this newsletter in PDF
In this issue:
1. Firm and Industry News
2. New U.S. Food Safety Regulations Will Impact Canadian Food Haulers
3. U.S. Fifth Amendment Not Valid in Ontario
4. Duty of Insurer on a Fleet Policy to Point Out Gaps in Coverage
5. Punitive Damages Update: $4.5 Million Against Two Insurers
6. Aviation: Revisiting 261/04 - A Mixed Bag For Passengers and
7. Unlu v Air Canada: Provincial Consumer Protection Law
in a Federal Sphere
1. Firm and Industry News
- Fernandes Hearn LLP is pleased to announce
that the Firm has been listed for inclusion in Chambers and Partners
Global 2013 as one of the best "Shipping" Law Firms
- Gordon Hearn will be profiled as President
of the Transportation Lawyers Association in the April edition
of Lawyer Monthly magazine. The interview will focus on
the Association and developments in the area of Transportation
- Rui Fernandes presented a paper on "New
Developments in Canadian Subrogation Law" at the Recovery
Forum in New York on April 11th, 2013 and presented a webinar
for the Ontario Trucking Association on the Kruger Products
Limited v. First Choice Logistics Inc. decision and implications
for the trucking industry on April 25th, 2013.
- Rui Fernandes, Gordon Hearn and Kim
Stoll will be representing the firm at the Transportation
Lawyers Association Annual Conference and the Canadian Transport
Lawyers' Association Mid-Year Meeting in Napa, California on April
30th to May 4th, 2013. Gordon Hearn is the current President
of the Transportation Lawyers' Association and is running the
conference in Napa and will be giving opening remarks. Kim
Stoll will be moderating the Canadian Law Workshop where Rui
Fernandes will be presenting a case review.
- Chris Afonso will be presenting a paper
on "Third Party Logistics Contracts: Avoiding Common Pitfalls"
at the 46th Annual Conference for Supply Chain Canada in Mississauga
on May 14th, 2013.
- Rui Fernandes, Kim Stoll and Chris Afonso will be representing the firm at the annual Canadian International
Freight Forwarders Gala Dinner in Mississauga on May9th, 2013.
- Kim Stoll will be representing the firm
at the annual conference of The Chartered Institute of Logistics
and Transport in North America in Montreal, Quebec on May 7, 2013.
- Rui Fernandes and Kim Stoll will
be representing the firm at the Semi-Annual Meeting of the Canadian
Board of Marine Underwriters on May 22 and 23rd, 2013 at Manoir
- Rui Fernandes will be presenting on a panel
on "Law & Order: Police and Criminal Investigation in
the Boating and Small Vessel Sector" at the annual seminar
of the Canadian Maritime Law Association on June 7th, 2013 in
- Rui Fernandes will be presenting a paper
on "Constitutional Jurisprudence in Transportation Law -
Perspectives on Canadian Federalism and the Division of Powers"
at the Commons Institute Seminar on Supreme Court and Constitutional
Litigation in Toronto on June 27th, 2013.
- LexisNexis Canada has released its Halsbury's
Laws of Canada - Maritime Law title. Rui Fernandes is the author of this new work. This completes Rui's trilogy of
works for LexisNexis' Halsbury's Laws of Canada. Last December
his Transportation - Carriage of Goods and Transportation - Railway
Law was published. The current work is described by LexisNexis
with the following introduction:
"The globalization of the economy has ballooned the international
shipping community in size, making the sea an integral means of
modern trade. This title is a complete source of admiralty law
across Canada. Covering both the general issues of maritime law,
such as its legislative and constitutional framework, and the
more specific issues, such as regulatory and safety requirements
and the operation of ships, this title is essential for practitioners
working in fields of trade, administrative and international law."
2. New U.S.
Food Safety Regulations Will Impact Canadian Food Haulers
The U.S. Food Safety Modernization Act ("FSMA")
was enacted on January 4, 2011 but sat idle until after the U.S.
election. Now, lawmakers in the U.S. are acting on the legislation
and putting it into effect.
The FSMA gives the Food and Drug Administration ("FDA")
"sweeping new powers," including the ability to send people
to prison for felonies related to the careless or negligent handling
Under the new rules, food companies will be required
to demonstrate care of their products through the entire supply
chain, or from "field to fork." This, of course, extends
to the transportation of their products.
Exactly two years after the FSMA enactment the FDA
released two proposed Rules - one relating to the hazard analysis
and risk-based preventive controls requirements of FSMA and the
other relating to the establishment of science-based standards for
growing, harvesting, packing and holding produce on domestic and
foreign farms. Comments on both proposed rules are due by May 16,
Preventive Control Requirement
One of the key aspects of the FSMA is the requirement
that food facilities recognize and address risks associated with
their product by implementing requirements for "hazard analyses"
and "risk-based preventive controls". Unfortunately, the
FSMA doesn't provide any insight into what these hazard analyses
or risk-based preventive controls should look like.
The rule proposes to amend the FDA's regulation for
Current Good Manufacturing Practice in Manufacturing, Packing, or
Holding Human Food to modernize it and add requirements for the
establishment and implementation of hazard analysis and risk-based
preventive controls by domestic and foreign facilities.
These preventive controls would include requirements
for food facilities (with limited exceptions) to maintain a food
safety plan, perform a hazard analysis, and institute preventive
controls for the mitigation of those hazards. Facilities would also
be required to monitor their controls, verify that they were effective,
take any appropriate corrective actions, and maintain records documenting
these actions. All records have to be kept for two years and be
available to the FDA. Trucking companies must now determine by asking
their clients who ship food as to where they fit in the plan.
The new regulations will also require a product tracing
system that can be used to track and trace all food products that
are produced in or imported into the U.S. These requirements are
likely to include a temperature traceability aspect, meaning that
the FDA will want to see proof that food was transported at the
proper temperature throughout its journey. Trucking companies will
be a vital part of any compliance plan.
A final rule is expected to be published in 2014,
with full enforcement in place by 2015. Trucking companies should
be prepared to face shippers insisting on more transparency and
control over the transportation of their products. Costs to trucking
companies may increase in order to upgrade fleets to provide more
information. Trailer manufacturers may be required to provide some
of the solutions including better locking doors, compartmentalizing
product from various shippers, and temperature sensors that can
send information remotely.
Within the next few months, the FDA hopes to issue
a proposed rule on preventative safety controls for animal feed
as well as proposed regulations related to importer accountability
for food safety.
