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Newsletters 2010 > November 2010

In this issue:
1. Firm and Industry News
2. Warehouses Beware! B.C. Court Disallows Standard Terms and Conditions
3. Don't Take Forum Selections Clauses Lightly
4. Personal Injury Claims Assessment: Case comment on Rollin v. Baker et al, Ontario Court of Appeal, 2020 ONCA 569

 

1. Firm and Industry News

  • November 30th, 2010 Toronto: CBMU Annual Conference and Dinner
  • December 3rd, 2010 Montreal: Grunt Club Annual Dinner
  • January 20th, 2011 Toronto: Fernandes Hearn Annual Seminar
  • January 21st 2011 Toronto: CMLA Meeting
  • January 21st 2011 Toronto: Marine Club Annual Dinner
  • January 21st, 2011 Chicago: Transportation Lawyers Assoc. Seminar
  • February 2-3, 2011 Quebec City: Marine Oil Pollution Seminar
  • May 11-14 Las Vegas: Transportation Lawyers Assoc. Annual Meeting
  • May 25-26 2011 Collingwood: CBMU Semi-Annual Dinner
  • June 3rd 2011 Quebec City: CMLA Annual Meeting

Gordon Hearn presented a paper on "Limitations of Liability in the Modern Carriage World" at the Annual Conference of the Canadian Board of Marine Underwriters at Toronto on November 30th, 2010. Gordon will be speaking at the upcoming Transportation Lawyers Association annual Chicago Regional Seminar on January 21, 2011

Rui Fernandes will be speaking at the Institut maritime du Quebec's conference on Marine Oil Pollution Prevention and Combating: Where do we stand? being held February 2-3, 2011 in Quebec City.

 

2. Warehouses Beware! B.C. Court Disallows Standard Terms and Conditions

In the recent decision of Kruger Products Limited v. First Choice Logistics Inc., 2010 BCSC 1242 Justice Burnyeat had to deal with responsibility for a fire at a warehouse involving multiple parties. Kruger Products Limited was the owner of paper products stored at a warehouse operated by First Choice Logistics Inc. The origin of the fire was a fork lift operated by Terrance Bodnar. The fork lift was manufactured by Toyota and leased to the warehouse by Mason Forklift Ltd.

Prior to the trial and subsequent to settlement agreement the claimant Kruger Products discontinued its actions against Toyota and Mason. The fire destroyed a number of large paper rolls stored at the warehouse. The forklift was powered by propane. An original propane forklift used at the warehouse was noticed to overheat due to paper debris being sucked up into the body of the vehicle by the operation of the radiator cooling fan. Operators also noticed that they could smell paper smouldering within the machine. They were forced to stop the forklift and allow it to cool before cleaning it and putting it back into service. First Choice sought the assistance of Mason regarding these problems. As a result of discussions, an air compressor was obtained to "blow out" the forklift at various intervals and to have the exhaust pipe wrapped with fiberglass insulation in order to shield paper and debris from the hot surface of the exhaust pipe. The number of "problems" was reduced.

In mid July 2001, the original forklift was damaged and taken in for repair. Mason was asked to find a replacement unit during the repair period. Mason did not install venting and did not wrap the exhaust pipes of the forklift with fiberglass prior to delivering the forklift to First Choice. First Choice did not request the modifications and Scott was not consulted regarding the use of the forklift without the modifications.

Mr. Bodnar was aware that the replacement forklift was not wrapped with fiberglass tape. His supervisor advised him to proceed to use the forklift but to adhere to the procedure of blowing down the machine with compressed air as required. Justice Burnyeat held that the forklift was blown down with compressed air approximately 10 to 15 minutes prior to the fire. While passing an electric forklift at the warehouse Mr. Bodnar did not see any large pieces of paper in the aisle ahead of him. The electric forklift operator noticed a piece of paper about 2 to 3 feed long in the vicinity of the exhaust grill of Mr. Bodnar's forklift. The paper was on fire and drifted away from the back of the forklift landing at the base of a stack of rolls. The fire spread within the warehouse causing a total destruction of the building and its entire contents.

Kruger Products claimed against the warehouse under a partly written and partly oral contract. It claimed that First Choice breached its contract to take reasonable care of the warehouse, failure to train employees etc. In addition it claimed that First Choice breached their duties at common law and as a warehouser under the Warehouse Receipts Act of B.C. The losses amounted to $16,000,000.

