2017 QCCA 1471, 2017 QCCA 1471

Wärtsilä Canada inc. c. Transport Desgagnés inc. 2017 QCCA 1471 COUR D’APPEL CANADA PROVINCE DE QUÉBEC GREFFE DE MONTRÉAL N° : 500-09-025791-153 (500-17-060283-101) DATE : 29 septembre 2017 CORAM : LES HONORABLES PAUL VÉZINA, J.C.A. ROBERT M. MAINVILLE, J.C.A. PATRICK HEALY, J.C.A. WÄRTSILÄ CANADA INC. WÄRTSILÄ NEDERLAND B.V. APPELANTES – défenderesses / demanderesses reconventionnelles c. TRANSPORT DESGAGNÉS INC. DESGAGNÉS TRANSARCTIK INC. NAVIGATION DESGAGNÉS INC.

INTIMÉES – demanderesses / défenderesses reconventionnelles et LLOYDS UNDERWRITERS AND INSTITUTE OF LLOYDS UNDERWRITERS (ILU) COMPANIES SUBSCRIBING TO POLICY NUMBER B0856 09H0016 AND AIM INSURANCE (BARBADOS) SCC INTIMÉES – demanderesses en reprise d’instance ARRÊT [ 1 ] Les appelantes se pourvoient contre un jugement rendu le 23 novembre 2015 par la Cour supérieure du district de Montréal (l’honorable Marie-Anne Paquette) qui leur ordonne de payer aux intimées une indemnité de 5 661 830,33 $ avec intérêt et l’indemnité additionnelle depuis le 27 octobre 2009. [ 2 ] Pour les motifs du juge Mainville auxquels souscrit le juge Healy dans ses motifs, la COUR : [ 3 ] ACCUEILLE en

partie l’appel; [ 4 ] INFIRME le jugement attaqué; [ 5 ] ACCUEILLE en

partie l’action des intimées; [ 6 ] REJETTE la demande reconventionnelle des appelantes; [ 7 ] ORDONNE aux appelantes de payer aux intimées la somme de 78 900 $ avec intérêt et l’indemnité additionnelle depuis le 27 octobre 2009, avec frais de justice en appel et en première instance, incluant les frais d’expertises; [ 8 ] Pour d’autres motifs, le juge Vézina aurait rejeté l’appel, avec frais. PAUL VÉZINA, J.C.A. ROBERT M. MAINVILLE, J.C.A. PATRICK HEALY, J.C.A.

M e George J. Pollack Davies Ward Phillips & Vineberg Pour les appelantes M e Danièle Dion M e Victor De Marco Brisset Bishop Pour les intimées Date d’audience : 10 mai 2017 MOTIFS DU JUGE VÉZINA [ 9 ] Les appelantes du groupe Wärtsilä vendent aux Intimées, le groupe TDi, pour l’un de ses navires, une assise de moteur et un vilebrequin remis à neuf ( a new bedplade and a reconditioned crankshaft ).

Le prix de vente est de plus d’un million de dollars. [ 10 ] L’assemblage des pièces du vilebrequin se fait à l’usine de Wärtsilä. [ 11 ] Quelque dix mois plus tard, le moteur subit un bris majeur et le navire est immobilisé durant plusieurs mois.

Le préjudice des Intimées – le montant en est admis – est de 5 661 830 $. [ 12 ] Il est aussi admis que la cause du bris est le serrage insuffisant d’une bielle d’un des pistons fixée au vilebrequin. [ 13 ] Selon TDi, cette insuffisance est le fait des employés de l’usine de Wärtsilä lors de l’assemblage alors que selon celle-ci, elle résulte plutôt d’une intervention postérieure des employés de TDi.

A- Question de fait [ 14 ] La Juge de première instance tranche sans réserve que le problème origine de la fixation défectueuse de la bielle lors de l’assemblage à l’usine de Wärtsilä. [ 15 ] Voici quelques faits tirés de la preuve qui la mènent à cette conclusion :

a) Le bris est causé par le manque de serrage d’un des deux boulons de la bielle sur l’unité 5L.

b) Les employés de TDi n’ont pas desserré l’écrou sur le boulon qui a causé le bris depuis le moment de l’achat du moteur.

c) Un boulon, même suffisamment serré, peut se desserrer en l’absence d’intervention.

d) TDi a présenté une preuve d’expert convaincante démontrant que le vice était présent au moment de la vente.

e) L’assemblage n’était inspecté ni assujetti à aucun contrôle de qualité par Wärtsilä.

f) La procédure d’assemblage de Wärtsilä faisait défaut, et celle-ci a manqué de rigueur dans la planification, la supervision et la conduite des travaux d’assemblage. [ 16 ] Quant aux faits, Wärtsilä ne fait, en appel, que reprendre sa théorie de cause sans pointer une erreur dans celle retenue par la Juge. Elle réitère que c’est le seul incident de cette nature (un serrage insuffisant) qui soit survenu sur les centaines de bielles fixées sur des moteurs semblables. Elle réaffirme que le travail à l’usine est bien fait et que la procédure appropriée est suivie.

Elle nous renvoie à ses experts selon qui il est « impossible », si la bielle était mal serrée au départ, que le bris du moteur ne survienne qu’après 13 600 heures de marche. [ 17 ] Sur ce dernier point, la Juge a plutôt retenu l’opinion contraire de l’experte des Intimées. Elle écrit à son sujet : [83] Mrs. Banuta’s experience is vast, undisputable, highly reliable and relevant to the expert issues in this case. Wärtsilä also participated in the elaboration of the testing protocol which she followed for the metallurgical investigation conducted after the failure of the engine on the Camilla Desgagnés.

Wärtsilä experts fully relied on the result of her investigations.

[ 18 ] Certes, les experts divergeaient d’opinion, mais les constats de fait de la Juge sont étayés sur la preuve et Wärtsilä n’y a démontré aucune « erreur manifeste et déterminante », qui seule – la règle est bien établie – justifie une intervention de la Cour. [ 19 ] Ce moyen de fait est mal fondé. B- Questions de droit [ 20 ] Quant au droit, Wärtsilä soumet le syllogisme suivant. La vente de pièces d’un moteur de navire relève du droit maritime et non du droit civil.

Or, selon le droit maritime, la clause du contrat qui limite la période de garantie est valable et la dégage de toute responsabilité puisque le bris est survenu après cette période.

Wärtsilä écrit : 78. [Wärtsilä] therefore submit that inasmuch as the Incident occurred after the Warranty had expired, and as the parties had agreed in the Contract that the implied warranty of fitness would not apply, Appellants are entitled to disclaim liability for Respondents’ claim. [ 21 ] Avant de discuter de droit maritime ou droit civil , il est opportun de faire certaines distinctions relatives à la responsabilité du vendeur . 1- Distinctions relatives à la responsabilité du vendeur

a) Distinction entre une clause de limitation de la période de garantie et une d’exclusion de toute garantie [ 22 ] Il importe de distinguer une clause d’un contrat de vente qui limite la période de garantie de celle par laquelle le fabricant [1] (ou le vendeur) d’un bien se dégage de toute responsabilité relative à sa qualité. [ 23 ] Selon la dernière clause, rien n’est garanti, ni que le bien est exempt d’un vice caché ni, par exemple, qu’un moteur fonctionnera bien après la vente.

Le Code civil le permet [2] et consacre une formule « lorsque l’acheteur l’achète à ses risques et périls » ( when a buyer buys property at his own risk ); d’autres expressions au même effet sont aussi couramment utilisées : « vendu tel que vu » ou même simplement « sans garantie ».

Dans le Black’s Law Dictionnary , on trouve « sale as is » et « sale with all defects ». [ 24 ] Par contre, selon la première clause, celle de limitation de la période de garantie, le fabricant garantit l’absence de vices cachés lors de la vente et, comme ici, le bon fonctionnement du vilebrequin, même si ce n’est que pour un temps limité. [ 25 ] On voit aisément la différence. Dans le cas d’une vente « sans garantie », si le moteur cesse de fonctionner quelques jours après la vente, l’acheteur ne peut poursuivre son vendeur.

Par contre, si la vente prévoit une période de garantie, même limitée à quelques mois, l’acheteur a un recours contre le vendeur, il pourra faire annuler la vente et être indemnisé.

b) Distinction de l’obligation de qualité du vendeur et celle de toute personne de réparer le préjudice causé [ 26 ] Il importe encore de distinguer la responsabilité du vendeur en vertu de la garantie contre les vices cachés, qui découle de l’obligation de qualité, de celle de toute personne en vertu du droit commun, qui oblige à réparer le préjudice causé par sa faute. [ 27 ] L’importance de la distinction provient du fait que, dans presque tous les cas de vices cachés, l’acheteur ignore la cause du problème et il n’est donc pas en mesure de prouver s’il résulte d’une faute du vendeur ou du fabricant.

La garantie contre les vices cachés crée alors une présomption de faute du vendeur en faveur de l’acheteur, laquelle fonde son action en justice. [ 28 ] On en a une illustration dans la fameuse affaire Kravitz [3] où l’acheteur d’une automobile s’est retrouvé avec un « citron », selon l’expression populaire.

Malgré plusieurs tentatives, son concessionnaire n’est pas parvenu à trouver la source du problème et à remettre l’auto en bon état de fonctionnement. À plus forte raison, l’acheteur était-il incapable de prouver la cause du problème et une faute du fabricant.

