this newsletter in PDF
In this issue:
1. Firm and Industry News
2. Freight Forwarder found to be "Holder" and "Merchant"
under Bill of Lading
3. TSB Releases its Investigation Report into the Aldershot VIA
4. Kruger v. First Choice Update
5. Pierringer Debate Sanctifies Settlement Privilege
6. Limitation Periods for Dummies
7. Recent U.S. Customs and Border Protection Position Paper on C-TPAT
8. Lac-Mégantic Rail Disaster Update
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 in Canada.
- CBMU Golf Day - August 28th - Richmond Hill
- Gordon Hearn will be speaking at a joint
meeting of the Canadian Trucking Alliance, Ontario Trucking Association
and Verisk Crime Analytics Canada - CargoNet on September 5th.
The meeting is the Official Launch of "Project Momentum"
to address cargo crime along the Highway 401 Corridor.
- International Union of Marine Insurers (IUMI) annual meeting - London England - 15th to 18th of September. Rui
Fernandes will be representing the firm at the meeting.
- Kim Stoll will be speaking at the 2013 Canadian
Transport Lawyers Association Annual Conference - Quebec City,
Canada- 19th to 21st of September, 2013 on "Trucking Modal
- International Marine Claims Conference -
Dublin Ireland - 25 to 27 September. Gordon Hearn will
be representing the firm at the conference.
- CMI Symposium - Dublin Ireland - 27 September
to 4 October.
- Women's International Shipping and Trading Association
(Wista) 1 to 4 October - Montreal, Quebec, Canada. Kim
Stoll will be representing the firm at the conference.
- Canadian Board of Marine Underwriters Network
Night - October 3 Montreal, Quebec, Canada. Kim Stoll and Martin Abadi will be representing the firm.
- Rui Fernandes will be presenting a paper
on general average in Montreal at the meeting of The Association
Mondiale de Dispacheurs / International Association of Average
Adjusters on October 8th.
- 2013 Surface Transportation Summit 16 October
Mississauga, Ontario Canada. Kim Stoll and Martin Abadi will be representing the firm at the summit.
- Fort Lauderdale Mariners Club Seminar - October 29-30, Fort Lauderdale. Kim Stoll will be representing
the firm at the seminar.
2. Freight Forwarder
found to be "Holder" and "Merchant" under Bill
On May 23, 2013, the Federal Court's decision in DHL
Global Forwarding (Canada) Inc. v. CMA-CGM S.A. 2013 CF 534
was released (*1). This decision highlights freight forwarders'
potential exposure when exercising a freight forwarder's lien; that
is, if asserting control over goods that are the subject of a Bill
of Lading, such freight forwarder may be bound to the terms of that
Bill of Lading and, in particular as in this case, the jurisdiction
clause. The appeal will be heard on November 6, 2013.
HSB International ("HSB") hired DHL Global
Forwarding (Canada) Inc. ("DHL") as a freight forwarder
who in turn retained CMA-CGM S.A., through its Canadian agent, CMA
CGM Canada, ("CMA CGM") as carrier to transport 68 containers
(the "cargo") by sea from Halifax, Nova Scotia, to the
Port of Ho Chi Minh City, Vietnam. A series of bookings were made
by DHL and booking confirmations were provided to DHL by CMA CGM,
as its client. Upon instructions by DHL, HSB was later identified
as the shipper, Tan Mai as the consignee and DHL as the forwarding
agent in the Bills of Lading.
Upon arrival, the consignee, Tan Mai Group Joint Stock
Company ("Tan Mai") was unable to take final delivery
as DHL had asserted a freight forwarder's lien and had refused to
release the original Bills of Lading to HSB without payment. Apparently,
due to a dispute between HSB and Tan Mai, HSB had not paid DHL for
some or all of the freight already paid by DHL to CMA CGM. CMA CGM
was now left with the demurrage and accumulating storage charges
regarding the unreleased cargo. As of August 15, 2012, these charges
totaled $681,655.55 US (the "charges").
CMA CGM then commenced proceedings in France as against
HSB, DHL and Tan Mai, jointly and severally, regarding payment of
such charges as per the jurisdictional clause in the Bill of Lading
30. LAW AND JURISDICTION
All actions against Carrier under the contract of
Carriage evidenced by this Bill of Lading shall be brought before
the "Tribunal de Commerce de MARSEILLE" and no other
Court shall have jurisdiction with regards to any such action.
Actions against the Merchant under the contract of Carriage evidenced
by this Bill of Lading may be brought before the "Tribunal
de Commerce de MARSEILLE" or, in Carrier's sole discretion,
in another court of competent jurisdiction.
[Emphasis in the original]
DHL, within a few days of the commencement of the
French proceedings, then initiated an action in Canada (the "Declaratory
Action") seeking a declaratory order that (1) it was not liable
for payment of the charges arising from the performance of the contracts
of ocean carriage by CMA CGM pursuant to CMA CGM's Bills of Lading
or any consequential services such as demurrage and port storage
charges; and (2) it was not bound by any terms and conditions in
the said Bills of Lading.
Prothonotary Morneau then heard a motion brought by
CMA CGM under the Federal Courts Act seeking a stay of the
Declaratory Action in favour of the French proceedings. CMA CGM
was successful and a stay was granted.
The Prothonotary, in his decision, found that CMA
CGM S.A. is an international carrier of goods by containers acting,
in Canada, through the intermediary of its agents, CMA CGM Canada.
DHL was also acting as a freight forwarder with respect to its relations
with CMA CGM Canada in this dispute. The two entities had a long-standing
The issue, on the motion for a stay of the Declaratory
Action, was whether DHL was a party to the CMA CGM Bills of Lading
and therefore bound by the terms of that contract (i.e. the jurisdiction
clause noted above).
The Court in its analysis acknowledged that a freight
forwarder can act as a principal if it creates Bills of Lading or
holds the cargo or the interests in the cargo. The Court also found
that, in this matter, DHL acted as an agent or an intermediary of
its client, the shipper, HSB. The Court further confirmed that the
booking and booking confirmation can be viewed as preliminary contracts
to the contract of transportation.
DHL had argued that it accomplished all its obligations
under such preliminary contracts, but that the costs of demurrage
and storage (which continued to accumulate) resulted from a "second"
contract, the contract of transportation itself.
The Court, however, found that the clauses found in
the booking confirmations (reproduced below) referring to the terms
and conditions of the Bills of Lading rendered the "splitting
up" of the contracts merely a theoretical exercise.
To determine whether DHL was subject to the terms
of the Bills of Lading and the within exclusive jurisdiction clause,
the Court looked at the associated documentation for the subject
shipment including the booking instructions, booking reservations
and also the Bills of Lading, which included the definitions of
"Merchant" and "Holder".
