February 2016 chong - Fernandes Hearn · FERNANDES HEARN LLP FEBRUARY 2016 In#1673#Thomas#Cornell#(Jr.)#was#accused,#tried,#convictedand#hanged for# the# alleged# murder# of# his#mother,#

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IN THIS ISSUE

PAGE 1 EYEWITNESS TESTIMONY

PAGE 2FIRM AND INDUSTRY NEWS

PAGE 5CONTRACT RENEWAL AND DUTY TO ACT REASONABLY

PAGE 8EROSION OF MOTOR CARRIER CONTRACT PAGE 13PROFESSIONAL DRIVERS OWE DUTY OF CARE

PAGE 15AIR CANADA OVERHAUL LITIGATION

PAGE 18RAIL CARRIER LIABILITY VIA TARIFF

PAGE 21TRANSPORT CANADA OWES NO DUTY OF CARE TO AIRLINE

PAGE 23DEPENDENT / INDEPENDENT CONTRACTOR UPDATE

PAGE 28CONTEST

FERNANDES HEARN LLP FEBRUARY 2016

In 1673 Thomas Cornell (Jr.) was accused, tried, convicted and hanged for the alleged murder of his mother, Rebecca Briggs Cornell, in Portsmouth, Rhode Island. He was convicted using circumstanEal evidence as well as spectral evidence, in which witnesses recounted dreams involving ghosts poinEng to his alleged guilt. American jurisprudence was later modernized to exclude the use of appariEons and dreams as evidence in trials. This case and its history have been chronicled in the book Killed Strangely: The Death of Rebecca Cornell by Elaine Forman Crane.

Over three hundred and twenty five years later in 1998, Richard Alexander was convicted of a series of rapes in South Bend, Indiana and was dubbed the "River Park Rapist". He was convicted largely on the basis of eyewitness tesEmony. In 2001, with Alexander already having served five years in prison, an alleged burglar and child molester named Michael Murphy confessed to one of the two rapes of which Alexander had been convicted, knowing details only the true assailant would know. With this revelaEon, a judge ordered a new round of DNA tesEng in Alexander's case. Hairs found at the scene of the rape were submi\ed to mitochondrial DNA tesEng. At the Eme of Alexander's original convicEon, such tesEng was not available in the State of Indiana. The tests proved that the DNA did not match Alexander's profile, but did match Murphy's. Alexander was released from prison on December 12, 2001.(*1)

Researchers have reported that 73 percent of the 239 convicEons overturned through DNA tesEng were based on eyewitness tesEmony. One third of these overturned cases rested on the tesEmony of two or more mistaken eyewitnesses. How could so many eyewitnesses be wrong?(*2)

In addiEon to being used in criminal trials, eyewitness tesEmony is rouEnely uElized in civil cases ranging from automobile accidents to custody disputes. Eyewitness tesEmony is fickle and, all too o_en,

The Fickleness of Eyewitness TesJmony

https://en.wikipedia.org/wiki/Genetic_fingerprinting

https://en.wikipedia.org/wiki/Genetic_fingerprinting

https://en.wikipedia.org/wiki/Indiana

https://en.wikipedia.org/wiki/Indiana

FERNANDES HEARN LLP NEWSLETTER FEBRUARY 2016 PAGE 2

FIRM AND INDUSTRY NEWS

• Mar&n Abadi will be a guest lecturer at the University of O\awa Faculty of Law in the MariEme Law (Droit MariEme) course in March. MarEn will lecture on admiralty and commercial law and regulatory aspects in mariEme law.

• Gordon Hearn will be presenEng a paper on “The Ins and Outs of Moving Freight in Canada” at the Transporta:on Intermediaries Associa:on Annual Conference being held in San Antonio, Texas on April 7, 2016.

• Rui Fernandes will be presenEng a paper to the IIR Insurance CapEve annual meeEng on April 14th, 2016 on “Freight Contracts and Master Service Agreements.”

• Gordon Hearn, Kim Stoll and Louis Amato-‐Gauci will be represenEng the firm at the Transporta:on Lawyers Associa:on Annual Conference being held April 27-‐30th in DesEn, Florida. Louis Amato-‐Gauci is the EducaEon Program Chair for this conference. Kim Stoll will be facilitaEng the Canadian Transport Law and Cross Border Issues InteracEve Workshop.

shockingly inaccurate. Yet judges and jurors o_en uncriEcally accept such evidence.

Researchers have reported that (*3):

The uncriEcal acceptance of eyewitness accounts may stem from a popular misconcepEon of how memory works. Many people believe that human memory works like a video recorder: the mind records events and then, on cue, plays back an exact replica of them. On the contrary, psychologists have found that memories are reconstructed rather than played back each Eme we recall them. The act of remembering, says eminent memory researcher and psychologist Elizabeth F. Lo_us of the University of California, Irvine, is “more akin to pujng puzzle pieces together than retrieving a video recording.” Even quesEoning by a lawyer can alter the witness’s tesEmony because fragments of the memory may unknowingly be combined with informaEon provided by the quesEoner, leading to inaccurate recall.

Many researchers have created false memories in normal individuals; what is more, many of these subjects are certain that the memories are real. In one well-‐known study, Lo_us and her colleague Jacqueline Pickrell gave subjects wri\en accounts of four events, three of which they had actually experienced. The fourth story was ficEon; it centered on the subject being lost in a mall or another public place when he or she was between four and six years old. A relaEve provided realisEc details for the false story, such as a descripEon of the mall at which the subject’s parents shopped. A_er reading each story, subjects were asked to write down what else they remembered about the incident or to indicate that they did not remember it at all. Remarkably about one third of the subjects reported parEally or fully

remembering the false event. In two follow-‐up interviews, 25 percent sEll claimed that they remembered the untrue story, a figure consistent with the findings of similar studies.

In the mid 1970’s researcher Elizabeth Lo_us performed experiments demonstraEng the effect of a third party introducing false facts into memory.(*4) The experiments were described as follows: (*5)

Subjects were shown a slide of a car at an intersecEon with either a yield sign or a s top s ign . Exper imenters asked p a r E c i p a n t s q u e s E on s , f a l s e l y introducing the term "stop sign" into the quesEon instead of referring to the yield sign parEcipants had actually seen. S imi la r l y , exper imenters fa l se ly subsEtuted the term "yield sign" in quesEons directed to parEcipants who had actually seen the stop sign slide. The re su l t s i nd i ca ted tha t sub jec t s remembered seeing the false image. In the iniEal part of the experiment, subjects also viewed a slide showing a car accident. Some subjects were later asked how fast the cars were traveling when they "hit" each other, others were asked how fast the cars were traveling when they "smashed" into each other. Those subjects quesEoned using the word "smashed" were more likely to report having seen broken glass in the original slide. The introducEon of false cues altered parEcipants’ memories.

A number of factors can reduce the accuracy of eyewitness idenEficaEons and recollecEons of events. These have been idenEfied as: a) Extreme witness stress at the scene or during idenEficaEon or during recallb) Racial or cultural dispariEes c) AlteraEon of the memory by the interviewerd) Time

Recognizing the fallibility of witness memories, then, is especially important to parEcipants in


the judicial process, since many trials revolve around factual determinaEons of whom to believe. Rarely will a factual quesEon result in a successful appeal.

Where avai lable, most counsel prefer documentary evidence to eyewitness tesEmony. Historically, counsel have relied upon original photographs, le\ers wri\en by the parEes, and other “formal” documents. Recently, we have seen a significant increase in the use of digital informaEon. There has been an explosion in the use of email programs and of cell phones to take videos and photographs. These “tools” will change the nature of trials. As demonstrated recently in the Jian Ghomeshi trial, the unearthing of 13-‐year old emails by the defence and their use to a\empt to discredit a woman accusing Jian Ghomeshi of sexual assault underscores the growing importance of “digital debris” in criminal and civil trials. (*6)

The amount of electronic data, records and documents introduced in trials has risen dramaEcally in the last ten years, increasing the Eme and expense of trials. Individuals and companies alike are hanging on to emails and electronic informaEon, such as photographs and videos, forever, given the pracEcally unlimited storage space available on the web and on computers. It is common sense today for lawyers to ask if there is a likelihood that relevant electronic evidence is available, whether emails, text messages, social media posts, online reviews etc. Even when someone thinks they have deleted the electronic informaEon, it may not be deleted. The informaEon may sEll exist on the backups of company databases and service provider databases.

What can we expect next? More electronic informaEon and, with it, the risks of alteraEon of the electronic informaEon. It's the wild west, a brave new world. As before, with original photographs and documents , forens ic invesEgators will be required to determine if, in fact, the electronic photograph or document has been altered. This also means the likely

reducEon of the use of eyewitness accounts and witnesses’ memories, without the aid of digital informaEon. That might be a good thing.