The FDA is also setting requirements for the safe
transport of food and hopes to have a specific proposal out later
this year. It is also working to set standards to prevent intentional
contamination of food.
Growing, Harvesting, Packing and Holding Produce
The proposed produce rule sets science-based standards
for the safe production and harvesting of fruits and vegetables
to minimize the risk of serious adverse health consequences or death.
FDA proposes to set standards associated with identified
routes of microbial contamination of produce, including: agricultural
water; biological soil amendments of animal origin; health and hygiene;
animals in the growing area; and equipment, tools and buildings.
These new rules have been slow arriving. According
to the FDA, roughly one in six Americans suffers from a food-borne
illness each year, and about 3,000 die. The U.S. has had numerous
outbreaks from food-borne illnesses tied to salmonella, E. coli
"We have one of the safest food supplies
in the world, but we have work to do to stop food borne illnesses
before they start," Dr. Margaret Hamburg, commissioner of
the FDA said in a press conference. "While the FDA responds
very quickly and effectively in response to outbreaks, containing
them and finding their source and taking other necessary actions,
we really need to do more than react after the fact. Preventing
problems before they cause harm is not only common sense, it is
the key to food safety in the 21st century."
After a public comment period, the FDA will adjust
the rules based on the feedback.
3. U.S. Fifth Amendment Not Valid in Ontario
This case involved a proceeding which originated with
a Letter of Request issued by the Superior Court of the State of
California for the County of Los Angeles, in a civil action pending
in California relating to the alleged fraudulent offer and sale
of securities in California. The Letter of Request sought the assistance
of the Ontario court in ordering Gertrude Barnhardt a resident of
Ontario to provide testimony and documents relevant to the California
Action, and specifically in relation to certain alleged fraudulent
transfers of money from CanAm to a corporation known as Taurus Financial
Advisors Ltd. of which Gertrude Barnhardt was the sole shareholder
and only officer.
The issue in this reported decision (*1) was whether
a witness on an examination conducted in an Ontario proceeding,
under Ontario law, was entitled to refuse to answer questions on
the basis of the Fifth Amendment to the United States Constitution
(the U.S. rule against self- incrimination). Put in the vernacular,
would the Ontario Court permit a witness in Ontario to "plead
The concern expressed by counsel for Ms. Barnhardt
was that answers given by Ms. Barnhardt under oath in Ontario, and
reduced to a transcript for use in the California action, could
then be subsequently utilized by the FBI or investigators to found
evidentiary support against or to bring to fruition, criminal charges
against Ms. Barnhardt.
The Court noted that Ontario Courts have consistently
held that the process of taking evidence under Letters of Request
is not governed by foreign law where fundamental values, such as
the rights of witnesses, are concerned.
The Court also noted that Canadian courts, when asked
to assist courts of the United States in procuring evidence for
civil trials there, should be aware of the risk that might put citizens
or residents of Canada in the worst of both worlds - compulsion
to testify in Canada followed by use of the compelled material in
The judge refused to permit Ms. Barnhardt to "plead
the Fifth" and made several points outlining his reasoning:
a) There was no evidence that an FBI investigation
had proceeded or matured;
b) The receiver in the U.S. action had given an undertaking
not to make the information and evidence obtained available to third
parties save as may be required by law; and
c) In some respects, the sovereignty of a U.S. court
can be impinged or underappreciated, if a Canadian court rules,
under circumstances such as this, as to the validity or applicability
of Ms. Barnhardt's Fifth Amendment rights. Stated differently, the
Court was satisfied that the admission of transcript evidence taken
in Ontario, to be potentially utilized in an American criminal proceeding
against Ms. Barnhardt, was properly a matter for the American court,
not a Canadian court.
The judge stated: (*2):
It is for an American court to determine (if
such determination might ever be made), whether the admission
of any compelled transcript evidence from Ms. Barnhardt would
shock the judicial conscience or violate baseline due-process
requirements with respect to Ms. Barnhardt's Fifth Amendment rights.
Any American court considering this matter will have available
to it a full record as well as an appreciation of the fact that
Ms. Barnhardt's evidence was compelled by a court order made by
a Canadian judge. An American court will then apply its standards
to American law in determining whether any potential use of self-incriminating
transcript evi- dence provided by Ms. Barnhardt pursuant to a
Canadian court order can be introduced and made applicable in
American court proceedings.
The judge was of the view that arguments relating
to the rights and protections afforded by the Fifth Amendment to
the United States Constitution remained available to Ms. Barnhardt,
if and when she was required to rely upon such rights in proceedings
in an American court, when attempts may be made to have her compelled
transcript evidence used against her.
(*1) Davidson v. Barnhardt et al. (2012) 113 O.R. (3d) 475.
(*2) Ibid, at paragraph 17.
4. Duty of Insurer on a Fleet Policy to Point Out
Gaps in Coverage
In Ostenda v. Miranda (2012) ONSC 7346, the
litigation had its origin in a motor vehicle accident that occurred
on October 23, 2008 in Gurnee, Illinois, U.S.A. According to the
statement of claim, on that occasion, the defendant Bahena Miranda
was driving a car that struck the plaintiff Jan Ostenda, causing
him catastrophic injuries. At the time, Mr. Ostenda was a truck
driver employed by a transportation company known as Synergy Transportation
System Inc. Zurich had issued a fleet motor vehicle coverage policy
to Synergy, and thus Mr. Ostenda was covered by that policy.
The Zurich policy issued to Synergy did not contain
a so-called "family protection coverage endorsement - OPCF44R".
An OPCF44R endorsement, when included with an automobile insurance
policy in Ontario, provides uninsured or underinsured coverage.
Where an injured party is covered by such a policy (including an
OPCF44R endorsement) and he or she is injured through the negligence
of an uninsured or underinsured driver, the injured party may recover
the balance of their monetary damage award against their own insurer
(up to their own policy limits).
Bahena Miranda had either no insurance or very modest
insurance coverage. Mr. Ostenda sued Zurich and his insurance broker
for failing to include the OPCF44R endorsement. The statement of
claim asserted that Zurich held out the broker as its agent and
was, therefore, in law responsible for the negligence and breach
of contract of the broker. The statement of claim further asserted
that Zurich was negligent itself by reason of its failure to require
the broker to inform and advise Synergy and Ostenda of the availability
and need to obtain underinsurance coverage.
