In this issue:
1. Firm and Industry News
2. Miller v. Carley: A Lesson in Humanity
3. Genital Herpes Not an Accident
4. Exclusive Jurisdiction Clauses in Policies of Insurance
1. FIRM AND INDUSTRY NEWS
- Rui Fernandes and Gordon Hearn will
be representing the firm at a Joint Meeting of the Canadian Maritime
Law Association and certain government officials being held in
Ottawa on April 8 .
Rui Fernandes, Gordon Hearn and Kim Stoll will be representing the firm at the 2010 Transportation Lawyers
Association Annual Conference and Canadian Transport Lawyers
Association Mid-Year Meeting to be held at Hilton Head, South
Carolina April 27 to May 1. Gordon Hearn will be moderating
a panel at the conference addressing Shipper, Load Broker and
Carrier Liability arising from an accident casualty scenario.
- April 16th, 2010 MICA Spring Luncheon, New York
- April 27 to May 2nd, Transport Lawyers Association
Annual Meeting, Hilton Head, South Carolina
- May 7th, 2010 U.S. Maritime Law Association Semi-Annual
Meeting, New York
- May 26th and 27th 2010 - Canadian Board of Marine
Underwriters Semi Annual Meeting will take place in Montreal Canada.
- June 3rd, 2010 Canadian Maritime Law Association
Seminar - Current Developments in Canadian Maritime Law, Halifax
- June 4th, 2010 Canadian Maritime Law Association
Annual General Meeting, Halifax
- September 12-15 IUMI Conference, Zurich Switzerland
v. CARLEY: A LESSON IN HUMANITY - AS WELL AS A LESSON IN EVIDENCE
As they say sometimes "truth is stranger than
The recent Ontario Superior Court of Justice case
of Miller v. Carley (2010) 98 O.R. (3d) 432 is a hilarious if not
interesting read by way of a court decision.
Consider the wit, in the first three paragraphs of
the reasons for judgment from Mr. Justice Quinn:
 After a busy day conducting illegal drug
transactions, the plaintiff, the defendant and a mutual friend
stopped at a corner store where the defendant purchased some "scratch"
lottery tickets. One of the tickets proved to be a $5 million
 The parties dispute ownership of the winning
ticket. If the ticket were a child and the parties vying for custody,
I would find them both unfit and bring in Family and Childrens'
 The case is awash with untruths and curiosities.
It is a study in good fortune squandered and generosity abused.
The case involves a fact pattern which we have all
heard of one way or another. Someone has a winning lottery ticket
and another person, wanting in on the "spoils," alleges
having advanced the money for the winning ticket. Do they share
the winnings? The party alleged to have advanced the monies sued
the person, who held the winning ticket and who collected the monies,
for the half the amount.
In this case the plaintiff and the defendant fundamentally
disagreed on the question of the former's entitlement to half the
winnings. There were no other witnesses to the actual purchase of
the ticket or the alleged "advance" of monies by the unhappy
plaintiff to the happy defendant. The parties led much by way of
"circumstantial evidence" - that is, indirect evidence
through third party witnesses - about events leading up to and following
the purchase of the ticket.
The plaintiff asserted his participation in the winning
deal through corroborative evidence of others and the defendant
in turn relied on similar indirect evidence as corroboration that
there was no such agreement or scheme. As is the function of any
trial judge, Justice Quinn had to discern the likely from the unlikely,
or the believable from the unbelievable, through the various stories
produced at trial.
Unfortunately, as the Judge noted [at paragraph 210]
"During this trial, truth was only an
The judge had to assess and weigh the evidence, bearing
in mind that the burden of proof was on the plaintiff to prove that,
on a balance of probabilities (that is, on a "more likely than
not" basis) that he in fact had advanced the money to the defendant
and that the parties were to share in the winnings by way of a prior
agreement. Other than being an interesting read on human nature
and the ability to fabricate evidence, (with Justice Quinn making
no "bones" as to who he thought was lying in their evidence)
this case provides a helpful review of certain principles of evidence
law. While fourteen witnesses testified at trial, eleven of these
witnesses were not independent - that is, they were being called
by one side or the other for a clear cut agenda - with, as mentioned,
a variety of creditability issues to be worked out by the judge.
