In this issue:
1. Firm News
2. Mechanical or electrical derangement defined
3. Insurance Act - fire part application
4. Small vessel security strategy
5. Interprovincial enforcement of judgments
6. Warranty clauses and fundamental breach
7. Are Commercial fishing licences property?
8. Class action to watch
1. Firm News
Rui Fernandes and Gordon
Hearn have again been listed for the 2009 year in Lexpert in
the area of Shipping and Maritime law as well as in the 2009 International
Who's Who of Shipping & Maritime Lawyers.
Rui Fernandes and Gordon
Hearn will be attending the Conference of Freight Counsel at
its mid-winter meeting in Savannah, Georgia on January 10-12, 2009.
The Conference of Freight Counsel is a forum organized by leading
freight claims attorneys for the purposes of staying current with
case law and legislative developments.
Gordon Hearn will be attending
the 'Chicago Regional Seminar' of the Transportation Lawyers Association
on January 23, 2009. The Chicago Regional Seminar is a continuing
legal education forum for lawyers in the transportation law field.
The 70th Annual Marine Club Dinner is being held in Toronto on January 16th, 2009 at the Royal
York Hotel. The Marine Club is the fraternity of those persons engaged
in, concerned with, or directly interested in, the Water Carrying
Trades on the Great Lakes System and connecting waters of Canada
or Electrical Derangement
Caneast Foods Ltd. v. Lombard General
Insurance Co. of Canada
Rui Fernandes reviewed the lower court decision in
this matter (Caneast Foods Ltd. V. Lombard General Insurance
Company of Canada (2007), 86 O.R. (3d) 385) in the Fernandes
Hearn LLP November 2008 Newsletter. The decision of Justice Brown
was appealed to the Court of Appeal for Ontario (2008) 91 O.R. (3d)
Caneast Foods Ltd. ("Caneast") suffered
losses when its pickle production plant was shut down by a province-wide
blackout. It was insured under an all risks policy issued by Lombard
General Insurance Co. of Canada ("Lombard"). Lombard brought
a summary judgment motion on several bases including that the loss
came within an exclusion in the policy for loss or damaged caused
directly or indirectly by "mechanical or electrical breakdown
or derangement in or on the premises."
Justice Brown had concluded, "In my view, (there is case law
support for) the conclusion that the phrase "mechanical or
electrical breakdown" denotes a failure in the operation of
a piece of equipment due to some mechanical or electrical defect
in some part or parts of the equipment. It follows that where a
machine ceases to operate because of an interruption in its power
supply due to a regional blackout on the electricity grid, a mechanical
or electrical breakdown of the machine does not occur."
On the latter half of the exclusion relating to "
mechanical or electrical derangement", Justice Brown reviewed
definitions of the words "breakdown" and "derangement"
as well as judicial treatment of same, though the latter had received
little judicial attention. His Honour then relied upon the British
Columbia Supreme Court decision in Cominco Ltd. V. Commonwealth
Insurance Co.,  B.C. J. No. 174 and stated, "Although
somewhat cryptic, in my view the Cominco decision reinforces the
notion that a "derangement" (which in the case of this
Policy operates as an exclusion) involves some problem or defect
internal to the piece of equipment."
Justice Brown then held that an electrical derangement
did not include a power failure originating from outside a premise.
At the Court of Appeal, Lombard limited its submissions
to those concerning that part of the exclusion relating to mechanical
or electrical "derangement". Definitions from the dictionary
were once again proffered to argue that a plain meaning of the word
was to "disturb the normal state, working, operation or functioning
of" something, and, hence, the meaning of derangement was a
disturbance of a normal state etc. Because there was a disturbance
of the normal state, operation or functioning of Caneast's refrigeration
and processing equipment, there was, Lombard argued, an "electrical
derangement" on the premises that engaged the exclusion. Further,
counsel attempted to distinguish other case law that seemed at odds
with this position. Caneast, in reply argued, very attractively,
that it was contrary to common sense (and to the case law) to find
that an electrically operated machine breaks down or becomes "deranged"
simply because it stops working when there is no electricity.
Borins J.A., speaking for the court, agreed stating,
"I agree with his (Justice Brown) finding
and "derangement" refer to an internal problem or defect
in a machine, and not to the machine's failure to operate due to
an interruption to its power supply caused by a regional blackout.