The court held that it is well established that insurance
brokers owe a duty to their customers to provide not only information
about available coverage, but also to advise about which forms of
coverage and the costs customers require in order to meet their
needs. The court referred to the Supreme Court of Canada decision
in Fletcher v. Manitoba Insurance Co. (*1) and to the decision
of the Ontario Court of Appeal in Fine's Flowers Ltd. v. General
Accident Assurance Co. of Canada (*2).
The court held that the broker was involved on behalf
of the insured and had to meet duties as set out in Fletcher and in Fine's Flowers. The coverage that was offered by Zurich
and the policy it ultimately issued were consistent with that requested
by the broker, in that they did not reference or include OPCF44R
coverage. The broker's liability was not in issue in this reported
decision. The real issue was the liability of Zurich, if any.
After it received the application from the broker,
Zurich conducted its own risk assessment of Synergy's operations,
and it did so in relation to subsequent policy renewals. In the
course of those risk assessments, Zurich's representatives interacted
with Synergy's personnel and prepared and supplied risk assessment
reports to Synergy. Mr. Ostenda submitted that this interaction
and, in particular, Zurich's involvement and its advice to Synergy
regarding risks, were such as to impose a duty upon Zurich to warn
and counsel Synergy regarding potential gaps in its insurance coverage.
The court disagreed. Justice Stinson stated (*3):
To extend the principle in Fine's Flowers to the present case would require the court to accept that Zurich
was performing the same function as the broker and accordingly
had the same duties. The extension of that principle, however,
would require the court to accept that the customer looked to
the insurer and placed reliance upon it in the same fashion as
the customer in Fine's Flowers did in its broker, and further
that the insurer knowingly and willingly undertook the responsibilities
of a broker in the same fashion. In my view, the evidence in the
present case fails to establish either premise.
The court added at paragraph 45:
From a public policy perspective, I reach
the same conclusion. Professional insurance brokers are a regulated
industry with codes of conduct and specific obligations. They
perform specific services, including assessing customers' insurance
needs, preparing and advising with respect to applications for
insurance coverage and procuring insurance policies for the customer.
For so doing, they are compensated, frequently on the basis of
a commission paid by the insurer as a percentage of the policy
premium. That commission income covers the costs of the services
provided by the broker.
Interestingly, the judge also noted that if the law
were to impose upon insurers a similar duty to that undertaken by
brokers - to explore and advise regarding a customer's insurance
requirements - considerable duplication of effort would result.
In effect, insurers would be required to perform virtually the same
function as brokers. The result would be a duplication of effort
and expense that would inevitably be passed on to the customer,
thereby increasing the costs of insurance coverage.
The court also rejected the argument that Zurich should
be responsible for the failure of the broker as its own agent. The
evidence did not show that the broker had any legal authority to
represent Zurich. There was no evidence that the broker had authority
to bind Zurich in relation to the risk or to countersign the policy.
Rather, the policy was issued by Zurich and not the broker.
(*1)  S.C.J. No. 121
(*2) 17 O.R. (2d) 529 (C.A.)
(*3) at paragraph 37
5. Punitive Damages Update: An Award of $4.5 Million
Against Two Insurers
There have been several cases recently where awards
of punitive damages have been granted. The Supreme Court of Canada
seminal case of Pilot v Whiten, cited below, was shocking
both in facts and the penalty applied. The Supreme Court of Canada
set out the parameters for consideration by courts for those situations
where the actions of insurers in respect of their insureds were
considered to be so outside the appropriate as to attract a punishing
monetary award. With this in mind, the top award of punitive damages
against an insurer as confirmed by the Supreme Court of Canada in Pilot v Whiten was $1,000,000. The Saskatchewan Court of
Queen's Bench has now weighed in with a possible new high-water
mark. The case is under appeal and we will know in due course whether
the award will stand or be over-turned.
This article will revisit the Pilot v Whiten case and review Branco v. American Home Assurance Co., infra (a decision of the Saskatchewan Court of Queen's Bench).
Punitive Damages Review: The Current High-Water
Mark Case - Pilot v Whiten
It is, of course, important to review where we have
been in order to examine where we are going. The Supreme Court of
Canada in the Whiten v Pilot Insurance Corporation 
1 S.C.R.595 ("Pilot v Whiten") provided the standard
that all insurers live by in terms of appropriate activity. Essentially,
there is an implied obligation on the part of the insurer to deal
with claims of its insured with the utmost good faith.
Pilot v. Whiten was a shocking case. Binnie
J.'s opening words in his reasons in the first paragraph of the
case basically said it all.
1. This case raises once again the spectre of uncontrolled
and uncontrollable awards of punitive damages in civil actions.
The jury was clearly outraged by the high-handed tactics employed
by the respondent, Pilot Insurance Company, following its unjustified
refusal to pay the appellant's claim under a fire insurance policy
(ultimately quantified at approximately $345,000). Pilot forced
an eight-week trial on an allegation of arson that the jury obviously
considered trumped up. It forced her to put at risk her only remaining
asset (the insurance claim) plus approximately $320,000 in legal
costs that she did not have. The denial of the claim was designed
to force her to make an unfair settlement for less than she was
entitled to. The conduct was planned and deliberate and continued
for over two years, while the financial situation of the appellant
grew increasingly desperate. Evidently concluding that the arson
defence from the outset was unsustainable and made in bad faith,
the jury added an award of punitive damages of $1 million, in
effect providing the appellant with a "windfall" that
added something less than treble damages to her actual out-of-pocket
The Court of Appeal had overturned the jury's award
of $1,000,000 and reduced it to a more traditional and modest amount
Binnie J. and the majority of the Supreme Court of
Canada, however, reinstated the jury's unprecedented award. Binnie
J. noted the trial judge's statement, when endorsing the jury's
decision, that a very substantial punitive damage award was required
punish the defendant and to effectively send the
implied reminder to the defendant and to other insurers that they
owe their insureds a duty of good faith in responding to claims
made under policies of insurance issued by them." The award,
though high, was within "rational limits". (*1)
In its decision, the Supreme Court of Canada set out
the principles governing punitive damages in a series of points:
(1) Punitive damages are very much the exception
rather than the rule
(2) they are imposed only if there has been high-handed, malicious,
arbitrary or highly reprehensible misconduct that departs to a
marked degree from ordinary standards of decent behaviour.