First Choice and Mr. Bodnar defended on the basis of an agreement set out in a February 1, 2000 Warehouse Management Agreement accepted by Kruger Products through its conduct (as opposed to a proposal as alleged by Kruger Products). The Warehouse Management Agreement included a provision requiring Kruger Products to obtain insurance on the inventory in the warehouse and naming First Choice as an additional insured. Kruger Products was therefore barred and estopped from claiming against First Choice to the extend of the indemnity which would have been provided by such insurance. First Choice also relied on an appendix to the Agreement which excluded or limited the liability of First Choice. The appendix was developed by the International Warehouse Logistics Association and its "Canadian Standard Contract Terms and Conditions for Merchandise Warehouse."

First Choice also pleaded that Kruger Products was negligent by ordering the warehouse to stack the rolls higher than normal (creating a fire hazard) and failing to wrap the rolls in order to avoid paper sloughing off the rolls creating a housekeeping issue and fire hazard.

The judge found that the paper debris coming into contact with the unwrapped exhaust system of the forklift caused the fire. Other possible causes of the fire were rejected.

The judge reviewed the discussions and correspondence between the parties regarding the Warehouse Management Agreement. The Kruger Products representative died shortly after the fire and his recollections of the discussion were not available for trial. The judge heard the evidence of the First Choice representative who stated that he explained the agreement and left the agreement with the Kruger Products representative and the "it was his expectation that [the Kruger representative] would eventually get back to him with affirmation that the proposed terms were acceptable or, alternatively, would raise any concerns so that the parties could then negotiate further.

The judge then reviewed the formation of the Agreement and the appendix which had an effective date of February 1 2000. During the spring of 2000 the warehouse was being operated by First Choice and Kruger Products continued to forward product to the warehouse. First Choice followed up with the Kruger Products representative on numerous occasions to obtain the agreement. A number of excuses were provided as to why no comments were being forwarded. No agreement was signed. The judge found that the Agreement had many deficiencies. "Some of the drafting is incomprehensible." However, the judge was satisfied that the Agreement and the appendix accurately reflected the contract which existed between the two parties.

Justice Burnyeat then proceeded to go through the Agreement and appendix in detail. He found that:

a) First Choice did not "maintain the warehouse in food grade condition and cleanliness at all times" in accordance with the contract requirement. It failed to maintain the warehouse in a condition that met or exceeded professional warehousing management practices - housekeeping was poor;

b) First Choice breached its contract to "properly and safely maintain, and keep in sanitary, neat and orderly condition, all goods and products by failing to wrap the exhaust of the forklift.

c) First Choice owed Kruger Products a duty of care under the common law and pursuant to the provisions of the Warehouse Receipts Act. First Choice failed to meet the standard of care and the breaches caused the fire and the damages. The court found that the duty was as described in the Warehouse Receipts Act - as a "careful and vigilant owner." The court also found that section 2(4)(a) of the Act provides that any attempt by contract between the parties to reduce the care and diligence cannot prevail. The onus is a reverse onus - on the warehouse to show that it did not breach the duty of care, not on the owner of the goods to show that the warehouse breached such a duty. The court found that First Choice failed to take adequate preparations regarding dealing with fires, including a duty not to allow paper debris to build up.

"A careful and vigilant warehouseman in the position of First would have taken steps to sweep up the paper debris not only in the aisles but also at the base of the stacked parent rolls on a regular basis and not just after each shift. I find that these failures amount to a breach of the duties owed by First to [Kruger] [p. 116]… I also find that the failure to wrap the exhaust system of the Forklift was a breach of the duty owed by First to [Kruger][p.117]

d) The Toyota defendants and the Mason defendant were not liable for the damages.

e) Kruger Products was not contributorily negligent for the fire. The "unwrapped" rolls were not inherently dangerous. Stacking at a height over the recommended height was not contributory negligence.

f) A warehouser may limit its liability but not if it lowers the statutory duty of care. The paragraph dealing with any loss of profit or special, indirect or consequential damages was so poorly drafted that the judge refused to rectify the paragraph as "I cannot conclude that there would have been an agreement between the parties [on this issue]."

g) Paragraphs in the Agreement stating that goods were stored at the owner's risk of loss damage or delay caused by certain events were found contrary to other paragraphs in the Agreement and contrary to the duty to properly and safely maintain the goods.

h) There was a conflict in the warehouse receipt being used and in the Agreement (including the clause relating to indemnification). The warehouse receipt was also not signed. In addition the reverse side of the receipt was not provided to Kruger Products. As a result, the wording in the receipt allowing First Choice to limit liability was of no effect.

