The Civil and Common Law Origins of Canadian Maritime Law

The Civil and Common Law Origins of Canadian Maritime Law

To the Slovenian Maritime Law Association

Speaking Notes – The Honourable Sean Harrington, Federal Court

[1]When I studied law at McGill University, our Dean told us that clients do not like to hear that something cannot be done. They want to know how to do it: legally. A good lawyer is one who thinks outside the box – who has imagination. It is in this context that maritime law lawyers in Slovenia, a civil law jurisdiction, may find Canadian maritime law of interest.

[2]Canadian maritime law derives from English maritime law. Although the origins of English maritime law as practiced in the Doctors Commons were civilian, the English now seem to pay scant attention to maritime law’s civilian roots. Not so in Canada. Civil law has not been forgotten. Perhaps this is because at least three of the nine judges of our Supreme Court of Canada must be civilians. A good deal of maritime law is judge made. What judges have made, they may remake. In so doing our courts have reformed, or incrementally changed, maritime law, and have used maritime law to change the common law.

[3]In determining what a rule should be, our courts are not afraid to shop around. We may beg, borrow or steal from other jurisdictions. In this way our law has developed in tune with modern times. Perhaps one day when your law seems to be against your client, look around – you may gain inspiration elsewhere.

[4]A great example of an imaginative approach to the law is the common law Mareva injunction. Lord Denning took the civilian seizure before judgment which is an in rem process and converted it into an in personam freezing order.

[5]Canada inherited two great systems of Western law, the civil law of continental Europe and the common law of England. Canada is a federal state. On the provincial level the civil law prevails in the province of Québec, while the common law prevails in the other provinces. Canadian maritime law is federal law, not provincial law, and it is a mixture of both legal systems. Generally speaking the civil law states general principles, usually in codified form, which are used to resolve particular disputes. On the other hand the common law was much more procedural in outlook. It was from the resolution of individual disputes that general principles emerged.Lord Denning stated it very well in Chic Fashions (West Wales) Ltd v Jones, [1968] 2 QB 299:

“Such are the cases. They contain no broad statement of principle: but proceed, in our English fashion, from case to case until the principle emerges. Now the time has come when we must endeavour to state it.”

I should mention that our procedure, federally and provincially, including Québec, is common law based. It is an adversarial system. The judge decides on the evidence presented by both sides. He or she is not an investigator.

[6]Today I intend to discuss how the following issues have been dealt with in Canadian maritime law: a) stipulations for the benefit of a third party; b) claims in tort for pure economic loss; c) contributory negligence; d) limitation of liability and gross negligence; e)the Mareva injunction vs the action in rem; f) limitation of liability; g) admiralty secured creditors in bankruptcy; and h) admiralty procedure.

[7]But first, a bit of Canadian legal history. As I mentioned, Canada is a federal state. Navigation and shipping is a legislative class of subject assigned to the federal parliament. Property and civil rights, and the creation of the courts have been left to the provinces. However, by way of exception, the federal parliament may create a general court of appeal for Canada, which it has in the Supreme Court, and “additional courts for the administration of the laws of Canada.” These laws must be federal, not provincial. My court, the Federal Court, and the Federal Court of Appeal are courts created by the federal parliament, not the provincial legislatures. While the superior courts of the provinces have general jurisdiction, the Federal Court only has that jurisdiction properly assigned to it by Parliament. Since a good part of maritime law is not found in statutes but is unwritten, the lex non scripta, there has been a great deal of caselaw over the past 40 years as to what exactly falls within Canadian maritime law, because the initial assumption is that the law of obligations,i.e. contract and delict, falls within the provincial domain as matters of property and civil rights.

[8]All of this is to say, and I will list some of the leading cases in an endnote, that Canadian maritime law is based on English maritime law as it was in 1934, and includes the English law of contract, tort, bailment, trust and agency as administered by the English Admiralty Court, subject to amendments by Canadian statutes and to our courts refusing to follow some of the English precedents.

[9]One case deserves special mention, the decision of the Supreme Court of Canada in QNS Paper Co v Chartwell Shipping Ltd, [1989] 2 SCR 683. Indeed Professor Pavliha may have been studying in Montreal at that time. Chartwell entered into a contract for stevedoring services at a Québec port “as agent only”. At issue was its liability as agent for an unnamed principal. It was thought that in the civil law the agent of a non-disclosed principal is personally liable, while in the common law the declaration that one is acting as agent puts the other party on inquiry, so that the agent is not personally liable.