DHL attempted to assert that it did not know of the
existence of CMA CGM S.A. as it had only dealt with CMA CGM Canada
and was not aware of its role as intermediary for CMA CGM S.A. (the
party responsible for the provision of Bills of Lading and for the
transportation by sea of the containers). The Court did not accept
this argument citing that the invoices created in respect of the
shipment showed the involvement of CMA CGM S.A.
Further, in the booking confirmations provided to
DHL and pursuant to which CMA CGM issued Bills of Lading, clauses
6 and 7 incorporated the CMA CGM terms and conditions as follows:
6. Bill of Lading-All moves referenced in this Booking
Confirmation are subject to the terms and conditions of the carrier
issued long form bill of lading. The customer named on
this Booking Confirmation hereby acknowledges and agrees to
all the terms and conditions of the carrier issued long form bill
7. Booking subject to CMA CGM terms and conditions available on web site www.cma-cgm.com
or in any CMA CGM
Further, the booking confirmations stipulated on page
Shipping shall be subject to CMA CGM Bill of Lading
terms and conditions available in any CMA CGM agencies or on CMA
CGM web site: www.cma-cgm.com
It is reminded that if this shipment has been booked
on a "freight collect" basis you guarantee and will
be responsible for the payment of all freight and charges payable
by the receiver and that you shall proceed with the full payment
of all outstanding freight and charges should they remain unpaid
for more than three consecutive days after discharge.
While identified as the forwarder in the booking confirmation
and not referred to specifically as the "customer", DHL
was the only party expressed referred to. At that stage, DHL was
the only party identified and was therefore the "customer".
As the customer, DHL knew and recognized the terms and conditions
of the Bills of Lading. The Court further found that, even if DHL
was not the "customer", clause 7 in the booking confirmation,
noted above, stipulated that all reservations were subject to the
terms and conditions of the Bills of Lading.
There was no attempt by DHL to exempt itself or clarify
the effect or extent of clauses 6 and 7 of the booking confirmations
which referenced the terms and conditions of the Bills of Lading.
The Court found that DHL was bound by the content therein, despite
not having provided express consent (which had not been established
by the evidence as a normal and required measure in the maritime
industry for such agreements).
The terms and conditions of the Bills of Lading contained
definitions of the following terms "Merchant" and "Holder"
to whom these terms and conditions would apply:
Merchant includes the Shipper, Holder,
Consignee, Receiver of the Goods, any Person owning or entitled
to the possession of the Goods or of this Bill of Lading and
anyone on behalf of any such Person.
Holder means any Person for the time being
in possession of this Bill of Lading by reason of the consignment
of the Goods or the endorsement of this Bill of Lading or otherwise.
(emphasis in the judgment)
DHL argued that it was in simple physical possession
of the Bills of Lading and held same in the name of HSB; however,
the Court stated that such possession of the Bills of Lading permitted
DHL to refuse their release and to brandish them or to use them
to require the payment of the charges for the cargo, which had already
been paid to CMA-CGM Canada. DHL further recognized that it had
control over the Bills of Lading to the extent that it can keep
them or potentially sell them.
Given the above, the Court found that DHL met the
definition of "Holder" as any person "otherwise"
in possession of the Bill of Lading. Essentially, once DHL exercized
its lien on the Bills of Lading, it became a holder and subject
to the definition of "Merchant". Even if HSB, the shipper,
was the "Holder" and DHL acted as agent only, the Court
found that DHL, as forwarder, was covered by the definition of "Merchant"
in the circumstances in any event. (*2)
As the Merchant and/or Holder, DHL, through its actions
and exercise of the freight forwarder's lien, was held to be subject
to the terms and conditions of the Bills of Lading, including the
exclusive jurisdiction clause, as noted above, citing the appropriate
jurisdiction as France. The Court granted the request of CMA CGM
and stayed the Declaratory Action in favour of the French proceedings.
The appeal will be heard November 6, 2013.
Kim E. Stoll
(*1) Many thanks to Ajit
Singh, articling student, and our associate, Mark Glynn,
for assisting in the unofficial translation from the original French
language decision so necessary at time of writing. The Unrevised
English Certified Translation is now available on the Federal Court
(*2) DHL would be included
in the definition of "Merchant" as "any Person
to the possession of this Bill of Lading and anyone acting on behalf
of any such Person".
3. The Transportation Safety Board of Canada Releases
its Investigation Report into the February 26th, 2012 Aldershot,
Ontario VIA Train Derailment
The Transportation Safety Board ("TSB")
has released its Investigation Report R12T0038 concerning the Aldershot
VIA train derailment. The Report features a detailed analysis of
the events leading up to the incident and provides three safety
recommendations aimed at preventing future derailments:
1) that major Canadian passenger and freight railways
implement fail-safe controls, beginning with Canada's high-speed
2) that all controlling locomotives in main line operation be
equipped with in-cab video cameras; and
3) that crashworthiness standards for new locomotives also apply
to rebuilt passenger and freight locomotives.
On February 26, 2012, VIA Rail train no. 92 ("VIA
92") was proceeding eastward from Niagara Falls to Toronto,
Ontario on track 2 of the Canadian National rail line located near
Burlington, Ontario. VIA 92 was operated by two experienced locomotive
engineers who were accompanied by a locomotive engineer trainee.
VIA 92 was carrying 70 passengers and a VIA service manager. The
train departed the Aldershot station on track 2. Down the line,
the track switches were lined to route VIA 92 from track 2 to track
3 through a certain 'crossover' ("Crossover"), which had
a maximum speed of 15 miles per hour. VIA 92 entered the crossover
travelling at a speed of 67 miles per hour. Subsequently, the locomotive
and all 5 coaches derailed. The locomotive rolled onto its side
and struck the foundation of a building adjacent to the track. The
operating crew and trainee were fatally injured. 45 passengers and
the VIA service manager sustained various injuries. The locomotive
fuel tank was punctured and released approximately 4300 litres of
The TSB Investigation
Tragically, the two engineers and the engineer trainee
located in the locomotive did not survive the accident. There was
no 'black box' device to provide objective information as to what
happened. The TSB had to investigate what went wrong with no 'real
time' account from the locomotive.
Through the course of its investigation, the investigators
were able to eliminate the following as factors in the derailment:
- there were no pre-accident defects noted to the
locomotive or the railcars;
- there were no defects noted to the tracks in the
area in question;
- there were no defects noted to the signals throughout
the area (although, as noted below, the question of signal perception by the operating crew would be 'front and centre' in the investigation);
- the weather conditions were fair, with no restricted
- the two engineers were well experienced in respect
of the equipment and the territory in question;
- the two engineers were found to have been qualified
for their positions, had met 'rest' standards, with no relevant
post-accident toxicology findings;
- the two engineers had worked together as a crew
on a regular basis over the previous 16 months;
- an accident re-enactment confirmed that the "wayside"
rail signals were clearly visible from the locomotive cab throughout
the journey; and
- it was unlikely that the sun had interfered with
the crew's ability to identify the wayside rail signals.
