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June 2008
In this issue:
1. Firm News
2. River Rafting Regulations
3. Bodily Injury Exclusion for Headlock
4. Air Carrier Ordered to Provide Space for Service Animals
5. Punitive Damages Update
6. Due Diligence Defences
1. Firm News
- Matt Mulholland has rejoined the firm as an Associate
after articling with us in 2007/08. We congratulate Matt on his
call to the Bar of Ontario in June.
- Our Personal Injury Seminar originally scheduled
for June 19th had to be postponed until a later date due to scheduling
conflicts. It will be rescheduled for the fall.
Tentatively the upcoming programs are:
- November 6th, 2008 - Insurance and
Commercial Litigation Strategies
- January 16th, 2009 - Maritime and Transportation Conference
2. River Rafting Regulations
The Special-Purpose Vessels Regulations (the "Regulations"),
made under the Canada Shipping Act,2001, came into effect on April
17th 2008 (SOR/2008-121). The Regulations set out the requirements
for the safe operation of commercial river rafting in Canada.
The Regulations establish minimum standards for commercial
river rafting and apply them to all waters in Canada. The Regulations
incorporate industry "best practices" and address such
matters as:
- vessel and safety equipment requirements (e.g.
helmets, lifejackets and their equivalents, and the circumstances
in which they must be worn);
- operational requirements (e.g. first aid training,
familiarization trips and safety briefings); and
- the keeping of records for three years after an
excursion, including the name(s) of the guide(s), the date of
the excursion, the number of passengers on the excursion, a geographical
description of the waters on which the excursion took place, the
contents of the safety briefing and a copy of the rescue plan.
There are approximately 230 commercial river rafting
operations in Canada, with the largest concentration in Alberta,
Ontario and British Columbia. The majority of these enterprises
operate within well-organized associations such as the Canadian
Rivers Council (CRC), the Professional River Outfitters Association
of Alberta (PROAOA) and Jasper's Professional River Outfitters.
These associations have established guidelines that are mirrored
in the Regulations.
Compliance with the Regulations will be achieved through
the Small Vessel Inspection Program conducted by Transport Canada
marine safety inspectors. Local enforcement agencies may also request
Transport Canada to designate local enforcement officers with an
interest in public safety issues (such as police and conservation
officers) with the authority to respond to compliance and safety
issues while engaged on their regular duties.
Rui Fernandes
3. Bodily Injury Exclusion for Headlock
Ontario courts continue to do gymnastics with insurance
policy interpretation. In the recent decision of Mitsios v. Aviva
Insurance Co. of Canada (2008) 89 O.R. (3d) 556 Justice Allen
had occasion to hear an application for a declaration that a commercial
liability policy of insurance required the insurer to defend an
insured for a claim for bodily injury.
The insured was sued by a fellow employee who alleged
that he sprayed the insured with water while cleaning up, that the
insured reacted by placing him in a headlock, and that he lost his
balance and suffered injuries as a result.
In response to the application for a declaration for
coverage, the insurer Aviva relied upon an exclusion in the policy
for bodily injury "caused intentionally by or at the direction
of the insured."
Justice Allen held that the insured's acts were not
excluded under the policy. Relying on the decision of the Supreme
Court of Canada in Nichols v. American Home Assurance Co.
[1990] 1 S.C.R. 801 where that court held that provisions granting
coverage are to be construed broadly, while exclusion clauses are
to be construed narrowly, Justice Allen stated "Even if it
could be said that the headlock was intentional, there is no plea
of an intent to injure."
Rui Fernandes
4. Air Carrier Ordered to Provide Space for Service Animals
The Canadian Transportation Agency issued
its decision [Decision No. 327-AT-A-2008] on June 20th, 2008 ordering
Air Canada and Air Canada Jazz to ensure sufficient floor space
is provided for certified service animals at the person with a disability's
seat.