Rui M. Fernandes

Fo l l ow Ru i M . Fe rnandes on Tw iDe r @RuiMFernandes and on Linkedin. See also his blog at h\p://transportlaw.blogspot.ca

Endnotes(*1) “Richard Alexander”, The Innocence Project, h\p://www.innocenceproject.org/cases-‐false-‐imprisonment/richard-‐alexander(*2) Hal Arkowitz, Sco\ O. Lillienfeld, “Why Science Tells Us Not to Rely on Eyewitness Accounts”, Scien:fic American, January 1, 2010.(*3) Ibid(*4) See Elizabeth F. Lo_us & J.C. Palmer, Reconstruc:on of Automobile Destruc:on: An Example of the Interac:on Between Language and Memory, 13 J. of VERBAL LEARNING & VERBAL BEHAVIOR 585 (1974); Elizabeth F. Lo_us, D.G. Miller, & H.J. Burns, Seman:c Integra:on of Verbal Informa:on into a Visual Memory, 4 J. of Experimental Psych, 19 (1978).(*5) See Laura Engelhardt, “The Problem with Eyewitness TesEmony a talk by Barbara Tversky, Professor of Psychology and George Fisher, Professor of Law”, Standford Journal of Legal Studies, April 5, 1999. (*6) Laura Kane, “Ghomeshi email evidence shows how ‘digital debris’ increasingly used in trials” h\p://www.ctvnews.ca/canada/ghomeshi-‐email-‐evidence-‐shows-‐how-‐digital-‐debris-‐increasingly-‐used-‐in-‐trials-‐1.2768204

INVESTOR NEWSLETTER ISSUE N°3 FALL 2008FERNANDES HEARN LLP NEWSLETTER FEBRUARY 2016 PAGE 4

http://transportlaw.blogspot.ca

http://transportlaw.blogspot.ca

http://www.innocenceproject.org/cases-false-imprisonment/richard-alexander




http://www.ctvnews.ca/canada/ghomeshi-email-evidence-shows-how-digital-debris-increasingly-used-in-trials-1.2768204






2. Contract Renewal and the Duty to Act Reasonably

What duEes do parEes to a contract owe each other when it comes Eme for renewal? The Ontario Superior Court of JusEce stated in Data & Scien:fic Inc. v Oracle Corpora:on (*1) that there is a duty to exercise discreEonary contractual powers reasonably, including decisions regarding whether to renew a contract.

The Facts

The Defendant, Oracle CorporaEon (“Oracle”), is described by the court as a mulE-‐naEonal computer technology company carrying on business through its Oracle Partner Network (“ORN”) conduits. (*2) The PlainEff, Data & ScienEfic Inc. (“D & S”), was a member of Oracle’s OPN for a period of twenty years; who over that Eme became reliant upon its relaEonship with Oracle.

The parEes entered into Oracle’s standard OPN agreement (the “Agreement”), which was renewed annually at Oracle’s sole discreEon. The Agreement contained the following clause:

“Any renewal of this agreement shall be subject to Oracle’s standard terms and fees…and shall be at Oracle’s sole discreEon. You may apply for renewal of your membership in OPN by on-‐line electronic acceptance of the terms of the then current OPN agreement and Oracle will noEfy you if it accepts your applicaEon for renewal.” (*3)

The Agreement did not contain a provision regarding noEce of non-‐renewal. The parEes renewed the Agreement each year without incident. (*4) However, in the fall of 2014, Oracle invited D & S to renew the Agreement online as it had done in previous years. D & S accepted the terms online but without success so it wrote a le\er to Oracle requesEng renewal of the Agreement. Oracle advised that the

Agreement would not be renewed. No noEce was provided of the non-‐renewal. (*5)

D & S’ Posi:on

D & S sued Oracle for damages for failing to give reasonable noEce of non-‐renewal. D & S argued that Oracle was required to exercise its discreEonary renewal power reasonably and that to do so, at a minimum, it should have provided reasonable noEce of the non-‐renewal. (*6)

Oracle’s Posi:on

Oracle moved to strike the PlainEff’s claim for failing to disclose a reasonable cause of acEon, pursuant to Rule 21.01(1)(b) of the Rules of Civil Procedure. Oracle agreed that there is a general rule that discreEonary contractual powers must be exercised reasonably, but argued that the Supreme Court of Canada in its recent decision in Bhasin v Hrynew (*7) curtailed this rule. Oracle stated that the court in Bhasin established that the reasonable exercise of discreEonary contractual powers never applies in cases of contractual renewal, absent acEve dishonesty. (*8)

The Court’s Analysis

In deciding to dismiss Oracle’s moEon to strike D & S’ statement of claim, the court stated that Oracle’s interpretaEon of Bhasin was not what the Supreme Court intended in that decision:

In Bhasin , an obviously important d e v e l o pm e n t i n t h e c o n E n u i n g modernizaEon of Canadian contract law, the Court, in essence, did two things: one, it recognized that the ‘situaEonal’ and ‘relaEonal’ examples or pockets of a judicially recognized good faith doctrine were aspects of a broader organizing principle of good faith – ‘that parEes generally must perform their contractual duEes honestly and reasonably and not capriciously or arbitrarily;’ and two, the Court decided on the facts before it that it


was Eme to recognize a new duty – ‘a general duty of honesty in contractual performance.’(*9)

The judge noted that, in Bhasin, the court found that the defendant breached the duty of honesty in contractual performance by misleading the plainEff and acEng dishonestly in numerous ways leading up to and including the non-‐renewal of their agreement. The defendant, in that case, complied with the six-‐month noEce provision in the agreement so the complaint was not one of lack of reasonable noEce, but rather bad faith/dishonesty in the form of decepEon in their exercise of the non-‐renewal clause. The judge stated that the concern in Bhasin was dishonesty rather than unreasonableness. (*10)

The judge specifically stated that Bhasin did not stand for the principle that the “long-‐standing requirement that discreEonary contractual power must be exercised reasonably can never apply in contract renewal situaEons” where the non-‐renewal power is at the sole discreEon of one party and requires no noEce. (*11)

Of interest is the fact that in its analysis, the court considered that the principle of good faith would likely have different implicaEons in the context of a long-‐term contract of mutual cooperaEon than i t would in a more transacEonal exchange, presumably meaning that the principle would be more strictly applied in c i r cumstances invo lv ing long-‐ term agreements. (*12)

It is important to note that the court in this case was clear that it was not making any type of findings in regard to the actual merits of D & S’ case, but rather that it was not plain and obvious that their claim was certain to fail and had no chance of success. The merits of the case would be le_ for a trial judge to decide (*13)

Implica:ons and Conclusions

The court established that a party exercising discreEonary contractual renewal powers must do so in a reasonable manner. A party who does

not intend to renew a contract should, at a minimum, provide reasonable noEce of that intent. The court did not elaborate on the length of noEce that would be “reasonable” for these purposes; however, exisEng case law indicates that this is a fact specific inquiry.

Where the contract is silent with regard to noEce, the courts have held that “reasonable noEce” should be determined with regard to the facts that existed at the Eme noEce was given, the general nature and circumstances of the case, the established pracEce in the trade or business and the obligaEons incurred / the commitments made by the terminated party in order to fulfill its contract. (*14) Other similar factors that courts have considered include the nature of the parEes’ relaEonship, the duraEon of the relaEonship, the exclusivity of the agreement and the financial commitment of the terminated party. (*15)

ParEes should first look at the provisions of the contract in quesEon to determine if it sets out a minimum noEce period. Similarly, when negoEaEng a contract, parEes should discuss what amount of Eme would be appropriate and reasonable in their circumstances as a noEce period and incorporate a clause to that effect into their contract. ParEes should also consider if certain events would trigger terminaEon of the contract without noEce, and if so, provisions should be incorporated into the contract clearly sejng out those events and their implicaEons. In any event, parEes should ensure that if they intend to exercise the non-‐renewal clause of a contract, they do so in a reasonable manner and provide some form of noEce to the other party.

Jaclyne Reive

TwiDer: @jaclyne_reive Blog: hDps://jaclynereive.wordpress.com

Endnotes(*1) 2015 ONSC 4178 [hereina_er referred to as Data v Oracle].(*2) Ibid at 1.(*3) Ibid.


https://jaclynereive.wordpress.com

https://jaclynereive.wordpress.com

(*4) Ibid at 2.(*5) Ibid at 2-‐3.(*6) Ibid at 4.(*7) 2014 SCC 71 [hereina_er referred to as Bhasin].(*8) Data v Oracle at 8-‐9.(*9) Ibid at 10, 15, 17.(*10) Ibid at 11-‐14.(*11) Ibid at 15.(*12) Ibid at 16.(*13) Ibid at 17-‐18.

(*14) Clarke v Irwin & Co v George G Harrap & Co, (1980) 9 BLR 97 at p 111-‐112 (ONHC).(*15) Axiom Group Inc. v Inter Automo:ve Closures Inc., (2005) 2 BLR (4th) 171 (ONSC); WERAM (1975) Inc. v EMCO Ltd., (1999) 2 BLR (3d) 183 (ONSC); Toronto Type Foundry Ltd. v Miehle-‐Gross-‐Dexter Inc., [1969] 2 OR 431 (ONHC); RGO Office Products Ltd. v Knoll North America Corp., (1996) 37 Alta LR (3d) 113 (ABQB) and most recently, Keenan v. Canac Kitchens – see Kim Stoll’s ar:cle below.


