Desgagnés Transport Inc., Desgagn és Transarctik Inc., Navigation Desgagnés Inc., Lloyds Underwriters v. Institute of Lloyds, 2019 SCC 58

SUPREME COURT OF CANADA Citation: Desgagnés Transport Inc. v. Wärtsilä Canada Inc., 2019 SCC 58, [2019] 4 S.C.R. 228 Appeal Heard: January 24, 2019 Judgment Rendered : November 28, 2019 Docket: 37873 Between: Desgagnés Transport Inc., Desgagn és Transarctik Inc., Navigation Desgagnés Inc., Lloyds Underwriters and Institute of Lloyds Underwriters (ILU) Companies Subscribing to Policy Number B0856 09h0016 and Aim Insurance (Barbados) SCC Appellants and Wärtsilä Canada Inc. and Wärtsilä Nederland B.V. Respondents - and - Attorney General of Ontario and Attorney General of Quebec Interveners Coram: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin JJ.

Joint Reasons for Judgment: (paras. 1 to 107) Gascon, Côté and Rowe JJ. (Moldaver, Karakatsanis and Martin JJ. concurring) Joint Concurring Reasons: (paras. 108 to 193) Wagner C.J. and Brown J. (Abella J. concurring) desgagnés transport v. wärtsilä Desgagnés Transport Inc., Desgagnés Transarctik Inc., Navigation Desgagnés Inc., Lloyds Underwriters and Institute of Lloyds Underwriters (ILU) Companies Subscribing to Policy Number B0856 09h0016 and Aim Insurance (Barbados) SCC Appellants v. Wärtsilä Canada Inc. and Wärtsilä Nederland B.V.

Respondents and Attorney General of Ontario and Attorney General of Quebec Interveners Indexed as: Desgagnés Transport Inc. v. Wärtsilä Canada Inc. 2019 SCC 58 File No.: 37873. 2019: January 24; 2019: November 28.

Present: Wagner C.J. and Abella, Moldaver, Karakatsanis, Gascon, Côté, Brown, Rowe and Martin JJ. on appeal from the court of appeal for quebec Constitutional law — Division of powers — Navigation and shipping — Property and civil rights — Canadian non-statutory maritime law — Double aspect doctrine — Shipping company and supplier entering into contract for sale of marine engine parts for use on commercial vessel — Ship’s main engine suffering major failure caused by latent defect in parts supplied — Shipping company commencing action against supplier for damages and lost profit — Choice of law clause providing that laws in force in Quebec govern contract — Whether body of law governing dispute falls within federal power over navigation and shipping or provincial power over property and civil rights — Whether Canadian maritime law or Quebec civil law governs contract — Constitution Act, 1867, ss. 91(10) , 92(13) — Civil Code of Québec, art. 1733 .

In October 2006, an accident damaged the crankshaft and the bedplate of the main engine of a shipping company’s ship. The shipping company opted to purchase a reconditioned crankshaft from a supplier. The parties entered into a contract which was formed in Montréal, Quebec, the supplier’s place of business. It contained a six-month warranty, and limited the supplier’s liability to €50,000. The choice of law clause in the agreement indicated that the contract was to be governed by the laws in force at the office of the supplier. Well after the warranty expired, the ship’s main engine suffered a major failure.

The shipping company sued the supplier, founding its claim upon a latent defect in the engine parts purchased from the supplier. The trial judge concluded that the crankshaft sold by the supplier contained a latent defect that caused the damage to the ship. She then determined that the dispute was governed by the Civil Code of Québec (“ C.C.Q. ”), rather than Canadian maritime law. She was of the view that while the dispute over the sale was related to maritime activities, it was not integrally connected to them.

Accordingly, the limitation of liability clause in the parties’ contract was unenforceable and the supplier was liable for the full quantum

of damages. The majority of the Court of Appeal allowed the appeal in part. It found that Canadian maritime law governed the dispute, and hence that the supplier was entitled to rely on the limitation of liability clause, which restricted its liability to €50,000. The shipping company appeals to the Court. Held : The appeal should be allowed and the trial judge’s conclusions restored. Per Moldaver, Karakatsanis, Gascon, Côté, Rowe and Martin JJ.: The C.C.Q. governs this dispute. Therefore, the supplier cannot rely on the limitation of liability clause in the parties’ contract.

The sale of marine engine parts intended for use on a commercial vessel is sufficiently and integrally connected to navigation and shipping so as to come within federal legislative authority under the federal power enumerated at s. 91(10) of the Constitution Act, 1867 , and therefore be validly governed by Canadian maritime law.

However, art. 1733 C.C.Q. which pertains to warranties in contracts of sale, is also a validly enacted provincial law that, in pith and substance, concerns a matter of property and civil rights pursuant to s. 92(13) of the Constitution Act, 1867 , and that remains applicable and operative. The sale of marine engine parts thus gives rise to a double aspect scenario: a non-statutory body of federal law and a provincial law both validly directed at the same fact situation overlap.

Neither interjurisdictional immunity nor federal paramountcy ousts the application of art. 1733 C.C.Q. ; it is therefore ultimately the law governing this dispute. Since art. 1733 is a legislative enactment, Canadian non-statutory maritime law does not prevail over it. Canadian maritime law is a comprehensive body of federal law, uniform throughout Canada, that purports to govern and to deal with all claims in respect of maritime and admiralty matters, subject only to the scope of the federal power over navigation and shipping under s. 91(10) of the Constitution Act, 1867 .

Much of Canadian maritime law is non-statutory law, meaning that its principles are derived from precedent and custom and that it is liable to be developed judicially unless it is supplanted by validly enacted federal legislation. Canadian maritime law exists as a body of law with its own distinct identity, in parallel to the common law.

When Canadian maritime law validly governs a dispute, that body of law represents a seamless and ubiquitous web that is capable of resolving any legal dispute falling within the scope of its application because Canadian maritime law develops rules by analogy where a matter falls within its ambit. In order to ascertain whether Canadian maritime law may apply to a dispute, it is necessary to determine whether the matter comes within the scope of navigation and shipping under s. 91(10) of the Constitution Act, 1867 .

Canadian maritime law governs any matter that is integrally connected to maritime or admiralty matters. Its non-statutory scope is established by case law. The two stages of the division of powers analysis are characterizing the matter at issue and classifying it according to the different heads of legislative power. This analysis takes on a particular form where navigation and shipping — and more particularly, Canadian non-statutory maritime law — is concerned.

When it comes to a dispute purportedly governed by Canadian maritime law, courts must determine, on a case-by-case basis, whether Canadian maritime law can validly extend to that dispute. Where the purportedly applicable Canadian maritime law is non-statutory, characterization is crucial; the matter should be characterized by looking at the substantive law at issue and to the particular fact situation. Where the dispute is one in contract, what matters is the nature of the agreement at issue — as understood in light of the terms of the contract, its purpose, and the circumstances in which it was formed.

The matter must always be characterized with precision for the sufficiency of the connection with the federal power over navigation and shipping to be properly assessed. The maritime context at issue must be identified narrowly enough to make it possible to determine, at the classification stage, whether the matter comes within the federal power over navigation and shipping. In the present case, the matter at issue can be characterized, with sufficient precision, as the sale of marine engine parts intended for use on a commercial vessel.

The second stage, described as classification, requires courts to determine the classes of subjects into which the matter falls. It may require considering the scope of the relevant head of power. The application of specific tests stating the scope of the particular powers is rather common and often necessary to the proper working of the division of powers. Parliament’s power over navigation and shipping has been broadly construed in recognition of the national importance of the maritime industry, thereby permitting the development of uniform legal rules that apply across Canada.

However, broad federal powers must necessarily be kept within proper bounds, especially where they have the potential to overlap significantly with provincial powers, as with navigation and shipping. This head of power is not defined by reference to a discrete area of law but instead covers activities.

Consequently, Parliament can legislate, through public law and private law rules, so as to establish the framework of legal relationships arising out of navigation and shipping activities, thereby bringing within federal legislative authority matters that would otherwise fall within provincial legislative authority. Insofar as contract rules and principles are directed at activities that are integral to navigation and shipping, they can come within federal legislative authority. This

interpretation of federal legislative authority is specific to navigation and shipping. The integral connection approach should be used to assist in determining whether a matter properly comes within the navigation and shipping power. The ultimate question is whether the maritime elements of the matter are sufficient to render it integrally connected to the navigation and shipping head of power.

This test is important for the purpose of avoiding an encroachment on matters coming within provincial legislative authority and it must be applied rigorously to avoid expanding the federal power over matters that are only remotely related to navigation and shipping. The integral connection test encompasses a number of non-exhaustive factors, which may receive different weight depending on the facts of a given case.

In the present case, the factors relevant to the integral connection test overwhelmingly support the view that the sale of marine engine parts intended for use on a commercial vessel is integrally connected to navigation and shipping. A finding that Canadian maritime law can validly regulate a dispute does not end the analysis in the presence of an overlapping provincial rule. The division of powers analysis that unfolds from the modern conception of federalism expressed in Canadian Western Bank v.

