April 2008

In this issue:
1. Firm News
2. You May Get All Your Litigation Costs - In Certain Circumstances
3. Is a Trailer a "Vehicle?"
4. MSC "Sabrina" Update

1. Firm News

• Gordon Hearn will be moderating a panel on "Transportation Intermediaries" on May 8, 2008 at the annual Transportation Lawyers Association conference in Fort Lauderdale, Florida, on May 8, 2008. The panel will address recent legal and industry developments concerning Transportation Intermediaries and Logistics providers.
  
  
• Rui Fernandes will be presenting a paper on "Road and Rail Carriage" on June 9th, 2008 in Vancouver at the Canadian Maritime Law Association's Seminar Day on "Carriage of Goods and Passengers in the 21st Century"
  
  
• Tentative Fernandes Hearn Seminar Schedule - Keep an eye on our website for location and registration information:

  - June 19th, 2008 - Personal Injury Claims
  - November 6th, 2008 - Insurance and Commercial Litigation Strategies
  - January 16th, 2009 - Maritime and Transportation Conference
  

2. You May Get All Your Litigation Costs - In Certain Circumstances

Overseas Express Consolidators (Ottawa) Inc. v. David J. Burcsik carrying on business as Terran Textiles Court File No.: 07-CV-329448SR Heard: January 28, 2008

This case illustrates the circumstances in which an award of full, actual costs incurred by a party in the conduct of litigation may be granted. It also illustrates how the restructuring of a debt into a repayment schedule may act as a functional equivalent to an offer to settle and thereby engage the operation of our procedural rules concerning the cost consequences of a failure to accept an offer to settle by a party whose position proves unsuccessful at trial. It also, to a lesser extent, serves to outline some of the procedural vicissitudes a client can face when proceeding against an unrepresented litigant.

The facts of this case are straightforward. The action concerned an unpaid debt stemming from an account the defendant, an individual carrying on business as a textile enterprise, held with the plaintiff concerning the plaintiff's provision of services to the defendant in connection with the shipment and movement of the defendant's goods ("the Debt"). The plaintiff's position was that it diligently rendered those services and invoiced the defendant accordingly and that the defendant failed to make payments with respect to the full amount of the aforementioned invoices despite repeated requests. The plaintiff further argued that the defendant acknowledged the outstanding debt and undertook to service this debt pursuant to a schedule of payments he negotiated with the plaintiff ("the Undertaking"). The plaintiff maintained that the defendant reviewed preliminary drafts of the Undertaking and eventually, after expressing satisfaction with its terms, executed the Undertaking by affixing his signature on the document, which was accompanied by the signature of a witness to the document's execution.

The defendant, an unrepresented litigant, was given the opportunity to amend its Statement of Defence after pleadings had closed. The defendant impugned the validity of the Undertaking by alleging, inter alia, economic duress with respect to the execution of the Undertaking and proceeded to also contest the quantum of the Debt.

Eventually, the matter reached trial but the defendant did not attend nor did he cause a representative to attend on his behalf. At trial, the plaintiff proceeded with the proof of its case and the court, accepting the plaintiff's evidence concerning the validity of both, the Undertaking and the underlying Debt, entered judgment for the plaintiff. When it came to assessing costs in this matter, the Honourable Justice Moore accepted counsel's submission that the Undertaking did, in effect, constitute an offer to settle and that pursuant to Rule 49 of the Ontario Civil Rules of Procedure the plaintiff would be seeking costs on a substantial indemnity basis. The court accepted this submission and went on to state:

"In the circumstances of this case, I can't imagine how your client and [the plaintiff's representative], in particular, could have been more patient with [the defendant] and more helpful and mindful of his particular financial circumstances, accepting as they obviously did, the validity of the description they received from [the defendant] about that and it was clear, at least from the time of the execution of the undertaking and I accept [the plaintiff's representative's] evidence, that it was clear from the inception of his involvement with [the defendant], that the invoices for the amounts claimed were, in every respect, appropriate and accurate and so I am content that the undertaking be considered an offer to settle and that [the defendant] be held accountable in costs in the amount claimed….
[brackets added]