3. The Poten&al Erosion of the Motor Carrier Contract of Carriage as We Know It: Look Out Below

The recent decision in the case of Pelmen Foods Ltd. v. Fast Load Transport Inc. (*1) provides an excellent illustraEon of the liability issues that arise in the context of a shipper and load broker relaEonship. Its real importance, however, is the indicaEon that we may be seeing the erosion of the motor carrier contract of carriage as we have come to know it in the province of Ontario. As addressed below, the issue concerns the fact that, in Ontario, the applicable regulaEon governing road carriage contracts (*2) regulates the “contract of carriage” as opposed to the former regulatory regime that governed the “bill of lading”. Other provinces in Canada that regulate in the area conEnue to regulate the “bill of lading”. Commentators and lawyers conEnue to debate whether this is a “disEncEon without a difference” or whether there is an evoluEon in progress. Historically, a bill of lading has been regarded as being the best evidence of a contract of carriage – it might, in fact, be the contract of carriage, or it might simply form a part of the contract of carriage, which is to be filled in by other details that might be admissible in evidence.

Some examples come to mind. A shipper endorses 4 pallets as being tendered to a carrier on a bill of lading when only 3 were loaded onto the truck for carriage. The driver signs the bill of lading without having done a piece count. In the context of the eventual ‘pilferage’ claim for the missing pallet, the carrier may lead evidence to the effect that there are details informing the carriage mandate beyond the bill of lading itself; that is, to the effect that only 3 pallets were tendered at origin. In parEcular, the bill of lading, as it was issued at origin, would be said to only be a part of the contract of carriage.

In another context, a shipper and a carrier may agree to sEpulate various rights and obligaEons in a ‘pre-‐shipment’ motor services agreement or shipper-‐carrier contract, such agreement sEpulaEng that any bill of lading as issued will

only be a receipt for the cargo, with any terms therein (or as may be deemed to apply under applicable statute or regulaEon) that are at odds with the wri\en agreement being “read down”, so as to give effect to the terms of the la\er.

The potenEal danger of the Pelmen decision is its rather bold extension of what was clearly a fact driven result in the earlier case of A & A v. Dil’s Trucking Inc. (“A & A”)(*3). This decision held that the ‘contract of carriage’ in that case actually included a commercial invoice lisEng the value of the cargo, the effect of which being that the shipper in that case was found to have “declared a value” on the contract of carriage, with the consequence following that the carrier in that case could not limit liability to $2 per pound.

As menEoned, the Pelmen decision also highlights items of interest in the shipper-‐ broker context, most notably when a broker might be liable for loss of or damage to cargo in transit.

The Facts

Pelmen Foods Ltd. (“Pelmen”) sold 180 boxes of frozen perogies to a company based in Memphis, Tennessee. The perogies had a value of US $27,258. The goods were to be transported from Pelmen’s facility in Toronto to the buyer in Memphis. As Pelmen was inexperienced with cross-‐border transportaEon logisEcs, it made inquiries of the defendant, ByExpress CorporaEon (“ByExpress”), who carried on business as a load broker, facilitaEng the transportaEon of goods between shippers and motor truck carriers.

A logisEcs coordinator with ByExpress fielded the inquiry from Pelman, and followed up by sending an email to Pelmen staEng as follows:

We’re asset based transportaEon, logisEcs and warehousing company specializing in both FTL and LTL locally, as well as long-‐haul shipments. We do have a 3PL division that is fully licensed and bonded, which


allows us to specialize in acquiring and coordinaEng all types of transportaEon services including road freight, ocean, air and Intermodal, right across the US as well as Canada and overseas.

ByExpress, in turn, hired the other defendant, Fast Load Transport Inc. (“Fast Load”), to carry the goods to Tennessee for the plainEff. ByExpress learned of Fast Load through the Loadlink service, which matches brokers seeking to arrange the carriage of goods with carriers who have the assets to perform the movement of goods. ByExpress had no previous experience with either Pelmen or with Fast Load.

Accordingly, ByExpress provided a “Dispatch InformaEon” document to both Fast Load and to Pelmen (*4). The Dispatch InformaEon sheet set out the name of the carrier, the carrier’s contact informaEon, the name and address of the shipper, the name and address of the consignee, the load and carrier number, the pick up and delivery dates, the type of equipment required and the parEculars of the load, including the type of load, and the weight and the class of the goods. The Dispatch InformaEon document also set out the fee charged by ByExpress for providing the service.

Fast Load accepted the Dispatch InformaEon on January 9, 2013 for the load of perogies. The value of the goods was noted as “Not Specified”. Paragraph 4 of the Dispatch InformaEon provided as follows:

Carrier agrees to provide cargo insurance in the amount listed above and a minimum of $100,000 to compensate owner of property in the event of loss or damage. Carrier also agrees to provide a current cerEficate of insurance with ByExpress TransportaEon named as the cerEficate holder. In the event of a cargo claim, carrier will be liable for the full value of the loss.

Pelmen prepared a bill of lading for the carriage of the perogies to Memphis. The bill of lading did not specify the value of the goods. The perogies

were picked up from the plainEff’s warehouse at which Eme both a representaEve of Pelmen and the Fast Load driver signed the bill of lading.

ByExpress also prepared a bill of lading, which was also signed by the Pelmen representaEve at the point of pick up. This document idenEfied Fast Load as being the carrier. A “note to shipper” near the bo\om of this bill of lading stated, “Please review and confirm the accuracy of informa:on contained in this bill of lading and revise as needed”. No value for the goods was set out in this bill of lading either; however, this bill of lading did state that a 53-‐foot reefer was supplied to carry 5 pallets of frozen perogies weighing 7500 pounds.

The plainEff prepared a document for customs clearance, being an invoice sejng the value of the goods at US $27,258. In its review of the facts, the Court noted that a copy of this invoice must have been given to Fast Load’s driver, as he would be required to clear U.S. customs to get the perogies into the United States. This invoice referenced the first bill of lading, referred to above, by number, being the bill of lading prepared by the plainEff.

Fast Load delivered the perogies to Memphis on January 17, 2013. When the reefer trailer was opened, it was determined that the perogies had defrosted and were ruined. The consignee rejected the shipment. Fast Load, therea_er, acknowledged and accepted responsibility for the damage to the perogies. Pelmen did not conduct an examinaEon of the damaged perogies, but maintained that they were now unsafe for consumpEon.

Following the loss, ByExpress contacted Fast Load’s insurance company who “promised that it would then contact the plainEff”. For reasons not fully developed on the trial record, for some reason, an insurance claim was not pursued against the insurance policy that Fast Load apparently took out for the goods.

The Legal Proceedings


As Pelmen did not obtain any recovery from any insurance policy in respect of the perogies, it commenced a lawsuit against both Fast Load and ByExpress for $25,000 in Small Claims Court. ByExpress, in turn, commenced an acEon against Fast Load for contribuEon and indemnity in respect of all damages and costs for which it might be found liable to Pelmen. Fast Load did not defend either Pelmen’s claim or the claim by ByExpress for contribuEon and indemnity.

The acEon conEnued as between the Pelmen and ByExpress. The pleadings raised the following issues:

1. Was ByExpress liable to the plainEff for the lost perogies?

2. Did ByExpress hold itself out to the plainEff as a carrier?

3. What was the quantum of damages?

The Court’s Analysis and the Outcome

Pelman’s claim against ByExpress was premised on the contenEon that it was an express or an implied term of the agreement between them that ByExpress would ensure that Fast Load would safely deliver the cargo to desEnaEon and, in essence, that ByExpress had held itself out as a carrier with “carrier like” liability to Pelman. As such, the first two issues listed above were then interrelated.

ByExpress led evidence at the trial that it never provided services as an internaEonal carrier, as it was not registered in the United States under the Department of TransportaEon to haul loads. ByExpress led evidence to the effect that it operated two trucks in the O\awa area, exclusively providing services for Costco. ByExpress also led evidence that its “marketers”, who introduce the company and sell services to shippers as a standard pracEce, advise potenEal customers that ByExpress is only a broker and is not a carrier. Further Evidence led described how ByExpress used the Loadlink service in its capacity as a broker: Loadlink provided informaEon sejng out a carrier’s license, insurance coverage, WSIB coverage, the type of trailer, the routes, and

other perEnent informaEon concerning the carriers. ByExpress’ witness tesEfied how it relied on Loadlink to perform its due diligence with respect to hiring carriers to transport loads for shippers. In turn, the ByExpress witness tesEfied how, as a load broker, it would, in turn, coordinate carriers, track loads, obtain proof of delivery and “act as an extension of the consignor or its shipping department” and how, once a carrier is located on Loadlink, ByExpress contacted the carrier to negoEate the price and set up the details of the shipment.

ByExpress’s witness tesEfied that, while he could not recall the email noted above, ByExpress would always advise shippers that it was a brokerage and did not transport goods as a carrier.