The investigators thus focused on the events - in
particular, the crew's perception of the rail signals - leading
up to the derailment.
The Crossover from Track 2 to Track 3
A Canadian National ("CN") work crew had
been dispatched earlier that day to effect repairs to a signal on
track 2 east of the Aldershot station. The work crew required exclusive
occupancy over track 2. Arrangements were made with the CN Rail
Traffic Coordinator for that crew to occupy track 2. The CN Rail
Traffic Coordinator, accordingly, routed VIA 92 around the work
being done on track 2 by lining the track switches to route the
train from track 2 to track 3 through the Crossover. While the normal
routing for eastbound VIA trains was straight through the area on
track 2, the Rail Traffic Coordinator did not communicate the route
change to the VIA 92 crew. There was no requirement for him to do
so as there existed a well established and strict regime of wayside
track signals, providing VIA 92's crew (and all others) with routing,
speed, and "stop and go" information.
The Control of Train Movements Through Signals
The rail line had a standard Centralized Traffic Control
System. This system controls train movements employing interconnected
track circuits and field (or wayside) track signals. The design
of the system is such that trains are given a series of progressive
track-side signal indications that require train crews to take action
based on the signal displayed. In Canada, this system does not provide
any form of automatic enforcement to slow or stop a train if it
were, for example, to pass a stop signal or other point of restriction.
The displayed signal indications convey information to train crews
of the speeds at which they may operate and how far they are permitted
"Situational Awareness" on the Part of
the VIA 92 Rail Crew
The TSB focused on the apparent fact that there was
a critical 'disconnect' between the speed signals that were displayed
for the upcoming crossover from Track 2 to 3 and the train operation.
To the experienced conductor, the series of signals approaching
the crossover - if registered - would translate to an instruction
that, at the point of the Crossover, the train was to proceed at
"slow speed", being a maximum of 15 miles per hour. How
then was it that the train proceeded through the area at 67 miles
The TSB report delves into aspect of 'human factors'
and the crew's ability to perceive, comprehend and project events.
Quite simply, and as evidently borne out by the facts, the progression
of key signals to 'slow down' was missed by the crew. We will never
know for certain what went wrong in terms of the signal "disconnect",
given that there were no in cab-video and voice recording devices.
There is presently no requirement that locomotives be equipped with
forward-facing video recorders. At the time of the accident, 32
of VIA Rail's 41 locomotives had, however, been equipped with a
video recorder. Accordingly, it was not possible to recreate the
events in terms of signaling, related crew perception issues or
otherwise leading up to the accident.
The investigation reveals that the locomotive's braking
system was not implemented. In its analysis, the TSB cites the fact
that, with respect to train operations, the railways and Transport
Canada have based their safety philosophy on a cornerstone of strict
"While regulatory compliance is necessary
for accident prevention in transportation, regulatory compliance
alone is not sufficient to maintain safety in a complex transportation
organizations that place excessive reliance on strict
regulatory compliance tend to believe that the safety rules they
have developed are invulnerable to human error. A rule-book culture
can produce an attitude that assumes all accidents are the result
of individual failures to follow the rules. Unfortunately, in
a complex system such as transportation, even the most rigorous
set of rules will not cover every contingency and interpretation
by individuals will be required to cover unanticipated situations.
Even the most motivated and experienced employees are subject
to the normal slips, lapses and mistakes that characterize human
For many years, the railway industry in Canada
has relied on crew compliance with wayside track signals that
provide train crews with a series of signal indications requiring
crew actions relative to the signals displayed.
of safety afforded by wayside signal systems has not advanced
significantly beyond their original design, which dates back over
100 years. However, high-speed passenger trains now share track
with freight trains and the overall pace of rail transportation
has increased since wayside signals were first introduced."
In this context, TSB cited its finding from an earlier
incident (*1) that backup safety devices for signal indications
were inadequate, then recommending that:
The Department of Transport and the railway industry
implement additional backup safety defences to help ensure that
signal indications are consistently recognized and followed.
To date, there has been no formal strategy developed
to adapt either emerging technology or existing on-board computer
systems to provide fail-safe physical train control defences. The
TSB considered fail-safe safety regimes in use in Europe and which
are being phased into the U.S. rail industry. One such example concerns
"Positive Train Control".
"Positive Train Control"
Internationally, the rail industry has developed technology
to address the risk of crew misinterpretation of or failure to follow
signal indications. The various technologies include Positive Train
Control ("PTC"), which is an emerging train control technology
designed to prevent train to train collisions, overspeed derailments
or incursions into work zone limits and movement of a train through
a switch left in the wrong position: if the crew does not initiate
an adequate response, the PTC system would automatically slow or
stop the train.
In Canada, there are currently no PTC systems in use
by freight or passenger railways. The recent July 6, 2013 rail explosion
tragedy at Lac-Megantic, Quebec will certainly motivate the discussion
for the need for back up safety systems such as Positive Train Control.
The Locomotive Construction Issue
In light of the crew fatalities, the TSB investigation
also focused on the design and crashworthiness of the locomotive
and rail cars. The locomotive had sustained significant concentrated
damage. While its body had retained overall structural integrity,
it was noted to have been missing 'cab corner posts' being structural
reinforcements that would have provided extra protection in the
area where the locomotive was damaged. The conclusion was also formed
that the locomotive might have had better rollover protection had
then been a more "robust side and roof structure".
The TSB's Key Findings
Considering that the operating crew was very experienced,
the TSB had to focus on the question as to how such a crew could
have misperceived or misinterpreted a visible signal indication.
Without in-cab recordings, it was impossible to identify this cause
with any certainty.
This said, the TSB was able to make the following
key findings and observations:
1. VIA 92 was travelling in the derailment zone
at 67 mph instead of the prescribed 15 mph. This excessive speed
caused the derailment;
2. This conclusion was consistent with the crew
misperceiving or misunderstanding certain key wayside signals;
3. The crew's misperception or misunderstanding
may, in part, have been a function of the "lull" in
the routine of taking track 2 directly through the area and/or
the crew having been distracted upon discovering the signal working
crew up ahead in the distance on track 2;
4. "Administrative defences" (i.e. regulations,
operating procedures, supervision and training) are not enough
- rather, "physical defences" are required - being alarms
or warnings in the locomotive, or a physical means of stopping
the train. As stated by the TSB:
The reality of low probability, high-consequence
accidents argues for adding defences in depth to the rail system
to prevent accidents where crew members do not respond to the
signals displayed. To date there has been no formal strategy
developed to adapt either emerging technology or existing on-board
computer systems to provide fail-safe physical train control
defences. Additional defences such as Positive Train Control,
or systems such as Automatic Train Control or Advance Civil
Speed Enforcement Systems would have prevented this accident.
