- Rui Fernandes and Gordon Hearn were recently listed
in the International Who's of Shipping & Maritime Lawyers.
- Rui and Gordon have also been listed in Woodward/White's
"Best Lawyers in Canada" 2008 edition in the areas of
Transportation and Maritime law.
Seminar Schedule for 2008:
January 18: Maritime and Transportation Conference
- Full Day - $75 for lunch and CD - Royal & SunAlliance Theatre.
The seminar is scheduled for the same day as the Marine Club Annual
Dinner that evening at the Royal York Hotel.
April 17th: Dealing with Personal Injury Claims -
2 Hours Mini Seminar
June 19th: Trucking and Logistics - 2 Hours Mini Seminar
October 16th: Insurance and Commercial Litigation
Strategies - 2 Hours Mini Seminar
Keep an eye on our website for registration and location.
The Ontario Court of Appeal Reviews the Guidelines
Governing when Ontario Courts are to "Hear" International
Where should disputes arising from international commercial
agreements be resolved?
The logistics and resulting expense related to sorting
out which country or "forum" should play host to a dispute
can often leave litigants wondering why they pursued their rights
in the first place. Significant sums of money can be expended and
resources tapped in simply arguing over the "forum" for
The Ontario Courts have over the years articulated
guidelines concerning when they will accept jurisdiction over an
international contract dispute. These guidelines, or rules, confirm
that a) the parties may proactively enter into an agreement as to
which forum would have jurisdiction over a dispute and that b) in
the event of such a 'prenuptial' agreement our courts will, as a
rule, give effect to an agreement as to forum. Failing such an agreement,
these guidelines provide a list of factors to be taken into consideration
by an Ontario court being asked to 'assume' jurisdiction as to whether
it may hear a certain case or whether the battle should be waged
in another forum.
The recently published decision of the Ontario Court
of Appeal in Red Seal Tours Inc. v. Occidental Hotels Management [2007 ONCA 620 (CanLII] illustrates the application of these guidelines.
Red Seal Tours Inc. ("Red Seal") is a tour
operator based in Ontario. During 2003, Red Seal negotiated certain
"Guarantee Agreements" with Ontario-based Vox Travel Management,
the latter acting as an agent for six hotels in various locations
in the Caribbean operated by Occidental Hotels & Resorts ("Occidental").
Occidental is a conglomerate of separately incorporated entities
that facilitate the management and marketing of resort properties.
Vox negotiates with Ontario tour operators such as Red Seal in the
negotiation of tour operator agreements for room allotments and
pricing at the conglomerate (Occidental) hotels.
The Guarantee Agreements deal with various financial
terms, as well as various service related issues such as guarantees
that Red Seal clients would not be "bumped" from the subject
hotels during their peak periods of overbooking, that there would
be no blackout periods in respect of Red Seal clients with respect
to the hotels, together with a guarantee that no other Canadian
tour operator would be offered more attractive contractual terms
without such terms being offered to Red Seal.
Red Seal also entered into separate Hotel Operations
Agreements with each of the six hotels (the "Hotel Agreements").
Each of the Hotel Agreements contained a clause providing that:
Such Agreement will be governed by the laws of the
State of Florida, excluding its conflict of law provisions, subject
to the proviso that any claim based upon acts, omissions or occurrences
at the hotel will be governed by the laws of the place where the
hotel is located.
The parties also agreeing that the Courts of
Aruba would have jurisdiction over any matters or disputes arising
out of such agreement.
Red Seal alleged that the Guarantee Agreements were
breached in that Red Seal clients were "bumped" and met
with blackout periods when attempting to book vacations. It did
not have a dispute as concerns the individual hotels under the Hotel
Agreements. Red Seal brought an action in the Ontario Superior Court
of Justice against Vox Travel Management, the Occidental Hotels
and others. The defendants did not want this claim to proceed in
the Ontario court.
The defendants argued that the Ontario court should
not hear the matter, as the parties had contracted that the courts
of Aruba had jurisdiction by virtue of the above contract wording.
The defendants argued that the conflicts of law and forum clause
in the Hotel Agreements also governed the Guarantee Agreements:
their position was that the Guarantee Agreements would necessarily
exist "hand-in-hand" with the Hotel Agreements and that
the two should be read together so as to have the above conflicts
of law provision govern. As such, the defendants wanted the matter
litigated in Aruba.
