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Newsletters 2004 > March 2004

1. Federal Court Strikes Out Claim for Pure Economic Loss
2. Canadian Marine Liability Act, Part 4 (Compulsory Insurance)
3. PIPEDA ? The New Privacy Regime

Federal Court Strikes Out Claim for Pure Economic Loss

The St. Lawrence Seaway Management Corporation successfully brought a motion to strike out the claim of a business owner seeking damages for pure economic losses resulting from damage to the Allanburg Bridge. On August 11, 2001, the Allanburg bridge was closed to traffic for 3 months following a collision with the vessel "Windoc". The plaintiff owned a retail store alleged to be within a half mile from the bridge. The plaintiff claimed that it depended on the public being able to cross the bridge to conduct business, and that the closure of the bridge resulted in business losses.

The defendant moved to strike out the Statement of Claim for failing to disclose or plead a cause of action. Historically, courts have refused to find liability against persons alleged to have caused damage to a public highway or bridge in similar circumstances, on the ground that no duty of care is owed by such persons to the businesses whose earnings were affected by the closure of the bridge, in the absence of any property damage suffered by such businesses. These have been referred to as claims for "pure economic loss" where plaintiff has suffered economic losses without any property damage or bodily injury.

The plaintiff sought to amend the claim so as to plead gross negligence and nuisance, and argued that because of the proposed amendments, it was not plain and obvious that the claim disclosed no cause of action.

The Federal Court took note of the well-established principle laid out in Norsk Pacific Steamship Company Limited v. Canadian National Railway Company, [1992] 1 S.C.R. 1021, that persons in the position of the plaintiff cannot recover for pure economic losses arising from damage to a public bridge:

If the property is publicly owned, users may not be required to contract for its use. Thus persons who regularly use an ordinary bridge or other publicly maintained facility have no contractual right to do so but may nevertheless suffer damages by having to find alternative routes for themselves or their goods, and their suppliers or customers may also suffer damage. Those suffering such damage will ordinarily not recover. . . . To impose such indeterminate liability on tortfeasors is almost unthinkable as the cases make clear.

Where Canadian courts have not recognized a duty of care in the facts of the case, the question is whether the law of negligence should be extended to reach this situation. Recognition of a duty of care must be justified on the basis of a sufficiently close and direct relationship between the parties to satisfy the foreseeability and proximity requirements of the first branch of the so-called Anns test. The proximity analysis involved at the first stage of the Anns test focuses on factors arising from the relationship between the plaintiff and the defendant. These factors include questions of policy. Mere foreseeability is insufficient to establish a prima facie duty of care.

If foreseeability and proximity are established at the first stage, a prima facie duty of care arises. At the second stage of the Anns test, the question still remains whether there are residual policy considerations outside the relationship of the parties that may negative the imposition of a duty of care. Sufficiently proximate relationships are identified through the use of categories. The categories are not closed.

Citing decisions in similar "bridge cases", the Court found that the mere fact that the plaintiff's business was geographically close to the Allanburg Bridge and was dependent upon traffic being able to cross the bridge to conduct its business was not sufficient to meet the proximity requirements of the Anns test.

Even if there were to be found a relationship of proximity, the Court agreed with the Defendant that the most serious problem in the case is that of indeterminate liability for any alleged duty of care. The number of potential claimants who have been inconvenienced or have incurred expenses or loss of revenues from the closure of the bridge is indeterminate. The Court also cited a previous case also involving a bridge operated by the Defendant, wherein the Quebec Court of Appeal held, as a general policy restricting liability of the Defendant, that users of a public highway use it because of a privilege and not as of right. According to the Court, these are well-established and compelling grounds under the second part of the Anns test for the court not to extend the law of negligence to this claim.

The Federal Court struck out the claim without leave to amend the claim. Ramon Andal of Fernandes Hearn LLP was counsel for St. Lawrence Seaway Management Corporation.