The Agency ruled that failure to provide
sufficient space would constitute an "undue obstacle"
in transportation. The decision is designed to ensure equal access
to the federal transportation network for persons with disabilities,
regardless of the nature of the disability. The Agency found that
travelling in a very constrained position has negative implications
for a service animal which may impact on its ability to function
and which may negatively impact a person's well-being and increase
the risk of injury, and therefore has safety implications for both
the individual and the service animal.
The Decision applies only to the travel
of certified service animals within Canada on Air Canada and Air
Canada Jazz aircrafts with 30 or more seats. A service animal is
any guide dog, assistance dog, or other animal professionally trained
and certified to provide assistance to an individual with a disability.
In accordance with section 149 of the
Air Transportation Regulations, a carrier must accept a service
animal for carriage at no additional cost to accompany a person
on board an aircraft and permit the animal to remain on the floor
at the person's passenger seat.
While Air Canada and Air Canada Jazz
have provided sufficient space for service animals in many instances,
the carriers only confirm sufficient space accommodation without
additional cost just prior to departure and is subject to space
availability, thereby creating undue obstacles.
The Agency has ordered both carriers
to take the following corrective measures within 90 days in order
to remove undue obstacles to persons travelling with a service animal:
1. Develop policies and procedures for
domestic flights to ensure that, at the time of reservation and
upon receipt of a request at least 48 hours in advance, seating
with sufficient floor space will be provided for the person travelling
with their service animal, at no additional cost.
2. Make a reasonable effort to provide
the service when less than 48 hours advance notice is provided.
3. Enter into dialogue with the person
travelling with a service animal to determine floor space requirements
of the service animal and how best to accommodate these requirements.
Rui Fernandes
5. Punitive Damages Update
The Supreme Court of Canada and the U.S.
Supreme Court this month both had occasion to consider punitive
damage awards and the basis for these type of awards.
In Canada, in Honda Canada Inc.
v. Keays, [2008] SCC 39 and employee, Mr. Keays had worked
11 years for Honda, first on an assembly line and later in data
entry, when, in 1997, he was diagnosed with chronic fatigue syndrome.
He ceased work and received disability benefits until 1998, when
his Honda's insurer discontinued his benefits. Mr. Keays returned
to work and was placed in a disability program that allows employees
to take absences from work if they provide doctor's notes confirming
that their absences are related to their disability. Honda became
concerned about the frequency of his absences. Moreover, the notes
Mr. Keays offered to explain his absences changed in tone, leaving
Honda to believe that the doctor did not independently evaluate
whether he missed work due to disability. As such, Honda asked Mr.
Keays to meet an occupational medical specialist, in order to determine
how Mr. Keays disability could be accommodated. On the advice of
his counsel, Mr. Keays refused to meet the doctor without explanation
of the purpose, methodology and parameters of the consultation.
In March 28, 2000, Honda gave Mr. Keays a letter stating that it
supported Mr. Keays full return to work but that Mr. Keays employment
would be terminated if he refused to meet the doctor. When Mr. Keays
remained unwilling to meet the physician, Honda terminated his employment.
The trial judge found that Mr. Keays
were wrongfully terminated and awarded Mr. Keays a notice period
of 15 months. In addition the trial judge increased the notice period
to 24 months to award additional damages for the manner of dismissal
and awarded $500,000 in punitive damages. The Ontario Court of Appeal
reduced the punitive damages to $100,000.
The Supreme Court of Canada held that
Mr. Keays was wrongfully dismissed and the award of damages reflecting
the need for 15 months' notice should be maintained. However it
held that neither the aggravated damages (the extra notice period)
nor the punitive damages should have been awarded. The trial judge
had ordered the punitive damages on the basis of discriminatory
conduct by Honda.
The Supreme Court of Canada made it clear
that breaches of the Human Rights Code cannot be compensated by
way of court-awarded punitive damages. The Court held that the Code
provides a comprehensive scheme for the treatment of claims of discrimination
and that a breach of the Code cannot constitute an actionable wrong
(which is a necessary requirement for an award of punitive damages).