Red Seal responded arguing that the Guarantee Agreements
were an independent and standalone set of agreements from the Hotel
Agreements. Red Seal argued that none of the hotels were being sued,
there being no issue concerning any of the terms of the Hotel Agreements.
This forum dispute was heard by a judge of the Ontario
court. There being a question as to whether there was a binding
contract term as to forum, the court had to initially determine
whether there was a contractual agreement in that regard. If there
was no such agreement, the court then had to consider the 'guidelines'
as to whether it should 'take jurisdiction' over this international
dispute - bearing in mind that the hotels being the subject of the
Guarantee Agreements were located in Mexico, and on certain Caribbean
Islands - but not on the island of Aruba.
At First Instance Before the Ontario Superior
Court of Justice
The Court agreed with Red Seal and concluded that
the Guarantee Agreements were independent and standalone from the
Hotel Agreements. Accordingly, the defendants could not "piggy
back" on the choice of forum clause in the Hotel Agreements
and apply that clause to the Guarantee Agreements: different parties
and different issues were involved between these contracts.
The "Aruba clause" not governing, the Court
then embarked on an analysis as to whether, the nature of the action
rendered it appropriate for the Ontario Courts to assume jurisdiction
over the dispute.
While the facts of this case are somewhat convoluted
the analysis thereafter following is important as being of general
application. Where there is no governing contractual agreement for
the litigation "forum" for a dispute, in order for the
Ontario Court to assume jurisdiction in a case that is international
in nature, there must be a "real and substantial connection"
to Ontario. This is as outlined, and set forth in the Ontario Court
of Appeal decision of Muscatt v. Courcelles (2002) Can. LII
44957 (On. C.A.) with regard to the following factors:
1. The connection between the plaintiff's claim
in Ontario; [if there is a connection this would underscore
Ontario as being a reasonable 'choice']
2. The connection between the forum and the defendant; [if there is a connection this would underscore Ontario as being
a reasonable 'choice']
3. Unfairness to the defendant in the Ontario Court
assuming jurisdiction; [if there is unfairness an Ontario
court would give more credence to the 'foreign' court]
4. Unfairness to the plaintiff in the Ontario Court not assuming
jurisdiction; [if there is unfairness in depriving the plaintiff
of its choice of Ontario as the forum this will be weighed heavily]
5. The involvement of other parties to the suit; [where are they based? What is the relative fairness or unfairness
of the Ontario forum to them?]
6. The Ontario Court's willingness to recognize
and enforce an extra-provincial judgment rendered on the same jurisdictional
basis; [if the other proposed forum has credibility in terms
of fairness and ability to adjudicate the matter, the Ontario court
may be more inclined to refuse jurisdiction in light of the fact
that a foreign judgment may be readily enforced, in due course,
against an Ontario based defendant]
7. Whether the case is intra-provincial or international
in nature; and
8. Comity and the standards of jurisdiction, recognition
and enforcement prevailing elsewhere [that is, the court
must heed factors such as the likelihood of a foreign court in a
similar situation giving reciprocal regard to the interest of Ontario
and of parties wanting to block a 'foreign' action in favour of
a referral to the courts of Ontario].
The Ontario judge found that the "real and substantial
test" linking this case to Ontario was easily met. For example:
- The Guarantee Agreements were negotiated in Toronto
between Red Seal and Vox as the Canadian agent for Occidental.
As such there was a strong connection between Ontario and the
- The defendants continued to have Vox as their Canadian
agent, there thereby being a real connection between the defendants
in Ontario. Further, Vox was seen to be doing significant business
in Ontario with both the plaintiff and other tour operators.
- There was no unfairness to the defendants in the
Ontario Court assuming jurisdiction and as an Ontario Court would
fairly and neutrally assess the claim.
- There were no parties or potential witnesses involved
in the suit in having a connection to Aruba.
- Ontario law would be relevant to the adjudication
of the dispute, there being certain regulations governing the
travel industry that would have to be addressed concerning Red
Seal's obligation as a tour operator. (For example, the alleged
last minute bumping may have breached Red Seal's regulatory obligation
to notify customers of changes to their travel arrangements).