Accordingly, the TSB recommends that the Department
of Transport require major Canadian passenger and freight railways
to implement fail-safe train controls, beginning with Canada's
high-speed rail corridors";
5. That the Department of Transport require that
all controlling locomotives in main line operation be equipped
with in-cab video cameras; and
6. That the Department of Transport require that
crashworthiness standards for new locomotives also apply to rebuilt
passenger and freight locomotives.
(*1) TSB Report R98V0148
issued February 2001, concerning the 1998 Train Collision involving
2 Canadian Pacific Railway trains near Notch Hill, British Columbia.
(*2) Automatic Train Control
systems in the United States are integrated with existing cab signaling
systems. The ATC comes from electronics in the locomotive that implement
some form of speed control based on the inputs of the cab signaling
system. If the train speed exceeds the maximum speed allowed for
a portion of track, an over-speed alarm sounds in the cab. If the
driver fails to reduce speed and/or make a brake application to
reduce speed, a penalty brake application is made automatically.
Advanced Civil Speed Enforcement
Systems provide railway trains with positive enforcement of "civil"
speed restrictions (those based on the physical characteristics
of the line). The on-board components keep track of a train's position
and continuously calculate a maximum safe braking curve for upcoming
speed restrictions. If the train exceeds the safe braking curve,
then the train brakes are automatically applied.
4. Kruger v. First Choice Update
In our newsletter of November 2010 this warehouse
fire decision of the Supreme Court of British Columbia was reviewed.
In our newsletter of January 2013 we reported on the British Columbia
Court of Appeal's decision reversing some of the trial judge's findings.
On June 13th the Supreme Court of Canada dismissed the application
for leave to appeal this decision. (*1)
As we reported earlier, this may have serious implications
for insurers of cargo and their subrogation efforts. The trial judge
had to deal with a claim for a fire at a warehouse. Kruger Products
Limited ("Kruger Products") was the owner of paper products
stored at a warehouse operated by First Choice Logistics Inc. ("First
Choice"). First Choice was found to be responsible for the
fire and fully liable for the large loss.
The trial judge rejected the position of First Choice
that the warehouse agreement required Kruger Products to obtain
insurance for the inventory and to name First Choice as an additional
insured. The judge held that 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 could not rely on a waiver of subrogation clause in the warehouse
contract. The trial judge held that such a position would result
in an impairment of the duty of care owed by First Choice to Kruger
Products as a warehouseman.
The Court was advised that the claim was a subrogated
claim - Kruger's property insurer had paid the claim and now sought
to recover the amounts it had paid to Kruger, from First Choice.
The importance of the appeal decision is the finding
that the waiver of subrogation clause in the contract was valid
and that the subrogated claim of Kruger was totally barred. Kruger's
insurer recovered nothing. The ruling has wide implications for
any transportation or storage contract that contains a clause barring
insurers of cargo from claiming against a party to a contract responsible
for the loss.
The Court of Appeal also found that the warehouse
had an insurable interest in the property that was destroyed by
the fire. The warehouse was subject to the "possibility of
liability" under the warehouse agreement.
The Supreme Court of Canada has chosen not to hear
Rui M. Fernandes
(*1) Kruger Products Limited / Produits Kruger
Limitée v. First Choice Logistics Inc., et al., 2013 CanLII
5. Pierringer Debate Sanctifies Settlement Privilege
Pierringer Agreements (*1) are key to insurers and
their counsel in the resolution of complex multiparty litigation,
which has the potential to be astronomically expensive. The Supreme
Court of Canada recently used a dispute over a Pierringer agreement
to underline the fundamental value of settlement in contemporary
litigation by indulging the crucial term of quantum in such agreements
with "privilege" until the conclusion of trial, to the
wrath of the non-settling defendants (*2).
Before considering the context of the Supreme Court
decision, the recent trial in Rychman v. Pottinger will be used
to exemplify the potential utility of Pierringer agreements to insurers
and other defendants in multi-defendant litigation(*3).
Pierringer agreements are reached by plaintiff counsel
when settling with one or more, but not all, tortfeasors in a multi-defendant
tort action. The defendant with whom settlement is reached exits
the lawsuit, and the existence of such an agreement must be disclosed
to the co-defendants (*4). The terms of the settlement will protect
the settling party by providing that recovery from non-settling
parties will be limited to their relative liability, thereby insulating
the settling defendant from any claims for contribution and indemnity
to an eventual verdict against non-settling defendants.
In Rychman v. Pottinger, the plaintiff was injured
as the result of two successive motor vehicle accidents, and a lawsuit
was commenced against the drivers involved in both incidents. Liability
was admitted by both defendants, however damages were to be at issue
at trial, as well as the respective liabilities of the defendants.
The defendant from the first accident concluded a
Pierringer agreement with the plaintiff, which was entered into
court and sealed until the jury decision. The plaintiff prosecuted
the claim against the remaining defendant and argued that 80% liability
for her injuries lay with the remaining defendant, being the driver
of the second vehicle. The jury verdict was returned finding that
the first driver was 90% liable.
Given that the jury was also skeptical of the plaintiff's
alleged damages of $1m, and awarded a total of only $175,000, the
plaintiff thus recovered at trial only a priori $17,500 given
that the remaining defendant was only liable for 10% of the upheld
damages. Without knowing the value of the settlement, it is impossible
to quantify the result for the plaintiff and the settling defendant.
It is however apparent that the plaintiff settled the case with
the first driver with the expectation of a vastly different apportionment
of liability as amongst the drivers. Given that the first driver
escaped a finding of 90% liability and also avoided all trial costs,
it is unlikely to have been a negative result from the insurer's
perspective unless settlement was premised on much greater anticipated
damages than those accepted by the jury. This case highlights the
double alee involved in such settlements of apportionment of liability
and quantification of damages.
The upswing for a settling defendant in the Pierringer
agreement necessarily includes the significant economies of not
trying the case. For the plaintiff, the result is a greater gamble
since trial costs will still be incurred, however the Pierringer
agreement guarantees a floor level of damages even if trial is unsuccessful,
and the advance payment may either be used to cover legal fees or
ensure the liquidity of the plaintiff - who may be catastrophically
injured - pending the outcome of the lengthy litigation process
through the appeals stage.
In Ms. Ryckman's case, the situation went from bad
to worse when, after the jury's verdict, the second defendant moved
for a ruling that the insurer was not responsible for payment of
non-pecuniary damages as assessed in total by the jury as $35,000.
On the basis that the second defendant's liability for non-pecuniary
damages was $3,500 - being 10% of the total award for this head
of damage - the judge found that the plaintiff's injuries sustained
as a result of the second tortfeasor's misconduct did not, per the
jury, reach the standard requisite to meet the threshold test established
by s. 267.5(5) of the Insurance Act, which provides that
liability for non-pecuniary damages in the case of a motor vehicle
accident will arise only if the injured party dies, or sustains
permanent serious disfigurement, or permanent serious impairment
of an important physical, mental or psychological function. Final
recovery after trial from the second defendant was thus reduced
The issue arose in the Nova Scotia case of Sable
Offshore Energy Inc. v. Ameron International Corp.(*2) as to
whether non-settling defendant(s) have a right at law to know the
quantum of settlement reached by the plaintiff and the exited defendant(s).
