2018 FC, 2018 FC 1026

Date: 20181012 Docket : T-1621-16 Citation: 2018 FC 1026 Ottawa, Ontario, October 12, 2018 PRESENT: The Honourable Madam Justice Strickland BETWEEN: THE ST. LAWRENCE SEAWAY MANAGEMENT CORPORATION Plaintiffs and THE VESSEL “BBC LENA” FORMERLY “LENA J” -AND- THE OWNERS AND ALL OTHERS INTERESTED IN THE VESSEL “BBC LENA” FORMERLY “LENA J” -AND- SCHIFFFAHRTS UG (HAFTUNGSBESCHRANKT) & CO. KG MS “LENA J” Defendants JUDGMENT AND REASONS [ 1 ] The St.

Lawrence Seaway Management Corporation ( " “Plaintiff” " ) manages and operates a bridge that was damaged when the vessel " “BBC Lena” " (formerly the " “Lena J.” " ) collided with it. The Plaintiff brought a negligence action against the " “BBC Lena” " , its owners and all others interested in it, and Schifffaharts UG (Haftungsbeschrankt & Co. KG MS " “Lena J.” " ) (collectively, the " “Defendants” " ). The Defendants bring this motion for

summary judgement ( " “Motion” " or " “Summary Judgment Motion” " ) seeking to dismiss the Plaintiff’s action on the basis that the Plaintiff’s losses constitute unrecoverable economic loss. While the Plaintiff agrees that this matter lends itself to disposition by way of

summary judgment, it is of the view that the matter should be resolved in its favour. Factual Background [ 2 ] On September 30 th , 2015, the " “BBC Lena” " ( " “Vessel” " ) collided with Bridge No. 19 ( " “Bridge 19” " or the " “Bridge” " ), which forms part of the St. Lawrence Seaway ( " “Seaway” " ). The collision caused severe structural damage to Bridge 19 necessitating significant repairs and halting passage over and through it for almost 6 months. [ 3 ] The Plaintiff is a corporation without share capital that was established by the Government of Canada.

It was incorporated by Letters Patent dated July 9, 1998, pursuant to the Canada Corporations Act , RSC 1970, c C-32, and was continued under the Canada Not-for-profit Corporations Act , SC 2009, c 23. As such, the Plaintiff has the capacity, rights and powers of a natural person ( Canada Not-for-profit Corporations Act , s 16(1)). [ 4 ] For the purposes of this Motion, the Defendants accept that the Plaintiff was, at all material times, a not-for-profit corporation charged with the management and operation of the Seaway, including Bridge 19.

This responsibility arises from s 80(5) of the Canada Marine Act , SC 1998, c 10 (or the " “Act” " ), and a series of management agreements entered into by the Plaintiff and the Crown. These agreements make the Plaintiff responsible for causing any necessary repairs to the Bridge, to be conducted at its own expense. [ 5 ] The Plaintiff commenced this action in rem against the Vessel and in personam against its owners and all others interested in it.

It claims that the collision and the resulting damages were caused by the unseaworthiness of the Vessel with the actual fault and privity of the defendant owners, and the negligence of its officers and crew. Its Statement of Claim seeks approximately $1 million dollars of damages for the cost of repairing the Bridge. It also claims for loss of use of the Bridge, for indemnification for any actions from third parties arising from the Bridge’s closure, as well as for costs and pre- and post-judgment interest. [ 6 ] The Defendants’ Statement of Defence puts the Plaintiff to strict proof of its claims.

It also asserts that any losses and damages that the Plaintiff incurred constitute relational economic losses, which are not recoverable at law. In the alternative, the Defendants assert that any damages are excessive and exaggerated. [ 7 ] On February 26, 2018, the Defendants filed a Notice of Motion for

Summary Judgment under Rule 215 of the Federal Courts Rules , SOR/98-106 ( " “Rules” " ), seeking to have the Plaintiff’s negligence action dismissed. In the alternative, the Defendants ask that the Plaintiff’s claim for the repair costs be dismissed with costs and that the balance of the action, if any, continue to trial. [ 8 ] In a nutshell, the Defendants’ position is that the Plaintiff’s damages are not accompanied by physical injury or damage to property owned by the Plaintiff, making the damages pure economic losses, which are only recoverable in limited circumstances.

The Defendants argue that none of those circumstances are present in this matter. Preliminary Matter - Confidentiality Order

[ 9 ] In its Notice of Motion for

Summary Judgment, the Defendants seek, among other things, direction on the confidentiality of motion materials. In her Order dated April 4, 2018, Justice St-Louis addressed this issue. She also ordered that the sound recording available for the hearing (in camera) would be turned off and no recording by Court stenography or otherwise of oral argument would be made. The rational being that it would permit counsel the freedom to refer to confidential material when appearing before the Court without fear of jeopardizing the confidentiality of such materials.

Justice St-Louis also stated that the whole of her Order was subject to the ultimate decision of the presiding Judge. [ 10 ] With respect to the portion of Justice St-Louis’ Order that precludes sound recording of the proceeding, I am concerned that its effect is that there would be no record of the proceeding before me. In the event of an appeal, there would be no transcript of the hearing. In my view, this is not desirable.

I also note that the Federal Court’s " “Notice to the Profession, Pilot Project for Access to Digital Audio Recordings of Federal Court Proceedings” " (2015), specifically envisions that confidentiality orders might apply to recordings of proceedings. In that event, the confidential information will either be redacted from the recording or, if redaction is impracticable, the recording will not be released.

Accordingly, and as discussed with the parties at the commencement of the hearing, I permitted the hearing to be recorded, in the normal course, and will order that the recording be treated as confidential and that it shall only be released at my specific written direction. The Availability of

Summary Judgment - Rule 215 [ 11 ] Rule 215(1) states that if on motion for

summary judgment the Court is satisfied that there is no genuine issue for trial with respect to a claim or defence, the Court shall grant

summary judgment. Rule 215(2)(

b) states that if the Court is satisfied that the only genuine issue is a question of law, the Court may determine the question and grant

summary judgment. [ 12 ] In Manitoba v Canada , 2015 FCA 57 , the Federal Court of Appeal considered Rule 215 and, citing Burns Bog Conservation Society v Canada , 2014 FCA 170 , held that there is no genuine issue if there is no legal basis for the claim based on the law or the evidence brought forward. The Court found that this was consistent with the Supreme Court of Canada’s decision in Hryniak v Mauldin , 2014 SCC 7 , which held that there is no genuine issue if there is no legal basis to the claim or if the judge has the evidence required to fairly and justly adjudicate the dispute . [ 13 ] For the purposes of this

Summary Judgment Motion, the Defendants admit most of the relevant facts. Specifically, by way of an affidavit sworn on February 23, 2018 by Defendants’ counsel, Mr. David Colford ( " “Colford Affidavit” " ):

i) the Defendants admit that the Vessel collided with Bridge 19 in clear weather and in excellent visibility causing severe structural damage to the Bridge, halting passage over and through it, and that the Plaintiff incurred substantial costs and damages as a result (paras 5–8 of the Statement of Claim); " ii) " the Defendants have not contested the allegations of fault contained in paragraph 9 of the Plaintiff’s Statement of Claim, but also have not admitted them, nor do they allege any facts that would excuse the Defendants’ failure to navigate the Vessel in a safe manner " ; " iii) the Defendants have been advised by Plaintiff’s counsel and believe that the Plaintiff has paid for repairs to Bridge 19, with the relevant documents and proof of payments being attached as an exhibit to Mr.

Colford’s affidavit.The Defendants accept, for the purposes of the Motion, that the Plaintiff has made the payments described; iv) the Defendants admit that Bridge 19 is a " “Managed Asset” " as defined within the management agreements described below. [ 14 ] The Coldford Affidavit also states that the Plaintiff has not produced any documents relating to claims for loss of use of the Bridge or indemnification of third parties.

In this regard, when appearing before me, Plaintiff’s counsel confirmed that the Plaintiff is not seeking damages in relation to its claims for loss of use of Bridge 19 or for indemnification of any third parties. As a result, the only losses at issue are the costs of the repairs to Bridge 19, which the Plaintiff has paid and seeks to recover from the Defendants. [ 15 ] Given these admissions, there is really only one question to be resolved in deciding this Motion.

