[1993] 1 F.C. 131
T-171-92
Her Majesty the Queen (Plaintiff)
v.
Maritime Group (Canada) Inc., Acari Shipping Co. Ltd., Transmed Shipping Ltd., John Shillien, D. P. Byrne, Robert Lyon, Dennis McLeod and the Montreal Board of Trade (Defendants)
Indexed as: Canada v. Maritime Group (Canada) Inc.(T.D.)
Trial Division, Noël J.—Montréal, September 28; Ottawa, October 29, 1992.
Practice — Limitation of actions — Action for negligent acts (improper inspection and certification of ship, which later sank in international waters) occurring at Montréal — Under Federal Court Act, s. 39 provincial limitation of action laws apply in respect of cause of action arising in province — “Cause of action” referring to breach of duty i.e. improper inspection, certification — Arising where breach of duty occurring, not where damages suffered — Product liability cases where jurisdiction of cause of action determined by reference to jurisdiction where damages suffered, not applicable — Two-year limitation period under Quebec law applied.
Crown — Practice — Federal Court Act, s. 39 providing provincial limitation of action laws apply to cause of action arising in province “except as expressly provided by any other Act” — Exception contemplating Act of Parliament — Adoption of laws in force between subject and subject demonstrating intention to apply same limitation periods to Crown as to private litigants — Omission of “of Parliament” found in predecessor Exchequer Court Act, s. 31 not indicating intention to depart from prior law — Nothing suggesting intention to revive special limitation periods favouring Crown.
Civil Code — Art. 2215 prescribing thirty-year limitation period for Crown debts not declared imprescriptible — Part of federal body of law so far as rights and obligations of federal Crown concerned pursuant to Constitution Act, 1867, s. 129 but neither Act of Parliament nor “law of Canada” in jurisdictional sense — Excluded by Federal Court Act, s. 39 “except as expressly provided by any other Act” of Parliament.
This was an appeal from a decision of the Senior Prothonotary rejecting a motion to strike the statement of claim as against certain of the defendants under Rule 419 as statute barred. The negligent acts alleged in the statement of claim (improper inspection and certification of the ship Charlie, and allowing it to sail on a transatlantic voyage in an unseaworthy state) took place at Montréal. The ship sank on January 19, 1990. The statement of claim was filed on January 22, 1992, but not served until June 17. Under Federal Court Act, subsection 39(3), the laws relating to limitation of actions referred to in subsections (1) and (2) apply to any proceedings involving the Crown. Subsection 39(1) provides that except as expressly provided by any other Act, the laws relating to limitation of actions in force in any province between subject and subject apply to any proceedings in the Federal Court in respect of any cause of action arising in that province. Subsection 39(2) provides that a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose. In Quebec, the prescription period is two years from the date of the plaintiff’s knowledge of the damage and it continues to run unless the judicial demand is served upon the defendants within sixty days of filing. Appellants submitted that the action was statute barred as against them because the claim had not been served on them within the sixty days, thus the prescription period had not been interrupted. The respondent submitted that the cause of action arose in international waters where the damages had been suffered so that the six-year limitation period prescribed by subsection 39(2) would apply. Alternatively, the respondent argued that article 2215 of the Civil Code of Lower Canada, which provides for a thirty-year limitation period for Crown debts which are not declared imprescriptible, applied. The issues were where the cause of action arose, and whether article 2215 applied.
Held, the appeal should be allowed.
The different meanings ascribed to “cause of action” seem to depend on whether the issue arises with respect to jurisdiction, the commencement of a period of limitation or under Federal Court Act, section 39. “Cause of action” refers to the breach of duty, whether imposed by law or by contract, which provides the victim with a right of action. The alleged breaches of duty herein were the improper inspection and certification of the vessel, and the granting of permission to voyage in circumstances that the ship was not seaworthy. These breaches took place at Montréal. That the ship sank elsewhere did not alter the location of the cause of action. Although there would have been no cause of action had the ship not gone down, once damages have been suffered a cause of action arises where the breach of duty took place regardless of where the damages were suffered. Product liability cases wherein the jurisdiction where the cause of action arose was determined by reference to the jurisdiction in which the damages were suffered, did not apply. Unlike the situation in product liability cases, where a special duty of care has been imposed on manufacturers which reaches into any jurisdiction where distribution of the products can be reasonably contemplated, in the case at bar the breach of duty alleged to have occurred in the province of Quebec did not transport itself to international waters where the damages were suffered. The cause of action arose at Montréal and the Quebec laws as to prescription applied.