The case, which continues today, involves high stake litigation
with an initial claim by the plaintiff for damages of $443.9 million.
The plaintiff is the owner of the major Sable Offshore
Energy Inc. ("Sable") gas project, comprising three offshore
structures and two onshore gas processing facilities. The lawsuit
pertains to paint supplied to the plaintiff for corrosion protection
for all of the structures, which is alleged to have been unsuitable
and, therefore, failed prematurely.
Settlement was reached with 12 parties, but not with
the paint manufacturer, Ameron International Corp. ("Ameron"),
and Amercoat, an independent franchisee of Ameron products. These
entities were not in a direct contractual relationship with the
Ameron and Amercoat were provided with the settlement
agreement between the plaintiff and exiting defendants, to the sole
exclusion of the quantum of settlement. Ameron and Amercoat thus
moved for disclosure of this information.
This trial judge in Nova Scotia, Hood J., held that
the quantum of settlement was relevant information, for which the
threshold is low, and therefore was subject to disclosure (*5).
Hood J., however, went on to use the Pierringer agreement to distinguish
the case from precedent cited by Ameron and Amercoat, highlighting
that over-recovery is barred in cases of Pierringer agreements and
each non-settling defendants cannot be required to pay more than
their respective liability, thus there is no risk from the settlement
of increased exposure at trial for the non-settling defendant. Rather,
the risk in Pierringer Agreements lies with the plaintiff who may
Given that the remaining defendants are thus not subject
to over-exposure by reason of the Pierringer agreement, Hood J.
held that the quantum should be privileged, holding that it would
be a disincentive for a defendant to make the first move to settle
if the quantum would later be subject to disclosure to the other
defendant(s). The tactical disadvantage for the remaining defendants
of not knowing the quantum of settlement was outweighed by the benefit
of encouraging settlement with the exited defendants.
The Nova Scotia Court of Appeal reversed this decision
with Farrar J.A. reasoning for the bench (*6). The Court of Appeal
decided the case on the rationale that it is a "fundamental
tenet of our legal system that a party has a right to know the case
it has to answer" (*7). Since the quantum of settlement with
other parties speaks inherently to the case to be met, the amount
was necessarily subject to disclosure to the parties, but not to
the trial judge with the associated issue of admissibility at trial
deferred to the trial judge.
The plaintiff appealed to the Supreme Court, which
in June 2012 granted leave to hear the appeal. On June 21, 2013,
Abella J. rendered reasons for a unanimous court reversing the decision
of the Nova Scotia Court of Appeal and reverting to the position
of the trial court per Hood J.
At the outset of a succinct decision, Abella J. expressed
in her first paragraph that settlement was a key component to access
to the justice system, which assists in combating "litigation's
stubbornly endemic delays, expense and stress". Settlement
privilege evolved, per Abella J., as a tool to promote settlement,
which, borrowing from the reasons of L'Heureux-Dubé J. in
previous Supreme Court jurisprudence, is "sound judicial policy
contributes to the effective administration of justice" (*7).
Abella J. proceeded to rely on English precedent from
the House of Lords to highlight two key features of settlement privilege:
(i) Settlement privilege does not turn on the employment
of the magic phrase "without prejudice" in communications;
(ii) Settlement privilege extends to successful
negotiations as it does to unsuccessful negotiations (*8).
The Court went on to dismiss Canadian precedent (*9
) which did not extend such privilege to quantum. Abella J. did
recognize that privilege is never an absolute concept, and is subject
to exceptions where there is a competing and overarching public
interest. Thus, the crux of the case was returned to the paradigm
as articulated by the trial judge of whether the interest of disclosure
to the non-settling defendants outweighed the interest of privilege
to the plaintiff and the exiting defendants.
The Supreme Court stated that the privilege of quantum
of settlement does not "materially affect the ability of the
non-settling defendants to know and present their case". Although
the court acknowledged that future settlement may be hastened or
facilitated with remaining defendants vested with the knowledge
of quantum of settlement, this interest should not be preferred
over the rights of the initial settlor(s). Reward should be extended
to those who make the first move in resolving the complex litigation,
and the ultimate public interest of settlement is, in the opinion
of the court, better served by protecting the quantum of initial
settlement(s), since the imposed disclosure of the agreed amount
to remaining defendants would represent a barrier to reaching the
initial settlement(s). Therefore, the absence of an outweighing
public policy dictated that the prima facie privilege associated
with settlement quantum should be preserved.
The decision is to be welcomed by insurers and the
defence bar. Settlement is integral to avoiding the burden of litigation
and associated expenses. Investing reluctant defendant(s), who resist
to participate in initial settlement efforts with the knowledge
of the details of settlement with exited defendants, would be to
encourage freeriding in multiparty litigation that could ultimately
derail settlement initiatives and encourage protracted litigation
to the ultimate stage of trial.
(*1) The name derives from
the Wisconsin case which first contemplated such as agreement, Pierringer
v. Hoger 124 N.W. 2d 106
(*2) Sable Offshore Energy
Inc. v. Ameron International Corp, 2013 SCC 37
(*3) Tracy Ryckman v.
Lisa Jayne Pottinger, 2013 ONSC 2857
(*4) Aecon Buildings v.
Stephenson Engineering Limited, 2010 ONCA 898, leave to Supreme
Court of Canada refused.
(*5) 2010 NSSC 473
(*6) 2011 NSCA 121
(*7) Kelvin Energy Ltd.
v. Lee,  S.C.R. 235
(*8) Rush & Tompkins
Ltd. v. Greater London Council,  3 All E.R. 737 (H.L.)
(*9) Amoco Canada Petroleum
Co. v. Propak Systems Ltd., 2001 ABCA 110
6. Limitation Periods for Dummies: An Update Regarding
The Limitation Period for Contractual Indemnity Claims
When it comes to statutory limitation periods, timing
is everything; even if a claimant has a nearly perfect claim on
the merits, a failure to commence an action (i.e. have the Superior
Court of Justice issue a Statement of Claim) within or before the
expiration of the applicable limitation period will cause the claim
to be "thrown out at first base." Once the limitation
date passes, the claim is time barred and the claimant will have
permanently lost their right to legal recourse in respect of that
By necessity, lawyers are intimately familiar and
intensely concerned with limitation periods. One of the first questions
a lawyer will always ask a client about a new file, regardless whether
they act for a plaintiff or a defendant, will be about the relevant
dates in order to determine whether there are any existing or imminent
Lawyers are not the only ones that should be concerned
with limitation periods. We recommend to all of our clients, not
only those that are routinely involved in litigation, that they
obtain a general understanding of the limitations regime in Ontario.