That is, do the Plaintiff’s damages constitute relational economic losses and, if so, are they are recoverable. [ 16 ] I am satisfied that this issue can be determined summarily. No genuine issue for trial exists because the evidence before me is sufficient to permit me to fairly and justly adjudicate this question (see Leo Ocean S.A. v Westshore Terminals , 2015 FCA 282 ( " “Leo Ocean” " )). And, even if this issue amounts to a genuine issue, it is a question of law, which I am able to determine, and, accordingly, I may dispose of the matter by

summary judgment. [ 17 ] To the extent that there remains any residual issue as to whether the repairs are excessive and exaggerated, as the Defendants assert as their only alternative defence, Rule 215(2)(

a) permits the Court to grant

summary judgment and to refer the issue of quantifying the loss to a referee pursuant to Rule 153. Statutory and Contractual Framework [ 18 ] To address whether the Plaintiff’s damages constitute relational economic losses, it is first necessary to understand the relevant legislative and contractual framework in this matter. This is comprised of the Canada Marine Act and the management agreements. Canada Marine Act [ 19 ] Section 2(1) of the Canada Marine Act defines the " “Seaway” " , which includes the locks, canals and facilities between the Port of

Montreal and Lake Erie, and which is stated to be generally known as the St. Lawrence Seaway.

Section 77 of the Act defines the " “Authority” " (referred to hereafter as the “Authority” or “SLSA”) as The St. Lawrence Seaway Authority, established by s 3(1) of the St. Lawrence Seaway Authority Act . The Authority, an agent of the Crown, was the predecessor entity to the Plaintiff. [ 20 ]

Part 3 of the Canada Marine Act concerns the Seaway.

Section 78 sets out the objectives of

Part 3 and s 79 deals with the powers of the Minister. Significantly, for the purposes of this matter, s 80(5) permits the Minster to enter into agreements in respect of the Seaway: 80(5) The Minister may enter into agreements in respect of all or part of the Seaway and the property or undertakings referred to in subsection (1) or (2) and those agreements may be with a not-for-profit corporation that accords a major role to Seaway users, in particular in the way in which directors of the corporation are appointed and in its operations, or, where the Minister considers it appropriate, with any other person or anybody established under an international agreement .

(6) An agreement may include any terms and conditions that the Minister considers appropriate, including provisions respecting (

a) the transfer of all or part of the property or undertakings referred to in subsection (1) or (2); (

b) the management and operation of all or part of the Seaway or the property or undertakings referred to in subsection (1) or (2); (

c) the construction, maintenance and operation of all or part of the Seaway; (

d) the charging of fees; (

e) the performance and enforcement of obligations under the agreement; (

f) the transfer of officers and employees of the Authority; (

g) the making of financial contributions or grants or the giving of any other financial assistance; (

h) the imposition of additional obligations of financial management; and (

i) where the agreement is with a body referred to in subsection (5), the application of any of the provisions of this Part relating to an agreement with a not-for-profit corporation or other person referred to in that subsection. [ 21 ] Also of particular significance are s 91(1)(

d) and s 91(2), which concern the taking of legal proceedings: 91

(1) Where an agreement entered into under subsection 80(5) so provides, the person who has entered into the agreement (

a) need not pay compensation in respect of the use of the property that is owned by Her Majesty and managed by the person; (

b) may, notwithstanding the Financial Administration Act , retain and use the revenue received in respect of the property for the purpose of operating the Seaway; (

c) may lease the property under the person’s management and grant licences in respect of it; (

d) shall undertake and defend any legal proceedings with respect to the management of the property; and (

e) shall discharge all obligations with respect to the management of the property.

(2) A civil, criminal or administrative action or proceeding with respect to any federal real property or federal immovable that a person who has entered into an agreement under subsection 80(5) manages, or any property that the person holds, or with respect to any act or omission occurring on the property, shall be taken by or against the person and not the Crown. Management Agreements [ 22 ] The Plaintiff’s rights and responsibilities concerning the management, operation and maintenance of the Seaway arise by way of three agreements:

i) The Framework Agreement, dated August 11, 1998 as between the Plaintiff, and the Crown as represented by the Minister of Transport; ii) The Managed Asset Agreement, dated September 30, 1998, as between The Authority and the Plaintiff; and iii) The Management, Operation and Maintenance Agreement, dated September 30, 1998, as amended, as between the Plaintiff, and the Crown as represented by the Minister of Transport. (collectively, the " “Agreements” " ). Relevant portions of the Agreements are set out in Appendix A of these reasons. The Agreements explicitly state that they constitute

agreements entered into pursuant to s 80(5) of the Canada Marine Act. Parties’ Positions Defendants’ Submissions [23] Although the Plaintiff exclusively frames its action in tort, the Defendants’ written submissions begin by arguing that theDefendants do not have a contractual relationship with the Plaintiff arising from the Defendants’ payment of Seaway tolls. I take theDefendants to mean that the Plaintiff is therefore unable to recover its losses from the Defendants based on contract law principles.

However, when appearing before me, Plaintiff’s counsel confirmed that the Plaintiff is not asserting a claim in contract. Accordingly, Ineed not address this point. [24] The remainder of the Defendants’ submissions argue that the Plaintiff’s losses amount to unrecoverable relational economic loss. [25] The Defendants begin by providing a history of the management of the St. Lawrence Seaway. They note that in 1951 the St.Lawrence Seaway Authority Act established the Authority.

It was a Crown agent that acted on the Crown’s behalf of in the managementand operation of Crown assets, including the facilities, the properties and the bridges used in the Seaway. Its constituting statute gavethe Authority the right to act for and on behalf of the Crown, in its own name, with respect to the protection and defence of Crowninterests in the Crown assets. [26] In 1998, in an effort to commercialize certain marine activities, including Seaway operations, the Canada Marine Act was enacted. Under the Act, a not-for-profit corporation would now manage the Seaway.

This corporation would assume for its own account allexpenses and losses in relation to the Seaway, which, according to the Defendant, was in exchange for the right to charge tolls for the useof the facilities. The Plaintiff is such a corporation. [27] Under its Agreements with the Crown, the Plaintiff assumed full responsibility for and sole risk of the management of Bridge 19with respect to its operation, maintenance and repair.

The Defendants submit that this liability extends up to a specified amount of $2.5million. [28] They argue that the Plaintiff’s damages arise as a function of its contractual obligation to repair the Bridge, rather than fromproperty damage to the Bridge itself.

Accordingly, the Plaintiff’s repair expenses constitute relational economic losses because they arepurely financial damages that stem from damage to a third party’s property, specifically, the Crown’s property. [29] As a general rule, the common law does not impose a duty of care to avoid causing relational economic losses to another partyabsent any injury or physical damage to person or property. There are exceptions to this rule. Recovery is permitted in cases ofrelational economic loss arising in situations in which (

i) a contractual relationship gives the claimant a proprietary or possessory interestin the damaged property; (ii) the loss arises from a general average incident; or, (iii) the relationship between the claimant and theproperty owner constitutes a joint venture (CN v Norsk Pacific Steamship Co.

"“The Jervis Crown”" (SCC), [1992] 1SCR 1021 ("“Norsk”"); Bow Valley Husky v Saint John Shipbuilding (SCC), [1997] 3 SCR 1210 at paras 45–56, pp1240–1246 ("“Bow Valley”")). [30] The Defendants argue that the Plaintiff’s claim does not fall within any of these exceptions. [31] This is because the Agreements explicitly state that the Plaintiff is not in an agency relationship with the Crown. Nor are the twoengaged in a joint venture. Instead, the Plaintiff’s relationship to the Crown is that of an independent contractor.

This relationship can becontrasted to the Plaintiff’s predecessor, which was explicitly given agency status under its constituting statute. [32] The Agreements also do not transfer to the Plaintiff any possessory or proprietary rights over the Managed Assets, which includeBridge 19, nor does the Plaintiff’s Statement of Claim allege that any such rights were prejudiced. Subsections 80(1) and (2) of theCanada Marine Act and

Article 2 of the Managed Asset Agreement demonstrate that it was the intent of the legislators that any proprietyor possessory rights held by the Plaintiff’s predecessor, the Authority, were to be transferred to the Crown. [33] The Defendants also argue that the Canada Marine Act and the Agreements do not afford the Plaintiff with a right to recover purelyeconomic losses. [34] In that regard, as to ss 91(1) and (2) of the Canada Marine Act, which the Plaintiff argues affords it the authority to undertake anddefend any legal proceeding with respect to the management of the property, the Defendants submit that these provisions do not assistthe Plaintiff.

