Established 1996 Serving All of Canada
Telephone:
416-203-9500
 


Newsletters 2016 > March 2016

View/Download this newsletter in PDF

In this issue:
1. News & Upcoming Events
2. J.D. Irving Limitation Supplementary Reasons
3. One Year Contractual Limitation Period Overrides Statutory Period
4. Intentional Interference with Economic Relations
5. Air Passenger Compensation Rights in Canada and the European Union
6. Privity of Contract and Parent, Subsidiary and Affiliated Companies
7. Cargo Claim Limitation Periods in the Common Law Provinces: An Overview


 

1. News & Upcoming Events

  • Gordon Hearn will be presenting a paper on “The Ins and Outs of Moving Freight in Canada” at the Transportation Intermediaries Association Annual Conference being held in San Antonio, Texas on April 7, 2016. 

  • Rui Fernandes will be presenting a paper to the IIR Insurance Captive annual meeting on April 14th, 2016 on “Freight Contracts and Master Service Agreements.”

  • Gordon Hearn, Kim Stoll and Louis Amato-Gauci will be representing the firm at the Transportation Lawyers Association Annual Conference being held April 27-30th in Destin, Florida.    Louis Amato-Gauci is the Education Program Chair for this conference. Kim Stoll will be facilitating the Canadian Transport Law and Cross Border Issues Interactive Workshop.

 

 

2. J.D. Irving Limitation Supplementary Reasons

On January 22nd, 2016 Federal Court of Canada released its decision in J.D. Irving, Limited v. Siemens Canada Limited 2016 FC 69. This was an action commenced by J.D. Irving Limited (“JDI”) seeking a declaration that it was entitled to limit its liability to $500,000 in relation to cargo (valued at $40,000,000) that had fallen into the sea, while being loaded on the deck of a barge on October 15th 2008 in Saint John, New Brunswick. A commentary on the decision is found in the Fernandes Hearn LLP newsletter of January 2016.

On March 7th, 2016 the Court released supplementary reasons on a distinct issue. (*1)

To recap, Siemens Canada Limited (“Siemens”) had entered into a contract to supply a number of low pressure rotors and a generator rotor to the New Brunswick Power Nuclear Power Corporation for the refurbishment and upgrade of its Point Lepreau nuclear generating station.

Siemens contracted with JDI to transport the modules and generator rotor from the Port of Saint John to Point Lepreau. JDI chartered a barge, the “SPM 125”, and a tug to assist with the move. JDI retained Maritime Marine Consultants (2003) Inc. (“MMC) to provide naval architectural and consulting services. Mr. Don Bremner (“Bremner”) was the principal and owner of MMC. BMT Marine and Offshore Surveys Limited (“BMT”) was retained by Siemens and its insurer, AXA Corporate Solutions, to provide marine surveying services for the move of the cargo. The attending surveyor was Mr. Douglas Hamilton (“Hamilton”).

On October 15th, 2008 two of the rotors were placed on self-propelled multi-wheeled transporters owned by JDI. This allowed the rotors to be driven or rolled on and off the SPM 124. While in the process of loading the second transporter onto the barge, it tipped to starboard, fell over and off the barge into Saint John Harbour. The other rotor, which had been placed on the first transporter loaded onto the barge, immediately followed.

The supplementary reasons deal with the discrete issues of whether MMC and Bremner are entitled to the benefit of the limitation pursuant to Article 1(4) of the Limitation Convention. Article 1(4) states:

If any claims set out in Article 2 are made against any person for whose act, neglect or default the shipowner or salvor is responsible, such person shall be entitled to avail himself of the limitation of liability provided for in this Convention.

It was not disputed the JDI was a shipowner as defined in Article 1(2) of the Limitation Convention. MMC and Bremner argued that Article 1(4) extends the class of persons entitled to limit liability to include independent contractors, provided that the shipowner is responsible for the actions of the independent contractor as a matter of law.

MMC and Bremner asserted that an independent contractor or expert who renders a ship unseaworthy by his act, neglect or default saddles the shipowner, JDI in this case, with personal legal liability.  To the extent that the “SPM 125” was not seaworthy, JDI “is responsible for any shortcomings of his agents or subordinates in making the [vessel] seaworthy at the commencement of the transportation of the particular cargo.” MMC and Bremner submitted that the task of making the “SPM 125” seaworthy was a core function of JDI and the role of MMC and Bremner in preparing the loadout plan was in furtherance of that core function.  The concept of “responsibility” in Article 1(4) speaks to this relationship.  According to MMC and Bremner, if the “SPM 125” was unseaworthy then JDI is liable to Siemens and that liability is neither distinguished or diminished by engaging MMC and Bremner to carry out the duty. Thus, MMC and Bremner are persons for whose act, neglect or default JDI is responsible.

