This was an appeal from an order of the Trial Division granting a motion to strike Canada’s (the appellant's) third party claim against Greif Containers Ltd (the respondent) on the ground that it did not come within the Court’s admiralty and maritime jurisdiction.

The claim in the main action was by Pakistan National Shipping Corp (the plaintiff) against the appellant and Kuenhne & Nagel International Ltd in which it claimed damages, interest and costs arising out of the carriage of a cargo of refined rapeseed (canola) oil on board its ship MV Islamabad from Montréal, Canada, to Karachi, Pakistan. The respondent manufactured and distributed plastic containers from its facility in Ontario. Some of the drums in which the oil was shipped were supplied by the respondent to the sellers of the oil and no contractual relationship existed between the appellant and the respondent in that regard.

References were made in the statement of claim to a charterparty between Kuehne & Nagel and the Department of Supply and Services, and to a bill of lading said to have been issued on behalf of the master of the ship after completion of the loading at the Port of Montréal in which the shippers were described to be the Government of Canada and the Canadian International Development Agency (CIDA). According to the pleading, the bill of lading included the following clauses:

This Bill of Lading shall have effect subject to the provisions of the Water Carriage of Goods Act, 1936, enacted by the Parliament of the Dominion of Canada, which shall be deemed to be incorporated herein, and nothing herein contained shall be deemed a surrender by the Carrier of any of its rights and immunities or an increase of any of its responsibilities or liabilities under said Act. If any term of this Bill of Lading be repugnant to said act to any extent, such term shall be void to that extent but not further. ...

This Bill of Lading is subject to the terms, conditions and exceptions of the Governing Charterparty and should any conflict or ambiguity arise between the Bill of Lading and the Charterparty, the terms, conditions and exceptions of the Charterparty shall prevail.

On 3 December 1989, while in the North Atlantic, the vessel encountered heavy weather. In order to reduce the effects of the weather the vessel changed course and reduced speed but nevertheless began to roll and pitch.

The canola oil drums were subjected to the stresses and strains caused by the vessel’s rolling and pitching. Subsequently, the drums began to leak, collapse and lose their contents, creating gaps in the stow which led to a collapse or shift of stow in the holds. This affected the vessel’s stability and caused the vessel to develop a severe list which placed it in peril.

The vessel was forced to seek refuge at Norfolk, Virginia, until the heavy weather abated. The vessel then proceeded to Charleston, South Carolina, and arrived on 6 December 1989. The plaintiff restowed and resecured the defendant’s cargo to put the vessel into a condition suitable for the voyage. These measures caused the plaintiff substantial expenses and losses.

When the vessel arrived at Karachi, more drums had leaked and collapsed. The plaintiff pleaded that it had incurred additional expenses at Karachi as a result of the extra handling required to discharge these defective drums as well as for the cost of removing canola oil residues from the vessel and cleaning the holds.

On 27 February 1991, the appellant filed a statement of defence and counterclaim in which it denied the allegations in the statement of claim, and claimed for a quantity of cargo said to have been 'shortlanded' at Karachi. Specifically, the appellant denied that the ‘drums were defective’.

On 14 May 1991, the appellant filed the third party claim against the respondent as well as against Hunter Drums Ltd, the supplier of the remaining drums that were carried on the ship. The respondent filed a defence to state that its drums were manufactured in accordance with CIDA specifications and that its drums passed all required testing procedures and were up to the accepted standard in all respects and fit for the purpose intended when they left the manufacturer.

On 1 June 1995, the respondent launched the motion to strike the third party statement of claim on the ground that the Court 'has no jurisdiction ratione materiae under s 22 of the Federal Court Act in respect of the claim against it'. The Judge granted the motion on 15 April 1995.

Held: Appeal allowed.

Whether the Trial Division has jurisdiction over the third party claim in the above circumstances depends upon the interpretation of various sections of the Federal Court Act RSC 1985 c F-7) (the Act) that confer admiralty and maritime jurisdiction upon the Court. Section 22(1) and para 22(2)(i) read:

(1) The Trial Division has concurrent original jurisdiction, between subject and subject as well as otherwise, in all cases in which a claim for relief is made or a remedy is sought under or by virtue of Canadian maritime law or any other law of Canada relating to any matter coming within the class of subject of navigation and shipping, except to the extent that jurisdiction has been otherwise specially assigned.

(2) Without limiting the generality of subsection (1), it is hereby declared for greater certainty that the Trial Division has jurisdiction with respect to any one or more of the following: ...