(3) Where they are awarded, punitive damages should be assessed
in an amount reasonably proportionate to such factors as the harm
caused, the degree of the misconduct, the relative vulnerability
of the plaintiff and any advantage or profit gained by the defendant.
(4) Having regard to any other fines or penalties suffered by
the defendant for the misconduct in question.
(5) Punitive damages are generally given only where the misconduct
would otherwise be unpunished or where other penalties are or
are likely to be inadequate to achieve the objectives of retribution,
deterrence and denunciation.
(6) Their purpose is not to compensate the plaintiff, but
(7) to give a defendant his or her just desert (retribution),
to deter the defendant and others from similar misconduct in the
future (deterrence), and to mark the community's collective condemnation
(denunciation) of what has happened.
(8) Punitive damages are awarded only where compensatory damages,
which to some extent are punitive, are insufficient to accomplish
these objectives, and
(9) they are given in an amount that is no greater than necessary
to rationally accomplish their purpose.
(10) While normally the state would be the recipient of any fine
or penalty for misconduct, the plaintiff will keep punitive damages
as a "windfall" in addition to compensatory damages.
(11) Judges and juries in our system have usually found that moderate
awards of punitive damages, which inevitably carry a stigma in
the broader community, are generally sufficient.
Pilot v Whiten is considered to be the "high-water
mark". There is now potentially a new high-water mark case
that is making its way up the appeal ladder.
Branco v American Home Assurance, Cameco Corporation,
Kumtor Operating Company and Zurich Life Insurance Company,
2013 SKQB 98 (Saskatchewan Court of Queen's Bench) March 21, 2013.
Luciano Branco was employed by Kumtor Operating Company
as a welder in Kyrgyztan. He was described by the court as being
an excellent employee with a perfect attendance record. Unfortunately,
Mr. Branco suffered a work related injury to his foot. American
Home provided insurance akin to Workers Compensation benefits (the
"WCB insurer"). Zurich Life Insurance Company, located
in Switzerland, provided long term disability benefits (the "LTD
Even though Mr. Branco had surgery and took physiotherapy
and rehabilitation therapy, according to his doctor, he was permanently
disabled and unable to return to his employment. The WCB insurer,
despite this confirmation of status, made a cash settlement offer
of $22,500 US. A comment was made in file by the handler:
I called the claimant and he did not accept our
offer and said that he was going to get an attorney. I hope he
re-considers because he lives in Portugal and he will have to
go back to Canada to get an attorney and this whole process is
going to take years to settle. Here we go CANADA!!!!!
It went downhill from there from requiring Mr. Branco
to pay for his own rehabilitation and medical appointments to insistence
on retraining at jobs well below his previous earning potential
and incompatible with his then current physical ability. Mr. Branco
went where he was directed to go including a vocational rehabilitation
facility over three hours from his home in Portugal. Despite an
opinion from the Saskatchewan Workers Compensation Board that Mr.
Branco was not an appropriate candidate for retraining given his
nearness to retirement of about 10 years, the insurer took this
as a refusal to take rehabilitation and ultimately discontinued
payment of benefits in 2004. Further, there was payment inconsistency
over the years for no apparent reason. Even after agreement that
Mr. Branco was entitled to various lifetime payments, these were
not made until the day before trial. The WCB insurer was said to
have engaged in court delay tactics.
With regard to the LTD Insurer, there were some difficulties
with the proper submission of forms. The LTD insurer rather than
paying benefits brought legal proceedings in the Canadian proceedings
alleging that Switzerland was the more convenient forum. Costs were
awarded against the LTD insurer. Even though the LTD insurer agreed
that the first 24 months of benefits were payable ("disabled
from his own occupation"), it refused to pay benefits after
Mr. Branco would not accept an inappropriate reduction of $9,000
representing legal fees incurred even though there was the award
of costs against the insurer. The payments were not made up until
9 years after the accident and nearly 6 years after litigation started
and 1.5 years after the independent medical, which it eventually
accepted. The LTD insurer instead engaged in low offers to settle
and engaged in numerous court delay tactics. It failed to pay despite
knowing there was an obligation to do so and when it knew that Mr.
Branco was severely affected.
Throughout the years in which the case took to get
to trial, Mr. Branco suffered financially to the point where he
relied on family loans and borrowed clothing. His marriage was damaged
and he was depressed. Mr. Branco was ashamed that he was unable
to support himself and his family, which went to the root of his
personal self-worth and integrity. He was put through many defence
medicals and was diagnosed by 7 out of 10 doctors as having a rare
disorder, Reflex Sympathetic Dystrophy or complex regional pain
syndrome, which has a very poor success rate of rehabilitation.
The Decision on Punitive Damages
Acton J. cited Pilot v Whiten as the accepted
law in Canada on punitive damages and quoted extensively from it,
including the following excerpt from Binnie J.:
102. The respondent claims that an insurer is entirely
within its rights to thoroughly investigate a claim and exercise
caution in evaluating the circumstances. It is not required to
accept the initial views of its investigators. It is perfectly
entitled to pursue further inquiries. I agree with these points.
The problem here is that Pilot embarked on a "train of thought"
as early as February 25, 1994 (see para. 7 above) that led to
the arson trial, with nothing to go on except the fact that its
policy holder had money problems.
103. The "train of thought" mentioned
in the letter to Pilot from Derek Francis kept going long after
the requirements of due diligence or prudent practice had been
exhausted. There is a difference between due diligence and wilful
tunnel vision. The jury obviously considered this case to be an
outrageous example of the latter. In my view, an award of punitive
damages (leaving aside the issue of quantum for the moment) was
a rational response on the jury's part to the evidence.
It was not an inevitable or unavoidable response, but it was a
rational response to what the jury had seen and heard. The jury
was obviously incensed at the idea that the respondent would get
away with paying no more than it ought to have paid after its
initial investigation in 1994 (plus costs). It obviously felt
that something more was required to demonstrate to Pilot that
its bad faith dealing with this loss claim was not a wise or profitable
course of action. The award answered a perceived need for retribution,
denunciation and deterrence.
104. The intervener, the Insurance Council of Canada,
argues that the award of punitive damages will over-deter insurers
from reviewing claims with due diligence, thus lead to the payment
of unmeritorious claims, and in the end drive up insurance premiums.
