Desgagnés Transport v Wärtsilä Canada: Canadian Maritime Law Enters Uncharted Waters

The Supreme Court of Canada has plotted a new course for Canadian maritime law in Desgagnés Transport v Wärtsilä Canada, 2019 SCC 58. Distinguishing over 30 years of precedent, the Court held that provincial legislation that regulates private law matters (such as the Civil Code of Québec, or sales of goods legislation in common law provinces) can apply to contractual claims governed by Canadian maritime law. Parties to such contracts can no longer rely on the uniformity of Canadian maritime law; they will instead need to take particular care to ascertain and specify which province's private law will govern any claims that may arrive.

Background

Wärtsilä manufactured a component for a cargo vessel owned by Desgagnés Transport. The contract of sale included a limitation of liability clause, which was the subject of considerable negotiation. Over two years later, the component failed on the open water, causing considerable damage to the vessel. Desgagnés Transport's insurer repudiated the limitation of liability clause and sued to recover the full amount of the damage, which greatly exceeded the value of the component. The trial judge found that the component contained a latent defect for which the supplier was responsible.

Under Articles 1729 and 1733 of the Civil Code of Québec, a manufacturer cannot contractually limit its liability for latent defects. The trial judge therefore found Wärtsilä liable for the full amount of the damage done to the vessel. On appeal, the Québec Court of Appeal, in a 2-1 decision, reversed the decision and found that the claim was governed by Canadian maritime law, which allowed parties to contractually limit their liability and excluded application of the Civil Code of Québec. The Court of Appeal also held that it could have come to a different conclusion than the trial judge about the existence of a defect but left her conclusion undisturbed.

Decision and Change

In the decision on November 28, 2019, the Supreme Court justices all agreed that Desgagnés Transport's appeal should be allowed, and the trial judgment restored; however, they disagreed sharply over the reason for allowing the appeal. Basically, the majority held that Canadian maritime law applied to Desgagnés Transport's claim, but that the Civil Code of Québec would apply incidentally and bar release on the limitation of liability clause. The minority, on the other hand, accepted the uniformity of Canadian maritime law, but held that Canadian...