this newsletter in PDF
In this issue:
1. News & Upcoming Events
2. Seizure of Sailboat Disallowed
3. Choice of Law Clause in Contracts
4. Truck Food Safety Plan
5. City of Toronto v. Uber
6. Spoliation of Evidence
1. News & Upcoming Events
Fernandes Hearn LLP is pleased to announce its inclusion in the Chambers Canada 2016 Guide of Canada’s Leading Lawyers for Business in “Shipping” and “Rail & Road”, with Rui Fernandes and Gordon Hearn being listed as “Leading Individuals” in those areas.
Gordon Hearn will be representing the firm at the Transportation Law Institute being held in Columbus, Ohio on October 30, 2015.
The Fort Lauderdale Mariners Club 26th Annual Marine Seminar will be taking place November 3-4, 2015, in Fort Lauderdale Florida. Kim Stoll and Rui Fernandes will be attending representing the firm.
The Canadian Maritime Law Association will be holding an open meeting in Toronto November 10th sponsored by Fernandes Hearn LLP and Borden Ladner Gervais. Dr. Dinesh Kumbhare will be speaking on “Imaging of Pain.”
The Canadian Passenger Vessel Association Annual Conference will be taking place in Halifax November 18-20. Rui Fernandes will be speaking at the conference. Tara Cassidy will also be attending.
Gordon Hearn and Martin Abadi will be speaking at a combined meeting of Delta Nu Alpha and the National Transportation Brokers Association on November 19, 2015 on the following topic: “The Bills of Lading Act: What Does it Really Accomplish?"
The CBMU Fall Conference will be in Toronto on December 1. The Transportation Club of Toronto dinner will be on December 3 in Toronto and the Grunt Club dinner will be on December 4th in Montreal.
The Fernandes Hearn Annual Seminar will take place on January 14th, 2016 at the Advocates Society Education Centre in Toronto.
The Marine Club Annual Dinner will take place on January 15th, 2016 at the Royal York Hotel in Toronto.
2. Seizure of Sailboat Disallowed
In the recent decision of A.G. Ontario v. Kittiwake Sailboat, 2015 ONSC 6106 Justice Corbett of the Superior Court of Justice of Ontario disallowed a proposed seizure of a sailboat by the Attorney General of Ontario (“AG Ontario”) under the Civil Remedies Act (“CRA”).
The facts of this case are simple. On August 4, 2013, Valentin Chygyrynskyy was seen operating his sailboat in Toronto harbour. The sailboat struck a moored powerboat. Then Mr. Chygyrynskyy was observed falling out of his boat into the water. Mr. Chygrynskyy swam to shore with the aid of a flotation device thrown to him by his passenger. The police Marine Unit was dispatched and helped Mr. Chygyrynskyy from the water. Mr. Chygyrynskyy provided two breath samples. His readings were 158 mgs and 147 mgs of alcohol per 100 ml of blood. Mr. Chygyrynskyy was charged with offences related to impaired operation of a boat. Following these events, the AG Ontario obtained a preservation order and applied for forfeiture of Mr. Chygyrynskyy’s sailboat under the CRA.
The CRA is a “Robin Hood” law conceived as a way to take property from criminals and give the proceeds from its sale to victims. It is a procedure in a civil court and not criminal court. It doesn’t require a charge and conviction in a criminal proceeding. An application can simply be made to a judge in a civil proceeding where the onus of proof is on a balance of probabilities as opposed to the more rigorous standard of beyond a reasonable doubt.
The procedure has its supporters and its critics. The Toronto Star (*1) has reported that:
… an Oshawa couple had a portion of the value of their house seized even though drug possession charges against them were dropped. In Orillia, a landlord who rented rooms to homeless people could lose his property because the province contends that tenants paid rent with money made selling drugs.
Critics point out that because it’s easier to prove a case in civil court than in criminal court, the forfeiture process has become a parallel justice system for weak cases.
The CRA provides in Subsection 8(1) that:
In a proceeding commenced by the Attorney General, the Superior Court of Justice shall, subject to subsection (3) and except where it would clearly not be in the interests of justice, make an order forfeiting property that is in Ontario to the Crown in right of Ontario if the court finds that the property is an instrument of unlawful activity.
An “instrument of unlawful activity” is defined in s.7(1) of the CRA as:
… property that is likely to be used to engage in unlawful activity that, in turn, would be likely to or is intended to result in the acquisition of other property or in serious bodily harm to any person, and includes any property that is realized from the sale or disposition of such property….
“Unlawful activity” is defined in s.7(1) of the CRA to mean:
an act or omission that… (a) is an offence under an Act of Canada, Ontario or another province or territory of Canada….
Subsection 7(2) provides:
For the purpose of the definition of “instrument of unlawful activity” in subsection (1), proof that property was used to engage in unlawful activity that, in turn, resulted in the acquisition of other property or in serious bodily harm to any person is proof, in the absence of evidence to the contrary, that the property is likely to be used to engage in unlawful activity that, in turn, would be likely to result in the acquisition of other property or in serious bodily harm to any person.
Justice Corbett pointed out that forfeiture is mandatory if the conditions of s. 7(1) are met, unless such an order “would clearly not be in the interests of justice.” Thus forfeiture will be automatic in all but exceptional cases.
The judge found that the condition in s. 7(1) was met since impaired operation of a sailboat is an offence under the Criminal Code of Canada and therefore is an “unlawful activity” within the meaning of the CRA.
