CANADIAN NATIONAL RAILWAY COMPANY Plaintiff v. HANJIN SHIPPING, 2017 FC 198

Date: 20170217 Docket: T-1613-16 Citation: 2017 FC 198 Ottawa, Ontario, February 17, 2017 PRESENT: The Honourable Mr. Justice Harrington Docket: T-1613-16 ACTION IN PERSONAM AND IN REMBETWEEN:CANADIAN NATIONAL RAILWAY COMPANYPlaintiffandHANJIN SHIPPING CO LTD -AND- THE OWNERS AND ALL THOSE INTERESTED IN THE SHIPS LISTED IN

SCHEDULE “A” -AND- THE SHIPS LISTED IN

SCHEDULE “A”Defendants ORDER AND REASONS [1] Before the Court is a motion by Conti 24, Alemania Schiffahrts-GMBH & Co KG MS “Conti Lissabon”, the owners of theship Hanjin Vienna, to dismiss Canadian National Railway Co.’s action as against it on the grounds that the amended statement of claimdiscloses no reasonable cause of action within the subject-matter jurisdiction of this Court. In the alternative it submits that the action asagainst the Hanjin Vienna and her owners is scandalous, frivolous, and vexatious. [2] Hanjin Shipping Co.

Ltd., recently defunct and insolvent, operated a worldwide multimodal, door-to-door, liner containerservice. It chartered in various ships, including the defendant Hanjin Vienna, to perform the sea leg of the carriage. It hired the plaintiff,Canadian National Railway Co. (CNR), to perform the North-American inland leg thereof. CNR would pick-up inbound containers atVancouver and Prince Rupert terminals and deliver them to consignees at destination.

It would also carry containers to the Vancouverand Prince Rupert terminals for export. [3] CNR asserts that Hanjin is indebted to it for approximately $20,000,000, a portion of which relates to the Hanjin Vienna. Italleges that it is in a contractual relationship not only with Hanjin but also with the owners of the ships it chartered, more particularly, theowners of the Hanjin Vienna.

Decision [4] In order to succeed, the owners must persuade me that it is plain and obvious that this action should proceed no further. [5] Accordingly, it is not plain and obvious to me that this Court does not have jurisdiction to adjudicate CNR’s claim on themerits because it is arguable: (

a) CNR enjoys a maritime lien by virtue of s 139 of the Marine Liability Act; (

b) its claim is governed by Canadian Maritime Law; and (

c) its claim falls within the Canadian Transportation Act, a federal statute, and is in relation to a work and undertaking extendingbeyond the limits of a single province. [6] However, it is plain and obvious to me that CNR’s claim is not scandalous, frivolous, nor vexatious. Federal Courts Rule 221 [7] Federal Courts Rule 221, which is an example of the Court’s power to control its own process, provides that the Court maystrike out a pleading, in this case CNR’s statement of claim, on a number of grounds. Two grounds are invoked by the owners of theHanjin Vienna.

The first is that the statement of claim discloses no reasonable cause of action, and the second is that it is scandalous,frivolous, or vexatious. The rule goes on to provide that no evidence shall be heard on a motion for dismissal on the grounds that noreasonable cause of action was disclosed. Nevertheless, the courts have allowed affidavit evidence if the basis of the motion is that theCourt does not have jurisdiction over the subject-matter of the action (MIL Davie v Ibernia Management & Development Co, (FCA), 1988 FCJ No 614, 226 NR 369).