Grâce à la présomption résultant de l’obligation de qualité, la vente a été annulée et l’acheteur indemnisé. [ 29 ] Lorsque le vendeur limite – dans la mesure où la loi le lui permet – la période de garantie, cette présomption de faute de sa part disparaît à l’expiration de la période stipulée et l’acheteur ne peut plus l’invoquer pour fonder une action contre son vendeur. [ 30 ] En somme, si pour des raisons inexpliquées le moteur flanche avant l’expiration de la période de garantie, le fabricant devra en répondre, mais il n’en sera pas de même si la période est expirée.

Par contre, si la raison en est expliquée et démontre sa faute, alors le fabricant sera tenu responsable peu importe la période de garantie, la seule limite de l’action devenant alors celle du délai de prescription. [ 31 ] Ici, on se trouve dans la seconde situation où la source du problème, la raison du mauvais fonctionnement du moteur, est connue, c’est le serrage insuffisant de la bielle d’un piston à l’usine de Wärtsilä. [ 32 ] Certes, TDi engage son action en invoquant la garantie contre les vices cachés, ce qui l’oblige à prouver que le vice existait au moment de la vente.

Mais, comme celle-ci coïncide avec l’assemblage du vilebrequin, la preuve de l’insuffisance de serrage au moment de la vente démontre ipso facto une faute du fabricant/vendeur, ce qui nous amène à la responsabilité générale de droit commun. [ 33 ] C’est ainsi que la Juge conclut à la fois que le bris du moteur révèle l’existence d’un vice caché et une faute causale de Wärtsilä : [98] This improper torque of the nut of the big stud on unit 5L was therefore present at the time of the sale.

[…] [104] Wärtsilä is thus liable for the defect in the crankshaft and bedplate assembly which it delivered to TDI in February 2007 and forall the related damages.

c) Quid de ces distinctions ici? [34] Ces distinctions établies, le syllogisme de Wärtsilä est en porte-à-faux.

Elle devait, pour échapper à sa faute, démontrer non passimplement que la période de garantie est expirée, mais bien que la vente a été conclue aux risques et périls de l’acheteur (at his ownrisk), ce qui est nettement plus exigeant. [35] À mon avis, il est incompatible de garantir la qualité du vilebrequin, ne fût-ce que pour six mois, et prétendre l’avoir vendu sansgarantie aucune. [36] Wärtsilä invoque la loi (UK) Sales of Goods Act de 1893, (56,57 Vict. c.71) mais le droit commun a évolué depuis lors.

Dansl’affaire Kravitz, par exemple, le fabricant est tenu responsable malgré l’absence de contrat entre lui et l’acheteur du véhicule, ce qui étaitimpensable auparavant. [37] L’arrêt National Bank of Canada c. Rogers[4] signale cette évolution : [43] Le droit maritime canadien comprend le droit appliqué par les tribunaux d’amirauté en Angleterre jusqu’en 1934, qui a évolué augré de la jurisprudence et les lois canadiennes (ITO-International Terminal Operators c. Miida Electronic Ltd, (SCC),[1986] 1 RCS 752. Le (UK) Sales of Goods Act faisait

partie de ce droit […] [38] L’argumentation de Wärtsilä porte entièrement sur l’obligation de qualité du bien vendu. Elle écrit : 62. [Wärtsilä] submit that the application of Canadian maritime law to the present dispute compels the application of the common lawrules. These rules include implied contractual terms that oblige vendors and manufacturers to supply goods that are fit for their intendedpurpose. […] […] 67.

Even if the provisions of the (UK) Sale of Goods Act had not been received into Canadian maritime law, the common law impliedwarranty of fitness for purpose predated and was the basis for that (and similar Canadian) legislation. […] 77. […] It is also clear that the provision [du contrat de vente] specifically ousts the application of the implied warranty of fitness. [39] Dans l’arrêt Chabot v. Ford Motor Co. of Canada Ltd. (1982)[5], la Cour suprême de l’Ontario analyse l’effet d’une claused’exclusion dans un contrat de vente de voiture.

La clause se lisait ainsi : [7] […] The new vehicle warranty is the only warranty applicable to such new vehicle or chassis and is expressly in lieu of all otherwarranties, expressed or implied, including any implied warranty of merchantability or fitness for a particular purpose… et la Cour considère que l’exigence d’être propre à l’usage n’est pas écartée : [Je souligne car j’y reviens plus loin.] [72] … The condition (of fitness for a particular purpose) implied by virtue of the

section can hardly be said to be a warranty given withthe goods sold.

It is made by law a part of the sale itself. […] [40] À mon avis, Wärtsilä a restreint sa garantie contre les vices cachés, mais elle n’a pas pour autant stipulé une clause « aux risqueset périls » de l’acheteur (at his own risk) qui seule pouvait la dégager d’une faute causale de sa part. [41] Notons que le Code civil interdit au fabricant et au vendeur professionnel de limiter sa responsabilité (C.c.Q., art. 1728 et 1733).Ce qui n’est plus contesté en appel par Wärtsilä dont les moyens sont tous conditionnels « if Canadian maritime laws applies… ». [42] En somme, la limitation de la période de garantie contre les vices cachés stipulée par Wärtsilä ne la dégage pas de sonobligation de réparer le préjudice causé à autrui par sa faute.

Ce qui est le cas ici, où il est prouvé que l’insuffisance de serrage d’unboulon, la cause du préjudice, n’est pas le fait des préposés de TDi sur son navire, mais bien de ceux de Wärtsilä à son usine. 2- Droit maritime ou droit civil [43] Traitant de cette question, la Juge rappelle la règle pour déterminer quel droit s’applique : [20] While the laws of the Parliament govern matters of “Navigation and Shipping” (Constitution Act, 1867, s. 91(10)), the laws ofthe relevant province apply to matters of “Property and Civil Rights” (Constitution Act, 1867, s. 92(13)). […] [24] The test uniformly applied to determine whether Canadian maritime law applies is the following: [Soulignement de la Juge] Is the activity at stake so integrally connected to maritime matters such that it is practically necessary for Parliament to have jurisdiction

over same, in order to properly exercise its legislative power over navigation and shipping ? puis, elle l’applique aux faits de l’affaire : [26] The current matter relates to the sale of a marine engine. [27] Issues relating to the obligations arising from such a contract of sale are not integrally connected to the pith and substance of the Parliament’s jurisdiction over navigation and shipping, as defined above. [28] More particularly, the contract for the sale of a marine engine is not integrally connected, for instance, to issues of safe carriage of goods over the sea, movement of goods on and off a ship (shipping), seaworthiness of a ship or good seamanship (navigation).

It is also not integrally connected to applicable admiralty law, rules, principles or practices or international maritime conventions. […] [31] Wärtsilä is sued as the seller of the crankshaft and bedplate.

It is not sued as a party performing a contract that pertains to the pith and substance of navigation and shipping activities. [32] As the contract for the sale of the engine and of the bedplate was formed in Montreal, the laws of Quebec therefore apply to the present dispute. [ 44 ] Je partage cet avis. [ 45 ] Ce point de vue est aussi celui du juge de Montigny de la Cour fédérale dans 9171-7702 Québec inc. c. Canada [6] .

Voici quelques extraits de ses motifs : - la question à trancher, droit maritime ou droit civil : [20] …un contrat de vente portant sur un navire est-il régi par le droit maritime ou par le droit civil de la province où le contrat a été formé? […] - la source de la compétence fédérale sur la navigation est la constitution canadienne et non une loi fédérale : [24] […] Il va de soi que ni l’un ni l’autre des deux ordres de gouvernement ne peut de son propre chef et unilatéralement s’arroger le pouvoir d’interpréter le texte constitutionnel en légiférant sur la question. - la compétence fédérale est très étendue : [30] [références omises] Sur la base de ces principes, la jurisprudence a reconnu au Parlement un vaste pouvoir de légiférer non seulement sur les eaux navigables … les ouvrages reliés à la navigation … et les ports … mais également sur la réglementation de la navigation…, sur la responsabilité découlant d’accidents maritimes…, sur la responsabilité en cas de perte ou dommages à des marchandises transportées par bateau…, sur l’assurance maritime…, sur la réparation, la construction et l’entretien des navires… ainsi que sur le pilotage et le remorquage des navires… - le caractère véritable d’un contrat de vente de navire : [31] Qu’en est-il des contrats de vente portant sur un navire?

S’agit-il là d’une matière qui relève, intrinsèquement ou par analogie avec les matières mentionnées précédemment, du droit maritime? Ou doit-on plutôt conclure que, de par son caractère véritable, un tel contrat relève plutôt du droit civil?

La Cour suprême ne s’est jamais directement prononcée sur la question […] - la distinction entre la propriété d’un navire et son enregistrement : [33] […] il n’y a pas de lien étroit entre le transfert de propriété d’un navire (par opposition à son enregistrement) et le droit maritime. […] - l’enseignement le plus récent de la Cour suprême qui réduit la portée des immunités juridictionnelles : [39] …il faut prendre acte d’une décision plus récente rendue par la Cour suprême dans l’affaire Banque canadienne de l'Ouest c Alberta , 2007 CSC 22 , [2007] 2 RCS 3 [ Banque canadienne de l'Ouest ], qui a considérablement réduit la portée des immunités interjuridictionnelles. […] - et favorise une interprétation souple et flexible du fédéralisme : [42] La Cour [suprême] s’est par la suite employée à décrire les effets pervers de cette doctrine [des immunités interjuridictionnelles] : elle favorise indûment la législation fédérale au détriment de la législation provinciale et n’est pas compatible avec l’interprétation souple et flexible du fédéralisme, […] - ne retenant la doctrine des immunités juridictionnelles que s’il y a entrave : [43] Il appert donc de cette décision que la doctrine des immunités interjuridictionnelles est d’une portée limitée, et qu’elle est soumise à deux limites importantes.