Pelmen’s representaEve, who originally booked the load with ByExpress, was not called as a witness. In the absence of her evidence, the court accepted ByExpress’ evidence that it would “never advise a customer that ByExpress was a carrier that transported goods”. In this regard, the court also noted that ByExpress prepared and delivered the Dispatch InformaEon form and the bill of lading to the plainEff, both of which stated clearly that Fast Load was the carrier. The court accordingly found that ByExpress did not hold itself out as a carrier to Pelmen, but rather provided the services of a load broker. (*5)

Pelman also alleged that ByExpress was negligent for assigning the carriage of the goods to Fast Load and further that ByExpress failed to confirm that Fast Load had adequate insurance coverage. The court rejected this argument on the basis that Loadlink had, in fact, confirmed the existence of coverage, and that there was the suggesEon on in the evidence that such insurance coverage actually was in existence. As menEoned, Pelmen did not fully explain at the trial why it or Fast Load had not proceeded with an insurance claim. Without expressly making a finding on point in its dismissal of the case outright against ByExpress, the court necessarily found that ByExpress’ reliance on Loadlink to source and then obtain informaEon about the


carrier was a reasonable approach. Not being a carrier, and not having been negligent as a load broker in the selecEon of Fast Load as a carrier, the court dismissed the case against ByExpress.

The Damage Claim and Limita:on of Liability

It not being in issue that Fast Load was liable as a carrier, the court had to then determine the amount of damages to which Pelman was enEtled; however, neither the Dispatch InformaEon form or the ByExpress bill of lading specified the value of the goods (*6).

In a rather disconcerEng exercise, the court noted that Fast Load could not limit its liability to CDN $15,000 (i.e. the weight of 7500 lbs. x $2.00) for lack of a declared value on the bill of lading itself, on the basis that Fast Load had been provided with the aforemenEoned customs invoice, which listed the value at US 27,258. NoEng that that invoice referenced the ByExpress bill of lading number, the Court reverted to a consideraEon of the A & A decision. (*5) In that decision, a carrier was not allowed to limit liability – despite there being no declared value on the bill of lading itself – owing to an expansive consideraEon and definiEon of a “contract of carriage” for the purposes of clause 10 of the Uniform Bill of Lading, which provides:

If the consignor has declared a value of the goods on the face of the contract of carriage, the amount of any loss or damage for which the carrier is liable shall not exceed the declared value.

[emphasis added]

In A & A, the court found that the reference, by number, of an invoice on the carrier’s bill of lading in effect incorporated the customs invoice into the contract of carriage, having the effect then of being a value ‘declared’ in the carriage contract. In the present case, there was something of a leap by the judge, who found that the reference of the bill of lading number onto the commercial invoice had the same effect of creaEng a declaraEon of a value. It might be one

thing (per A & A) for a court to find an invoice as having been incorporated into a contract of carriage by being endorsed on a bill of lading; however, it seems to be a rather bold approach to find that an invoice is incorporated into a contract of carriage because the bill of lading number was referenced on that commercial invoice. Quite simply, as indicated above, bills of lading are either the contract of carriage or, at a minimum, they inform the contract of carriage. Commercial invoices, do not, by their nature, tend to inform the contract of carriage given their stand alone purpose of being given to the carrier to facilitate the customs entry into another country, being a customs event, pure and simple.

The reader is also cauEoned that A & A also involved specific facts, which do not appear to exist in this case, and that may have influenced the finding in that case. Evidence was led in A & A that the shipper and carrier had engaged in pre-‐shipment discussions about the shipper’s concern that the carrier have adequate liability insurance coverage to cover the value of that cargo and which, in the context of that discussion, had been disclosed to the carrier. In that sejng, one can see how a court might embrace how such discussions might inform a contracEng intent that the ‘contract of carriage’ included a declaraEon of value, when the commercial invoice number was actually endorsed onto the operaEve bill of lading.

Without any further analysis on the point, the court ruled that the customs invoice was a part of the contract of carriage and, accordingly, rendered judgment for $25,000 in favour of Pelmen instead of the limitaEon amount of CDN $15,000. (*7)

Conclusion

The clear ‘take away’ from this case is that shippers, brokers and carriers all benefit from the certainty of contract that comes with specifically sejng forth their contracEng intenEons in wriEng. Concerns as to any uncertainty that may result in how a court might incorporate extrinsic or “outside” documents into what consEtutes a


“contract of carriage” (whether for the purposes of determining if there is a limitaEon of liability or otherwise) will certainly dissipate by the parEes properly contracEng for their affairs.

The case also, of course, has an admonishment for the load brokering community: each case will turn on its own specific and as to whether a broker held itself out to a shipper as being a carrier, such that the broker would be liable for cargo loss and damage. Load brokers are advised to be deliberate and consistent in implemenEng their business model on point so as to make it clear what service they intend to offer a shipper and what degree of responsibility for cargo loss or damage that they are prepared to assume.

Gordon Hearn

Endnotes (*1) 2015 CanLII 85873 (ON SCSM)(*2) RegulaEon 643/05 enacted under the Highway Traffic Act RSO 1990 c.H.8(*3) [2015] O.J. No. 1444. See the Fernandes Hearn LLP newsle\er from April, 2015, and James

Manson’s arEcle for a review and discussion of the A & A v. Dil’s Trucking Inc. case. (*4) Also known as or referred to in the industry as a “carrier confirmaEon sheet”. It is interesEng that, in this case, this document was also sent to Pelman. Load brokers do not usually send this document to the shipper of goods. (*5) InteresEngly, the court did not address the point that the email, noted above, did, in fact, state that “… ByExpress was an asset backed transporta:on, logis:cs and warehouse company…” may reasonably imply that it did, in fact, operate equipment.(*6) Recall that, by the “uniform bill of lading” prescribed in Ontario by RegulaEon 643/05 under the Highway Traffic Act, a carrier can limit liability to $2 per pound unless a value for the goods is declared on the bill of lading at the point of origin. (*7) Note: the monetary jurisdicEon in Ontario Small Claims court is $25,000. Accordingly a plainEff wishing to sue in that venue has to reduce its claim to that amount so as to liEgate a claim in that sejng. Accordingly, Pelmen, in this case, ‘waived’ the difference between US $27,258 and CDN $25,000.


4. The Ontario Superior Court’s Decision in Gardiner v MacDonald, 2016 ONSC 602 – Professional Drivers Owe a Higher Standard of Care than Ordinary Drivers

On January 28, 2008, a collision occurred at the intersecEon of Heron Rd. and Riverside Dr. in O\awa, Ontario at approximately 1:54 am, when an OC Transpo bus driven by Raymond Richer (the “Bus”) T-‐boned an oncoming SUV (the “SUV”). The SUV occupants were the driver, Mark MacDonald, and the passengers, Brianne Deschamps, Vanessa Crawford, and Ben Gardiner. Mr. MacDonald, Ms. Deschamps, and Ms. Crawford were fatally injured. Mr. Gardiner was catastrophically injured. (*1)

The collision occurred when the bus, which entered the intersecEon of Riverside Dr. and Heron Rd. on a green light travelling northbound on Riverside Dr., and the SUV, which entered the intersecEon of Riverside Dr. and Heron Rd. on a red light travelling westbound on Heron Rd., collided. The Court found that the Bus had the right of way when the collision occurred. (*2)

Alcohol use by the SUV driver, Mr. MacDonald, was a factor in the collision. No criminal charges were laid against the Bus driver, Mr. Richer, as a result of the accident. (*3)

One issue that the Court had to consider in this case was whether Mr. Richer, as a professional bus driver, had to meet an even higher standard of care than an ordinary non-‐professional driver. (*4)

With respect to the duty of care, the Court noted the decision of the Ontario Court of Appeal in Sant v. Sekhon, 2014 ONCA, 623, 68 M.V.R. (*5):

A driver with a green light is free to go through the intersecEon assuming that drivers approaching the intersecEon from other direcEons and who are necessarily being shown a red light will stop. However, a statutory right of way does not absolve a driver from exercising

proper care. A driver should not exercise his or her right of way 1) if the driver becomes aware or should become aware that the driver without the right of way is going to go through the intersecEon and 2) if the circumstances are such that the driver with the right of way had the opportunity to avoid the collision.

The Court noted that the dominant driver (the driver with the right of way) will be fixed with some responsibility if he or she had a reasonable opportunity to avoid the collision, but failed to do so. In determining whether the dominant driver had met the standard of care, the Court must consider all of the dominant driver’s acEons and how those acEons relate to the percepEon of hazard. The Court noted that such relevant factors include speed, distracEon, the size and weight of the vehicle, and weather condiEons. (*6)

Importantly, the Court also found that such relevant factors may take into account the experEse of the driver. The Court noted that, “professionals can be held to a higher standard than the general public when performing their professional duEes.” (*7)

The Court held that, although the SUV driver, Mr. MacDonald was primarily responsible for the accident, the Bus driver, Mr. Richer was 20% contributorily negligent. The Court considered that Mr. Richer owed a higher standard of care in the circumstances given his status as a professional driver, and that he had breached this standard by, inter alia, travelling over the posted speed limit in poor weather condiEons. (*8)

Such assignment of liability to the professional driver in this ma\er may be somewhat surprising given the Court’s finding that the Bus had the right of way and that the SUV driver was under the influence of alcohol and entered the intersecEon on a red light. However, this case demonstrates that professional drivers will be held to a higher standard of care than ordinary drivers. The Bus driver’s decisions with respect to travel speed in poor weather condiEons breached


the standard of care in the circumstances despite the fact that he had the right of way when entering the intersecEon where the accident occurred.