In this proceeding, the onus was on the AG Ontario to show that it was “likely” that the boat would be used for unlawful activity in the future. The court noted that Mr. Chygrynskyy has operated his boat once while impaired. There was no evidence that he had done so before. The owner also testified that he intended to sell the sailboat since he had health problems. The judge accepted this evidence as credible. The judge found that the AG Ontario had not met its onus to show that it was “likely” that the sailboat would be used in unlawful activity in the future.
The judge also found that the events that gave rise to the court application by the AG Ontario did not cause serious bodily harm to any person. Thus the AG Ontario did not have the benefit of the presumption in s. 7(2) of the CRA.
Justice Corbett found that the AG Ontario had not established that the prospective unlawful use of the sailboat would “likely” lead to serious bodily harm to a person stating:
There is some risk that it may. But that is not the test. The test is “likely”. The Crown has not come close to establishing this proposition, which strikes me as rather remote. The Crown has not come close to establishing this proposition, which strikes me as rather remote. Certainly there is no evidence before me that it is more likely than not that an impaired boater will cause serious bodily injury to a person. The statistics indicate that the risk for motorists is much smaller than 50%, and as a matter of common sense I would suggest that the risks for persons on a leisure sailboat would be much lower still. The applicant has adduced evidence that forty per cent of fatal boating accidents involve drugs or alcohol. With respect, that evidence is beside the point. It may establish that there is elevated risk associated with impaired operation of a boat. It does not establish that this risk is above 50%, the level required to make serious bodily harm a “likely” consequence.
…I appreciate that this mathematical analysis could be seen to trivialize the risks associated with impaired operation of cars and boats. That is not the point here. The probability of serious bodily harm is less than “likely”, but the consequences of that risk being realized are unacceptable. Impaired driving, whether of cars or boats, is a serious social harm – it creates no benefit to anyone, and may cause disastrous loss to some. But the seriousness of the consequences does not make those consequences more likely.
The judge commented that the CRA was aimed at organized crime and intentional crime undertaken for personal gain. It was not aimed at leisure boating. The judge was fortified in this conclusion by the legislative debates when the CRA was enacted. There was debate of drug trafficking and organized crime, but none of impaired driving. The judge commented on the forfeiture procedure stating:
Forfeiture under the CRA is a confiscation of private property by the state, without compensation. Where proceeds of crime are confiscated, there is no countervailing interest to balance: criminals can rightly be deprived of the fruits of their criminal activity. Where property is used for the purpose of committing criminal acts, there may be conflicting values at play. Where the property is not owned lawfully in the first place, there is a strong argument for confiscation without compensation. Where the property is owned and used legitimately by its owner, but also happens to be used in connection with a crime, the case for confiscation without compensation becomes more problematic. The Legislature recognized these issues when it used the strong language it did to define “instruments of unlawful activity” as it did: the strict interpretation of this provision is consistent with the Legislature’s goals to make this powerful remedy available to fight organized crime, drug crimes, and other similar activities.
The owner of the sailboat had been unrepresented. The court had, however, appointed a lawyer to assist the owner and the court with some of the issues, an amicus curiae. The amicus curiae had raised an interesting issue as to whether the application of the CRA to a sailboat was constitutional, given the federal government’s exclusive jurisdiction over navigation and shipping. The judge noted that it was not necessary for him to decide this constitutional issue to dispose of this case, and declined to do so. This issue was left to be decided in a future case.
The application by the AG Ontario to seize the vessel was dismissed. The sailboat was ordered to be returned to its owner.
The Toronto Star noted that the case had serious implications for those caught driving drunk and, had it been successful, could have led to more widespread seizure of cars and trucks. (*2)
Rui M. Fernandes
Follow Rui M. Fernandes on Twitter @RuiMFernandes and on Linkedin
(*2) http://www.thestar.com/news/gta/2015/10/01/judge-rejects-seizure-of-sailboat-after-drunken-accident.html. “This decision makes it a lot more challenging to seize property if it’s not property that’s inherently illegal or property that has a proven track record of being used illegally resulting in injury to others,” said Justin Safayeni, who was appointed by the court to oppose the Attorney General. “Certainly there’s been a trend to the expansive use of these powers, and this decision — at least for the time being — seems to dial it back.”
3. The Importance of the “Choice of Law” Clause in International and Cross-Border Contracts
While negotiating the terms of an international or “cross-border” agreement the parties will of course address the detail of the goods of services being provided, the pricing, delivery obligations and other related items. Often the parties will fail to turn their minds to an important legal consideration: in the event of a dispute arising from the contract, what law will apply? By not addressing this topic, or, as is often the case, one or both parties simply by default agreeing to adopt a “choice of law” clause that exists in a “boilerplate” wording, a party may face unintended adverse consequences in the event of a dispute.
That the “choice of law” is an important consideration in an international or “cross-border” agreement is nicely illustrated by the recent decision of the Ontario Court of Appeal in Lilydale Cooperative Limited v. Meyn Canada Inc. (*1).
Meyn Canada Inc. (“Meyn”) is a multi-national enterprise, incorporated federally in Canada and operating only in the province of Ontario. Lilydale Cooperative Limited (“Lilydale”) is an Alberta operation, which operates a poultry processing plant in Edmonton. In 1993, Lilydale purchased from Meyn a “fryer and oven system” for its Edmonton plant. Lilydale used the fryer and oven system for 10 years until January 2004 when a fire occurred in its plant. In January 2006, (13 years after the purchase) Lilydale sued Meyn in Ontario for negligence and breach of contract, alleging that the fryer and oven system was defective and had caused the fire.