Therefore, the owners have filed an affidavit from Eckart Mӧller, the NauticalDirector of the Hanjin Vienna’s managers, and CNR has filed the affidavit of Bruce Yi, the Account Manager responsible for Hanjin. As

a result, the Court has been provided with (

a) The contract between Hanjin and the owners of the Hanjin Vienna (a time charter party in the New York Produce Exchange form,with deletions and amendments); (

b) The contract between Hanjin and CNR; and (

c) Hanjin’s Bill of Lading form (under the owners’ objection). [8] To understand what this motion is, it is important to understand what it is not. It is not a motion to dismiss CNR’s action onthe basis that there is no merit to it. If CNR establishes the facts alleged, and those facts are taken to be true at this stage, there is merit toits claim (Operation Dismantle v The Queen, (SCC), [1985] 1 SCR 441, [1985] SCJ No 22). Much of Mr. Mӧller’saffidavit relates to that issue. However, no evidence shall be led on the merits, and the jurisdiction of this Court cannot be used as anexcuse to circumvent that rule.

Consequently, much of what he says cannot be taken into account. [9] Neither is it a motion for

summary judgment or on a stated case for a definitive ruling on the Court’s jurisdiction. All I haveheld is that it is not plain and obvious that this Court is without jurisdiction.

When the merits of the case are heard, it is still open to theowners to argue that CNR’s action is beyond this Court’s subject-matter jurisdiction (see Toney v Canada (Royal Canadian MountedPolice), 2012 FCA 167 , [2011] FCJ No 1740, [2012] FCJ No 705, [2012] FCJ No 1691, and 2013 FCA 217 , [2013]FCJ No 1011). [10] It cannot be said that CNR’s action is scandalous, frivolous, or vexatious, should it ultimately turn out that this Court iswithout jurisdiction – the only ground alleged by the owners.

The action is not so clearly futile that it does not have the slightest chanceof success. [11] The burden upon the owners of the Hanjin Vienna is a heavy one: “If there is a chance that the plaintiff might succeed, thenthe plaintiff should not be ‘driven from the judgment seat’” (Hunt v Carey Canada Inc, (SCC), [1990] 2 SCR 959,[1990] SCJ No 93). It is certainly not for the Court, at this stage, to weigh CNR’s chances of success. [12] As Madam Justice Wilson explained it in Operation Dismantle, above, at pp 486 and 487: The law then would appear to be clear. The facts pleaded are to be taken as proved.

When so taken, the question is do they disclose areasonable cause of action, i.e. a cause of action "with some chance of success" (Drummond-Jackson v. British Medical Association,[1970] 1 All E.R. 1094) or, as Le Dain J. put it in Dowson v. Government of Canada (1981), (FCA), 37 N.R. 127(F.C.A.), at p. 138, is it "plain and obvious that the action cannot succeed?" [my emphasis] Marine Liability Act [13]

Section 139 of the Marine Liability Act, which came into force in 2009, gives a person, such as CNR, carrying on business inCanada, a maritime lien on a foreign ship: (

a) in respect of goods, materials or serviceswherever supplied to the foreign vessel for itsoperation or maintenance, including, withoutrestricting the generality of the foregoing,stevedoring and lighterage; or

a) celle résultant de la fourniture — auCanada ou à l’étranger — au bâtimentétranger de marchandises, de matériel ou deservices pour son fonctionnement ou sonentretien, notamment en ce qui concernel’acconage et le gabarage;(

b) out of a contract relating to the repair orequipping of the foreign vessel.

b) celle fondée sur un contrat de réparationou d’équipement du bâtiment étranger. [14] However, if the claim is with respect to stevedoring or lighterage, the services must have been provided at the request of theshipowner or a person acting on the owner’s behalf. [15] It is clear that the services rendered by CNR were not by way of stevedoring or lighterage.

Although the law as it was beforethe enactment of s 139 in 2009 was such that there was no action in rem in the circumstances contemplated therein unless there waspersonal liability on the part of the shipowner (Mount Royal/Walsh Inc v Jensen Star (The), [1990] 1 FC 199, [1989] FCJ No 450), it hasnot yet been decided, as a matter of law, whether, apart from stevedoring or lighterage services, the personal liability of the shipownermust still be engaged (Comfact Corporation v Hull 717 (The), 2012 FC 1161, [2012] FCJ No 1228, aff’d 2013 FCA 93, [2013] FCJ No93). [16] As Lord Justice Fletcher Moulton held in Dyson v Attorney-General, [2011] 1 KB 410 at 419: Differences of law, just as differences of fact, are normally to be decided by trial after hearing Court and not to be refused a hearing inCourt by an order of the judge in chambers. [17] The issue is whether the services allegedly rendered to the Hanjin Vienna, a German ship, were supplied for its operation.