Alberta , 2007 SCC 22 , [2007] 2 S.C.R. 3, applies to the overlap between navigation and shipping and provincial heads of power, just as it does for other classes of subjects under the Constitution Act, 1867 . The double aspect doctrine recognizes that the same fact situations can be regulated from different perspectives, one of which may relate to a provincial power and the other to a federal power. The federal power over navigation and shipping is not watertight and remains subject to this flexible understanding of the division of powers.

A valid provincial enactment will be allowed to have incidental effects on a federal head of power unless either interjurisdictional immunity or federal paramountcy are found to apply. It follows that these doctrines must be applied to navigation and shipping in the same way as in all division of powers cases. The sale of goods is a matter that comes plainly within the provincial power over property and civil rights under s. 92(13) of the Constitution Act, 1867 . The mere fact that such a matter, in the context of a sale of marine engine parts, also falls under the

navigation and shipping power does not undermine the validity of the relevant C.C.Q. provisions. In the present case, the sale of marine engine parts for use on a commercial vessel can be addressed both from the broad perspective of regulating the sale of goods, which constitutes an exercise of the provincial power over property and civil rights, and from the narrower perspective of the exercise of the federal power over navigation and shipping. The two sets of contract rules and principles are thus valid.

According to the doctrine of interjurisdictional immunity, the core of exclusive heads of power under the Constitution Act, 1867 , can be protected from the effects of a law validly enacted by the other order of government. If the doctrine is found to apply, the impugned provisions remain valid but are declared inapplicable to matters that would fall under the core of the exclusive head of power of the other order of government.

For the doctrine to apply, the impugned provision must trench on the core of an exclusive head of power under the Constitution Act, 1867 and the effect of this overlap must impair the exercise of the core of the head of power. It is necessary to identify the essential, vital elements of the head of power in question by reference to the jurisprudence. The core of the head of power is necessarily narrower than the scope of the power, here reflected in the integral connection test.

The core of navigation and shipping does not apply to the contractual issues raised by the current claim as it is not essential for the exercise of federal competence over navigation and shipping that only one body of law — Canadian maritime law — regulate contracts of sale for commercial marine equipment. Interjurisdictional immunity therefore does not apply in this case. According to the doctrine of federal paramountcy, when valid provincial and federal legislation are incompatible, the federal law prevails and the provincial law is declared inoperative to the extent of the conflict.

The purpose of the federal paramountcy doctrine is to ensure that federal legislative intent will prevail when it conflicts with valid provincial laws. However, to have rules that are created by courts prevail over valid legislation would upset the proper interaction in common law systems between rules created by courts and those enacted by legislative authorities. It would therefore run contrary to the purpose of the paramountcy doctrine to declare that the non-statutory rules of Canadian maritime law can prevail over valid provincial legislation.

The paramount position of federal legislative intent over provincial legislative intent in certain circumstances cannot be extended to the law developed by courts who exercise admiralty jurisdiction in Canada. As the rules of Canadian maritime law that would arguably be applicable in this case are non-statutory, this case does not present a conflict between a provincial and a federal law so as to trigger the doctrine of federal paramountcy.

Article 1733 C.C.Q. is therefore operative and governs the dispute between the shipping company and the supplier. Per Wagner C.J. and Abella and Brown JJ.: There is agreement with the majority that the C.C.Q. governs the shipping company’s claims and that the appeal should therefore be allowed. However, the division of powers issues raised by this appeal are to be resolved as they are in respect of any head of power — that is, by applying the pith and substance test.

While the claim at issue in this case touches upon issues of navigation and shipping, it raises, in pith and substance, a matter coming within property and civil rights, in relation to which the National Assembly of Quebec exclusively may make laws. Accordingly, by operation of arts. 1729 and 1733 of the C.C.Q. , the supplier, as a “professional seller”, cannot rely on its contractual limitation of liability, and the shipping company is entitled to the full agreed-upon quantum of damages.

The pith and substance test applies to determining whether a matter comes within navigation and shipping within the meaning of s. 91(10) of the Constitution Act, 1867 , just as it applies to determining whether a matter comes within any other head of power. Applying the pith and substance test typically begins by characterizing an impugned law or provision in order to assign it to a head of power since, in most cases, courts are presented with a law enacted either by Parliament or a provincial legislature, and the parties’ dispute is over whether that law is intra vires or ultra vires its enacting body.

However, where, as in this case, there is no law to assign to either of those heads of power but rather a claim for damages and loss of profit, the division of powers analysis requires identification of the subject matter engaged by the claim, which must be assigned to one of the Constitution’s heads of power. Whether the matter is raised by a law or a claim does not change which order of government has the constitutional authority to legislate with respect to the matter. In many cases, identifying the matter at issue will resolve the allocation of the matter to a head of power with little difficulty.

Examining a claim, rather than a statute, to determine the matter at issue is frequently required in cases in which it is alleged by one party that a matter falls within Parliament’s authority over navigation and shipping, much of the law relied upon by litigants and courts in navigation and shipping cases is non-statutory. There is disagreement with the majority that the issue is about jurisdiction over a substantive body of law rather than jurisdiction over a claim.

The majority analyzes the dispute between the parties (i.e., the law as applied to the facts), which is indistinguishable from characterizing a claim and entails the same inquiry. Having identified the relevant matter, a court must determine which level of government has legislative authority in relation thereto. Depending on these determinations, however — the matter and which level of government holds legislative authority — the analysis as to the applicable law may not end there. Recourse to constitutional doctrines such as paramountcy and interjurisdictional immunity may be necessary.

These constitutional doctrines apply to matters said to come within Parliament’s power over navigation and shipping, as they would apply to any matter said to come within any other head of power.

Section 22 of the Federal Courts Act (“ FCA ”) does not, and cannot, define the scope of Parliament’s legislative authority over navigation and shipping. It is merely a statutory grant of jurisdiction by Parliament to the Federal Court. While Canadian maritime law is a body of federal law which governs matters falling within s. 91(10) of the Constitution Act, 1867 , it is the head of power itself — that is, navigation and shipping — which defines the boundaries of federal jurisdiction. Merely because a matter arises in a maritime context does not automatically consign the matter to navigation and shipping.

Although s. 22 of the FCA may represent Parliament’s considered view of what constitutes “Canadian maritime law”, it cannot be taken as stating the content of Parliament’s legislative authority over navigation and shipping under s. 91(10) . It does not define Canadian maritime law or create operative law. The division of powers inquiry does not end simply because a claim can be shown to fall within s. 22(2); a mere grant of jurisdiction to the Federal Court is ineffective without an existing body of federal law to nourish the statutory grant of jurisdiction.

Parliament may not, by enactment, define the scope of its legislative authority so as to displace the operation of the pith and substance test as the means by which a matter is determined to come within or fall outside that legislative authority. The fact of a legislative grant of jurisdiction to the Federal Court is therefore legally insignificant to a division of powers analysis. Where a matter is said to come within Parliament’s legislative authority over navigation and shipping, there is no logical basis to apply a different test based on whether an integral connection to Canadian maritime law is shown.

A division of powers analysis always entails applying the pith and substance test. One cannot apply the pith and substance test to determine whether a matter comes within provincial legislative authority, while applying a different test to determine whether it comes within federal legislative authority.

The division of powers analysis is a single determination, made by applying a single test, about which heads of power a particular mattercomes within. The integral connection test superimposes an additional test onto the pith and substance test; it speaks not to whether aparticular activity falls within s. 91(10), but to the depth of the connection between that activity and the federal power over navigationand shipping. No such test exists for the other heads of power, and no such test should be applied in determining whether a matter fallswithin Parliament’s legislative authority over navigation and shipping.

Concerns for uniformity cannot drive the division of powers analysis. Uniformity of maritime law is an importantconsideration in deciding the scope of Parliament’s legislative authority over navigation and shipping. It properly drives how mattersfalling within federal heads of power are treated, particularly where the laws governing such subject matters apply across provincialboundaries.

However, uniformity does not drive the prior inquiry into whether matters come within those federal heads of power at all.Concerns for uniform treatment of matters coming within a federal head of power such as navigation and shipping cannot always prevail,so as to oust provincial laws of general application. Section 91(10) is not a watertight compartment granting authority for federal lawswhose operation cannot be incidentally affected by provincial heads of power.

Such an understanding of s. 91(10) would be squarelyopposed to the Court’s jurisprudence on federalism, and to the modern realities of the Canadian federation. The Court has held that thelaw favours, where possible, the concurrent exercise of power by both levels of government. There is room for the application ofprovincial laws in the maritime context. Although this leaves the doctrine of interjurisdictional immunity with an exceedingly limitedrole in the division of powers analysis, this is not cause for concern.

Interjurisdictional immunity should not be the first recourse in adivision of powers dispute — a broad application of interjurisdictional immunity is inconsistent with the notion of flexible federalism andfails to account for the fact that overlapping powers are unavoidable. Resort to the dominant tide of pith and substance should be favoured over resort to interjurisdictional immunity, which formsa mere undertow of federalism jurisprudence. Attempting to define a core of federal jurisdiction poses dangers, particularly in the contextof broad and general heads of federal power that apply to numerous activities.

Courts must thus be especially cautious when attemptingto define the core of navigation and shipping, as the federal head of power over navigation and shipping is undeniably broad.Interjurisdictional immunity risks creating serious uncertainty and, Parliament can always make its legislation sufficiently precise toleave those subject to it with no doubt as to the application of provincial legislation.