An issue arose as to whether Alberta or Ontario law applied to the negligence and breach of contract claim. This issue was more than one of passing interest or a legal technicality: Alberta and Ontario have different “ultimate limitation periods” for actions based on negligence or breach of contract. (*2) Alberta’s ultimate limitation period is 10 years. Ontario’s ultimate limitation period is 15 years. The parties agreed, as a matter of fact, that the purchase of the system by Lilydale was consummated in or about August 31, 1994, being the effective date on which Lilydale’s “cause of action” or legal basis to sue arose. Accordingly, as Lilydale did not commence a lawsuit until January 2006, if Alberta law applied, its action was statute barred. However on the other hand, if Ontario law applied, Lilydale’s action was not statute barred.
The purchase agreement did not have a “choice of law” clause as between Alberta or Ontario, or for that matter any other body of law.
Proceedings before the Ontario Superior Court of Justice
The parties brought a motion before the court for a determination as to whether Alberta or Ontario law applied to the negligence and breach of contract claims. The judge initially hearing the matter ruled that Alberta law applied to the negligence claim and that Ontario law applied to the beach of contract claim (*3). Accordingly, Lilydale was time barred from proceeding with it’s action against Meyn for “negligence” but was still able to pursue it’s claim for breach of contract against Meyn on account of the more generous “ultimate limitation period” under Ontario law. In ruling that Ontario law governed the contract claim, the judge applied the conventional test for determining the applicable law (where there is no contractual “choice of law” clause) long recognized in Canadian jurisprudence being as follows: which jurisdiction, Alberta or Ontario, had the “closest and most real connection” to the contract? The judge considered the four criteria typically used to assess the “closest and most real connection”:
- The nature and subject matter of the contract;
- The place of performance of the contract;
- The place of contracting; and
- The residence and domicile of the parties.
The motion judge held that the first two criteria favoured Ontario, and that the last two criteria were neutral as between Alberta and Ontario. The judge accordingly concluded that Ontario law governed Lilydale’s claim for breach on contract and that the action was accordingly not barred by the Ontario limitation period. (*4)
Meyn appealed this result. Noting that while the judge in first instance stated the correct test to determine applicable law, Meyn asserted that the judge misapplied the same to the facts of the case. Meyn took it’s appeal to the Ontario Court of Appeal, for a ruling that the contract claim was in fact time-barred.
In the Court of Appeal
Meyn raised 2 issues:
- Did the motion judge err in holding that the nature of the contract favoured Ontario rather than Alberta and;
- Did she similarly err in holding that the place of performance of the contract favoured Ontario?
In its ruling, the Court of Appeal reiterated the test set out by the Supreme Court of Canada nearly 50 years ago as to how the court should determine the applicable law of a contract in the absence of a choice of law clause. (*5) In this regard the Supreme Court restated the applicable test as follows:
It now appears to have been accepted by the highest Courts in England that the problem of determining the proper law of the contract is to be solved by considering the contract as a whole in light of all the circumstances which surround it and applying the law with which it appears to have the closest and most substantial connection.
This test was adopted by the Privy Council in Bonython v Commonwealth of Australia  A.C. 201 where Lord Simonds said at p. 219:
“…the substance of the obligations must be determined by the proper law of the contract (i.e. the system of law by reference to which the contract was made or that which the transaction had its closest and most real connexion.”
For the criteria that informs this test, Ritchie J. turned to Chesire’s text on Private International Law:
The many factors which have been taken into consideration in various decided cases in determining the proper law to be applied, are described in the following passage from Cheshire on Private International Law, 7th ed., p. 190:
The court must take into account, for instance, the following matters: the domicile and even the residence of the parties; the national character of a corporation and the place where it’s principle place of business is situated; the place where the contract was made and the place where it is to be performed; the style in which the contract is drafted, as, for instance, whether the language is appropriate to one system of law, but inappropriate to another; the fact that a certain stipulation is valid under one law but void under another … the economic connexion of the contract with some other transaction … the nature of the subject matter or its situs; the head office of an insurance company, whose activities range over many countries; and, in short, any other fact which serves to localize the contract
The Court of Appeal addressed the issues raised on the appeal:
i) The Nature and Subject Matter of the Contract
Meyn characterized the contract as simply being for the sale and installation of a piece of equipment. This was completed in the delivery to, and installation in the province of Alberta, so Alberta law should govern. The Court of Appeal disagreed, noting that the contract was not simply for the sale of an item, but was rather a contract for the design and sale of the fire and oven system. In this regard the Court noted that the system consisted of a number of different components that Meyn had to order from various third party suppliers to be shipped to Lilydale. Meyn also had to design the system. The Court of Appeal noted that the steps involved in terms of the ordering of components and in the design of the system were all done in Ontario and that accordingly, the first instance judge’s finding that the nature and subject matter of the contract was more connected to Ontario was a reasonable finding and should “stand”.
ii) The Place of Performance of the Contract
The first instance judge concluded that most of the contract was performed in Ontario and that there was virtually no work done in Alberta. Noting that the contract called for Meyn’s design of the system, which was done in the province of Ontario, the Court of Appeal in similar fashion sided with the judge that it was with reasonable for her to have found that most of the contract had been performed by Meyn in Ontario.
Disposition of the Case
The Court of Appeal found that the motion judge’s findings on the relevant criteria were reasonable, as was her overall conclusion that the “closest and most real connection” to the contract was Ontario. The Court of Appeal also noted that this result was just in the circumstances, in terms of requiring Meyn to adhere to the substantive law of Ontario, being its home jurisdiction. As noted by the court:
Meyn, a multi-national enterprise, could have inserted a choice of law clause in its contract with Lilydale. Had Meyn done so, it would have undoubtedly chosen Ontario, the only province in Canada where it operates. It seems to me more than a little ironic that despite its own connections with Ontario, Meyn would seek to take advantage of Alberta law.