Itwould appear that the supply of containers falls within that category (Textainer Equipment Management BV v Baltic Shipping Co, 84FTR 108, [1994] FCJ No 1267). [18] It must also be kept in mind that Hanjin, and arguably the owners of the Hanjin Vienna, operated an international liner servicewhich forms part of Canadian Maritime Law in virtue of s 92(10) of the Constitution Act. [19] As was held by the Supreme Court in R v Imperial Tobacco Canada Ltd, 2011 SCC 42, [2011] 3 SCR 46, a claim will only be

dismissed on a motion to strike if it is plain and obvious that there is no cause of action. The approach must be generous and air on theside of permitting a novel but arguable claim to proceed to trial. Canadian Maritime Law [20] The owners of the Hanjin Vienna submit that CNR and they were both sub-contractors of Hanjin and had nothing to do onewith the other. CNR’s activities were entirely land-based. They neither loaded the containers onboard nor discharged them from theHanjin Vienna. That fact is not contested.

CNR took containers from, or delivered them to, the terminals at Vancouver and Prince Rupert. [21] The Federal Court, unlike the superior courts of the provinces, is a statutory court. It was established pursuant to s 101 of theConstitution Act, 1867 which provides that Parliament may establish courts for the better administration of the laws of Canada, whichmeans federal law, be it statute, regulation, or common law. Thus, the Federal Court only has jurisdiction if (

a) the cause of action isbased upon a federal legislative class of subject as opposed to a provincial legislative class of subject; (

b) there is actual federal law toadminister which is essential, not incidental, to the disposition of the case; and (

c) Parliament gave the court jurisdiction. (ITO-International Terminal Operators Ltd v Miida Electronics Inc, (SCC), [1986] 1 SCR 752 (the Buenos Aires Maru)). [22] By way of illustration, bankruptcy is a federal legislative class of subject and there is a federal statute, however, jurisdictionremains with the superior courts of the provinces as it has not been given either exclusively or concurrently to the Federal Court. [23] Canadian Maritime Law is referred to in ss 2, 22, 42 and 43 of the Federal Courts Act. [24] It is defined in s 2 as follows: Canadian maritime law means the law thatwas administered by the Exchequer Court ofCanada on its Admiralty side by virtue of theAdmiralty Act,

chapter A-1 of the RevisedStatutes 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 maritimeand admiralty matters, as that law has beenaltered by this Act or any other Act ofParliament. droit maritime canadien Droit — compte tenudes modifications y apportées par la présenteloi ou par toute autre loi fédérale — dontl’application relevait de la Cour del’Échiquier du Canada, en sa qualité dejuridiction de l’Amirauté, aux termes de laLoi sur l’Amirauté,

chapitre A-1 des Statutsrevisés du Canada de 1970, ou de toute autreloi, ou qui en aurait relevé si ce tribunal avaiteu, en cette qualité, compétence illimitée enmatière maritime et d’amirauté. [25] The second part of the definition – the law which would have been administered – is so broad that for all intents and purposesit is co-extensive with the Federal legislative class of subject of “navigation and shipping” (the Buenos Aires Maru, above). [26] Section 22(1) confers jurisdiction upon this Court in any matter coming within the class of navigation and shipping, unlessotherwise assigned. [27] Section 22(2) provides specific instances over which the Court has jurisdiction, including e.g.:

f) any claim arising out of an agreementrelating to the carriage of goods on a shipunder a through bill of lading, or in respect ofwhich a through bill of lading is intended tobe issued, for loss or damage to goodsoccurring at any time or place during transit;

f) une demande d’indemnisation, fondée surune convention relative au transport parnavire de marchandises couvertes par unconnaissement direct ou devant en fairel’objet, pour la perte ou l’avarie demarchandises en cours de route; [28] CNR’s claim is not a claim relating to loss or damage to goods but rather one for non payment of freight. [29]

