The appellants, a Canadian shipping conglomerate, purchased reconditioned marine engine parts from the respondent supplier, whose contract contained a six-month warranty and a clause limiting liability to €50,000.
Well after the warranty expired, the ship's main engine suffered a major failure caused by a latent defect in the supplied crankshaft, and the appellants commenced proceedings for $5,661,830.33 in damages and lost profit.
The trial judge held that the Civil Code of Québec governed the dispute and that the limitation clause was unenforceable, but the Court of Appeal majority reversed, finding Canadian maritime law applicable and the clause valid.
A unanimous Supreme Court of Canada allowed the appeal, restoring the trial judge's conclusions, although the six-judge majority and the three-judge concurrence differed as to the constitutional analysis: the majority applied a modified pith and substance test followed by the integral connection test and concluded that while the sale of marine engine parts falls within both federal legislative authority and provincial property and civil rights power (a double aspect scenario), neither interjurisdictional immunity nor federal paramountcy displaces art. 1733 C.C.Q., which prevails over non-statutory Canadian maritime law; the concurrence would have resolved the matter solely through pith and substance, characterizing the dispute as one of sale of goods governed by s. 92(13).