While the scope of legislative authority conferred upon Parliament in relation to navigation and shipping is undeniablybroad, courts must be careful to ensure that it does not swallow up matters that fall within provincial legislative authority, whether overproperty and civil rights, or other provincial heads of power. The first step in determining the matter raised by the shipping company’sclaim is to characterize the nature of the contract. The claims arising in this case relate to the contractual terms agreed to between theparties pursuant to a contract for the sale of goods.

As such, the matter at issue is the sale of goods, albeit in the maritime context. Thischaracterization is consistent with the Court’s past jurisprudence. In cases that concern whether a matter falls within s. 91(10) or 92(13)of the Constitution Act, 1867, the Court has repeatedly defined the matter as a given area of private law in the maritime context. Thischaracterization also reflects the appropriate degree of precision.

The weight of Canadian jurisprudence supports the conclusion that the sale of goods, even in the maritime context, is, in pithand substance, a matter coming within the jurisdiction conferred on provincial legislatures by s. 92(13). Sale of goods in the maritimecontext did not form part of the historical body of law administered by the English admiralty courts. There is nothing particularly“maritime” about the sale of goods that would require its consignment to Parliament’s legislative authority.

Sale of goods does notinvolve the safe carriage of goods, shipping, the seaworthiness of a ship, good seamanship, or international maritime conventions, norare there special rules of procedure governing the sale of goods in the maritime context which would benefit from the uniformapplication across jurisdictions. Where the provinces have developed a comprehensive body of law governing the sale of goods, there isno good reason for the Court to disregard it merely because the claim arising from a particular sale bears some relation to maritimeactivities.

Such an expansive definition of a federal head of power would be an affront to a principal source of provincial legislativecompetence to regulate local trade and commerce and, therefore, to the constitutional division of powers, which is the primary textualexpression of the principle of federalism in the Canadian Constitution.

Accordingly, the claim in this case raises a matter which is, in pithand substance, one of property and civil rights, exclusive legislative authority over which rests with the provincial legislatures unders. 92(13) and the provisions of the C.C.Q., including arts. 1729 and 1733 thereof, govern the dispute. Since the claim raises, in pith andsubstance, a matter falling solely within s. 92(13), there is no need to consider whether to apply the doctrines of paramountcy orinterjurisdictional immunity. Cases Cited By Gascon, Côté and Rowe JJ. Applied: Canadian Western Bank v.

Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3; considered: ITO — International TerminalOperators Ltd. v. Miida Electronics Inc., (SCC), [1986] 1 S.C.R. 752; Bow Valley Husky (Bermuda) Ltd. v. Saint JohnShipbuilding Ltd., (SCC), [1997] 3 S.C.R. 1210; Ordon Estate v. Grail, (SCC), [1998] 3 S.C.R. 437;Q.N.S. Paper Co. v. Chartwell Shipping Ltd., (SCC), [1989] 2 S.C.R. 683; Wire Rope Industries of Canada

(1966) Ltd.v. B.C. Marine Shipbuilders Ltd., (SCC), [1981] 1 S.C.R. 363; Monk Corp. v. Island Fertilizers Ltd., (SCC), [1991] 1 S.C.R. 779; Antares Shipping Corp. v. The Ship “Capricorn”, (SCC), [1980] 1 S.C.R. 553; Quebecand Ontario Transportation Co. v. The Ship “Incan St. Laurent”, (SCC), [1980] 2 S.C.R. 242, aff’g (FCA), [1979] 2 F.C. 834; referred to: Associated Metals & Minerals Corp. v. The “Evie W”, (FCA), [1978] 2 F.C.710; Porto Seguro Companhia De Seguros Gerais v. Belcan S.A., (SCC), [1997] 3 S.C.R. 1278; Isen v. Simms, 2006SCC 41, [2006] 2 S.C.R. 349; McKay v.

The Queen, (SCC), [1965] S.C.R. 798; Whitbread v. Walley, (SCC), [1990] 3 S.C.R. 1273; Reference re Pan-Canadian Securities Regulation, 2018 SCC 48, [2018] 3 S.C.R. 189; Reference reFirearms Act (Can.), 2000 SCC 31, [2000] 1 S.C.R. 783; Reference re Assisted Human Reproduction Act, 2010 SCC 61, [2010] 3 S.C.R.457; Chatterjee v. Ontario (Attorney General), 2009 SCC 19, [2009] 1 S.C.R. 624; Quebec (Attorney General) v. Canada (AttorneyGeneral), 2015 SCC 14, [2015] 1 S.C.R. 693; Reference re Securities Act, 2011 SCC 66, [2011] 3 S.C.R. 837; Ward v.

Canada (AttorneyGeneral), 2002 SCC 17, [2002] 1 S.C.R. 569; General Motors of Canada Ltd. v. City National Leasing, (SCC), [1989]1 S.C.R. 641; Bank of Montreal v. Hall, (SCC), [1990] 1 S.C.R. 121; Tennant v. Union Bank of Canada, [1894] A.C.31; Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, [2013] 3 S.C.R. 53; British Columbia (Attorney General) v. Lafarge

Canada Inc., 2007 SCC 23, [2007] 2 S.C.R. 86; Triglav v. Terrasses Jewellers Inc., (SCC), [1983] 1 S.C.R. 283;Reference re Industrial Relations and Disputes Investigation Act, (SCC), [1955] S.C.R. 529; Montreal City v. MontrealHarbour Commissioners, (UK JCPC), [1926] A.C. 299; Queddy River Driving Boom Co. v. Davidson (1883), 1883CanLII 60 (SCC), 10 S.C.R. 222; Tropwood A.G. v. Sivaco Wire & Nail Co., (SCC), [1979] 2 S.C.R. 157; ArisSteamship Co. v. Associated Metals & Minerals Corp., (SCC), [1980] 2 S.C.R. 322; Holt Cargo Systems Inc. v.

ABCContainerline N.V. (Trustees of), 2001 SCC 90, [2001] 3 S.C.R. 907; Rogers Communications Inc. v. Châteauguay (City), 2016 SCC 23,[2016] 1 S.C.R. 467; Quebec (Attorney General) v. Canadian Owners and Pilots Association, 2010 SCC 39, [2010] 2 S.C.R. 536; Isen v.Simms, 2005 FCA 161, [2005] 4 F.C.R. 563; Citizens Insurance Co. of Canada v. Parsons (1881), 7 App. Cas. 96; Gilroy Sons & Co. v.Price & Co., [1893] A.C. 56; Goodfellow (Charles) Lumber Sales Ltd. v. Verreault, (SCC), [1971] S.C.R. 522; The“Neptune” (1834), 3 Hagg. 129, 166 E.R. 354; Argosy Marine Co. v. SS “Jeannot D”, [1970] Ex. C.R. 351; Webster v.

Seekamp (1821),4 B. & Ald. 352, 106 E.R. 966; The “Flecha” (1854), 1 Sp. Ecc. & Ad. 438, 164 E.R. 252; Momsen v. The Ship Aurora (1913), (CA EXC), 15 Ex. C.R. 27; Hawker Industries Ltd. v. Santa Maria Shipowning & Trading Co., S.A., (FCA), [1979] 1 F.C. 183; Robillard v. The Sailing Sloop St. Roch and Charland (1921), (CA EXC), 21 Ex. C.R. 132;Quebec North Shore Paper Co. v. Canadian Pacific Ltd., (SCC), [1977] 2 S.C.R. 1054; Casden v. Cooper EnterprisesLtd. (1993), 151 N.R. 199; Salvail Saint-Germain v. Location Holand (1995) ltée, 2017 QCCS 5155; The Queen v. Canadian VickersLtd., (FC), [1978] 2 F.C. 675; R. v.

Canadian Vickers Ltd., (FCA), [1980] 1 F.C. 366; BensonBros. Shipbuilding Co.

(1960) Ltd. v. Mark Fishing Co. (1978), (FCA), 21 N.R. 260; Upper Lakes Shipping Ltd. v.Saint John Shipbuilding and Dry Dock Co. (1988), 86 N.R. 40; Deveau (I.) Fisheries Ltd. v. Cummins Americas Inc. (1996), 115 F.T.R.254; Dome Petroleum Ltd. v. Excelsior Enterprises Inc. (1989), 30 F.T.R. 9; Groupe Maritime Verreault Inc. v. Alcan Métal Primaire,2011 FCA 319, 430 N.R. 124; John Deere Plow Co. v. Wharton, (UK JCPC), [1915] A.C. 330; Multiple Access Ltd. v.McCutcheon, (SCC), [1982] 2 S.C.R. 161; Rio Hotel Ltd. v. New Brunswick (Liquor Licensing Board), (SCC), [1987] 2 S.C.R. 59; Law Society of British Columbia v.