Section 42 provides that Canadian Maritime Law, as it was before the enactment of the Federal Courts Act, continues, while s43 deals with this Court’s Admiralty jurisdiction in rem and in personam. [30] The leading case on the content of Canadian Maritime Law is the Buenos Aires Maru, above. The Supreme Court held thatthe Federal Court had jurisdiction over a claim for loss of cargo carried under a port-to-port Bill of Lading from Caen, France, toMontréal where it was stolen in the hands of the terminal operator after discharge from the ship but before delivery. In speaking for themajority, Mr.

Justice McIntyre stated at para 23: At the risk of repeating myself, I would stress that the maritime nature of this case depends upon three significant factors. The first is theproximity of the terminal operation to the sea, that is, it is within the area which constitutes the port of Montreal. The second is theconnection between the terminal operator's activities within the port area and the contract of carriage by sea. The third is the fact that thestorage at issue was short-term pending final delivery to the consignee.

In my view, it is these factors, taken together, which characterizethis case as one involving Canadian maritime law. [31] At first blush, this quote appears to favour the owners of the Hanjin Vienna as CNR’s activities only began where the terminaloperators’ ended. However, earlier in his decision, Mr. Justice McIntyre also said: I would agree that the historical jurisdiction of the Admiralty courts is significant in determining whether a particular claim is a maritimematter within the definition of Canadian maritime law in s. 2 of the Federal Court Act.

I do not go so far, however, as to restrict thedefinition of maritime and admiralty matters only to those claims which fit within such historical limits. An historical approach mayserve to enlighten, but it must not be permitted to confine. In my view the second part of the s. 2 definition of Canadian maritime law was

adopted for the purpose of assuring that Canadian maritime law would include an unlimited jurisdiction in relation to maritime andadmiralty matters. As such, it constitutes a statutory recognition of Canadian maritime law as a body of federal law dealing with allclaims in respect of maritime and admiralty matters. Those matters are not to be considered as having been frozen by The Admiralty Act,1934. On the contrary, the words "maritime" and "admiralty" should be interpreted within the modern context of commerce andshipping.

In reality, the ambit of Canadian maritime law is limited only by the constitutional division of powers in the Constitution Act,1867. I am aware in arriving at this conclusion that a court, in determining whether or not any particular case involves a maritime oradmiralty matter, must avoid encroachment on what is in "pith and substance" a matter of local concern involving property and civilrights or any other matter which is in essence within exclusive provincial jurisdiction under s. 92 of the Constitution Act, 1867.

It isimportant, therefore, to establish that the subject-matter under consideration in any case is so integrally connected to maritime matters asto be legitimate Canadian maritime law within federal legislative competence. [my emphasis] [32] In the Buenos Aires Maru, the claim by cargo interests against the terminal operator did not fall within any of the instances setforth in s 22(2) of the Federal Courts Act.

Rather, it fell within s 22(1) and the law to be administered was the law the Exchequer Courtwould have administered had it had unlimited jurisdiction in maritime and admiralty matters. [33] The division between sea and shore is not nearly as clear as the owners of the Hanjin Vienna would like.

If they were suedunder a through Bill of Lading for cargo damage, this Court would have jurisdiction over their indemnity claim against CNR (seeQuebec Liquor Corp v The Dark Europe, [1979] FCJ 518, [1979] 3 ACWS 10, and Boutique Jacob Inc v Paintainer Inc, 2008 FCA 85,375 NR 160). [34] CNR’s claim is for unpaid freight and thus does not fall within s 22(2)(f). It may, however, fall within s 22(1). Is it reasonablethat CNR would have to defend a cargo claim in the Federal Court but would have to go to a provincial court to sue its shipper forfreight? As Mr.