This is because, interpreted purposively (Rizzo & Rizzo Shoes Ltd. (Re) (SCC), [1998] 1 SCR 27 at para21 "(“Rizzo”")), taking into account the predecessor legislation, the purpose of the current Act, and the placement of s 91 within it, thesesections only empower the Plaintiff to conduct itself and engage in legal proceedings to “protect Her Majesty’s interests, not the PlaintiffCorporation’s interests”. The Plaintiff’s power to act on behalf of the Crown only arises when the Crown’s property or interests in theproperty are engaged, not when there is an unexpected repair cost to the Plaintiff itself.

As to s 91(1)(d), which states that the Plaintiff "“shall undertake and defend any legal proceedings with respect to the management of the property”", here the Crown owns thedamaged property, but has not suffered a loss.

Only if the Crown had incurred the repair expenses would the Plaintiff have been able toinstitute proceedings against the third party wrongdoer to recover those losses - but the Agreements required the Plaintiff to incur thecosts on its own account. [35] Further, s 9.01 and 12.01 of the Managed Assets Agreement make it clear that it was the intention of the parties that the Plaintiffrepair any damages to the Managed Assets, which include Bridge 19, at its own cost and for its own account.

In this regard, theManagement, Operation and Maintenance Agreement is significant as it contains no indemnity by the Crown to the Plaintiff, in the eventthat the Plaintiff is unable, as a matter of law, to recover compensation from a third party for repairs carried out pursuant to the Plaintiff’smanagement, operation and maintenance responsibilities if those repairs amount to less than $2.5 million. In this matter, the Plaintiff

paid $909,009.54 for the repairs on its own account and has no recourse under the Agreements for reimbursements from the Crown. Nor is there any evidence that the Crown has suffered a financial loss. According to the Defendants, had the loss exceeded $2.5 million, then

section 14 of the Management, Operation and Maintenance Agreement, which pertains to catastrophic events, would have applied. Otherwise, there is no provision for the Plaintiff to be indemnified by the Crown for money it spends on repairs.

Thus, the intention of the parties was that the Plaintiff’s losses below $2.5 million are for its own account and at its own risk with respect to third party recovery. [ 36 ] The Defendants emphasize that the Agreements do not purport to grant to the Plaintiff a right to claim relational economic loss, opposable against third parties, which at law the Plaintiff would not otherwise have. [ 37 ] Finally, the Defendants acknowledge that s 122(1) of the Canada Marine Act gives the Plaintiff the benefit of a lien on a ship, but submit that a lien can only be exercised for an amount owing; it does not create a debt.

Rather, its purpose is to give priority over other claims in the event of a debt. Here, the Plaintiff is owed nothing at law, because it is claiming relational economic losses. Plaintiff’s Submissions [ 38 ] The Plaintiff submits that a review of the relevant provisions of the Agreements and the Canada Marine Act clearly establishes that all, or essentially all, of the Crown’s rights and responsibilities in connection with the relevant assets, including Bridge 19, were conferred upon it and, therefore, the Plaintiff has all necessary powers to commence these proceedings and obtain full indemnification.

The Agreements refer to and were intended to implement the objectives of the Canada Marine Act . Together, the legislation and the Agreements serve to transfer rights and responsibilities in respect of certain specified assets, including Bridge 19, from the Crown to the Plaintiff. This is demonstrated by the

preamble and s 3.01.01 of the Framework Agreement; Articles 2.01.03, 2.01.04, 2.02.01(a), 2.02.02, 2.02.03, 9.01.01, 9.02.02, and 12.01.02 of the Managed Asset Agreement; and s 91(1)(

d) and s 91(2) of the Canada Marine Act . Significantly, this transfer of the Crown’s rights and obligations included the maintenance and replacement of the subject assets and obliges the Plaintiff to act as would a " “prudent owner” " of the assets. These provisions demonstrate that the Plaintiff is to take the place of the true owner, being subject to the same obligations and exercising the same rights as would the true owner. [ 39 ] Additionally, pursuant to ss 91(1)(

d) and 91(2) of the Canada Marine Act , where an agreement has been entered into pursuant to s 80(5) of that Act, as is the case in this matter, the person who has entered into the agreement, here the Plaintiff, exercises the rights of the Crown, explicitly including the right to commence and defend proceedings. [ 40 ] Accordingly, it is the Plaintiff’s position that it is not necessary to determine whether the sums the Plaintiff claims constitute relational economic losses. Under the Agreements and the Act, the Plaintiff has the exclusive obligation to repair and replace certain property, including Bridge 19.

The entire risk of damage to such assets is placed on the Plaintiff, which stands in the place of the true owner. As a result, the Plaintiff is the only party that sustained losses or damages as a result of the collision. The Agreements and the Act also leave no doubt that the Plaintiff has the full and exclusive right to commence proceedings seeking to recover sums from parties that cause damage to such property. [ 41 ] Further, the Defendants’

interpretation of s 91 of the Canada Marine Act imports language into that provision that conflicts with the text, spirit and objectives of that Act, is contrary to the principles of statutory

interpretation ( Williams v Canada (Public Safety and Emergency Preparedness) , 2017 FCA 252 at paras 41–42 ), and renders s 91 futile. Specifically, there is no basis for the Defendants’ suggestion that s 91 only authorizes legal proceedings to protect Crown property and Crown interests on behalf of the Crown. Neither the Agreements nor s 91 make any mention of the Plaintiff commencing proceedings " “on behalf of the Crown” " .

Rather, s 91 confers on the Plaintiff the exclusive right to commence proceedings and recover amounts that it will necessarily have incurred itself in carrying out its obligations under the Agreements, notably the obligation to repair and replace property damaged by third parties. As the Crown has transferred to the Plaintiff all risks and responsibilities relating to loss of assets, including Bridge 19, proceedings that the Plaintiff commences under s 91 will necessarily be for its own account, not on the Crown’s behalf.

Accordingly, the Plaintiff has all necessary rights and powers to commence the present proceedings and to seek full indemnification from the Defendants. Judgment should be granted to the Plaintiff on this basis alone, there is no need to consider whether the Plaintiff’s losses are relational economic loss. [ 42 ] In any event, the Plaintiff’s losses do not constitute unrecoverable relational economic losses. Relational economic losses arise where one party (the property owner) suffers a loss due to damage to its property, while another party (the plaintiff) suffers a separate and distinct financial prejudice.

In contractual relational economic loss, the distinct financial prejudice suffered relates to disruption or interference with the performance of a contract (Philip H. Osborne, The Law of Torts , 5th ed (Toronto: Irwin Law, 2015) at page 202 ( " “Osborne” " )). Here the Plaintiff’s losses can be differentiated from relational economic losses. [ 43 ] First, by way of the Canada Marine Act and the Agreements, the true owner of Bridge 19, the Crown, suffered no loss or damage as the risk of loss and the duty to repair were transferred to the Plaintiff.

Second, the sums claimed by the Plaintiff do not result from disruption or interference with the performance of its contracts with the Crown, but rather represent the actual damages sustained in order to repair the damaged property. That is, the losses that the Crown would have sustained but for the transfer of risk and responsibility. This is particularly relevant in distinguishing this matter from the Norsk decision, upon which the Defendants rely.

In that case, the Supreme Court of Canada considered whether economic losses, in addition to the property damage sustained and collected by the owner of the damaged bridge, were recoverable.

In this matter, the Plaintiff is seeking the equivalent of the sums awarded to bridge owner in Norsk and no other parties are alleging that they have sustained distinct or consequential damages. [ 44 ] The Plaintiff also stresses that this distinction is all the more crucial in light of the policy considerations underpinning the general exclusionary rule against recovery of relational economic loss as set out by Justice La Forest in Norsk (p 1051–1052). None of those policy concerns have application in this matter.

Instead, they mitigate in favour of permitting the Plaintiff to recover. [ 45 ] Further, even if this Court were to determine that the concept of relational economic loss is generally applicable to the sums claimed in this matter, those sums fall within one of the categories that have been recognized as recoverable; that is, where the claimant has a possessory or proprietary interest in the damaged property ( Bow Valley at para 48). Here, at the very least, the Canada Marine Act and the Agreements establish that the Plaintiff has a possessory interest in Bridge 19 (Osborne at p 206). It has far more than a non-

exclusive right to use the Bridge, as was CN’s circumstance in Norsk . Rather, the Plaintiff has full control over and responsibility for the Bridge and is the sole party charged with its repair and replacement. The Agreements require that the Plaintiff act as would a prudent owner. In this regard, the Plaintiff notes that claims of a bareboat charter are generally considered the most obvious example of recoverable relational economic loss based on a proprietary or possessory interest (Osborne at p 206).