Relative to the discussion below on certain principles of evidence
law there were some persons with knowledge of certain events in
the case who did not testify. This raised the issue as to whether
an "adverse inference" should be drawn from their absence.
Principles Concerning "Adverse Inference"
The general rule in civil cases respecting the court
drawing an adverse inference from the failure by a party to call
a witness at trial to give evidence goes back to case law from 1774.
Back then, it was stated that:
"It is certainly a maxim that all evidence
is to be weighed according to the proof which it was in the power
of one side to have produced, and in the power of the other to
have contradicted". The "adverse inference" principle
is said to be derived from ordinary logic and experience. That
is, the failure to call evidence, may, depending on the circumstances,
amount to an implied admission that the evidence of the absent
witness will be contrary to the parties case (who would logically
be expected to have called such witness) or least would not support
Accordingly, an adverse inference is something that
a court can apply to affect the outcome of a case. It is a proper
factor for a court to consider in ruling who should prevail in a
civil dispute. Judges properly and routinely draw inferences, or
conclusions of fact, from indirect evidence (such as circumstantial
evidence) or, in the lack of evidence, they draw negative, or adverse,
inferences of fact. That is, a "negative sign" against
the party failing to call certain evidence.
However, the courts have recently ruled that the circumstances
in which an adverse inference may be drawn by a judge based on a
failure to call a witness or adduce certain evidence will be rare
and should only be done with the greatest of caution, particularly
where an explanation for not introducing the evidence has already
been provided to the court.
At least one author has put the rule as follows:
"An adverse inference can be drawn against
a party for failure to call a witness who may give material evidence
when that party alone could bring the witness before the court.
Where those uncalled witnesses are equally available to the other
parties, an adverse interest will be unwarranted: Gordon D. Cudmore,
Civil Evidence Handbook (Toronto: Carswell, 1987) at p. 6-22.
Accordingly, to avoid an adverse inference being drawn
(which could be a harmful, if not fatal to a party's case), a party
must provide a reasonable explanation for why a witness was not
called. This explanation must come from the evidence given in testimony
during the trial, rather than from the submissions (or excuses provided)
of counsel during argument at the end of the trial. Of course, it
can be asserted that the 'missing witness' was just as available
to the other side, to be called to give evidence.
A party fearing having an adverse inference drawn
may explain it away or prevent its application by showing circumstances
which account for the failure to produce a witness. Perhaps the
witness could not be located, or there might be some other legitimate
reason why the witness might not be called. To avoid the inference
being drawn, the trial judge would have to be satisfied that the
circumstances offered would, in ordinary logic and experience, furnish
a plausible reason for non-production: R. Rooke  40 C.C.C.
(3d) 484 (C.A.).
In this particular case, the court refused to draw
certain adverse inferences from the failure to call a witness who
had been involved in the "illegal drug transactions" mentioned
in the opening of reasons for judgment cited above. The court understood
why counsel for a party implicated in such conduct and who would
otherwise have been expected to call this "tainted" individual
might choose not to face the uncertainties of putting that witness
in the witness box. Might the party otherwise expected to have called
a tainted witness not run the risk of being "painted with the
same brush" by the judge who had to rule on the case? In this
case, the judge accepted this concern as a legitimate reason for
the "missing witness" not being called and refused to
draw, or factor in, an adverse inference. In other words, counsel
are entitled to weigh the relative cost/benefit of calling a witness.
If a witness would have been helpful in leading relevant evidence
on point, but would otherwise have caused an unnecessary risk to
the rest of that party's case, then this could amount to a sufficient
explanation for a witness not being called to give evidence.