Justice Binnie stated in Canada (Attorney General) v TeleZone Inc, 2010 SCC 62, [2010] 3 SCR 585, at para 18: This appeal is fundamentally about access to justice. People who claim to be injured by government action should have whatever redressthe legal system permits through procedures that minimize unnecessary cost and complexity. The Court’s approach should be practicaland pragmatic with that objective in mind. [35] The ocean carrier is the shipper vis-à-vis CNR (Boutique Jacob, above). One of its obligations is not to ship undeclared,dangerous goods. Another is to pay freight.

It seems peculiar to me that CNR could defend a claim for damage to dangerous goods inthis Court, but could not sue for unpaid freight. [36] CNR has invoked the Hanjin form of Bill of Lading which it took from the Hanjin website. The owners object. However, itwas they that raised the jurisdiction of the Court. Bills of Lading are relevant. While a Bill of Lading form taken from the Internet maynot be the best evidence, it is the only evidence available to the Court at this time, and shall be considered. [37] The Bill of Lading defines the carrier as not only meaning Hanjin Shipping Co.

Ltd. but also its “vessels, agents andsubcontractors at all stages of carriage; in context of Multimodal Transportation”. Thus, it is certainly arguable that there is, in fact and inlaw, a contractual relationship between CNR and the owners of the Hanjin Vienna. [38] As stated in the Buenos Aires Maru, above, “the words ‘maritime’ and ‘admiralty’ should be interpreted within the moderncontext of commerce and shipping”. The Bill of Lading at issue in the Buenos Aires Maru was a port-to-port Bill. CNR only becomesinvolved in multimodal, through Bills of Lading.

In 2009, the United Nations Commission on International Trade Law enacted theUnited Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea. The

preamble refers to theHague Rules and Hamburg Rules but notes that technological and commercial developments have taken place since then.

Chapter 1 ofthe Convention defines a contract of carriage as meaning a contract in which a carrier, against a payment of freight, undertakes to carrygoods from one place to another. The contract must provide for carriage by sea and may provide for carriage by other modes of transport. [39] The Convention, commonly known as the Rotterdam Rules, has been signed but, as yet, is not in force because it has not beenratified by a sufficient number of states. Canada is not a party thereto. [40] I do not suggest that the Rotterdam Rules are part of international law and enforceable in Canada.

Even if the Convention hadbeen signed by Canada, it would not form part of our domestic law unless implemented by legislation (Reference as to Powers to LevyRates on Foreign Legations, (SCC), [1943] SCR 208, Chung Chi Cheung v The King, (UK JCPC),[1939] AC 160; and Laane & Baltser v Estonian SS Line, (SCC), [1949] SCR 530. However, in Suresh v Canada(Minister of Citizenship and Immigration), 2002 SCC 1, the Court held that international instruments, although not incorporated intoCanadian domestic law, could influence the Court’s

interpretation of our Charter. If our Constitution is a living tree, our understanding ofnavigation and shipping, and lines of steamships, may evolve from time to time. Canada Transportation Act [41] CNR operates a railway that connects British Columbia with other provinces and the United States. This Court was givenjurisdiction under s 23(

c) of its enabling Act. The question is whether there is federal law to be administered.

Section 23(

c) was invokedboth in Quebec North Shore Paper v Canadian Pacific. Ltd, (SCC), [1977] 2 SCR 1054 and more recently inCorporation of the City of Windsor v Canadian Transit Company, 2016 SCC 54. In both cases, the Supreme Court held that the FederalCourt did not have jurisdiction because there was no actual existing federal law to administer. [42] In Quebec North Shore, the governing law was that of the Province of Quebec, not federal law.

