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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.
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