Mangat, 2001 SCC 67, [2001] 3 S.C.R. 113; Bell Canada v. Quebec(Commission de la santé et de la sécurité du travail), (SCC), [1988] 1 S.C.R. 749; O’Grady v. Sparling, (SCC), [1960] S.C.R. 804; Hodge v. The Queen (1883), 9 App. Cas. 117; Reference re Employment Insurance Act (Can.), ss. 22 and 23,2005 SCC 56, [2005] 2 S.C.R. 669; Alberta (Attorney General) v. Moloney, 2015 SCC 51, [2015] 3 S.C.R. 327; Attorney-General forCanada v. Attorney-General for Ontario, (UK JCPC), [1937] A.C. 326; Saskatchewan (Attorney General) v. LemareLake Logging Ltd., 2015 SCC 53, [2015] 3 S.C.R. 419; Rothmans, Benson & Hedges Inc. v.

Saskatchewan, 2005 SCC 13, [2005] 1S.C.R. 188; Bank of Montreal v. Marcotte, 2014 SCC 55, [2014] 2 S.C.R. 725. By Wagner C.J. and Brown J. Applied: ITO — International Terminal Operators Ltd. v. Miida Electronics Inc., (SCC), [1986] 1 S.C.R.752; Canadian Western Bank v. Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3; Monk Corp v. Island Fertilizers Ltd., (SCC),[1991] 1 S.C.R. 779; distinguished: Antares Shipping Corp. v. The Ship “Capricorn”, (SCC), [1980] 1 S.C.R. 553;considered: 9171-7702 Quebec Inc. v. Canada, 2013 FC 832, 438 F.T.R. 11; Ordon Estate v.

Grail, (SCC), [1998] 3S.C.R. 437; Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44, [2013] 3 S.C.R. 53; Bow Valley Husky (Bermuda) Ltd. v.Saint John Shipbuilding Ltd., (SCC), [1997] 3 S.C.R. 1210; referred to: Whitbread v. Walley, (SCC),[1990] 3 S.C.R. 1273; Reference re Secession of Quebec, (SCC), [1998] 2 S.C.R. 217; Northern Telecom Canada Ltd.v. Communication Workers of Canada, (SCC), [1983] 1 S.C.R. 733; Reference re Anti-Inflation Act, (SCC), [1976] 2 S.C.R. 373; Reference re Firearms Act (Can.), 2000 SCC 31, [2000] 1 S.C.R. 783; Kitkatla Band v.

British Columbia(Minister of Small Business, Tourism and Culture), 2002 SCC 31, [2002] 2 S.C.R. 146; Global Securities Corp. v. British Columbia(Securities Commission), 2000 SCC 21, [2000] 1 S.C.R. 494; Quebec (Attorney General) v. Lacombe, 2010 SCC 38, [2010] 2 S.C.R.453; Quebec North Shore Paper Co. v. Canadian Pacific Ltd., (SCC), [1977] 2 S.C.R. 1054; McNamara Construction(Western) Ltd. v. The Queen, (SCC), [1977] 2 S.C.R. 654; Q.N.S. Paper Co. v. Chartwell Shipping Ltd., (SCC), [1989] 2 S.C.R. 683; Skaarup Shipping Corp. v. Hawker Industries Ltd., (FCA), [1980] 2 F.C. 746; Canada(Human Rights Commission) v.

Canadian Liberty Net, (SCC), [1998] 1 S.C.R. 626; Isen v. Simms, 2006 SCC 41,[2006] 2 S.C.R. 349; Wire Rope Industries of Canada

(1966) Ltd. v. B.C. Marine Shipbuilders Ltd., (SCC), [1981] 1S.C.R. 363; Triglav v. Terrasses Jewellers Inc., (SCC), [1983] 1 S.C.R. 283; R. v. Comeau, 2018 SCC 15, [2018] 1S.C.R. 342; Reference re Pan-Canadian Securities Regulation, 2018 SCC 48, [2018] 3 S.C.R. 189; Alberta (Attorney General) v.Moloney, 2015 SCC 51, [2015] 3 S.C.R. 327; 114957 Canada Ltée (Spraytech, Société d’arrosage) v. Hudson (Town), 2001 SCC 40,[2001] 2 S.C.R. 241; OPSEU v.

Ontario (Attorney General), (SCC), [1987] 2 S.C.R. 2; Canada (Attorney General) v.PHS Community Services Society, 2011 SCC 44, [2011] 3 S.C.R. 134; British Columbia (Attorney General) v. Lafarge Canada Inc.,2007 SCC 23, [2007] 2 S.C.R. 86; Reference re Assisted Human Reproduction Act, 2010 SCC 61, [2010] 3 S.C.R. 457; Casden v.Cooper Enterprises Ltd. (1993), 151 N.R. 199; Cork v. Greavette Boats Ltd., (ON CA), [1940] O.R. 352; Curtis v.Rideout (1980), 27 Nfld. & P.E.I.R. 392; Salvail Saint-Germain v. Location Holand (1995) ltée, 2017 QCCS 5155; Quebec and OntarioTransportation Co. v. The Ship “Incan St.

Laurent”, (SCC), [1980] 2 S.C.R. 242; The Parchim, [1918] A.C. 157;Cammell Laird & Co. v. Manganese Bronze and Brass Co., [1933] 2 K.B. 141; Behnke v. Bede Shipping Co., [1927] 1 K.B. 649;Manchester Liners, Ld. v. Rea, Ld., [1922] 2 A.C. 74; Reference re Securities Act, 2011 SCC 66, [2011] 3 S.C.R. 837. Statutes and Regulations Cited Admiralty Act, 1891, S.C. 1891, c. 29. Admiralty Act, 1934, S.C. 1934, c. 31. Admiralty Court Act, 1840 (U.K.), 3 & 4 Vict., c. 65, ss. 4, 6. Admiralty Court Act, 1861 (U.K.), 24 Vict., c. 10, ss. 4, 5. Canada Shipping Act, R.S.C. 1970, c. S-9. Civil Code of Québec, arts. 1729, 1733.

Constitution Act, 1867 , ss. 91 , 92 . Contributory Negligence Act , R.S.N. 1990, c. C-33. Federal Courts Act , R.S.C. 1985, c. F-7, ss. 2 , 22 , 42 . Marine Liability Act , S.C. 2001, c. 6 , Sch. 3 (Hague-Visby Rules), art. III. Marine Machinery Regulations , SOR/90-264 . Sale of Goods Act , R.S.B.C. 1979, c. 370. Sale of Goods Act , R.S.N. 1970, c. 341. Sale of Goods Act , R.S.O. 1937, c. 180. Sale of Goods Act , R.S.P.E.I. 1974, c. S-1. Sale of Goods Act, 1893 (U.K.), 56 & 57 Vict., c. 71. Supreme Court of Judicature Act, 1873 (U.K.) , 36 & 37 Vict ., c . 66, ss. 16, 34 .

Workplace Health, Safety and Compensation Act , R.S.N.L. 1990, c. W-11 . Authors Cited Abel, Albert S. “The Neglected Logic of 91 and 92” (1969), 19 U.T.L.J. 487. Braën, André. Le droit maritime au Québec . Montréal: Wilson & Lafleur, 1992. Brun, Henry, Guy Tremblay et Eugénie Brouillet. Droit constitutionnel , 6 e éd. Cowansville, Que.: Yvon Blais, 2014. Chevrette, François, et Herbert Marx. Droit constitutionnel: Notes et jurisprudence . Montréal: Les Presses de l’Université de Montréal, 1982. Chircop, Aldo, et al. Canadian Maritime Law , 2nd ed. Toronto: Irwin Law, 2016. Friedell, Steven F.

Benedict on Admiralty , vol. 1, 7th ed. (rev.). New York: M. Bender, 1974 (loose-leaf updated May 2019, release 138). Gélinas, Fabien. “La doctrine des immunités interjuridictionnelles dans le partage des compétences: éléments de systématisation”, dans Mélanges Jean Beetz . Montréal: Thémis, 1995, 471. Giaschi, Christopher J. The Application of Provincial Statutes to Maritime Matters Revisited , April 7, 2017 (online: http://www.admiraltylaw.com/papers/Application%20of%20Provincial%20laws%20to%20Maritime%20Matters%20Revisited.pdf; archived version: https://www.scc-csc.ca/cso-dce/2019SCC-CSC58_1_eng.pdf).

Henley, David G. Canadian Maritime Law — A Work In Progress , May 24, 2014 (online: http://www.cmla.org/papers/Canadian_Maritime_Law_-_Henley.pdf; archived version: https://www.scc-csc.ca/cso-dce/2019SCC- CSC58_2_eng.pdf ). Hogg, Peter W. Constitutional Law of Canada , vol. 1, 5th ed. Supp. Scarborough, Ont.: Thomson/Carswell, 2007 (updated 2018, release 1). Honickman, Asher. “Watertight Compartments: Getting Back to the Constitutional Division of Powers” (2017), 55 Alta. L. Rev. 225. Keyes, John Mark, and Carol Diamond. “Constitutional Inconsistency in Legislation —

Interpretation and the Ambiguous Role of Ambiguity” (2017), 48 Ottawa L. Rev. 313. Lederman, William Ralph. “Classification of Laws and the British North America Act”, in The Courts and the Canadian Constitution . Toronto: McClelland and Stewart, 1964, 177. Mayers, Edward Courtenay. Admiralty Law and Practice in Canada , 1st ed. Toronto: Carswell, 1916. Monahan, Patrick J., Byron Shaw and Padraic Ryan. Constitutional Law , 5th ed. Toronto: Irwin Law, 2017. Mundell, D. W. “Tests for Validity of Legislation under the British North America Act: A Reply to Professor Laskin” (1955), 33 Can. Bar Rev. 915.