Tout d’abord, ce n’est que dans l’hypothèse où une loi adoptée par un niveau de gouvernement « entrave » (sans nécessairement stériliser ou paralyser) le contenu essentiel d’une compétence relevant de l’autre ordre de gouvernement que la doctrine s’appliquera. […] - puis il conclut à l’absence d’entrave :

[44] À la lumière de ces derniers développements, il m’apparaît encore moins crédible de prétendre que les lois provinciales encadrant la vente et l’exécution d’un contrat de vente ne puissent recevoir application lorsque l’objet de la vente est un navire.

De telles lois n’entravent certainement pas la compétence fédérale sur la navigation et les expéditions par eau, dont le noyau dur consiste plutôt à réglementer les divers aspects du commerce maritime et de la circulation sur les eaux notamment pour assurer une certaine uniformité ainsi que la conformité avec le droit applicable au niveau international.[…] - et à l’application du droit civil : [47] Pour tous les motifs qui précèdent, je suis donc d’avis que c’est le droit québécois des contrats qui doit être appliqué au présent litige, et que la réponse aux questions formulées par le Protonotaire doit trouver sa source dans le Code civil du Québec et plus particulièrement dans le

chapitre premier du

titre premier du livre cinquième de ce code portant sur la vente. [ 46 ] La Loi de 2001 sur la marine marchande du Canada [7] oblige le « propriétaire d’un bâtiment… de veiller à ce que celui-ci soit immatriculé », mais la Loi ne définit pas le droit de propriété ni n’édicte des dispositions pour l’établir.

Manifestement la Loi nous renvoie alors au droit commun concernant ce concept. [ 47 ] Et, si le propriétaire du navire décède, on ne cherchera pas dans le droit maritime pour savoir qui en hérite. [ 48 ] À mon avis, l’établissement de propriété et son transfert, par contrat de donation entre vifs ou à cause de mort, relève du droit commun, c’est-à-dire du droit civil au Québec, comme la Loi d’interprétation fédérale [8] le confirme : 8.1 Le droit civil et la common law font pareillement autorité et sont tous deux sources de droit en matière de propriété et de droits civils au Canada et, s’il est nécessaire de recourir à des règles, principes ou notions appartenant au domaine de la propriété et des droits civils en vue d’assurer l’application d’un texte dans une province, il faut, sauf règle de droit s’y opposant, avoir recours aux règles, principes et notions en vigueur dans cette province au moment de l’application du texte. 8.1 8.1 Both the common law and the civil law are equally authoritative and recognized sources of the law of property and civil rights in Canada and, unless otherwise provided by law, if in interpreting an enactment it is necessary to refer to a province’s rules, principles or concepts forming part of the law of property and civil rights, reference must be made to the rules, principles and concepts in force in the province at the time the enactment is being applied. [ 49 ] Ici, le droit de propriété du vilebrequin est passé de Wärtsilä à TDi par un contrat de vente conclu au Québec.

Il faut donc « avoir recours aux règles, principes et notions » du droit civil pour l’interprétation et l’application de ce contrat. [ 50 ] Le Code civil fait de l’obligation de garantie un élément essentiel de toute vente conclue par un fabricant ou un vendeur professionnel. Tout comme dans l’arrêt ci-dessus cité [9] de la Cour suprême de l’Ontario « the condition (of fitness for a particular purpose) … is made by law a part of the sale itself ». [ 51 ] Les moyens de droit de Wärtsilä ne sont pas fondés. Le Code civil régit la vente intervenue et Wärtsilä ne pouvait limiter sa garantie.

En outre, sa faute est prouvée et les clauses du contrat ne la dégagent pas de l’obligation de réparer le préjudice causé. [ 52 ] En somme, vendre un vilebrequin non fonctionnel, c’est vendre un amas de pièces qui y ressemble sans vraiment en être un. La commune intention des parties était pour l’acheteur de payer plus d’un million de dollars pour un vilebrequin fonctionnel et pour le vendeur de lui assembler et livrer un tel vilebrequin à ce prix. [ 53 ] Pour ces motifs, je suis d’avis de rejeter l’appel, avec les frais de justice. PAUL VÉZINA, J.C.A.

REASONS OF MAINVILLE J.A. [ 54 ] This appeal concerns a dispute between a Canadian merchant shipping corporation and its marine insurers against a Dutch manufacturer and supplier of marine propulsion systems with respect to damages incurred by a cargo vessel plying the Eastern and Arctic Canadian waters, the MV Camilla Desgagnés (the “Camilla”), following the failure of the ship’s main engine in 2009.

The trial judge found that the failure had resulted from improper torque applied to a stud during the replacement of the engine’s crankshaft and bedplate in early 2007, when the ship had been towed to Halifax for repairs. [ 55 ] I am of the view that Canadian maritime law governs the dispute. The contract for the main engine repairs performed in Halifax to the Camilla provides for a limited warranty and limitations of liability. The sophisticated commercial parties to that contract specifically set their minds to the issue of warranties and liabilities.

Through negotiations, they allocated between themselves the risks resulting from the contract. Under Canadian maritime law, the commercial contract between the parties must prevail. As a result, I would allow the appeal, set aside the trial judge’s decision and order the appellants to pay the sum of €50,000 (converted to $78,900) to the respondents with interest and costs.

FACTS [ 56 ] Except for the cause of the improper torque applied to the stud, the facts are not in dispute. [ 57 ] The Camilla is owned and operated by Transport Desgagnés Inc. (“TDI”) which, with Desgagnés Transarctik Inc. and Navigation Desgagnés Inc., forms part of a large Canadian merchant shipping conglomerate. The Camilla is an ocean-going general cargo ship principally operating in Eastern Canadian and Arctic waters. [ 58 ] The crankshaft and bedplate of the main engine of the Camilla became damaged beyond repair in October of 2006 while it was in Pond Inlet.

TDI contacted Wärtsilä Canada Inc., a subsidiary of Wärtsilä Nederland B.V. (collectively referred to as “Wärtsilä”) which sent a technician to Pond Inlet for the purposes of inspecting and assessing the damage and recommending repair options. The ship was towed to Halifax to undergo repairs. Wärtsilä proposed several repair options. TDI opted for a reconditioned crankshaft assembled on a new bedplate together with related equipment, as well as new marine style connecting rods. [ 59 ] Wärtsilä’s proposal to TDI offered a six-month warranty period as well as general terms and conditions limiting its liability.

The provisions of Wärtsilä’s General Terms and Conditions Spare Parts (2005) relating to warranty and to liability read as follows : 6. WARRANTY 6.1 The Supplier shall repair or replace, at its discretion, as soon as reasonably possible, any defect in the Spare Parts which appears during the warranty period as a result of defective material or workmanship, provided, always when required by the Supplier, that such part or parts be returned to the Supplier at the Supplier’s cost to the place instructed by the Supplier.

The Buyer shall immediately take appropriate steps to prevent any defect from becoming more serious and to enable the Supplier to rectify the aforesaid defect. In order to receive this remedy, any warranty claims or requests with respect to this warranty must be made in writing without delay and within fourteen (14) days at the latest from the discovery during the warranty period. 6.2 Replaced parts shall become the Supplier’s property.

The Supplier shall bear only the costs of repairing or replacing the defective parts at the Supplier’s works as well as the costs occasioned by the transport of the defective and of the repaired or replaced parts between the respective manufacturer’s works and the place of delivery as originally agreed in the delivery terms. 6.3 The warranty period in respect of the Spare Parts begins at delivery and ends six (6) months from the date of the replacement or twelve (12) months from the date of delivery, whichever occurs first. [Emphasis added] 6.4 The warranty period in respect of parts which have been repaired or replaced under the warranty shall be three (3) months from the date of repair or replacement or until the expiration date of the original warranty period of the Spare Part, whichever occurs later, under the same terms, conditions and limitations of liability, as those applicable to the Spare Part.

This provision shall not apply to non- replaced, original parts of the equipment.

Under no circumstances shall the warranty period of any part exceed eighteen (18) months from the date of commencement of the original warranty period as stipulated above in subclause 6.3. 6.5 This warranty does not cover any defect due to or connected with : 1) any materials or components or design provided by the Buyer or on behalf of the Buyer; 2) negligence or other improper acts or omissions of the Buyer, its employees or agents or other third parties; 3) other than original Spare Parts supplied by the Supplier; 4) improper installation or alterations carried out without the Supplier’s consent in writing; 5) parts, accessories or attachments which are not sold, supplied or expressly approved in writing by the Supplier or ; 6) Spare Parts provided by the Supplier that are warranted directly to the Buyer by another manufacturer.

This warranty does not cover any defects that are caused by or connected with the design, normal wear and tear, the use of unsuitable material or consumables by the Buyer, fluctuation in the grid or with any use, maintenance, service or operation of the equipment or the Spare Parts or any part thereof which is not in conformity with the Supplier’s or any of its subcontractor’s manuals, instructions or specifications or which is otherwise not in accordance with normal industry practice.