The consideration of the appropriate forum is,
in circumstances such as this, often a two-part test. The first
part, also referred to "jurisdiction simpliciter",
addressed above, may then give way to an analysis as to whether
the proposed forum is a "forum non conveniens".
This occurs when the party seeking to have the matter heard in a
foreign jurisdiction argues that Ontario is not the proper or 'convenient'
The first part, being the jurisdiction simpliciter analysis, simply asks the question as to whether the Ontario court
can adjudicate the matter. The second "forum non conveniens"
test involves an analysis as to whether 'justice' could be pursued
with substantially greater ease and at less expense in Ontario as
compared to a foreign forum.
Finding that there was no 'forum clause', and that
Ontario could accept jurisdiction on the basis of connecting factors
to Ontario, the court proceeded to consider whether Aruba was in
any event a substantially more appropriate forum than Ontario so
as to warrant the court exercising its discretion to 'bump' the
action from the Ontario to Aruba. In this regard the court considered
the following established factors: (as articulated in the earlier
case of Incorporated Broadcasters Limited et al v. Canwest Global
Communications Corp. et al (2003) Can LII 52135 (On. C.A.)):
- the location of the majority of the parties;
- the location of the key witnesses and evidence;
- contractual provisions that specify the applicable
law or accord a jurisdiction;
- the avoidance of a multiplicity of proceedings;
- the jurisdiction in which the factual matters arose;
- the residence or place of business of a party;
- any loss of judicial advantage to a party.
In this regard, the Court noted that the following
facts in this case:
- None of the hotels are located in Aruba. They were
in Mexico, the Dominican Republic and Cuba.
- There was no evidence of any precedent that the
Aruba courts had been used as a forum to determine international
disputes involving the Caribbean or Mexican hotels.
- Several witnesses for both parties directly involved
in negotiating the Guarantee Agreements reside and work in Toronto.
One aspect of the claim is the loss of reputation that Red Seal
has suffered with clients. This breach affects clients of Red
Seal for Ontario and these witnesses are all residents in Ontario.
- Instructions with respect to the negotiation of
the Guarantee Agreements and alleged breaches would potentially
involve testimony witnesses from Florida and Spain but they have
no connection to Aruba. It was possible that Aruba might be more
convenient for potential witnesses from the Caribbean, but there
was no clear evidence before the court in that regard.
- The Court ultimately found that the location of
the majority of the parties and key witnesses were mostly connected
- The Guarantee Agreements were negotiated in Ontario,
by Ontario parties, and affected sales to Ontario residents. As
such, Ontario law would apply to the case.
- The defendants would not suffer a juridical
or a legal "disadvantage" with the proceeding in Ontario,
given that their agent (Vox) carries on a substantial business
in Toronto. Accordingly, the judge ruled that the overriding balance
of convenience and other factors pointed to Ontario as the most
Accordingly, this application, brought by the
defendants to "stay" the claim in favour of the matter
proceeding in the courts of Aruba, was dismissed and the matter
was ordered to be heard by an Ontario court.
The defendants appealed to the Ontario Court of Appeal. They still
wanted the Red Seal claim "stayed" in favour of the courts
The Court of Appeal concluded that the motions judge
erred on the 'forum clause' issue, and that the "Guarantee
Agreements" in fact form part and parcel of the so-called "Hotel
Agreements". Accordingly, the Aruba forum selection clause
would govern. The Court of Appeal found a relationship between the
two different contracts. On a close review of the agreements the
Guarantee Agreements in fact referred to and incorporated obligations
that were in fact part and parcel of the Hotel Agreements. Further,
one could not simply read the Guarantee Agreement as a standalone
document, its terms dealing with specific aspects of matters governed
by the Hotel Agreements. In light of these features, the contracts
did in fact interrelate.
Finding that the Guarantee Agreements then did in
fact incorporate the 'forum clause' calling for suit to be heard
in Aruba, the Court of Appeal then reiterated and relied upon well
established case law in Canada that a 'forum clause', being a contractual
bargain struck between the parties, should be followed unless the
party resisting the prescribed forum from hearing the dispute can
show a 'strong cause' or reason why the clause should not be enforced.
The Court confirmed that it is a well-established law in Canada
that "special deference" is owed to forum clauses when
found in international agreements involving sophisticated parties.