In the result, the Court of Appeal confirmed that Lilydale’s breach of contract claim against Meyn could still proceed under Ontario law. The action would live to see another day – perhaps even a trial.
The facts of this case are perhaps an extreme example of what happens when, in the absence of a “choice of law” clause, the parties remain, for better or worse, subject to the views of a court as to what law should govern. The concept of the “ultimate limitation period”, and how it might vary between legal jurisdictions is, admittedly, likely a remote consideration even if contracting parties turn their minds to the choice of law issue. No doubt there are more pressing short-term comparisons to be made as to how one jurisdiction’s laws are more beneficial than another. The ‘take away’ here is that a careful study and analysis should be undertaken as much as possible in the completion of an international or a cross-border contract as to what law will govern the contract. The failure to do so could result with unintended consequences.
(*1) (2015 ONCA 281) (CanLII)
(*2) Each province has legislation pertaining to how long a party can wait to commence a court action. Ontario and Alberta are no exception, having enacted two conceptually different “time bars” or periods for suit to be taken. One relates to a certain number of years (i.e. for these provinces, two years) for suit to be taken after a plaintiff develops an awareness (or, with the exercise of due diligence, could have become so aware) of the facts giving rise to its ability to claim damages from the other party. This is known as the “discoverability” principle, and is meant to be fluid and fact specific as to when such two year time clock starts “ticking”. Both provinces however have an interest in an ultimate “shelf life”, or end date – discoverability considerations aside – for a plaintiff to commence an action. This is what is referred to as the “ultimate limitation period”.
(*3) The ruling that the ”negligence“ claim in tort was subject to Alberta law went uncontested on the appeal hearing being the subject of this article. This was in keeping with the well established rule that the relevant law in a negligence case is the legal system governing the place where the “wrong” took place. The question of what law governed the contract remained “up in air”.
(*4) In Canadian law, the time bar period, or “statutes of limitation” are considered to be “substantive” law, meaning that the time bar provisions in the law governing the contract in question applies.
(*5) Imperial Life Assurance Co. of Canada v Segundo Casteleiro Y Colmenares  S.CR. 443. While perhaps an implied notion with the discussion thus far, the reader should note that as a general rule the courts do, in effect, apply the law prescribed in a “choice of law” clause agreed to by the parties. Granted, there may be expense and significant logistics involved in proving what that law actually is in the foreign “chosen country for application in a Canadian based dispute. Typically this involves calling a lawyer from the “chosen” jurisdiction as an expert witness to give evidence before the Canadian judge hearing the matter as to what the foreign law is as a matter of fact.
4. The Trucking Food Safety Program
The Trucking Food Safety Program (“TFSP”) may soon become the new standard for transporting food products. Carriers may want to consider following this voluntary program or implementing their own HACCP (Hazard Analysis Critical Controls Points) plan to increase their competitive advantage and facilitate their compliance with any future legislation adopting similar principles.
The TFSP adopts the principles of the HACCP program, which aims to control major food risks, such as microbiological, chemical and physical contaminants to enable the food industry to better assure consumers that its products are as safe for consumption “as good science and technology allows”. (*1)
The HACCP program requires manufacturers of certain food products to maintain HACCP plans. These plans aim to identify potential hazards associated with the food production, packaging, storage and transportation process that are likely to cause contamination and illness. Once identified, the plan sets out ways to control and/or prevent those hazards. Having a carrier who complies with the TFSP is beneficial to shippers because it diminishes their concerns regarding contamination hazards to their product in one more link of the supply chain. (*2) HACCP became mandatory in Canada in 2005 for federally registered meat and poultry establishments. (*3)
Benefits of Participating in the TFSP
The TFSP consists of food safety prerequisites, the development of standard operating procedures and commodity specific modules that will enable carriers to prove that they have taken all reasonable steps to ensure food safety and support a shipper’s HACCP food safety plan. (*4) TFSP-compliant carriers will appear more appealing to customers, will be recognized as using industry best practices and improve their competitiveness in cross-border food transportation as HACCP is recognized as the internationally accepted standard for food safety. (*5)
Hazard Control & Food Safety Legislation: Canada and the US
In the United States, new requirements recently came into effect for the food industry, representing “the first major overhaul of US food safety regulations since the [previous] rules were written in 1938.” (*6) The previous program was based on a “see, smell, touch” approach which relied on detection rather than prevention of hazards. (*7)
The Food Safety Modernization Act (“US Act”) became law in the United States in 2011. In September 2015, the first two major Rules under the US Act have been finalized and will become effective November 16, 2015 (Rules on Preventative Controls in Human and Animal Food). There are also proposed Rules regarding Accreditation of Third Party Auditors, Amendments to Registration of Food Facilities, Standards regarding Produce, Food Supplier Verification Programs for Importers, and the Sanitary Transportation of Human and Animal Food.
