Geophysical Service Inc. v. Canada (Attorney General), 2016 NSSC 264

SUPREME COURT OF Nova Scotia Citation: Geophysical Service Inc. v. Canada (Attorney General), 2016 NSSC 264 Date: 20161011 Docket: Hfx No. 408202 Registry: Halifax Between: Geophysical Service Incorporated, a body corporate Plaintiff v. Attorney General of Canada First Defendant v. Chris Hanham Second Defendant v. Fugro Canada Corp., a body corporate Third Defendant Decision –

Summary Judgment on Pleadings Judge: The Honourable Justice Denise M. Boudreau Heard: September 1, 2016, in Halifax, Nova Scotia Counsel: Matti Lemmens, for the Plaintiff/Respondent on Motion Patricia MacPhee, for the First and Second Defendant/Applicant on Motion Ahmed Shafey, for the Third Defendant/Applicant on Motion By the Court: [ 1 ] Both defendants in this matter have made motions for

summary judgment on the pleadings. [ 2 ] The active pleading is the “Amended Amended Statement of Claim”, dated March 23, 2016. The facts alleged therein are as follows: Regulatory Context 5. GSI is a seismic service company. At all times material to this action GSI was in the business of providing seismic services including the acquisition, licensing and storage of seismic, gravity and magnetic data.

In the years 2007, 2008 and 2009 all inclusive – GSI was the owner and operator of the ship GSI ADMIRAL, which was Canadian registered and flagged, and was at all those times the only Canadian flagged ship equipped to perform seaborne seismic surveys. 6. At all times material to this action pursuant the Coasting Trade Act , SC 1992 c. 31, foreign ships were prohibited from engaging in the coasting trade, including the performance of seismic surveying, except and unless no suitable Canadian ship was available. 7.

Pursuant to section 3(1) of the Coasting Trade Act foreign ships were prohibited from engaging in the coasting trade except under a licence issued by the Minister of Public Safety and Emergency Preparedness and such a license to a foreign ship could only be issued if the minister was satisfied by a determination of the Canadian Transportation Agency that there was no Canadian ship suitable and available to perform the proposed work. 8.

Pursuant to section 4(1) of the Coasting Trade Act the proponent seeking to engage a foreign vessel to perform work, was required to apply to the Canadian Transportation Agency for a determination that there was no Canadian ship suitable and available to provide the

service or perform the activities for which the foreign vessel was desired. Upon any such application the Canadian Transportation Agency was required to (and did) notify owners of Canadian ships which might be suitable and available, which owners were then permitted to object and to seek a ruling of the Canadian Transportation Agency requiring that the owners’ Canadian ship be employed to perform the proposed work.

In the case of seismic vessels, it was the invariable practice of GSI to so object, and as GSI was the owner of the only Canadian ship equipped to perform seaborne seismic surveys, the Canadian Transportation Agency would rule that employment of the GSI ADMIRAL was required for the proposed work whenever she was suitable and available. Tender and Award of the 2009 Contract 9. In July and August 2008, NRCan submitted to DPWGS various requisitions to arrange performance of “East Coast Marine Seismic Acquisition”. 10.

On August 11, 2008, DPWGS posted on the federal government’s tendering website a request for proposals for 2D multichannel seismic acquisition northeast of the coast of Labrador, the “Destination” of which was stated to be “DEPARTMENT OF NATURAL RESOURCES, BEDFORD INSTITUTE OF OCEANOGRAPHY” and the technical specifications of which made repeated references to NRCan.

There was in this posted document one reference to DFO, which stated only that DFO was responsible for approval credentials for marine mammal observers the carriage of whom was to be required during performance of the work to monitor for marine mammals. 11. On March 11, 2009 DPWGS awarded a contract to perform the seismic surveys offshore Labrador (the “2009 Contract”) to Third Defendant, Fugro which firm had proposed to employ, and which firm to the knowledge of DPWGS intended performance of work under the 2009 Contract to employ, the Italian-flagged seismic ship OGS EXPLORA.

Pursuant to the 2009 Contract the amount to be paid to Fugro was €5,138,324EUR. Original Terms of the 2009 Contract Documents 12. Pursuant to the 2009 Contract documents, the destination of “Goods, Services and Construction” and destination of “Invoices” is stipulated to be Natural Resources Canada; and the “Project Authority” is stipulated to be “John Shimeld, Geological Survey of Canada, Natural Resources Canada”. The 2009 Contract defines the “Project Authority” as “the representative of the department or agency for whom the Work is being carried out under the contract.” 13.