Caneast's refrigeration did not stop because of some internal defect;
it stopped because the power to it was cut off." Justice Borins
also added that, if Lombard had wanted to exclude such blackouts,
it certainly could have specifically excluded same.
Borins J.A. acknowledged Lombard's view that the there
was a derangement if the power supply was not functioning properly;
however, His Honour held that this was not the case with Caneast.
Rather, the electrical supply was not disturbed by the blackout,
as there was no electrical supply to be disturbed. Because of the
blackout, there was no electrical supply and the equipment failed
to operate. Accordingly, there was no disturbance to Caneast's refrigeration
equipment and no "derangement" simply because the electricity
was cutoff and the machinery could not operate.
It is now clear that "a mechanical or electrical derangement"
is to be interpreted as a "disturbance of the normal state,
working, operation or functioning" of something, but it must
be more than simply a failure of the machinery to operate resulting
from an outside cause unrelated to the actual mechanism itself or
its premises. If power failures are not covered, they will have
to be specifically excluded in the policy.
Kim E. Stoll
3. A Brief Note on the Application
of the Fire Part of the Ontario Insurance Act to Multi-Peril Policies
The question of whether the special statutory Fire
Part of the Insurance Act (Part IV of the Insurance Act) applies
to multi-peril policies in Ontario is an issue that appears to have
been settled by the Supreme Court of Canada decision in KP Pacific
Holdings Ltd. v. Guardian Insurance Co. of Canada  1 SCC
433 ("KP Pacific"). Although, KP Pacific concerned the
elucidation of the question concerning application of fire part
provisions to multi-peril policies within the context of B.C. legislation,
I submit that the considerations enunciated and adopted by the court
in support of its holding are equally apposite and, more importantly,
binding in Ontario (I note that there is, to my knowledge, no reported
decision yet in Ontario specifically applying this holding to the
KP Pacific, a case that originated in British Columbia,
involved a claim for fire insurance and whether a provision that
was mandatory for fire insurance governed a multi-peril policy.
The court held that the fire insurance part of the British Columbia
Insurance Act did not govern a multi-peril policy.
The rationale expressed by a unanimous court in KP
Pacific, I submit, is authority for the proposition that all-risks
or multi-peril insurance policies are governed by the general provisions
of provincial insurance legislation rather than by the specific
provisions that apply to fire insurance.
In KP Pacific, the insured claimed for loss by fire under a multi-peril
policy. The lawsuit was commenced more than one year after the loss
occurred but within one year of filing the proof of loss. The insurer
argued that Part V of the British Columbia Insurance Act, the fire
insurance part equivalent to Part IV in the Ontario Insurance Act,
applied to the multi-peril policy in question. Pursuant to the special
provisions in the fire insurance part, the limitation period would
extend to one year from the date of the loss. Accordingly, following
this argument, the insured's claim would be time barred. The insured's
position, on the other hand, was that the policy in question, being
a multi-peril policy, was not governed by the Fire Part of the British
Columbia Insurance Act but rather by the general provisions of that
statute. Consequently, the insured argued that the limitation period
would be one year from filing the proof of loss. The insurer's position
prevailed at trial and subsequently at the British Columbia Court
of Appeal. The insured appealed the matter to the Supreme Court
The Supreme Court of Canada categorically held that
a multi-peril policy could not be brought within the fire insurance
provisions. To do so would result in an exercise of "contrived
reinterpretation" and "anomalous consequences".
In delivering the judgment of the court, McLachlin,
CJ, exhorted the provincial legislature to amend the statute to
provide specifically for comprehensive all-risks or multi-peril
policies. The British Columbia Insurance Act, like the Ontario Insurance
Act, is based on the assumption that insurance policies can be classified
into categories based on their exclusive or primary subject matter.
This assumption, however, is obsolete and incongruous with the modern
realities of multi-peril insurance. As the court in KP Pacific put
it: "one is driven to conclude that s.119 [the application
of fire part section], despite its alterations, is based on the
paradigm of discrete categories of insurance policies and is incapable
of coherently addressing the modern multi-peril policy."