So Who Gets The Money?
The defendant gets the money. All of it. The plaintiff
was unsuccessful and will remain unhappy.
Upon weighing all the evidence in this case, the court
found that the plaintiff and the defendant did not in fact pool
money for the purchase of lottery tickets. They did not have a history
of pooling funds to purchase lottery tickets before the date of
the purchase and the court found that they did not do so on that
date. The plaintiff had attempted to build his case on a series
of telephone discussions with others, that is, to corroborate the
fact that he expected to participate in any winnings; however, evidence
of his conduct and admissions throughout were found by the court
to only be consistent with the conclusion that his claim was a "fabrication".
For example, the plaintiff had attended with the winning defendant
at the Ontario Lottery Gaming Corporation offices to collect the
prize money - as well as at the bank thereafter where the winning
funds were to be deposited - on both occasions failing to announce
that he was a winner, too, but rather somehow tolerating the defendant's
announcement to all who would listen that the defendant was "the"
winner of the money. The plaintiff was seen to have stood "idly"
by during these events, with the court reasoning that the plaintiff
would be expected to have "stood up" for his portion of
the winnings if he truly believed that there was an "agreement"
that by pooling the money to buy the ticket there would be a sharing
of the proceeds. However, the plaintiff failed to speak up or stand
his ground that he, too, was a winner. The admission by the plaintiff
that he did not tell anyone that he contributed to the cost of the
lottery tickets, while having had the ample opportunity to do so,
was seen to be an insurmountable obstacle to his case. The plaintiff
failed to satisfy the onus on the balance of probabilities that
he gave the $10 to, and pooled his money with, the defendant as
alleged. Accordingly the plaintiff's action was dismissed.
3. GENITAL HERPES IS NO ACCIDENT ACCORDING TO SUPREME COURT OF CANADA: Co-operators Life Insurance Co. v. Gibbens,
2009 SCC 59
In January and February of 2003, Mr. Gibbens engaged
in unprotected sex with several women, which resulted in his acquisition
of genital herpes. This triggered a medical condition known as transverse
myelitis, which paralyzed him from the mid-abdominal region down,
in what was no doubt a rare occurrence.
Mr. Gibbens had an insurance policy, which provided
coverage for losses sustained "as a direct result of Critical
Disease or resulting directly and independently of all other causes
from bodily injuries occasioned solely through external violent
and accidental means, without negligence."
The insurance policy contained a section, which provided
coverage for certain enumerated "Critical Disease[s]"
but transverse myelitis was not included in that list. As a result,
Mr. Gibbens decided to claim compensation in the policy amount of
$200,000 on the basis of his condition, being the result of an "accident".
The term "accident" was not defined in the policy.
At trial, the judge was of the view that for transverse
myelitis to be considered "accidental", the means of acquiring
it must have been unexpected. As such, the judge framed the issue
of determining "accident" as whether Mr. Gibbens expected
to become a paraplegic as a result of having unprotected sexual
intercourse. On the basis of this reasoning, the court concluded
he could not have expected this consequence and it awarded the policy
payout of $200,000. The insurer then appealed.
On appeal to the British Columbia Court of Appeal,
the court agreed with the trial judge that Mr. Gibbens' transverse
myelitis was an accident, and that it arose from an external factor
or "unlooked-for mishap" being the introduction of the
herpes virus into his body by a sexual partner sufficient to qualify
as "accidental" in the ordinary meaning of that term.
The insurer then appealed to the Supreme Court of Canada.
