In this issue:
1. Firm and Industry News
2. Marine Insurance: Machinery Not Properly Packed Is Not Covered
3. Recent Cases of Interest
1. Firm and Industry News
- May 6th -7th Montreal: McGill University
Aviation Legal Liability Conference
- May 11-14 Las Vegas: Canadian Transport
Lawyers Association and Transportation Lawyers Assoc. Annual Meeting
- May 25-26 2011 Collingwood: Canadian Board
of Marine Underwriters Semi-Annual Meeting and Dinner
- June 3rd 2011 Quebec City: Canadian Maritime
Law Association Annual Meeting and Dinner
Rui Fernandes will be representing
the firm at the McGill University Aviation Legal Liability Conference.
Rui Fernandes, Gordon Hearn and Kim E. Stoll will be
representing the firm at the CTLA and TLA Annual Meeting in
Fernandes Hearn LLP Named One of Top 6 Maritime Boutique Firms
in the Country. "This boutique came on the scene in 1996,
when Rui Fernandes and Gordon Hearn left Cassels Brock &
Blackwell LLP. Maritime law is a major component of its general
transportation law practice, which also deals with matters involving
aviation, trucking, and rail carriage. Its nine lawyers serve
key clients such as Royal & Sun Alliance Insurance, Allianz
Insurance, Chubb Group of Insurance Companies, JEVCO Insurance
Co., NYK Logistics, Quik X Transportation Inc., and Whirlpool
Jet Boat Tours. Fernandes has helped solidify the firm's strong
reputation by publishing five texts on transportation law."
- Canadian Lawyer Magazine
2. Marine Insurance:
Machinery Not Properly Packed Is Not Covered
In a recent decision of the Federal Court of Canada
Justice Gauthier had an opportunity to look at the provisions of
an "all risks" marine policy in determining if damages
to a machine shipped from Canada to Germany were covered by the
policy. See Feuiltault Solution Systems Inc. v. Zurich Canada 2011 FC 260.
Feuiltault Solution Systems Inc. sued its their marine
insurers, Zurich Canada under an all risk policy (Institute Cargo
Clauses A) for damage to machines shipped to Germany in three separate
containers in May 2005.
The main issue in this matter was whether or not Feuiltault
met its burden of proving that the loss occurred through a fortuity,
whatever it may be. Another issue was whether the insurers established
that the proximate cause of the loss was the insufficient or unsuitable
packing of the cargo inside the containers and thus the loss was
excluded by paragraph 4.3 of the Institute Cargo Clauses A.
The machinery was loaded in three dry van general
cargo forty (40) foot containers at Feuiltault's premises. The three
containers were then loaded onboard the "Maersk Palermo"
together with another 1,345 containers for a voyage to Bremerhaven,
Germany via Rotterdam. The three containers were stowed in three
different locations onboard the ship: two were under deck and one
on deck protected on all sides, including the top, by other containers.
The voyage to Europe was uneventful. In fact, it was described as
ideal for a voyage at that time of the year. Captain Van Calcar,
the master of the ship, described the weather as beautiful with
very little movement of the ship and no spray over the deck. The
three containers were unloaded at Bremerhaven on June 2 and 3, 2005.
The court found that they were kept at the North Sea Terminal located
at least 100 metres away from the dock, and thus could not be affected
by any spray that might come over the dock if the sea was rough.
The containers were delivered to Feuiltault's buyer,
Mohn Media Mohndruck GmbH, in Gütersloh, Germany, on June 7,
2005. There was evidence that there were water droplets on the ceiling
of one container as well as on the machines loaded therein. There
was also some water on the floor discovered when the doors were
opened. All of the units were rusted into varying degrees.
After the arrival of the last container, Feuiltault
notified its insurers and Captain Schmidt, a certified Lloyd's agent,
who was appointed on behalf of Zurich to survey the damage. On August
3, 2005, shortly after Captain Schmidt completed his report, Zurich
denied coverage on the following basis:
The findings of the surveyor reveal, that the damage
is attributable to the inherent humidity / water contents of the
timber, which was used to secure the goods in the container. In
conclusion of the surveyor's opinion, the sweat water resulting
from the humidity of the square timber in conjunction with the
insufficient protection of the goods, led to the damage.
During the course of the trial, Zurich established
that the three containers were in good order and condition prior
to and at the end of the voyage. In fact, before the end of the
trial, Feuiltault acknowledged that this was no longer a disputed
fact. During the voyage, there was thus no ingress of either fresh
or sea water (as opposed to humid air) inside those containers.
The court also accepted evidence that there were no
claims for damage to the contents of any of the other 1,344 containers
onboard the ship, other than one reefer unit that broke down.