Having found that First Choice could not limit its liability under the Agreement, the judge had to decide what the limitation would be should he be found incorrect in the decision. The question to be determined was what made up a "package or stored unit" for the purposes of limitation. First Choice took the position that "unit" was a pallet or lift given how the warehouse dealt with the product. Kruger Products took the position that the "unit" measure was a case given how customers ordered the product. The court found that the limitation amount (if he was incorrect in his determination that there was no limitation) was the lesser of the monetary amount of the damage incurred or of twenty five times the monthly storage rate on any "case" (not pallet or lift).

i) The court rejected the position of First Choice that the Agreement required Kruger Products to obtain insurance for the inventory and to name First Choice as an additional insured. First Choice did not have an insurable interest in the goods. First Choice had a lien on the goods and that was the extent of its interest. The court also found that First Choice's position would result in an impairment of the duty of care owed by First Choice to Kruger Products and thus would be contrary to the Warehouse Receipts Act.

In summary, First Choice was found solely and fully liable to Kruger Products for the full loss.

The moral of the story is that, if you are a warehouser and you want to limit your liability in any way you should have a well drafted signed warehouse agreement that does not have any conflicting language.

Rui Fernandes

 

3. Don't Take Forum Selections Clauses Lightly

Earlier this year, Justices O'Connor, Gillese and Juriansz of the Ontario Court of Appeal confirmed that our courts strongly favour the enforcement of forum selection clauses in commercial contracts. A departure from enforcement will occur only in exceptional circumstances.

In Expedition Helicopters Inc. v. Honeywell Inc., 2010 ONCA 351, the Court of Appeal overturned the motions judge's dismissal of Honeywell's motion to stay Expedition's action by virtue of the forum selection clause contained in their agreement.

The dispute between Honeywell and Expedition arose following the crash of an Expedition helicopter that was operating with a Honeywell engine. The crash left the pilot and passenger dead. The helicopter was a total loss and Expedition sued Honeywell in Ontario.

Of note, Expedition is an Ontario company and Honeywell, a Delaware company. The crash occurred in Saskatchewan, the subject engine was manufactured in Pennsylvania and modified in a Honeywell facility located in South Carolina but managed by a different division in Arizona.

The agreement that was ultimately enforced between Expedition and Honeywell contained a forum selection clause stating, "this agreement shall be governed, controlled and interpreted under the law of the State of Arizona". The agreement also provided the Federal Court located in Phoenix, Arizona, with exclusive jurisdiction over all proceedings "arising out of or in connection with" the agreement.

The proper test for considering the enforcement of a forum selection clause is the "strong cause" test and not a forum non conveniens analysis. The strong cause test requires courts to hold contracting parties to their agreements absent an exceptional "strong cause" justifying departure.

The underlying presumption is that parties should be held to their bargains.

Incidentally, the strong cause test was first expressed in the British case, The "Eleftheria" [1969] 1 Lloyd Rep. 237 (ADM Div.) and subsequently affirmed in the Supreme Court decision in Z.I. Pompey Industrie v. ECU-Line N.V., [2003] 1 S.C.R. 450, the leading authority in Canada.

Expedition Helicopters, supra, serves as an important reminder to commercial parties that Canadian courts take forum selection clauses seriously; they are common components of international commercial transactions, repeatedly applied in both industry and by courts and therefore, such clauses will be judicially protected.

As Justice Bastarache observed at pp. 189-190 in Z.I. Pompey, supra,:

The "strong cause" test reflects the desirability that parties honour their contractual commitments and is consistent with the principals of order and fairness at the heart of private international law as well as those of certainty and security of transaction at the heart of international commercial transactions.

In Expedition Helicopters, supra, the distinction between the strong cause test and the forum non conveniens doctrine was the basis for Honeywell's successful appeal.

The strong cause test requires that full weight be given to a forum selection clause because the clause and its effect on the other factors relevant to the determination of forum should both be considered.

The motions judge mistakenly applied a forum non conveniens analysis that did not give proper weight to the forum selection clause by treating it as but one factor "and a subsidiary one at that".

