T-5704-79
The Queen (Plaintiff)
v.
Chimo Shipping Limited and Crosbie Enterprises
Ltd. (Defendants)
Trial Division, Walsh J.—Montreal, March 3;
Ottawa, March 13, 1980.
Practice — Parties — Motion to strike pleadings — Motion
by second defendant to strike proceedings against it for failure
to disclose reasonable cause of action and as a duplication ql
proceedings — Undertaking by second defendant to submit tc
jurisdiction of Federal Court, to accept service of legal pro
ceedings against first defendant, to cause appearance to be
entered on behalf of first defendant and to pay certain amount
which might be adjudged against first defendant, deemed
surety for contingent liability — Undertaking does not make
second defendant jointly and severally liable — Motion
allowed — Motion by first defendant to stay proceedings
based on duplication of proceedings, dismissed — Quebec
Civil Code, art. 1929 et seq.
Tropwood A.G. v. Sivaco Wire & Nail Co. [1979] 2
S.C.R. 157, referred to. R. v. Thomas Fuller Construction
Co. (1958) Ltd. [1980] 1 S.C.R. 695, applied.
MOTIONS.
COUNSEL:
B. Bierbrier for plaintiff.
T. Bishop for defendant Chimo Shipping
Limited.
M. de Man for defendant Crosbie Enterprises
Ltd.
SOLICITORS:
Deputy Attorney General of Canada for
plaintiff.
Brisset, Bishop, Davidson & Davis, Montreal,
for defendant Chimo Shipping Limited.
Stikeman, Elliott, Tamaki, Mercier & Robb,
Montreal, for defendant Crosbie Enterprises
Ltd.
The following are the reasons for judgment
rendered in English by
WALSH J.: Two motions came before the Court
for hearing in this matter and were argued simul
taneously, since the decision in one is to some
extent dependent on the decision in the other.
Defendant Chimo Shipping Limited moves for a
stay of proceedings depending on the outcome of
the action instituted by the same plaintiff against
the same defendants in the Superior Court of the
District of Montreal, commenced on the same day
and containing identical allegations. The granting
of such a stay is of course within the discretion of
the Court, but defendant's point is well taken that
it should not be placed in double jeopardy contest
ing the proceedings in two different jurisdictions.
Defendant Crosbie Enterprises Ltd. applies for
an order to strike out the proceedings and style of
cause in so far as they refer or allude to defendant
Crosbie Enterprises Ltd. without leave to amend
on the grounds that the action discloses no reason
able cause of action against it, is a duplication of
the action brought on the same date in the Supe
rior Court of the Province of Quebec, is frivolous
and vexatious and an abuse of the process of the
Court. Said defendant also applies for leave to file
a conditional appearance to establish the lack of
jurisdiction of the Court.
A brief summary of the facts is necessary.
Defendant Chimo Shipping Limited entered into a
contract with plaintiff represented by the Minister
of Transport to carry and warehouse certain cargo
from the Port of Montreal and elsewhere to vari
ous ports in the Canadian Arctic and by other
contracts undertook to transport cargo from ports
in the Arctic to Montreal. Some of the cargo was
not delivered and some of it was delivered in
damaged condition. Because of the time of the
year and urgent requirement for some of the cargo
to be delivered to the Arctic, plaintiff secured the
release of the cargo and airlifted it to its destina
tion. Before doing this agreements were entered
into with said defendant Chimo Shipping Limited,
and defendant Crosbie Enterprises Ltd. by virtue
of which plaintiff under protest paid Chimo Ship
ping Limited its freight and other charges. The
action now claims freight charges with respect to
undelivered cargo in the amount of $378,353, cost
of handling, trucking, storage and airlifting of
cargo not delivered to destination in the amount of
$1,643,556 and cargo lost or damaged $108,-
683.44 or a total of $2,130,592.44.
The difficulty in the present proceedings arises
with respect to defendant Crosbie Enterprises Ltd.