Pursuant to the 2009 Contract documents, the “Contracting Authority” was stipulated to be “Chris Hanham, Public Works and Government Services”. The 2009 Contract defines the Contracting Authority as being “responsible for the management of the Contract and any changes to the Contract must be authorized in writing by the Contracting Authority”. 14. Pursuant to the 2009 Contract documents, the contractor was stipulated to be “Fugro Jaques GeoSurveys Inc.” As set out herein at paragraph 4, Furgo Jaques GeoSurveys Inc. is now Furgo Canada Corp.

Pursuant to clause 1 of the 2009 Contract, Fugro was responsible for the importation of the vessel equipment and personnel required to complete the work. Pursuant to clause 2.1 of the 2009 contract, Fugro was required to “secure general permits, licenses etc. that are required to be in their name and for their personnel and equipment (i.e. vessel permits, work permits etc.)”. Unlawful Amendment of the Terms of the 2009 Contract 15. Fugro did not own a vessel capable of performing the seismic work required under the 2009 contract.

Instead Fugro proposed to charter or otherwise employ a foreign ship, the Italian-flagged seismic ship OGS EXPLORA, for the performance of work under the 2009 Contract. 16. The DPWGS, NRCan, Hanham and Fugro were at all material times aware that the use of a foreign ship to perform the work under the 2009 Contract would engage the provisions of the Coasting Trade Act , and require a foreign ship licence issued thereunder.

Neither DPWGS, NRCan, Fugro, nor anyone else, made at any time any application for a coasting trade license pursuant to the Coasting Trade Act , in respect to the use of a foreign ship, the Italian-flagged ship OGS EXPLORA, for purposes of the 2009 Contract. 17. At all material times, the DPWGS, NRCan, Hanham and Fugro knew that the GSI ADMIRAL was the only Canadian flagged ship equipped to perform seaborne seismic surveys. 18.

On March 19, 2009 Fugro advised DPWGS and NRCan that there was a 140-day wait period for licences under the Coasting Trade Act and it did not believe it could obtain a license under the Act for the OGS EXPLORA. All that time NRCan advised Fugro that obtaining a coasting trade license was Fugro’s responsibility per the 2009 Contract. 19. On March 19, 2009, Hanham on behalf of DPWGS advised NRCan and Fugro that the 2009 Contract could be amended to avoid the application of the Coasting Trade Act .

In particular Hanham suggested an amendment to engage the exception in section 3(2) (13) of the Coasting Trade Act which exempted foreign ships engaged in any ocean research activity commissioned by DFO. Hanham suggested the contract could be amended to simply state DFO as the “Destination” of the work and the requirements of the Coasting Trade Act would be avoided. 20. At all material times subparagraph 3(2) (

b) of the Coasting Trade Act provided as follows: (2) Subsection (1) does not apply in respect of any foreign ship or non-duty paid ship that is … (

b) engaged in any ocean research activity commissioned by the Department of Fisheries and Oceans. 21. The Defendants subsequently agreed to amend the 2009 Contract purporting to change the destination of the “Goods, Services and Construction” to be the Department of Fisheries and Oceans.

22. On March 20, 2009 Hanham on behalf of DPWGS sent Fugro a draft contract amendment (the “Contract Amendment”) which purported to amend the previously, awarded 2009 Contract to delete “Department of Natural Resources” from the “Destination – of Goods, Services, and Construction” and inserted in its place “(see herein]”.

At page 2 of the Contract Amendment the amendment stated: This amendment serves to provide the following clarification: The Work under the Contract, i.e. an ocean research activity, has been commissioned, through Public Works and Government Services Canada, by the Department of Fisheries and Oceans (DFO), also referred to as Fisheries and Ocean’s Canada, jointly with Natural Resources Canada (NRCan), as part of the mapping component, jointly managed by NRCan and DFO (see attached), for the United Nations Convention on the Law of the Sea (UNCLOS) project led by the department of foreign affairs.

The “attached” document to which the Contract Amendment referred was a printed

article authored by Natural Resources Canada, entitled “Using Science to Delineate the Limits of Canada’s Continental Shelf” which states in part: Partners The UNCLOS project is led by the Department of Foreign Affairs and International Trade with the mapping component jointly managed by Natural Resources Canada and Fisheries and Oceans Canada. 23. On or about March 27, 2012 the Contract Amendment was executed by Fugro and by Hanham for the minister of DPWGS on behalf of the Federal Crown. 24.

Hanham did not, at any time material to this Action, have authority to (1) change the nature of work under the 2009 contract, (2) change the destination of the work under the 2009 Contract, or (3) add another Department of the Federal Government, as a party to or as the destination of the 2009 Contract. 25.

The Plaintiff states that the Contract Amendment of the 2009 Contract, was made only for the purpose of purporting to justify the failure of Fugro, and/or DPWGS, and/or NRCan to make application to the Canadian Transportation Agency as otherwise required by the Coasting Trade Act and to deprive Canadian ship owners, and GSI specifically, of work under the 2009 contract. The representation in the Contract Amendment that the Work under the 2009 contract was commissioned by the DFO was false.