[brackets and emphasis added].
Notwithstanding any differences in language between
the two statutes, e.g. the B.C. statute refers to "contracts
of fire insurance whether or not a contract includes insurance against
other risks"* while the Ontario statute provides that the application
of the relevant fire part comprises "insurance against loss
of or damage to property arising from the peril of fire in any contract
made in Ontario,"** the holding in KP Pacific, particularly
as supported by the principled rationale respecting the inadequacy
of (anachronistic) classifications informed by an insurance policy's
exclusive or primary subject matters, is equally germane in Ontario.
Furthermore, the rationale applied by the Supreme
Court of Canada in KP Pacific case was followed in Newfoundland
by the Court of Appeal in Burry v. The Cooperators General Insurance
Company (2007), NLCA 52, in Manitoba by the Manitoba court of
Queen's Bench in Audio Works Production Services Ltd. v. Canadian
Northern Shield Insurance Co.,  8 W.W.R. 643 and in Alberta
in Fenrich v. Wawanesa Mutual Life Insurance Co., 
A.J. No. 458 (Q.B.) [upheld on appeal on other grounds] concerning
statutory language virtually identical to that found in the Ontario
Insurance Act. Accordingly, all else equal, an Ontario court would
likely find no reason at law or policy to distinguish KP Pacific
in its application to the provisions of the Ontario Insurance Act.
The rationale expressed by the Supreme Court of Canada concerning
the infelicities underlying the attempted classification of modern
multi-peril policies within the ambit of fire insurance parts applies
with equal force in Ontario and, consequently, multi-peril policies
governed by Ontario law are unlikely, ceteris paribus, to
be brought within the ambit of the fire insurance provisions of
the Ontario Insurance Act.
*Application of Part
119 This Part applies to insurers carrying on the business of fire
insurance and to contracts of fire insurance, whether or not a contract
includes insurance against other risks as well as the risks included
in the expression "fire insurance" as defined by this
(a) contracts of insurance falling within the classes of aircraft,
vehicle, boiler and machinery, inland transportation, marine, plate
glass, sprinkler leakage and theft insurance,
(b) if the subject matter of the contract of insurance is rents,
charges or loss of profits,
(c) if the peril of fire is an incidental peril to the coverage
if the subject matter of the insurance is property that is insured
by an insurer or a group of insurers primarily as a nuclear risk
under a policy covering against loss of or damage to the property
resulting from nuclear reaction or nuclear radiation and from other
perils. **143. (1) This Part applies to insurance against loss of
or damage to property arising from the peril of fire in any contract
made in Ontario except,
(a) insurance within the class of aircraft insurance;
(a.1) insurance within the class of automobile insurance;
(a.2) insurance within the class of boiler and machinery insurance;
(a.3) insurance (other than marine insurance) against loss of or
damage to property,
(i) while in transit or during delay incidental to transit, or
(ii) where, in the opinion of the Superintendent, the risk is substantially
a transit risk;
(a.4) insurance within the class of marine insurance;
(a.5) insurance against loss of or damage to plate, sheet or window
glass, whether in place or in transit;
(a.6) insurance against loss of or damage to property through the
breakage or leakage of sprinkler equipment or other fire protection
system, or of pumps, water pipes or plumbing and its fixtures;
(a.7) insurance against loss or damage through theft, wrongful conversion,
burglary, house-breaking, robbery or forgery;
(b) where the subject-matter of the insurance is rents, charges
or loss of profits;
(c) where the peril of fire is an incidental peril to the coverage
(d) where the subject-matter of the insurance is property that is
insured by an insurer or group of insurers primarily as a nuclear
risk under a policy covering against loss of or damage to the property
resulting from nuclear reaction or nuclear radiation and from other
4. Small Vessel Security
The U.S. Department of Homeland Security (DHS) announced
this year a new Small Vessel Security Strategy (SVSS) designed to
close security gaps and reduce risks associated with the potential
exploitation of small maritime vessels. The SVSS identifies specific
goals for which security efforts can achieve the greatest impact
without excessive imposition upon the freedom of operation common
to the country's waterways.
