T-1105-77
Dome Petroleum Limited (Plaintiff)
v.
N. Bunker Hunt, W. Herbert Hunt, and Lamar
Hunt, carrying on business under the style and
name of Hunt International Petroleum Company
of Canada and Hunt International Petroleum
Company of Canada (Defendants)
Trial Division, Dubé J.—Vancouver, April 25 and
29, 1977.
Jurisdiction — Application to strike out statement of claim
and to set aside injunction in contract action for want of
jurisdiction — Plaintiff drilling for oil in Beaufort Sea — Use
of ships in operation — Whether jurisdiction derived from s.
22 of Federal Court Act — Federal Court Act, s. 22.
The defendants moved for an order to strike out the plain
tiffs statement of claim and injunction in a contract action on
the ground of want of jurisdiction. The defendant had contract
ed with the plaintiff to drill for oil in the Beaufort Sea; the
operation involved the use of drilling ships and supply vessels.
The plaintiff contended that its action fell within the jurisdic
tion of the Federal Court by virtue of section 22 of the Federal
Court Act.
Held, the application is allowed. A prerequisite to the exer
cise of jurisdiction by the Federal Court is that there be
existing and applicable federal law which can be invoked to
support any proceedings before it. It is not sufficient that there
be federal jurisdiction; there must be an Act of Parliament on
which to base the action. Jurisdiction cannot be extended
except by clear and unambiguous legislation. There is nothing
in paragraph 22(2)(i) and in section 22 read as a whole that
would clearly indicate that "drilling systems" referred to in the
agreement and the statement of claim constitute navigation and
shipping over which the Federal Court would have concurrent
original jurisdiction.
McNamara Construction (Western) Ltd. v. The Queen
(1977) 75 D.L.R. (3d) 273; Quebec North Shore Paper
Co. v. Canadian Pacific Ltd. (1977) 71 D.L.R. (3d) 111;
Underwater Gas Developers Ltd. v. Ontario Labour Rela
tions Board (1960) 24 D.L.R. (2d) 673 and Sumitomo
Shoji Canada Ltd. v. The "Juzan Maru" [1974] 2 F.C.
488, followed.
APPLICATION.
COUNSEL:
Marvin V. McDill and P. Jull for plaintiff.
F. J. Fleury and J. D. McCartney for
defendants.
SOLICITORS:
Ballem, McDill & Maclnnes, Calgary, for
plaintiff.
MacKimmie Matthews, Calgary, for defend
ants.
The following are the reasons for order ren
dered in English by
DUBÉ J.: These are two motions by the defend
ants for an order striking out plaintiff's statement
of claim and for an order setting aside an injunc
tion against defendants on the ground that the
Court has no jurisdiction. These reasons apply to
both motions which were heard together.
The plaintiff (hereinafter "Dome") is a Canadi-
an company with head office at Calgary, Alberta.
The defendants (hereinafter "Hunt") are all oil
executives from Texas, U.S.A., engaged in the
exploration of oil and natural gas.
It is alleged in the statement of claim that by an
agreement dated March 15, 1974, Hunt engaged
Dome to drill by use of ships a test well on certain
lands underlying the Beaufort Sea within the terri
torial limits of Canada. Paragraphs 5 and 7 of the
statement of claim read:
5. In order to carry out the drilling of the test well for the
Defendants under the Agreement the Plaintiff arranged and
paid for the construction, purchase and mobilization of two (2)
large drilling ships, five (5) supply vessels, a shore base to
permit the servicing and supplying of such ships and all other
equipment necessary to conduct drilling operations for the
Defendants on lands underlying the Beaufort Sea.
7. Pursuant to the Agreement the Plaintiff agreed to drill the
test well for and on behalf of the Defendants at the sole cost,
risk and expense of the Defendants with such costs to be
determined and paid by the Defendants to the Plaintiff pursu
ant to paragraphs 2(a) and (b) thereof which provide as
follows:
2(a). The cost of drilling of the test well (in addition to cost
of drilling supplies, consumables and personnel not forming a
part of the drilling systems) shall be the cost of providing the
drilling systems and shore base, supplies and transportation
equipment and utilizing them over the initial two year period
of their utilization (said two years to date not earlier than the
arrival of both systems in the Beaufort Sea) prorated to the
number of days the system will be on the location of the test
well in relation to the number of days that said systems are
on location on all wells drilled by the systems in the two year
period. Until this proration can be established by actual
experience and events, it will be assumed that the combined
time of the two drilling systems on well locations during the
two year period will be 240 days, and that during the 240
days, four wells will be drilled by the systems. In addition
thereto, Hunt shall pay for such supplies and consumables
used in drilling such test well, as used.