The Contract Amendment misrepresents the substance and nature of the tendered and awarded 2009 Contract to disguise the failure of Fugro to obtain a coasting trade licence for the foreign ship, OGS EXPLORA, all of which is unlawful and violates the Coasting Trade Act and public tendering law. 26. In due course, the seismic survey component of the 2009 Contract was performed by Fugro Jacques Geophysical Inc. employing the Italian-flagged ship OGS EXPLORA. Neither Fugro, nor any of the Defendants made application for a licence under the Coasting Trade Act .

To the best of the Plaintiff’s knowledge payment in full was made to Fugro pursuant to the 2009 Contract. [ 3 ] The claim alleges that, in their actions, the defendants committed the following torts: (

a) unlawful interference with economic relations (in relation to the Federal Crown / Fugro); (

b) misfeasance in public office (in relation to defendant Hanham); (

c) conspiracy (all defendants); (

d) interference with contractual relations (in relation to defendant Fugro); (

e) negligent infliction of economic loss (all defendants); (

f) unjust enrichment (in relation to defendant Fugro); [ 4 ] A motion for

summary judgment on pleadings is provided for in Civil Procedure Rule 13.03: 13.03

(1) A judge must set aside a statement of claim, or a statement of defence, that is deficient in any of the following ways: (

a) it discloses no cause of action or basis for a defence or contest; (

b) it makes a claim based on a cause of action in the exclusive jurisdiction of another court or tribunal; (

c) it otherwise makes a claim, or sets up a defence or ground of contest, that is clearly unsustainable when the pleading is read on its own. (2) the judge must grant

summary judgment of one of the following kinds, when a pleading is set aside in the following circumstances: (

a) judgment for the party making a claim, when the statement of defence is set aside wholly; (

b) dismissal of the proceeding, when the statement of claim is set aside wholly; (

c) allowance of a claim, when all parts of the statement of defence pertaining to the claim are set aside; (

d) dismissal of a claim, when all parts of the statement of claim that pertain to the claim are set aside.

(3) A motion for

summary judgment on the pleadings must be determined only on the pleadings, and no affidavit may be filed in support of or in opposition to the motion. (4) a judge who hears a motion for

summary judgment on pleadings may adjourn the motion until after the judge hears a motion for an amendment to the pleadings. (5) a judge who hears a motion for

summary judgment on pleadings, and who is satisfied on both of the following, may determine a question of law: (

a) the allegations of material fact in the pleadings sought to be set aside provide, if assumed to be true, the entire facts necessary for the determination; (

b) the outcome of the motion depends entirely on the answer to the question. [ 5 ] The foundation for all of the plaintiff’s claims is the Coasting Trade Act (the “Act”) . This Act seeks to limit foreign vessels from engaging in “coasting trade”, where a Canadian ship is available. The plaintiff claims that the defendants have acted contrary to the Act , and have caused harm to the plaintiff. [ 6 ] The defendants, for their part, submit that the Act does not apply in these circumstances. Therefore, they say, the plaintiff’s claims have no chance of success on their face.

Coasting Trade [ 7 ] Firstly, the defendants submit, the activity engaged in by Fugro, through its contract with the Federal Crown, was not “coasting trade”. [ 8 ] The Act provides a definition for the expression “coasting trade”, at s. 2(1) . A number of different activities are listed; items (

a) to (

e) clearly have no application here. However, subsection (

f) provides the following activity, relevant to this debate: (

f) the engaging, by ship, in any other marine activity of a commercial nature in Canadian waters and, with respect to waters above the continental shelf of Canada, in such other marine activities of a commercial nature that are in relation to the exploration, exploitation or transportation of the mineral or non-living natural resources of the continental shelf of Canada; [ 9 ] The defendants submit that their activities are not caught by that section. They argue that the work being done was the mapping component of a project looking at the extension of Canada’s continental shelf.

This project, they say, was not “of a commercial nature”; furthermore, it was taking place beyond Canadian waters; and finally it did not involve the exploration or exploitation of mineral or non-living natural resources. [ 10 ] The plaintiff disagrees, and argues that the activity which was engaged in here is caught by that section. They submit that the fact that Fugro was paid for their work, makes their work “of a commercial nature”. Furthermore, they submit, seismic testing, by definition, relates to the ocean floor and its study, by way of seismic waves.