It submits that, in this situation, the Plaintiff’s relationship to the Bridge even more closely resembles the role of the owner of the Bridge than does the relationship of a bareboat charterer to the ship it has chartered. [ 46 ] Finally, the Plaintiff submits that the Defendants’ motion implicitly challenges the constitutional validity, applicability, and operability of s 91 of the Canada Marine Act , and must be dismissed because the Defendants have not served notice on the Attorneys General as required by s 57 of the Federal Courts Act , RSC 1985, c F-7.

Analysis [ 47 ] In my view, this matter essentially comes down to the nature of the contractual relationship between the Plaintiff and the Crown. [ 48 ] Accordingly, it is necessary to first analyse the relevant provisions of the Canada Marine Act and the Agreements to ascertain the nature of the resultant relationship between the Crown and the Plaintiff. That relationship must then be assessed in the context of the jurisprudence pertaining to relational economic loss.

In taking this approach, I will address the Plaintiff’s right to pursue its claim; whether this right is restricted; whether the intent of the Agreements was to exclude recovery by the Plaintiff; whether the Plaintiff’s losses are relational economic loss; and, if so, whether they are unrecoverable. i. Does the Canada Marine Act, as implemented by the Agreements, afford the Plaintiff the right to pursue claims? [ 49 ] Section 80(5) of the Canada Marine Act permits the Minister to enter into agreements in respect of the Seaway, which agreements can be with a not-for-profit corporation.

Pursuant to s 80(6), such an agreement can include any terms and conditions that the Minister considers appropriate, including, by way of s 80(6)(b), provisions respecting the management and operation of all or part of the Seaway, or property and undertakings referred to in s 80(1) or s 80(2) (property directed to be transferred from the Authority to the Minister or other specified entity, and then otherwise transferred by the Minister).

Section 80(5) agreements can also contain provisions as to the performance and enforcement of obligations contained therein (s 80(6)(e)). [ 50 ] Where an agreement entered into pursuant to s 80(5) so provides, the person who has entered the agreement shall undertake and defend any legal proceedings with respect to the management of the property (s 91(1)(d)) and shall discharge all obligations with respect to the management of the property (s 91(1)(e)).

Section 91(2) states that " “a civil proceeding…with respect to any federal real property or immovable that a person who has entered into an agreement under s 80(5) manages, or any property that the persons holds, or with respect to any act or omission occurring on the property, shall be taken by or against the person and not the Crown.” " Thus, to the extent that the provisions of the Agreements implement s 91(1)(

d) and (e), the Canada Marine Act places a positive obligation on the Plaintiff to undertake legal proceedings concerning the management of the property and to discharge all of its obligations with respect to the managed property. The implementation of provisions incorporating s 91(2) requires that civil proceedings pertaining to property managed pursuant to a s 80(5) agreement shall be taken by or against the Plaintiff, and not by the Crown. [ 51 ] It is clear from the

preamble and

Article 3.01.01 of the Framework Agreement that it was effected to implement the intent of the Canada Marine Act , being that the management, operation and maintenance of the Seaway by the Crown, through the Authority, would cease and would be transferred to the Plaintiff, in accordance with the Management, Operation and Maintenance Agreement and such other agreements as may be entered into by the parties. [ 52 ] Similarly,

Article 2.01.03 of the Managed Asset Agreement explicitly acknowledges that it, and the other instruments as defined therein, constitute agreements entered into pursuant to s 80(5) of the Canada Marine Act and are to be interpreted having regard to the objectives set out in s 78 of the Act. Significantly,

Article 2.01.04 states as follows: 2.01.04 Her Majesty and the Corporation hereby acknowledge and agree that all civil, criminal and administrative actions and proceedings with respect to the Assets shall be taken by or against the Corporation and not Her Majesty pursuant to Subsection 91(2) of the Act. [ 53 ] The Managed Asset Agreement does not include a provision obliging the Plaintiff to undertake legal proceedings in respect of the management of the property as permitted and contemplated by s 92(1)(d).

However, it does implement and require that any civil proceedings shall be brought by (and against) the Plaintiff and not the Crown, as explicitly contemplated by s 91(2) of the Canada Marine Act . [ 54 ] The Managed Asset Agreement also obliges the Plaintiff to manage, operate, maintain, repair, acquire and replace the Managed Assets at its own cost and expense, as would a prudent owner (Article 2.02.01(a)); to pay when due all Costs (as defined), charges, expenses and outlays of every nature whatsoever and whether extraordinary or ordinary, and whether foreseen or unforeseen, relating to the Managed Assets (Article 2.02.02); to assume at its own cost and expense the full and sole responsibility for the repair, replacement and maintenance of the Managed Assets (Article 9.01.01); and, at its own expense, to put and keep or cause to be put and kept the Managed Assets in a Fully Operational State (as defined) during the term of the agreement and to make or cause to be made all necessary maintenance and repair, ordinary and extraordinary, foreseen or unforeseen, structural or non-structural in order to keep the Managed Assets Fully Operational, as would a prudent owner (Article 9.02.01).

Similarly, the Plaintiff is obliged, at its own expense, to repair, replace, restore or reconstruct any Managed Assets that are wholly or partially damaged or destroyed (Article 12.01.02). [ 55 ] Thus, by virtue of its obligations under the Managed Asset Agreement, the Plaintiff was required at its own expense, to repair the physical damage to Bridge 19, a Managed Asset, caused by the Defendants’ negligence.

[56] As to the Management, Operation and Maintenance Agreement, this agreement also explicitly states that it is made under s 80(5) ofthe Canada Marine Act (s 1.12).

Section 3 sets out the Plaintiff’s responsibilities and obligations.

They include that it shall manage,operate, maintain, repair and acquire and replace the Managed Assets and the Other Assets and Properties (as defined) in a competent,honest and commercially prudent manner (s 3.2); manage, operate, repair, acquire and replace the Managed Assets and the Other Assetsand Properties in accordance with the Managed Asset Agreement and the Management, Operation and Maintenance Agreement (s3.4(1)); immediately notify the Crown of any Claim, demand, right or cause of action asserted, threatened or instituted by or against thePlaintiff or the Crown which involves the Managed Assets and other described assets (s 3.4(3)); generally do and cause to be done allsuch acts, matters and things required to manage, operate, maintain, repair, acquire and replace the Managed Assets and the Other Assetsand Properties in a competent, honest and commercially prudent manner (s 3.4(4)); and, all costs and expenses incurred by or on behalfof the Plaintiff in connection with its performance of its obligations under the Management, Operation and Maintenance Agreement shallbe for the Plaintiff’s own account, the Crown having no responsibility for such costs and expenses as contemplated under the agreementor other Instrument (s 3.5). [57] In sum, the provisions of the Canada Marine Act and the Agreements make it clear that responsibility for the management andoperation of the Managed Assets, which include Bridge 19, lies exclusively with the Plaintiff.

Further, that repair costs of the ManagedAssets are to be incurred exclusively by the Plaintiff, which is obliged to keep and repair them as would a prudent owner, and to operatethe Seaway in a commercially prudent manner. Further, any actions related to the Managed Asset must be brought by the Plaintiff. Read together and in whole, the Act, as implemented by the Agreements, grants to the Plaintiff the statutory right to pursue claims suchas this action.

And, as submitted by the Plaintiff, given that the Agreements transfer from the Crown to the Plaintiff all risks andresponsibilities pertaining to Bridge 19, the practical effect of s 91(2) is that only the Plaintiff can, and has the exclusive right to, pursueclaims for damages, as it has done in this matter. In my view, it is also commercially prudent for the Plaintiff to attempt to recover thecost of repairs incurred due to the negligence of a party such as the Defendants. ii.