The reasoning is simple: if a client does not know when a claim
is time barred, there is a risk that they may not contact their
lawyer until it is too late.
Ordinarily, limitations issues are relatively straightforward;
however, a recent decision of the Ontario Superior Court of Justice
caused some confusion as to the applicable limitation period for
contractual indemnity claims. Fortunately, the Court of Appeal cleared
up the confusion in Canaccord Capital Corporation v. Roscoe,
2013 ONCA 378 (CanLII), which is discussed below following a general
overview of the Ontario limitations regime.
i. General Limitation Periods
In Ontario, general limitation periods are governed
by the Limitations Act, 2002, R.S.O. 2002, c. 24, Sched.
B (the "Act"). In addition to the general limitation periods
contained in the Act, certain other statutes impose limitation periods
pertaining to specialized subject matter (for example, the Insurance
Act contains various limitations periods by way of the statutory
conditions thereunder). A full list of the various statutory exceptions
are outlined in section 19 of the Act.
Under the Act, the basic limitation period in Ontario
is two-years from the date on which the claim was discovered. The
concept of "discoverability" is outlined in subsection
5(1) of the Act, which reads as follows:
(1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused
by or contributed to by an act or omission,
(iii) that the act or omission was that of the
person against whom the claim is made, and
(iv) that, having regard to the nature of the
injury, loss or damage, a proceeding would be an appropriate
means to seek to remedy it; and
(b) the day on which a reasonable person with
the abilities and in the circumstances of the person with the
claim first ought to have known of the matters referred to in
In summary, the "clock starts ticking" on
either (a) the date of loss (i.e. the date that the contract was
breached, the date that the negligent act occurred, etc.) or (b),
where a claim is not discovered until a later date, the clock starts
on the date on which a person acting reasonably ought to have been
aware of the loss. In either scenario, a claimant has two years
from the date that the clock starts ticking to commence their action.
ii. Limitation Period for Contribution and Indemnity
When a party has been named a defendant in an action,
it is not uncommon for that defendant to assert its own claim for
contribution and indemnity against another party. Procedurally,
this can be accomplished by way of a number of avenues including,
but not limited to: by a Crossclaim against another defendant, by
a Third Party Claim against a third party, or the claiming party
could commence a separate and stand-alone action against a third
party for contribution and indemnity in respect of any damages that
may be awarded in the underlying action.
A claim for contribution is premised on the idea that
the target party shares some degree of liability in the circumstances
and, therefore, should contribute some amount in respect of any
damages awarded against the claiming defendant in proportion to
that party's liability. A claim for indemnity is simply a claim
for 100% of any damages awarded against the claiming defendant.
Most commonly, indemnity claims are rooted in contractual indemnity
clauses, which can also include indemnity obligations in respect
of legal fees and the cost of investigating claims among other things
on top of the principal damages. All things equal, the difference
between contribution and indemnity "is a distinction without
a difference. The difference [
] is simply the extent of the
Section 18 of the Act governs the limitation period
that is applicable to claims for contribution and indemnity. It
reads as follows:
Contribution and indemnity
18. (1) For the purposes of subsection 5 (2) and
section 15, in the case of a claim by one alleged wrongdoer against
another for contribution and indemnity, the day on which the first
alleged wrongdoer was served with the claim in respect of which
contribution and indemnity is sought shall be deemed to be the
day the act or omission on which that alleged wrongdoer's claim
is based took place.
(2) Subsection (1) applies whether the right to
contribution and indemnity arises in respect of a tort or otherwise.
In summary, a party has two years from the date
that it was served with the claim in respect of which contribution
and indemnity is sought to commence an action in respect of
As discussed above, the Court of Appeal recently clarified
the scope of section 18 relative to contractual indemnity claims.
iii. Canaccord Capital Corporation v. Roscoe
- Summary Judgment Motion
The factual underpinning of the decision involved
a dispute between an investment advisor and his clients, which ultimately
turned into a dispute between the investment advisor and his employer
Specifically, in August of 2008, an investment advisor,
Roscoe, and his employer company, Canaccord Capital Corporation
("Canaccord"), were served with a Statement of Claim by
two former clients (the "Clients"). The Clients alleged,
among other things, that Roscoe and Canaccord had been negligent
in their management of the Clients' investments.
Initially, Canaccord funded a common defence. Then,
in the Spring of 2009, it found itself at the table with the Clients
having settlement discussions. At that time, Roscoe retained independent
counsel who advised Canaccord that Roscoe denied any wrongdoing,
would dispute any indemnity claim, and reserved his right to assert
any available defences to any claim for indemnity. In July 2009,
without Roscoe's involvement, Canaccord settled that action with
In January 2010, Canaccord wrote to Roscoe and formally
requested indemnification pursuant to Roscoe's employment agreement,
which contained an indemnity clause for Canaccord's benefit. Through
a letter from Roscoe's counsel in February 2010, he denied any liability
and resisted Canaccord's claim for indemnification.
In June 2011, almost three years after the delivery
of the Clients' Statement of Claim, Canaccord commenced an action
against Roscoe for indemnity, claiming the amount of the settlement
plus Canaccord's legal fees. The claim was pleaded as a claim for
damages for breach of contract based on Roscoe's refusal to comply
with the contractual indemnity provision.
Unsurprisingly, Roscoe brought a summary judgment
motion before the Superior Court of Justice to have Canaccord's
claim dismissed on the basis that the indemnity claim was time barred
because it was not issued before the two-year anniversary of the
delivery of the Clients' Statement of Claim, as required under section
18 of the Act.
Surprisingly, the Superior Court of Justice dismissed
the motion on the basis that section 18 of the Act did not apply.
Specifically, the Court found that: (*2)
[T]he provision did not apply to indemnity claims
arising out of contract. She found that Canaccord's actions did
not assert a claim for "'contribution and indemnity' as between
one wrongdoer and another". In her view, Canaccord's action
was more properly categorized for limitations purposes as a claim
for breach of Roscoe's employment contract, and that it was therefore
governed by the basic two-year limitation period that ran from
the date Canaccord settled the [Clients] action. The motion judge
held that a breach of contract claim for damages is fundamentally
different from a claim for contribution and indemnity as between
two wrongdoers and that s. 18 does not apply to claims for damages
for breach of contract.