The warranty obligation does not include any cranage, electricity, scaffolding, assisting work, docking, diving, demounting, mounting or travel and boarding costs of the Supplier’s personnel or representatives. 6.6 THIS IS THE ONLY WARRANTY APPLICABLE TO THE SPARE PARTS AND EXPRESSLY REPLACES ANY OTHER WARRANTIES, GUARANTEES, OBLIGATIONS AND LIABILITIES EXPRESS OR IMPLIED INCLUDING ANY OTHER WARRANTIES, GUARANTEES, OBLIGATIONS OR LIABILITIES AGAINST NON-CONFORMITY OR DEFECTS, HIDDEN OR OTHERWISE, AND ANY OTHER OBLIGATION, TERM OR LIABILITY IN RESPECT OF OR RELATING TO THE SPARE PARTS WHETHER IN CONTRACT OR IN LAW AND THE BUYER HEREBY WAIVES ALL OTHER REMEDIES, WARRANTIES, GUARANTEES AND LIABILITIES, EXPRESSED OR IMPLIED, ARISING BY LAW OR OTHERWISE (INCLUDING WITHOUT LIMITATION ANY OBLIGATIONS OF THE SUPPLIER WITH RESPECT TO ANY FITNESS FOR PURPOSE, MERCHANTABILITY OR SATISFACTORY QUALITY). 7.

SUPPLIERS LIABILITY 7.1 IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT.

BREACH OF WARRANTY , TORT (INCLUDING (WITHOUT LIMITATION) NEGLIGENCE AND STRICT LIABILITY) OR OTHERWISE, AND WHETHER ARISING BEFORE, DURING OR AFTER ANY WARRANTY PERIOD SHALL THE SUPPLIER BE LIABLE FOR ANY I NDIRECT, CONTINGENT , SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING (WITHOUT LIMITATION) FOR ANY LOSS OF ACTUAL OR ANTICIPATED PROFITS OR REVENUE OR ANTICIPATED SAVINGS, PUNITIVE OR EXEMPLARY DAMAGES , THE COST OF SUBSTITUTED EQUIPMENT OR SPARE PARTS , TOWAGE CHARGES , POLLUTION REMEDIATION COSTS, DOCKING OR DIVING COSTS, DAMAGE TO ANY VESSEL , ENGINE ROOM OR POWER PLANT SITE, YARD OR OTHER PROPERTY (INCLUDING DAMAGE TO GOODS OWNED BY THE BUYER), COST OF LABOR OR THE REMOVAL OR REINSTALLATION OF THE EQUIPMENT OR SPARE PARTS OR ANY PART THEREOF , COSTS FOR ANY ADDITIONAL TESTS (INCLUDING, WITHOUT LIMITATION, SEA TRIALS) .

DEBRIS REMOVAL, OR FOR LOSS OF TIME OR USE OF ANY

EQUIPMENT, INSTALLATION SYSTEM, OPERATION OR SERVICE INTO WHICH PARTS MAY BE PUT, OR WITH RESPECT TO WHICH ANY SERVICES MAY BE PERFORMED BY THE SUPPLIER, HOWEVER CAUSED OR ARISING. THIS LIMITATION ON THE SUPPLIER'S LIABILITY SHALL APPLY TO ANY LIABILITY FOR DEFAULT UNDER OR IN CONNECTION WITH THE EQUIPMENT , HARDWARE, SOFTWARE, GOODS, PARTS AND/OR SERVICES DELIVERED HEREUNDER, WHETHER BASED ON WARRANTY , FAILURE OF OR DELAY IN DELIVERY OR OTHERWISE.

This exclusion of liability, however, does not apply to unlawful intent on the part of the Supplier . 7.2 In no case shall the Supplier's liability cover such damages as could not have been foreseeable at the time of the conclusion of the Contract. Notwithstanding any other provision of the Contract, the Supplier’s maximum liability shall never exceed fifty-thousand euro (50.000 €). […] [ 60 ] At the outset, it is useful to review the contract negotiations leading to the agreed contract terms, including the agreed warranty and limitation of liability provisions.

These negotiations and the agreed terms are set out in Exhibits P-2, P-15, P-16, D-3, D-28, D-29 and D-33. [ 61 ] After numerous exchanges between TDI and Wärtsilä, on October 17, 2006, Mario Rossi, of TDI, faxed to Dieter Hohoff, of Wärtsilä, TDI’s proposal for a price of $1,175,000 CAD FOB Halifax and with the following warranty condition: « WARRANTY: we propose 6 months after the completion of the repairs OR 5,000 engine running hours. » [ 62 ] In an email dated October 18, 2006, 12:32 p.m., Dieter Hohoff responded for Wärtsilä: We are pleased to receive your purchase order 070002525 in the amount of CAD $ 1 175 000.00 and appreciate your confidence in Wärtsilä but would like to propose the following comments/changes: 1.

We will accept CAD $ 1 175 000.00 FOB Halifax, but which will only refer to the actual freight costs, all other costs like broker, custom clearance, local costs in Halifax and transportation from Halifax port to the vessel are not covered by Wärtsilä. This is a major additional concession by Wärtsilä. 2.

The warranty condition cannot be altered as this is a standard part of the Wärtsilä head office directive. […] We hope the above is acceptable to you and kindly take into consideration that we are now covering as well the freight costs to Halifax which was not covered in our final proposal. [ 63 ] Mario Rossi responded for TDI on October 18, 2006, 4:53 p.m. : Thank you for your confirmation below; which in principle we accept. However, as per our various telecoms, the warranty portion of 6 months starting from completion of repairs is absolutely unacceptable.

As explained, due to a very strong market and the loss of our charter, our vessel will in all probability remain approx. 4 months alongside; therefore it is our contention that the 6 months option will not give Transport Desgagnes a proper comfort level and thus totally unfair. […] [ 64 ] On October 19, 2009, 9:29 a.m., Dieter Hohoff for Wärtsilä made a new warranty proposal to TDI : Subject to further discussion we are prepared to make an amendment to the standard Wärtsilä “General Terms & Conditions of Spare Parts 2005”, paragraph 6.3 to extend the time period from 6 month to 9 month with the stipulation that the “Camilla” will not be employed for a period of 4 month following completion of the repair.

The special warranty extension will not be valid if the “Camilla” will be operating immediately after the repair period.

Furthermore we kindly ask you to make a revision to your purchase order to cover the changes in the payment period and the warranty conditions. […] [ 65 ] Mario Rossi responded to TDI on October 19, 2006, 10:36 a.m. : We confirm that changes in the PO will be made with respect the delivery “4 weeks ex Zwolle, Netherland” However your extended warranty should read something like this : “if in the event that the ship is laid up for an extended time during the 6 month warranty period; then this applicable laid up time will be added to the original six month period” […] [ 66 ] Dieter Hohoff accepts for Wärtsilä by email dated October 19, 2006, 10:45 : « Please proceed with the amendment, we agree. »

[ 67 ] The final revised purchase order issued by TDI is dated October 19, 2006, and reads as follows:

A) As per reference B, please supply the following engine parts including : 1) new bedplate 2) Reconditioned crankshaft 1mm undersize, complete with counterweights, gear wheel, stub shaft and fitted bolts 3) Main bearings, axial bearing and connecting rod bearings 4) 1 set of new marine type connecting rods, with special hydraulic tool 5) Set of fitted bolts for vibration damper.

B) PRICE: CAD $1, 175, 000.00 —F.O.B. Halifax (Any additional transportation costs to be dealt with separately). For custom purpose only, the invoice should give a price per item. Transport Desgagnés Inc. will proceed with the custom clearance in Canada.

C) PAYMENT CONDITION : 25 % with the order 25 % when goods are ready for shipment from factory Zwolle, Netherland 25 % upon arrival of parts at Halifax 25 % within 30 days after parts have arrived at Halifax

D) DELIVERY : 4 weeks after reception of the order, ex. Zwolle, Netherland, please send the order by seafreight to : Transport Desgagnés inc. C O M/V Camilla Desgagnés Port of Halifax, Halifax Nova-Scotia Canada

E) WARRANTY: 6 months as specified by Wartsila conditions with agreed amendment “If in the event that the ship is laid up for an extended time during the 6 month warranty period; then this applicable laid up time will be added to the original six month period.”

F) Our purchase order number is 070002525.

G) Please send the order confirmation to the undersigned. (Emphasis added) [ 68 ] Wärtsilä accepted this purchase order that same day : 00 0003 * PARTS : 12 TM 410 R 1 11 75000.00 11 75000.00 CONSISTING OF THE FOLLOWING : 1) New bedplate 2) Reconditioned crankshaft 1mm undersize, complete with counterweights, gear wheel, stub shaft and fitted bolts. 3) Main bearings, axial bearing and connecting rod bearings 4) 1 set of new marine type connecting rods with special hydraulic tool

5) Set of fitted bolts for vibration camper ABOVE IS BASED ON WARTSILA’S GENERAL TERMS AND CONDITIONS OF SPARE PARTS 2005. OTHER TERMS AND CONDITIONS AS STATED IN YOUR FAX ORDER “10/19/06 THU 12:43” PARAGRAPH B) TO

G) SUB – TOTAL 1 175 000.00 (Emphasis added) [ 69 ] Once the contract terms were agreed, the components were assembled at Wärtsilä’s workshop in Zwolle, Netherland, between November 13 and 28, 2006. A Wärtsilä team installed the crankshaft in the bedplate and this was shipped to Halifax and installed in the engine room of the Camilla under supervision of Wärtsilä personnel while it was undergoing engine repairs in Halifax harbour in January and February of 2007. [ 70 ] The Camilla went back into service in February of 2007.