The Court noted that the evidence was clear that MMC contracted with JDI, pursuant to the Irving Equipment Purchase Order, to provide naval architecture services for the subject cargo move.  Further, the Court noted the evidence that JDI and MMC had a longstanding relationship, that MMC provided particular expertise that JDI indicated it did not have in-house, and that MMC and Bremner were described by JDI as part of its team.  It was also noted without question that MMC and Bremner were required to and did provide advice on the suitability and use of the “SPM 125” for the safe loading and transport of the LP Rotors.

The Court concluded, however, that this did not suffice to make MMC and Bremner persons for whose act, neglect or default JDI, as the shipowner, was “responsible” which would entitle them to avail of limitation under Article 1(4). Justice Strickland noted that there was no evidence or suggestion that Bremner was retained by JDI in his personal capacity or that he was an employee of JDI.  There was also no suggestion that Bremner, at any time, acted other than in his capacity as a principal of MMC.  Rather, MMC acted as an independent contractor in providing naval architectural services to JDI. The Court stated:

The relationship of an employer and an independent contractor, unlike that of employer and employee or servant or agent, typically does not give rise to a claim for vicarious liability.  In this case, the evidence is that JDI entered into contract for services with MMC.  MMC provided naval architectural services that JDI did not have in-house.  JDI did not supervise or control MMC’s work.  MMC is an independent corporate entity that was in business on its own account.  In sum, the nature of the relationship between JDI and MMC was not one that attracted vicarious liability.  Therefore, while MMC may have been retained by JDI on many occasions in the past and JDI may have relied on MMC for provision of naval architectural services, under Canadian law this is not sufficient to make JDI vicariously liable or responsible for MMC’s acts or omissions (671122 Ontario Ltd v Sagaz Industries Canada Inc, 2001 SCC 59 at paras 46-47; 1292644 Ontario Inc (Connor Homes) v Canada (National Revenue), 2013 FCA 85 at paras 23, 39-41; KLB v British Columbia, 2003 SCC 51).  

The mere fact that JDI contracted with MMC to provide naval architectural services that were a necessary part of, or integral to, or a core function of the cargo move was insufficient to found legal responsibility as described in Article 1(4) under the Limitation Convention.

Justice Strickland further added:

Secondly, the Griggs article, relied upon by MMC and Bremner, states that it is by no means clear what is meant by the word “responsible” as used in Article 1(4).  Griggs acknowledges that this could be interpreted broadly or narrowly.  This potential for diverging interpretations is evidenced in Shipowners Limitation of Liability (Frederick, MD: Aspen, 2012) at 35 by Barnabas WB Reynold and Michael N Tsimplis.  The authors of that text state that the purpose of the words “persons for whose act, neglect or default the shipowner or salvor is responsible” is to prevent a claimant circumventing the right to limit by suing the wrongdoer rather than the ship, the previous success of that approach having led to the introduction of Himalaya clauses (see Adler v Dickson (The Himalaya), [1954] 2 Lloyd’s Rep 267 and, for their acceptance in Canadian law, London Drugs Ltd v Kuehne & Nagel International Ltd, [1992] 3 SCR 299).
[16]      Reynold and Tsimplis go on to say that the extension of the right to limit to persons for whom the shipowner is responsible clearly covers the master and crew members when they act within the scope of their employment.  “However, anyone who can show that he is linked to the shipowner in a way that makes the shipowner responsible would be entitled to limit liability” (p 35).  They suggest that under English law this could include pilots because their negligence makes the shipowner liable, although pilots are also entitled by statute to limit their liability to a much lower limit.  However, the authors also state that independent contractors and others involved in the shipping business may not fall within the definition, including ship’s agents, stevedores and classification societies (see also Michael Tsimplis and Richard Shaw, “The Liabilities of the Vessel” in Yvonne Baatz, ed Maritime Law, 3d (UK: Routledge, 2014) 222 at 277-278).
[17]      Further, Aleka Mandaraka-Sheppard notes in Modern Maritime Law, Volume 2: Managing Risks and Liabilities, 3rd Edition(New York: Routledge, 2013) at p 746-747 that Article 1(4) is mainly concerned with granting an independent right of limitation to those people for whose act, neglect or default the shipowner, or manager, or operator, or salvor will be vicariously liable.