Further to the above, the Court treated the date that
Canaccord settled the Clients' claim as the date on which its contractual
claim against Roscoe "crystallized". In turn, because
Canaccord had commenced its action against Roscoe within two years
of the date of settlement, the Court found that Canaccord was not
afoul of the general limitation period applicable to breach of contract
claims. To the surprise of few, Roscoe appealed the decision.
iii. Canaccord Capital Corporation v. Roscoe
- Court of Appeal
The Court of Appeal deftly and economically allowed
Roscoe's appeal, set aside the order of the motions Judge and, in
its place, substituted an order dismissing Canaccord's action on
the basis that the claim is barred by operation of section 18 of
In reaching its decision that the motions Judge had
erred in its interpretation of section 18, the Court reviewed the
legislative history of the Act and applied the principles of statutory
With regard to the legislative history of the Act,
the Court cited the deliberate historical expansion of the limitation
legislation to extend the availability of contribution and indemnity
claims beyond the limited category of "tortfeasors" to
the broader category of "wrongdoers". The Court viewed
this as a deliberate effort to have such claims include contractual
claims for indemnity such as the subject claim. The Court found
this to be consistent with evidence available as to the legislative
purpose of the present limitations regime, being the creation of
a "a clear, cohesive scheme for addressing limitation issues."
Relying on the accepted principle of statutory interpretation,
being that "the words of an Act are to be read in their entire
context and in their grammatical and ordinary sense harmoniously
with the scheme of the Act, the object of the Act, and the intention
of Parliament[,]" (*4) the Court focused on the deliberate
inclusion of the conjunctive phrase "or otherwise" in
subsection (2) of section 18, which states that section 18 "applies
whether the right to contribution and indemnity arises in respect
of a tort or otherwise." In other words, had the legislature
wished to limit the application of section 18 to tort claims only
(and thereby exclude contractual indemnity claims), then it would
not have selected the self-evident language as it exists in present
It is unlikely that many interested observers were
surprised by the above-described decision of the Court of Appeal.
The decision on appeal was not about making new law, rather it was
a clarification of the status quo, which has been temporarily
muddied by a curious decision of the Superior Court. In any event,
this decision puts to rest any confusion that was created regarding
the limitation period that applies to contractual claims for indemnity.
(*1) Canaccord Capital
Corporation v. Roscoe, 2013 ONCA 378 (CanLII) at para. 33.
(*2) Ibid, at para.
(*3) Ibid, at para.
(*4) Rizzo & Rizzo
Shoes Ltd. (Re), 1998 CanLII 837 (SCC),  1 S.C.R. 27,
at para. 21.
7. The Recent U.S. Customs and Border Protection
Position Paper on C-TPAT: Some Comfort for Supply Chain Interests
Carrying and Shipping Cargo into the United States
C-TPAT and PIP: U.S. and Canadian "Trusted
The Customs-Trade Partnership Against Terrorism (C-TPAT) was established as a partnership program between stakeholders
involved in international trade and the U.S. Customs and Border
Protection agency following the events of 9/11. The goal was to
eliminate organized crime and terrorism risks to the international
supply chain. Through this program, the U.S. Customs and Border
Protection has worked with the trade community to strengthen supply
chains into the U.S. and to improve U.S. border security.
Partners in Protection (PIP) is the complementary
Canada Border Services Agency (CBSA) programme likewise enlisting
the cooperation of private industry stakeholders concerning the
shipment of goods into Canada to enhance border and trade chain
C-TPAT and PIP are voluntary programmes whose importer
and carrier members agree to implement and adhere to high security
standards. For example, members must ensure the security and integrity
of their cargo by adhering to well-defined targeted security measures,
such as the sealing of trailers and containers and ensuring continuous
seal integrity throughout the course of a containerized shipment.
The U.S. Customs and Border Protection and the Canada Border Services
Agency assess members' security measures under both programmes,
provide them with information sessions on security issues and offer
other benefits. Member companies become known as "trusted traders".
C-TPAT and PIP accordingly offer an element of 'border
protection' respectively for the import of goods into the United
States and Canada. The United States and Canada signed a Mutual
Recognition Agreement in June 2008, recognizing the compatibility
of the C-TPAT and PIP customs-trade partnership programs in light
of the similarity of security standards and member site validations.
Qualification for one is effectively qualification for the other.
The advantages of being "PIP Qualified"
to the Canadian importer or carrier starts with the fact that this
is an objective qualification that can be marketed to an existing
or potential client base: it attests that the company has achieved
certain processes and methodologies reducing import supply chain
security risks. PIP 'members' receive the following benefits:
- if they qualify for the CSA ("Customs Self
Assessment") programme, they are then eligible to apply to
the "Free and Secure Trade" (FAST) programme to be able
to use designated FAST lanes to cross the border into Canada.
FAST provides expedited border clearances into Canada for pre-approved
importers, carriers and drivers.
- they can access CBSA expertise, critique and commentary
on their security measures and in addressing supply chain vulnerabilities;
- they can enhance their reputation by being a secure,
low-risk company, and
- they can contribute to the protection of Canadian
The Recent Position Paper on C-TPAT Regulation,
Enforcement, and Due Process for Members
Over time concerns developed concerning the ability
of the interested government agency to suspend or remove a member
from C-TPAT or PIP. In particular, concerns had been registered
from the national trucking associations on both sides of the U.S.
- Canada border concerning the perceived lack of transparency and
due process concerning the possible immediate suspension of members
of C-TPAT. The concern was that a member might be suspended pending an investigation into a security incident - in essence, calling
into question the time honoured tradition of '"innocent before
proven guilty". (*2) The concern related to the rights of many
Canadian carriers and exporters of goods into the United States:
what of the situation where carriers or importers with otherwise
diligent security processes could be immediately suspended from
C-TPAT for what might be regarded as a relatively minor or infrequent
incident, such as the failure to properly seal a trailer - sometimes
with little or no communication or the opportunity to implement
corrective action, pending an investigation?
In response to the articulation of these concerns,
the U.S. Department of Homeland Security ("DHS") published
a document on June 13, 2013 which clearly lays out the measures
it will take to address security breaches involving motor carriers
- the most important of which being that suspension or removal from
the programme will not be immediate and without the newly published
process described therein being carried out. (*3)
In the recently published position paper, DHS has
set forth details on how the investigative process will work and
has provided industry partners with detailed information on their
legal rights and obligations following a security incident. DHS
has made a strong commitment to "not arbitrarily suspend
or remove a partner from the program [and] make every effort to
work with the partner to achieve required levels of compliance".
Partners will not be immediately suspended if they identify a security
breach and report it to DHS. The Agency has noted that such self-reporting "
demonstrates that the partner's security procedures
are functioning". While DHS has reserved the right to impose
an immediate suspension, "the program will not automatically
suspend a partner if a breach occurs" and a review will
be conducted to determine the cause of a security breach prior to
any decision to suspend. In the event that a partner is suspended, " the suspension letter will clearly articulate the reasons
for the suspension and include requirements the partner must meet
to be reinstated".
It would appear that this is a step in the right direction,
giving credence to the notion that C-TPAT, like PIP, is a voluntary
membership intended to be a "win-win" proposition: the
carrier and importer interests being able to market supply chain
integrity and security, and each country enjoying enhanced security
with both elements working in partnership.