The Court stated (at p. 62):
Damages for conduct in the manner of dismissal are
compensatory; punitive damages are restricted to advertent wrongful
acts that are so malicious and outrageous that they are deserving
of punishment on their own. This distinction must guide judges
in their analysis.
The Court also stated (at p. 69):
…it is worth mentioning that even if the facts
had justified an award of punitive damages, the lower courts should
have been alert to the fact that compensatory damages were already
awarded, and that under the old test, they carried an element
of deterrence. This stems from the important principle that courts,
when allocating punitive damages, must focus on the defendant's
misconduct, not on the plaintiff's loss… In this case, the
same conduct underlays the awards of damages for conduct in dismissal
and punitive damages. The lower courts erred by not questioning
whether the allocation of punitive damages was necessary for the
purposes of denunciation, deterrence and retribution, once the
damages for conduct in dismissal were awarded. Be that as it may,
we now have a clearer foundation to distinguish between damages
for conduct in dismissal and punitive damages.
On 25 June 2008, the United States Supreme
Court issued its opinion in Exxon Shipping Co. v. Baker
(No. 07-219) 472 F. 3d 600 and 490 F. 3d 1066. The decision concerned
the limits of punitive damages which may be assessed under federal
maritime law. The Court held that under federal general maritime
law governing maritime cases, an award of punitive damages may not
be greater than a 1:1 ratio as compared with compensatory damages.
The Supreme Court reduced the prior $2.5 billion punitive damages
award to $500 million.
In 1989 the "Exxon Valdez,"
ran aground, spilling some 11 million gallons of crude oil into
Prince William Sound. The accident occurred after the tanker's captain,
Joseph Hazelwood-who had a history of alcohol abuse and whose blood
still had a high alcohol level 11 hours after the spill-inexplicably
exited the bridge, leaving a tricky course correction to unlicensed
subordinates. Exxon spent some $2.1 billion in cleanup efforts,
pleaded guilty to criminal violations occasioning fines, settled
a civil action by the United States and Alaska for at least $900
million, and paid another $303 million in voluntary payments to
private parties. Other civil cases were consolidated into this one,
brought against Exxon, Hazelwood, and others to recover economic
losses suffered by those who depended on Prince William Sound for
their livelihoods. The Court converted the case into a class action,
with approximately 32,000 claimants. The jury awarded approximately
$507.5 million in "relevant compensatory damages." The
jury then initially awarded $5 billion in punitive damages against
Exxon. After several appeals to the Ninth Circuit, the award was
reduced to $2.5 billion.
The Supreme Court of the U.S.A. was split
evenly on the issue whether punitive damages can be assessed against
a ship-owner based on the independent acts of its managerial employees
under federal maritime common law. The Ninth Circuit's decision
(answering the question in the affirmative), therefore stands, and
the Supreme Court's "split" creates no precedent. The
Court rejected Exxon's argument that penalties for spills under
the Clean Water Act preempted an award of punitive damages. The
Court then turned to the core of the case: whether the punitive
damage award was excessive.
The Supreme Court surveyed the history
of punitive damages in Anglo-American jurisprudence, and concluded
that "the consensus today is that punitives are aimed not at
compensation but principally at retribution and deterring harmful
conduct." The Court noted that the median punitive damage award
in United States courts is in an approximately 1:1 ratio with compensatory
damages. The Court held that the punitive damages award against
Exxon was excessive as a matter of maritime common law. In the circumstances
of this case, the award should be limited to an amount equal to
compensatory damages.
The Supreme Court was troubled by outlying
cases: "The real problem, it seems, is the stark unpredictability
of punitive awards." The Court reasoned that "a penalty
should be reasonably predictable in its severity," and similar
conduct should result in similar punitive damage awards. The Court
discussed three possible methods of increasing predictability: a
multi-factored test (which require judges to weight various factors),
a hard dollar cap on punitive damages and pegging punitive damages
to compensatory damages.