The exception expressed in subsection 39(1) is limited to Acts of Parliament. Had Parliament intended to maintain the application of special provincial limitation periods in favour of the Crown, it would have simply adopted the laws relating to limitation of actions in force in the provinces. By adopting such laws as were in force “between subject and subject”, Parliament clearly intended to have Crown suits governed by the same limitation periods as those applicable to private litigants and to exclude the application of special periods favouring the Crown which existed under provincial laws. The exception is aimed at preserving the application of those provisions enacted by federal statute which expressly provide for specific limitation periods for Crown suits. This conclusion is supported by the wording of Exchequer Court Act, section 31, the predecessor to section 39, which adopted the limitation periods as between subject and subject “subject to any Act of the Parliament of Canada”. The omission of “of Parliament” does not signal an intention to depart from the prior law. There is nothing to suggest that Parliament intended to revive the application of special limitation periods in favour of the Crown.
Article 2215 became part of the federal body of law in so far as the rights and obligations of the federal Crown were concerned pursuant to the Constitution Act, 1867, section 129. Therefore it could not be disregarded on the sole ground that it was provincial law. It was, however, neither an Act of Parliament nor, in a jurisdictional sense, a “law of Canada”. The application of article 2215 was expressly excluded by section 31 of the Exchequer Court Actand subsection 39(1) of the Federal Court Act continued that exception. The two-year limitation period between subject and subject in the province of Quebec applied, and as it was not interrupted, the action against the appellants was time barred.
STATUTES AND REGULATIONS JUDICIALLY CONSIDERED
Civil Code of Lower Canada, Arts. 2215, 2224, 2261.
Constitution Act, 1867, 30 & 31 Vict., c. 3 (U.K.) (as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item 1) [R.S.C., 1985, Appendix, No. 5], s. 129.
Exchequer Court Act, R.S.C. 1952, c. 98, s. 31.
Federal Court Act, R.S.C. 1970 (2nd Supp.), c. 10, s. 38 (now R.S.C., 1985, c. F-7, s. 39).
Federal Court Rules, C.R.C., c. 663, R. 419.
CASES JUDICIALLY CONSIDERED
APPLIED:
Northern Telecom Canada Ltd. et al. v. Communication Workers of Canada et al., [1983] 1 S.C.R. 733; (1983), 147 D.L.R. (3d) 1; 83 C.L.L.C. 14,048; 48 N.R. 161.
CONSIDERED:
Distillers Co (Bio-Chemicals) Ltd v Thompson (by her next friend Arthur Leslie Thompson), [1971] 1 All E.R. (P.C.); Moran v. Pyle National (Canada) Ltd., [1975] 1 S.C.R. 393; (1973), 43 D.L.R. (3d) 239; [1974] 2 W.W.R. 586; 1 N.R. 122; Page v. Churchill Falls (Labrador) Corp. Ltd., [1972] F.C. 1141; (1972), 29 D.L.R. (3d) 236 (C.A.); Queen (The) v. City of Montreal, [1972] F.C. 382 (T.D.); Procureur général du Canada v. Dallaire et Dallaire, [1949] B.R. 365 (C.A.).
APPEAL from Senior Prothonotary’s refusal to strike out the statement of claim as against certain of the defendants as statute barred. Appeal allowed.
COUNSEL:
Danielle Dion for plaintiff.
Mireille Tabib for defendants.
SOLICITORS:
Deputy Attorney General of Canada for plaintiff.
Stikeman, Elliott, Montréal, for defendants.
The following are the reasons for order rendered in English by
Noël J.: This is an appeal from the decision of the Senior Prothonotary rejecting the motion brought by D. P. Byrne, Robert Lyon, Dennis McLeod and the Montreal Board of Trade (herein the “appellants”) seeking to have the statement of claim struck out as against them pursuant to Rule 419 [Federal Court Rules, C.R.C., c. 663] on the ground that it is statute barred.