The Court of Appeal did not accept that on the facts
of this case there was "strong cause" to displace the
forum chosen by the parties (Aruba) or for that matter that Ontario
was the more convenient forum. As the Supreme Court of Canada has
put it, "It is essential that the courts give full weight
to the desirability of holding contracting parties to their agreements".
The "strong cause" test imposes a burden on the plaintiff
to satisfy the Court that there is good reason that it should not
be bound by the forum selection clause. In effect, the parties'
Agreements should be enforced as to where the litigation should
proceed "in all but exceptional circumstances".
While undoubtedly it might be more convenient for the plaintiff
to be able to pursue its claims in Ontario, there were no "exceptional
circumstances" to justify a departure from the forum selected
in the Agreements - notwithstanding that this dispute could potentially
involve at trial many parties from different jurisdictions.
In conclusion, the intent behind this article was
not so much to showcase the facts of this dispute, but to illustrate
the weight given to a 'forum clause' in an international agreement,
and, absent same, the analysis that an Ontario court will go through
in deciding whether or not to hear a dispute. While the Court of
Appeal reversed the result imposed by the judge in first instance
in this case, that judge did accurately set forth the factors involved
in the two step analysis to be followed by an Ontario court where
there is in fact no forum clause: 1) the jurisdiction simpliciter test, and 2) where the defendant alleges that Ontario is not a proper
forum, there existing a better forum for the purpose, the forum
non conveniens test.
CANADA SHIPPING ACT, 2001 BECOMES LAW JULY 1, 2007
On July 1st, 2007 the long anticipated Canada Shipping
Act, 2001 S.C. 2001, c. 26 finally came into force. The coming
into force of this piece of legislation culminates the federal government's
decade old revision of statutory Canadian maritime law.
The Canada Shipping Act, 2001 has been broken
down into a number of parts:
Part 1 General: Powers of Ministers, Inspectors, Canadian
Part 2 Registration, Listing and Recording of Ships
Part 3 Personnel
Part 4 Safety
Part 5 Navigation Services
Part 6 Incidents, Accidents and Casualties
Part 7 Wreck
Part 8 Pollution Prevention and Response
Part 9 Pollution Prevention
Part 10 Pleasure Craft
Part 11 Enforcement
The new Act is streamlined and modernized. For example,
the former Board of Steamship Inspection has become the Marine Technical
Review Board: new name, slightly less responsibility (the new Board
does not have the power to resolve disputes), and more transparency.
Many of the principles of the old Canada Shipping Act have been
carried over into 2001 Act. Many provisions in the old CSA no longer
appear in the 2001 Act because much of the detail has been moved
to regulations, standards or other appropriate instruments. Hence,
the 2001 Act is much smaller than the previous legislation.
Some highlights of the new legislation:
- Under the previous legislation commercial vessels
smaller than 15 tonnes were licensed by the Customs and Excise
Division of the Canada Customs and Revenue Agency (CCRA) on behalf
of Transport Canada. Under the new 2001 Act all non-pleasure craft
have to be registered with Transport Canada (clause 46). Hence,
the CCRA is no longer involved in licensing small commercial vessels.
As well, the new 2001 Act allows the creation of small vessel
register to accommodate those commercial vessels that are currently
licensed (clause 43(1)).
- Previously, Transport Canada kept sea service records
of crew members of Canadian vessels. Under the new 2001 Act, this
responsibility has been shifted to the authorized representative
of the vessel and every crew member (clause 93)
- A new section (116) allows the industry to deal
with persons boarding or disembarking a vessel if safe means are
not available or without the permission of the master or person
responsible for embarkation or disembarkation.
- Part 7 allows the Minister of Fisheries and Oceans
to appoint receivers of wreck, and sets out the procedures for
finding and disposal of wrecks. Section 160 makes it easier for
the receiver to dispose of the wreck.
- Part 10 is a new Part which has no counterpart
in the previous legislation. It outlines the responsibilities
of Fisheries and Oceans Canada for pleasure craft, covering such
matters as inspections, investigations, enforcement and licensing.
The requirements for pleasure craft are not new but were previously
scattered throughout the old legislation.