At the Supreme Court of Canada, the insurer
argued that the consequences of the disease were a result of a "natural"
cause acquired through sexual intercourse and as such cannot be
said to be "accidental." The Court agreed with this position
and emphasized the available case law, which typically precluded
accidents to include ailments proceeding from natural causes. The
court also emphasized the commercial importance of not allowing
what was intended to be an accident policy from becoming misconstrued
as a comprehensive health insurance policy to cover non-enumerated
diseases, especially when lower premiums were being charged than
what otherwise could have been charged for the insurer to take on
The Supreme Court of Canada also discussed
the importance of maintaining the reasonable expectations of the
parties and that permitting transverse myelitis to be included as
"accidental" in these circumstances would open the door
to putting insurers on the hook for commonly derived consequences
acquired from the natural transmissions of diseases through coughing,
sneezing, or shaking hands. In other words, it appears that the
natural spreading of disease devoid of any associated mishap or
trauma should not be considered accidental in the view of the Supreme
Court of Canada.
The Supreme Court of Canada cited Justice Cockburn's
1995 British judgment from Sinclair where the relationship between
accident and disease was distinguished:
"[D]isease or death engendered by exposure
to heat, cold, damp, the vicissitudes of climate, or atmospheric
influences, cannot, we think, properly be said to be accidental;
unless at all events, the exposure is itself brought about by circumstances
which may give it the character of accident. Thus (by way of illustration),
if, from the effects of ordinary exposure to the elements, such
as is common in the course of navigation, a mariner should catch
cold and die, such death would not be accidental; although if, being
obliged by shipwreck or other disasters to quit the ship and take
to the sea in an open boat, he remained exposed to wet and cold
for some time, and death ensued therefrom, the death might properly
be held to be the result of accident".
As a result, it would seem that acquiring herpes triggering
transverse myelitis alone through ordinary and natural means is
not in and of itself enough to constitute an accident. However,
had the disease been originally acquired by some non-natural exposure
such as through a sexual assault, or some medical procedure gone
wrong, perhaps this might have been considered an accident in the
eyes of the Supreme Court of Canada in the absence of an
explicit definition of "accident" to the contrary within
the policy itself.
4. EXCLUSIVE JURISDICTION CLAUSES IN POLICIES OF
INSURANCE: DRAFTERS BEWARE
The recent decision of Midnight Marine Limited
v. M. J. Oppenheim, 2010 NLTD 3 highlights how important it
is for drafters of insurance policies to be precise in the formation
of the policy wordings. Simply cutting and pasting clauses from
other policies to create new wordings can be fatal.
The plaintiffs sued the defendant Lloyd's of London
for damages for failing to pay a claim for a loss of cargo of scrap
metal under a policy of marine insurance, amongst other relief.
The plaintiffs had previously been sued by the cargo owner and had
settled the case with the cargo owner after Lloyd's refused to defend
them and had advised them to act as prudent uninusureds. They were
now looking to Lloyd's to reimburse them pursuant to the protection
and indemnity (P & I) coverage under the policy of insurance.
Lloyd's of London, the insurer, applied for a stay
of proceedings on the basis that a term in the policy of insurance
required that all disputes under the policy to be referred to arbitration
in London, England.
The application was dismissed. The Court held that,
on a proper interpretation of the contract as a whole, the clause
relied upon by the applicant was not an exclusive jurisdiction clause.
The policy was subject to English law and the non-exclusive jurisdiction
of the English courts. Therefore, the plaintiffs/respondents were
entitled to commence action in Newfoundland and Labrador.
The clause in the P & I coverage provided:
Notwithstanding anything else to the contrary, this
insurance is subject to English law and practice and any dispute
arising under or in connection with this insurance is to be referred
to Arbitration in London, one Arbitrator to be nominated by the
Assured and the other by Osprey on behalf on [sic] Underwriters. The Arbitration shall be conducted pursuant to exclusive supervision
of the English High Court of Justice. In case the Arbitrators
shall not agree, then the dispute shall be submitted to an Umpire
to be appointed by them. The award of the Arbitrators or the Umpire
shall be final and binding upon both parties. In the event of
a conflict between this clause and any other provision of this
insurance, this clause shall prevail and the right of either party
to commence proceedings before any Court or Tribunal in any other
jurisdiction shall be limited to the process of enforcement of
any award hereunder. [Emphasis added]
The Court held that that a contract must be read as
a whole in order to arrive at the intention of the parties. The
Court looked at various documents to determine what was the contract.