The Senior Prothonotary rejected the motion in the following terms: “the motion is denied on the grounds of section 17 of the Interpretation Act, articles 9 and 2215 of the Civil Code of Lower Canada; the damages arose at sea in extraterritorial water when the vessel sunk; this gives opening to this action.”
The negligent acts alleged by the statement of claim took place in Montréal, Québec. According to the statement of claim, those acts are said to have been the negligent inspection and certification of the vessel Charlie and allowing her to sail on a transatlantic voyage in an unseaworthy state. The Charlie sunk at high seas on or around January 19, 1990, thereby giving rise to the damages sought to be recovered by Her Majesty the Queen in this action.
APPELLANTS’ POSITION
The appellants claim that because the cause of action advanced by the plaintiff arose in Quebec, subsection 39(1) of the Federal Court Act, R.S.C., 1985, c. F-7, provides that the prescription period must be determined by reference to the limitation applicable between subject and subject pursuant to the laws of Quebec and that, under the laws of Quebec, this period is of two years from the date of the plaintiff’s knowledge of the damage. Under the laws of Quebec, the running of the prescription period is not interrupted unless the service of the action on the party against whom it is directed is made within sixty days of the filing of the action in the office of the Court.
In this respect, appellants acknowledge that the action was filed on January 22, 1992, that is within approximately two years from plaintiff’s knowledge of the damages, but claim that because it was not served on them until June 17, 1992, the prescription period was not interrupted. Appellants therefore conclude that the action as against them is, on the face of it, statute barred and must be struck out at this stage under Rule 419, as it is clear and obvious that it cannot succeed.
RESPONDENT’S POSITION
The respondent acknowledges that the statement of claim was not served within six months of the action being filed, and that her action as against the appellants must fail if the two-year prescription period is applicable. The respondent claims, however, that the cause of action did not arise in the province of Quebec where the alleged negligent acts took place, but in international waters where the damages were suffered. That being the case, respondent relies on subsection 39(2) of the Federal Court Act which provides for a six-year limitation period for causes of action arising otherwise than in a province.
The respondent further argues that even if the cause of action arose in the province of Quebec, the application of subsection 39(1) of the Federal Court Act is subject to special limitation periods provided by any other Act, and that article 2215 of the Civil Code of Lower Canada, which provides for a thirty-year prescription applies in the instant case.
In the further alternative, the respondent argued that the matter in issue is governed by admiralty law, and that the limitation period should be ascertained accordingly. When I asked counsel what that prescription period might be, no answer was given. I have therefore not given this argument any further consideration.
RELEVANT LEGISLATION
Prior to recent amendments which came into force on February 1, 1992 [S.C. 1990, c. 8], section 39 of the Federal Court Act dealt with suits by and against the Crown. It provided:
39. (1) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions in force in any province between subject and subject apply to any proceedings in the Court in respect of any cause of action arising in that province.
(2) A proceeding in the Court in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose.
(3) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions referred to in subsections (1) and (2) apply to any proceedings brought by or against the Crown. [Underlining added.]
The relevant articles of the Civil Code of Lower Canada provide as follows:
Art. 2261. The following actions are prescribed by two years;
…
2. For damages resulting from offences or quasi-offences, whenever other provisions do not apply;
Art. 2224. The filing of a judicial demand in the office of the court creates a civil interruption provided that demand is served within sixty days of the filing in accordance with the Code of Civil Procedure upon the person whose prescription it is sought to hinder.
Art. 2215. All arrears of rents, dues, interest and revenues and all debts and rights, belonging to the crown, not declared to be imprescriptible by the preceding articles, are prescribed by thirty years.
Subsequent purchasers of immoveable property charged therewith cannot be liberated by any shorter period.
ANALYSIS
The effect of the legislation may be summarized as follows:
1. If a cause of action arises in a given province, then the laws relating to prescription and limitation periods in that province as between subject and subject apply, unless otherwise provided by any other Act.