O’Connor, John G. “ Admiralty Jurisdiction and Canadian Maritime Law in the Federal Courts: The Next Forty Years ”, a paper prepared for the National Judicial Institute’s 2011 Federal Courts Education Seminar in Ottawa, October 28, 2011 (online: https://www.fca- caf.gc.ca/fca-caf/pdf/03E.%20OConnor_Maritime%20Law%20Jurisdiction_2011-10-17_ENG.pdf; archived version: https://www.scc- csc.ca/cso-dce/2019SCC-CSC58_3_eng.pdf). Régimbald, Guy, and Dwight Newman. The Law of the Canadian Constitution , 2nd ed. Toronto: LexisNexis, 2017.

Roscoe, Edward Stanley. The Admiralty Jurisdiction and Practice of the High Court of Justice, with which is Incorporated “Williams and Bruce’s Admiralty Practice” with Forms and Precedents , 5th ed. by Geoffrey Hutchinson. London: Stevens and Sons, 1931. Stone, Arthur J. “Canada’s Admiralty Court in the Twentieth Century” (2002), 47 McGill L.J. 511. Sullivan, Ruth. Sullivan on the Construction of Statutes , 6th ed. Markham, Ont.: LexisNexis, 2014. Tetley, William. “A Definition of Canadian Maritime Law” (1996), 30 U.B.C. L. Rev. 137. Tetley, William. International Maritime and Admiralty Law .

Cowansville, Que.: Yvon Blais, 2002. Tetley, William. Maritime Liens and Claims , 2nd ed. Montréal: Yvon Blais, 1998. Tetley, William. “The General Maritime Law — The Lex Maritima” (1994), 20 Syracuse J. Int’l L. & Com. 105. APPEAL from a judgment of the Quebec Court of Appeal (Vézina, Mainville and Healy JJ.A.), 2017 QCCA 1471 , [2017] AZ-51429098, [2017] J.Q. n o 13424 (QL), 2017 CarswellQue 8576 (WL Can.), setting aside a decision of Paquette J., 2015 QCCS 5514 , [2015] AZ-51234224, [2015] Q.J. No. 12923 (QL), 2015 CarswellQue 11288 (WL Can.). Appeal allowed. Danièle Dion and David G.

Colford , for the appellants. George J. Pollack , Michael H. Lubetsky and Joseph-Anaël Lemieux , for the respondents. Sean Hanley and Audra Ranalli , for the intervener the Attorney General of Ontario. Jean-François Beaupré and Frédéric Perreault , for the intervener the Attorney General of Quebec. The judgment of Moldaver , Karakatsanis, Gascon, Côté, Rowe and Martin JJ. was delivered by Gascon, Côté and Rowe JJ. — TABLE OF CONTENTS Paragraph I. Overview 1 II. Analysis 7 A. The Nature, Content, and Scope of Canadian Maritime Law 7

(1) Nature: What Is Canadian Maritime Law? 8

(2) Content: How Are the Substantive Rules of Canadian Maritime Law Determined? 19

(3) Scope: What Is the Relationship Between Canadian Maritime Law and Navigation and Shipping? 24 B. Parliament’s Legislative Authority Over the Matter at Issue 30

(1) The Characterization of the Matter as a Sale of Marine Engine Parts for Use on a Commercial Vessel 31

(2) The Classification of the Matter as Being Within Navigation and Shipping . 38 (

a) The Breadth of Navigation and Shipping 43 (

b) The Integral Connection Test 50 (

c) Application to the Facts 59 C. The Overlap Between Canadian Maritime Law and the C.C.Q. 81

(1) The Concurrent Application of Federal and Provincial Laws 82

(2) The Applicability and Operability of the C.C.Q. Provisions 86 (

a) Interjurisdictional Immunity 90 (

b) Federal Paramountcy 99 III. Conclusion 107 I. Overview [ 1 ] This appeal centres on a dispute between a Canadian shipping company located in Quebec, Desgagnés Transport Inc. (“TDI”), and a manufacturer and supplier of marine engines, Wärtsilä Nederland B.V. and its Canadian division, Wärtsilä Canada Inc. (collectively “Wärtsilä”). The action arises out of the failure of engine parts — a new bedplate, a reconditioned crankshaft and connecting rods — that TDI purchased from Wärtsilä to repair the engine of one of its oceangoing ships.

The central controversy on appeal is what law governs TDI’s contractual claim, which is founded upon a latent defect in the engine parts purchased from Wärtsilä: Canadian maritime law [1] or the Civil Code of Québec (“ C.C.Q. ”). If Canadian maritime law governs this dispute, the limitation of liability clause in the parties’ contract is arguably valid and enforceable, limiting Wärtsilä’s liability for the engine parts’ failure to €50,000.

If the C.C.Q. governs, however, the limitation clause is unenforceable, and Wärtsilä’s liability extends to more than CAN $5.6 million. [ 2 ] Like our colleagues, we conclude that the C.C.Q. governs this dispute, and that Wärtsilä cannot rely on the limitation of liability clause in the parties’ contract in these circumstances. However, we disagree with the approach they propose to

allow the appeal and thus, we arrive at this conclusion for substantially different reasons. [3] To determine whether Canadian maritime law or the C.C.Q. applies in this case, we must determine whether thematter in dispute falls within the federal power over navigation and shipping, or the provincial power over property and civil rights, orboth. This is accomplished through a division of powers analysis, which requires: (1) characterizing the relevant matter; and (2)classifying it according to the heads of legislative power enumerated in the Constitution Act, 1867.

As we will explain, the Canadianmaritime law at issue in this proceeding is non-statutory.

As a result, a modified pith and substance test must be applied at thecharacterization stage: one that looks at the substantive law at issue and to the particular fact situation, rather than to purpose and effect.At the classification stage, the integral connection test is the proper method for determining whether the matter is subject to the federalpower over navigation and shipping enumerated at s. 91(10) of the Constitution Act, 1867, and, thus, would not come exclusively withinprovincial jurisdiction. [4] The Court made clear in Canadian Western Bank v.

Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3, that the division ofpowers between the federal and provincial governments must be managed with a view to flexible federalism. Where possible, the Courthas sought to maintain a role for the two orders of government in areas of overlapping jurisdiction. This approach does not simplydisappear in the maritime context, notwithstanding the unique historical development of Canadian maritime law. [5] Parliament’s authority over navigation and shipping, and consequently the scope of Canadian maritime law, isbroad.

As we see it, the sale of marine engine parts intended for use on a commercial vessel is sufficiently connected to navigation andshipping so as to be validly governed by Canadian maritime law. However, there is also no doubt that art. 1733 C.C.Q. — pertaining towarranties in contracts of sale — is a validly enacted provincial law that, in pith and substance, concerns a matter of property and civilrights pursuant to s. 92(13) of the Constitution Act, 1867.

In this case, the sale of marine engine parts thus gives rise to a double aspectscenario: a non-statutory body of federal law and a provincial law both validly directed at the same fact situation overlap. However,art. 1733 C.C.Q. remains applicable and operative. Neither interjurisdictional immunity nor federal paramountcy ousts the application ofart. 1733 C.C.Q.: interjurisdictional immunity is inapplicable because contractual issues surrounding the sale of marine engine parts arenot at the core of navigation and shipping, and federal paramountcy cannot be triggered by Canadian non-statutory maritime law.

Leftwith two applicable bodies of law, art. 1733 C.C.Q. is ultimately the law governing this dispute; since it is a legislative enactment,Canadian non-statutory maritime law does not prevail over it. [6] We are content to rely on our colleagues’

summary of the facts and judicial history. To that

summary, we wouldadd that the constitutional issues in the present case arise only because the choice of law clause in the agreement (clause 15.1) does notindicate whether Canadian maritime law or Quebec civil law governs the contract (A.R., at p. 89). The clause merely provides that “[t]heContract shall be governed by and interpreted in accordance with the laws in force at the registered office of the Supplier”. Weunderstand that the trial judge interpreted the “office of the Supplier” as referring to Wärtsilä’s place of business in Montréal, Quebec,where the contract was formed (2015 QCCS 5514, at para. 32 ).

Yet the “laws in force” in Quebec include both provincial andfederal laws (see ITO — International Terminal Operators Ltd. v. Miida Electronics Inc., (SCC), [1986] 1 S.C.R. 752, atp. 777; Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., (SCC), [1997] 3 S.C.R. 1210, at para. 87).This is why it remains necessary to undertake a constitutional analysis in the present case. II. Analysis A. The Nature, Content, and Scope of Canadian Maritime Law [7] In this appeal, the parties argued extensively about the nature, content, and scope of Canadian maritime law.

Inparticular, TDI contends that Canadian maritime law does not purport to govern the contractual claim at issue, and that in any event,there is no substantive rule of Canadian maritime law applicable to the disputed limitation of liability clause. We disagree with both thesearguments, and begin our analysis with a general overview of this body of law.