At para. 24 of its decision, the Court of Appeal, confirmed that generally speaking, a forum selection clause in a commercial contract should be enforced.

The factors that may justify departure are few:

(a) was the plaintiff induced to agree to the clause by fraud or some other improper reason?
(b) is the contract otherwise unenforceable?
(c) does the court in the selected forum refuse to accept jurisdiction or is it otherwise unable to deal with the claim?
(d) is the claim, or the circumstances that have arisen, outside of what was reasonably contemplated by the parties when they agreed to the clause?
(e) can the plaintiff no longer expect a fair trial in the selected forum due to subsequent events that could not have been reasonably anticipated? or
(f) will enforcing the clause in the particular case frustrate some clear public policy?

A party hoping to avoid its bargain must show more than the mere inconvenience of having to assert a claim in a foreign jurisdiction. Litigation costs, such as the transportation of witnesses and evidence, that are disproportionate to the amount of the claim will not justify allowing a party to depart from its commercial agreement.

Interestingly, Expedition initially responded to Honeywell's motion by arguing that, among other things, its claim may be dismissed in Arizona because, under Arizona law, the claim may not have been filed in a timely fashion whereas such an issue would not arise in Ontario.

While this ultimately proved to be of no concern, the Court of Appeal noted, though perhaps in obiter, that a party should not be able to take advantage of its own failure to commence a timely suit in the proper jurisdiction by creating a prejudice that would might justify departure from the forum selection clause.

Leave to appeal this decision to the Supreme Court of Canada was refused in late November.

If only one thing is taken from this commentary, it should be that the law in Canada strongly favours the enforcement of forum selection clauses.

Parties, and counsel, who fail to give such clauses proper attention, do so at their own peril.

Sonny Ingram


4. Personal Injury Claims Assessment: Case comment on Rollin v. Baker et al, Ontario Court of Appeal, 2020 ONCA 569

The following case is significant from a practical point of view when considering the assessment of personal injury damages. The Court of Appeal has reminded parties and their lawyers that assessment of quantum must still be related back to cases previously adjudicated upon. Inflated assessment proposals well outside inflationary adjustments should be met with return requirements for citations. The following case shows a refusal by the Court of Appeal to accept general assessments of damage assessments by trial judges without case law support in their reasons. This should have a trickle down effect for any ongoing cases regarding assessment of general damages during negotiation including mediation.

In the Rollin v Baker case, the plaintiff suffered a severe broken wrist (Colles' fracture) of her left arm and attended an emergency room at a local hospital. The emergency room doctor, Dr. Baker, performed a procedure to reset the bone but failed to take an x-ray after the cast was applied to ensure that no displacement had occurred. He sent her home with instructions to obtain a follow up x-ray in 7-10 days and to see her family doctor. He did not tell her that there was a significant risk of slippage in the early stages after surgery or that slippage was very serious and should be closely monitored by having x-rays weekly for three weeks.

Unfortunately, the plaintiff could not visit her doctor who was on vacation, but she did obtain an x-ray, which showed no displacement or callus formation. She then visited her family doctor three weeks post surgery though he did not order another x-ray. A week later, the plaintiff discovered, after she jumped in a pool and her cast disintegrated, that her wrist looked like a claw and a big lump had formed on her wrist joint. The plaintiff then was required to have surgery to put the joint back together, which included surgery to install metal hardware. There were further complications including the need for a further surgery about 10 months later where the plate was removed and replaced and the long bone of her left forearm shortened. A third surgery two years post accident removed the hardware and she was then cleared to do normal tasks, though she continued with on going pain and discomfort from the wrist and her pelvis due to required bone graft. She also suffered interference with her normal daily activities.

Contrary to the Trial Judge's finding, the Court of Appeal found that Dr. Baker was not liable for damages arising out of the slippage since there was no evidence that the slippage occurred during the application of the cast. Dr. Baker did admit that he was negligent for failing to take an x-ray after the cast was applied; however, the follow up x-ray obtained by the plaintiff showed no signs of displacement. Further, as there was insufficient evidence and conflicting experts' opinions regarding standard practice, the Court of Appeal disagreed with the Trial Judge and determined that no finding could be made on the standard of care expected of an emergency room doctor regarding the level of follow up care that should have been made available to the plaintiff (the "capable hands" component).