2. If a cause of action arises otherwise than in a province, the limitation period is six years.
3. In Quebec, where the action is in damages arising from offences (i.e. torts), the prescription period as between subject and subject is two years and can be interrupted by the filing of a judicial demand within that period conditionally upon its service being made within sixty days from the date of filing.
4. In Quebec, rights accruing in favour of the Crown and which are not declared imprescriptible by the Civil Code of Lower Canada are prescribed by thirty years.
The respondent’s first argument is that because the cause of action arose otherwise than in a province, the six-year limitation period applies. In particular, counsel argues that the cause of action arose where the damages occurred, that is, in international waters. As Jackett C.J. (as he then was) stated in Page v. Churchill Falls (Labrador) Corp. Ltd., [1972] F.C. 1141 (C.A.), at page 1146, it appears that from time to time, different meanings have been given to the term “cause of action”. These differences seem to depend on whether the issue arises with respect to jurisdiction, the commencement of a period of limitation or again under section 39 (then section 38 [R.S.C. 1970 (2nd Supp.), c. 10]) of the Federal Court Act. As in that case it was not necessary for the Court of Appeal to decide this issue, the matter was expressly left to be decided at the appropriate time.
In my view, the term “cause of action”, or “fait générateur” as it appears in the French version of section 39, refers to the breach of duty, whether imposed by law or by contract, which provides the victim with a right of action. In the present case, the alleged breach of duty consisted in the improper inspection of the vessel, the improper certification of the vessel, the granting of permission to voyage in circumstances where the ship was not in a seaworthy state. All these acts or breaches are alleged to have taken place in Montréal.
The fact that the vessel sank at high seas and that, as a result, the damages were suffered outside the province of Quebec, in international waters, does not alter the location of the cause of action. It is true that, as argued by the respondent, there would have been no cause of action if the ship had not sank and damages had not been suffered. But once damages have been suffered, a cause of action does arise, and it is where the breach of duty took place that one must look to identify the jurisdiction where the cause of action arose, irrespective of where the damages were suffered.
Counsel for the respondent brought to my attention certain cases involving product liability where the determination of the jurisdiction where the cause of action took place appears to have been made by reference to the jurisdiction in which the damages were suffered. Cases involving product liability often involve a separation in time and place between the negligent act and the resulting damages, and courts have shown a tendency to search for means to allow the victim to sue in the jurisdiction where the damages have been suffered. Usually, however, this is done by concluding to the existence of a wrongful act in the jurisdiction where the damages were suffered, and not by concluding that the cause of action arose where the damages were suffered irrespective of where the wrongful act took place.
One case to which I was referred is the decision of the Privy Council in Distillers Co (Bio-Chemicals) Ltd v Thompson (by her next friend Arthur Leslie Thompson), [1971] 1 All E.R. 694. In that case, the plaintiff sued the defendant by her next friend for damages suffered in New South Wales as a result of her mother having taken thalidomide during her pregnancy. The courts of New South Wales had jurisdiction only to the extent that the “cause of action” had arisen “in the jurisdiction”. The product had been manufactured in England.
The Privy Council upholding the Supreme Court of New South Wales concluded that the “cause of action” had arisen in New South Wales, not because the damages were suffered there, but because the defendant had failed to communicate to plaintiff in New South Wales the potentially dangerous effect of its product.
This case illustrates how, in cases involving product liability, the jurisdiction where the damages were suffered is often made to coincide with the jurisdiction where the cause of action arose. It is not because a cause of action arises where the damages are suffered, but because the courts identify a breach of duty and hence a cause of action (usually in the form of an omission to communicate) in the jurisdiction where the damages are suffered.
Another case to which I was referred is the decision of the Supreme Court of Canada in Moran v. Pyle National (Canada) Ltd., [1975] 1 S.C.R. 393. In that case, the Court had to decide whether the courts of Saskatchewan had jurisdiction to hear an action in tort resulting from the manufacture of a defective product in Ontario. The sole basis for asserting jurisdiction in Saskatchewan appeared to be the fact that the damage had been suffered in that province. The Supreme Court took the occasion to review the issue in depth, and canvassed the leading Canadian, U.S. and Commonwealth decisions on the subject.