2(b). Commencing with the day when a drilling system is on
location at the above mentioned test well, Dome shall be
entitled to bill Hunt for the estimated costs of drilling
system, shore base, supply and transportation equipment
employed in the drilling of the test well in the next ensuing
30-day period on the above basis and thereafter may bill
Hunt for like advances at 30-day intervals during the period
while the test well is being drilled. Hunt shall, within 15 days
of receipt of such bill at its Dallas office, pay to Dome the
amount of each such billings on said basis.
Dome states that it commenced drilling on or
about August 6, 1976, submitted bills pursuant to
the agreement for the costs of such drilling and
that Hunt is indebted to it in the sum of over $33
million plus damages. In the statement of claim
Dome prays for the appointment of a receiver for
the purpose of protecting Hunt assets in Canada
until payment of the above amount has been
completed.
On the date the statement of claim was filed, or
on March 22, 1977, upon the ex parte application
of Dome, an order was issued from this Court
appointing a receiver and restraining Hunt, until
further order, from transferring or otherwise
encumbering any interests in respect to the drilling
of a test well pursuant to the March 15 agreement
referred to in the statement of claim.
It has now been clearly established from two
recent Supreme Court of Canada decisions' that a
prerequisite to the exercise of jurisdiction by the
Federal Court is that there be existing and appli
cable federal law which can be invoked to support
any proceedings before it. It is not sufficient that
there be federal jurisdiction; there must be an Act
of Parliament on which to base the action. The
Federal Court cannot grant relief in contract, even
if the enterprise contemplated by the agreement
falls within federal jurisdiction, unless there is a
specific federal Act under which the relief sought
may be claimed.
' McNamara Construction (Western) Ltd. v. The Queen
(1977) 75 D.L.R. (3d) 273. Quebec North Shore Paper Co.v.
Canadian Pacific Ltd. (1977) 71 D.L.R. (3d) 111.
The instant action is essentially an action in
debt between two subjects, one Canadian and one
American, and the injunction was issued to protect
that debt. The only statute under which such an
action might be based and a remedy sought in this
Court, and the only statute relied on by counsel, is
the Federal Court Act, and more particularly sec
tion 22 thereof dealing with navigation and ship
ping. The relevant subsections read as follows:
22. (1) The Trial Division has concurrent original jurisdic
tion 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:
(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;
The issue in a nutshell is whether or not Dome's
claim is one which arises out of an agreement
relating to the carriage of goods by ship, or the use
or hire of a ship, within the framework of section
22 as a whole which deals with navigation and
shipping.
The agreement referred to in the statement of
claim and served ex juris on Hunt with that
pleading makes no reference to the carriage of
goods by ship, or to the use or hire of a ship, or to
a ship. It deals with the drilling of a test well.
In Underwater Gas Developers Ltd. v. Ontario
Labour Relations Board 2 a company was engaged
in the establishment and servicing of sites for the
drilling of gas under water at distances between
1' to 14 miles from shore and used for that
purpose a tower and platform, a diving boat and
work boats. It was held that the company was
subject to The Labour Relations Act of Ontario,
not to the federal Act. The operations of the
company fell within subsections 92(1) and (16) of
The British North America Act, 1867 and were
not covered by the federal power in relation to
navigation and shipping under subsection 91(10)
of The British North America Act, 1867. While
2 (1960) 24 D.L.R. (2d) 673.
there was some "navigation" and some "shipping"
these were features incidental to the main activity,
namely the establishment and servicing of gas well
sites.