The court heard five experts on the cause of the loss
- Feuiltault called two experts: Dr. Aziz Laghdir and Mr. Luc Lafrenière.
Zurich called five experts: Dr. Paul Cooper, Mr. Alfred McKinlay,
Captain Mel Fernandes, Steve Bodzay and Mr. Christopher Mapp.
The court referred to British and Foreign Marine
Insurance Co. v Gaunt,  2 AC 41 (HL), and the Supreme
Court of Canada in Canadian National Railway Co. v Royal and
Sun Alliance Insurance Co., 2008 SCC 66,  3 SCR 453. The
latter refers to the classic statements on the meaning of "all
risks" in an all risks insurance policy (paras 79-80):
In construing these policies it is important to
bear in mind that they cover "all risk". These words
cannot, of course, be held to cover all damage however caused,
for such damage as is inevitable from ordinary wear and tear and
inevitable depreciation is not within policies. There is little
authority on the point, but the decision of Walton J. in Schloss
Brothers v. Stevens, on a policy in similar terms, states
the law accurately enough. He said that the words "all risk
by land and water" as used in the policy then in question
"were intended to cover all losses by any accidental cause
of any kind occurring during the transit... . There must be a
casualty." Damage, in other words, if it is to be covered
by policies such as these, must be due to some fortuitous circumstances
At page 57 Lord Summer added:
There are, of course, limits to "all risks". They are
risks and risks insured against. Accordingly the expression does
not cover inherent vice or mere wear and tear or British capture.
It covers a risk, not a certainty; it is something, which happens
to the subject-matter from without, not the natural behaviour
of that subject-matter, being what it is, in the circumstances
under which it is carried.
These well known passages essentially explain why
a Plaintiff needs to establish on a balance of probabilities the
occurrence of a fortuity in a case such as this one.
The court also noted the recent decision of the Supreme
Court of the United Kingdom in Global Process Systems Inc. v
Syarikat Takaful Malaysia Berhad,  UKSC 5 issued on February
1, 2011, where the Court reviewed the concept of fortuity in the
context of cargo insurance policies excluding damage proximately
caused by an inherent vice of the subject matter insured.
There is little case law dealing with the main exclusion
relied upon by Zurich and which reads as follows:
4.3 Loss, damage or expense caused by insufficiency
or unsuitability of packing or preparation of the subject matter
insured (for the purpose of this Clause 4.3 "packing"
shall be deemed to include stowage in a container or lift van
but only when such stowage is carried out prior to attachment
of this insurance or by the Assured or their servants).
Justice Gauthier held that "the comments of the
Supreme Court of Canada in the Canadian National Railway Co. decision above, in respect of the standard applicable to an exclusion
of "faulty and improper design" in an all-risks policy
are relevant. In effect, even if the exclusion at issue here is
very different from the one under review in that case, the approach
taken by the Supreme Court of Canada is still instructive. To determine
what is faulty or improper, the Court applied the standard of the
ordinary reasonably cautious and prudent person. As mentioned by
the Supreme Court of Canada, this standard is lower than a perfection
standard that takes into account all foreseeable risks but may sometimes
be higher than an industry standard that can include cutting corners
to cut costs. There appears to be no good reason to apply a different
standard to assess if the packing or preparation of the cargo is
Justice Gauthier found that having carefully considered
all the evidence in respect of the packing and preparation of the
machinery loaded by the assured inside the three containers under
review, that it was insufficient. Also, the wood used to brace the
cargo inside the container was
unsuitable given the absence of wrapping or protection of the machinery
against the additional moisture the wood introduced in the closed
environment in which the units were carried (a general dry van container).
"At a minimum, the individual machines should have been wrapped
in the same manner they were wrapped for the replacement shipments
of June 2005. There is no doubt in the Courts' (sic) mind that had
this been so, the cargo would not have rusted despite the condensation."
The court held that the Plaintiff had not established
by preponderance of proof that any fortuitous event or anything
of an accidental nature occurred during the insured transit. The
case was dismissed.
3. Recent Cases of Interest
Recent Cases of Interest
A. Environmental Assessment and the Detroit / Ontario
Bridge - In two separate proceedings that were heard together,
the Sierra Club of Canada and the Canadian Transit Company sought
a judicial review of a December 3, 2009, decision by the Minister
of Transport, the Minister of Fisheries and Oceans, and the Windsor
Port Authority that a proposed new bridge and accompanying infrastructure
linking Windsor, Ontario with Detroit, Michigan is not likely to
cause significant adverse environmental effects. In essence, the
decision was that the proposed new bridge plan met the requirements
of the Canadian Environmental Assessment Act, S.C. 1993,
c.37. After an extensive review and analysis the Federal Court of
Canada dismissed the judicial review. See the full case at 2011
FC 515 and 517.