Under the Rule on Preventative Controls in Human Food (“Preventative Controls Rule”), certain facilities must implement a food safety system that includes hazard analysis and risk-based preventative controls. The Preventative Controls Rule establishes requirements similar to HACCP, including the following for each type of food manufactured, processed, packed or held at the facility: a written food safety plan, hazard analysis, preventative controls, monitoring, corrective actions and verification, supply chain programs, recall plans and record keeping. (*8)
The purpose of the proposed rule on Sanitary Transportation is to prevent practices that create food safety risks, such as failure to properly refrigerate food, inadequate cleaning of vehicles between loads and failure to property protect food during transportation. (*9) The rule will set out standard requirements for the following: the design, cleaning and maintenance of vehicles and transportation equipment; measures taken during transportation such as adequate temperature control and separation of food from non-food items; information exchange; training of carrier personnel in sanitary practices; and record keeping. (*10)
The proposed rule on Foreign Supplier Verification Programs for Importers of Food for Humans (“Verification Rule”) aims to require importers to perform certain activities to help ensure that the food they bring into the US is produced in a manner consistent with US standards. (*11) Under the Verification Rule, when there is reason to believe that a hazard will cause serious injuries or death, a clear, rigorous verification standard is required in the form of annual on-site auditing of the supplier. Otherwise, importers will have the flexibility to determine the appropriate verification measure based on food and supplier risks.
Implementing the practices proposed under the US Act will facilitate carriers’ compliance with US law and provide a competitive advantage where US shippers require HACCP certified carriers under their Preventative Controls Rule plan. The Sanitary Transportation rule will be mandatory for shippers, carriers and receivers who transport food to and in the United States with some exceptions, such as food that is transshipped through the US to another country.
The Canadian Food Inspection Agency (“CFIA”) has indicated that they are working closely with the US Food and Drug Administration (“FDA”) “toward achieving food safety system recognition between Canada and the US. (*12) As noted in the September 2015 Fernandes Hearn LLP Newsletter, the Safe Food for Canadians Act (“Canadian Act”), which is not yet in force, aims to better protect Canadians from risks relating to food safety by implementing stronger food safety rules, more effective inspection methods, and increased penalties for contraventions of the Canadian Act. As with the Verification Rule under the US Act, the Canadian Act requires importers to be licensed and is meant to hold them accountable for the safety of the foods that they are bringing into Canada. In addition, the regulations under the Canadian Act intend to prescribe elements required for a food safety control plan, similar to HACCP.
Currently, establishments that process, inspect, package, freeze and store meat products, among other activities, must develop, implement and maintain HACCP plans and other control programs as set out in the Food Safety Enhancement Program Manual. (*13) Similarly, establishments that process, store or export fish are required to maintain an HACCP plan. (*14) While HACCP plans are not mandatory in federally registered dairy, processed product, egg, honey, maple and hatchery establishment, the CFIA strongly recommends that these establishments adopt HACCP, which suggests that regulations implementing hazard control plans may become law in the future (*15) Carriers who comply with HACCP will be more appealing to these customers by giving customers the piece of mind that the transportation of their product will comply with their HACCP plan.
Carriers should consider implementing a HACCP plan of their own or participating in the TFSP to increase their competitive advantage and facilitate compliance with future legislation that may make HACCP mandatory for the transportation industry or the industries of their customers.
(*7) Supra note 1.
(*13) Meat Inspection Regulations, 1990 SOR/90-288 s30.1
(*14) Fish Inspection Regulations, CRC, c 802, s 15(6)(c)
5. The Ontario Superior Court’s Decision in City of Toronto v. Uber Canada Inc., et al., 2015 ONSC 3572
In City of Toronto v. Uber Canada Inc., et al., 2015 ONSC 3572 (hereinafter referred to as “City v. Uber”), the City of Toronto (“the City”) brought an application seeking, amongst other things, a declaration that the respondents, Uber Canada Inc, Uber B.V., and Rasier Operations B.V. (hereinafter, collectively referred to as “Uber”) were operating a taxicab brokerage and limousine service company contrary to section c. 545 the City of Toronto Municipal Code (the “Code”). The City sought an injunction restraining Uber from, amongst other things, operating a taxicab brokerage and limousine service company in Toronto without a valid license.
The Court held in this decision that the City failed to demonstrate a breach of the Code by the Uber.
In City v. Uber, Justice Dunphy describes how the City’s regulations which govern the taxi industry in Toronto have their historical underpinnings from the beginning of the 20th century when the private automobile marked a disruptive change to local transport in the City. (*1) The City determined that the consumer required protection in its interactions with the taxi industry in the form of regulations which controlled prices, licensed drivers, and placed limits on the number of taxi licenses issued. (*2)
Uber began operating in the City of Toronto in 2012. Since then, Uber has grown rapidly both in Toronto and worldwide in terms of the regions it services, its number of users and drivers, and in the breadth of its service offerings (for example, Uber recently rolled out its UberEats service in Toronto). This growth has been disruptive to the taxi industry in Toronto and elsewhere. While the City of Toronto has approximately 5000 taxicabs with 10,000 drivers, Uber has indicated that by the end of 2015, it expects to have approximately 15,000 drivers signed up to drive in Ontario under the Uber X Driver app - with the majority of these drivers operating in Toronto and the surrounding area. (*3)
Justice Dunphy asks: “Have the City’s regulations, crafted in a different era, with different technologies in mind created a flexible regulatory firewall around the taxi industry sufficient to resist the Uber challenge, or have they instead created the equivalent of a regulatory Maginot Line behind which it has retreated, neither confronting nor embracing the challenges of the new world of internet enabled mobile communications?” (*4)
The issues that the Court had to consider in City v. Uber included:
1. Is Uber captured by the construction/definition of “Taxicab” and “Limousine” in Article 1 of c. 545 of the Code?
2. Does Uber operate a “Limousine Service Company” as defined by c. 545 of the Code? (*5)
Issue 1 - Definition of Taxicab and Limousine in the Code
Article 1 of Chapter 545 of the Code provides:
“For the purposes of this chapter, the following terms shall have the meanings indicated:
LIMOUSINE - Any automobile, other than a taxicab as defined by this chapter, used for hire for the conveyance of passengers in the City of Toronto, and formerly referred to in this chapter as a ‘livery cab’...