(i) any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise;

The term ‘Canadian maritime law’ is defined in s 2(1) of the Act as follows:

In this Act, ... 'Canadian maritime law' means the law that was administered by the Exchequer Court of Canada on its Admiralty side by virtue of the Admiralty Act, chapter A-1 of the Revised Statutes of Canada, 1970, or any other statute, or that would have been so administered if that Court had had, on its Admiralty side, unlimited jurisdiction in relation to maritime and admiralty matters, as that law has been altered by its Act or any other Act of Parliament;

Section 42 of the Act provides:

Canadian maritime law as it was immediately before June 1, 1971 continues subject to such changes therein as may be made by this Act or any other Act of Parliament.

In the leading case of International Terminal Operators Ltd v Miida Electronics Inc (1986) CanLII 91 (SCC), [1986] 1 SCR 752 (ITO), involving a claim for goods stolen from a storage shed following their discharge from a ship at the Port of Montréal, the Supreme Court of Canada laid down three essential requirements to be satisfied in order to support a finding that a claim falls within the Federal Court's admiralty and maritime jurisdiction:

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; and

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.

It is not disputed that the claims asserted against the appellant in the main action are maritime matters. Those claims are based on the shipping by sea under a contract of carriage of the canola oil in drums that the appellant knew or ought to have known were defective. The appellant's third party claim is in tort for negligent misrepresentation with respect to the suitability of drums so used to withstand the stresses and strains of the ocean voyage.

The circumstance that the alleged misrepresentation may have been made on land does not conclusively establish a want of jurisdiction. The cause of action in tort, if it can be made out, did not become crystallised until the loss or damage 'if proven' occurred after some of the drums collapsed in the course of the ocean voyage.

In Whitbread v Walley (1990) CanLII 33 (SCC); [1990] 3 SCR 1273 (CMI961), in referring to the above quoted statement of principle of McIntyre J in ITO, La Forest J stated that 'tortious liability which arises in a maritime context is governed by a body of maritime law within the exclusive legislative jurisdiction of Parliament'.

The theory of the plaintiff's case as pleaded is: that the losses claimed were sustained because the drums of canola oil 'began to leak, collapse and lose their contents ... creating gaps or void spaces in the stow' and leading to 'a collapse or shift of stow', that this in turn allowed the drums to become displaced in the holds 'causing the ship to develop a severe list that placed her in peril', that, as the shipper of the cargo, the appellant is responsible for the plaintiff's damages 'by virtue of Canadian maritime law', and, finally, that the appellant is liable in negligence because it 'knew, or ought to have known, of the defective condition of the drums'. The plaintiff's whole case, it appears, is predicated on the allegation that the drums of canola oil carried on the ship were somehow defective.

As appears from the plaintiff's pleading, the bill of lading that was issued by the carrier was to have effect subject to the Canadian statute referred to therein and to the terms of the 'Governing Charterparty'. By s 2 of that statute the Rules in the schedule (the Hague Rules) are to 'have effect in relation to and in connection with the carriage of goods by water in ships carrying goods from any port in Canada to any other port, whether in or outside Canada'. Article 4.2 of the Hague Rules exempts the carrier and the ship from responsibility for loss or damage arising or resulting from a number of circumstances including 'insufficiency of packing', and art 4.3 impliedly places responsibility on the shipper for 'act, fault or neglect' of that party to a contract of carriage by sea. The appellant relies on the 'insufficiency of packing' exemption as reflecting the understanding of those involved in carriage of goods by sea of the role that packing plays in safe carriage. Not infrequently cargo consists of packaged goods, and when it does the shipper is obliged to pack them in a way that is normal or customary for the trade.

The present case revolves around a claim arising out of an agreement relating to the carriage of goods by sea. While the merits of the claim are not to be adjudged at this time, the record indicates that the respondent was neither a party to that agreement nor even directly involved in the performance thereof. The record also suggests that the respondent approached CIDA in 1985 after becoming aware of CIDA's loss experience in annually shipping canola oil to Pakistan in steel drums, and that the respondent then represented to CIDA that its plastic drums were 'an improved package over steel drums' because they met accepted international standards. The record further suggests that at all material times the respondent was 'well aware of the intended use of the drums by CIDA, and more particularly ... that the drums would be used primarily to transport oil by ship'. It also suggests that CIDA officials 'relied entirely on the knowledge, expertise and past experience' of the respondent 'to advise us of the suitability of the drums for transport by sea'. It would thus appear that the root of the claims in the main action for losses incurred by reason of the collapse of the plastic drums in stow during the voyage to Pakistan was the sufficiency of the drums themselves to withstand the conditions experienced by the ship. It should be noted that the third party claim is based on the negligent misrepresentation by the respondent that the plastic drums manufactured by it would be sufficient for sea transport. It is not based on the mere supplying of defective drums by the third party to the vendors of goods that were later carried in those drums on the ship. The third party claim is integrally connected to the Court's admiralty and maritime jurisdiction.

The appeal is allowed with costs and the order of the Trial division set aside.