B. Pilots and Retirement Age - An application
for judicial review from a decision of the Canadian Human Rights
Tribunal regarding the age of retirement for pilots was heard by
the Federal Court of Canada and can be found at 2011 FC 120. The
court found the Tribunal's finding reasonable that Air Canada had
not established that an age under 60 was a bona fide occupational
requirement for its airline pilots at the time that, two pilots,
Messrs. Vilven and Kelly's employment was terminated in 2003 and
2005 respectively. However, the Tribunal's finding that Air Canada
had not established that age was a bona fide occupational
requirement for its pilots in light of the post-November 2006 ICAO
standards was not reasonable. As result, Air Canada's application
for judicial review as it related to the bona fide occupational
requirement issue was allowed in part. The question of whether Air
Canada has established that age was a bona fide occupational
requirement for its airline pilots after November of 2006 was remitted
to the same panel of the Tribunal, if available, for re-determination
on the basis of the existing record.
C. Shining a Light at an Aircraft Charge -
In R. v. Khorfan, 2011 ABPC 84 the accused was charged under
the Canadian Aviation Regulations to the Aeronautics Act as follows:
"On or about the 21st day of January, 2010,
at or near Calgary, Alberta, did unlawfully project or cause to
be projected a direct bright light source into navigable airspace
in such a manner as to create a hazard to aviation safety or cause
damage to an aircraft or injury to persons on board the aircraft,
contrary to Section 601.20 of the Canadian Aviation Regulations,
and did thereby commit an offence pursuant to Section 7.3(3) of
the Aeronautics Act."
The Crown called evidence from an air traffic controller
who was on duty at the Calgary International Airport on the night
of January 21, 2010. The Crown also called evidence from the police
officer who found the accused in his vehicle with a bright light
emanating from his vehicle pointing upwards at the end of runway
16 of the Calgary International Airport, which runs north and south.
In addition, the Crown entered, as exhibits, a video of the incident
taken from the police officer's vehicle as well as an expert's report
pursuant to section 657.3 of the Criminal Code regarding
the potential hazard to aviation safety created by the shining of
a bright light from the car into the sky at the end of runway 16.
Based on the expert's credentials and experience, the court accepted
him as an expert and allowed his opinions in the report to be entered
in the area of: "the effect of introducing a directed bright
light into the cockpit of an aircraft on the pilot and crew and
their ability to safely operate the aircraft". Based on the
information provided, the expert opined that the shining of the
light beam, as witnessed by the police officer and captured on the
police car video, represented "a real hazard to aviation safety".
The accused called no evidence. The court found the accused guilty
of the offence.
D. Seizure of Aircraft for Non Payment of Airport
Fees - On March 31, 2010, Thomas Cook Canada, Inc. applied for
an order pursuant to s. 243 (1) of the Bankruptcy and Insolvency
Act and s. 101 of the Courts of Justice Act appointing
FTI Consulting Canada Inc. as receiver of the assets, undertakings
and properties of Skyservice Airlines Inc. At 11:00 a.m. on March
31, 2010, Justice Gans granted the receivership order.
Priority disputes immediately arose involving the
Greater Toronto Airports Authority, the Ottawa MacDonald-Cartier
International Airport Authority, the Winnipeg Airports Authority
Inc., and NAV Canada on one side and International Lease Finance
Corporation, Thomson Airways Limited, Sunwing Tours Inc., IAI V,
Inc. and MCAP Europe Limited on the other side.
