Zavarovalna Skupnost, (Insurance Community Triglav Ltd.) v. Terrasses Jewellers Inc.

English version of the judgment of the Court delivered by

[TRANSLATION] Respondent Terrasses Jewellers Inc., a Quebec company, bought the required interest in an insurance policy issued by appellant, a Yugoslav company, to another Yugoslav company, Zlaterne Celje, or order.

This insurance policy applied to various property, namely 11 cases of items in crystal and one case of jewellery in gold, silver and platinum.

This property was purchased by respondent Terrasses Jewellers Inc. from Zlaterne Celje.

The property was placed in a container for transport from Celje, Yugoslavia, to a warehouse in Montreal, including transportation on the vessel “PRISTINA” from the port of Koper in Yugoslavia to the port of Montreal.

The policy guaranteed against various risks during this transportation, including theft and non-delivery.

The policy assigned an agreed value of U.S. $845,543.00 to the property.

The container was opened on arrival at a warehouse in Montreal, and found not to contain the jewellery case.

Respondent Terrasses Jewellers Inc. gave verbal and written notice to the Montreal agents designated in the policy (Hayes, Stuart & Co. Ltd.) and produced the documents they were asked to provide.

The value of the jewellery items (a part of the agreed value for insurance purposes) was U.S. $815,843.00, or Can. $1,100,000.00

Appellant denied liability under the insurance policy.

The constitutional question is stated as follows:

Is paragraph (r) of sub-section (2) of Section 22 of the Federal Court Act (R.S.C. 1970 c. 10, 2nd Supp., and Amendments) conferring upon the Trial Division of the Federal Court jurisdiction with respect to “any claim arising out of or in connection with a contract of marine insurance” ultra-vires and without effect on the grounds that marine insurance and more particularly the rights and obligations of the parties to and under contracts of marine insurance are outside the jurisdiction of the Parliament of Canada and consequently that there can be no “laws of Canada” to govern the matter in accordance with the provisions of Section 101 of the British North America Act, 1867 ?

[TRANSLATION] Does Canadian marine insurance law exist, that can be applied by the Federal Court?

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

(2) Without limiting the generality of subsection (1), it is hereby declared for greater certainty that the Trial Division has jurisdiction with respect to any claim or question arising out of one or more of the following:

…

(r) any claim arising out of or in connection with a contract of marine insurance;

42. Canadian maritime law as it was immediately before the 1st day of June 1971 continues subject to such changes therein as may be made by this or any other Act.

“Canadian maritime law” means the law that was administered by the Exchequer Court of Canada on its Admiralty side by virtue of the Admiralty Act or any other statute, or that would have been so administered if that Court had had, on its Admiralty side, unlimited jurisdiction in relation to maritime and admiralty matters, as that law has been altered by this or any other Act of the Parliament of Canada;

Admittedly, it was open to the Parliament of Canada to establish a federal Court, pursuant to s. 101 of the British North America Act, to administer its maritime law concurrently with provincial superior courts.

[TRANSLATION] In the view of the Attorney General of Quebec, the federal powers over navigation (s. 91(10)) and over interprovincial and international marine carriers (s. 92(10)(a) and (b)) do not authorize the federal Parliament to legislate with respect to insurance contracts.

The federal jurisdiction over navigation and shipping in s. 91(10) has not been precisely defined by the courts. However, it may be regarded as applying essentially to

the technical aspects of navigation, intraprovincial as well as interprovincial and international. Thus, the regulation of marine traffic and conditions of seaworthiness, all measures justified by the necessities of navigation, are undoubtedly matters falling within s. 91(10). That is not the case, however, with contracts of marine insurance which essentially and substantially concern only questions of civil rights.

[TRANSLATION] In the view of the Attorney General of Quebec, the marine insurance contract constitutes a matter far removed from navigation and is not an integral part thereof, in contrast with contracts of a marine nature such as contracts for the carriage of goods.

2693. Bottomry is a contract whereby the owner of a ship or his agent, in consideration of a sum of money loaned for the use of the ship, undertakes conditionally to repay the same with interest, and hypothecates the ship for the performance of his contract. The essential condition of the loan is that if the ship be lost by a fortuitous event or irresistible force, the lender shall lose his money; otherwise it is to be repaid with a certain profit for interest and risk.

Insurance in some form has been used as long as man has lived in historical society. So-called bottomry contracts were known to merchants of Babylon as early as

4000-3000 BC. Bottomry was also practiced by the Hindus in 600 BC, and was well understood in ancient Greece as early as the 4th century BC. Under a bottomry contract loans were granted to merchants with the provision that if the shipment was lost at sea the loan did not have to be repaid. The interest on the loan covered the insurance risk. Ancient Roman law recognized the bottomry contract in which an article of agreement was drawn up and funds were deposited with a money changer. Marine insurance became highly developed in the 15th century.