The Court determined that the best way
to eliminate outlying punitive damage cases was "by pegging
punitive to compensatory damages using a ratio." The Court
then determined that a 1:1 ratio, which represents the median punitive
damage award, is best suited for maritime cases such as Exxon
- "a case of reckless action, profitless to the tortfeasor,
resulting in substantial recovery for substantial injury."
Rui Fernandes
6. Due Diligence Defences
R v. Kanda (2008) 88 O.R. (3d) 732 [Ont.
C.A.]
Narrowly speaking, this case concerns whether a person
caught driving a car containing a child who is not wearing a seat
belt can raise a defence of due diligence.
More broadly, the case is a helpful reminder and an
illustration of the defences that are available to one charged with
a regulatory or a 'public' offence.
Facts
Ashwani Kanda was driving two sons, aged 8 and 12
years, to school in April of 2004. He was stopped by a police officer
and charged with an offence under s. 106 of the Ontario Highway
Traffic Act, R.S.O. 1990, c.H.8 which provides:
"No person shall drive on a highway a motor
vehicle in which there is a passenger who is under sixteen years
of age and occupies a seating position for which a seat belt assembly
has been provided unless that passenger is wearing the complete
seat belt assembly and it is properly adjusted and securely fastened".
Mr. Kanda testified at the trial of the charge that
he ensured both boys were wearing their seat belts when he left
the family home. The younger son had apparently unbeknownst to Mr.
Kanda freed himself from his own seat belt during the drive.
The trial judge convicted Mr. Kanda of the offence
on the basis that it was an 'absolute liability' offence. Mr. Kanda
appealed this finding, which was overturned on appeal. The judge
hearing the appeal ruled that the offence was a 'strict liability'
offence.
What is the difference between 'absolute' and 'strict'
liability? Under a 'strict' liability offence the accused may avoid
a conviction by leading evidence of 'due diligence' to avoid the
infraction from happening. Under 'absolute liability', an accused
will be found liable simply upon proof being established of the
offence itself - regardless of any explanations of steps taken to
prevent an infraction.
The appeal judge remitted the question of 'due diligence'
back to the original trial judge for evidence to be led, and considered
on that point.
Her Majesty sought leave to appeal the successful
'overturn' of the conviction and the remanding of the matter back
to the original judge for trial. Her Majesty wanted the conviction
restored and to stand without further proceedings. On this particular
appeal, the issue was whether the above offence was one of strict
as opposed to absolute liability.
Enter then the general relevance of this case. There
are many infractions and offences on the books, of municipal, provincial
and federal legislation. Which is which and what defences exist,
if a charge is laid?
The Court of Appeal in reviewing the matter had occasion
to revisit the important case of R. v. Sault Ste. Marie (City)
[1978] 2 S.C.R. 1299 which set forth the criteria by which various
offences were to be categorized. In the Sault Ste. Marie case
the Supreme Court of Canada classified 'regulatory' or 'public welfare'
offences into three different categories:
- mens reas offences
- strict liability offences and
- absolute liability offences
The first type [means rea] offence consists
of a positive state of mind such as intent, knowledge or recklessness,
which state of mind must by proven by the prosecution as a matter
of inference to be drawn from the act committed, or by separate
evidence.
The second type of offence, being the 'strict liability'
offence does not require the prosecution to prove 'state of mind'
on the part of the accused. Rather, proof of the commission of the
prohibited act will result in a conviction, unless the accused can
avoid liability by proving that he took 'all reasonable care', or
due diligence, to prevent the infraction. The Supreme Court noted
that this involves a consideration of what a reasonable man would
have done in the circumstances. The defence will be available if
the accused reasonably believed in a mistaken set of facts which,
if true, would render the act or omission innocent, or if he took
all reasonable steps to avoid the particular event.
The third type of offence, being absolute liability,
does not leave it open for the accused to try to show that he acted
reasonably to avoid a conviction. The mere commission of the prohibited
act will then result in a conviction.
How then to differentiate between these three types
of offences?