"We saw quite vividly with the U.S.S. Cole attack
that violent extremists will not hesitate to use any means, large
or small, in their efforts to inflict blows to our maritime assets,"
said Homeland Security Secretary Michael Chertoff. "This strategy
ensures all small vessel stakeholders across our ports and coastal
waterways can play a role in unified threat mitigation efforts and
replaces today's seemingly honor-based neighborhood watch program
with an efficient and successful means to combat terrorism along
our waterways." The concern is the domestic use of waterborne
improvised explosive devices; conveyance for smuggling weapons (including
radiological and nuclear weapons of mass destruction) into the U.S.;
conveyance for smuggling terrorists into the U.S.; and waterborne
platform for conducting a stand-off attack. Homeland Security classifies
a small vessel as any watercraft under 300 gross tons. There are
swarms of them. Secretary Chertoff said the Maritime Transportation
Security Act requires ships of more than 300 tons to have the Automatic
Identification System on board. AIS operates on a standard radio
frequency and broadcasts a ship's name, position, course, speed
and other particulars to other vessels and Coast Guard shore stations.
The Small Vessel Security Strategy doesn't go so far as to recommend
that every vessel out there have AIS. However, less-costly means
such as radio-frequency identification or a system based on cell
phones could be something the Coast Guard may consider in the future.
Transport Canada is presently consulting with stakeholders
on the development of a "Small
Vessel and Facility Security Strategy."
5. Interprovincial Enforcement of Judgments
A vast amount of the commerce generated out of Ontario
will have not only local, but national components. As a result,
when disputes arise it is often necessary to decide on the appropriate
provincial or territorial jurisdiction in which to bring suit. That
decision can be based on contractual provisions or on the "convenient
Either way it is always possible, regardless of the
appropriateness of the forum chosen, that a successful party will
have to take steps in another province or territory to enforce a
judgment or costs award. In situations where there is an appeal
or right of appeal in the jurisdiction where the judgment was granted
one must remain cognizant of certain issues with respect to reciprocal
Provinces and Territories, which are reciprocating
jurisdictions (i.e. which have in place Reciprocal Enforcement
of Judgments Acts ("REJA")), permit two types of procedures
for the enforcement of judgments emanating out of each other. The
usual REJA statutes contain provisions to allow for a summary procedure
by way of application to quickly move before the court of the forum
where enforcement is sought for registration of and execution on
The alternative is to commence an action on the judgment,
under common law, and, where applicable, to seek summary judgment.
There is a temptation to use the application procedure
contemplated by REJA to facilitate a more expeditious registration
and enforcement. However, where an appeal is pending or contemplated,
a judgment creditor must consider whether immediate enforcement
is necessary. REJA will not permit the reciprocal enforcement of
a judgment if it is under appeal or there is a right to appeal in
the jurisdiction in which it was granted.
Therefore, if immediate enforcement is required, the
judgment creditor needs to determine if the procedure operating
where the judgment was granted causes a stay of enforcement on appeal.
If there is no automatic stay of a monetary or other judgment under
the foreign law, the judgment creditor should bring an action, as
the common law will allow a foreign judgment to be enforced, even
where an appeal is pending, where REJA will not.
The following are selected relevant cases on this
Morguard Investments v. De Savoye, 
3 S.C.R. 1077 [change from restrictive common approach to enforcement
to a more liberal approach in recognition of importance of global
commerce and need for certainty, particularly in relation to sister
United States v. Ivey (1995), 26 O.R.
(3d) 533 (Gen. Div.) [extension of Morguard principle to truly international
setting - enforcement of foreign judgments in Canada]
Four Embarcadero Center Venture v. Mr. Greenjeans
Corp. (1988), 65 O.R. (3d) 160, affirming (1988) 64 O.R.
(2d) 746 (H.C.J.) [finality not defeated by a pending or contemplated
appeal, providing that original court cannot review, modify, reopen
abrogate or vary]
Arrowmaster Inc. v. Unique Forming Ltd. (1993), 17 O.R. (3d) 407 (Gen. Div.) [reviews law on requirement
of finality and confirms that a pending or contemplated appeal does
not defeat finality; only issue is whether original judgment was
conclusive and not subject to further modification by original court]
Acme Video Inc. v. Hedges (1993), 12
O.R. (3d) 160 (C.A.) [very brief example of implications of relying
exclusively on REJA and strict compliance with REJA provisions]?