- Part 11 introduces a new administrative enforcement
scheme to encourage and promote compliance with regulatory requirements
(clauses 228-243). The concept of administrative penalties is
designed to streamline the enforcement process and initiate the
use of a modern compliance tool rather than the court system.
According to departmental sources, administrative penalties were
introduced because the court system is not cost or result effective
for regulatory violations.
A number of new regulations have been introduced
under the Canada Shipping Act, 2001. Of real importance is
the Marine Personnel Regulations.
Parts 1 and 2 revise and update the existing
requirements for qualifications, training and certification of crew
members, for having the appropriate marine personnel on board vessels
for safe and efficient operation, and for the protection of the
Part 1 deals with certificates of competency
for seafarers. It prescribes the knowledge, skills and abilities
needed to perform assigned functions on a ship, for each certificate
required. It lists the types of training certificates a seafarer
must hold, any required testimonials, sea service time, and the
examinations leading to a particular certificate of competency.
Certificates are being updated and realigned
with the new voyage classifications definitions and the International
Convention on Standards of Training, Certification and Watch Keeping
for Seafarers (STCW). Information on the new voyage classification
definitions can be found in the CSA 2001 Vessel Certificates Regulations.
Part 2 sets out the number and type of personnel
needed to safely operate and prevent pollution on or from a Canadian
vessel or a non-registered vessel in Canadian waters. For example,
all commercial vessels, regardless of length, must have a certified
master. However, for operators of certain small commercial vessels,
a Small Vessel Operator Proficiency training certificate and, in
some cases, a Pleasure Craft Operator Card, will be accepted.
All vessels needing an inspection certificate,
as identified in the Vessel Certificates Regulations, must have
a Safe Manning Document. This indicates the minimum safe crewing
levels for the vessel, and is valid for a maximum of five years
after the day it is issued. Details about Safe Manning Documents
can be found in the Marine Personnel Regulations.
Part 3 establishes and coordinates the maritime labour
standards for working conditions of seafarers onboard a vessel in
order to protect their health and well-being. The CSA 2001 regulations
update and align the occupational health and safety working conditions
of seafarers with other legislative requirements. They now comply
with the STCW as well as part of the Maritime Labour Convention,
Some highlights of the new maritime labour standards
for working conditions under Part 3 include:
- Crew members must now be at least 16 years of
- The duration of hours worked for employees under
18 years of age will be limited.
- Seafarer recruitment and placement services operating
in Canada must meet new requirements to apply for, issue, hold,
and maintain a licence.
- Conditions of employment related to hours of work
and rest now depend on the voyage classification and food being
- With the coming into force in 2007 of Maritime
Labour Convention, the introduction of the Maritime Labour Certificate
and Document of Compliance fully harmonizes the labour framework
in the maritime sector.
The field of Canadian maritime law is now comprised
of the Canada Shipping Act, 2001 and the following major
- Arctic Waters Pollution Prevention Act and Regulations
- Canada Labour Code (Part II) and Regulations
- Canada Marine Act and Regulations
- Canada Transportation Act and Regulations
- Canadian Transportation Accident Investigation
and Safety Board Act and
- Coasting Trade Act
- Department of Transport Act and Regulations
- Government Property Traffic Act and Regulations
- Marine Liability Act and Regulations
- Marine Transportation Security Act and Regulations
- Navigable Waters Protection Act and Regulations
- Northumberland Strait Crossing Act
- Pilotage Act and Regulations
- Safe Containers Convention Act and Regulations
- Shipping Conferences Exemption Act, 1987 and Order
- Transportation Appeal Tribunal of Canada Act
- Transportation of Dangerous Goods Act and Regulations
This newsletter is published to keep our clients and friends informed
of new and important legal developments. It is intended for information
purposes only and does not constitute legal advice. You should not
act or fail to act on anything based on any of the material contained
herein without first consulting with a lawyer. The reading, sending
or receiving of information from or via the newsletter does not
create a lawyer-client relationship. Unless otherwise noted, all
content on this newsletter (the "Content") including images,
illustrations, designs, icons, photographs, and written and other
materials are copyrights, trade-marks and/or other intellectual
properties owned, controlled or licensed by Fernandes Hearn LLP.
The Content may not be otherwise used, reproduced, broadcast, published,or
retransmitted without the prior written permission of Fernandes