Some two and a half years later, on October 27, 2009, after it had been in operation for 13,653 hours, the Camilla’s main engine suffered a major failure as the ship was sailing on the St. Lawrence River in the vicinity of Les Escoumins. THE PROCEEDINGS [ 71 ] TDI commenced proceedings in the Quebec Superior Court against Wärtsilä for recovery of its damages and profit loss while the Camilla was out of service. The quantum of the claim was admitted at $5,661,830.33.

TDI was partially indemnified ($4,714,002.01) by its marine insurers, Lloyds Underwriters and Institute of Lloyds Underwriters (ILU) Companies subscribing to Policy Number B0856 09H0016 and Aim Insurance (Barbados) SCC (collectively referred to as « Lloyds »). Lloyds filed a continuation of suit. [ 72 ] It is common ground between the parties that the engine failure was caused by improper torque being applied to a stud.

As a result of stresses caused by this, the stud broke, leading materials to be projected through the main engine and thus causing extensive damage. [ 73 ] The basis of the claim was set out as follows in the Amended Motion to Institute Proceedings : 10. Upon investigation and metallurgical testing, it was ascertained that the origin and root cause of the incident was the failure of the connecting rod 5L big end bolt.

The failure was identified metallurgically to have initiated a fatigue crack on the big end bolt directly caused by the improper tightening of the big end bolt of the connecting rod H piece of no. 5L unit which was fully assembled by Wärtsilä prior to shipment of the complete crankshaft to the vessel. […] 14. The crankshaft assembly provided by Wärtsilä was not fit for the intended purpose, was not of merchantable quality and contained a latent defect not apparent or known to the Plaintiffs nor discoverable by the exercise of due diligence. 15.

The Plaintiffs relied on the expertise of Wärtsila in choosing and purchasing Wärtsilä engine parts and would not have purchased the said crankshaft assembly had it been made aware of the defect. 16.

The latent defect existed at the time of sale of the crankshaft assembly to TDI by the Wärtsilä Defendants who were a professional seller, supplier and manufacturer, and the latent defect was caused by the personal fault and negligence of Wärtsilä, its servants, employees and agents. [ 74 ] In its defence, Wärtsila denied liability on the ground that it would have been impossible for the engine of the Camilla to have been in service for over 13,500 hours after the installation of the crankshaft had improper torque been applied to the stud at assembly time.

It also relied on the contract terms, notably the warranty and limitations of liability terms: 45. Quite apart from the fact that Wärtsilä Netherland’s quality control procedures are such that the Crankshaft could not have left the factory with a loose or improperly torqued big-end stud in the connecting rod for Cylinder Unit 5-L, had such a defect, in fact, existed when the Crankshaft was installed aboard the vessel, the failure described in the Motion would have occurred soon after the MV Camilla Desgagnés went back into service in February 2007. 46.

In the present case, the failure occurred after the engine had been in service for 13,653 hours after the installation of the

Crankshaft in February 2007. Given the tremendous stresses that the connecting rods were under, it is impossible for the engine to have remained in service for as long as it did if the big-end studs of the connecting rod of Cylinder Unit 5-L had not been properly assembled and torqued. […] 48. Defendants state, therefore, that if the big-end stud failed, then such failure occurred for reasons beyond Defendants’ control and for which Defendants are not in any way liable. 49.

Without limiting the generality of the foregoing, Defendants state that there is in fact evidence to suggest that Plaintiff’s employees carried out maintenance work on the connecting rod on Cylinder Unit 5-L at a time and under circumstances unknown to Defendants and that during the course of such maintenance work they would have loosened the studs that secured the big-end caps on that connecting rod. […] 52. Whatever the explanation for the failure, it is clear that Defendants are not in any way liable for same.

Even if they were, any legal and/or conventional warranty that Defendants may have given was limited in time to six months from when the vessel went back into service, the whole as more fully appears from the Contract. 53. That six month warranty period had long since expired when the incident occurred in October 2009. 54. Plaintiff is an experienced and professional vessel operator and has a long history of purchasing marine engines and engine components for use aboard its ships.

Plaintiff understood full well that, inasmuch as it was purchasing reconditioned equipment, Defendants were only prepared to give a limited warranty in respect of same and Plaintiff agreed to such limited warranty in an informed fashion. […] 56. Defendants hereby invoke to their benefit all of the limitations and immunities contained in the Terms & Conditions, including provisions of

section 7 thereof, in virtue of which Defendants are not liable for indirect or consequential damages such as those claimed by Plaintiff, and in virtue of which Defendants liability for damages is, in all cases, limited to and capped at €50,000. […] 58. Plaintiff’s claim and the present action is subject to and governed by Canadian Maritime law and not by the civil law of the Province of Quebec. TRIAL JUDGMENT [ 75 ] There were two main issues before the trial judge, one of law and the other of fact: (

a) whether Canadian maritime law or the provisions of the Civil Code of Quebec (“ C.C.Q ”) applied to the dispute, and (

b) whether the improper torque applied to the stud resulted from an error of Wärtsilä or from some subsequent event. [ 76 ] In a judgment dated November 23, 2015 ( 2015 QCCS 5514 ) (“Trial Judgment”), the Honourable Marie-Anne Paquette (“Trial Judge”) decided both issues in favour of TDI and Lloyds and ordered Wärtsilä to pay them $5,661,830.33. [ 77 ] The Trial Judge found that Canadian maritime law did not apply on the ground that the dispute related to the sale of a marine engine, a matter she deemed not to be integrally connected to maritime matters: [26] The current matter relates to the sale of a marine engine. [27] Issues relating to the obligations arising from such a contract of sale are not integrally connected to the pith and substance of the Parliament's jurisdiction over navigation and shipping, as defined above. [28] More particularly, the contract for the sale of a marine engine is not integrally connected, for instance, to issues of safe carriage of goods over the sea, movement of goods on and off a ship (shipping), seaworthiness of a ship or good seamanship (navigation).

It is also not integrally connected to applicable admiralty law, rules, principles or practices or international maritime conventions. [29] Moreover, there is no practical necessity for uniform federal law to prescribe, for instance, the rules governing the seller's obligations to provide warranty regarding the quality of the product sold.

The fact that such rules may vary depending on the applicable provincial law of contracts does no hinder the efficient and coherent conduct of the activities of navigation and shipping. [30] Neither the extraterritorial use of the good sold nor the fact that the good sold will be used in connection with maritime activities drag such sale out of the ambit of the legislature's power over Property and Civil Rights. Although related to maritime activities, the current dispute is not integrally connected with same. [31] Wärtsilä is sued as the seller of the crankshaft and bedplate.

It is not sued as a party performing a contract that pertains to the pith and substance of navigation and shipping activities. [32] As the contract for the sale of the engine and of the bedplate was formed in Montreal, the laws of Quebec therefore apply to the present dispute. (Emphasis in original)

[78] The application of Quebec civil law had two major consequences which were determinative to the resolution of the factual andlegal dispute. [79] First, under articles 1726 to 1730 of the C.C.Q. in the case of a sale by a professional seller, the latent defect is presumed tohave existed at the time of the sale unless the seller or manufacturer proves, on a balance of probabilities, that the defect is due toimproper use by the buyer; the seller is further presumed to have known the existence of the defect at the time of the sale. [80] Second, the professional seller or the manufacturer cannot rely on a limitation of liability clause unless it rebuts the presumptionthat it knew of the existence of the defect at the time of the sale; evidence of good faith or of ignorance of the defect or an honest belief inthe adequacy of the product is not enough: ABB Inc. v.

Domtar Inc., 2007 SCC 50, [2007] 3 S.C.R. 461, at paras. 56, 69, 72, 73 and 102-106. [81] These rules starkly contrast with those applicable under the common law should Canadian maritime law govern the dispute. InCanada, the common law rule is that a latent defect must affect an essential characteristic of the good and make the good unfit for itsintended use. The onus is on the buyer to prove that the latent defect was known to the seller or that the seller showed reckless disregardfor what it should have known: ABB Inc. v.

Domtar Inc., at para. 80. [82] Furthermore, contrary to Quebec law, the common law has no specific rule for the special case of professional sellers andbuyers. In principle, a limitation of liability clause in a contract between two merchants will be valid unless it is declared to beunenforceable either for unconscionability or because failure to discharge the obligation to which it applies would amount to afundamental breach of contract.

Even where a fundamental breach has been established, in a common law context, the court must stillanalyze the limitation of liability clause in light of the general rules of contract

interpretation. If the words can reasonably be interpretedin only one way, it will not be open to the court, even on grounds of equity or reasonableness, to declare the clause to be unenforceablesince this would amount to rewriting the contract negotiated between the parties: ABB Inc. v.