This would only be true if the respondent's treatment of the appellant
is not an isolated case but is widespread in the industry. If,
as I prefer to believe, insurers generally take seriously their
duty to act in good faith, it will only be rogue insurers or rogue
files that will incur such a financial penalty, and the extra
economic cost inflicted by punitive damages will either cause
the delinquents to mend their ways or, ultimately, move them on
to lines of work that do not call for a good faith standard of
105. The Ontario Court of Appeal was unanimous that
punitive damages in some amount were justified and I agree with
that conclusion. This was an exceptional case that justified an
exceptional remedy. The respondent's cross-appeal will therefore
Acton J. went on to quote extensively from Pilot
v Whiten on a number of bases including the concept of proportionality
in the assessment of appropriate quantum; that is, the more reprehensible
the nature of the conduct, the higher the potential award as well
as the factors involved in the assessment of blameworthiness (including
planned and deliberate misconduct, awareness of the wrong, profit
from the wrong, persistence in the wrong, intent and motive as well
as whether the interest violated was deeply personal to the plaintiff
and whether the plaintiff was vulnerable, financially or otherwise.)
His Honour went on to quote Binnie J. on the issues of deterrence
and rationality and appropriate quantum.
Unfortunately for the WCB insurer, Acton J. also noted
a previous decision which awarded punitive damages against the WCB
insurer, which case involved the same adjuster using the same tactics
on another claimant worker in similar circumstances to Mr. Branco
stating at paragraph 176 that the award of $60,000 in that case
was "not sufficient to prevent an immediate recurrence of the
unacceptable technique." (*2)
Acton J. considered that the actions of both insurers
had continued for over 8-13 years and that they were very aware
of the hardship it was inflicting both through withholding funds
and also that they engaged in litigation tactics such as numerous
and expensive court applications. The actions of the insurers were
considered planned and deliberate and meant to force Mr. Branco
into an unreasonably low cash settlement. The insurers' adjusters
knew their actions were wrong and also took steps to ensure failure
by Mr. Branco.
The award for punitive damages in Pilot v Whiten was $1,000,000 for misconduct over two years. The misconduct here
was over 8 to 13 years. Acton J. was not convinced that the $1,000,000
as awarded was sufficient to stop such misconduct as the Pilot
v. Whiten decision was rendered during the time period that
Mr. Branco's case was being handled.
Acton J. awarded $3,000,000 in punitive damages against
the LTD insurer for behaviour that was "protracted and reprehensible"
"nothing short of torturous on Branco." He awarded $1,500,000
in punitive damages against the WCB insurer for behaviour that was
outrageous and similar in nature to previous conduct. Acton J. stated:
216. The court is cognizant of the fact that a punitive
damages award of $3 million may not be particularly significant
to the financial bottom line of a successful worldwide insurance
company. It is hoped that this award will gain the attention of
the insurance industry. The industry must recognize the destruction
and devastation that their actions cause in failing to honour
their contractual policy commitments to the individuals insured.
217. Both AIG and Zurich failed to deal with Branco's
claim in good faith. Each tried to take advantage of Branco's
economic vulnerability to gain leverage in negotiating a settlement.
The fact that Branco was able to continue to withstand this pressure
for so many years from two different fronts is truly remarkable
and almost superhuman, even though his resistance may have resulted
in irreparable mental distress which may last for the remainder
of his lifetime.
218. The court has grave concerns as to how often
this type of action occurs in dealing with insurance claims. The
court is only cognizant of the cases such as Sarchuk, Whiten
and Branco which come before them. If Whiten (in the Whiten case) and Branco, in this case, had not been able to withstand
the unbelievable pressure to settle on the terms and conditions
originally offered these cases would not have received the attention
of the courts either. The question remains: how many individuals
have been unable to withstand the financial and psychological
pressure of these tactics?
The highest award at any level is the award imposed
in Branco. It appears that the "sticker shock"
of the Pilot v Whiten case has dulled. The trial judge in Branco has made it known that the court (at least at that
level) will seek to punish with greater severity and has potentially
opened the door to even higher awards if inappropriate conduct is
as extended or more extended than that in the Pilot v Whiten case.
Both insurers have appealed to the Saskatchewan Court
Every insurer and insured should take note and watch
with interest as the Branco case moves through the appeal
process and we are witness to treatment by higher courts and whether
the floodgates are indeed open.
Kim E. Stoll
(*1) at para. 30
(*2) Sarchuk v Alto Construction Ltd. 2003 SKQB 237
6. Aviation: Revisiting 261/04 - A Mixed Bag For Passengers
In the January 2013 edition of the Fernandes Hearn
LLP newsletter, when reviewing the 2012 Nelson/TU (*1) judgments
rendered by the European Court of Justice ("ECJ") confirming
the earlier Sturgeon (*2) decision that EU Regulation 261/2004
("261/04") (*3) afforded passengers a right to compensation
in instances of delay as well as cancellation of flights, we alluded
to the fact that the Commission was in the process of reviewing
the infamous and broadly litigated European Union's cornerstone
legislation on air passenger rights (*4).
After considering the outcome of a six-month stakeholder
consultation process, the European Commission released on March
13, 2013 its proposal for a revision of 261/04 (*5). The revised
text seeks to redress certain imbalances created by the innovative
jurisprudential law-making of the ECJ through its broad and teleological
interpretation of 261/04, while broadening the Regulation's scope
to ensure passengers are protected in more circumstances. The new
text reads more as a Charter of passenger rights, whereas the initial
version of the Regulation was focused on delay, cancellation and
This overview of the key changes being proposed by
the European Commission will be subdivided into the changes that
benefit passengers and those that are to the advantage of the airlines.
Expansion of current benefits
Right to care - This references the rights
of passengers to access to telecommunications, refreshments, and
- in case of lengthier delays - meals, accommodation and transportation
to accommodation. Under the current Regulation, the time trigger
for these duties to arise in cases of delay varies between two and
four hours according to the flight distance. The proposal would
unify the time trigger at two hours of delay. The current articulation
translates a philosophy that the same delay duration to longer flights
should be seen as a lesser inconvenience than for shorter operations.
This approach lends itself better to differentiated rights to monetary
compensation for inconvenience rather than the entitlement to alert
family or friends, and to be nourished during the delay, thus this
adaptation is rational.