(*1) Extracted from the Canadian
Border Services Agency web site located at http://cbsa-asfc.gc.ca/security-securite/pip-pep/
(*2) Canadian Trucking Alliance
Press Release: Marco Beghetto: "Greater Transparency on
C-TPAT Suspensions, Appeals a "Significant Step Forward"" June 13, 2013. Marco.Beghetto@Ontruck.org
(*3) Customs Trade Partnership
Against Terrorism Suspension, Removal, Appeals and Reinstatement
Processes, U.S. Customs and Border Protection, June 13, 2013
8. Lac-Mégantic Rail Disaster Update
On July 3rd, 2014 a unit train carrying crude oil
operated by Montreal, Maine & Atlantic Railway derailed in Lac-Mégantic,
Quebec. The subsequent inferno killed over forty people.
The Transportation Safety Board of Canada (the "TSB")
has provided updates of its continuing investigation. Its status
report of July 19 2013 gives us some information about this disaster.
What we know Timeline
At about 23:00 on 5 July 2013, the train stopped
at Nantes, Quebec. At 23:50, the fire was reported to the rail
traffic controller. At about midnight, the engine was shut down,
and the fire was extinguished. An MMA employee arrived on site
to assist the fire department. At approximately 00:56 on 6 July
2013, the train started to move, after the fire department and
MMA had left.
The train rolled down the approximately 1.2%
grade into the centre of Lac-Mégantic. The train derailed
at approximately 01:14 on 6 July 2013. The locomotives detached
from the rest of the train. There were no signals or track circuits,
so the rail traffic controller would have no indication of a runaway
The TSB indicates that it is still working on some
of the elements of the disaster:
- The cause of the fire, and its role on the runaway
- A number of operational issues, including the operation
of the train, and the requirements and company policies regarding
securement of trains (e.g., locked doors, adequate brakes)
- The packaging of dangerous goods, and their performance
(e.g., class 111 tank cars in train accidents)
- Additional interviews
- Review of documented information, which we are
waiting to receive
- Support the coroner's efforts
- With other agencies, support the families, loved
ones and survivors by keeping them informed
- Select components for further analysis at the TSB
Engineering Laboratory in Ottawa.
- Start decoding the content of the locomotive event
recorder as well as the sense and braking unit (commonly known
as the black boxes).
The TSB provides a graphic illustration of the rail
occurrences from 2003 to 2012.
The number of incidents has been decreasing.
The media and the public have been horrified by the
event. Some Canadian politicians have attempted to use the incident
for their own agenda. (*1) Andrew Coyne of the National Post has
put some reality back into the discussion. He wrote:
To be fair, the NDP is hardly alone in this game.
Commentators on the right have been equally quick to claim the
disaster makes the case for transporting oil by pipe, rather than
by rail. But here again, there is no evidence, the experts tell
us, to say that one or the other is safer overall. Each has its
advantages, and each its perils.
Certainly this one accident, as unprecedented as
it is horrific, is not sufficient evidence in itself. Consider
what a singular convergence of events was required to bring it
about. A highly flammable cargo; an unattended train; parked on
a hill; on the main track, not a siding; above a town; far enough
from town to build up great speed; and, as a final piece, that
fatal bend in the track as it entered town. If any one of those
is not present, no disaster and no deaths. But even if all are,
you still need two more: the failure (so it seems) of the air
brakes; and the failure (so it is alleged) to lock the hand brakes.
So as you read each news story suggesting the accident
was a result of some obvious regulatory failure, and not to a
catastrophic mix of inclement circumstance and human negligence,
ask yourself how any of them would have contributed to this particular
tragedy; how, if they had not been present, it might have been
avoided; or whether whatever remedy is now proposed would have
occurred to anyone except in hindsight.
We are told, for example, that the townsfolk had
earlier expressed concerns about the condition of the track. Great:
how would even an immaculately maintained track have held a train
going around a bend at better than 100 km per hour? We are told
that the Montreal, Maine & Atlantic Railway used "only"
one-man crews, as if it were unusual. But it's not unusual, except
in Canada: in most developed countries it's the norm. Do runaway
trains routinely plow into towns in Europe?
Similarly Mary-Jane Bennett of Vancouver has taken
a similar approach of reality and the need to properly evaluate
and learn from what happened.(*2)
Some are claiming that the Lac-Mégantic rail
disaster means oil transportation should be confined to pipelines,
but pipelines have their own set of risks and more pipeline capacity
will not eradicate rail demand for oil transport. The facts show
that, despite the increase in the amount of crude oil shipped
by rail over the past five years, there has been no concurrent
increase in the number of derailments. Rail accidents involving
dangerous goods have decreased nearly by half in recent years.
Freight railways in the U.S. transport about 1.7
million carloads of dangerous goods each year. Canada's railways
transported 140,000 carloads of oil last year. With dangerous
goods criss-crossing the country daily, it may be a hollow argument
to now turn against transportation of oil by rail.
Rail disasters are not unique to Canada. On the other
side of the Atlantic, the Spanish train derailment of July 24th
killed at least eighty people and injured over a hundred and thirty.
It appears the train was traveling at double the posted speed.
Use of positive train control technology ("PTC")
is being urged by many in the media. No one, however, seems to want
to discuss the costs involved in that regard to shippers, rail carriers
and taxpayers. Ms. Bennett concedes that PTC's may be of limited
relevance to situations like the Lac-Mégantic disaster (*3),
Canada should give a fresh look at positive train
control technology, mandated by the U.S. Congress in the Rail
Safety Improvement Act of 2008. PTC technology monitors train
speed and position, warns of speed or authority limits and brakes
automatically if train crews fail to respond. PTC would prevent
derailments, in cases of excessive speed, conflicting train movements
or engineer failure to obey wayside signals, by automatically
stopping trains where a collision or derailment is imminent.
Depending on the facts found by the TSB in the Lac-Mégantic
disaster, PTC may be of limited relevance. Yet, given that most
rail accidents originate with human error and track defect in
equal measure, an examination of how technology can best ensure
safe rail operations is needed. It can provide Canadians with
the extra security they require in the transportation of goods.
The debate is only beginning. The TSB investigation
will take some time. The litigation that will inevitably arise from
the Lac-Mégantic disaster could last a decade or more.
We will keep you posted.
(*1) See the National Post
July 10, 2013 Andrew Coyne: Beware those using Lac-Mégantic
disaster to further their own agendas "If the NDP leader
did not explicitly blame the train derailment and explosion that
leveled the town on Conservative spending cuts, he certainly left
the impression they could have been responsible. "This tragic
accident," he told CTV News, "reminds us [that] we are
seeing more and more petroleum products being transported by rail,
and there are attendant dangers involved in that. And, at the same
time, the Conservative government is cutting transport safety in
(*2) July 18, 2013 The Montreal
Gazette "Let's Learn the Right Lessons from Lac-Mégantic"
(*3) PTC's may have been
relevant in the Spanish disaster.
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