Therefore, they say, such testing relates to the exploration of mineral or nonliving natural resources. [ 11 ] In the alternative, the plaintiff submits that this disagreement is a triable issue requiring evidence and more fulsome argument. They submit that I should not grant

summary judgment on the pleadings, but rather allow the matter to proceed to trial, where a trial court could properly determine the applicability of the Act in these circumstances. DFO Exception [ 12 ] Secondly, the defendant points out an exception contained at

section 3 of the Act : 3

(1) Subject to subsections (2) to (5), no foreign ship or non-duty paid ship shall, except under and in accordance with a licence, engage in the coasting trade. (2) Subsection (1) does not apply in respect of any foreign ship or non-duty paid ship that is … (

b) engaged in any ocean research activity commissioned by the Department of Fisheries and Oceans; … [ 13 ] As noted in the pleadings, the original request for proposals indicated the “Department of Natural Resources” as the responsible agency. However, it did provide a reference to DFO, in that DFO would be responsible for approving credentials for marine mammal observers, which would be required during performance of the work. [ 14 ] The defendants also point out that when the contract was amended to include the joint reference to Department of Natural

Resources / Department of Fisheries and Oceans, reference was made to an

article (which predated the contract and amendment) statingthat the mapping component of the project was “jointly managed by Natural Resources Canada and Fisheries and Oceans Canada”. [15] Again, this issue is the subject of debate between the parties. The plaintiff submits that DFO’s involvement was only in respectof the marine mammal observers, and was completely incidental to this project. They submit that the department that contracted thiswork, in fact, was DNR. The plaintiff further submits that the inclusion of DFO, by way of the amendment, was done only to engage theexception of section 3(2) (

b) of the Act. In fact, that allegation forms part of their claim. [16] The defendants disagree; they submit that DFO was an integral part of the project, from the beginning, and therefore theexception was/is engaged. Conclusion – Coasting Trade Act [17] The case law in respect of

summary judgment on pleadings is clear: the burden is on the moving party, and it is a heavy one.The question I must ask myself is whether the claims being made by the plaintiff are unsustainable on their face. Such a conclusionshould only be reached in those clearest of cases (see Cape Breton v. Nova Scotia 2009 NSCA 44): 17 [The Rule] offers a drastic remedy. It provides for an action to be dismissed summarily, thus denying litigants their “day in court”.Understandably, therefore, any defendant seeking such relief bears a heavy burden.

The Chambers judge would have to consider thisclaim at its highest, by assuming all allegations to be true without the need to call any evidence. Then even with this assumption, it muststill remain “plain and obvious” that the pleadings disclose no reasonable cause of action. In Hunt v. T&N (SCC), [1990]2 S.C.R. 959.. 18 In following Hunt, our court has recently confirmed that in order to strike pleadings under [the rule], they must appear to be either“certain to fail” (Sable Offshore Energy Inc. v. Ameron 2007 NSCA 70) or “absolutely unsustainable” (CGU Insurance v.

Noble 2003NSCA 102). [18] Having considered the question of the applicability of the Act, I am not satisfied that the plaintiff’s claims are completely“doomed to fail”, or are “completely unsustainable”. It is certainly possible, as the defendants argue, that the Act does not apply; it is alsopossible that the DFO exception in the Act is engaged. Having said that, in my view, neither of those conclusions are foregone. I amsatisfied that the arguments raised by the plaintiff are of some substance, and are worthy of more consideration.

These issues may requirethe calling of evidence, and will require further trial submissions. Causes of Action [19] In relation to the specific causes of action pled: the first three are “intentional” torts (misfeasance in public office; conspiracy;and interference with contractual relations). The defendants submit that there are no material facts pled to support the finding that theyacted deliberately to harm the plaintiff; or alternatively, that they acted knowing that harm was likely, and that such harm did come topass. [20] In assessing a motion for

summary judgment on pleadings, I am to assume that all pleaded facts can be proven. (Body Shop v.Dawn Carson 2010 NSSC 25) [21] Assuming the facts pled here to be true, there is some evidence of intent. It is clearly pled that the defendants knew of theplaintiff’s special circumstances as the only Canadian ship capable of doing this work; and it is clearly pled that the defendants arrangedtheir affairs to avoid the application of the Act, thereby avoiding the plaintiff.

If these alleged facts are proven, it would be possible for acourt to find that the relevant tests have been met. [22] In relation to the negligence claim, the defendants further argue that no standard of care could possibly exist on the facts of thiscase, since there is no proximity between the defendants’ actions and the plaintiffs. Again, assuming the pleaded facts to be true, thedefendants knew that the plaintiff’s ship was the only Canadian ship affected by these actions.

This could, conceivably, lead to a courtfinding that there was a resulting duty of care. [23] The plaintiff’s claims are not “completely unsustainable” on their face. I therefore dismiss both defendants’ motions forsummary judgment on the pleadings. [24] If the parties cannot agree on costs, I would ask for written submissions within 30 days of this decision. Boudreau, J.