(1) Nature: What Is Canadian Maritime Law? [8] Canadian maritime law is a body of federal law that purports to govern maritime and admiralty disputes in Canada.It is recognized in the Federal Courts Act, R.S.C. 1985, c. F-7 (“F.C.A.”), at ss. 2, 22, and 42. These three statutory provisions eachaddress a different aspect of Canadian maritime law: s. 42 recognizes its continued existence in Canada; s. 2(1) describes its substantivecontent; and s. 22(1) vests jurisdiction over Canadian maritime law claims concurrently in the Federal Court and provincial SuperiorCourts. They state:

Definitions 2

(1) In this Act, . . . Canadian maritime law means the law that was administered by the Exchequer Court of Canada on its Admiralty side by virtue ofthe Admiralty Act,

chapter A-1 of the Revised Statutes of Canada, 1970, or any other statute, or that would have been so administered ifthat Court had had, on its Admiralty side, unlimited jurisdiction in relation to maritime and admiralty matters, as that law has been alteredby this Act or any other Act of Parliament;

. . . Navigation and shipping 22

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

Maritime law continued 42 Canadian maritime law as it was immediately before June 1, 1971 continues subject to such changes therein as may be made by thisAct or any other Act of Parliament. [9] The nature of this substantive body of federal law has been the subject of a number of decisions from this Court.These make clear that Canadian maritime law is a comprehensive body of law, uniform throughout Canada, that purports to deal with allclaims in respect of maritime and admiralty matters, subject only to the scope of the federal power over navigation and shipping unders. 91(10) of the Constitution Act, 1867 (ITO, at pp. 776-77 and 779; Ordon Estate v.

Grail, (SCC), [1998] 3 S.C.R.437, at para. 71). [10] The term “comprehensive” refers to the fact that Canadian maritime law, like the common law, is a seamless web thatis capable of resolving any dispute that falls within the scope of its application.

To understand why this is so, it is necessary to trace thehistory of Canadian maritime law to its English roots. [11] Canadian maritime law is the progeny of English maritime law as administered by the High Court of Admiralty inEngland until 1874 and the unified High Court of Justice thereafter (Supreme Court of Judicature Act, 1873 (U.K.), 36 & 37 Vict., c. 66;see also A. J. Stone, “Canada’s Admiralty Court in the Twentieth Century” (2002), 47 McGill L.J. 511, at p. 527). Those courtsadministered maritime law in England on the basis of jurisdiction.

By this we mean that, like English common law courts (e.g. the Courtof Queen’s Bench), as long as the High Court of Admiralty had jurisdiction over a dispute it was capable of providing an answer to it.The late Professor William Tetley explained it in this way: . . . English maritime law is . . . based on jurisdiction, a feature which is of common law origin. If the court has jurisdiction to hear aclaim for damage by a ship or claims of cargo against a ship, for example, then the right of a lien exists without there being legislationcreating maritime liens and mortgages. . . .

In other words, once the court’s jurisdiction is established in the U.K., the substantive law(the governing right) is found in the general maritime law. . . . [Emphasis in original; footnote omitted.] (W. Tetley, “The General Maritime Law — The Lex Maritima” (1994), 20 Syracuse J. Int’l L. & Com. 105, at p. 116) [12] In the modern era, neither the United Kingdom nor Canada continues to have distinct admiralty courts.

In Canada,Parliament adopted The Admiralty Act, 1891, S.C. 1891, c. 29, which conferred to the existing Exchequer Court — the predecessor of theFederal Court — the jurisdiction exercised by the English High Court of Admiralty with regard to maritime and admiralty matters.However, the merger of jurisdiction did not equate to the merger of Canadian maritime law into the common law, notwithstanding thatover time, Canadian maritime law has borrowed heavily from it. Indeed, ss. 2 and 42 of the F.C.A. reflect this: Canadian maritime lawcontinues to exist as a body of law with its own distinct identity.

This distinct identity is consistent with the historical development ofCanadian maritime law: English maritime law never formed part of the ordinary municipal law of England, nor did it form part of thecommon law as adopted by various provinces of Canada (Associated Metals & Minerals Corp. v. The “Evie W”, (FCA), [1978] 2 F.C. 710, at pp. 716-17; W. Tetley, “A Definition of Canadian Maritime Law” (1996), 30 U.B.C. L. Rev. 137, at p. 151;see also S. F.

Friedell, Benedict on Admiralty (7th ed. rev. (loose-leaf)), vol. 1, at pp. 7-4 to 7-5). [13] Thus, while the same Canadian court may now adjudicate common law, civil law, and Canadian maritime lawaspects of a dispute, each body of law is distinct within the Canadian system. And when Canadian maritime law validly governs adispute, that body of law represents a seamless and ubiquitous web that is capable of resolving any legal dispute.

Professor Tetley, in thearticle excerpted above, confirms this understanding of Canadian maritime law: Where the Federal Court of Canada exercises admiralty jurisdiction in Canada, a maritime right exists (as in the United Kingdom),without a statute being required. Thus, if there is jurisdiction, the governing law is the general maritime law of England, “received” intoCanadian law as of 1934 (or 1891), when the Admiralty Acts were adopted by the Federal Parliament, unless amended by a specificstatute or judicial precedent. [Emphasis in original; footnote omitted.]

(Tetley (1994), at p. 117) [14] This conception of the comprehensiveness of Canadian maritime law has formed the basis for a number of decisionsof the Court. In ITO, McIntyre J. held that Canadian maritime law encompassed the common law doctrines of tort, contract, and bailmentso as to present litigants with a comprehensive system of dispute resolution.

He wrote that because the English High Court in 1934applied common law principles where necessary to resolve issues within a maritime dispute the body of admiralty law, which was adopted from England as Canadian maritime law, encompassed both specialized rules andprinciples of admiralty and the rules and principles adopted from the common law and applied in admiralty cases as these rules andprinciples have been, and continue to be, modified and expanded in Canadian jurisprudence. [p. 776] [15] In Q.N.S. Paper Co. v.

Chartwell Shipping Ltd., (SCC), [1989] 2 S.C.R. 683, La Forest J. for themajority concluded the same with respect to agency law, writing that the majority of this Court in ITO concluded that Canadian maritime law encompassed the common law principles of tort, contract andbailment. To these I would add, if indeed it is an addition, agency.

For nowhere does it become more obvious that the law is a seamlessweb than when one considers the interplay between contract, agency and tort, to say nothing of bailment. [p. 696] Justice L’Heureux-Dubé, writing in concurrence in Q.N.S., emphasized that where Canadian maritime law does not provide a specificrule governing the situation at hand, courts must extract and adopt relevant principles of law from both the common law and civil law,where appropriate, so as to provide for a coherent resolution to the dispute (p. 725).

Such a method for discerning new Canadianmaritime law rules would only be necessary if Canadian maritime law represented a comprehensive body of law capable of resolving anydispute. [16] Finally, in Bow Valley, the plaintiffs sought to rely upon the Newfoundland Contributory Negligence Act, R.S.N.1990, c. C-33, in the context of a maritime negligence action. They argued that it applied because there was an “absence of federal law”(para. 89) on the matter within Canadian maritime law.

Justice McLachlin (as she then was) wrote, in answer to this argument: On the view I take, there is no “gap” that would allow for the application of provincial law. While the federal government has not passedcontributory negligence legislation for maritime torts, the common law principles embodied in Canadian maritime law remain applicablein the absence of federal legislation.

The question is not whether there is federal maritime law on the issue, but what that law decrees.[Emphasis added; para. 89.] [17] All of these passages reflect an understanding of Canadian maritime law as a seamless web of law that exists inparallel to the common law and that is capable of resolving any dispute falling within the scope of its application. In this way, there areno “gaps” in Canadian maritime law, just as there are no “gaps” in the common law.

And the application of common law or civil lawrules within Canadian maritime law is not an incidental application of provincial private law; they are rather part of that body of federallaw (ITO, at p. 782; Ordon Estate, at para. 71). We thus disagree with TDI’s position that there is no rule within Canadian maritime lawthat could govern the contractual dispute between the parties in the instant case.

Consistent with McIntyre J.’s statement in ITO thatCanadian maritime law is a body of federal law encompassing the common law principles of contract (p. 779), the common lawprinciples relating to the enforceability of contractual limitation of liability clauses for latent defects are very likely part of this body oflaw. However, given our conclusion that Canadian maritime law is ultimately not the governing law in this case, we need not decide thisissue. [18] Before concluding this section, one further aspect of Canadian maritime law should be noted.

Much of Canadianmaritime law is non-statutory law (Ordon Estate, at para. 71), meaning that its principles are derived from precedent and custom. It alsomeans that Canadian maritime law is liable to be developed judicially unless and until it is supplanted by validly enacted federallegislation. The fact that Canadian maritime law has been incorporated into Canadian law by statute, or that it includes precedents thatthemselves relied upon English statutes, does not change its character into statutory law, rendering it untouchable by the courts thatcreated it.

This Court has long taken the view that courts can continue to modify and expand judge-made rules introduced by statute(Porto Seguro Companhia De Seguros Gerais v. Belcan S.A., (SCC), [1997] 3 S.C.R. 1278, at paras. 23-24).