The agreement between plaintiff and defendant
Chimo Shipping Limited for the release of the
latter's lien on the cargo and partial payment of
sums due for the carriage thereof, undertook in
addition to making certain payments specified
therein to pay a balance of $711,359.55 plus 5%
hold-back to the contractor, (i.e. Chimo Shipping
Limited) in exchange for a letter of undertaking of
Crosbie Enterprises Ltd. or other solvent surety
generally in the form of and not inconsistent with
the draft attached thereto as Schedule 4 to form
part thereof, in an amount not to exceed $750,000
in order to secure any alleged claim the Minister
might have against the contractor for damages
allegedly resulting from alleged breaches by the
contractor of its obligations to the Minister under
the aforesaid contracts. This agreement was signed
on November 29, 1978 and Crosbie Enterprises
Ltd. was not a party to it. However annexed to it
was the undertaking by Crosbie Enterprises Ltd.
addressed to plaintiff entered into on November
30, 1978 which sets out that in consideration of
immediate payment of the said sum to Chimo it
undertakes the following. It is the wording of the
undertaking which causes the problem. It first of
all agrees to submit to the jurisdiction of the
Federal Court of Canada. It appoints attorneys "to
accept service of any legal proceedings which you
may institute against Chimo for recovery of such
alleged damages". It undertakes to cause an
appearance to be entered in such proceedings "on
behalf of Chimo", then undertakes "On demand to
pay any sum not exceeding Canadian 750,000 dlrs
(inclusive of interest and costs) which may be
adjudged to you by final judgment against Chimo
arising from such proceedings or agreed to be due
to you under any compromise of your alleged
claim which may be properly made on Chimo's
behalf'. It goes on to say that if no action is filed
"in the said Court and duly served and forwarded
to us for acceptance of service as herein provided
within one year from the date hereof the present
letter of undertaking shall automatically lapse".
Plaintiff contends that this undertaking made
defendant Crosbie Enterprises Ltd. jointly and
severally liable to the extent of the said $750,000
with Chimo Shipping Limited which is why the
said defendant is made a co-defendant in the
proceedings. Plaintiff further contends that that is
why proceedings were also instituted in the Supe
rior Court in the District of Montreal in view of
there being some possible doubt as to the jurisdic
tion of this Court, despite the recent decision of
the Supreme Court in Tropwood A.G. v. Sivaco
Wire & Nail Company.' Plaintiff is unwilling to
withdraw the proceedings in the Superior Court
therefore, because counsel feels that jurisdiction of
this Court to hear the proceedings, in particular
with respect to defendant Crosbie Enterprises Ltd.,
might be successfully contested. Moreover counsel
agree that there is no rule in the Quebec Code of
Civil Procedure to provide for stay of proceedings
there. Plaintiff's counsel is prepared to give an
undertaking however not to take any further steps
in connection with them in the event that the stay
in this Court is refused. Defendant Chimo Ship
ping Limited states that it has no intention of
contesting the jurisdiction of this Court but never
theless has requested the stay of proceedings here
unless plaintiff is prepared to withdraw the pro
ceedings in the Superior Court of Quebec.
Defendant Crosbie Enterprises Ltd., since it is
asking that the proceedings against it be struck,
alleging inter alia the duplication of proceedings
with those instituted in the Superior Court of
Quebec, can be said to be supporting the motion
for the stay. More serious is said defendant's argu
ment that the agreement it entered into although
annexed to the agreement to which it was not a
party between Chimo Shipping Limited and Her
Majesty the Queen is merely a surety agreement
and does not make it a joint and several debtor and
can in fact only be invoked against it after final
judgment has been obtained against Chimo. It
contends moreover that there are no allegations or
conclusions against it in plaintiff's action. Finally
it seeks by means of a conditional appearance to
contest the jurisdiction of the Court.
[1979] 2 S.C.R. 157.