1340232 Ontario Inc. v. St. Lawrence Seaway Management Corporation 2004 FC 209 (Proth.)
Ramon Andal

Notes From Parliament Hill
Canadian Marine Liability Act, Part 4 (Compulsory Insurance)

Last January (2003) the Canadian Department of Transport released the Mariport Report and its recommendations which included an immediate application for all vessels except those involved in the adventure tourism business. Mariport suggested a graded implementation for the adventure tourism industry and also additional consultations with US operators. The Canadian Department of Transport is currently developing the regulations for the proposed compulsory insurance scheme. These proposed regulations are expected to appear in the Canada Gazette later this year (2004).

Current indications are that operators engaged in the domestic carriage of passengers will be required to maintain insurance against their maximum liability under the Act which in the case of death or personal injury to a passenger will be $350,000.00 per person per carriage. For example, a vessel certified to carry 20 passengers will be required to maintain $7 million in insurance coverage, 20 x $350,000.00. However, there is talk that the regulations will contain a threshold which once again will be 15 GRT. Vessels below that threshold will not be expected to maintain full insurance cover and the reduced limits will be dependant upon whether the vessel carries 12 or more passengers. Indications are that these reduced limits may be as little as $1 million per vessel where the passenger complement is less then 12. Fleet operators with more than one vessel will be required to maintain sufficient coverage to accommodate the largest vessel in the fleet and each vessel will be deemed to be separately insured.

The proposed regulations will not apply to non-motorized and/or inflatable vessels such as zodiacs nor will they apply to vessels engaged in international carriage such as ferry services between Canada and the US. The Canadian Department of Transport has indicated that compulsory insurance for international carriage of passengers will be considered in the future together with the Athens Protocol of 2002 which introduced the subject internationally for the first time.

Canadian Marine Liability Act, Part 3 (Limitation of Liability for Maritime Claims)

Canada is a State Party to the Convention on Limitation of Liability for Maritime Claims 1976 and its Protocol of 1996. Both have the force of law in Canada by virtue of Part 3 of the Canadian Marine Liability Act. The International Maritime Organization based in London, England announced earlier this month that the 1996 Protocol to the Convention will at last come into force internationally on May 13, 2004, 90 days after the island State of Malta deposited its accession to the Protocol.

Canada Shipping Act Reform

Of interest to those of you following the subject of Shipping Act reform here in Canada is the news out of Ottawa in December 2003 to the effect that the policy component of the Canadian Coast Guard is returning to the Canadian Department of Transport and that the operational components of the organization will become a special operating agency, which for the time being will remain at the Canadian Department of Fisheries & Oceans. What that all means for the fate of the new Canada Shipping Act 2001 is not known at this time, but some have opined recently that amendments to the new legislation may now be necessary, that is before the new legislation is even proclaimed!

Simon P. Barker

PIPEDA ? The New Privacy Regime

The Personal Information Protection and Electronic Documents Act, is federal legislation that applied to federally regulated employers for the past three years. Its scope has now broadened. PIPEDA prescribes the collection, use and disclosure of "personal information" about employees, clients and customers in the course of the employer's business. Effective January 1, 2004, the PIPEDA applies to Ontario businesses. This will continue until such time as "substantially similar" provincial legislation is proclaimed. Presently, Ontario has a draft privacy bill undergoing the consultation process.

The policy basis for the PIPEDA has been the need to address consumer concerns about privacy as well as the ability of Canadian businesses to compete globally. The European Union recognizes PIPEDA as providing adequate privacy protection, which is key because the European Union prohibits transmission of personal information to countries that do not have such legislation. Other countries, such as the US, do not have a federal version of PIPEDA but do regulate privacy at the state level and through regulatory regimes.

PIPEDA applies to "personal information"

PIPEDA prescribes what has been referred to as the "life-cycle of information", which has six stages- collection, use, disclosure, retention, security and disposal. Personal information is defined by PIPEDA as any factual information, recorded or not, about an "identifiable individual". This includes age, income, employee files, medial records, but does not include basic pieces of information such as an employee's name or business address and business phone number.

Personal information does not include your job title, telephone number or address, anything that might appear on your business card, or can be found through publicly available information such as the telephone book.

What is not covered by the Personal Information Protection and Electronic Documents Act?
* The Collection, use or disclosure of personal information by federal government organizations listed in the Privacy Act;
* Provincial or territorial governments and their agents;
* An employee's name, title, business address or telephone number;
* An individual's collection, use or disclosure of personal information strictly for personal purposes (e.g. personal greeting card list); and,
* The collection, use or disclosure of personal information solely for journalistic, artistic or literary purposes.