Cavell Insurance Co., Re (2005), 80
O.R. (3d) 500 (C.A.) [modifications of common law enforcement rules
where bankruptcy, receivership or limited fund settings; example
of problems associated with use of REJA as opposed to common law
Parsons v. McDonald's Restaurants of Canada
Ltd. (2005), 74 O.R. (3d) 321 [example of issues arising
from the recognition and enforcement of foreign class proceedings]?
Alberta Securities Commission v. Maitland Capital
Ltd., 30 June 2008 (Ont. Sup. Ct.) [example of issues arising
on enforcement of foreign judgment where failure to plead common
law and exclusive reliance on REJA; where no automatic stay of proceedings
pending appeal in place for foreign judgment]
6. Warranty Clauses and Doctrine of Fundamental
New Brunswick Court of Appeal recently considered
the commercial reality of warranty clauses in New Brunswick Power
Corp. v. Westinghouse Canada Inc.  N.B.J. No. 364 where
New Brunswick Power Corp. ("NB Power") sought to recover
$12.5 million that it expended repairing or replacing defective
power transformers. The transformers had been purchased from Westinghouse
Canada Inc. ("Westinghouse") between 1972 and 1975 and
had been operational for between 15 and 25 years. The transformers
were found to have suffered from a design defect that meant that
they did not comply with CSA Standards. Westinghouse sought to rely
upon warranty and limitation of liability clauses that it claimed
limited its liability to one year after the shipment. The trial
judge agreed with Westinghouse that it was protected by the clauses.
The Court of Appeal was asked to interpret the clauses and determine
whether they were sufficient to exclude liability. The Court found
that Westinghouse could indeed rely upon the clauses, and in doing
so made an important common sense commentary on warranties. It stated
that "common sense tells us that most manufacturers or suppliers
are not prepared to provide purchasers with a forever warranty".
This seems reasonable, particularly with smaller ticket consumer
items. However, one may instinctively think that more expensive
goods (such as transformers) should come with more extensive warranties
and that consumers are entitled to expect an increased level of
care in their construction. Conversely, the Court of Appeal stated
that when dealing with "million dollar products . . . the thought
of the manufacturer assuming liability for an indefinite term and
one that could exceed the expected lifespan of a transformer is
simply too difficult to accept". The court was focused on the
rationale behind these clauses and seemed to be alert to the cost
of manufacture. These goods are likely to have a long lifespan,
and given the cost of production, the cost of repair is likely also
high. Manufacturers (and their insurers) have an expectation that
they will not be exposed to the risk of liability indefinitely.
Yet, despite the above, when is a contractual limitation
of liability completely unacceptable? Would it be logical or appropriate
for a manufacturer of a very expensive item to limit is liability
completely? At the trial level NB Power had argued unsuccessfully
that the transformers' design defects constituted a fundamental
breach. Effectively, NB Power attempted to persuade the Court that
Westinghouse could not rely on the clauses that limited or excluded
its liability because the design defect was a breach that rendered
the clause unenforceable. Although this ground was not pursued on
appeal, the Court of Appeal felt it was necessary to reflect upon
the recent legal uncertainty surrounding the doctrine of fundamental
breach. This doctrine has been the subject of some criticism in
Canadian courtrooms. However, one can readily understand why a doctrine
of this type would be necessary to prevent unreasonable limitations
of liability. Although parties (especially sophisticated ones) are
free to enter into contracts, the Canadian public has an interest
in ensuring that certain unreasonable contracts are unenforceable.
Historically, a fundamental breach that could render a contract
unenforceable was a breach that went "to the 'root of the contract'".
The Court of Appeal summarized the doctrine of fundamental
breach as follows:
"once an exculpatory clause is properly construed
and found to cover the breach then the exculpatory clause is enforceable
unless it can be established the breach was 'fundamental' and
that it would be 'unconscionable' or 'unreasonable' to enforce
the clause in the circumstances. Whether the unconscionability
relates to the formation of the contract or the unreasonableness
relates to the result of the application of the exculpatory clause
seems to be of no moment; either is sufficient for purposes of
nullifying the clause".