My brother Collier held in Sumitomo Shoji
Canada Ltd. v. The "Juzan Maru" 3 that the
Federal Court had no jurisdiction to entertain an
action against a warehouseman under paragraphs
22(2)(h) and (i) of the Federal Court Act, where
the warehouseman had hired a tug and scow to
off-load a quantity of pipe from ship to warehouse.
That activity was merely incidental to the main
activities of warehousemen. The Trial Judge said
at page 493:
I am unable to accede to the plaintiff's contention that
jurisdiction can be found in paragraphs (h) or (i). The mere
fact that the plaintiff and Johnston, by one of the terms of their
contract in respect of the handling and storing of pipe, agreed
the tubing should be transported by scow (a "ship" or "vessel")
rather than by truck or rail or some other means of transporta
tion, does not necessarily or automatically bring into play the
two heads of jurisdiction relied on. In my view, one must look
at the essence of the arrangement between the plaintiff and
Johnston.
And again at page 496:
Finally, when, as submitted on behalf of Johnston, one looks
at the essence of the arrangement or contract between the
plaintiff and Johnston, and the particular facts of this case, the
maritime or shipping aspects of the business arrangement
between the parties were miniscule and incidental. The domi
nant activity of Johnston was the reception and storage of the
plaintiff's property. Its prime activities were those of a bailee-
warehouseman, not those of a company engaged in shipping,
giving that expression its widest meaning. [See City of Mont-
real v. Montreal Harbour Commissioners [1926] A.C. 299.]
The test of dominant features and objects was one applied by
the Ontario Court of Appeal in Underwater Gas Developers
Ltd. v. Ontario Labour Relations Board (1960) 24 D.L.R. (2d)
673.
The agreement upon which this claim for debt
rests is obviously not an agreement for the carriage
of goods by ship under paragraph 22(2)(i) of the
Federal Court Act. Is it possibly an agreement for
"the use or hire of a ship" under the same para
graph? It is not. The agreement is for the drilling
of a test well.
3 [1974] 2 F.C. 488.
It is a well established principle of law that
jurisdiction cannot be extended except by clear
and unambiguous legislation. There is nothing in
paragraph 22(2)(i) and in section 22 read as a
whole that would clearly indicate that the "drilling
systems" referred to in the agreement and the
statement of claim constitute navigation and ship
ping over which the Federal Court would have
concurrent original jurisdiction. Section 22 as a
whole deals with the subject of navigation and
shipping and it refers to "ships" in most para
graphs. "Ship" and "vessel" are defined in section
2 of the Canada Shipping Act, R.S.C. 1970, c.
S-9:
"ship" includes
(a) every description of vessel used in navigation and not
propelled by oars, and
(b) for the purpose of Part I and sections 647 to 652, every
description of lighter, barge or like vessel used in navigation
in Canada however propelled;
"vessel" includes any ship or boat or any other description of
vessel used or designed to be used in navigation;
The word "navigation" reappears in both defini
tions. "Navigation" is not defined in the Canada
Shipping Act nor in the Federal Court Act, but it
is a well known term connoting the travel of ships
on water from one point to another. It is thus
defined in the following leading dictionaries:
The Shorter Oxford English Dictionary
Navigation 1. The action of navigating; the action or practice
of passing on water in ships or other vessels.... 2. The art or
science of directing the movements of vessels on the sea ... .
The Living Webster Encyclopedic Dictionary of the English
Language
Navigate. To travel on water in ships or boats ....
Navigation. The act of navigating; the science or art of manag
ing ships; the science of determining the location, speed, desti
nation, and direction of airplanes and other craft.
Black's Law Dictionary, 4th ed.
Navigation. The act or the science or the business of traversing
the sea or other waters in ships or vessels.
Stroud's Judicial Dictionary, 4th ed.
Navigation. (1) "Navigation" is "the science or art of conduct
ing a ship from one place to another ...."
By no stretch of the imagination can it be
conceived that a "drilling system" is navigating as
it carries out its main function, drilling through
land. Whatever be its configuration or position,
above water or down below, it must be stationary.
Any navigation necessary to tow it into position is
merely incidental.
I am therefore of the view that the Federal
Court has no jurisdiction in this matter. It follows
that the statement of claim must be struck out and
the injunction set aside.
ORDER
The statement of claim is struck out and the
injunction set aside.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.