[10]Although the Court held that the common law of agency applied, the judges acknowledged that the development of English maritime law owes much to the civilian tradition. Three of the seven judges specifically stated that the consideration of civil law principles should not be confined to situations within the ancient core of admiralty jurisdiction. Of particular interest is the decision of Madam Justice L’Heureux-Dubé. She said that comparative law played an important role in the development of Canadian maritime law, as did, and do, civil law sources. “Maritime law continues to blend a rich variety of sources --”. “To summarize, as at 1934, which marks the last statutory reception into Canada of English admiralty law, English courts were still drawing upon, and indeed developing, the civilian tradition in maritime law.” “It bears repeating that ‘the specialized rules and principles of admiralty’ derive largely from civil law and that civil law principles, like common law principles, have been and continue to be modified and expanded in Canadian jurisprudence.”

Stipulations for the Benefit of a Third Party

[11]A promise was not enforceable in common law unless the promisee gave consideration. Carriers often shield themselves from liability by non-responsibility or limitation of liability clauses and seek to extend those benefits to their servants, agents and independent contractors. In Adler v Dickson, [1955] 1 QB 158, [1954] 2 Lloyd’s Rep 267, Mrs. Adler was injured while boarding the steamship HIMALAYA as a passenger. The conditions in her ticket exempted the carrier from liability. She instead sued the master and bo’sun on the basis that they were personally negligent. Lord Denning held that the law permitted a carrier to stipulate exemptions from liability not only for himself but also for those he engages to carry out the contract, and that this can be done by necessary implication as well as by express language. However, no such language existed in the ticket. Thus began the convoluted Himalaya Clause through which the courts have held that a stevedore performing the contract for the carrier, which includes a stipulation of non-responsibility for his benefit, has a direct contract with the cargo interests.

[12]In 1986 our Supreme Court upheld the Himalaya Clause in the case of the BUENOS AIRES MARU. Cargo had been stolen after discharge but before delivery due to the negligence of the terminal operator. The governing bill of lading stipulated to cargo interests that the terminal operators were not liable for damage through their negligence. Under Québec civil law stipulations for the benefit of a third party were perfectly valid and as the loss had taken place in Montreal, the terminal operators were arguing for the application of civil law. However, it was held that the common law principles of contract and tort applied, but nevertheless the Himalaya Clause was valid. The Court later used the BUENOS AIRES MARU to modify the common law as a whole so that stipulations for the benefit of a third party are now enforceable even if that third party had not given consideration and in fact was not even aware of the stipulation.

[13]This was a huge sea change. It had earlier been held that automobile liability insurance policies did not cover guest drivers because they had not given consideration. To overcome this consideration issue the various provinces had to enact legislation. Our courts recently have been far more inventive than the English courts as the United Kingdom attained the same result by statute, the Contracts (Right to Third Parties) Act, 1999.

Claims in Tort for Pure Economic Loss

[14]With a few exceptions, the common law holds that claims in tort for pure economic loss are too remote. The fear is that there could be “liability in an indeterminate amount for an indeterminate time to an indeterminate class - -”as the great American jurist Justice Cardozo said in Ultramares Corp v Touche, Niven & Co, 255 NY 170, 74 ALR 1139 (1931) (US).

[15]The JERVIS CROWN had the misfortune of striking a bridge in Vancouver. Everyone knew the Canadian National Railway used the bridge. However, it did not own it. The bridge was owned by the federal government and it of course recovered the cost of repair as physical damage. The CNR sued for the cost of rerouting trains during repair. The Supreme Court allowed the claim. It said that in principle pure economic loss in tort is recoverable where, in addition to negligence and foreseeability, there is sufficient proximity between the negligent act and the loss. In so doing the Court relied on the civilian concept of a direct causal relationship between the negligence and the loss. The Court has backtracked somewhat from the JERVIS CROWN ever since.

Contributory Negligence

[16]The common law was such that contributory negligence on the part of the plaintiff barred recovery in full. The common law had been reformed by statute in England in 1947, as well as in the Canadian provinces. However, since Canadian maritime law comprised English law as it was in 1934, and did not include provincial law, the question arose as to whether the contributory negligence defence still applied. The Supreme Court held that the old contributory negligence rule was judge made, was outmoded and did not meet the needs of modern society. It “incrementally” amended Canadian maritime law, and thus common law, by abolishing the old contributory negligence rule in favour of a proportionate fault rule.

Limitation of Liability

[17]Canada follows the Convention on Limitation of Liability for Maritime Claims, 1976 with the 1996 protocol. Article 4 of the Convention provides that:

“A person liable shall not be entitled to limit his liability if it is proved that the loss resulted from his personal act or omission, committed with the intent to cause such loss, or recklessly and with knowledge that such loss would probably result.”