It will be a matter of analyzing the facts of each
individual case to determine when it is unconscionable or unreasonable
to enforce a clause that seeks to limit liability. However, it is
readily apparent from the above summary that the doctrine remains
uncertain and the test will be difficult to apply. In the case in
question, the Court considered that the parties were of equal bargaining
power, that the transformers were operational for 15 to 25 years
(with a reasonable life expectancy of 30 years) and that the application
of the clauses did not lead to an unjust, unfair or unconscionable
result. The Court found that there was "nothing about the facts
of this case that cry out for judicial intervention". Although
the warranty period seems short in this case, it was not so short
as to warrant intervention. This conclusion seems reasonable in
the circumstances and appears to comply with the expectations of
contracting parties in entering into these types of sales agreements.
It will be interesting to see how courts treat the doctrine of fundamental
breach in the future, particularly when dealing with less sophisticated
As a side note, the Court of Appeal was also asked
to overturn the trial judge's decision on costs. The trial judge
had fixed costs at $35,000.00. She had not sought any submissions
of counsel with respect to same. Counsel argued that this sum was
too low given the amount of damages claimed, the complexity of the
case, importance of the issues and the length of trial (5 weeks).
The judge did not provide any reason for her award. The Court of
Appeal sent the issue back to the trial judge for full consideration.
This portion of the judgment is interesting. Although costs awards
are discretionary, parties are still entitled to the opportunity
to make submissions with respect to quantum and receive proper reasons
for the result. These submissions are absolutely necessary. Trial
judges are not always aware of the many steps or delays that can
occur prior to the trial of an action. It is important that the
cost of trial does not become prohibitive and that parties pay the
cost of forcing an action to trial without justifiable grounds.
7. Are Commercial Fishing Licences Property?
In Saulnier v. Royal Bank of Canada, a recent
Supreme Court of Canada decision, the court ruled that "property",
as defined by Bankruptcy and Insolvency Act ("BIA") and the Nova Scotia Personal Property Security Act ("PPSA"),
was sufficiently broad in its scope to allow trustees and lenders
an interest in commercial fishing licences.
This action arose after Benoit Saulnier, a commercial
fisher in Nova Scotia, made an assignment in bankruptcy. Following
the assignment, the Royal Bank, who had an General Security Agreement
with Mr. Saulnier, proceeded to sell his commercial fishing licences
to a third party. Mr. Saulnier refused to sign the documents required
to complete the transaction and argued that Commercial Fishing Licences
were nothing more than privileges granted by the government and,
consequently, were not "property" that would fall into
the ambits of the BIA and/or the PPSA. Accordingly,
he did not believe that the trustee had a right to dispose of these
The Supreme Court of Canada disagreed and upheld the
decisions of the Supreme Court of Nova Scotia and the Nova Scotia
Court of Appeal, albeit for different reasons.
In reaching its conclusion, the Supreme Court of Canada
began by discussing the commercial realities of the fishing industry
and the importance of commercial fishing licences to those in the
industry. Justice Ian Binnie, writing for a unanimous Supreme Court,
A commercial fisher with a ramshackle boat and
a licence to fish is much better off financially than a fisher
with a great boat tied up at the wharf with no licence. Financial
institutions looking for readily marketable loan collateral want
to snap up licences issued under the federal Regulations, which
in the case of the lobster fishery can have a dockside value that
fluctuates up to a half a million dollars or more. Fishers want
to offer as much collateral as they can to obtain the loans needed
to acquire the equipment to enable them to put to sea.
The court continued by stating that the fact that
licences have commercial value does not necessarily mean that commercial
fishing licences constitute property as statutorily defined. Rather,
in order to determine whether in fact commercial fishing licences
constitute property, as defined by the BIA and the PPSA,
the court advised that one has to look at the purposes of those
In this regard, after reviewing the rules of statutory
interpretation the court concluded that the purpose of the BIA is to keep a balance between the rights of the creditors and providing
the bankrupt a clean break. In terms of the PPSA the court
advised that it was created to allow property holders to use their
property as collateral and to allow lenders a way to predict the
priority of their claims against particular assets.