Tara Cassidy

Endnotes (*1.) Ben Gardiner et al. v Andrew MacDonald et al., 2016 ONSC 602 at para 1. (*2.) Ibid at para 2, and 3. (*3.) Ibid at paras 5 and 6. (*4.) Ibid at para 16 and 18. (*5.) Ibid at para 137. (*6.) Ibid at paras 138, 139, 140, and 142. (*7.) Ibid at para 143.

(*8.) Ibid at paras 171 and 194.


5. Air Canada Overhaul Li&ga&on: Supreme Court Hearing Delayed and Likely Averted

On February 17, 2016, Air Canada and Bombardier announced that the airline had entered into a le\er of intent to purchase 75 aircra_ from the manufacturer’s troubled C-‐Series line. The C-‐Series project, launched in 2004, is Bombardier’s first challenge to the duopoly enjoyed by Airbus and Boeing in the 100+ seat passenger aircra_ market. Bombardier has struggled with repeated delays to the delivery of the new aircra_, which has translated into slowing and cancelled orders.

Air Canada further announced that it would establish a maintenance facility in the Montreal area to service the new Bombardier jets. Concurrently, the Quebec provincial government announced that it had reached a se\lement with Air Canada whereby the provincial A\orney General would disconEnue its ongoing legal proceedings against the airline relaEng to violaEons of the Air Canada Public Par:cipa:on Act (“ACPPA”) (*1), being legislaEon enacted to govern the privaEzaEon of the flag carrying airline.

In November 2015, a panel of five Quebec Court of Appeal judges (*2) upheld a trial level decision finding that Air Canada was in breach of its legal obligaEons pursuant to the aforemenEoned legislaEon (*3). On December 30, 2015, Air Canada had filed an applicaEon for leave to appeal the Court of Appeal decision to the Supreme Court of Canada (*4). On February 19, 2016, Air Canada and the Quebec A\orney General filed correspondence with the Supreme Court indicaEng that the parEes had reached an agreement and that accordingly the hearing of the applicaEon for leave to appeal should be delayed unEl July 15, 2016, presumably allowing the parEes Eme to implement their agreement.

The Quebec Court of Appeal had, in its judgment, confirmed the non-‐compliance of Air Canada with its legislaEve obligaEons. At issue was s. 6(1)(d) of the ACPPA, which required that “the arEcles of conEnuance of (Air Canada) shall contain

provisions requiring the CorporaEon to maintain operaEonal and overhaul centres in the City of Winnipeg, the Montreal Urban Community and the City of Mississauga”.

At the Eme of its privaEzaEon, Air Canada performed all maintenance and repair of aircra_ in house through its internal technical division, Air Canada Technical Services (“ACTS”). As part of Air Canada’s restructuring under the Companies’ Creditors Arrangements Act (*5) during its 2003 insolvency, ACTS was “spun off” as an independent corporaEon. As well as servicing many third party customers, ACTS retained the heavy maintenance and overhaul services contract for the Air Canada fleet. ACTS rented hangar space to perform the work from Air Canada and conEnued to render services in the Canadian ciEes, as prescribed in the ACPPA.

In 2006, ACTS became Aveos, and, in March 2012, Aveos filed for bankruptcy protecEon. One month later, the A\orney General of Quebec commenced liEgaEon against Air Canada alleging that the closure of Aveos and its Canadian overhaul centres placed Air Canada in breach of the ACPPA because overhaul funcEons were then being performed overseas. Later in 2012, the A\orney General of Manitoba was granted intervening party status in the liEgaEon, given its interest in the outcome in light of the same statutory provision’s requirement to maintain overhaul faciliEes in Winnipeg (*6).

In 2013, the Quebec Superior Court granted declaratory judgment in favour of the A\orney General dismissing Air Canada’s defences and holding it in breach of the representaEons it had made in order to secure its 1988 privaEzaEon.

Before the Quebec Court of Appeal, Air Canada challenged the factual determinaEon of the trial judge that it did not, in fact, maintain an overhaul centre in Montreal. The Court of Appeal upheld the reasoning of the trial judge, denying Air Canada’s posiEon that the Court had adopted a staEc definiEon of aircra_ maintenance. The trial judge, rather, had properly referred to the Air Transport RegulaEons in disEnguishing between


servicing, maintenance, scheduled maintenance and overhaul of aircra_, and properly found that overhaul work performed in Montreal, if any, was insignificant.

Air Canada’s second line of appeal quesEoned the standing of the A\orney General to bring the legal proceeding and denied that it had the requisite interest to prosecute the suit. The Court of Appeal applied the three-‐step test established by the Supreme Court of Canada (*7) and found in favour of the A\orney General that: (1) There was a proper liEgious case to be heard based on interpretaEon of legislaEon, (2) As reasoned at trial level, given the number of jobs in Quebec at issue and the lost fiscal revenue from the displacement of overhaul services, the A\orney General had the requisite interest in ensuring that Air Canada respect the ACPPA, and (3) the applicaEon for declaratory order was an appropriate recourse.

Bich J.C.A., delivering the unanimous decision of the court, dismissed Air Canada’s argument that the A\orney General had erred in failing to bring its proceeding under s. 247 of the Canada Business Corpora:ons Act (“CBCA”) (*8). Air Canada argued that the ACPPA merely contained a requirement of form as to the terms of its arEcles of incorporaEon, and that such requirement of form was met, since the arEcles sEll required it to maintain overhaul services in Montreal. Accordingly, Air Canada advocated that the proper basis for suit would be failure to comply with arEcles of incorporaEon under s. 247 of the CBCA, which imported the applicaEon of the rule of business judgment granEng deference to the choices of Air Canada.

Per JusEce Bich, pursuant to an interpretaEon of the ACPPA which takes account of the objecEves, context and purposes of the legislaEon, the ACPPA encapsulated substanEve requirements incumbent upon Air Canada to maintain overhaul faciliEes, with a volume of operaEons comparable to the Eme of enactment of the ACPPA. The ACPPA did not simply impose a formality to maintain the obligaEons in the statute, or a duty to retain faciliEes absent operaEons.

The content of parliamentary debates, at the Eme of the ACPPA’s adopEon, were persuasive for the Court in disclosing the true extent of the intended duEes imposed by s. 6(1)(d) of the ACPPA. Moreover, Air Canada, itself, had successfully lobbied previously for amendments to other provisions under s. 6(1) of ACPPA, thereby implicitly recognizing the mandatory nature of the provisions. Accordingly, Air Canada could and ought to have made recourse to the legislature, if it could no longer respect its obligaEons under s.6(1)(d), as only the legislature could grant reprieve from the terms of the law.

Finally, Air Canada raised a difficulty with the trial judgment in that it provided Air Canada with no certainty regarding how it should respect its obligaEons under the ACPPA. Air Canada could not know the volume of operaEons required to be done at the Canadian centres, in order to meet its legal obligaEons. The appeal court, however, maintained the terms of the trial judgment, sEpulaEng that it would be difficult for the Court to indicate at what volume of overhaul operaEons performed in Canada, Air Canada would be in compliance with the ACPPA. It was not for the trial judge to direct Air Canada as to the specific number of workers required to be based at the Canadian overhaul centres. Despite Air Canada’s concern that there would be conEnual liEgaEon because it did not know the extent of repatriaEon of overhaul required to appease the A\orney General and to comply with the law, the court declined to usurp legislaEve funcEons of chronicling obligaEons not detailed in the law, or to impinge on the laEtude afforded to Air Canada to exercise business discreEon in fulfilling its duEes under the ACPPA.

Although the decision is controversial, highly publicized and likely veering to a Supreme Court of Canada hearing, this may be averted given the purchase of Bombardier jets by Air Canada and its promise to establish an overhaul centre in Montreal for the aircra_. It remains, however, to be determined whether further recourse will be made by the Manitoba A\orney General, intervenor in the Quebec proceeding, who is le_


astray by the resoluEon of the Quebec dispute, since there is no public knowledge of reinstatement of a Winnipeg overhaul facility.

Mark A. Glynn

Endnotes(*1) Air Canada Public Par:cipa:on Act, RSC 1985, c 35(*2) Quorum of the court is ordinarily three judges; however at the discreEon of the Chief JusEce, a five judge bench can be appointed in respect of high profile or complex ma\ers. This is rarely. In 2012/2013, a five judge panel was used twice, and, in 2013/2014, on a single occasion.