Confirmation of pro-passenger jurisprudence
In two key respects, the amended text will adopt the
"pro-passengers" stances favoured by the ECJ in its case
Compensation for delay - Whether the omission in the
drafting of the original 261/04 of a provision for compensation
for lengthy delay was deliberate or inadvertent was consigned to
history by the ECJ in its previously mentioned Sturgeon and TUI/Nelson decisions. A redrafted Article 6 of the Regulation
will clearly provide for compensation due to passengers inconvenienced
by long delays. However, the Commission proposes alternative and
longer time lapses before passengers' entitlement to compensation
arises compared with those in force today under the court's prescriptions
in the Sturgeon case.
Extraordinary Circumstances - One of the most litigated
points under the Regulation has been what constitutes extraordinary
circumstances such as to exonerate a carrier from having to provide
compensation to passengers. The ECJ in its Wallentin-Herman (*6) decision offered a relatively restrictive interpretation of
extraordinary circumstances, most notably excluding routine mechanical
faults from constituting bases for exoneration. This position would
be firmly adopted by the amended Regulation which would include
an Annex 1 dedicated in a non-exhaustive manner to detailing what
are and what are not "extraordinary circumstances". It
is also noteworthy that the airline would only be able to invoke
the extraordinary circumstances where these affect the flight at
issue or the flight operated immediately before by the aircraft.
System-wide delays owing to extraordinary circumstances will not
be a blanket catch-all defence without showing how those circumstances
directly impacted the aircraft subject to delay or cancellation
in its immediate operations.
Re-routing - Since the era of airline alliances,
airlines have shown a markedly increased reluctance to rebook inconvenienced
passengers on non-aligned carriers. Given the significant, and often
punitive premium, placed by carriers on airfares booked at the last
minute, an operator would frequently be financially better off by
providing hotel accommodation and, where required, compensating
passengers, as compared with rebooking them on a competitor's service.
The revised text at Article 8(5) seeks to redress this by granting
inconvenienced passengers who elect to be rerouted the right to
be rebooked on a competing carrier's flights where the operating
carrier cannot make arrangements on its own services within twelve
hours. This is bound to be a contentious provision given that it
further imposes on the selling carrier the duty not to charge more
than a recent average historical fare to the purchasing airline.
This could not only lead to underpricing for the selling airline
during peak season travel, but also raises issues of jurisdiction
of the right of the Commission to impose fares on non-European carriers
including when they are operating from their home jurisdictions.
No-shows - Carriers have traditionally viewed
the contract of carriage as a strict sequential undertaking, which
is voided by the failure of a passenger to present for any stage
or leg of the flight. Given airlines' preference that passengers
purchase round-trips which allow the carrier to adjust pricing on
presumptions of the nature of the travel as premised on the duration
of stay, carriers have often applied prohibitive pricing to one
way fares. One tool for enforcing this was by cancelling the return
portion of a flight if the outbound were cancelled. The revised
Article 4(4) of the Regulation prevents this practice by denying
the right to carriers to cancel in-bound travel on the basis of
failure to show for the out-bound leg. However, the text stops short
of preventing carriers from cancelling flights within a leg of an
itinerary for failure to use the flights sequentially. Hypothetical
airline Air Paris may be prepared to offer a cheaper fare to fly
London-Paris-Toronto than it would offer for the premium convenience
of a direct Paris-Toronto leg. The Regulation, by omission of prescribing
this, legitimizes Air Paris's policy that the Paris-Toronto stage
of the flight leg is forfeited by failure to show for the preceding
Information - The Commission gives passengers
under this draft a legislative right to information concerning their
flight disruption at the soonest opportunity.
Tarmac delays - The new Article 6(5) legislates
the rights of passengers to water and a climate controlled cabin
once a tarmac delay reaches an hour, and passengers are entitled
to disembark in cases of tarmac delays reaching five hours, save
where safety concerns would preclude this.
Name spelling changes - Prohibiting the most
egregious of administrative fees - reaching $250 in the case of
Ryanair - the new paragraph 4(5) proposes to require airlines to
make changes to spellings of names which may lead to denied boarding
situations on a gratuitous basis.
Connecting Flights - Passenger rights in cases
of delay owing to a missed connection due to a late arrival of the
preceding leg potentially by a different carrier, which were woefully
overlooked in the drafting of the current 261/04, are addressed
in the added Article 6a. The onward carrier would be responsible
for rerouting the passenger and providing care to the passenger,
whereas the airline whose late arrival caused the misconnect would
owe compensation were this due. This provision will be particularly
contentious owing to apparently applying to non-EU airlines where
their operation from their home country into the EU is delayed,
whereas these operations were previously not regulated by 261/04
as deemed ultra petita for the Community which could only
regulate EU carriers and operations of non-EU carriers from EU airports.
The provision moreover only applied where the connection is pursuant
to a single contract of carriage as the airlines have approbated
the connection and submitted to the risk of misconnect. This could
potentially lead to airlines increasing minimum connect times particularly
where the onward flight leg is operated only once daily.
Faced with the detailed onslaught of new duties, two
significant concessions are afforded to airlines, in an explicit
recognition that in certain instances the European Court of Justice
has been overly favourable to passengers in its reading of 261/04.
Cap on accommodation costs - Recognizing that
entirely unforeseeable conditions may arise, and with a clear hark
to the Eyjafjallajökull eruption of 2010 and the contentious McDonagh v. Ryanair (*7) ECJ judgment which ensued requiring
low cost carriers to cover hotel accommodation for indefinite periods,
a cap is set on the exposure of airlines to these expenses.
Under the proposal, the airline would not be responsible
for accommodation beyond €100 per passenger and to a maximum
of three nights. Some clarification in the drafting would assist
here as all hotel accommodations have various rates adapted to supply
and demand, and in case of extreme weather conditions or force majeure
such as Eyjafjallajökull, demand can grow exponentially for
airport lodgings. In these cases, airlines are best placed to obtain
negotiated reasonable rates from the airport hotels and also benefit
from volume booking discount, therefore it should remain incumbent
upon airlines to make accommodation arrangements on behalf of the
passengers rather than simply providing €100 per passenger
An additional carve out is made to exclude liability
for lodgings where the flight stage is stand alone and less than
The impact of these changes is mitigated by the new
entitlement to be rerouted with competing carriers, hence in cases
notably of industrial action which could create multi-day disruption,
the passenger should usually be accommodated on another airline.