The court then examined the wordings of definitions
for "property" in the case of the BIA and "intangible"
and "personal property" in the case of the PPSA and concluded that they were drafted in such a way as to have very
wide application in order to sweep up a variety of assets that would
not constitute "property" at common law.
Following the determination of what the purposes of
those acts were and looking at the scope of the definitions, the
court preceded to draw out what interests that were being conferred
by a fishing licence. The court held that "The holder acquires
the right to engage in an exclusive fisher under the conditions
imposed by the licence and, what is of prime importance, a proprietary
right in the wild fish harvested there under, and the earnings from
The court admitted that Mr. Saunier was likely right
in that if commercial licences were nothing more than privileges
then they would not likely fit under the definitions of "property"
as defined in the BIA and/or the PPSA; however, the
court concluded that because they in fact consist of a bundle of
rights and that the pecuniary rights bear a resemblance to a profit
à prendre (which is the right to procure something off
of the land of another person) and that this is undeniable a property
right then it necessarily follows that the commercial fishing licence
is a right in terms of both the BIA and the PPSA.
The court then addressed the argument that "property"
cannot be so broadly defined as to fetter the Minister's powers
to grant and revoke licences, as provided by the Fisheries Act.
The court concluded that the Minister would still have the powers
to grant or revoke a licence, as is reasonable, regardless of whether
it is granting and revoking the licences of the trustee or the original
owner of the licence. Moreover, when it comes to renewal the Minister
still has the rights to accept or deny the renewal of the licence
and the trustee simply steps into the shoes of the bankrupt and
takes the licence "warts and all".
This drafting coupled with the purpose of the Acts
and the fact that it does not fetter the Minister's power, led the
court to conclude that commercial fishing licences would constitute
a "property" as defined by the BIA and the PPSA.
At first blush it appears that the court has provided
a balanced decision. It provides commercial fishers more security
to offer if they are attempting to obtain loans and provides creditors
more assets to liquidate in the event that they are forced to recover
funds that are owed by insolvent parties. The concern arises with
the ambiguity created by the broadened definitions of what constitutes
"property" in terms of the BIA and the PPSA and the fact that those who are suffering the financial hardships
may be forced to incur the costs of litigation or surrender their
assets unjustly while the scope of the term is ascertained.
8. Class Action Case to Watch
Peter De Wolf v. Bell ExpressVu Inc. and Bell ExpressVu
LP, 2008 CanLII 46218 (ON S.C.) is an interesting class action
case. If Peter De Wolf is ultimately successful in his action, it
will likely have an effect on the way service providers deal with
late paying customers.
Mr. De Wolf was a customer of Bell ExpressVu. He was
a subscriber to their satellite television service. He was also
periodically late in paying his Bell ExpressVu bills. When his payment
was late he was charged a one-time interest payment and, after a
certain period of time, he would also be charged a further fee of
between $19 or $25. Bell ExpressVu described these fees as 'administration
fees' in its service agreements and claimed that they were charged
to recover the collection costs associated with customers' late
Mr. De Wolfe sued Bell EpressVu as a representative
plaintiff on behalf of a class of late paying Bell ExpressVu customers.
His claim was that the 'administration fee' was in fact interest
in excess of the criminal rate established under the Criminal
Without boring the reader with the actuarial realities
of the case, Mr. De Wolfe presented evidence on certification demonstrating
that if the fees were interest he was charged an annual rate of
interest of anywhere between 200% and 348%, which exceeds the criminal
rate of 60%.
Mr. De Wolfe's action was certified as a class action. Then both
he and Bell ExpressVu brought summary judgment motions on the question
of whether or not the 'administration fee' was 'interest' under
the Criminal Code. Relying on a number of cases including Garland v. Consumers' Gas Co., 1998 CanLII 766 (S.C.C.),
Mr. Justice Perell found that it was.
Mr. Justice Perell's finding certainly does not decide
the case. Not only has his decision been appealed, but if the decision
stands there are a number of other substantive issues the court
will have to grapple with, including what damages were suffered
and how they are to be distributed to the class.
This is case worth watching. Not only because it may
dictate a change in the way service providers deal with late paying
customers, but also because it may result in any number of copycat
actions against other service providers who have levied similar
fees from late payers.
[Fred Fischer was the counsel who certified the case
as a class action]
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