Desgagnés Transport Inc. v. Wärtsilä Canada Inc.

In Admiralty Jurisdiction, Admiralty Practice, Appeals, Constitutional Cases on

Facts: In 2006 the respondent supplier sold to the appellant shipowner a marine crankshaft and bedplate for use in the appellant’s vessel. The crankshaft and bedplate were installed in the vessel in 2007 but in 2009 the crankshaft suffered catastrophic failure, attributed to improper torque applied to a stud during the installation in 2007. The contract for the sale was formed in Quebec, contained a choice of law clause that Quebec law governed the contract, and limited the appellant’s liability to €50,000. The validity of the limitation depended on whether the sale was governed by Canadian maritime law or the law of Quebec.

The first instance trial Judge held that the Civil Code of Quebec applied to the contract, which provides that a seller may not exclude or limit liability unless defects in the product are disclosed by the seller. In finding that while the dispute was related to maritime activity but was not integrally connected to navigation and shipping, the trial Judge held that the limitation of liability clause was unenforceable and the supplier was liable for the full cost of the loss.

On appeal, the Quebec Court of Appeal found that the trial Judge failed to consider s.22(2)(m) and (n) of the Federal Courts Act which relates to claims in respect of materials supplied to a ship and claims arising out of a contract for repair or equipping of the ship. The clear language of s. 22(2) and jurisprudence of the Supreme Court of Canada and the Federal Courts have recognized that construction, repair or equipping of a ship are integrally connected to navigation and shipping. Accordingly, the Court of Appeal found that Canadian maritime law governed the dispute, and not the law of Quebec. The shipowner then appealed to the Supreme Court of Canada.

Decision: 6:3 majority ruled the law of Quebec governs the dispute; supplier cannot limit liability.

Held: Canadian maritime law is a body of federal law that is uniform throughout Canada, most of it being non-statutory. It is a body of law with a distinct identity akin to the commonlaw. Any claim that is integrally connected to maritime or admiralty matters under s. 91(10) of the Constitution Act 1867 is governed by Canadian maritime law. The Court found that the sale of marine engine parts for use on a commercial vessel is sufficiently and integrally connected to navigation and shipping under s. 91(10) of the Constitution Act so that it validly applies to the contract. The Civil Code of Quebec also applies to the claim as it is a validly enacted law that in pith and substance relates to property and civil rights under s. 92(13) of the Constitution Act. This presents a double aspect in which matters can be regulated by both a provincial power and a federal power. Unless either interjurisdictional immunity or federal paramountcy applies, the valid provincial law will apply despite the incidental effects on a federal power. The Court found no precedent suggesting the contractual issues engaged the core of the federal competence over navigation and shipping, or that the core of navigation and shipping could or should encompass contractual issues related to the sale of marine engine parts for use on a commercial vessel. As such interjurisdictional immunity did not apply. The Court then found that the doctrine of federal paramountcy did not apply as Canadian maritime law is non-statutory and, based on the Court’s own ruling in Ryan Estate, such non-statutory law cannot be paramount to valid provincial legislation. The Civil Code of Quebec is operative and governs the dispute.