The policy of insurance was evidenced by a cover note
dated 5 July 2006 from Ropner Insurance Services Limited of London
addressed to Wedgwood Insurance Limited of St. John's, the respondents'
agent in the Canadian jurisdiction. It set out the five vessels
which were covered by the policy (including the two in question
in this litigation). The period was twelve months at 30 June 2006.
It set out the sum insured, the trading area permitted (later extended
by agreement to include the trip in question to the Caribbean) and
setting out certain conditions to the contract. It set out the premium
to be paid. The court was satisfied that insurance was effected
as at 5 July 2006 pursuant to this cover note, subject only to the
eventual issuance of the formal certificate of insurance in compliance
The Certificate of Insurance was issued bearing No.
5152 M 3553765 and was dated 31 May 2006, signed by Lloyd's and
countersigned under seal by Osprey Underwriting Agency, an agent
of Lloyd's, on 14 August 2006.
The Certificate contained on its face the following
JURISDICTION AND GOVERNING LAW
The agreement is subject to English Law and practice and to the
non-exclusive jurisdiction of the English Courts [Emphasis added]
The policy also contained a number of references to
the right of the insured to take "action" to enforce its
rights under the policy. For example, the following provision appeared
at the conclusion of clause (14) of SP 23:
No action shall lie against the Assurer for
the recovery of any loss sustained by the Assured unless such action is brought against the Assurer within one year after
the final judgment or decree is entered in the litigation against the Assured, or in case the claim against the Assurer
accrues without the entry of such final judgment or decree, unless
such action is brought within one year from the date of the payment
of such claim.
The Court found that the claimant was barred from
taking any "action" (not "initiate arbitration")
against the insurer unless commenced within one year "after
the final judgment is entered in the litigation against the assured",
or "within one year from the date of payment of such claim",
where there was no final judgment.
The certificate terms and the other clauses in the
policy were in conflict with the P & I clause requiring arbitration
in London. Poor drafting of the policy of insurance opened the door
to the court's final decision.
However, what closed the door to Lloyd's application
for a stay of proceedings in favour of arbitration in London, was
the course of conduct of the parties during the many years the policy
was in existence and the course of the various disputes litigated
in the Canadian courts.
Following a dispute with Lloyd's respecting a claim
under the policy, the claimants sued Lloyd's in the Federal Court
of Canada. Lloyd's defended the claim but did not raise the issue
of arbitration. Lloyd's then took numerous steps in that litigation
including filing documents, participating in pre-trial procedures
and drafting orders to express the will of the court without ever
raising the interpretation it currently put on clause (I) that that
provision requires disputes to be arbitrated in London.
Eventually that action was not proceeded with and,
after settlement of the claim with the cargo owners, a new action
was begun in this court in Newfoundland in respect of payment for
the settlement of the claim. Later, the action in this Court was
settled with the full participation of the Lloyds and a notice of
discontinuance was filed.
Finally, the present action for reimbursement of the
paid amounts was commenced against Lloyd's. It was in this third
action that Lloyd's brought an application for a stay of proceedings
in Canada in favour of arbitration in London.
The Court held that:
This course of conduct demonstrates that as between
identical parties, respecting three of the five ships included
in the within insurance policy and the same policy provisions
as at play in this action, the applicant failed to raise the issue
of clause (I) as being an exclusive arbitration provision. I agree
with counsel for the respondent that this either represents an
interpretation by the applicant of clause (I) from which it now
seeks to resile or it amounts to a waiver of that provision as
an exclusive clause
The lesson to be learned by insurers is that courts
will not allow insurers to benefit from conflicting clauses and
This newsletter is published to keep our clients and friends informed
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