(2) Content: How Are the Substantive Rules of Canadian Maritime Law Determined? [19] In general, Canadian maritime law includes (but is not limited to) the body of law administered in England by theHigh Court on its Admiralty side in 1934, as that body of law has been amended by the Parliament of Canada and developed by judicialprecedent (ITO, at pp. 771 and 776; Ordon Estate, at para. 71). That body of law is an “amalgam of principles deriv[ed] in large partfrom both the common law and the civilian tradition” (Ordon Estate, at para. 71; Q.N.S., at pp. 695-96).

And it borrows from manycommon law doctrines — like tort, contract, bailment, and agency — to resolve disputes within its scope of application (ITO, at p. 776;Q.N.S., at p. 696). [20] Because the scope of Canadian maritime law is limited only by the scope of the federal power over navigation andshipping, there may or may not be readily apparent rules that apply to maritime aspects of every dispute.

However, as already noted, theabsence of readily apparent “rules” does not mean that no Canadian maritime law exists; rather, like the common law, Canadian maritimelaw is ubiquitous and develops rules by analogy where a matter falls within its ambit (see above, at para. 17). [21] In this regard, the Court’s decisions in Ordon Estate and Q.N.S. provide guidance as to how to ascertain the relevantrules of Canadian maritime law.

In Ordon Estate, Iacobucci and Major JJ. wrote, for a unanimous court, that it is important to canvass all of the relevant sources of Canadian maritime law when seeking to determine whether an issue has alreadybeen addressed.

Canadian maritime law has sources which are both statutory and non-statutory, national and international, common lawand civilian . . . includ[ing], but . . . not limited to, the specialized rules and principles of admiralty, and the rules and principles adoptedfrom the common law and applied in admiralty cases, as administered in England by the High Court on its Admiralty side in 1934 and asamended by the Canadian Parliament and developed by judicial precedent to date. [para. 75]

[22] Even where Canadian maritime law does not provide a specific rule governing a maritime issue, courts must rely on asimilar comparative methodology. In Q.N.S., L’Heureux-Dubé J. wrote that “if either the common law or the civil law offers a ‘morecoherent and certain basis’ for resolving the matter at issue, the best solution should be chosen” (p. 725). While L’Heureux-Dubé J.wrote about this in a concurring judgment, the majority in Q.N.S. also contemplated employing a comparative methodology when dealingwith unaddressed questions under Canadian maritime law (Q.N.S., at p. 697, per La Forest J.).

To the foregoing approach we would addthat courts faced with ascertaining Canadian maritime law rules should have regard to related statutes (national and foreign) as well asinternational agreements and conventions to which Canada is a party (Ordon Estate, at paras. 75 and 79; Q.N.S., at p. 697, perLa Forest J.; A. Chircop et al., Canadian Maritime Law (2nd ed. 2016), at p. 173). [23] If a rule of Canadian maritime law has previously been determined, courts may be asked to reform it.

In thoseinstances, courts must “determine whether or not it is appropriate for Canadian non-statutory maritime law to be altered in accordancewith the principles for judicial reform of the law as developed by [the] Court in Watkins v. Olafson, (SCC), [1989] 2S.C.R. 750, and R. v. Salituro, (SCC), [1991] 3 S.C.R. 654, as well as in Bow Valley Husky, . . . and in [Ordon Estate]”(Ordon Estate, at para. 76).

This inquiry should consider “not only the social, moral and economic fabric of Canadian society, but alsothe fabric of the broader international community of maritime states, including the desirability of achieving uniformity betweenjurisdictions in maritime law matters” (Ordon Estate, at para. 79). This is what the Court meant when it stated in Ordon Estate that“Canadian maritime law is not static or frozen.

The general principles established by [the] Court with respect to judicial reform of the lawapply to the reform of Canadian maritime law, allowing development in the law where the appropriate criteria are met” (Ordon Estate, atpara. 71, citing ITO, Bow Valley and Porto Seguro).

(3) Scope: What Is the Relationship Between Canadian Maritime Law and Navigation and Shipping? [24] While the F.C.A. recognizes that Canadian maritime law exists, and that the Federal Court has jurisdiction whensomeone makes a claim by virtue of it, it does not explicitly state when Canadian maritime law purports to govern a particular claim.Some, like the majority of the Court of Appeal (2017 QCCA 1471) in this case, have pointed to s. 22(2) of the F.C.A. in this regard; itlists — non-exhaustively — various maritime-related claims over which the Federal Court has been granted jurisdiction. For example,s. 22(2)(

m) and s. 22(2)(

n) state: Maritime jurisdiction

(2) Without limiting the generality of subsection (1), for greater certainty, the Federal Court has jurisdiction with respect to all of thefollowing: . . . (

m) any claim in respect of goods, materials or services wherever supplied to a ship for the operation or maintenance of the ship,including, without restricting 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; [25] However, while s. 22(2) of the F.C.A. may be an indication by Parliament of the intended scope of Canadianmaritime law, it is not determinative. As the Court explained in ITO, this

section “does no more than grant jurisdiction, and it does notcreate operative law” (p. 772). As a result, we disagree with the majority of the Court of Appeal that s. 22(2) can “dispose of the issue”absent a constitutional challenge (para. 90). [26] The closest the F.C.A. comes to defining the scope of Canadian maritime law is in s. 2, where it refers to that body oflaw being defined by an “unlimited jurisdiction in relation to maritime and admiralty matters”. As a result, we must look to case law todetermine the scope of Canadian maritime law. The Court dealt with that question in ITO.

There, the Court held that Canadian maritimelaw governs any matter that is integrally connected to “maritime or admiralty matters” and is limited only by s. 91 of the ConstitutionAct, 1867. Justice McIntyre wrote: . . . Canadian maritime law [is] a body of federal law dealing with all claims in respect of maritime and admiralty matters. . . . [T]hewords “maritime” and “admiralty” should be interpreted within the modern context of commerce and shipping. In reality, the ambit ofCanadian maritime law is limited only by the constitutional division of powers in the Constitution Act, 1867.

I am aware in arriving atthis conclusion that a court, in determining whether or not any particular case involves a maritime or admiralty matter, must avoidencroachment on what is in “pith and substance” a matter of local concern involving property and civil rights or any other matter whichis in essence within exclusive provincial jurisdiction under s. 92 of the Constitution Act, 1867.

It is important, therefore, to establish thatthe subject-matter under consideration in any case is so integrally connected to maritime matters as to be legitimate Canadian maritimelaw within federal legislative competence. [Emphasis added; p. 774.] In this passage, by referring to the constitutional division of powers, McIntyre J. clarified that the scope of Canadian maritime law islimited only by the scope of the federal head of power over navigation and shipping. [27] In the same vein, in Ordon Estate, this Court essentially construed “maritime and admiralty matters” under s. 2 of theF.C.A. as being limited only by the constitutional division of powers.

The Court reiterated that Canadian maritime law extends to allmatters that are integrally connected to navigation and shipping:

The first step [when determining whether provincial statutes may apply in a maritime context] involves a determination of whether thespecific subject matter at issue in a claim is within the exclusive federal legislative competence over navigation and shipping unders. 91(10)of the Constitution Act, 1867. . . . The test for making this determination is to ask whether the subject matter under considerationin the particular case is so integrally connected to maritime matters as to be legitimate Canadian maritime law within federal legislativecompetence. [para. 73] (See also Isen v.

Simms, 2006 SCC 41, [2006] 2 S.C.R. 349, at para. 21, and Bow Valley, at paras. 83-84 and 86.) [28] Construing “maritime and admiralty matters” as being circumscribed by the scope of navigation and shipping is inkeeping with the presumption of constitutional compliance, which provides that “if the text of the legislation is capable of bearing ameaning that is constitutionally valid, then the courts will give it that meaning” (J. M. Keyes and C. Diamond, “ConstitutionalInconsistency in Legislation —

Interpretation and the Ambiguous Role of Ambiguity” (2017), 48 Ottawa L. Rev. 313, at p. 319; see alsoMcKay v. The Queen, (SCC), [1965] S.C.R. 798, at pp. 803-4; R. Sullivan, Sullivan on the Construction of Statutes(6th ed. 2014), at p. 523; P. W. Hogg, Constitutional Law of Canada (5th ed. Supp.), at pp. 15-23 and 15-26). [29] Courts have thus had to develop a way to ensure that Canadian maritime law remains within its constitutionalbounds. The purpose of the “integral connection test” was (and is) to permit Canadian maritime law to apply only to the extent that doingso is constitutionally permissible.

An inquiry into the scope of Canadian maritime law is therefore “simultaneously an inquiry as to thescope and content of an important aspect of Parliament’s exclusive jurisdiction over navigation and shipping” (Whitbread v. Walley, (SCC), [1990] 3 S.C.R. 1273, at p. 1290). As we will explain below, the integral connection test is thus constitutional innature; in order to ascertain whether Canadian maritime law may apply to a dispute, it is necessary to determine whether the mattercomes within the scope of navigation and shipping under s. 91(10) of the Constitution Act, 1867. B.

Parliament’s Legislative Authority Over the Matter at Issue [30] TDI argues that Canadian maritime law cannot validly regulate its contractual dispute, because the dispute is, in pithand substance, a matter of property and civil rights, and is not integrally connected to navigation and shipping. We disagree with thiscontention, even though we ultimately conclude that the C.C.Q. governs the dispute.