Domtar Inc., at paras. 81-84. [83] The Trial Judge’s finding with respect to the application of Quebec civil law thus essentially sealed the fate of the proceedings. [84] Despite the evidence presented by Wärtsilä that the improper tightening resulted from maintenance work performed by TDIemployees and despite its expert reports establishing that the fracture initiation site originated from the surface, a fact compatible withfailure occurring after a few thousand hours (1,000 – 2,000 hours) of operations following improper tightening and incompatible with afailure occurring after more than 13,000 hours of engine use, the Trial Judge concluded that the civil law presumption had not beenrebutted: [62] Rebutting the presumption of

article 1729 C.C.Q. indeed requires more than raising doubts on the adequacy of the buyer's use ormaintenance of the good sold. Unless the professional seller or manufacturer shows, on a balance of probabilities, that the defect is dueto improper maintenance by the buyer, the presumption that the defect existed at the time of the sale still applies.

Such a demonstrationmay be made either by direct evidence or by presumption. [63] The evidence on which Wärtsilä relies raises legitimate scientific questioning on the timing of the incident and shows that TDI'sinterventions were not perfect at all times and in all respects.

However, it falls short of demonstrating that TDI employees have orprobably have loosened the nut on the big end stud 5L. [85] The application of Quebec civil law was also dispositive of Wärtsilä’s reliance on the contract’s warranty limitations: [99] The contract which the parties entered into incorporates Wärtsilä's standard terms and conditions for spare parts.

Section 6.3 ofsuch standard terms and conditions, as modified at TDI's request, provide that the warranty runs for 6 months from the time the CamillaDesgagnés returned to service. They also limit Wärtsilä's liability to €50,000 (CAN $79,000). [100] However, these limitation provisions are not enforceable in the case at hand, as Wärtsilä did not rebut the presumption ofknowledge of the existence of the defect. [101] As mentioned above, Wärtsilä's bad faith and knowledge of the existence of the defect at the time of the sale is presumed.

Inthis context, any contractual exclusion or limitation of its liability for latent defect is considered fraudulent. In principle, Wärtsilä is thusnot authorized to contractually limit its obligations in respect of latent defects. ISSUES IN APPEAL [86] There are three main issues in this appeal : (

a) Is the claim to be decided under Canadian maritime law or Quebec’s civil law? (

b) If Canadian maritime law applies, were the appellants responsible for the damages which occurred to the main engine of theCamilla? (

c) If so, can the appellants rely on the terms of the contract to exclude or limit their liability? ANALYSIS First Issue: Does Canadian maritime law or Quebec civil law apply to the dispute? [87] Canadian maritime law is defined in the Federal Courts Act, as stated by McIntyre J. in the seminal case of ITO – Int’lTerminal Operators v. Miida Electronics, (SCC), [1986] 1 S.C.R. 752 [“ITO”], at pp. 771 and 774: I would be of the opinion then that the term 'Canadian maritime law' includes all that body of law which was administered in England bythe High Court on its Admiralty side in 1934 as such law may, from time to time, have been amended by the federal Parliament, and as it

has developed through judicial precedent to date. […] In my view the second part of the s. 2 definition of Canadian maritime law [in the then Federal Court Act] was adopted for the purposeof assuring that Canadian maritime law would include an unlimited jurisdiction in relation to maritime and admiralty matters. As such, itconstitutes a statutory recognition of Canadian maritime law as a body of federal law dealing with all claims in respect of maritime andadmiralty matters. […] [88] This was further elaborated by La Forest J. in Whitbread v.

Walley, (SCC), [1990] 3 S.C.R. 1273, at p. 1290: In the case of the Federal Court's jurisdiction over maritime and admiralty matters, that body of law is referred to in s. 22 of the FederalCourt Act as "Canadian maritime law". As already explained, this Court has ruled that such a body of law does exist. It has also foundthat it is federal law that comes within Parliament's power to legislate in respect of navigation and shipping under s. 91(10) of theConstitution Act, 1867: see ITO, at p. 777.

It follows that an inquiry as to the scope and substantive content of the Federal Court'sjurisdiction over Canadian maritime law is simultaneously an inquiry as to the scope and content of an important aspect of Parliament'sexclusive jurisdiction over navigation and shipping. [89] Paragraphs 22(2)(

m) and (

n) of the Federal Courts Act, R.S.C., 1985, c. F-7, clearly set out that any claim in respect of goods,materials or services wherever supplied to a ship for its operation or maintenance, as well as any claim arising out of a contract relating tothe construction, repair or equipping of a ship, fall within the Federal Court’s jurisdiction under Canadian maritime law: Navigation and shipping 22

(1) The Federal Court has concurrent originaljurisdiction, between subject and subject as wellas otherwise, in all cases in which a claim forrelief is made or a remedy is sought under or byvirtue of Canadian maritime law or any otherlaw of Canada relating to any matter comingwithin the class of subject of navigation andshipping, except to the extent that jurisdictionhas been otherwise specially assigned. Navigation et marine marchande 22

(1) La Cour fédérale a compétenceconcurrente, en première instance, dans les cas— opposant notamment des administrés — oùune demande de réparation ou un recours estprésenté en vertu du droit maritime canadien oud’une loi fédérale concernant la navigation ou lamarine marchande, sauf attribution expressecontraire de cette compétence. Maritime jurisdiction

(2) Without limiting the generality of subsection(1), for greater certainty, the Federal Court hasjurisdiction with respect to all of the following: […] (

m) any claim in respect of goods, materials orservices wherever supplied to a ship for theoperation or maintenance of the ship, including,without restricting the generality of theforegoing, claims in respect of stevedoring andlighterage; (

n) any claim arising out of a contract relating tothe construction, repair or equipping of a ship; Compétence maritime

(2) Il demeure entendu que, sans préjudice de laportée générale du paragraphe (1), elle acompétence dans les cas suivants : […]

m) une demande relative à des marchandises,matériels ou services fournis à un navire pourson fonctionnement ou son entretien, notammenten ce qui concerne l’acconage et le gabarage;

n) une demande fondée sur un contrat deconstruction, de réparation ou d’équipementd’un navire; [90] It is undisputable that any claim resulting from the contract between TDI and Wärtsilä falls under these provisions, since it isunquestionably a “contract relating to the […] repair or equipping of a ship”. In the absence of a constitutional challenge – as was thecase in Whitbread v. Walley, above – these provisions of the Federal Courts Act dispose of the issue: Canadian maritime law applies. [91] The Trial Judge did not refer to paragraphs 22(2)(

m) and (

n) of the Federal Courts Act in her reasons. She rather proceeded toanalyze the issue of the applicability of Canadian maritime law in a statutory vacuum. This was an error of law. [92] Instead of applying Parliament’s clear and unequivocal legislative intent as to the scope of Canadian maritime law, the TrialJudge relied on Isen v.

Simms, 2006 SCC 41, [2006] 2 S.C.R. 349 - a case concerning the improper use of a bungee cord on land forsecuring a small sailboat for highway transport - to conclude that the supply of marine engine parts to an ocean-going ship used forcommercial cargo transportation while it was being repaired in the Halifax harbour was not integrally connected with maritime activities:Trial Judgment, at paras. 24-31. [93] These conclusions not only run counter to the clear language of

section 22 of the Federal Courts Act, they are also at odds withgeneral principles of maritime law as well as the unbroken jurisprudence of the Supreme Court of Canada and of the Federal Courts. [94] I start with general principles of maritime law. [95] It seems to me self-evident that the repair and supply of engine parts to a ship is intrinsically related to its seaworthiness andtherefore directly and integrally connected to navigation and shipping. Cargo ships need ports to load and unload and engines to movefrom port to port.

The proposition that the supply of marine engine parts to carry out repairs to a cargo ship is not integrally connectedwith marine activities seems untenable, since such repairs are essential to allow the ship to operate on water (navigation) and to move

goods from port to port to deliver cargo (shipping). [96] It is not capriciously that the construction, repair or equipping of a ship falls under Canadian maritime law. The suppliers ofmarine equipment and the operators of commercial shipping vessels have a clear interest in ensuring that Canadian maritime law applies.By its very nature, a ship can move over water and from port to port. Moreover, determining the ownership of a ship, particularly aforeign vessel, is not an easy task.

As a result, when a ship is in need of repairs, suppliers of services and parts need to know thatpayment guarantees are available, while operators of the ships need to be able to secure urgent repairs. [97] As a result, suppliers of equipment to ships can rely on the in rem jurisdiction of the Federal Court and proceed to the requiredsupplies and repairs with some confidence of being paid.

Likewise, ship operators and captains can rely on the value of the ship itself toencourage suppliers to provide required repairs and equipment so as to allow the commercial maritime activities of the ship to continue.For this purpose, suppliers of equipment and repairs to a ship benefit from a maritime lien to the ship which flow from Canadian maritime law: William Tetley, Maritime Liens and Claims, 2nd ed., Montreal, International Shipping Publications, 1998, at p. 652. [98] As the eminent maritime law expert William Tetley clearly sets out in his treatise concerning Maritime Liens and Claims, thesupply of equipment to a ship is undoubtedly integrally connected to maritime matters (at p. 653): A claim for equipping a ship, under sect. 22(2)(

m) or (n), has been held to fall within the admiralty jurisdiction of the Federal Court ofCanada, even where the goods or equipment concerned were supplied under a conditional sales agreement, whereby the supplier of theitem retained ownership until full payment of the price, because the matter was so integrally connected to maritime matters as to belegitimate Canadian maritime law within federal competence. Admiralty jurisdiction under sect. 22(2)(

m) and (

n) has also been held toexist even where the repair work is done on land, as long as the work is integrally connected with maritime matters. (See also A. Chircop, W. Moreira, H. Kindred and E. Gold, Canadian Maritime Law, 2nd ed., Toronto, Irwin Law Inc., 2016, at pp. 387-389). [99] This connection to maritime matters largely flows from the requirement of seaworthiness of the shipping vessel, a requirementwhich is itself an integral part of all maritime law, including numerous international conventions.