The Court of Appeal, however, did confirm and fix liability upon Dr. Baker for failing to provide key information to the plaintiff that there was a significant risk of displacement post surgery, that such displacement was very serious and time sensitive and that an x-ray should be taken every 7-10 days post surgery for several weeks to monitor for displacement so that a fresh displacement could be corrected early. Dr. Baker was required to ensure that his patient was sufficiently equipped to obtain her own aftercare. Where a reasonable person could be expected to carry out the steps, the doctor's responsibility diminishes. The plaintiff here though did not receive the post-operative advice and directions and this failure deprived her of the tools to take adequate care of herself.

In terms of damages, there was no evidence that the plaintiff had suffered harm as a result of Dr. Baker not taking a second x-ray, as there was no evidence that the misalignment took place upon application of the cast. However, the Court of Appeal agreed that had the plaintiff received proper instructions and if she had obtained x-rays which would have discovered a fresh displacement, then the procedures to treat the displacement would have been less severe. As it was, she had endured two additional surgeries and had been left with pain, disfigurement and limitations in the use of her dominant hand.

The Court of Appeal went on to find that the Trial Judge's assessment of damages included consideration of Dr. Baker's failure to take an x-ray after the application of the cast, which could not be maintained. The quantum of general damages awarded by the Trial Judge was $90,000, but there was no explanation provided for the basis for this assessment and, the majority of the Court of Appeal found that the Trial Judge's reasons strongly suggested that the assessment included a determination that Dr. Baker was responsible for all of the damages that his patient suffered after the fall. As a result, the usual deference applied to the Trial Judge's assessment was not applied.

The Court of Appeal went on to state that $90,000 was several times the usual quantum awarded for non-pecuniary damages for a severely broken wrist even with severe after-effects, even in cases where there is full liability for same and so damages were re-assessed.

It is to be noted that the basis for any assessment of personal injury damages is based on the Supreme Court of Canada's trilogy of cases which established a cap for general damages for pain and suffering with the high end at $100,000 (Andrews v. Grand & Toy Alberta Ltd., [1978] 2 S.C.R. 229, Thornton v. School Dist. No. 57 (Prince George), [1978] 2 S.C.R. 267, Arnold v. Teno, [1978] 2 S.C.R. 287). The upper limit of the cap is applied to the most extreme cases (such as paraplegia) and the quantum of same now sits at approximately $320,000 with inflation. What is fair and reasonable for any injury must be determined in relation to this cap and any assessment must be guided in part by previous cases assessing such injuries.

The Court of Appeal outlined the law further to the trilogy and went on to a review of cases involving broken wrists with extended discomfort, which the Trial Judge had not done and determined that the range was $10,000 to $25,000 but added that Dr. Baker's liability did not include damages for the actual break or for the slippage. Dr. Baker was only responsible with respect to damages arising thereafter and resulted from the delayed detection of the displacement. For these damages, the court awarded a more modest $30,000 as being slightly above the range in their cited cases.

Justice Jurianz's dissent indicates an acceptance of the Trial Judge's assessment of damages as not unreasonable given the severity of the treatment required by the plaintiff resulting from the delay. His Honour disagreed with his fellow judges that the starting point of any review of damages of broken wrists that have been properly treated and maintained that medical malpractice cases involve different consideration and there was little case law to establish such a quantum. His Honour though did not disagree that the starting point was a review of the cases, which is the significant point here.

This case should be a wake up call that counsel and parties must be cognizant that a review of previous cases are key to support an assessment of damages in any personal injury case. A trial judge's finding will not be disturbed if there is a proper review of such cases when the case goes to trial. Almost more importantly, such review should be considered in any negotiation and/or mediation and is a reminder of the importance of the application of the cap on general damages.

Kim E. Stoll




This newsletter is published to keep our clients and friends informed of new and important legal developments. It is intended for information purposes only and does not constitute legal advice. You should not act or fail to act on anything based on any of the material contained herein without first consulting with a lawyer. The reading, sending or receiving of information from or via the newsletter does not create a lawyer-client relationship. Unless otherwise noted, all content on this newsletter (the "Content") including images, illustrations, designs, icons, photographs, and written and other materials are copyrights, trade-marks and/or other intellectual properties owned, controlled or licensed by Fernandes Hearn LLP. The Content may not be otherwise used, reproduced, broadcast, published,or retransmitted without the prior written permission of Fernandes Hearn LLP.

 


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