Delay duration preceding compensation - whereas
the ECJ adopted in Sturgeon and reiterated in Nelson/Tui a bizarre
calculation for the duration of a delay before the right to compensation
arose (*8), and the quantum of compensation owed, a more coherent,
clear and restrictive prescription of delay duration is found in
the draft revision at the amended Article 6(2). Delays must reach
5 hours for intra EU-journeys and journeys under 3,500 kms, 9 hours
for journeys between 3,500 kms and 6,000 kms and 12 hours for journeys
beyond 6,000 kms before an entitlement to compensation arises. Delay
is now clearly defined as based upon arrival time compared with
scheduled arrival, which means that tarmac delays may compound with
push-back delays to trigger compensation rights.
It complicates matters that the time triggers for
compensation for delay and for cancellation are now differentiated,
especially given that the rationale for compensating delayed passengers
was to ensure their equal treatment. Under this proposal it now
becomes attractive for carriers to delay a flight extensively even
when this could be cancelled and passengers accommodated on other
flights that it operates.
If "Air Alberta" cancelled a flight at 8AM
out of London bound to Calgary, and it instead accommodated its
passengers on its 11:30AM service, compensation would be due, whereas
the 8AM flight could be delayed until 17:00PM without a right to
compensation accruing. There should also be a single set of distance
criteria to facilitate understanding and application of the Regulation.
It unnecessarily complicates matters having the duration of delay
triggering the right to compensation differentiated by one series
of distances and the quantum of compensation due determined by a
different set of distances.
In conclusion, the proposed amended Regulation elevates
to legislation much of the ECJ case law interpreting the incumbent
text, responds to certain iniquities which have arisen from circumstances
not foreseen at the time of the 2004 draft thereby in limited circumstances
capping airline exposure, prohibits certain publicized and maligned
egregious practices particularly amongst the ultra low cost airlines
of Europe, and creates an overall broader Charter of air passenger
rights. Whereas there are improvements and clarifications, it is
to be hoped that before adoption, the amendment will be subjected
to a degree of legal scrutiny that was not exercised in the enactment
of the incumbent 261/04.
(*1) Case C-581/10 Nelson v. Deutsche Lufthansa AG &
Case C-629/10 TUI Travel plc et al v. Civil Aviation Authority.
(*2) Case C-402/07 Sturgeon et al v. Condor Flugdienst GmbH.
(*3) REGULATION (EC) No 261/2004 OF THE EUROPEAN PARLIAMENT AND
OF THE COUNCIL of 11 February 2004 establishing common rules on
compensation and assistance to passengers in the event of denied
boarding and of cancellation or long delay of flights, and repealing
Regulation (EEC) No 295/91.
(*4) Mark Glynn, "Controversies under Regulation 261/2004 :
The ECJ Reaffirms Passenger Entitlement to Compensation for Long
Delays to Flights in Nelson v. Deutsche Lufthansa AG and TUI Travel plc et al v. Civil Aviation Authority" (2013),
Fernandes Hearn LLP Newsletter 2013:1.
(*5) Online: European Commission <http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2013:0130:FIN:EN:PDF>.
(*6) Case C-549/07 Wallentin-Hermann v, Alitalia SpA.
(*7) Case C-12/11, McDonagh v. Ryanair Ltd.
(*8) For more detail, see Fernandes Hearn Newsletter 2013 Vol. 1
7. Unlu v Air Canada: Provincial Consumer Protection Law in a
On March 14, 2013, the British Columbia Court of Appeal
upheld a ruling stating that certain sections of B.C.'s general
consumer protection law are constitutionally applicable to international
aviation ticketing practices and, as such, the airlines must comply
with the provincial law. This decision is a boost to a potentially
enormous class action involving almost every non-US international
flight out of Vancouver sold by the defendant airlines. For their
part, the airlines argued that the result of such a ruling would
be regulatory overload, as businesses would be forced to comply
with 11 different legislative regime: federal Parliament and each
of the 10 provinces.
The Court of Appeal was alive to the concern of over-regulation,
and the decision is narrow in scope; it constitutionally validated
only one prohibition from a much broader law. Although narrow, however,
the ruling provides insight into how courts in the future will treat
litigation involving similar provisions of provincial consumer protection
law as these laws are brought to bear on maritime, rail, and other
transportation modes under the jurisdiction of the federal government.
Mr. Unlu launched his prospective class action lawsuits
against, inter alia, Air Canada and Lufthansa ("the
airlines") in relation to flights out of Vancouver International
Airport. Each suit was based on an alleged violation of B.C.'s Business
Practices and Consumer Protection Act ("the BPCPA"),
which states that a business must not commit or engage in a deceptive
act or practice in respect of a consumer transaction. (*1)
At issue was the classification of fuel surcharges
as they appeared on the airline's electronic tickets. On these,
the total cost paid was broken down into categories, such as base
price and taxes. Mr. Unlu alleged that by including the cost of
the fuel surcharge in the "Tax" category, the airlines
were representing to customers that the fuel surcharge was an amount
collected on behalf of a third party government. This representation
was alleged to be deceptive, as the fuel surcharge was in fact retained
by the airlines.
In addition to denying that this practice violated
the BPCPA, the airlines asserted that as provincial legislation,
the law was constitutionally inapplicable to airline ticketing practices.
As such, each brought an application for a summary trial on the
The Constitutional Framework
Federal Parliament has jurisdiction over aviation
as part of its power to make laws respecting matters of national
concern, for the peace, order and good government of Canada. This
jurisdiction is independent of any international or interprovincial
aspect - the BC Court of Appeal has ruled that it covers aircraft
operating solely within a single province. (*2) Even in circumstances
of federal jurisdiction, however, provincial laws of general application
apply unless violate the constitutional principles governing the
division of powers between the two levels of government. (*3) The
airlines argued that the BPCPA was inapplicable based on
two such principles: paramountcy and interjurisdictional immunity.
Two types of conflicts between federal and provincial
law trigger paramountcy. The first is simple: if the federal law
says, "you must", but the province says, "you cannot",
complying with one means violating the other. With the second type,
complying with both laws is possible, but doing so would frustrate
the underlying purpose of the federal law. There is a high threshold
required to demonstrate that federal purpose has been frustrated.