Note that PIPEDA requirements will apply to personal information collected prior to January 1, 2004. The PIPEDA does not have a grandfathering provision, which is problematic when one considers that much of the information collected by a firm or company prior to this year was done in a manner not in strict compliance with PIPEDA.

Another issue for lawyers is that the PIPEDA contains an exception to access to information for solicitor-client privilege and the Schedule to the statute contains a broader exception to access for solicitor-client and litigation privilege. Thus, an individual seeking access to personal information can be denied access on these grounds.

PIPEDA Principles

The PIPEDA requirements are based upon ten principles that organizations must follow:

1. Accountability
2. Identifying purposes
3. Consent
4. Limiting collection
5. Limiting use, disclosure, and retention
6. Accuracy
7. Safeguards
8. Openness
9. Individual access
10. Challenging compliance

The law requires organizations to:

* obtain your consent when they collect, use or disclose your personal information;
* supply you with a product or a service even if you refuse consent for the collection, use or disclosure of your personal information unless the information is essential to the transaction;
* collect information by fair and lawful means; and,
* provide personal information policies that are clear, understandable and readily available.

There are three forms of consent appropriate under PIPEDA, including express, implied and negative option consent. Consent can be given orally as well as in writing. The form of consent will depend upon the sensitivity of the personal information and the individual's reasonable expectations. Note that if an organization intends to use personal information already collected for a new purpose not disclosed when the information was originally gathered, the new purpose must be disclosed before the information can be used.

In terms of consent, there are exceptions to these principles. For example: an organization may not need to obtain your consent if collecting the information clearly benefits you and your consent cannot be obtained in a timely way; or if the information is needed by a law enforcement agency for an investigation, and getting consent might compromise the information's accuracy.

In limiting collection, the organization must collect only information that is necessary for the purposes identified by the organization. By limiting use, disclosure and retention, the organization must ensure that personal information not be used or disclosed for purposes other than those for which it was collected. Note that personal information cannot be kept indefinitely and may be retained for as long as necessary to fulfil purposes "as required by law." Thus, organizations should destroy, erase or make anonymous personal information about you that it no longer needs in order to fulfil the purpose for which it was collected.

Obviously, security is a key PIPEDA principle and companies should ensure the security of their existing information management systems as well as upgrading and maintaining current modes of protecting electronic information, including the use of firewalls and other monitoring systems.

Further, when data is disclosed, companies must protect the privacy of the information. Thus, there is an obligation to ensure that third parties who receive or process personal information ensure the protection of that information and will not disclose it. This requires that contracts with such third parties incorporate these obligations.

In addition to these requirements, organizations must develop a privacy policy, which includes dealing with complaints, and appointing a privacy officer to implement policies and procedures. While implementing PIPEDA policy within a company may seem relatively straight forward, it requires a lot of preparatory work. Organizations should audit the information flow within their infrastructure to identify what information is collected, how it is collected, stored, disclosed and discarded. Based upon this, an organizations privacy policy will address each of these elements and inform customers and clients how information is treated at each stage of its handling.

The PIPEDA does not impose privacy requirements on workplaces, but grants privacy rights only to employees in federally regulated places of employment. Nonetheless, given various pieces of provincial legislation, organizations should protect employee information, including personnel files. Beyond that, employees should be informed on how their privacy is protected as well as how they are to implement their employer's privacy policy when it comes to the flow of customers information from intake to discarding.

Apart from the Privacy Commissioner's powers such as investigating complaints and auditing personal information management practices, breaching PIPEDA entails a number of potential consequences. It is an offence to:

* Destroy personal information that an individual has requested;
* Retaliate against an employee who has complained to the Privacy Commissioner, or who refuses to contravene Sections 5 to 10 of PIPEDA;
* Obstruct a complaint investigation or an audit by the Privacy Commissioner.

Upon summary conviction, the fine imposed is $10,000. A person is liable up to $100,000 for an indictable offence.

Tina Margellis



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