(*3) Québec (Procureur général) c. Air Canada, 2013 QCCS 367 (trial); Air Canada c. Québec (Procureure générale), 2015 QCCA 1789 (appeal)(*4) Supreme Court of Canada Docket 36791: Air Canada v. ADorney General of Quebec, et al.(*5) Companies' Creditors Arrangement Act, RSC 1985, c C-‐36(*6) Québec (Procureur général) c. Air Canada, 2012 QCCS 4475(*7) Canada (ADorney General) v. Downtown Eastside Sex Workers United Against Violence Society, [2012] 2 SCR 524(*8) Canada Business Corpora:ons Act, RSC 1985, c C-‐44


6. Federal Court of Appeal Addresses Rail Carriers’ Right to Limit Liability Via Published Tariffs

Cargo losses occasioned in the trucking and mariEme environments are subject to generally well-‐known terms. In the case of road transportaEon, in parEcular, most provinces have enacted legislaEon that imposes a rebu\able presumpEon of liability, default limitaEon amounts, and certain uniform condiEons of carriage that apply even in the absence of a bill of lading.

The rail regime is a different beast altogether. Firstly, Canadian rail carriers cannot turn away clients indiscriminately. They are subject to common carriage obligaEons pursuant to secEon 113 of the Canada Transporta:on Act (the “Act”), requiring them to accept goods for transportaEon upon payment of railway carriers’ freight rates (*1). Secondly, SecEon 113 of the Act also grants rail carriers significant freedom to contract with their shipping clients, both with regard to freight rates and condiEons of service. ConfidenEal agreements are not uncommon (*2).

Beyond the foregoing, a rail carrier is also enEtled to simply publish tariffs, unilaterally, to govern its shipments in the absence of a wri\en agreement (*3). Once published, the Act deems the tariff rates to be enforceable. Moreover, the Act requires the rail carriers to publish binding terms and condiEons of their services (*4). In pracEce, since various types of cargo carry different risks, rail carriers publish mulEple tariffs, each with their own rates and condiEons. Of course, this places significant power in the hands of the rail carriers vis-‐à-‐vis shippers, who do not have large enough market posiEons to negoEate more favourable rates and terms.

In the recent case of Canadian Pacific Railway v. Canexus Chemicals Canada, LP (*5), the Federal Court of Appeal considered the extent of a rail carrier’s ability to unilaterally dictate its terms and condiEons by published tariffs.

Several shippers argued that the limitaEon of liability provisions contained in Item 54 of Canadian Pacific Railway’s Tariff 8 were in contravenEon of SecEon 137(1) of the Act, which secEon prohibits a rail carrier from limiEng its liability to a shipper in the absence of a wri\en agreement. Further, if no wri\en limitaEon of liability agreement is executed by the shipper (or an associaEon represenEng the shipper), then the Railway Traffic Liability Regula:ons apply. (*6) The parEculars of those regulaEons, which generally make carriers liable for all loss, damage or delay, were outside of the ambit of the Court’s review.

The tariff at issue was published in respect of hazardous commodiEes. In order to Eghtly insulate itself from any potenEal liabiliEes for those goods, the Canadian Pacific Railway (the “CPR”) appeared to have dra_ed Item 54 with the intent of shi_ing significant risk back on to the shippers. In parEcular, it provided that CPR would not be liable for claims, loss or damage caused by, or arising from, the transportaEon of the commodiEes (the “Broad LimitaEon”); and that shippers must indemnify and hold harmless CPR with respect to the claims of third parEes (the “General ObligaEon to Indemnify”). For example, CPR would be indemnified for any alleged violaEon of an environmental law however, the foregoing was subject to certain restricEons, such that CPR would be liable for its own negligence or its agents’ negligence, but only in proporEon to its fault in the case of joint liability (the “Joint Liability Clause”); and CPR would be liable for any loss, damage or delay to the goods in transit.

The shippers had iniEally sought redress from the Canadian TransportaEon Agency (the “Agency”), asking that body to consider Item 54. The Agency found that CPR was, in fact, acEng contrary to the legislaEon and that the Broad LimitaEon needed to be agreed upon in wriEng, and not simply published in Tariff 8, because it was a limitaEon upon the shipper’s rights. Similarly, it found that the principle of apporEonment in the Joint Liability Clause was required to be agreed upon in wriEng because it was tantamount to a limitaEon


provision, given the shipper’s exposure to increased liability in certain circumstances.

With respect to the principle of indemnificaEon more generally, the Agency found that it might be a limitaEon of liability, depending upon the facts. In parEcular, the Agency was concerned that the Joint Liability Clause could operate as a waiver by the shipper with respect to claims that it might have against CPR in relaEon to third party liabiliEes. The appeal lay directly to the Federal Court of Appeal, which reviewed all of the foregoing.

First, the Court of Appeal disagreed with the Agency as to the purpose of SecEon 137(1). Whereas the Agency’s frame of analysis was that the secEon was designed to protect shippers from unauthorized transfers of exposure to liability, the Federal Court of Appeal reasoned that the secEon was simply designed to moderate the power imbalance. If the rail carriers a\empted to impose overly broad limitaEons in their tariffs, market forces would push parEes towards negoEated wri\en agreements:

Le_ unchecked, the power to set terms by the use of tariffs would leave the shippers of certain types of traffic at the mercy of the railway company. SubsecEon 137(1) is the means by which Parliament has chosen to strike a balance between the interests of the railway companies and shippers and to favour the negoEaEon of commercial agreements between shippers and railway companies.Requir ing the shipper's s ignature (however defined) on contracts of carriage which limit the railway company's liability to shippers is, in effect, a way of forcing railway companies to either negoEate limitaEons of liabiliEes with shippers or to dra_ their limitaEon of liability clauses in such a way that they do not need to be signed to be enforceable. If the railway company choses to limit its liability narrowly, so that it is not caught by subsecEon 137(1), then the limitaEon of liability clause is likely to be more

balanced, which is to the advantage of the shipper …. (*7)

The Court of Appeal held that SecEon 137(1) applied equally to limitaEons on the shipper’s right to claim over against the rail carrier for losses suffered by a third party.

The Court conEnued to find that the Broad LimitaEon did not apply to ordinary loss, damage or delay claims, as those items were explicitly covered.

The Court then found that the Joint Liability Clause acted both as a restricEon on the Broad LimitaEon and as an excepEon to the General IndemnificaEon ObligaEon. It reasoned that a claim by a shipper for CPR's proporEonate share of a loss – caused jointly by the shipper and the railway – must be excluded from the scope of the Broad LimitaEon so as to give effect to the Joint Liability Clause. By the same logic, the General ObligaEon to Indemnify would be equally ineffecEve in the case of a third party claim for CPR's proporEonate share of a loss. In effect, the Court found that the Joint Liability Clause was paramount to the Broad LimitaEon and the General IndemnificaEon ObligaEon.

As a result of the foregoing, the Court of Appeal found that the real effect of the Broad LimitaEon and the General IndemnificaEon ObligaEon, which had troubled the Agency, was limited to claims by third parEes where there was no negligence on the part of CPR or its agents.

In the result, CPR would be liable for:

1. loss, damage or delay claims,

2. loss or damage caused by CPR’s own negligence, and

3. loss or damage caused jointly by CPR and another party (subject to apporEonment).

Item 54 would conEnue to operate in CPR’s favour with respect to the obligaEon of shippers


to indemnify it and hold it harmless in circumstances where CPR was not negligent.

In light of this decision, railway tariffs ought to be closely reviewed, parEcularly with respect to third party liability. ParEes – both shippers and rail carriers – would be well served to ensure that their liability insurance is sufficient to cover their risks.

Alan S. Cofman

Endnotes(*1) SC 1996, c 10.(*2) In fact, they are explicitly permi\ed. See ibid., secEon 126.(*3) ibid. See Division IV of Part III.(*4) Ibid. See secEon 117(2) and the Railway Traffic and Passenger Tariffs Regula:ons, SOR/96-‐338.(*5) 2015 FCA 283.(*6) SOR/91-‐488.(*7) supra note 4 at paras. 99-‐100.(*8) Ibid. at paras. 118-‐119.


7. Bri&sh Columbia Court Of Appeal Rules Transport Canada Does Not Owe A Duty Of Care To Airline

The BriEsh Columbia Court of Appeal, in its decision of Gill v. Canada, 2015 BCCA 344 (“Gill”), ruled that Transport Canada does not have a duty of care to protect the economic interest of aviaEon industry enEEes operaEng within its regulatory regime (“AOC”) (*1).

The Facts

InternaEonal Express Aircharter Ltd. (“IEA”) was an aircra_ company engaged mainly in the air cargo business. In order to operate an air cargo service such as this, IEA was required to hold an Air Operator CerEficate (“AOC”) issued by Transport Canada, being the regulatory body that oversees the aviaEon industry in Canada. Transport Canada’s mandate in this sphere includes the licensing and cerEficaEon of individuals and business providing aviaEon services in Canada.

On January 21, 2006, an IEA aircra_ was involved in a tragic accident that resulted in the death of three individuals. The cause of the accident was unknown.

Prior to the accident, Transport Canada had placed IEA on an enhanced monitoring programme of inspecEons, as the result of Transport Canada’s concerns regarding IEA’s maintenance procedures for their aircra_.

Following the accident, Transport Canada cancelled IEA’s AOC pursuant to SecEon 7.1 (1) of the Aeronau:cs Act, R.S.C. 1985, c. A-‐2 ( the “Act”), which provides for the suspension of an AOC where an immediate threat to aviaEon safety or security exists or is likely to occur. Transport Canada ruled that the IEA’s OperaEons Manager failed to properly discharge his responsibiliEes.