Is the Plaintiff’s right to commence claims restricted to actions intended to protect the Crown’s interests? [58] The Defendants submit that s 91 only authorizes the Plaintiff to commence proceedings to "“protect Her Majesty’s interests—notthe Plaintiff Corporation’s interests”". Significantly, in my view, s 91 contains no such wording or restriction. [59] The Supreme Court of Canada has stated that the preferred approach to statutory

interpretation is that set out by Elmer Driedger inConstruction of Statutes (2nd ed 1983). Specifically, that: "“Today there is only one principle or approach, namely, the words of an Actare to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object ofthe Act, and the intention of Parliament”" (at p 87; also see Rizzo at para 21; Bell Express Vu Limited Partnership v Rex, 2002 SCC 42 atpara 26). The Supreme Court of Canada has also cautioned against adopting an

interpretation that is not supported by the text of aprovision and that requires the Court to read in words that are simply not there, as this can amount to judicial rewriting of legislationunder the guise of

interpretation (Wilson v British Columbia (Superintendent of Motor Vehicles), 2015 SCC 47 at para 27 citing R vMcIntosh, (SCC), [1995] 1 SCR 686 at p 701; R v Hinchey, (SCC), [1996] 3 SCR 1128 at paras 8–9and 36; Canada (Information Commissioner) v Canada (Minister of National Defence), 2011 SCC 25 at para 40.). [60] In my view, s 91(1)(

d) and s 91(2) are clear and unambiguous and do not require reference to extrinsic evidence to determine theintent of the legislators (see: Professional Institute of the Public Service of Canada v Canada (Attorney General), 2012 SCC 71 at para95). Nor does anything in the scheme, object or overall context of the Canada Marine Act suggest that s 91 has the restrictive meaningthat the Defendants suggest. In line with the overall purposes of the Act (s 4), the objectives of

Part 3, Seaway, include promoting acommercial and competitive approach to the operation of the Seaway; protecting its integrity and its long term operation and viability asan integral part of Canada’s national transportation infrastructure; and, encouraging user involvement in its operation.

Part 3 also setsout operational requirements for a contemplated not-for-profit corporation. [61] Further, the Canada Marine Act and agreements made pursuant to s 80(5) create a scheme under which, once a s 80(5) agreement isentered into, the entity that enters into the agreement effectively steps into the Crown’s shoes in the management and operation of thesubject property, assets and services. This scheme affords that entity certain rights and responsibilities.

These rights include the right tocharge fees (s 92(1)), to control Seaway traffic as specified (s 99) and to act jointly or in conjunction with parallel US authorities (s 100). Further, they include the right to cause a ship to be detained if there are reasonable grounds to believe that an amount is due and payablefor fees imposed under the Act (s 115(1)(b)), or, that property that is managed by a person who has entered into an agreement undersubsection 80(5) has been damaged by the ship or through the fault or negligence of a member of the crew of the ship ((115(1)(c)).

Inthat regard, for purposes of obtaining clearance from detention, the s 80(5) entity will estimate the amount and determine the satisfactorykind of security to be deposited in court with respect to a claim against a ship for fees owed or damages incurred (s 116(4)(

c) and (d)). And, significantly, clearance may be granted when "“an amount satisfactory to the port authority, to the Minister or to the person whohas entered into an agreement under subsection 80(5), as the case may be, has been paid to the port authority, the Minister or the personin respect of the ship in respect of the fees payable or the damages referred to in paragraph 115(1)(c)”" (s 116(e)). [62] The s 80(5) entity may also apply to court to sell a detained ship (s 117). Additionally, it has the right to place a lien over a shipand on the proceeds of its sale: 122

(1) A port authority, the Minister or a person who has entered into an agreement under subsection 80(5), as the casemay be, has at all times a lien on a ship and on the proceeds of its disposition for an amount owing to the port authority, theMinister or the person, and the lien has priority over all other rights, interests, claims and demands, other than claims forwages of crew members under the Canada Shipping Act, 2001, if the amount is owing in respect of (

a) fees and interest in respect of the ship or goods carried on the ship; or (

b) damage to property caused by the ship or through the fault or negligence of a member of the crew of the ship acting inthe course of employment or under the orders of a superior officer. [63] The Defendant correctly submits that a lien on a ship does not create a debt, but merely gives priority over other claims in the event

of a debt. However, s 122(1)(

b) serves to explicitly recognize that a person who has entered into an agreement under s 80(5) has a lien on the ship, and on the proceeds of its disposition, for an amount owing to that person in respect of damage to property caused by the ship. If anything, the natural implication of s 91, s 116(4)(c), (

d) and (

e) and s 122 (1)(

b) is that in circumstances such as this, where a ship collides with and causes damage to a bridge that is an asset managed by the Plaintiff, the Plaintiff, as a s 80(5) entity, can commence proceedings to cause the sale of the ship to satisfy an unpaid debt arising from that damage. Further, that the proceeds for the amount owing for those damages will be paid to the Plaintiff, not to the Crown.

In other words, the Plaintiff can commence an action to recover the losses it incurred because of its obligations under the Agreements to effect the repair of the Managed Asset. [ 64 ] It is possible, of course, that by way of defence a ship may assert, as the Defendants do here, that no debt is owing because the damages are unrecoverable economic loss. However, my point is that the above provisions do not support the

interpretation proposed by the Defendants, that s 91 restricts or precludes the Plaintiff from commencing an action and recovering damages it incurred in repairing property owned by the Crown, managed by the Plaintiff, and damaged by a third-party ship. [ 65 ] Rather, the Plaintiff, having entered into the Agreements pursuant to s 80(5), in effect, acts in lieu of the Crown.

Section 91 reflects this as it requires that legal proceedings shall be brought by the Plaintiff and not the Crown. Moreover, under the Defendants’

interpretation of s 91, the Plaintiff would have no right of recovery in any circumstances such as this.

Yet, that would seem contrary to the purpose of the Act, which is to manage the Seaway in a commercially sound manner, as well as the Plaintiff’s responsibility under the Agreements to act as would a prudent owner. [ 66 ] In conclusion on this point, I see nothing in the text of s 91, the context or the purpose of the Act, or the Agreements which implement it, suggesting that the Plaintiff’s right to engage in legal proceedings is restricted to protecting Crown property and Crown interests on behalf of the Crown, to the exclusion of the Plaintiff recovering losses it incurs as a result of the responsibilities it assumes under the Agreements.

In this regard, whether the Plaintiff is a Crown agent or independent contractor is irrelevant. iii. Was the intent of the Agreements to exclude the Plaintiff from recovering damages caused by third party negligence? [ 67 ] The Defendants also assert that the terms of the Agreements demonstrate that the parties did not intend for the Plaintiff to recover its losses in circumstances such as those before the Court.

In this regard, the Defendants argue that it is significant that the Management, Operation and Maintenance Agreement provides no indemnity by the Crown to the Plaintiff in the event that the Plaintiff is unable, as a matter of law, to recover from a third party compensation for repairs to a Managed Asset that are carried out by the Plaintiff pursuant to their management and operation responsibilities, for amounts less than $2.5 million.

I do not find this argument persuasive. [ 68 ] It is correct that the Agreements do not provide for indemnity by the Crown to the Plaintiff for any losses the Plaintiff incurs that it is unable to recover, for any reason, from a negligent third party whose actions cause damage to managed property.

Rather, the Agreements primarily address indemnification by the Crown in two circumstances - losses or claims concerning Seaway Management that arose prior to the commencement of the Agreements (Management, Operation and Maintenance Agreement s 19.3), and Catastrophic Events (Management, Operation and Maintenance Agreement s 14). However, the Agreements do not tie the absence of indemnity for claims arising from third party negligence to the Catastrophic Events provisions, as do the Defendants. [ 69 ] The provisions of

Section 14, Catastrophic Events, serve to make the Crown solely responsible for taking action to address a Catastrophic Event, as the Crown deems fit, and to be solely responsible for the payment of all Catastrophic Expenses.

Thus, Catastrophic Events and Catastrophic Expenses, which are defined in ss 1.1(20) and (21), respectively, of the Management, Operation and Maintenance Agreement, are a carve out from the Plaintiff’s responsibilities otherwise arising with respect to the repair of the Managed Assets. [ 70 ] The Crown may, however, direct the Plaintiff to repair any damage or destruction arising from a Catastrophic Event, or to take other action in respect thereof, and to incur Catastrophic Expenses. In that circumstance, the Crown will reimburse the Plaintiff, subject to Treasury Board approval (s 14.2).

The Plaintiff can also take action in response to a Catastrophic Event and incur Catastrophic Expenses if it determines that such action or expense must be incurred immediately, or otherwise prior to obtaining Crown consent, in order to contain or mitigate damage or destruction (s 14.3). [ 71 ] The Plaintiff otherwise has no responsibility to repair any damage or destruction caused by a Catastrophic Event or to incur Catastrophic Expenses (s 14.5).