Below, we address the two stages of the division ofpowers analysis: characterizing the matter at issue and classifying it according to the different heads of legislative power (Reference rePan-Canadian Securities Regulation, 2018 SCC 48, [2018] 3 S.C.R. 189, at para. 86; G. Régimbald and D. Newman, The Law of theCanadian Constitution (2nd ed. 2017), at p. 175). As we will explain, this analysis takes on a particular form where navigation andshipping — and more particularly, Canadian non-statutory maritime law — is concerned.

(1) The Characterization of the Matter as a Sale of Marine Engine Parts for Use on a Commercial Vessel [31] Where a statute or a specific provision is challenged, the first stage of the analysis, characterization, requires courtsto examine its purpose and effects with a view to identifying its “main thrust” or “dominant or most important characteristic”, that is, thematter to which it essentially relates (Canadian Western Bank, at para. 26; Reference re Firearms Act (Can.), 2000 SCC 31, [2000] 1S.C.R. 783, at paras. 15-16; Whitbread, at p. 1286; Hogg, at p. 15-7).

This is generally referred to as the “pith and substance” test. [32] When it comes to a dispute purportedly governed by Canadian maritime law, however, courts are tasked withdetermining on a case-by-case basis whether Canadian maritime law can validly extend to that dispute. Even in the absence of a specificfederal enactment, characterization is crucial in ascertaining whether Parliament has authority to legislate in relation to the matter and,therefore, whether Canadian maritime law applies to the dispute.

In this regard, we note that a traditional “pith and substance” analysishas never been applied by the Court in the context of Canadian non-statutory maritime law. We also note that the ultimate issue then isnot about jurisdiction over a claim, but about which level of government has legislative authority over the substantive body of law atissue (see Wire Rope Industries of Canada

(1966) Ltd. v. B.C. Marine Shipbuilders Ltd., (SCC), [1981] 1 S.C.R. 363,at p. 379). To use the wording of ss. 91 and 92 of the Constitution Act, 1867, characterization is the first step in determining whetherParliament or a legislature can “make Laws in relation to Matters coming within the [enumerated] Classes of Subjects” (emphasisadded). In other words, our task is not to take a narrow approach focusing on the claim only, but rather to determine what body of lawpertains to the claim — and which level of government can legislate over that body of law.

We consider that this is how the Courtconducted its analysis in Wire Rope: 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; p. 379.] [33] In our view, where, as here, the purportedly applicable Canadian maritime law is non-statutory, a slightly differentapproach to the pith and substance analysis is thus required.

Rather than considering the purpose and effects of a statute or statutoryprovision, the matter should be characterized by looking at the substantive law at issue and to the particular fact situation (see OrdonEstate, at para. 73; Isen, at para. 21; ITO, at pp. 774-75). [34] Where the dispute is one in contract, what matters is the nature of the agreement (or the specific undertakings) atissue — as understood in light of the terms, the purpose of the contract, and the circumstances in which it was formed (Monk Corp. v.Island Fertilizers Ltd., (SCC), [1991] 1 S.C.R. 779, at pp. 796-97; ITO, at p. 775).

By contrast, the nature andcircumstances of the contractual breach are not determinative. This is so because the parties to a contract must be able to determine thegoverning law from the moment they negotiate it. It would defeat their expectations — and impede their capacity to organize their affairseffectively — if the governing law could change depending on events occurring after the formation of the contract.

To provide aconcrete example, in the present case, the fact that the defective engine part failed on the open water is of little import. [35] The matter must always be characterized with precision for the sufficiency of the connection with the federal power

over navigation and shipping to be properly assessed (see in the context of the pith and substance analysis, Reference re Assisted HumanReproduction Act, 2010 SCC 61, [2010] 3 S.C.R. 457, at para. 190, per LeBel and Deschamps JJ.; Chatterjee v. Ontario (AttorneyGeneral), 2009 SCC 19, [2009] 1 S.C.R. 624, at para. 16; H. Brun, G. Tremblay and E. Brouillet, Droit constitutionnel (6th ed. 2014), atp. 463; A. S. Abel, “The Neglected Logic of 91 and 92” (1969), 19 U.T.L.J. 487, at p. 490). Vague and general characterizations areunhelpful in that they can be superficially assigned to various heads of powers.

To use the colloquial language of Professor Abel, thematter should be “spelled out sufficiently to inform anyone asking, ‘What’s it all about?’” (p. 490). For example, the Court in ITOidentified the matter at issue as “the negligence of a stevedore-terminal operator in the short-term storing of goods within the port areapending delivery to the consignee” (pp. 774-75). [36] Turning to the present case, we are of the view that the matter at issue can be characterized, with appropriateprecision, as the sale of marine engine parts intended for use on a commercial vessel.

The substantive law invoked, being Canadianmaritime law, would arguably allow Wärtsilä — as the manufacturer and professional seller — to limit its liability by contract in thecontext of the sale of a bedplate, crankshaft and connecting rods to be installed in the ship’s main engine. But this cannot be consideredin isolation, without regard to the extent of the parties’ obligations. Ultimately, this is part of a set of contract rules and principles dealingwith the sale of marine engine parts intended for use on a commercial vessel.

This is the matter at issue. [37] We respectfully disagree with the characterization put forward by our colleagues, namely the “sale of goods, albeit inthe maritime context” (para. 165). This expression is too vague and general. We are simply not tasked with deciding whether regulatingthe sale of goods in any potential “maritime context” falls within federal legislative authority.

In our opinion, the “maritime context” atissue must necessarily be identified more narrowly so as to make it possible to determine, at the classification stage, whether the mattercomes within the federal power over navigation and shipping. Indeed, the “sale of goods in the maritime context” could potentiallycapture very different fact situations — ranging from the sale of food to a ship’s cook to complex “Cost, Insurance & Freight” contractsin which the sale itself is intertwined with carriage by sea (see J. G.

O’Connor, Admiralty Jurisdiction and Canadian Maritime Law inthe Federal Courts: The Next Forty Years, October 28, 2011 (online), at pp. 14-15). While the latter would seem to fall within federallegislative authority, it seems highly doubtful in the case of the former. A narrower characterization is therefore necessary.

(2) The Classification of the Matter as Being Within Navigation and Shipping [38] Once the matter has been characterized, courts must determine the “class[es] of subjects” into which the matter falls(Quebec (Attorney General) v. Canada (Attorney General), 2015 SCC 14, [2015] 1 S.C.R. 693, at para. 29).

This second stage can bedescribed as classification (Reference re Pan-Canadian Securities Regulation, at para. 86). [39] As our colleagues rightly point out, classification may sometimes be self-evident — and thus constitute a mereformality — once the law is properly characterized (para. 124, citing Hogg, at p. 15-8). But it is not always so. Sometimes, it requiresconsidering the scope of the relevant head of power (see Reference re Securities Act, 2011 SCC 66, [2011] 3 S.C.R. 837, at paras. 65 and69; Reference re Assisted Human Reproduction Act, per LeBel and Deschamps JJ., at para. 159; Ward v.

Canada (Attorney General),2002 SCC 17, [2002] 1 S.C.R. 569, at para. 29; Hogg, at pp. 15-6 and 15-7).

In the present case, deciding whether Canadian maritimelaw could validly govern the matter ultimately comes down to the breadth of the navigation and shipping power and, more particularly,to the application of the integral connection test, which assists courts in determining whether a matter legitimately comes within thisfederal power. [40] Before going further, we note our colleagues’ statement that “[a]pplying different tests for different heads of poweris a recipe for confusion and inconsistency in our Constitution’s division of powers” (para. 145).

In our view, there is in fact nothingexceptional in “the application of specific tests stating the scope of the particular powers” — like the integral connection test — once thematter is characterized (see Régimbald and Newman, at p. 177). On the contrary, it is rather common and indeed, often necessary to theproper working of the division of powers. [41] The federal trade and commerce power offers a prime example.

There, the Court developed a test for determiningwhether a matter properly comes within the general branch of s. 91(2) of the Constitution Act, 1867 (Reference re Pan-CanadianSecurities Regulation, at paras. 101-3; Reference re Securities Act, at paras. 6, 85 and 108; General Motors of Canada Ltd. v. CityNational Leasing, (SCC), [1989] 1 S.C.R. 641, at pp. 662-63). The criminal law power under s. 91(27) is also of noteas the Court’s jurisprudence requires that the matter satisfy three criteria: (

i) a prohibition; (ii) backed by a penalty; (iii) with a criminallaw purpose (Quebec (Attorney General) v. Canada (Attorney General), at para. 33; Reference re Firearms Act, at paras. 12 and 27).Courts also inquire, for instance, whether a transaction comes within the “legitimate business of a banker” to determine if it is a matter“integral” to banking under s. 91(15) (Bank of Montreal v. Hall, (SCC), [1990] 1 S.C.R. 121, at pp. 145-47 and 149;Tennant v. Union Bank of Canada, [1894] A.C. 31 (P.C.), at p. 46).

These are just a few examples, but they illustrate that the integralconnection test developed with respect to navigation and shipping is far from being an exception. [42] That such approaches differ from one power to another is not an “inconsistency”. This stems f

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