Dickson J. (as he then was), speaking for a unanimous Court, presented the problem as follows, at page 397:
The task of determining the situs of a tort is of some difficulty. A number of tests which one might apply are to be found in the cases and in the learned journals but none has been free of criticism and I think it fair to say that no clear principle has emerged. The difficulty has not been diminished by the failure in many of the cases to distinguish between jurisdiction and choice-of-law. The rules for determining situs for jurisdictional purposes need not be those which are used to identify the legal system under which the rights and liabilities of the parties fall to be determined.
After reviewing the case law, Dickson J. stated, at page 405, “In a Donoghue v. Stevenson case, can carelessness in manufacture be separated from resulting injury?”, and, at pages 408-409, he concluded:
Generally speaking, in determining where a tort has been committed, it is unnecessary, and unwise, to have resort to any arbitrary set of rules. The place of acting and the place of harm theories are too arbitrary and inflexible to be recognized in contemporary jurisprudence. In the Distillers’ case and again in the Cordova case a real and substantial connection test was hinted at. Cheshire, 8th ed., 1970, p. 281, has suggested a test very similar to this; the author says that it would not be inappropriate to regard a tort as having occurred in any country substantially affected by the defendant’s activities or its consequences and the law of which is likely to have been in the reasonable contemplation of the parties. Applying this test to a case of careless manufacture, the following rule can be formulated: where a foreign defendant carelessly manufactures a product in a foreign jurisdiction which enters into the normal channels of trade and he knows or ought to know both that as a result of his carelessness a consumer may well be injured and it is reasonably foreseeable that the product would be used or consumed where the plaintiff used or consumed it, then the forum in which the plaintiff suffered damage is entitled to exercise judicial jurisdiction over that foreign defendant. This rule recognizes the important interest a state has in injuries suffered by persons within its territory. It recognizes that the purpose of negligence as a tort is to protect against carelessly inflicted injury and thus that the predominating element is damage suffered. By tendering his products in the market place directly or through normal distributive channels, a manufacturer ought to assume the burden of defending those products wherever they cause harm as long as the forum into which the manufacturer is taken is one that he reasonably ought to have had in his contemplation when he so tendered his goods. This is particularly true of dangerously defective goods placed in the interprovincial flow of commerce.
As this decision illustrates, the courts have developed and imposed on manufacturers a special duty of care which reaches into any jurisdiction where distribution of the products can reasonably be contemplated to take place at the time the products are put on the market, and it is the breach of that duty which generally allows the courts to assert jurisdiction where the damage occurred.
In the case at hand, quite aside from the fact that product liability is not involved, I do not believe that it can be said that the breach of duty alleged to have taken place in the province of Quebec somehow transported itself to international waters where the damages were suffered. The duty of the appellants was to properly prepare the ship to sail from its point of departure, in Montréal, and it is the breach of that duty which is alleged by the statement of claim. No duty of a lingering nature is alleged by the statement of claim and there is no basis for the proposition that the cause of action arose in international waters on the sole ground that that is where the damages were suffered.
I therefore conclude that, in the present matter, the cause of action arose in Montréal, where the negligent acts are alleged to have taken place, and that, accordingly, the laws relating to prescription in the province of Quebec are applicable.
Respondent’s alternative argument is that the application of the two-year limitation period in the province of Quebec for suits between subjects is overridden by the thirty-year prescription period provided for in article 2215 of the Civil Code of Lower Canada. Pratte J. (as he then was) considered this issue without deciding it in Queen (The) v. City of Montreal, [1972] F.C. 382 (T.D.). He said at page 386:
Section 38 of the Federal Court Act, which is new law, enacts that rules relating to prescription in force “between subject and subject” in any province apply to any proceedings instituted by or against the Crown. By its very terms this new provision applies only “except as expressly provided by any other Act”. It may therefore be doubted that it applies in Quebec, since the Civil Code (which, it must be remembered, is a statute antecedent to the British North America Act) contains a provision by which the Crown’s debts which are not declared imprescriptible are prescribed by thirty years. However, even if s. 38 had to be interpreted, in so far as the Crown in right of Canada is concerned, as having amended the rule established by Art. 2215, it would not apply here, for the Federal Court Act came into force on June 1, 1971, after plaintiff had brought her action against defendant.