TAXICAB - An ambassador taxicab, a standard taxicab, a Toronto Taxicab and an accessible taxicab…”. (*6)
The terms “ambassador taxicab”, “standard taxicab”, “Toronto taxicab” and “accessible taxicab” are defined elsewhere in the Code and refer to particular categories of licenses issued to taxicabs. (*7)
The Court found that Uber did not fall under the definition of “taxicab” in the Code since the term only applies to holders of any of the four categories of license referenced. (*8)
The Court found that since Uber lacks such taxi permits, it must fall within the definition of “limousine” in the Code, which includes all other automobiles other than taxicabs used for hire for the conveyance of passengers in the City of Toronto. The Court noted that if the Uber defendants were operating a business that requires a license, it could only be as a “limousine service company”. (*9)
Issue 2 - Does Uber operate a “Limousine Service Company” as defined by the Code?
Article II of the Code provides that licenses are required for every limousine servicing company operating in Toronto. A “limousine servicing company” is defined as “any person or entity which accepts calls in any manner for booking, arranging, or providing limousine transportation”. (*10)
The Court held that the Uber entities did not fall under the definition of a “limousine servicing company” for reasons that include:
1) “The only limousine service company business which requires a license is one which ‘accepts’ calls in any manner to arrange limousine transportation...Uber’s peer to peer process operates, in a sense, as a super-charged directory assistance service. Indeed, many internet apps are available today which enable a smartphone to identify the name and address, phone number and web site of the nearest static seller of almost any good or service...Pressing links on the apps will direct the user to the web site of the service provider (e.g. Restaurant or hardware store) or connect a telephone call. The innovation of the Uber App is that, in effect, it is able to identify service providers (in this case, drivers) who are not static but constantly mobile. While the software design behind such applications may be clever, and even ingenious, the purely automatic relaying and connection role they undertake is the 21st Century version of what telephone exchanges were to the 20th Century. Neither can be described as ‘accepting’ the calls or requests of users in any usual sense of the word when no human interaction or discretion is involved.” (*11)
2) “...[T]he only point in the process where there can be anything identified as ‘accepting’ a request for a service is when the driver signifies his acceptance of the passenger’s request by so signifying within the Driver App.” (*12)
3) “The only function in the Uber business structure (viewed broadly) that the City has been able to point to in its argument as coming close to the concept of ‘accepting calls in any manner for booking, arranging or providing limousine transportation’ is that of relaying the message sent from the prospective passenger to the prospective driver. There is simply no evidence before me that any of the Uber companies who are respondents have any role in that relay function. The owner of the Uber App (Uber Technologies Inc.) is not before me; neither the owner nor operator of the servers in Northern California were identified.” (*13)
Conclusion Regarding the Court’s Decision
Justice Dunphy concludes that: “While the City made much in argument of its ‘walk like a duck’ metaphor, the simple fact of the matter is that it does not require ducks to be licensed. None of the ancillary aspects of Uber’s business - recruiting drivers, marketing, billing, customer relations and the like - is subject to a requirement to obtain a license. Accepting calls for transportation does require a license and Uber does not do that”. (*14)
Justice Dunphy’s decision was grounded in a strict statutory interpretation of the Code. Justice Dunphy noted that the Court’s role is to “determine disputes in the light of the output of the political process...” rather than “...start with the desired outcome that the regulator seeks in light of new developments to see what can be found to stretch the words used to accomplish the goal”. (*15)
Naturally, the legislature could respond to the regulation of mobile communications through political means. Of course, the decision to create regulations that will properly capture Uber will only become more politically difficult as time passes given the seemingly unstoppable rise in Uber’s popularity as well as its ubiquity in the City’s culture and landscape. As Justice Dunphy eloquently noted: “The City finds itself caught between the Scylla of the existing regulatory system, with its numerous vested interests characterized by controlled supply and price, and the Charybdis of thousands of consumer/voters who do not wish to see the competition genie forced back into the bottle now that they have acquired a taste for it.” (*16)
(*1.) City of Toronto v. Uber Canada Inc., et al., 2015 ONSC 3572 at para 3 and 4.
(*2.) Ibid at para 4.
(*3.) Ibid at para 26.
(*4.) Ibid at para 12.
(*5.) Ibid at para 49.
(*6.) Ibid at para 52.
(*7.) Ibid at para 52.
(*8.) Ibid at para 60.
(*9.) Ibid at paras 60 and 61.
(*10.) Ibid at para 62.
(*11.) Ibid at paras 65 and 77.
(*12.) Ibid at para 79.
(*13.) Ibid at para 103.
(*14.) Ibid at para 104.
(*15.) Ibid at paras 13 and 69.
(*16.) Ibid at para 9.
6. Spoliation of Evidence Causes Dismissal of Action: Burin Peninsula Marine Services Centre v. Maxwell Forsey 2015 FCA 216
In Ontario, if there is a reasonable inference via the evidence presented that a party to an action has intentionally destroyed relevant evidence to affect the outcome of the litigation, a presumption arises against that party that the evidence was unfavourable to it. However, such an presumption is “rebuttable” meaning that the offending party or “spoliator” may counter the presumption by presenting evidence proving, that even though the evidence was intentionally destroyed, his or her actions or events that resulted in the destruction of evidence were not aimed at affecting the outcome of the litigation or impacting the way that the spoliator proves or disproves his or her case.