On February 22, 2006, IEA requested that the TransportaEon Appeal Tribunal of Canada (the “TATC”) review the noEce of suspension.

In July, 2006, the TATC ruled that the basis for Transport Canada’s suspension of IEA’s AOC was invalid. The OperaEons Manager, as idenEfied by Transport Canada, was not responsible for the issues potenEally engaged by the accident. AddiEonally, it was discovered that the cause of the accident was a manufacturing defect that was not a\ributable to IEA; however, the TATC did not make a final determinaEon to re-‐instate IEA’s AOC. Rather, the TATC referred the ma\er back to Transport Canada for reconsideraEon.

Ove r a yea r and a ha l f l a t e r , t he ReconsideraEon Panel of Transport Canada issued a report in February, 2008, which concluded that Transport Canada’s original decision to suspend IEA’s AOC was unfounded.

By that Eme, however, IEA had suffered irreparable economic harm as a result of the suspension of its AOC and declared bankruptcy as a result.

Trial Court Decision

IEA, through its owner Ranjit Singh Gill, brought an acEon against Transport Canada in the Supreme Court of BriEsh Columbia (“BCSC”) for damages allegedly resulEng from Transport Canada’s failure to properly invesEgate the circumstances of the accident before suspending the AOC.

The BCSC held that Transport Canada relied, in error, upon an inapplicable regulatory power in support of its suspension of the AOC and, further, that the suspension of IEA’s AOC resulted in the bankruptcy of its business and economic loss.

The BCSC, however, also held that Transport Canada did not owe a duty of care to IEA. In short, the BCSC held that, in these circumstances, the existence of a private law duty of care was incompaEble with the purpose of the regulatory scheme governing the conduct of Transport Canada. The purpose


of that scheme, the BCSC concluded, was to protect public safety – a purpose inconsistent with a duty to take care to protect the economic interests of a regulated enEty, such as IEA.

Without the existence of a duty of care, Transport Canada could not be found to be liable to IEA for the losses IEA had suffered.

The Appeal

IEA appealed the decision to the BriEsh Columbia Court of Appeal (the “BCCA”).

The issue on appeal was whether Transport Canada owed IEA a duty of care during the invesEgaEon and suspension process following the July, 2006 accident.

IEA argued that, although the primary purpose of Transport Canada was to protect public safety, Transport Canada must also have regard for the economic interests of a regulated enEty, such as IEA, when considering whether to suspend an AOC.

The Cou r t o f Appea l o u t l i n ed t h e jurisprudence of when a duty of care arises in the context of a regulatory environment. The Supreme Court of Canada (the “SCC”) made it clear in R. v. Imperial Tobacco Canada Inc., 2011 SCC 42, that the regulatory context is relevant to the determinaEon of whether there is a relaEonship of proximity (*2). The regulatory regime may contemplate the existence of a duty of care, be inconsistent with one, or be neutral. Building on the reasoning on the SCC, the BCCA, in the decision of The Los Angeles Salad Company Inc. v. Canadian Food Inspec:on Agency, 2013 BCCA 34, held that a duty of care will not be found in the regulatory context where its recogniEon conflicts with or is precluded by the purpose of the regulatory regime (*3).

Following the above jurisprudence, the BCCA disagreed with IEA’s posiEon that Transport Canada must also consider the economic

interest of IEA. The BCCA held that the BCSC was correct in idenEfying public safety as the overriding purpose to suspend IEA’s AOC and that the statutory purpose was not to protect the specific interests or parEcular parEcipants in the aeronauEcal industry.

Implica:on

The BCCA’s decision obviously has a negaEve impact on enEEes operaEng within the aviaEon industry to sue Transport Canada. Without the existence of a duty of care, Transport Canada cannot be found liable to such enEEes. The BCCA has stated clearly that public safety in the aviaEon industry is paramount to the economic concerns of airlines, even where unfounded decisions by Transport Canada have the impact of pujng an airline out of business.

The decision also underscores the importance of the first instance hearing before Transport Canada. In this case, IEA was successful in appealing Transport Canada’s original decision of July, 2006. However, it was not before February, 2008 that IEA was able to have the decision overturned. Unfortunately for IEA, by that Eme, it was too late as it was impossible for IEA to survive without its AOC for this length of Eme. Companies faced with a potenEal penalty from Transport Canada, must take their first instance hearing before Transport Canada very seriously. In this case, it appears that the cause of the accident was not properly argued at the first instance hearing, which, if done, might have ulEmately avoided the iniEal Transport Canada suspension. Although, in theory, the appeal of a Transport Canada decision is available, depending upon the severity of the penalty imposed by Transport Canada, the delay sought on appeal can make the success of that appeal a pyrrhic victory.

Charles Hammond

Endnotes(*1) Gill v. Canada, 2015 BCCA 344


(*2) R. v. Imperial Tobacco Canada Inc., 2011 SCC 423) The Los Angeles Salad Company Inc. v.

Canadian Food Inspec:on Agency, 2013 BCCA 34

9. Dependent or Independent Contractor/Operator? Keenan v Canac Kitchens Upheld

The appeal judgment in Keenan v Canac Kitchens (*1) provides further guidance on the definiEon of “dependent contractor”, which will assist with any review of whether owner operators are “independent contractors” for the purposes of the Workplace Safety & Insurance Board (WSIB) or other contracts or agreements. Indeed, the decision of the Court of Appeal, no doubt, may have significant ramificaEons regarding owner operator contracts or agreements already in place and enough to potenEally to merit a review.

The trial court decision, Keenan v Canac Kitchens was reviewed in the Fernandes Hearn LLP November 2015 Newsle\er (*2). It was noted therein that:

The determinaEon of whether an individual is a dependent or independent contractor has a number of legal ramificaEons. Two important aspects are the employment relaEonship between the parEes and its terminaEon, and workers compensaEon.

Some advantages for use of independent c o n t r a c t o r s a r e : ( 1 ) o v e r Em e compensaEon is not owed to an independent contractor; (2) employee benefits do not have to be provided, nor do employment taxes have to be paid or withheld; (3) the work relaEonship is governed by contract and not by laws governing compensaEon; (4) and skills training is not usually necessary.

S ome d i s a d v a n t a g e s t o u s e o f independent contractors include: (1) companies o_en regret situaEons where non-‐employees develop experEse about the company business, only to have the workers move on to a new customer when t he con t r a c t e xp i r e s ; ( 2 ) misclass ificaEon of employees as independent contractors can result in severe legal penalEes and/or legal liability;


(3) independent contractors o_en charge a premium for their services; and (4) lack of contractor knowledge about the company's specific needs.

The trial judge in Keenan v, Canac Kitchens found that the plainEffs were dependent contractors and awarded damages. Canac’s appeal was based on one aspect of the trial court’s finding, being that of “exclusivity”. The Ontario Court of Appeal, in dismissing the appeal, agreed with the trial court that the plainEffs had worked exclusively or with a high level of exclusivity for Canac and were “dependent” contractors.

Facts

Canac was a manufacturer, distributor, and retailer of kitchen cabinets and related accessories. The plainEff, Lawrence Keenan, worked for Canac starEng in 1976. Mr. Keenan worked as an installer of kitchen cabinets for 6-‐7 years and in 1983, he became a foreman, supervising the work Canac cabinet installers in new homes. Marilyn Keenan began to work for Canac in 1983 as a foreman. They were full Eme employees. In 1987, they were told at a meeEng that they would henceforth be contractors as opposed to employees.

Canac told the Keenans that their Etles were “Delivery and InstallaEon Leader” and that, going forward, installers would provide their own trucks and pick up the kitchens from Canac. They would then deliver the kitchens to job sites for installaEon. Canac would set the installers’ rates and provide the Keenans amounts to pay the installers. The Keenans were also then responsible for any in transit damage to the cabinets and were expected to obtain insurance to cover those costs. The Keenans conEnued to be paid, as before, on a piece work basis for each box or unit installed; however, the amount was increased to reflect the fact that they were paid in gross, without deducEons for income taxes, employment insurance and CPP.

Shortly therea_er, the Keenans were provided with a dra_ agreement reflecEng the new

arrangements and which described them as “subcontractors” who were required to devote “full Eme and a\enEon” to Canac. Only Canac and Mrs. Keenan signed the agreement. The Keenans did not obtain independent legal advice.

The Keenans’ relaEonship and duEes with Canac essenEally remained unaltered and they considered themselves loyal employees. They never incorporated, carrying on business as Keenan Cabinetry, a sole proprietorship, and working almost exclusively for Canac to the end of 2006. They received employee discounts, wore shirts with the Canac logo, and used Canac business cards. Mr. Keenan received a signet ring for 20 years of loyal service. For all intents and purposes, the Keenans appeared to the outside worlds as Canac’s employees.

The Keenans did perform some weekend jobs and work for friends and family and also for CarEer Kitchens at the beginning of 2007. Their work with Canac had slowed down and Canac turned a blind eye to this extra work with CarEer Kitchens.