At first glance, I would have been inclined to think that the thirty-year prescription period provided by article 2215 of the Civil Code of Lower Canada is limited in its application to rights relating to immoveable property. However, the Quebec Court of Appeal in Procureur général du Canada v. Dallaire et Dallaire, [1949] B.R. 365, held that the prescription period provided in article 2215 operated in favour of the Crown in Right of Canada in an action in tort which was otherwise statute barred.
I have little difficulty in concluding, as appellants argued, that the exception expressed in section 39 of the Federal Court Act is limited to Acts of Parliament and that, accordingly, article 2215, to the extent that it is a provincial enactment, cannot apply. If Parliament, in enacting section 39, had intended to maintain the application of special provincial limitation periods in favour of the Crown, such as provided by article 2215, it would have simply adopted the laws relating to limitation of actions in force in the provinces. But section 39 adopts such laws as in force “between subject and subject” which shows a clear intent to have Crown suits governed by the same limitation periods as those applicable to private litigants, and to exclude the application of special periods operating in favour of the Crown as they existed under provincial laws.
The exception expressed in section 39 is, in my view, aimed at preserving the application of those provisions enacted by federal statute which expressly provide for specific limitation periods for Crown suits. This conclusion is supported by the wording of section 31 of the Exchequer Court Act [R.S.C. 1952, c. 98], the predecessor in time to section 39 of the Federal Court Act, which adopted the limitation periods as between subject and subject “subject to any Act of the Parliament of Canada”. In my view, the fact that the reference to Acts of Parliament was omitted in section 39 of the Federal Court Act was not intended to create a departure from the prior law, and the exception as to “any other Act” in the present law continues as a reference to Acts of Parliament only. There is nothing which would suggest that in 1972, when Parliament adopted what was then section 38 of the Federal Court Act, the legislator intended to revive the application of special limitation periods in favour of the Crown.
However, as Pratte J. observed in the above-noted passage, article 2215 of the Civil Code of Lower Canada is a statute antecedent to the Constitution Act 1867 [30 & 31 Vict., c. 3 (U.K.) (as am. by Canada Act 1982, 1982, c. 11 (U.K.), Schedule to the Constitution Act, 1982, Item I) [R.S.C., 1985, Appendix II, No. 5]] and this may have been the source of the doubt that he expressed about the application of the rules relating to prescription “between subject and subject” to Crown suits in the province of Quebec. Indeed, because article 2215 preceded the Constitution Act, 1867, it was continued by section 129 of that enactment and became part of the federal body of law in so far as the rights and obligations of the Crown in right of Canada are concerned. Accordingly, the application of article 2215 of the Civil Code of Lower Canada, for purposes of section 39 of the Federal Court Act, cannot be disregarded on the sole ground that it is a provincial law.
In this respect, while article 2215 of the Civil Code of Lower Canada was continued by the Constitution Act, 1867 and, as such, is part of the federal body of law, it remains that it is not an Act of Parliament. Indeed, as it is not an Act of Parliament, it is not, at least in a jurisdictional sense, a “law of Canada”. As Estey J. stated for the majority in Northern Telecom Canada Ltd. et al. v. Communication Workers of Canada et al., [1983] 1 S.C.R. 733, at page 745:
One final note should be added to this jurisdictional discussion. The Constitution Act, 1867, as amended, is not of course a “law of Canada” in the sense of the foregoing cases because it was not enacted by the Parliament of Canada.
Article 2215 not being an Act of Parliament, its application was expressly excluded by the legislator at the time section 31 of the Exchequer Court Act was enacted, and subsection 39(1) of the Federal Court Act continues to adopt the limitation period between subject and subject in the relevant province except only as otherwise provided by an Act of Parliament. Accordingly, the limitation period between subject and subject in the province of Quebec is applicable. That period is two years and as it was not interrupted, the action as against the appellants is time barred and cannot succeed.
For these reasons, the action as against the appellants cannot succeed and an order will be issued striking out the appellants as defendants in the statement of claim, with costs against the plaintiff.