Burin Peninsula Marine Services Centre v. Maxwell Forsey 2015 FCA 216
On October 9, 2015, the Federal Court of Appeal dismissed an appeal by Burin Peninsula Marine Services Centre (“Burin”) from a judgment rendered by Madam Justice Heneghan of the trial court in favour of the plaintiff, Maxwell Forsey (“Forsey”).
The case involved Forsey’s fishing vessel, “Eastern Gambler” (the “Vessel”). The Vessel’s hull was to be serviced by Burin at the Burin premises, a facility used for storage and servicing of vessels. Burin agreed to remove the Vessel from the water and to place it on dry land prior to effecting repairs. The Vessel was then supported on land by a cradle consisting of keel blocks (large rectangular pieces of wood) that were placed at perpendicular angles to the keep and two pieces of “cribbing” or “supports” on each side. These support were adjusted against the hull by “wedges” inserted between the support and hull.
The Vessel remained stored at Burin during which time Burin’s employees performed general maintenance and repairs. About a month after the Vessel’s arrival, heavy winds swept through the Burin Peninsula and the Vessel was then found lying on the ground on its starboard side having suffered serious structural damage.
The Trial Decision
Forsey brought an action in Federal Court for damages of approximately $270,000.00 claiming that the relationship with Burin was one of bailment for reward and that Burin was responsible for the safekeeping of the Vessel while in Burin’s care, custody and control. Further it was alleged that Burin had failed to supply adequate and proper cradling materials and failed to install additional cradle supports in respect of the storm when Burin knew or ought to have known that such adverse weather conditions were imminent so as to ensure the safety of the Vessel.
Burin in response argued that it was Forsey’s responsibility for building the cradle to secure the Vessel in that Forsey had chosen to use materials stored at the Burin premises and that Forsey was responsible for ensuring that such materials were sound and appropriate for their intended use as part of the cradle. Burin argued that it was Forsey’s responsibility to ensure that he was satisfied that the Vessel was properly secured.
The Court found that there was a bailment relationship between the parties and, therefore, the burden of proof reversed and Burin was required to prove that it was not negligent (as opposed to the plaintiff having to prove Burin’s negligence).
At trial, the evidence showed that materials associated with the Vessel’s cradle and supports were owned by Burin and Burin had, at all times, physical and managerial control. Further those materials were found to have been left unattended and exposed to the elements and were not properly maintained. The Court found that, while provided at no cost, Burin was still responsible to ensure that the materials were fit for the purpose of the job at hand.
The fitness of the materials then was a key issue. To meet the burden that it was not negligent, Burin would have had to produce the cribbing materials in question for examination and likely expert examination to determine their fitness. Burin could not meet its burden, however, because the cribbing materials could not be produced. The plaintiff tendered evidence (and the Court found) that the subject cradling materials had been removed by Burin prior to the attendance of the surveyor hired to inspect the Vessel post loss. The Court also found that this removal of the subject cradling materials or spoliation of evidence was done with the intent to thwart an inspection by the assigned surveyor.
At paragraph 118 and 119 of the trial decision (*1), Her Ladyship stated:
 My conclusion in this regard raises a rebuttable presumption that the evidence was unfavourable to the Defendant [Burin], that is, that the cribbing materials used to construct the cradle were unsound and unfit. The burden is on the Defendant to rebut this presumption by showing that it did not intend to destroy evidence relevant to existing or contemplated litigation.
 In my opinion, the Defendant has not provided sufficient evidence to rebut this presumption.
The Court found that Burin had been negligent in the selection and use of inadequate cribbing materials for the construction of the cradle and that it had not met its burden of showing that the loss had occurred without its negligence.
Before agreeing to lift the Vessel out of the water, Burin had required that certain paperwork be signed; specifically, the “Statement of Acceptance of Responsibility” (the “Statement”). The Statement included various clauses that attempted to ensure that Burin’s customers shouldered any risk of loss, damage or injury to the Vessel at any time along with providing indemnification for Burin on a variety of bases.
Madam Justice Heneghan found that the wording of all of the exclusion clauses failed to protect Burin against its negligence regarding the storage and security of the Vessel.
Judgment was found for Forsey in the sum of $269,206.38.
Burin appealed the Judgment on the basis that the trial judge erred in drawing an adverse inference that the missing subject cradling materials were disposed of to prevent Forsey’s surveyor from examining them. Burin argued that there was no evidence to support the finding that Burin had intentionally disposed of the materials. Burin claimed to have never been given an opportunity to rebut the presumption that it had disposed of the evidence and so there was procedural unfairness.
On the issue of procedural fairness, the Court of Appeal found that Burin’s counsel knew of the spoliation issue at pretrial, the joint book of authorities (*2) contained case law on spoliation and there was an allegation that Burin had disposed of the subject cradling materials. Therefore, there was no procedural unfairness and this ground of appeal was dismissed.
The more significant issue on appeal was whether the trial judge had made a palpable and overriding error in finding that the subject cradling materials had been intentionally removed prior to arrival of the surveyor so as to prevent him from examining them, that the materials had been destroyed intentionally to negatively affect the litigation and that Burin had not offered any proof to disprove the inference made by the Judge.