Given the ambiguity that arises from the wording of Article 1(4) and the various possible interpretations of that Article, the Court found it necessary to examine The Travaux Préparatoires of the LLMC Convention 1976 and of the Protocol of 1996 (the “travaux”), as compiled by the Comité Maritime International (“CMI”),in an effort to ascertain the intention of the Member States as regard Article 1(4) within the context and purpose of the Limitation Convention.

Justice Strickland’s review of the CMI materials, and the recorded debates of the Member States during the drafting of the Convention led her to conclude that the travaux provides no clear answers. However, she concluded that what can be taken from them is that there was certainly no explicit intention to extend the category of persons who are entitled to limit their liability pursuant to Article 1(4) to include independent contractors. If anything, the travaux tends to suggest that the underlying premise of Article 1(4) is that “responsibility” remains tied to the vicarious liability of the shipowner and that a narrow interpretation was intended.

Justice Strickland concluded that JDI, as the shipowner, was not vicariously liable for the acts, neglect or default of its independent contractor, and that MMC and its principal Bremner were not entitled to limit their liability pursuant to the Limitation Convention.

Rui M Fernandes

Follow Rui M. Fernandes on Twitter @RuiMFernandes and on Linkedin. See also his blog at http://transportlaw.blogspot.ca

Endnotes
(*1) 2016 FC 287



3. One Year Contractual Limitation Period Overrides Statutory Period

In Ontario under the Limitations Act, 2002, the general limitation period for contracts is two years. The limitation period under the Act in respect of business agreements may be varied or excluded by agreement. A “business agreement” is defined as an agreement made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002. A recent decision of the Ontario Court of Appeal considered whether a one year limitation period in an insurance policy was a “business agreement” and would be enforced.

In Daverne v. John Switzer Fuels Ltd. 2015 ONCA 919 a fuel oil tank leak caused damages to property owned by Gerald Daverne and Jutta Daverne. McKeown & Wood Limited (“MW”) had sold the tank to the Davernes. MW was insured by Federated Insurance Company of Canada (“Federated”). At issue in the litigation considered by the Court of Appeal was whether the one year limitation period set out in Federated’s insurance policy was enforceable against MW. The judge hearing the original application had found that the clause was not enforceable. The Court of Appeal disagreed.

Firstly, the Court of Appeal found that the standard of review (of the judge’s decision) was correctness. The Court of Appeal reiterated that the correctness standard of review applies on standard form insurance contracts. (*1) The Court of Appeal held that, in the case of insurance policies, which involve the interpretation of similar if not common language and the application of general principles of insurance law, the high degree of generality and precedential value justifies a departure from the reasonableness standard of appellate review set out by the Supreme Court of Canada.

The Court of Appeal had to consider if in fact there was a one year limitation period in the policy, given that the period was set out in a statutory condition.

Section 148 of the Insurance Act, R.S.O. 1990, c. I.8, makes certain statutory conditions part of every fire insurance contract in Ontario. Statutory condition 14 was included in Federated’s policy as clause 14 of the “Basic Policy Statutory Conditions” form that is included in the Basic Policy. It provided:

14. Action: Every action or proceeding against the insurer for the recovery of any claim under or by virtue of this contract is absolutely barred unless commenced within one year next after the loss or damage occurs. [Emphasis added.]

Clause 8 of the “Additional Conditions” of the Basic Policy form also applies:

8. Applicability of Statutory Conditions and Additional Conditions: The Statutory Conditions and Additional conditions apply with respect to all the perils insured by this policy and to the liability coverage, where provided, except where these conditions may be modified or supplemented by riders or endorsements attached. [Emphasis added.]

The Court of Appeal held that Clause 8 applied the contractual limitations period in clause 14 to the other perils insured against in Federated’s policy and to the liability coverage provided by it.

The Court of Appeal then had to deal with the issue as to whether the policy was a business agreement. The Court of Appeal concluded that “It is plain that none of the parties to Federated’s insurance policy is a “consumer”, which is defined in the Consumer Protection Act, 2002 to mean “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.” The parties are business entities.” The parties referred to, of course, were Federated and MW. The Court held that clause 14 of the Basic Policy Statutory Conditions, combined with clause 8 of the Additional Conditions, clearly varied the two-year limitation period provided for in the Limitations Act, 2002.

