief is based not on federal statute law but on the Quebec civil law of contract. The contracts in issue all contain a provision that they and any disputes arising thereunder are to be interpreted and construed in accordance with the laws of the Province of Quebec. In so far as the civil law of Quebec applies to a matter within federal legislative jurisdiction with respect to an extra-provincial undertak­ing contemplated by s. 92(10)(a) of the B.N.A. Act, it forms part of the laws of Canada within the meaning of s. 101 of the B.N.A. Act since it could be enacted, amended or repealed by the Parliament of Canada. In other words, Parliament could validly enact contract law to apply to matters falling within its jurisdiction with respect to such undertakings.

I do not agree with the statement in the forego­ing passage that "in so far as the civil law of Quebec applies to a matter within federal legisla­tive jurisdiction ... it forms part of the laws of Canada within the meaning of s. 101 of the B.N.A. Act since it could be enacted, amended or repealed by the Parliament of Canada". I do not understand

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how provincial laws can be amended or repealed by Parliament, albeit in relation to a matter within federal competence, unless they first have been made laws of Canada by adoption or enactment. I think it begs the question raised by the words "or otherwise" to say that merely because Quebec law applies to the claim for relief in this case, as it clearly would if the action were brought in the Quebec Superior Court, that law forms part of the laws of Canada, although there is no federal re-enactment or referential incorpora­tion.

It must be remembered that when provincial law is applied to disputes involving persons or corpora­tions engaged in enterprises which are within fed­eral competence it applies on the basis of its independent validity: see Canadian National Railway Co. v. NorMin Supplies Ltd.[5] Provincial legislation cannot interfere with the integrity of enterprises within federal regulatory jurisdiction: see Johannesson v. West St. Paul[6]. Moreover, if the provincial legislation is of general application, it will be construed so as not to apply to such enterprises: see Campbell-Bennett Ltd. v. Com­stock Midwestern Ltd.[7] If independently valid and applicable, as Quebec law obviously is in the present case (indeed, as being the law chosen by the parties to govern the agreement), it is not federal law nor can it be transposed into federal law for the purpose of giving jurisdiction to the Federal Court. Jurisdiction under s. 23 follows if the claim for relief is under existing federal law, it does not precede the determination of that question.

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 "laws", and they carry, in my opinion, the requirement that there be applicable

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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. Section 23 requires that the claim for relief be one sought under such law. This requirement has not been met in the present case and I would, accordingly, allow the appeal, set aside the judgments below and declare that the Federal Court is without jurisdiction to entertain the claims of respondents. The appellants are entitled to their costs throughout.

Appeal allowed with costs.

Solicitors for the appellants: Weldon, Courtois, Clarkson, Parsons & Tétrault, Montreal.

Solicitors for the respondents; Gadbois, Joannette & Durand, Montreal.