In Rome there were also burial societies that paid funeral costs of their members out of monthly dues.

The insurance contract also developed very early. It was known in ancient Greece and among other maritime nations in commercial contact with Greece.

Of the origin of marine insurance, all that can be said with certainty is that it is “veiled in antiquity and lost in obscurity.” The concept of protection against loss by maritime perils has been traced back to B.C. 215 …

On the above evidence, inter alia, inferences have been drawn that the origins of marine insurance go back at least two millenniums, and probably as far as to the great Levantine Empires, e.g., Rhodes. In support of the latter contention, the old Rhodian Law of general average is adduced as being so allied to marine insurance as to justify conclusions which are perhaps merely hypothetical and which are lacking in convincing corroborative evidence.

Bottomry.

It is certain, however, that bottomry (foenus nauticum), that is, an advance of money on the security of a vessel (not recoverable in the case of subsequent total loss of that vessel before arrival), was practised prior to A.D. 533.

In his Researches into the Origins of Marine Insurance, Professor C.F. Trenerry places the origin of bottomry as early as B.C. 2250. He states that methods

of financing commercial activities indistinguishable from the practice of bottomry were employed by the Babylonians.

[TRANSLATION] 2347. The origin of marine insurance.—Marine insurance is the only type of insurance that was known to our old law. The nineteenth Century witnessed an astonishing proliferation of types of insurance. Some date back to the early years of the nineteenth century and near the end of the eighteenth; others are of recent creation. Whatever their date of origin, all these types of insurance are many years junior to marine insurance. At a time when men accepted misfortune without attempting to protect themselves against such disasters as fire or accident, shipowners and merchants, perpetually subject to the risk of their vessels being destroyed and their goods swallowed up at sea, had looked for some means of protecting themselves against a hostile fate. In the fifteenth century, prosperous marine commerce gave rise to a regular practice of insurance.

The Origin of the Contract of Marine Insurance

Insurance has been defined as a contract by which one party (the insurer) in consideration of a premium, undertakes to indemnify another (the insured) against loss. The researches of M. Bensa have proved that the earliest variety of this contract was the contract of marine insurance; that as a separate and independent contract it dates from the early years of the fourteenth century; and that it was evolved, like many other of our modern mercantile institutions, in the commercial cities of Italy.

1. Development and sources of insurance law. The concept of insurance, in England as elsewhere, arose out of the mercantile adventure of transporting goods across the sea, the adventure consisting in early times of the enormous fortune to be made if the project turned out to be successful, as contrasted with the disastrous loss, even ruin, which resulted if the project foundered amid the perils of the seas.

[The Colbert ordinance] has in a great measure furnished the principles of marine law to a large portion of the continent and is the chief basis upon which the courts in England, by a series of decisions confirmed and aided by careful legislation, have built up the present system.

[TRANSLATION] The same was true for everything concerning Title Three, regarding “affreightment” [chartering]; as the rules were identical in all maritime countries, the codifiers relied on the Colbert ordinance and the solutions derived from that ordinance by British legal theory and precedent. This was facilitated as they were dealing with customs embodied in legislation, and the latter was in most cases supplementary in nature. Chartering was therefore a matter dealt with just as it had been at the time of the codification. This assessment also applies to the carriage of passengers, and to marine insurance which is the subject of Chapter II of Title Five.

[TRANSLATION] 27. It should be noted that we do not propose to analyse the provisions relating to marine insurance, as in view of the importance of this area a special study would be necessary, and this would go beyond our objective here. We will simply mention that insurance originated in a marine context and that its ancestor is the contract of bottomry;

[TRANSLATION] this is why we are amazed to see the codifiers devote Title VI to this institution, which had already disappeared in their time. However, great attention was given to questions of insurance and a considerable effort of synthesis led the Commissioners to prepare a text which, though complex, was very up to date on the eve of Confederation.

2663. The insured may make an abandonment to the insurer of the thing insured in all cases of its constructive loss and may thereupon recover as for a total loss. Without abandonment he is entitled in such cases to recover as for a partial loss only.

[TRANSLATION] Marine insurance is an institution without which maritime trade and navigation would be almost inconceivable; we would go so far as to say that in the absence of insurance it would be meaningless to speak of the ownership of vessels and their operation. In view of the large sums committed by participants in an ocean voyage and the frequency and seriousness of maritime risks, the merchant shipping industry would be at an end, and with it sea transportation, if persons

engaging in them felt they were threatened without compensation with loss of the ship and of the cargo. That in brief accounts for the close and indissoluble link between chartering and insurance; and for the dependence of a prosperous maritime trade on an effective insurance system.

—(a) any claim as to title, possession or ownership of a ship or any part interest therein or with respect to the proceeds of sale of a ship or any part interest therein;

Antares Shipping Corp. v. The Ship “Capricorn”, [1980] 1 S.C.R. 553.