As Professor Tetley explains inInternational Maritime and Admiralty Law, Montreal, International Shipping Publications, 2002, at pp. 52-53: Seaworthiness runs like a thread through all maritime and admiralty law in various forms. It is found, for example, as an obligation toexercise due diligence to make the ship seaworthy under the Hague and Hague/Visby Rules (art. 3(1)(a)) and in voyage charterparties.

Itis an absolute obligation to make the ship seaworthy under demise and time chaterparties (which may be contracted out of and usuallyis), as a warranty of fitness in tug and tow contracts, as an implied warranty in hire of seamen, in sale of a ship, in marine insurance andmust have been exercised by the shipowner when claiming a contribution from cargo-owners in general average. [100] The fact that the construction, repair or equipping of a ship is integrally connected to shipping and navigation has, moreover,been recognized time and again by the Supreme Court of Canada and the Federal Courts. [101] In Wire Rope Industries of Canada

(1966) Ltd. v. B.C. Marine Shipbuilders Ltd. et al., (SCC), [1981] 1 S.C.R.363, B.C. Marine Shipbuilders Ltd. and Straits Towing Ltd. (“B.C. Marine”) commenced proceedings in the Federal Court against F.MYorke & Son Limited (“Yorke”) claiming damages for breach of a contract of towage and for negligence resulting in the loss of theirbarge. Yorke issued a third party notice directed to Wire Rope Industries of Canada

(1966) Ltd. (“Wire Rope”) and later filed a statementof claim for indemnity for any damages for which it might become liable to B.C. Marine. Yorke alleged negligence on the part of WireRope in the resocketing of a cable used in towing the barge and breach of an implied warranty of fitness of its work. Wire Rope deniednegligence in the resocketing and also denied any implied or express warranty as to the quality of its work. A jurisdictional questionarose as to whether Yorke’s claim against Wire Rope, which alleged breach of contract and negligence in the resocketing, fell withinCanadian maritime law. Relying on paragraphs 22(2)(

m) and (

n) of the Federal Courts Act, the Supreme Court of Canada unanimouslyfound that it did: [p. 375] […] The jurisdictional question arises, however, because of the claims against Wire Rope which allege a breach of contract andnegligence in the resocketing of the main towing cable.

The issue then is, do such claims fall within the jurisdiction of the Federal Court,or are they governed by provincial law and therefore come within the jurisdiction of the Supreme Court of British Columbia? […] [p. 377] Turning to the case at bar, the claim against Wire Rope by Yorke alleges negligence in the resocketing of the main towing cablepursuant to a contract made regarding such work, and claims an indemnity for loss caused by a breach of that contract. The claim by B.C.Marine and Straits involves negligence in the resocketing operation which resulted in their loss.

It will be observed that the root of bothclaims lies in the work done by Wire Rope in resocketing the cable and that the cable was part of the equipment of the tug Lorne Yorke,a seagoing vessel which was involved in the marine accident that gave rise to this action. That such a claim formed part of admiralty lawwhich was incorporated into Canadian law by the Canadian Admiralty Act of 1891 seems clear. […] […] [pp. 378-379] Section 22(1) gives a general statement of jurisdiction, and s. 22(2) (

m) and (

n) reproduced hereunder are apt to cover theclaims in question here and in part are a restatement of the jurisdiction of the British Admiralty Courts contained in s. 6 of the 1840Statute cited above: (

m) any claim in respect of goods, materials or services wherever supplied to a ship for her operation or maintenance including, withoutrestricting the generality of the foregoing, claims in respect of stevedoring and lighterage; (

n) any claim arising out of a contract relating to the construction, repair or equipping of a ship;

I am therefore of the view that the claims made against Wire Rope come within Canadian maritime law as defined in the Federal CourtAct. There can be no doubt in my mind that the substantive law relating to these claims falls within federal legislative competence unders. 91.10 of the British North America Act, being in relation to navigation and shipping. There is therefore law of Canada relating to theissues arising in this case upon which the jurisdiction of the Federal Court may operate. (Emphasis added) [102] Likewise, in Bow Valley Husky (Bermuda) Ltd. v.

Saint John Shipbuilding Ltd., (SCC), [1997] 3 S.C.R. 1210[“Bow Valley Husky”], a case which is fact similar to the one at hand, the Supreme Court of Canada was required to determine whether aclaim for damage to an oil rig resulting from a fire that was caused by defective equipment was governed by Canadian maritime law. Inthat case the plaintiffs had argued that Canadian maritime law should not apply since the defective equipment had no relationship to therig’s navigational equipment and because the claims were advanced in contract and tort rather than navigation and shipping.

Thissubmission was rejected by McLachlin J. who, though dissenting in part on the question of the contractual exclusion of the duty to warn,held the majority view on the application of Canadian maritime law: [86] This is not a case that “is in ‘pith and substance’ a matter of local concern involving property and civil rights or any other matterwhich is in essence within exclusive provincial jurisdiction under s. 92 of the Constitution Act, 1867”: ITO, supra, at p. 774, perMcIntyre J.

I conclude that the issues for resolution in this case are integrally connected with maritime matters, and fall to be resolvedunder Canadian maritime law. [103] The Federal Courts have consistently held the same view: - In Hawker Industries Limited v. Santa Maria Shipowning and Trading Company, S.A., (FCA), [1979] 1 F.C. 183(C.A.), the Federal Court of Appeal found that “a contract for repair of a ship that arrives in port after becoming disabled at sea is asubject matter that falls within that same body of Canadian maritime law.” - In Canadian General Electric Co. Ltd. v. The Queen (indexed as Canada v.

Canadian Vickers Ltd.), (FCA), [1979] 2F.C. 410 (C.A.), the Federal Court of Appeal was called upon to determine whether an action in warranty under a contract to supply andinstall generators on the icebreaker Louis St-Laurent was a claim arising out of a contract relating to the construction, repair or equippingof a ship within the scope of paragraph 22(2)(

n) of the Federal Court Act (as it was then called). It concluded that it was. - In Dome Petroleum Ltd. v. Excelsior Enterprises Inc. (1989), 30 F.T.R. 9, the Federal Court found that a claim for breach of contractand negligence in the repair of the stern bushing of a ship was related to Canadian maritime law as set out in

section 22 of the FederalCourt Act (as it was then called). - In Charles R. Bell Ltd. v. The Stephanie Colleen (1990), 36 F.T.R. 210, the claim in payment arising from a conditional sale agreementof a marine diesel engine package and associated parts and equipment to be installed in a ship was found by the Federal Court to becovered by paragraph 22(2)(

n) and therefore subject to Canadian maritime law. - In I. Deveau Fisheries Ltd. v. Cummins Americas, Inc. (c.o.b. Cummins Diesel) (1996), 115 F.T.R. 254, the plaintiff commenced anaction in Federal Court against the defendant alleging negligence or breach of contract with respect to repairs conducted to the engines ofthe vessels “Janica II” and “Sylvialyn II”. The defendant initiated third party proceedings for work done on land to the cylinder head ofthe engine of the “Sylvialyn II”. Both the main action and the third party proceedings were found to fall within navigation and shippingas outlined in paragraphs 22(2)(

m) and (

n) of the Federal Court Act (as it was then called). - In Offshore Interiors Inc. v. Harry Sargeant III and Comerica Bank, 2013 FC 1266, conf. 2015 FCA 46, a claim arising out of acontract relating to the construction of a ship was found to fall within navigation and shipping as outlined in paragraph 22(2)(

n) of theFederal Courts Act. [104] In

summary, the supply of marine engine parts by Wärtsilä to Halifax for the repair of the ocean-going cargo ship Camilla wasintegrally related to the marine operations of that ship. TDI’s and Lloyds’ claims against Wärtsilä fall squarely within paragraphs22(2)(

m) and (

n) of the Federal Courts Act in that these are claims “in respect of goods, materials or services […] supplied to a ship forthe operation or maintenance of the ship […]” and “[…] arising out of a contract relating to the […] repair or equipping of a ship”. Theseclaims are clearly maritime in nature. [105] As Canadian maritime law governs, it is the common law of contract and tort which applies to the dispute, since Canadianmaritime law is a body of federal law encompassing principles derived from the law applied by the Admiralty Court.

This law appliesuniformly across Canada whatever court may exercise jurisdiction in a particular case. As stated by McIntyre J. in ITO, at p. 779: It is my view, as set out above, that Canadian maritime law is a body of federal law encompassing the common law principles of tort,contract and bailment. I am also of the opinion that Canadian maritime law is uniform throughout Canada, a view also expressed by LeDain J. in the Court of Appeal who applied the common law principles of bailment to resolve Miida's claim against ITO. Canadianmaritime law is that body of law defined in s. 2 of the Federal Court Act.