The finding is particularly interesting in light of the jurisprudence concerning the assessment of costs in simplified proceedings, such as the present case. Cost awards under the simplified procedure, historically, have been significantly lower than they would be under the ordinary procedure. (See for example, Yeh v. Ng, [2000] O.J. No. 185 (Quicklaw) (S.C.J.); Walker v. Rosser, [1999] O.J. No. 3645 (Quicklaw), 102 O.T.C. 236 (S.C.J.); Bank of Nova Scotia v. Antoine (1998), 159 D.L.R. (4th) 365, [1998] O.J. No. 1603 (Quicklaw) (Gen. Div.), affd [1999] O.J. No. 2931 (Quicklaw) (Gen. Div.), affd [1999] O.J. No. 2931 (Quicklaw) (Div. Ct.).)

The circumstances of this particular case, as outlined by Mr. Justice Moore in the above-cited passage accepting the plaintiff's evidence concerning forbearance and goodwill, may have proved dispositive in justifying an "actual costs" award.

This case was argued before the Ontario Superior Court of Justice by Kim E. Stoll
Case comment by Martin Abadi.


3. Is a Trailer a "Vehicle?"

Blue Star Trailer Rentals Inc. v. 407 ETR Concession Company Limited 2008 CanLII 3422 [Ont. S.C.]

Highway 407 is an open-access highway servicing the greater Toronto metropolitan area. Motor vehicles are not required to pay tolls upon entrance to or exit from this highway system. The Highway 407 Act, 1998, S.O. 1998 [the "407 Act"] authorizes the 407 Company to charge tolls for the use of the highway.

Two types of technology are used to determine the amount of the toll charge. The first is a toll device - known as a 'transponder' - that is kept on the windshield of a vehicle. All 'heavy vehicles' are required to have such a toll device installed. The transponder toll device is read by scanners mounted on overhead gantries at the entrance and exit points on the highway.

The second type of technology involves the taking of a photograph of the rear license plate by a digital camera mounted overhead at the entrance of the highway. The 407 Company does not have the technology in place to take a photograph of front license plates. (Where a vehicle has a toll device, no photograph of the rear license plate is required to be taken).

A dispute arose between the Blue Star Trailer Rental company ["Blue Star"] and the 407 Company. Blue Star is a trailer rental company that rents out commercial highway and cartage trailers to individuals and companies. Licenses for the Blue Star trailers are issued to Blue Star. As a matter of course customers of Blue Star attach Blue Star trailers to their own tractors for use on the 407 highway.

One can see where this is heading: the Blue Star "license plate" is photographed by the 407 Company. The front license plate - on the customers tractor pulling the Blue Star trailer - is not. Over time Blue Star accumulated 407 toll invoices in the mail through its license being registered to its address on the Ministry of Transportation registry. Adding insult to injury, Blue Star, not wanting to pay these charges, paid some [for which it seeks rebate] but did not pay all which has rendered it unable to obtain renewal licenses for its own equipment. [In Ontario users of highways that have unpaid charges, fees, or fines as a rule cannot 'renew'.]

Should Blue Star be liable for the use of the highway by a trailer attached to a motor vehicle owned by a third party? Can Blue Star get is money back? Should Blue Star be allowed to have it own licenses validated for renewal without paying all invoices that it has received?

The issue referred to the Ontario Superior Court was whether the 407 Company was authorized to charge a toll to any person for the use of any trailer attached to a motor vehicle on the highway, where the plate portion of the trailer permit and the plate portion of the motor vehicle permit towing the trailer are not issued to the same person.

The real mischief that has taken place - and the specific context here - concerns the practice where tractor drivers towing Blue Star trailers attempted to avoid toll charges by having the transponder in place on the windshield upon entry to the highway and having it removed upon exit [as a result of which no transponder driven billing is effected - being the first technology listed above. Rather, a billing is done through the photography of the rear license plate - of the trailer]. In the result, the 407 Company has been unable to match entry times and locations with exit times and locations.

To rectify this problem, the 407 Company in 2007 began charging heavy vehicles a flat rate when the transponder was not registered at the time of entry and the time of exit. Before this time, a minimum trip toll would be charged from where the toll device was registered [on entry to the highway] to the next closest exit or entry and the owner of the trailer license plate would be charged from where the photograph of the license was taken to the next closest exit or entry. Blue Star has asked for reimbursement for any such minimum trip tolls resulting from this pre-2007 billing practice by the 407 Company. The amount in issue was $200,000.