Paragraph 15 in the statement of claim states:
Under the terms of said Agreement, no. W7604 dated
November 29, 1978 and the letter of undertaking dated
November 30, 1978 supplied in connection therewith by the
Defendant, Crosbie Enterprises Ltd., the latter undertook, to
submit to the jurisdiction of the Federal Court of Canada and
to cause an appearance to be entered on behalf of the Defend
ant, Chimo Shipping Ltd., with respect to such proceedings as
Plaintiff may institute against the latter for damages arising
from Defendant's, Chimo Shipping Ltd., breach of its obliga
tions under the aforementioned contracts 106910, 106911 and
106912 and to pay such damages as may be adjudged to
Plaintiff therein by such Court, to the extent of $750,000.00.
The next paragraph refers to the fact that in
view of defendant Crosbie Enterprises Ltd.'s letter
of undertaking plaintiff claims jointly and several
ly from the defendants. I do not believe that this is
a proper interpretation of the letter of undertaking
or that on a proper interpretation defendant Cros-
bie Enterprises Ltd. could be held to be jointly and
severally liable with Chimo Shipping Limited.
Although the relationship between the two compa
nies is not disclosed they are separate corporate
enterprises. If Crosbie Enterprises Ltd. undertook
as it did to accept service of legal proceedings
against Chimo Shipping Limited and to cause an
appearance to be entered on its behalf, it was
acting as an agent of Chimo; there is nothing to
indicate an undertaking that it would consent to be
named as a defendant itself. Its undertaking to pay
up to $750,000 any amount which might be
adjudged by final judgment against Chimo arising
out of such proceedings does not justify the institu
tion of proceedings against it until such final judg
ment is obtained. The contract is one of surety
within the meaning of articles 1929 and following
of the Quebec Civil Code and did not in my view
make Crosbie Enterprises Ltd. jointly and several
ly liable to plaintiff with Chimo Shipping Limited
at the time the proceedings were instituted. What
it undertakes to do is to go surety for a contingent
liability, the validity and amount of which can only
be ascertained by final judgment against Chimo.
I therefore conclude that Crosbie Enterprises
Ltd. should not have been named as defendant in
the proceedings whether here or in the Superior
Court of Quebec and that its motion to strike out
the proceedings with respect to it should be main
tained and the references in the statement of claim
referring to its liability should be struck as being
premature and the style of cause amended accord
ingly. It is unnecessary therefore to go into the
question of the jurisdiction of this Court over
proceedings on the guarantee against said defend
ant Crosbie Enterprises Ltd. about which some
doubt may well have been raised by the case of
The Queen v. Thomas Fuller Construction Co.
(1958) Limited [1980] 1 S.C.R. 695, a judgment
rendered December 21, 1979. While the facts were
substantially different in that although the princi
pal action brought by the Foundation Company of
Canada Limited against Her Majesty the Queen
under the provisions of the Crown Liability Act,
R.S.C. 1970, c. C-38, was properly within the
jurisdiction of this Court, when the Crown
attempted to bring third party proceedings against
Thomas Fuller Construction Co. (1958) Limited
which would have been founded under the Ontario
The Negligence Act, R.S.O. 1970, c. 296, it was
found that this Court had no jurisdiction over it. In
the majority judgment of the Supreme Court,
Pigeon J. at page 713 had this to state with respect
to ancillary power:
Consequently, I fail to see any basis for the application of the
ancillary power doctrine which is limited to what is truly
necessary for the effective exercise of Parliament's legislative
authority. If it is considered desirable to be able to take
advantage of provincial legislation on contributory negligence
which is not meant to be exercised outside the courts of the
province, the proper solution is to make it possible to have those
rights enforced in the manner contemplated by the general rule
of the Constitution of Canada, that is before the superior court
of the province.
Since there is no doubt of the jurisdiction of this
Court over Chimo Shipping Limited, and in view
of my finding on the other motion, there appears
to be no justification for staying the proceedings in
this Court. I do not accept said defendant's argu
ment that since plaintiff commenced the proceed
ings in two courts, failing to make the option for
one or the other this gives defendant the option of
deciding in which court the proceedings should be
continued. The granting of a stay is discretionary
and as a long line of jurisprudence has established
it is only used sparingly and when there is a real
advantage in authorizing it. The motion of Chimo
Shipping Limited for such a stay will therefore be
dismissed with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.