In the hours after the granting of the Receivership
Order, GTAA brought its application, in the Court, for aircraft
seizure and detention orders and WAA brought an application for
an aircraft seizure and detention order in the Court of Queen's
Bench for Manitoba. NAV Canada verbally gave notice of its intention
to bring an application for similar relief and formally brought
its application on April 6, 2010. On April 6, 2010, OMCIAA brought
an application, in this Court, for an aircraft seizure and detention
The Airport Authorities and NAV Canada grounded their
applications in s. 9 of the Airport Transfer (Miscellaneous Matters)
Act, S.C. 1992, c.5 (the "Airport Transfer Act")
and s. 56 of Civil Air Navigation Services Commercialization
Act, S.C. 1996, c. 20 ("CANSCA") Section 9(1) of the Airport Transfer Act reads:
9 (1) Where the amount of any landing fees, general
terminal fees or other charges related to the use of an airport,
and interest thereon, set by a designated airport authority in
respect of an airport operated by the authority has not been paid,
the authority may, in addition to any other remedy available for
the collection of the amount and whether or not a judgment for
the collection of the amount has been obtained, on application
to the superior court of the province in which any aircraft owned
or operated by the person liable to pay the amount is situated,
obtain an order of the court, issued on such terms as the court
considers necessary, authorizing the authority to seize and detain
Section 56(1) of CANSCA reads:
56 (1) In addition to any other remedy available
for the collection of an unpaid and overdue charge imposed by
the Corporation for air navigation services, and whether or not
a judgment for the collection of the charge has been obtained,
the Corporation may apply to the superior court of the province
in which any aircraft owned or operated by the person liable to
pay the charge is situated for an order, issued on such terms
as the court considers appropriate, authorizing the Corporation
to seize and detain any such aircraft until the charge is paid
or a bond or other security for the unpaid and overdue amount
in a form satisfactory to the Corporation is deposited with the
The aircraft lessors, ILFC, Thomson, Sunwing, IAI
and MCAP, brought motions seeking declarations, among other things,
that none of NAV Canada, GTAA, OMCIAA and WAA were entitled to seize
or detain various aircraft for any amounts alleged to be owing by
Skyservice to any of the Airport Authorities or to NAV Canada.
There was no dispute that prior to the Receivership
Order, Skyservice operated commercial aircraft that landed at the
various airports and used the facilities and services provided by
the Airport Authorities and NAV Canada. Nor was it disputed that,
as a consequence, Skyservice owed GTAA, OMCIAA and WAA for landing
fees, general terminal fees, airport improvement fees and/ or other
charges related to the use of the airports and, further, that Skyservice
owed monies to NAV Canada for air navigation services provided by
The Airport Authorities and NAV Canada were attempting
to recover amounts due to them from Skyservice by enforcing their
rights as against the aircraft formerly used by Skyservice and which
had been leased from the various lessors. The lessors took the position
that circumstances were such that the Airport Authorities and NAV
Canada did not have the right to seize and detain such aircraft
and that the aircraft should be returned to the lessors without
payment to the Airport Authorities and NAV Canada.
The court held that the Airport Authorities and Nav
Canada were entitled to the seizures and were entitled to be paid.
See Skyservice Airlines Inc. (Re), 2011 ONSC 703.
E. Transporting Dangerous Goods without a Placard - In R. v. Quik X Transportation Inc., 2011 ONCJ 9 Quik X
Transportation Inc. was charged with two offences under the Transportation
of Dangerous Goods (TDG) Act: s. 3 (a) Fail to comply with federal
regulations safety requirement - no shipping document with prescribed
information; and s. 3 (b) fail to display prescribed safety mark.
Officer Ronald Demerchant of the Ministry of Transportation
of Ontario (MTO) testified that he carried out a level three inspection
of a commercial motor vehicle - a three-axle Western Star tractor
drawing a two-axle utility trailer -- at about 2 a.m. on June 9,
2010 at the Whitby Truck Inspection Station in the Regional Municipality
During the investigation Demerchant noted there were
dangerous goods placards on the sides and rear of the trailer as
required. A dangerous goods placard that was required on the front
of the trailer was missing.
Demerchant, a qualified dangerous goods inspector
and trainer of dangerous goods inspectors, said he checked documentation
and dangerous goods information pertaining to the tractor-trailer
combination which is registered to Quik X Transportation Inc. The
documentation presented to him was set out according to U.S. standards,
which were near identical to information required to meet Canadian
regulations, albeit in a different format, in imperial measures
rather than metric measures.
Section 9.1 of the TDG Regulations allows U.S. based
consignments to be transported into or through Canada in accordance
with the classification, marking labeling, placarding and documentation
requirements of 49 CFR (U.S. legislation) under specified conditions.
If these dangerous goods originating from the U.S. were still "in
transport" they can be shipped to the destination in Canada
using the U.S. shipping document. The court held that they were
in fact still in transit and dismissed the first charge.
As to the second charge, the failure to display a
placard, the court accepted the evidence of Officer Demerchant that
the trailer in question was missing the prescribed dangerous goods
safety placard from the front of the trailer. There was no evidence
to the contrary and as such the judge found that the Crown had proven
the charge beyond a reasonable doubt.
Quik X argued that the driver was not charged and
that the company should not be found responsible for the driver's
error. The court reviewed the law and determined that in order to
escape prosecution the company had to show that it exercised due
diligence to avoid the commission of the offence. The only evidence
before the court was the certificate of training of the driver.
The court held that no evidence of what the training consisted of
was tendered by Quik X and therefore the due diligence burden had
not been met.
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