That law was the maritime law of England as it has beenincorporated into Canadian law and it is not the law of any province of Canada. [106] This was confirmed in Q.N.S. Paper Co. v. Chartwell Shipping Ltd., (SCC), [1989] 2 S.C.R. 683, at pp. 696-698, in Whitbread v. Walley, above, at p. 1288, and again in Ordon Estate v. Grail, (SCC), [1998] 3 S.C.R. 437, atpara. 68. As stated in Bow Valley Husky, at paras. 88-89: [88] Policy considerations support the conclusion that marine law governs the plaintiffs’ tort claim. Application of provincial laws tomaritime torts would undercut the uniformity of maritime law.

The plaintiff BVHB argues that uniformity is only necessary with respectto matters of navigation and shipping, such as navigational rules or items that are the subject of international conventions. I do notagree. There is nothing in the jurisprudence of this Court to suggest that the concept of uniformity should be so limited. This Court hasstated that “Canadian maritime law”, not merely “Canadian maritime law related to navigation and shipping”, must be uniform. BVHB

argues that uniformity can be achieved through the application of provincial contributory negligence legislation as all provinces haveapportionment provisions in the statutes. However, there are important differences between the various provincial statutes. Thesedifferences might lead over time to non-uniformity and uncertainty. Difficulty might also arise as to what province’s law applies in somesituations. [89] The plaintiffs argue that this Court’s decision in Stein v. The Ship “Kathy K”, (SCC), [1976] 2 S.C.R. 802,provides that provincial laws can apply to maritime matters in the absence of federal law.

Assuming this is so, it does not advance theplaintiffs’ case. On the view I take, there is no “gap” that would allow for the application of provincial law. While the federalgovernment has not passed contributory negligence legislation for maritime torts, the common law principles embodied in Canadianmaritime law remain applicable in the absence of federal legislation. The question is not whether there is federal maritime law on theissue, but what that law decrees. [107] This Court held accordingly in Administration de la voie maritime du Saint-Laurent c. Canron Inc., J.E. 97-140, [1996] J.Q.

No.3965 (QL) (majority opinion of Beauregard J.A.) and in CSL Group c. Administration de la voie maritime du Saint-Laurent, J.E. 97-139,[1996] J.Q. No. 3966 (QL) (dissenting opinion of Fish J.A.) (leave to appeal to the SCC dismissed July 3, 1997: [1997] S.C.C.A. No. 52(QL)). The main issue in that case was whether the users of the St.

Lawrence Seaway could sue the Seaway Authority for the economicdamages they suffered following the temporary closing of the Seaway as a result of the obstruction of navigation caused by the road andrail lift bridge spanning the Seaway at Valleyfield being left in a partially raised position as a result of a failure of the bridge mechanism.Though they disagreed as to whether or not a claim of economic loss was available, both Beauregard J.A. and Fish J.A. (as he then was)agreed that the claim was governed by Canadian maritime law and that, as a result, Quebec civil law could not be applied in light of theuniform application of maritime law throughout Canada.

Fish J.A. stated the matter as follows in his dissenting opinion reported at J.E.97-139, [1996] J.Q.

No. 3966 (QL), at paras. 48-52 of the QL ed.: [48] In considering whether CSL's claim against the Authority was governed by maritime law or provincial civil law, Denis J. waslargely guided by the essential nature of the demand and by the importance of treating cases relating directly to navigation in a uniformmanner. [49] He found that the Valleyfield Bridge was a maritime structure, since it was converted from a fixed to a vertical lift bridge uponthe construction of the Seaway, and that CSL's claim related to its navigational activities. [50] Denis J. thus concluded that CSL's action is governed by maritime law. [51] He concluded as well that the civil law of Quebec could not be applied in a parallel manner. [52] I agree with these conclusions, which are in my view dictated by International Terminal Operators (I.T.O.) Ltd. v.

MiidaElectronics (The Buenos Aires Naru), (SCC), [1986] 1 S.C.R. 752 and Monk Corp. v. Island Fertilizer Ltd., (SCC), [1991] 1 S.C.R. 779; Q.N.S. Paper Co. v. Chartwell Shipping Ltd., (SCC), [1989] 2 S.C.R. 683; andWhitbread v. Walley, (SCC), [1990] 3 S.C.R. 1273. Beauregard J.A. expressed the same opinion in his reasons reported at J.E. 97-140, [1996] J.Q.

No. 3965 (QL), at paras. 220-221 of theQL ed.: [220] Je partage l'opinion du juge qu'entre l'appelante et les usagers maritimes, c'est le droit maritime canadien qui trouve application:la réclamation des usagers maritimes en est une par des usagers d'une voie d'eau navigable contre l'organisme qui a le contrôle de cettevoie d'eau et qui aurait, au mépris de ses obligations, causé des dommages aux usagers, en bloquant la voie d'eau. V. I.T.O. -International Terminal Operators c.

Miida Electronics, (SCC), [1986] 1 R.C.S. 752. [221] Le droit maritime canadien comprend les principes de la common law canadienne, mais ne comprend pas les dispositionsquébécoises en matière de responsabilité civile. V. I.T.O. - International Terminal Operators c. Miida Electronics, déjà cité, et ChartwellShipping Limited c. Q.N.S. Paper Company Limited, (SCC), [1989] 2 R.C.S. 683. [108] The principle that a claim governed by Canadian maritime law excludes the application of Quebec civil law was again recentlyreiterated by this Court in Labonté c.

Voyageur Marine Transport Ltd., 2012 QCCA 1940, at para. 10. [109] In closing on this matter, I deem it appropriate to answer two arguments put forward by my esteemed colleague Vézina J.A. withrespect to the application of Quebec civil law. First, the decision of de Montigny J. (as he then was) in 9171-7702 Québec inc. (c.o.b.Surplus JT) v. Canada, 2013 FC 832 [“Surplus JT”] has no bearing on the present case. Second,

section 8.1 of the

Interpretation Act,R.S.C., 1985, c. I-21 does not incorporate Quebec civil law into Canadian maritime law. [110] Surplus JT dealt exclusively with a contract for the sale of a vessel, a matter which is not specifically enumerated under section22 of the Federal Courts Act dealing with the scope of Canadian maritime law, contrary to a “contract relating to the construction, repairor equipping of a ship” which is specifically enumerated therein. Moreover, in his reasons in Surplus JT at paras. 31-32, de Montigny J.questioned the conclusion of the Supreme Court of Canada in Antares Shipping Corporation v.

The Ship 'Capricorn' et al., (SCC), [1980] 1 S.C.R. 553 [“Antares”] providing that the title, possession or ownership of a ship falls under navigation andshipping. In essence, de Montigny J. proceeded to overturn that decision of the Supreme Court of Canada.

Finally, de Montigny J.recognized at para. 30 of his reasons that a contract relating to the construction, repair or equipping of a ship falls under navigation andshipping and forms part of Canadian maritime law: Based on these principles, case law granted Parliament broad law-making authority not only on navigable waters, navigation works andports, but also on the regulation of navigation, on the liability for maritime accidents, on the liability in case of loss or damage to goodsshipped by sea, on marine insurance, on the repair, construction and maintenance of vessels and on the driving and towing of vessels.

(References omitted and emphasis added) [111] Consequently, insofar as the decision of the Federal Court in Surplus JT is good law and that of the Supreme Court of Canada inAntares is not, an issue which need not be commented on in the context of this appeal, it has no bearing on the litigation at issue whichinvolves a “contract relating to the construction, repair or equipping of a ship”. [112] As for

section 8.1 of the federal

Interpretation Act, it provides for the equal status of the common law and the civil law withrespect to property and civil rights, “unless otherwise provided by law / sauf règle de droit s’y opposant”. This exclusion precludes theapplication of Quebec civil law where Canadian maritime law governs the claim. [113] Louise Maguire Wellington sets out the applicable principle as follows in Émergence d’une nouvelle terminologie bijuridiquedans les lois fédérales, TERMIUM Plus/Chronique de langue/Recherche: Lorsqu’une règle de droit exclut l’application de la législation provinciale à

titre supplétif, on dit qu’il y a dissociation. Par exemple, ladéfinition de « droit maritime canadien » à l’article 2 de la

Loi sur la Cour fédérale exclut expressément l’application du droit privéprovincial. C’est ce que l’on entend par « sauf règle de droit s’y opposant ».

Il en est également ainsi lorsqu’une loi fédérale définit unenotion comme « conjoint de fait » plutôt que de s’en remettre à la législation provinciale. [114] The same position is expressed by Professor André Braën in “Le rôle du droit civil québécois et l’utilisation du droit comparé endroit maritime canadien”, (2013) 43 R.D.U.S. 561, at p. 584, fn. 88 when discussing the effects of the Federal Law-Civil LawHarmonization Act, No. 1, L.C., 2001, c. 4 and of the Federal Law-Civil Law Harmonization Act, No. 2, L.C., 2004, c. 25 on Canadianmaritime law: Cette législation a pour objet de faire du droit provincial en matière de propriété et de droit civils le droit supplétif pour ce qui est de lalégislation fédérale dans les provinces sauf règle de droit s’y opposant.

Évidemment, l’approche de la Cour suprême du Canada dans ledomaine maritime constitue une règle de droit s’opposant à l’application du droit civil. (Emphasis in original) Second Issue: Under Canadian maritime law, are the appellants responsible for the damages which occurred to the main engine ofthe Camilla? [115] On the sale of goods, the traditional rule under the common la

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