It shall, however, cooperate with the Crown in connection with repairs (s 14.5(1)), and shall pay to the Crown any Property Insurance Proceeds, as defined, or other payment received by the Plaintiff from third parties relating to a Catastrophic Event to the extent that the Crown incurs or pays the Plaintiff for Catastrophic Expenses relating to such Catastrophic Event (s 14.5(2)). [ 72 ] Of note is the limited scope of the Crown indemnity provision pertaining to Catastrophic Events and Catastrophic Expenses, s 14.4(3).

Indemnity only comes into play when the Plaintiff incurs costs and expenses as an urgent mitigation effort prior to Crown consent (s 14.3); when the Plaintiff incurs a claim or loss because of the Crown’s failure to act in response to a Catastrophic Event (s 14.4); when the Plaintiff fails to act or to incur Catastrophic Expenses following receipt of notice not to do so from the Minister (s 14.4); and, when the Treasury Board fails to give approval for the expenses that the Plaintiff incurs (s 14.4). [ 73 ] In my view, these provisions do not suggest that the parties intended that the Plaintiff would have no means of recouping any losses caused by a negligent tortfeasor unless the damages exceeded $2.5 million.

Rather, they pertain to and address a narrow and discrete circumstance, Catastrophic Events and Expenses. [ 74 ] It is also of note that Catastrophic Events are only those in which the damages exceed $2.5 million and pose a risk to the safe operation of the Seaway or any Managed Asset. Thus, on the Defendants’

interpretation, the parties must also have intended that the Plaintiff would be responsible for and would be unable to recover damages exceeding $2.5 million that pose no safety concerns. I am not persuaded that the terms of the Agreement support that

interpretation.

[75] Finally, I note that the insurance provisions of the Management, Operation and Maintenance Agreement contemplate that thePlaintiff will obtain, at its own expense, property and liability insurance, including with respect to the Managed Assets, and that thePlaintiff and the Crown will be named as insured on policies of insurance, as their respective interests may appear (s 18.2).

The Plaintiffis entitled to, and, if received, the Crown shall pay to the Plaintiff, all property insurance proceeds or payments from third parties fordamage in respect of any Managed Assets to pay for the repair or replacement, except to the extent that the Crown is obliged under theagreement to pay for such damage or destruction. Again, these provisions do not support an

interpretation that such losses were intendedto be unrecoverable by the Plaintiff. Nor do the above discussed provisions concerning the detention or sale of vessels for amountsowing in respect of damage caused by a ship to managed property. [76] In conclusion, while the Plaintiff does not own the Managed Assets, including Bridge 19, it is solely responsible for the operation,management and repair of those assets at its own expense, and to operate the Seaway on a commercially sound basis and as a prudentowner would.

To carry out this function, the Plaintiff must be able to pursue actions to recover costs it incurs to repair damage to thoseassets caused by the negligence of third parties. By way of the Canada Marine Act, as implemented by the Agreements, it has thisauthority.

The absence of an indemnity by the Crown in the event that such an action, for any reason, should not succeed, does notsuggest that the parties intended that the Plaintiff would incur these losses as a cost of doing business, rather than pursuing them by wayof legal actions. [77] That said, and while I acknowledge that the practical effect of s 91 of the Act and the Agreements is that only the Plaintiff incurredthe cost of the repairs and only the Plaintiff can sue to recover them, I agree with the Defendants that nothing in the Act, itsimplementation by way of the Agreements or the terms of the Agreements themselves, goes so far as to grant them a right of recoverythat would otherwise not be available to them at law, such as with respect to relational economic loss. [78] Accordingly, it is necessary to next consider the nature of the relationship between the Plaintiff and the Crown for the purpose ofdetermining if the losses incurred were relational economic losses and, if so, whether the Plaintiff can recover them or not. iv.

Are the Plaintiff’s losses relational economic losses? [79] To address this issue, it is helpful to first set out jurisprudence delineating what constitutes relational economic loss. I will thenanalyse the factual circumstances present in this case to determine if the Plaintiff’s damages fall within that definition. [80] Historically, the common law did not permit recovery of economic loss where a plaintiff suffered neither physical harm norproperty damage.

However, over time, Canadian jurisprudence has reconsidered the traditional rule and it now recognizes that, inlimited circumstances, such damages may be recovered (Martel Building Ltd. v Canada, 2000 SCC 60 at paras 36–37 "(“Martel”")). [81] Currently, five categories of negligence claims for which a duty of care has been established with respect to pure economic losses,have been recognized:

i) the independent liability of statutory public authorities; ii) negligent misrepresentation; iii) negligent performance of a service; iv) negligent supply of shoddy goods or structure;

v) relational economic loss. (Norsk at p 1049, Justice La Forest, writing in dissent, referencing Feldthusen, "“Economic Loss in the Supreme Court of Canada:Yesterday and Tomorrow”" (1990 – 91) 17 Can Bus LJ 356 at pp 357–58; Martel at para 38; Design Services Ltd. v Canada, 2008 SCC22 at para 31 ("“Design Services”")). [82] These categories are not closed (Martel at para 45).

However, before assessing whether a new category of pure economic lossshould be recognized, it must first be determined whether the situation fits within, or is analogous to, a relationship previouslyrecognized as having a duty of care between the parties (Design Services at para 27 referencing Childs v Desormeaux, 2006 SCC 18 atpara 15).

If it does not, then the Court will proceed to determine whether to extend the duty of care in a given case, applying the two-stage test set out in Anns v Merton London Borough Council, [1978] AC 728 (HL) ("“Anns”"), and Kamloops (City of) v Nielsen (SCC), [1984] 2 SCR 2 at pp 10–11 ("“Kamloops”"): 1) whether the relationship between the plaintiff and defendant was sufficiently proximate to give rise to a prima facieduty of care? 2) if such a prima facie duty of care existed, whether it was negated for policy reasons and recovery should be denied? (Design Services Ltd., at paras 45–46; Martel at paras 46–47). [83] However, for policy reasons, courts have been cautious in recognizing new categories of recoverable economic loss.

These policyreasons were described as follows in Martel: [37]…First, economic interests are viewed as less compelling of protection than bodily security or proprietary interests. Second, an unbridled recognition of economic loss raises the spectre of indeterminate liability. Third, economic losses oftenarise in a commercial context, where they are often an inherent business risk best guarded against by the party on whom theyfall through such means as insurance. Finally, allowing the recovery of economic loss through tort has been seen toencourage a multiplicity of inappropriate lawsuits.

See D’Amato, supra, at para. 20, and A.M. Linden, Canadian Tort Law(6th ed. 1997), at pp. 405-6.

[ 84 ] Relational economic loss has been defined as a " “situation in which the defendant negligently causes personal injury or property damage to a third party. The plaintiff suffers pure economic loss by virtue of some relationship, usually contractual, it enjoys with the injured third party or the damaged property” " ( Design Services at para 33 quoting A. M. Linden and B.

Feldthusen, Canadian Tort Law 8th ed (Markham, Ont: LexisNexis Butterworths, 2006) at para 477). [ 85 ] Of the five currently recognized categories of pure economic loss, only relational economic loss continues to operate under a presumption against recovery.

There are three categories of contractual relational economic loss that currently constitute exceptions to the presumption against recovery: 1) where the claimant has a possessory or proprietary interest in the damaged property; 2) general average cases; and 3) where the relationship between the claimant and the property owner constitutes a joint venture; Like the broader categories of economic loss, these three categorical exceptions are not closed ( Martel , at paras 42–45; Design Services at para 35). [ 86 ] So then, how does the matter before me fit into the principles set out by the Supreme Court in the above decisions? [ 87 ] On their face, the damages that are claimed by the Plaintiff fall within the definition of relational economic loss.

That is because this is a situation in which the Defendants have negligently caused property damage to a third party, the Crown.

The Plaintiff has suffered pure economic loss by virtue of its contractual relationship with the Crown and/or the damaged property, Bridge 19 ( Design Services at para 33). [ 88 ] However, as the Plaintiff notes, its damages do not fit neatly within circumstances that have previously been described as defining contractual relational economic loss: Contractual relational economic loss arises where the defendant has interfered with or damaged the property of a third person with whom the plaintiff has a contractual relationship.

The property damage disrupts or interferes with the performance of the contract, causing the plaintiff to lose some economic advantage or benefits. (Osborne at page 202) [ 89 ] Here, the losses claimed by the Plaintiff do not result from disruption or interference with the Agreements, the contracts with the Crown. They are not loss of use or loss of profit claims.

