DESGAGNÉS TRANSPORT INC. v. WÄRTSILÄ CANADA INC., 2019 SCC 58

Application of doctrines of “interjurisdictional immunity” and “federal paramountcy”.

The case is an appeal before the Supreme Court of Canada in which the prime issue is regarding the decision that which law is applicable to the case of a contract between Desgagnés Transport Inc. [TDI], the Appellants and Wärtsilä Canada Inc., the Respondents. The question is that whether the Civil Code of Quebec would apply or the Canadian Maritime Law prevails over the provincial powers.

In this case, the appellant, a shipping company located in Quebec purchased a reconditioned crankshaft from the respondent. They entered into a contract in Montreal, Quebec which is the place of business of the respondent. There was a major engine failure and the engine parts i.e. new bedplate, a reconditioned crankshaft and connecting rods stopped working. If in this case, the Civil Code of Quebec is to be applied then the Respondents cannot limit their liability and has to pay shipping company the full cost for the defects which is CAN $5.6 million, whereas, if the court considers it a dispute of navigation and shipping and applies the Maritime law, then the limitation clause within the contract between the parties is enforceable and the respondent., has to pay less amount. Trial Court concluded that the Maritime Law is applicable.

To arrive at a conclusion, it is to be determined that whether in this case federal power prevails over the provincial powers or vice versa. If the federal power overrides, the Canadian Maritime law is to be applied but in case the provincial power persists, Civil Code of Quebec [C.C.Q.] would be applicable. The court stated that this problem could be solved by the interpretation of division of powers. This requires characterization of the relevant matter and its classification according to the heads of legislative power enumerated in the Constitution Act. With respect to categorization of sale of marine engine parts, on application of the integral test, the court observed that it is integrally connected to navigation and shipping but it does not imply that no other law can validly govern such sale. This situation of “double aspect scenario” means that both levels of government have power at the same time.

The court also paid emphasis to the interpretation of “interjurisdictional immunity” and “federal paramountcy”. Interjurisdictional immunity implies that when something falls within the ambit of the exclusive powers under the Constitution Act, 1867 then it can be protected from the law validly enacted by the other order of government. The court analysed that the core of navigation refers to the federal power over navigation and shipping so the contracts related to ship engine cannot be included within the ambit of federal power. Further, the doctrine of “federal paramountcy” means that when the federal and provincial legislation seem incompatible then federal law prevails over the provincial law. Regarding this, the court observed that the maritime law is based on courts decisions and it is generally used as precedents so as it is not based on the laws formulated by the legislature, the principle of “federal paramountcy” thus do not apply here. Therefore, the court allowed the appeal and held that Respondents are the “professional seller” within the ambit of Articles 1729 and 1733 of the C.C.Q. and is liable to pay full amount of damages.