The Appeal Court noted that the judge hearing the original application held that the phrase “loss or damage”, as used in clause 14 and other places in the statutory conditions, is “not readily adaptable to liability insurance coverage where the loss or damage which is the subject of a claim has been suffered by a third party who then seeks compensation from the insured.” The Appeal Court found that the judge erred in rejecting Federated’s argument that its denial of defence coverage to MW could constitute “loss or damage” for the purpose of the limitation period in clause 14 stating:

There is no reason not to apply the basic principle that the insured “suffers a loss from the moment [the insurer] can be said to have failed to satisfy its legal obligation [under the policy of insurance].” Where the benefit of a duty to defend is denied, the insured “suffers a loss ‘caused by’” the insurer’s denial of a defence “the day after the demand … is made” (*2)

The Appeal Court concluded that Clause 8 is clear and unambiguous. It explicitly states that the statutory conditions apply to the liability coverage under the policy. The insurance policy at issue in this case was a business agreement for the purposes of s. 22 of the Limitations Act, 2002, and the one-year contractual limitation period was enforceable by Federated against MW.

Rui M Fernandes

Follow Rui M. Fernandes on Twitter @RuiMFernandes and on Linkedin. See also his blog at http://transportlaw.blogspot.ca

Endnotes
(*1) The Court of Appeal in MacDonald v. Chicago Title Insurance Company of Canada 2015 ONCA 842 had previously arrived at this correctness standard, which is different than set out in 2014 by the Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp. 2014 SCC 53 [see the Fernandes Hearn LLP article in the firm’s August 2014 Newsletter]. In Sattva the Supreme Court of Canada held that contractual interpretation involves mixed questions of mixed fact and law rather than pure questions of law and the standard of review is reasonableness, not correctness.
(*2) at paragraph 33


 

4. An Angry Reaction Today Can Have Significant Consequences Tomorrow:  The Tort of Intentional Interference with Economic Relations

The recently published decision by the Court of Appeal for Ontario in Grand Financial Management Inc. v. Solemio Transportation Inc. and others (*1) provides a cautionary tale on how an aggrieved party to a commercial dispute might “think twice” before reacting. 

The decision also provided a nice illustration of the mechanics involved in the use of factoring agreements, which are commonplace in the road carriage industry.

Background

Arnold Brothers Transport Ltd. (Arnold Brothers) undertook a series of carriage mandates for a shipper.  It subcontracted some of the shipments to a third party carrier, Solemio Transportation Inc. (“Solemio”).   Accordingly, Arnold Brothers would come to owe certain payments for freight charges to Solemio.

Solemio entered into a factoring agreement with a factor, Grand Financial Management Inc. (“Grand Financial”).  In a factoring agreement, a party assigns its accounts receivable to a financing party, the factor, in return for immediate payment of the accounts at a discount. The factor collects from the third party responsible for payment and assumes the risk of delay and potential loss associated with that exercise. The discount in effect rewards the factor for this arrangement.  Accordingly, the Solemio receivables were assigned to Grand Financial, with Arnold Brothers then becoming responsible for their payment to that company.

Solemio in turn subcontracted the Arnold Brothers shipments to another carrier, Wild Lions.  Solemio then became responsible for the payment of freight charges to Wild Lions.

Wild Lions then entered into a separate factoring agreement with Grand National.  Accordingly, the Wild Lions Receivables were assigned to Grand National, with Solemio then becoming responsible for their payment to that company.

While the result seems complicated, the mechanism was straightforward. In effect, Solemio would be paid its discounted amount up front by Grand National, who would be paid in due course by Arnold Brothers.  Wild Lions would then likewise be paid its own discounted amount up front by Grand National, who would be paid in due course by Solemio.

This worked out for a short period of time, until the Arnold Brothers – Solemio arrangement changed.   Solemio terminated the factoring arrangement with Grand Financial in favour of a certain “quick pay” arrangement entered into with Arnold Brothers whereby Solemio would be paid by Arnold Brothers promptly, with only a 2.5% discount – less than the amount of the 10% discount that came with the factoring agreement.  Arnold Brothers accordingly stopped making payments to Grand Financial.  At the same time, Grand Financial continued to immediately make payments to Wild Lions on its own invoices, which were, as noted above, for the same shipments of goods.   While Grand Financial looked to Solemio for payment of the Wild Lions invoices, Solemio did not make them on a timely basis, because pursuant to its payment terms with Wild Lions it had 45 – 90 days for payment. 