Rather, they reflect the cost of repairing the actual damage caused to Bridge 19 by the Defendants’ negligence. [ 90 ] The Plaintiff takes the view that it has taken the place of the true owner and, as a result, it is the only party that sustained losses or damages arising from the collision. Alternatively, the Plaintiff submits that the losses fall within the possessory or proprietary exception to the presumption against recovery of contractual relational economic loss.

Conversely, the Defendants characterise the damages as contractual relational economic losses that arose solely because of the Plaintiff’s repair obligations assumed under the Agreements. [ 91 ] In effect, albeit indirectly, the Plaintiff characterises its damages as transferred losses, being losses that the Crown would have suffered but for the fact that all risk and responsibility pertaining to Bridge 19 has been transferred from the Crown to the Plaintiff pursuant to the Agreements. [ 92 ] While not a recognized exception to the rule against recovery, the Supreme Court of Canada has addressed the concept of transferred losses on two occasions, in Bow Valley and in Norsk . [ 93 ] In Bow Valley , Husky Oil Operations Ltd. ( " “HOOL” " ) and Bow Valley Industries Ltd. ( " “BVI” " ) made arrangements to have an oil drilling rig constructed by Saint John Shipbuilding Limited ( " “SJSL” " ).

Before construction began, ownership of the rig and the construction contract with SJSL were transferred to Bow Valley Husky (Bermuda) Ltd. ( " “BVHB” " ). HOOL and BVI entered into contracts with BVHB for the hire of the rig to conduct drilling operations. These contracts provided that HOOL and BVI would continue to pay day rates to BVHB in the event that the rig was out of service. An improperly installed heat trace system caused a fire that damaged the rig and put it out of service for several months while repairs were affected.

BVHB, HOOL and BVI commenced an action against SJSL alleging breach of contract and negligence and an action against Raychem, the manufacturer of the heat trace system, for negligence. BVHB claimed both for the cost of the repairs to the rig and for the revenue lost as a result of the rig being out of service for several months.

HOOL and BVI sought to recover the day rates that they were contractually required to pay to BVHB during the period the rig was out of service, as well as expenses they incurred for supplies to the rig. [ 94 ] The Supreme Court noted that the plaintiffs, HOOL and BVI, sought damages for economic loss incurred as a result of the shutdown of the drilling rig during the period it was being repaired. That is, they sought to recover the economic loss they suffered as a result of damage to the property of a third party, or contractual relational economic loss.

The question before the Court was whether the loss suffered by HOOL and BVI was recoverable. The Court found that the case before it did not fall into any of the above noted categories of recoverable contractual relational economic loss. However, as the categories were not closed, it went on to consider whether the situation was one in which the right to recover should nonetheless be recognized. Applying the Anns test, the Court found that while a prima facia duty of care existed, it was negated by policy considerations, the most serious being indeterminate liability.

The ripple effect was found to be present in that case. The Court also considered two other policy factors, additional deterrence of liability and a plaintiff’s ability to contractually allocate risk to the property owner. It concluded, however, that these policy considerations did not assist BVI and HOOL in the circumstances of that matter. [ 95 ] Of note is that in Bow Valley , BVI and HOOL also argued that the loss they claimed against the defendants was really loss transferred from BVHB, the rig owner.

However, unlike the present matter, they submitted that they were in a common venture with BVHB, which resulted in BVHB’s losses being transferred to them. On that basis, they argued they should be able to claim the losses as though they stood in the shoes of BVHB. Because BVHB could have claimed consequential losses for loss of use of the drilling rig, so

then could HOOL and BVI. The Supreme Court dismissed this argument in the following paragraph: 58 This argument suffers from a number of difficulties. First, insofar as courts have recognized transferred loss, it has been confined to physical damage: Norsk , supra . Applied to relational economic loss, it would need to meet the criteria for recovery of that category of loss, and hence would seem not to advance the plaintiffs’ case.

Second, the plaintiffs claim not only for loss of use of the drilling rig, but for losses related to unavoidable expenses they incurred for other supplies, including food, drilling mud and additional equipment. It is more difficult to see how these losses, based entirely on contracts between the plaintiffs and others, independent of BVHB, can be said to be transferred from BVHB. Third, there is nothing to show that the day rates paid by HOOL and BVI while the rig was idle are identical to what BVHB’s consequential losses would have been, Finally, what does one do about the contributory negligence of BVHB?

Given that BVHB is 60 percent at fault, under the transferred loss theory would the plaintiffs be able to recover only 40 percent of their claim? These difficulties suggest that the plaintiffs’ loss is not the transferred loss of BVHB, the owner of the damaged rig. It is contractual relational economic loss, and should be treated as such. [ 96 ] Significantly, in Bow Valley , the contractual relational economic losses claimed by BVI and HOOL did not pertain to the cost of repairs to the drilling rig, which had been recovered by the rig owner.

Conversely, in the case before this Court, the Plaintiff’s claim for repair costs is related to physical damage to Bridge 19. Further, in Bow Valley , BVI and HOOL sought to recover damages for loss of use, unlike the circumstances in this matter. And, as to BVI and HOOL’s claim for expenses incurred for supplies, these were based on contracts between those plaintiffs and third parties who were independent of BVHB and, therefore, were not transferred from BVHB, the rig owner.

In short, while HOOL and BVI’s claim of transferred loss did not succeed, the factual circumstances are dissimilar to those in this matter and, in my view, the case does not serve to discredit the concept of transferred loss, as the Defendants suggested when appearing before me. [ 97 ] The Supreme Court’s decision in Norsk is factually closer to the situation before me. In that case, a tug that Norsk owned was towing a barge down the Fraser River when the tug collided with a railway bridge owned by Public Works Canada ( " “PWC” " ) and used by four railways, including Canadian National ( " “CN” " ).

The collision caused extensive damage that closed the bridge for several weeks. Norsk admitted liability for its negligence which had caused the collision. [ 98 ] The railways' use of the bridge was governed by a contract that explicitly reserved full ownership of the bridge to PWC and explicitly rejected any possibility of a leasehold estate or interest. The bridge operated on the principle of full recovery of all operating and maintenance costs, but not for profit.

CN, in addition, agreed to provide PWC, on a contractual basis, with any repair, maintenance, consulting and inspection services that PWC might request. PWC was to authorize all such services and to pay for them as needed. [ 99 ] PWC paid for the repair to the bridge and, at trial, recovered all damages resulting from the collision. The licence contracts between PWC and the railways, however, did not provide for indemnification in the case of disruption to bridge service.

Unable to claim under the contract, CN brought an action in tort against Norsk and the other defendants, claiming costs CN incurred because of the bridge closure. At issue before the Supreme Court was whether or not economic loss and contractual relational economic loss in particular, was recoverable in tort. [ 100 ] Justice La Forest , writing in dissent, noted that Norsk involved a claim for relational economic loss by the plaintiff as a result of damage caused to someone else’s property. For him, the issue in that case was whether a person (

A) who contracts for the use of property belonging to another (

B) can sue a person who damages that property for losses resulting from A's inability to use the property during the period of repair, or contractual relational economic loss. Thus, the contractual relational losses sought by CN pertained to loss of use of its contractual rights. [ 101 ] As part of its submissions, CN argued that it had alternative interests at stake that differentiated it from the ordinary contractual claimant, and put forward two arguments to the effect that its interest was more than that of a mere contractor.

The first of these arguments was that CN suffered from a transferred loss of use; the second was that CN was involved in a common adventure with PWC. These arguments were centred on the relationship between the plaintiff and the property owner, i.e., between CN and PWC. [ 102 ] As to the transferred loss of use, CN submitted that while PWC initially suffered the physical loss for damage to the bridge, pursuant to their contracts with the railways, all costs were ultimately born by, or trickled down to, the railways. The Court rejected this argument for a number of reasons.

CN also submitted that granting judgment to it in the circumstances of that case would not be extending the liability of the defendants over and above what they would normally incur to the owner of a commercial property because, had PWC been using the bridge, it could have recovered loss of use as consequential economic loss. [ 103 ] In the course of addressing this argument, Justice La Forest noted that in Candlewood Navigation Corp v Mitsui O.S.K.