—(d) any claim for damage or for loss of life or personal injury caused by a ship either in collision or otherwise;

MacMillan Bloedel Ltd. v. Canadian Stevedoring Co., [1969] 2 Ex.C.R. 375; this decision preceded the Federal Court Act, but it concerns a claim of the type now covered by this paragraph.

—(e) any claim for damage sustained by, or for loss of, a ship including, without restricting the generality of the foregoing, damage to or loss of the cargo or equipment of or any property in or on or being loaded on or off a ship;

Tropwood (supra).

—(h) any claim for loss of or damage to goods carried in or on a ship including, without restricting the generality of the foregoing, loss of or damage to passengers’ baggage or personal effects;

Tropwood (supra).

—(i) any claim arising out of any agreement relating to the carriage of goods in or on a ship or to the use or hire of a ship whether by charter party or otherwise;

Tropwood (supra); Associated Metals and Minerals Corp. v. The Ship “Evie W” and Aris Steamship Co., [1978] 2 F.C. 710; Aris Steamship Co. v. Associated Metals & Minerals Corp., [1980] 2 S.C.R. 322.

—(m) any claim in respect of goods, materials or services wherever supplied to a ship for her operation or maintenance including, without restricting the gener-

ality of the foregoing, claims in respect of stevedoring and lighterage;

Wire Rope Industries of Canada (1966) Ltd. v. B.C. Marine Shipbuilders Ltd., [1981] 1 S.C.R. 363.

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

R. v. Canadian Vickers Ltd., [1980] 1 F.C. 366; Wire Rope (supra).

With all respect, I am […] of opinion that the provisions of s. 22(2)(a) of the Act constitute existing federal statutory law coming within the class of subject of navigation and shipping and expressly designed to confer jurisdiction on the Federal Court for claims of the kind here advanced by the appellant.

In the Tropwood case jurisdiction was found to reside in the trial division of the Federal Court by reason of the specific claims referred to in s. 22(2)(e), (h) and (i) of the Act by subs. 2(h) of which it is declared that the trial division has jurisdiction with respect to any claim or question arising out of

(h) any claim for loss of or damage to goods carried in or on a ship including, without restricting the generality of the foregoing, loss of or damage to passengers’ baggage or personal effects.

The same reasoning leads me to the conclusion that the claim here being one as to the appellant’s entitlement to possession of a ship, it is within the jurisdiction of the Federal Court pursuant to s. 22(2)(a).

The nature and history of admiralty is not easy to define or relate. For present purposes, I am happy to adopt the review thereof contained in the judgment of the Associate Chief Justice in The Queen v. Canadian

Vickers Ltd., [1978] 2 F.C. 675, as supplemented by the additional material contained in the judgment of Gibson J. in Intermunicipal Realty & Development Corp. v. Gore Mutual Insurance Company, [1978] 2 F.C. 691.

Without being more precise and realizing that there are many aspects of admiralty law that are obscure, I am of opinion that the better view is

(a) that there is, in Canada, a body of substantive law known as admiralty law, the exact limits of which are uncertain but which clearly includes substantive law concerning contracts for the carriage of goods by sea;

(b) that admiralty law is the same throughout Canada and does not vary from one part of Canada to another according to where the cause of action arises;

(c) that admiralty law and the various bodies of “provincial” law concerning property and civil rights co-exist and overlap and, in some cases at least, the result of litigation concerning a dispute will differ depending on whether the one body of law or the other is invoked; and

(d) that admiralty law is not part of the ordinary municipal law of the various provinces of Canada and is subject to being “repealed, abolished or altered” by the Parliament of Canada.

I am further of the view that, if a Canadian statute was necessary to give Canada a body of admiralty law during the period, from 1934 to 1971, The Admiralty Act, 1934, must be read as having had that effect.

In the Court of Appeal Chief Justice Jackett found that there was jurisdiction in the Federal Court, and it is really not necessary in my opinion to explore the point further because the appeal was heard before Chief Justice Laskin had rendered the unanimous judgment of this Court in Tropwood A.G., and the Owners of the Vessel Tropwood v. Sivaco Wire & Nail Company and Atlantic Lines & Navigation Company, Inc., [1979] 2 SCR. 157, 99 D.L.R. (3d) 235, wherein he explored the recent cases dealing with the jurisdiction of the Federal Court and concluded his comments of s. 22 by saying (at p. 161):

What is important to notice is that the heads of jurisdiction specified in s. 22(2) are nourished, so far as applicable law is concerned, by the ambit of Canadian maritime law or any other existing law of Canada relating to any matter coming within the class of navigation and shipping.

In light of this judgment I am satisfied that Chief Justice Jackett reached the correct conclusion as to jurisdiction.