This is unlike the subsequentdecision of the Supreme Court in Tropwood A G et al v Sivaco Wire & Nail Co et al, (SCC), [1979] 2 SCR 157, inwhich the contract of carriage was governed by the laws of France. The Federal Court had jurisdiction because Canadian Maritime Lawincludes common law conflict of law rules which allow foreign law to be proven as a fact.

[43] In City of Windsor, the Canadian Transport Company was federally incorporated. The Act empowered the company toconstruct, maintain, and operate a bridge across the Detroit River from Windsor to Detroit and to, inter alia, purchase land and buildingsfor that purpose. The Act declared its works and undertakings to be for the general advantage of Canada. However, the Supreme Courtheld that the company was not seeking relief “under

an Act of Parliament or otherwise” as required by s 23(

c) of the Federal Courts Act,but rather sought a declaration that it was not bound by a city of Windsor by-law. [44] The contract between Hanjin, and arguably the shipowners, is contemplated by Division IV of the Canada Transportation Actand the Railway Traffic Liability Regulations. The owners submit that the federal statute must create the cause of action. This is not so.As stated in The Tropwood, above, the issue was whether there was a body of law, competently enacted or recognized by Parliament,upon which jurisdiction could be exercised.

It is not correct to say that without the federal statute there would be no cause of action.There was a detailed statutory framework and this appears to be all that is required. This case is similar to Rhine v The Queen, (SCC), [1980] 2 SCR 442. That case reminds us that concepts such as “contract” or “tort” cannot be invariably attributed tosole provincial legislative competence or deemed to be, as common law, solely matters of provincial law.

It has been held time and timeagain that there is indeed federal common law. [45] The Canadian Transport Act was applied in the through Bill of Lading context by the Federal Court of Appeal in BoutiqueJacob, above (see also Cami Automotive Inc v Westwood Shipping Lines Inc, 2009 FC 664, aff’d 2012 FCA 16). [46] Quite apart from a through Bill of Lading which includes a sea leg, this Court has taken jurisdiction over a cargo claim againsta railway which had no maritime connection. (Herreandknecht Tunneling Systems USA Inc v Canadian Pacific Railway Company, 2002FCT 1089 , [2003] 2 FC 434, [2002] FCJ No 1447).

Claims Against the Proceeds of the Sale [47] At the time of writing, the Acting Sheriff has found a buyer for the Hanjin Vienna. The sale is pending. On the basis of thejurisprudence as it currently stands, even if CNR’s claim were to be beyond the jurisdiction of this Court, CNR’s would still be entitled toclaim against the proceeds of the sale (Eurobulk Ltd v Wood Preservation Industries Ltd, [1985] FCJ No 44; and Scott Steel Ltd vAlarissa (The), (FC), [1996] 2 FC 883, [1996] FCJ No 534 ; however, see Nordea Bank Norge ASA v Kinguk (Ship),2007 FC 434, [2007] FCJ No 593, at paras 21-23).

Thus, the owners of the Hanjin Vienna will still have to come to grips with the meritsof CNR’s action. ORDER For reasons given, this motion is dismissed with costs.

"Sean Harrington" Judge FEDERAL COURT SOLICITORS OF RECORD DOCKET: T-1613-16STYLE OF CAUSE: CANADIAN NATIONAL RAILWAY COMPANY v HANJIN SHIPPING CO LTDET ALPLACE OF HEARING: vancouer, bc.DATE OF HEARING: February 9, 2017REASONS FOR ORDER AND ORDER: HARRINGTON J.DATED: february 17, 2017 APPEARANCES: Jason Kostyniuk Steve Carey Vancouver, BC For The moving party, defendants Richard Desgagnés Montréal, QC for the plaintiff, respondent SOLICITORS OF RECORD:

Alexander Holburn Beaudin + Lang LLP Vancouver, BC for the MOVING PARTY, DEFENDANTS Brisset Bishop Montréal, QC for the plaintiff, respondent