Lines Ltd. (The Mineral Transporter) , [1986] A.C. 1 , the House of Lords rejected a variant of CN’s transferred loss argument made by the time charterer of a vessel damaged in a collision on the basis that , if accepted, it would have far-reaching consequences that would run counter to the accepted policy of the law. [ 104 ] Justice La Forest adopted similar reasoning in rejecting CN’s argument (at p 1095–6, 1101): To accept wide recovery for transferred loss as proposed by the plaintiff here would have the effect of entitling the plaintiff to compensation in all cases dealing with contracts for the use of another's property.

If loss of use is extended to include the costs of finding alternate sources for the same benefits, it goes considerably beyond what is normally payable to the owner in commercial cases, although admittedly it could be payable to the owner. True transferred loss cases involve a claim which is in essence a claim for property damage which the owner himself would have recovered, had the loss not fallen on the plaintiff because of their contract.

A true transferred loss case requires that the risk of property damage have passed, as in the case of goods damaged in transit after the risk (but not the property) has passed to the buyer. In such a case, unless the buyer is given a right of action, the carrier will be liable to neither party: not to the seller because he has suffered no loss, nor to the buyer who has no protected interest; see Fleming, The Law of Torts (7th ed. 1987), at pp. 164-65.

Even in that type of case, recovery was denied in the recent House of Lords decision in Leigh and Sillavan Ltd. v. AliakmonShipping Co., supra, essentially on the ground that contract law provided a sufficient protection in the circumstances of thatcase. It was only the particular variation of the contract to which the buyers agreed that deprived them of their usual right ofaction. The present is not a true transferred loss case. PWC has collected for the property damage it has sustained. The transferredloss claimed in this case is thus not with respect to the property damage claim.

Rather, it is a claim for the transferred lossof use, or transferred economic loss. In these circumstances, I fail to see how the respondent suffered a transferred loss such as to create an alternative protectedinterest to its contractual interest. […] In conclusion, I do not find the respondent's arguments to the effect that it had more than a mere contractual interestconvincing. CN's entitlement to use the bridge finds its sole source in the contract. The contract sets out the full extent ofCN's rights: without the contract, CN would be trespassing.

It has wisely not argued the existence of any possessoryinterest. Its transferred loss is merely the transfer of a loss of use and is a less compelling case for recovery than the lossincurred by a time charterer. This case does not involve a common adventure such as exists in the cases dealing with generalaverage contributions.

As a result, I cannot accept the rationale for recovery set forth by McLachlin J. to the effect that thepurpose of allowing recovery in this case is to permit "a plaintiff whose position for practical purposes, vis-à-vis thetortfeasor, is indistinguishable from that of the owner of the damaged property, to recover what the actual owner could haverecovered". (emphasis in original) [105] It is significant to note that in this matter, unlike Norsk, the Plaintiff is not seeking damages for transferred loss of use ofcontracted for rights.

And, unlike Norsk, here the true owner, the Crown, has not collected from the Defendant for the property damagesustained. Rather, under s 91 of the Canada Marine Act and the Agreements, the Crown transferred the risk and cost of repairs to thePlaintiff and all claims are to be brought by (and against) the Plaintiff. The transferred loss claimed in this case is with respect to theproperty damage claim, which the Crown would have recovered had the loss not fallen to the Plaintiff because of the contracts, theAgreements.

Here the circumstances appear to fit within those described by Justice La Forest as a "“true transferred loss case”". [106] However, the Plaintiff has not directly made this claim. In the result, while it is arguable that the Plaintiff’s damages for repaircosts constitute transferred losses (see Bruce Feldthusen, Economic Negligence, 6th ed (Toronto: Thomson Reuters Canada Ltd, 2012) atp 261–7 ("“Feldthusen 6th ed”")) and, therefore, are not unrecoverable contractual relational losses, I have not made a determination onthat basis.

That said, in my view, the conceptual basis underlying both transferred loss, and the possessory interest exception, which isdiscussed below, are similar. In this matter, the issue can be resolved by determining if the Plaintiff’s repair cost damages fall within thepossessory interest exception to the general presumption against recovery of relational economic loss. [107] As indicated above, the Supreme Court of Canada confirmed in Bow Valley that relational economic loss claims are generallyunrecoverable, subject to certain recognized exceptions.

These are, cases where the plaintiff has a possessory or proprietary interest inthe damaged property; general average cases; and, cases where the plaintiff is in a joint venture with the property owner. The claim ofHOOL and BVI in Bow Valley did not fall within any of those exceptions.

However, because the categories of recoverable contractualrelational economic loss in tort are not closed, Justice McLachlin went on to consider whether the situation was one in which the right torecover contractual relational economic loss should, nevertheless be recognized (at para 50 citing Norsk at p 1134). [108] In that regard, she also indicated that exceptional new categories might be created, based on the same approach used fordetermining whether a tort action lies for relational economic loss, the Anns test (at para 56).

While Justice McLachlin accepted thatnew categories of recoverable contractual relational economic loss may be recognized where justified by policy considerations andrequired by justice, she also stated that the courts should not assiduously seek new categories (at para 50). [109] While the circumstances before the Court in this case are novel and may warrant consideration as a new exception, the Plaintiffdoes not argue that the Court should create a new category.

Rather, it argues that its claim falls within the possessory or proprietaryinterest exception. [110] The jurisprudence of the Supreme Court of Canada does not describe what constitutes the parameters of a possessory or proprietyinterest sufficient to ground recovery for relational economic loss, or set out a test to be applied in that regard. However, whether thePlaintiff has a possessory or proprietary interest in Bridge 19 is a question of its contractual relationship with the Crown, or of contractualinterpretation (see Leo Ocean at para 34).

In this case, that relationship is also informed by the relevant provisions of the CanadaMarine Act. [111] The jurisprudence to date suggests that the minimum possessory or proprietary interest necessary to ground recovery forcontractual relational economic loss falls somewhere beyond the interests of a licensee or a time charter and will likely include those of aleaseholder or a demise charterer. [112] For example, a lease, unlike a license, confers a possessory interest in property (Anne Warren La Forest, Anger and HonsbergerLaw of Real Property, 3 ed (Toronto: Thompson Reuters, 2018) at s 7:10).

And, this Court has determined that a mere license was not asufficient propriety or possessory interest to ground recovery for pure economic loss (Gypsum Carrier Inc. v Canada, (FC), [1978] 1 FC 147 "(“Gypsum”")). In Gypsum, the Crown was the owner of a bridge damaged when a ship collided with it. Railway companies that had a contractual right of use of the bridge, and that claimed expenses incurred while re-routing their trainsduring the time the damaged bridge was closed, were held not to have a possessory interest in the damaged property.

Based on the termsof the agreements between the Crown and the railway companies, this Court held that, at best, they might have some kind of licence inrespect of land (the bridge and approaches).

[ 113 ] Further, as discussed above, in Norsk , Justice La Forest indicated that a demise charterer can have a sufficient possessory interest to ground recovery for relational economic loss. There, CN argued that it had alternative interests at stake that differentiated it from the ordinary contractual claimant. In that regard, Justice La Forest stated that CN did not seek to place itself under a long-standing exception to the exclusionary rule enunciated in Simpson & Co. v Thomson (1877), 3 App Cas 279 (HL) at p 290, which involves cases allowing recovery to a plaintiff with a possessory or proprietary interest.

If CN could have argued that its interest in the bridge was analogous to the interest of a demise charterer in the chartered ship, then it would have been able to recover since it would be, vis-à-vis third parties, the temporary owner of the bridge (referencing Scrutton on Charterparties and Bills of Lading (19th ed. 1984), at pp 47–52; Baumwoll Manufactur von Carl Scheibler v Furness , [1893] AC 8 (HL) ; The " "Father Thames" " , [1979] 2 Lloyd's Rep 364 ).

This was because a demise charterer's interest typically entirely supplants the interest of the owner of the ship, even in the repair of physical damage (referencing Candlewood Navigation Corp. v Mitsui O.S.K.

Lines Ltd. (The Mineral Transporter) , [1986] AC 1 at p 18) . [ 114 ] And while the Defendants assert that, in light of Bow Valley , Norsk is no longer good law, I note that although in Norsk Justice La Forest and Justice McLaughlin differed in result (what constituted a joint venture) and methodology (starting from a general exclusionary rule as opposed to a two-step test), this difference in approach was subsequently reconciled in Bow Valley .

In Bow Valley , Justice McLaughlin noted that she and Justice La Forest had in fact agreed on several important propositions, including the identification of the three current categories of contractual relational economic loss that constitute exceptions to the presumption against recov

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