The Supreme Court commented in Sault Ste. Marie:
"Offences which are criminal in the true sense
fall in the first category [above]. Public welfare offences, at
first blush, would be in the second category… An offence
of the first category type [mens rea] would require the use of
words in the relevant legislation such as "willfully",
"with intent", "knowingly" or "intentionally".
On the other hand, the principle that punishment should in general
not be inflicted on those without fault would apply. Offences
of absolute liability would be those in respect of which the legislature
made it clear that guilt would follow proof merely of the prohibited
act. The overall regulatory pattern of the legislature, the
subject matter of the legislation, the importance of the penalty,
and the precision of language used will be primary considerations
in determining whether the offence falls into the third category
[of absolute liability].
It is therefore important to note the presumption,
or general rule, that 'public welfare' offences are strict liability
offences, as opposed to being absolute liability offences.
On this particular appeal the Court of Appeal reviewed
the facts of this seat belt case. The police officer who laid the
charge was stopped in an unmarked cruiser at a four way stop in
Brampton, Ontario in the morning when he observed the vehicle driven
by Mr. Kanda at the intersection. He observed the younger child,
in the back seat, without a seat belt. Upon stopping the vehicle
the officer confirmed this to be the case. A ticket was issued.
As mentioned, at trial the original judge determined that this was
an absolute liability offence. As such Mr. Kanda's explanation that
he was unaware of what had happened in the back seat of his car
afforded no defence.
The Court of Appeal accordingly took the above underlined
factors outlined by the Supreme Court of Canada into consideration
in assessing the essence of s. 106 of the Highway Traffic Act.
The court noted that of the many offences contained in the Highway
Traffic Act, that there are clear illustrations of all three
types of offences. Accordingly, an analysis of the 'overall regulatory
pattern' of the Highway Traffic Act, being the first test
sanctioned by the Supreme Court, is neutral and does not answer
the question: that Act, as a whole, would not provide the answer
of what type of offence this is.
The second factor concerns the 'subject matter' of
the legislation. The purpose is obviously to minimize driver and
passenger injury. The Court of Appeal regarded s. 106 as supporting
a classification of 'strict liability' as striking an appropriate
balance between encouraging vigilance in drivers to take care of
minors and not punishing those who do expend reasonable efforts
to ensure their safety.
Looking at the third factor of 'penalty', the only
penalty that may be levied is a modest fine - a fine of not less
than $60 and not more than $500 plus 2 demerit points. The Court
notes that there is no stigma associated with a traffic ticket of
this sort. Accordingly, the Court of Appeal reasoned that such minor
penalties then support a classification of this offence of being
one of 'absolute liability' - there being less concern for the harsher
'fall out' that comes with the categorization of 'absolute liability'.
The fourth factor is that of "Precision of language'.
The prosecution argued that the wording in the particular offence
that "No person shall" points to the offence being
an absolute liability offence. The Court disagreed, citing that
while some cases have found that such wording leads to an 'absolute'
liability offence that such cases concern situations where an offence
has occurred through the action of the accused. Section 106
of the Highway Traffic Act necessarily concerns the action of a
third party. The Court found logic in the argument that where
a statute concerns itself with creating a duty of care in respect
of another person, that it would be illogical that an accused could
not raise a defence of due diligence or reasonable care. Further,
the wording of s. 106, by itself, does not preclude the defence
of due diligence as it does not use the specific words usually used
to create an 'absolute' liability offence.
The Court ultimately dismissed the appeal by the prosecution,
ruling that s. 106 is a 'strict' liability offence, citing the principle
from R. v. Sault Ste. Marie that there is a presumption in
favour of strict liability in an interpretive dispute between strict
and absolute liability offences - as a matter of fairness to the
accused individual. Factoring all the above, the Court ruled that
the prosecution did not displace the presumption in favour of strict
liability. Accordingly the appeal was dismissed and the matter was
referred back to the original trial court to hear evidence and argument
on the defence of due diligence.
Gordon Hearn
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