Interestingly the Court of Appeal noted that it would have been reluctant to conclude that Burin had intentionally disposed of the subject cribbing materials. However, the Court of Appeal, in dismissing this ground of appeal, went on to find that, given that the trial judge had found that bailment applied and the burden was on Burin to prove it was not negligent, the finding that Burin had disposed of the subject cribbing with the intention to thwart the litigation was unnecessary. Burin simply could not prove that it was not negligent without producing the subject cribbing materials to prove that the subject cribbing materials were fit for the job at hand. The fact that it had disposed of the subject cribbing materials intentionally had no effect on the burden it had to (and failed to) meet.
With regard to the exclusionary clauses, the Court of Appeal examined the wording in each paragraph of the Statement finding that none specifically excluded Burin’s own negligence as required and so none were applicable. The notice and signs erected on the premises further did not apply to the situation in the case.
The main clause at issue was:
I understand and agree that the securing and locking of my boat is my responsibility, and not that of the said Marine Service Centre, or of its agents, servants, employees, or otherwise. Furthermore I agree to indemnify and save harmless the said Marine Service Centre and its officers, agents, employees, servants or otherwise from, any claims on my part with respect to the same. (emphasis added)
The Court of Appeal noted that the trial judge had found that Burin had taken over the responsibility of “securing” the Vessel by the acts of its employees while the Vessel was on the Burin premises. The Court of Appeal agreed with the trial judge that, after review of the ordinary and grammatical meaning of the word “securing” consistent with relevant surrounding circumstances, it could not have been the intention of the parties that the word “securing” meant that Forsey was responsible for securing the Vessel during the period of repairs (*3). The trial judge also found that Forsey’s evidence in this regard was more believable. Burin further did not purport to act for Forsey.
As a result, the Court of Appeal found that Burin, having taken over the obligation of securing the Vessel, was bound to secure it properly and could not escape liability.
At trial, the Federal Court in Burin Peninsula Marine Services Centre v. Maxwell Forsey appropriately applied the doctrine of spoliation as a rule of evidence and ultimately dismissed the claim when Burin failed to successfully rebut the presumption that it intentionally destroyed evidence to thwart the litigation (though the Court of Appeal confirmed on other grounds).
The doctrine of “spoliation” is, as indicated, a rule of evidence in Canada, which means that the case will not be dismissed summarily upon the finding of intentional destruction of relevant evidence, but rather an “adverse inference” by the court that the destroyed evidence was adverse to that party will impact on the weight or persuasiveness of that party’s evidence at trial.
In the United States, spoliation of relevant evidence is an independent tort as opposed to a rule of evidence possibly impacting upon the spoliator’s case. Therefore, motions to dismiss actions where there has been proven spoliation can be brought by the opposing parties or sanctions imposed, for example. There are cases where, mid trial, actions have been dismissed, damages reduced and/or costs imposed on the spoliating party or upon their counsel (*4).
Canadian courts have yet to elevate spoliation from a rule of evidence to a tort. There have been some decisions arising out of summary judgment motions or motions to strike paragraphs from pleadings. See for example, Spicer v. CAA Insurance, 2013 ONSC 5148 (CanLII) where the Statement of Claim in question claimed damages for “intentional spoliation”. The Court refused to strike the paragraph/claims citing the Ontario Court of Appeal in Spasic Estate v Imperial Tobacco Limited (2000) (*5) at paragraph 22 of that decision,
If it is established that the conduct of the respondents resulted in harm to the plaintiff by making it impossible for her to prove her claim, then it will be for the trial judge, in the context of a complete record, to determine whether the plaintiff should have a remedy. This is how the progress of the common law is marked in cases of first impression, where the court has created a new cause of action where none had been recognized before. I need refer only to Donoghue v. Stevenson,  A.C. 562 (H.L.), as but one example … I can see no reason why the trial judge should be precluded from considering all possible remedies, including a separate tort, on the basis of the record that will be developed.
More recently, in Nova Growth Corp. et al v. Andrzej Roman Kepinksi et al, 2014 ONSC 2763 (CanLII), the Ontario Superior Court surveyed the status of the law. Newbould J. states:
 There is not a great deal of case law in Canada on the doctrine of spoliation. The tort of spoliation has been described as novel in Canada. See Spasic Estate v. Imperial Tobacco Ltd. (2000), 2000 CanLII 17170 (ON CA), 49 O.R. (3d) 699 (C.A.) at para. 12.
Newbould J. then went on to quote Alberta Court of Appeal that recently dealt with spoliation and permitted a claim to proceed in which spoliation was pleaded as a defence. In McDougall v. Black & Decker Canada Inc. (2008), 2008 ABCA 353 (CanLII), 97 Alta. L.R. (4th) 199 (C.A.) Conrad J.A. for the Court stated at para. 29:
The courts have not yet found that the intentional destruction of evidence gives rise to an intentional tort, nor that there is a duty to preserve evidence for purposes of the law of negligence, although these issues, in most jurisdictions, remain open.
In Canada, “We are not saying no forever, but (we’re) just not ready”, to paraphrase recent Conservative Party ads this past election. It appears that it may be some time before spoliation will be considered a tort in Canada.
Kim E. Stoll
(*1) 2014 FC 974
(*2) At trial, parties cooperate to consolidate a joint book of case law for the judge(s) review.
(*3) See Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53,  2 S.C.R. 633 at paragraphs 47 and 48 regarding the principles of contractual interpretation and the associated standard of review.
(*4) See for example Lester v. Allied Concrete (Virginia Cir. Crt 2011), where the injured plaintiff deleted his Facebook account in the midst of litigation, with his counsel’s approval. The Court found that such action was intended to affect the outcome of the litigation and costs were awarded against both the plaintiff and personally against his lawyer.
(*5) 2000 CanLII 17170 (ON CA)
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