The Keenans’ relaEonship with Canac came to an end on March 15, 2009, when they were told by Canac that it was closing its operaEons and that their services were no longer needed. Canac considered the Keenans to be independent contractors and, as a result, the Keenans received no noEce, payment in lieu of noEce and no payment of any statutory enEtlements.

Canac appealed the finding by the trial court that the Keenans were dependent contractors, ciEng specifically the Keenans lack of exclusivity as at the date of terminaEon regarding their work for Canac.

The Trial Decision The trial judge considered the five principles set out in Belton v. Liberty Insurance Co. of Canada (*3) for disEnguishing employees from independent contractors. Based on McKee v. Reid’s Heritage Homes Ltd.(*4) the trial judge noted that those five principles also apply to disEnguishing employees from dependent


contractors. At para. 18 of the trial decision, the trial judge idenEfied those principles (in the context of the status of a commissioned agent),

1. Whether or not the agent was limited exclusively to the service of the principal.2. Whether or not the agent is subject to the control of the principal not only as to the product sold, but also as to when, where, and how it is sold.3. Whether or not the agent as an investment or interest in what are characterized as the tools relaEng to his service.4. Whether or not the agent has undertaken any risks in the business sense, or, alternaEvely, has any expectaEon of profit associated with the delivery of his service as disEnct from a fixed commission.5. Whether or not the acEvity of the agent is part of the business organizaEon of the principal for which he works. In other words, whose business is it?

The trial judge found that: (1) all five principles favoured a finding that the Keenans were dependent contractors from 1987 unEl terminaEon; and (2) the Keenans were economically dependent on Canac because they worked exclusively for Canac or at a high level of exclusivity. His Honour stated at para. 17:

The common law in Ontario, relaEng to dependent contractors, is now well established. Employment relaEonships exist on a conEnuum; with the employer/employee relaEonship, at one end of the conEnuum, and independent contractors at the other end. Between those two points, lies a third intermediate category of relaEonship, now termed dependant (sic) contractors.

The trial judge found that the Keenans were dependent contractors and enEtled to proper noEce of 26 months upon their dismissal without cause. (*5)

The Appeal

The Ontario Court of Appeal dismissed Canac’s appeal from the trial judge’s finding that the Keenans were dependent contractors and went on to provide further guidance on Canac’s only issue with that finding, being that of “exclusivity.”(*6)

Canac argued that, while the Keenans worked exclusively for Canac up to the end of 2006, therea_er and unEl terminaEon, the Keenans also worked its compeEtors, CarEer Kitchens. Further, Canac contended that exclusivity should be determined at the Eme of terminaEon of the relaEonship and, therefore, because the Keenans did not work exclusively for Canac for about two years prior to terminaEon, the trial judge erred in his finding that the Keenans were “dependent” contractors.

The Court of Appeal, however, saw no reason to interfere with the trial judge’s finding of “exclusivity or near exclusivity”. Rather, the Court of Appeal noted that the trial judge observed that, in the jurisprudence recognizing an intermediate category of “dependent” contractors, a finding that “the worker was economically dependent on the company due to complete exclusivity or a high level of exclusivity weighed heavily in favour of the conclusion that the worker was a dependent contractor.” (*7)

The Court of Appeal found that trial judge’s observaEon was vital to understanding how the quesEon of exclusivity is to be approached by the trier of fact. At para. 25, the Court of Appeal provided further guidance for future cases:

Exclusivity cannot be determined on a “snapshot” approach because it is integrally Eed to the quesEon of economic dependency. Therefore, a determinaEon of exclusivity must involve, as was done in the present case, a consideraEon of the full history of the relaEonship. It is for the trial judge to determine whether, a_er examining that history, the worker was economically dependent on the company,


due to exclusivity or a high level of exclusivity.

The fact that the Keenans did some work for a Canac compeEtor in the two years prior to the end of the relaEonship at the end of 2006 was examined in context by the trial judge. The Keenans had worked exclusively for Canac for a significant period of Eme whereas the services for CarEer Kitchens were for a relaEvely short period, and done in response to a slowdown in work from Canac. Canac also turned a “blind eye” to that work.

Furthermore, on the findings of the trial judge, during the period that the Keenans provided services to CarEer, the “substanEal majority” of their work conEnued to be done for Canac; specifically, 97.5% of the Keenans’ income was from Canac. Further, of the approximately 32 and 25 years of service that Lawrence Keenan and Marilyn Keenan respecEvely gave to Canac, in all but two of those years they exclusively served Canac.

The Court of Appeal found that, where there was less than complete exclusivity, a review of work history and relaEonship between the parEes was necessary to determine whether there was a “high degree” or level of exclusivity.

Finally

As noted in the November 2015 FHLLP arEcle referred to above, in the trucking area, the use of independent operators is common. In fact, the Workplace Safety & Insurance Board (“WSIB”) organizaEonal test asks specific quesEons to confirm that the person qualifies as an independent operator for WSIB purposes. These provisions provide an excellent reference when considering the nature of the relaEonship between carriers and owner operators and as to whether they are indeed independent operators, dependent operators or employees.

The WSIB quesEonnaire provides:

Owner-‐operators will be treated as

independent operators, for workplace safety and insurance purposes only, when the work relaEonship contains all the following features:

(a) The owner-‐operator pays for the truck and a majority of the equipment or other related property (such as payments for gas, maintenance of the truck, licence and storage) and is not required to finance the truck and equipment/related property through company sources.

(b) The owner-‐operator has the right to exercise a choice in selecEng and operaEng the vehicle and has market mobility in that he/she has discreEon to enter into contracts of any duraEon to transport goods and maximize profits.

(c) The principal does not have the right to control where or from whom products/services are purchased by the owner-‐operator (however, this does not preclude the owner-‐operator from exercising his/her opEon to purchase products/services from the company). Also, the principal does not have the right to exercise control over the owner-‐operator's operaEons except to the extent that loads are offered, and desEnaEons and delivery schedules are established by the principal's contract with the shipper and except for the joint responsibiliEes set out in federal and provincial licensing and related statutes.

(d) The principal and the owner-‐operator state that the relaEonship is one of a contract for service and not that of employer and employee.

(e) The principal does not issue a Canada Revenue Agency T4, T4A or make statutory deducEons for E.I. and/or C.P.P.

The WSIB considers the owner-‐operator to be an “independent operator” for WSIB purposes of the owner operator and the company retaining him/her agree that the above criteria accurately


reflect their working relaEonship. If so, the independent operator is then registered with the WSIB and a clearance cerEficate is provided by the WSIB to confirm that insurance is in place.

However, just because an owner operator is idenEfied in an agreement as an “independent contractor”, this may not be enough to establish that he/she is truly “independent”, but rather could be an employee or a dependent subcontractor. Review of the criteria above plus the analysis regarding a full work and relaEonship history between the parEes, as outlined by the Court of Appeal, must be carefully undertaken when dra_ing agreements or contracts going forward.

For instance, when considering the engagement of owner operators in the Canadian context, a motor carrier might take into consideraEon how it structures certain items in the owner operator agreement. For example, it may be beneficial to assign the owner operator to plate the commercial motor vehicles and/or to take out the required insurance with such responsibility clearly assigned to the owner operator.

Further, to a\empt to avoid having the relaEonship characterized as an exclusive one or one with a “high degree” of exclusivity, carriers in Canada might, for example, provide drivers with the opportunity to seek hauling opportuniEes with other companies when they are not in the service of the carrier. Rather than promoEng a relaEonship of exclusivity, the decision as to whether to haul for third parEes is le_ then with the owner operator rather than the carrier. In Keenan v Canac Kitchens, however, Canac did not acknowledge that Keenans were working for a compeEtor and had turned a “blind eye” to that work. Further, the Keenans had essenEally been converted to “independent” contractors without any real noEce, input or a properly dra_ed contract. Such factors allowed the Court to find that the relaEonship between Canac and the Keenans was one of exclusivity or near exclusivity and that of a dependent contractor.

A relaEonship of economic dependency arguably

cannot be said to exist if the owner operator has the opEon to carry for other companies, if it wishes to do so. Including a non-‐exclusivity provision in Canadian contracts may help to ensure that the relaEonship will be characterized as that of independent contractor while sEll providing the carrier with protecEon should the owner operator choose to carry for other companies in addiEon to the carrier. Having said this, however, the Court of Appeal’s decision in Keenan v Canac Kitchens has now confirmed and clearly set out that any assessment of an owner operator’s status must include a full history of the relaEonship between the two parEes as at the specific Eme in quesEon and is ulEmately fact specific.

Kim E. Stoll

Endnotes(*1) 2015 ONSC 1055. (*2) Please read the arEcle wri\en therein by Rui Fernandes regarding a review and discussion of the trial decision. (*3) (2004), 70 O.R. (3d) 81, 2004 CanLII 6668 (C.A.)(*4) 2009 ONCA 916(*5) Dependent contractors and employees, if dismissed from employment without cause, are enEtled to “noEce” damages, which may include possible statutory payments, payment in lieu of noEce and working noEce, subject to applicable contractual provisions.(*6) The issue of the length of noEce for the Keenans is not canvassed in this arEcle although that ground of appeal was also dismissed.(*7) at para. 24 of the Appeal decision



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