[18]In Société Telus Communications et al v Peracomo Inc et al, 2011 FC 494, the master of a fishing vessel whose nets became entangled in a submarine cable intentionally cut the cable, in the belief that it had been abandoned. In fact it was a telecommunications cable in use. I held that he intended the act, that the damages flowed from operation of law and that therefore the master and shipowner could not limit liability. The Court of Appeal agreed in 2012 FCA 199. However, when the matter got to the Supreme Court of Canada as Peracomo Inc v Telus Communications Inc,[2014] 1 SCR 621, the Court was of the view the intention related not to the act, but rather whether the damage was intended. As the shipmaster had not intended to disrupt telecommunications the right to liability was not broken. I distinguished French cases on the Convention as they simply applied faute lourde or gross negligence. I was of the view that the Convention required more than gross negligence. The Supreme Court agreed. One of the judges, Mr. Justice Wagner carried out a detailed comparison of gross negligence and willful misconduct.This case is also interesting in that it held the insured’s conduct deprived it of benefit of its insurance.

The Mareva Injunction and the Action In Rem

[19]In order to obtain any injunction one has to make a good showing that otherwise the recovery of the debt would be in jeopardy. Some skulduggery on the part of the defendant is usually necessary. As with all injunctions, an undertaking for damages should the claim otherwise fall is usually required, often backed up by a bank guarantee or other security.

[20]An arrest arising from an action in rem was historically very different. Recovery of the debt need not be shown to be in jeopardy, and no undertaking in damages is required. If it turns out the arrest was wrongful, absent malicious behaviour, the only remedy is in costs. The Federal Court of Appeal attempted to equate the arrest in rem with the Mareva injunction. However, the Supreme Court refused, as it has remained loyal to the roots of maritime law.

Admiralty and Bankruptcy

[21]A maritime lien may exist although it is not registered anywhere, and even survives a private sale of the ship, as part of the civil lawdroit de suite. Some jurisdictions, such as the United States, are very generous when it comes to maritime liens, much more so than Canada. However, if the proper law gives a maritime lien, our courts will enforce it. Thus the Supreme Court held that an American stevedore’s maritime lien was enforceable against a ship, even though the shipowner had gone bankrupt.

Expert Witnesses

[22]The practice had developed in England, and had been followed in Canada, that if the judge sat with a nautical assessor, the parties could not call expert evidence on matters within the expertise of that assessor. The Federal Court followed this practice in the case of the BEOGRAD, an ex-Yugoslavian (Serbian) ship. However, the Supreme Court departed from the practice. It held that although it was acceptable to have an assessor, the questions put by the judge and the answers of the assessor should be provided to the parties who would have the opportunity to call experts of their own. This was more in line with the principle of natural justice that one should have a fair opportunity to know the case against him and to be able to answer it.

Access to Decisions

[23]Final decisions of the Supreme Court of Canada, the Federal Court of Appeal and the Federal Court are readily available in English and French on their respective websites, which can be easily Googled. Another useful free site is site of the Canadian Legal Information Institute, maintained by Canadian law professors. It contains all final decisions, statutes and regulations of all courts, and the Federal and Provincial governments.

Endnotes

[24]One of the early cases to confirm that there is federal unwritten law in maritime matters is Sivaco Wire and Nail Co et al v Tropwood AG et al, [1979] 2 SCR 157. That case did not actually state what that law was.

[25]By far, the most important case in the development of maritime law is ITO-International Operators (BUENOS AIRES MARU)v Miida Electronics [1986] 1 SCR 752. This case confirmed the validity of the definition of Canadian maritime law in the Federal Courts Act which included the law the Federal Court’s predecessor court would have had had it had unlimited jurisdiction. Thus Canadian maritime law includes law that never was! This case also held that Canadian maritime law incorporated English maritime law as it was in 1934 and is uniform throughout Canada.

[26]The BUENOS AIRES MARU, London Drugs Ltd v Kuehne & Nagle International Ltd, [1992] 3 SCR 299, and Fraser River Pile & Dredge v Can-Dive Services Ltd, [1999] 3 SCR 108 show the transformation of the Himalaya Clause into a general rule extending contractual benefits to strangers to that contract. The Court said in London Drugs at p 438:

“This Court has also recognized, however, that in appropriate circumstances courts have not only the power but the duty to make incremental changes to the common law to see that it reflects the emerging needs and values of our society: R. v. Salituro, at pp. 669-70. It is my view that the present appeal is an appropriate situation for making such an incremental change to the doctrine of privity of contract in order to allow the respondents to benefit from the limitation of liability clause.”