The Court had to consider firstly whether the Blue Star trailers were 'vehicles' for the purposes of the 407 Act. Only 'vehicles' can be the subject of toll charges under this statute. The Court ruled that while the word 'vehicle' is not defined in that statute that it should be interpreted as not including the Blue Star trailers, and accordingly, that the requirement to pay tolls falls on the person to whom the motor vehicle portion of the plate permit is issued - not the owner of a trailer. The 407 Company argued that the legislation on point could be interpreted to permit it the option of billing the trailer owner or the tractor owner - that is, any user of the highway in whatever capacity. Blue Star successfully argued that the legislature could not have intended an unfair billing practice of it being billed in cases where tractor drivers break the law by not having the transponder fixed to the tractor windshields at all times.

The Court ruled in favour of Blue Star that insofar as the legislature has mandated the use of transponders in tractors, that there was no intent that the trailer owners should inherit the risk of dishonest practices by certain tractor operators. Clearly, the legislators saw the potential for abuse when they legislated the mandatory use by heavy equipment of transponders.

Ultimately, in ruling for Blue Star, the court recognized that the 407 Company may have to modify its equipment to photograph front plates of vehicles or that it may have to require owners of tractors towing trailers owned by different persons to somehow visibly display the tractor's rear plate or the contents of the plate for rear photograph imaging.

In the result, the court ruled that Blue Star should not have been billed for the tolls and charges that it was charged [for the use of the highway by trailers attached to motor vehicles owned by others] and that Blue Star was entitled to a rebate of all such monies paid to the 407 Company.

Gordon Hearn


4. MSC "Sabrina" Update

On March 9th, 2008 the Mediterranean Shipping Company ship "Sabrina" ran aground in the St. Lawrence River en route to Montreal from France. One month later 1500 cargo containers which were on board the ship were still stashed on a dock at the Port of Montreal.

The vessel grounded near section 20 of the port of Trois Riviere during a snow storm that hit the province. MSC tried various methods to free the ship from the seaway's muddy bottom. Four tug boats finally managed to dislodge the 70,000 tonne vessel the first week in April. No damage is believed to have been done to the vessel. Costs of the refloating operation were high as the ship had to be lightened. Three hundred and sixty containers were removed by crane to a sister ship the MSC Jasmine.

The grounding was reportedly caused by engine cooling inlets being clogged with ice causing the engine to shut down. Blame for the grounding has also been placed on wind, blinding snow and too much headway.

A great photograph of the lightening operation can be seen at:
http://www.treklens.com/gallery/North_America/Canada/photo396223.htm

It is not the first time the MSC Sabrina has encountered trouble. The ship collided with a Dutch fishing vessel, the Concordia, on 13 June 2000 and fifteen minutes later struck the British cargo ship Wintertide off the coast of the Netherlands. The U.K. Marine Accident Investigation Branch determined that the contributing causes to the Wintertide collision included:

a) Wintertide's Officer of the Watch rigidly adhering to the planned navigation track;
b) The inaccurate radar plotting and monitoring of the MSC Sabrina by Wintertide's Officer of the Watch;
c) MSC Sabrina's Officer of the Watch failing to maintain a proper radar lookout;
d) MSC Sabrina's speed, which was considered to have been inappropriate, given the prevailing visibility.
e) Neither master was called, nor additional lookouts posted, when the vessels entered restricted visibility.

The recommendations of the MAIB made aim to promote greater compliance with standing instructions.

MSC and owners are now demanding general average bonds from the cargo owners. It is recommended that such bonds contain wording to reserve cargo owners rights to defend the claim for general average should the grounding be found to be caused by the vessel's unseaworthiness and lack of due diligence by owners of the vessel.

MSC do not appear to be having much luck with their vessels. The MSC Napoli was a United Kingdom-flagged container ship that was deliberately broken up by salvors after she ran into difficulty in the English Channel on 18 January 2007. The MSC Lugano, a container ship, had a fire in its engine room on Monday, 31 March 2008, and repairs were unable to be effected. The owners of the Marshall Islands registered vessel entered into a commercial arrangement with Svitzer Salvage to provide a large towage vessel from Fremantle to take the ship under tow.

Rui Fernandes