In either case, the provincial law is inoperative to the extent
of the incompatibility. (*4)
Interjurisdictional immunity is engaged when an otherwise
valid provincial law: 1) intrudes on a protected "core"
of federal jurisdiction, and 2) the effect of the intrusion is sufficiently
serious. The core in question is defined as a vital part of the
federal power - the basic, minimum and unassailable content. (*5)
The Decision of the Lower Court
Justice Adair of the British Columbia Supreme Court
dismissed the airlines' applications. According to the judge, there
was no conflict between the provincial consumer protection legislation
and the relevant federal aviation legislation, the Canada Transportation
Act and the Air Transport Regulations. In order for actual,
operational conflict to exist with provincial legislation that prohibited
deceptive practices, some section of federal law would have to require
deceptive practices, or at the minimum accept these practices as
legitimate. There is no such section. It is true that the Canadian
Transportation Agency ("CTA") accepts the airlines' tariffs,
which in turn permits them to charge the international fuel surcharge
and list it separately from the base fare. However, the lawsuit
did not claim that the airlines' did not have the right to impose
a fuel surcharge. Rather, the claim was solely against the manner
in which that surcharge was presented. Similarly, Justice Adair
found that the onus on the airlines to demonstrate frustration of
federal purpose was not met, as the claim did not intrude on areas
where the CTA had authority.
Justice Adair also rejected the airlines' argument
that interjurisdictional immunity applied. The Supreme Court of
Canada had previously concluded that the use of this constitutional
doctrine to limit provincial law should be reserved for situations
covered by precedent, and none were applicable to the present case.
Moreover, on the second part of the test, the impact of the BPCPA on the federal sphere would be minimal. Compliance with the provincial
act would not interfere with the CTA's decision-making powers with
regards to tariffs, fuel surcharges, and terms and conditions of
carriage. If the case were successful on the merits, airlines simply
would not be allowed to call a fuel surcharge a tax.
The Decision at the Court of Appeal
Both airlines appealed the decision to the British
Columbia Court of Appeal. The appeals were dismissed, and the initial
judgment was almost entirely affirmed.
The Court of Appeal agreed that there was no operational
conflict between the relevant federal and provincial legislation.
The Court was able to consider the impact of amendments to advertising
regulations that were implemented after the lower court's decision
was released. These regulations explicitly forbid the use of the
term "tax" to describe an air transportation charge in
any advertising. While the Unlu case dealt with tickets,
not advertising, the Court found that in principle this was consistent
with the plaintiff's assertion that non-third-party charges should
not be shown in a way that suggests they are for the benefit of
a third party. With regards to the frustration of federal purpose,
the Court noted that the CTA itself stated that it is the airlines
responsibility to ensure that they comply with all applicable legislation
respecting advertising, including provincial legislation. This indicates
that the CTA did not consider itself the sole authority regulating
all aspects of aviation, and that federal purpose was not frustrated
by provincial consumer protection legislation. (*6)
The Court of Appeal found that Adair J. applied the
correct principles and reached the correct conclusions with regard
to interjurisdictional immunity. With regards to the airlines' argument
that the application of the BPCPA would subject international
aviation companies to the decisions of provincial regulators without
expertise or knowledge of the airline industry, the Court found
that these arguments addressed provisions of the provincial law
that were not relevant to the specific provision at issue, being
the prohibition on deceptive practices.
The Effect of the Decision Going Forward
The Court of Appeal decision in Unlu offers
preview of how courts across the country might rule when provincial
law meets federal undertakings. Indeed, several provinces have similar
consumer protection legislation that prohibits misleading or deceptive
practices by businesses operating in the province. (*7) While a
British Columbia Court of Appeal decision is not binding on the
courts of the other provinces, other courts may find the reasoning
persuasive and use it as a model. Likewise, while this case is concerned
with the behaviour of international airlines, similar judicial reasoning
might validate the applicability of provincial consumer protection
legislation to other forms of transportation under federal jurisdiction.
Several factors will affect the breadth of the impact
of the Unlu decision. First, the Court of Appeal narrowly
focused on the exact circumstances of the case. The Court does not
state that the provincial legislation is applicable to aviation;
rather, that the three sections relied upon by Mr. Unlu are applicable
to aviation (those being the definition of a deceptive practice,
the prohibition of deceptive practices, and the grant of civil remedies
for violations). This narrow focus was helpful to Mr. Unlu, as the
onus was on the airlines to demonstrate an incompatibility between
the laws. In a sense, they had to demonstrate that federal aviation
law required airlines to mislead customers to the extent that the
prohibition on misleading was in conflict. As Justice Adair stated
in her decision, this would be absurd. For the broader group of
consumers covered by provincial legislation, however, this narrow
focus means that the question of whether any other section of the BPCPA can be applied to aviation has been left for another
day, another lawsuit, and another appeal. The Court of Appeal decision
is more effective as a guideline for future justices than for transportation
businesses attempting to determine which aspects of provincial consumer
protection law apply.
Likewise, the Court's reasoning on interjurisdictional
immunity will not make an easy transition from aviation to other
areas of federal jurisdiction. As noted in the decision of first
instance, interjurisdictional immunity should be invoked only in
cases with firm precedents; here, none existed. Moreover, Justice
Adair specifically carved out aviation as different from most other
areas of federal jurisdiction, as the source of federal power comes
from "peace, order, and good government". It is not a
subject matter explicitly enumerated in the Constitution Act,
1867, and as such is distinguishable those areas which are,
such as maritime shipping and navigation.
Finally, the Supreme Court of Canada recently allowed
a number of appeals concerning the applicability of provincial consumer
protection legislation to banks, another industry under federal
jurisdiction. These appeals will be heard in the coming year. The
B.C. Court of Appeal examined this issue on a micro scale, but the
Supreme Court will consider the wider picture. While the final decision
in Unlu was narrow, the precedents as reviewed in that decision
are the same ones that the Supreme Court will examine before refining
and interpreting the broader principles.
(*1) Business Practices and Consumer Protection Act, SBC
2004, c 2 at s. 5.
(*2) Jorgenson v North Vancouver Magistrate and North Vancouver
(City),  BCJ No. 80 (BCCA)
(*3) Ontario v Canadian Pacific Ltd,  OJ No 1082 (ONCA)
(*4) Quebec (Attorney General) v Canadian Owners and Pilots Association,
2010 SCC 39 at para 64.
(*5) Martin William Mason and Guy Regimbald, Halbury's Laws of
Canada - Constitutional Law (Division of Powers), at para HCL-102
(*6) Unlu v Air Canada, 2013 BCCA 112
(*7) In Ontario, for example, Consumer Protection Act, 2002,
SO 2002, c 30, Sch A at s. 14(1); in Alberta, Fair Trading Act,
RSA 2000, ch F-2, at s. 6(4)(a)
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