Grand Financial took the position that it never agreed to terminate the factoring agreement with Solemio and reacted angrily to its termination. Even though the Solemio factoring agreement had been terminated, the principal of Grand Financial caused it to act on its registered security interest provided to it by Solemio under that agreement and to seize the sum of $35,000 from Solemio’s account at the Royal Bank of Canada. That individual also threatened to put Solemio out of business and contacted Arnold Brothers, stating that “someone was going to pay the money he was owed” and that he “didn’t care who”, further stating that he would “go after” the customers of Arnold Brothers. In response, Arnold Brothers stopped doing business with Solemio because it did not want to put its customers in jeopardy, also interrupting deliveries that were in process at the time, directing that Solemio’s trucks were to be stopped where they were located and arranging for its own personnel and trucks to pick up the loads and to complete delivery itself.

The Law Suit

Grand Financial commenced a lawsuit in the Ontario Superior Court. It claimed damages for defaults under the factoring agreement with Solemio on account of it being left to pay Wild Lions for its receivables, while receiving nothing further from Arnold Bros., and “no or unreliable payments from Solemio”. 
Solemio defended the claim and filed a counterclaim for damages for the tort of intentional interference with economic relations.
The trial judge found that the Solemio – Grand National factoring agreement had in fact been terminated by those parties just two weeks following its execution.  Accordingly no damages were awarded to Grand Financial for Solemio’s alleged breach of that contract.  Interestingly, the judge did award Grand Financial damages based on his interpretation and resulting finding from the trial evidence that Solemio admitted owing Grand National a sum of money representing unpaid receivables owed it from its factoring arrangement with Wild Lions.  This was of interest because no such claim had been pursued on the pleadings in the case or at the trial by Grand Financial.   The judge awarded Solemio certain damages of $175,000 “at large” on the counterclaim for Grand Financial’s “intentional interference with [its] economic relations” but declined to award punitive damages against Grand Financial.

The Appeal to the Ontario Court of Appeal

Everyone was left unhappy following the trial.  Solemio appealed the finding that it owed money to Grand National on the basis of the Wild Lions factoring arrangement – that point not having been litigated at the trial.  Solemio also appealed the trial judge’s refusal not to award it punitive damages against Grand Financial in light of its conduct noted above. 

Grand Financial in turn appealed the finding that it was liable for the tort of intentional interference with economic relations resulting in the trial judge effectively having “pulled from thin air” the damages at large award of $175,000 in damages for Solemio.

The Issues Addressed by the Court of Appeal

i) Could Grand Financial recover damages pertaining to the Wild Lions Agreement, even though that Agreement had not been pleaded as a basis for recovery by Grand Financial?

ii) Was Grand Financial liable for the tort of intentional interference with economic relations based on its conduct?

iii) Should the trial judge’s award of “damages at large” awarded in favour of Solemio be increased (as asserted by Solemio) or be set aside (as asserted by Grand Financial)?

iv) Should the trial judge have awarded Solemio punitive damages based on the conduct of Grand Financial?

The Outcome

i) Could Grand Financial recover damages pertaining to the Wild Lions Agreement even though that Agreement had not been pleaded as a basis for recovery by Grand Financial?

The Court of Appeal set aside this award.  The Court accepted Solemio’s argument that Grand Financial’s claim as asserted in the action was based solely on the Solemio factoring agreement, and that Grand Financial did not plead or claim recovery under the Wild Lions factoring agreement.   As noted by the Court of Appeal:

…lawsuits are to be decided within the boundaries of the pleadings; a finding of liability and damages against a defendant on a basis that was not pleaded must be set aside for fairness reasons because it deprives the defendant of the opportunity to address the issue in evidence and argument at trial. (*2)

ii) Was Grand Financial liable for the tort of intentional interference with economic relations based on its conduct?

Grand Financial argued on the appeal that the trial judge erred in law in holding that it was liable for the tort of intentional interference with economic relations (or, as it is sometimes called, the tort of causing loss by unlawful means). The Court of Appeal however found that Solemio had succeeded in establishing the necessary elements of that tort on the evidence.
The Court of Appeal found that the trial judge properly identified the three essential elements of the tort as are traditionally required: first, the defendant must have intended to injure the plaintiff’s economic interests; secondly, the interference must have been by illegal or unlawful means; and thirdly, the plaintiff must have suffered economic harm or loss as a result. (*3)

In particular the Court of Appeal found:

i) as to the requirement of “Intentional Injury”

The Court accepted the trial judge’s finding that the actions of Grand Financial were directly intended both to harm Solemio in its business interests and to enrich itself and that such a finding was amply supported by the trial record. The Court noted Grand Financial’s threat that it would take steps to shut [Solemio] down if [it] did not make certain payments and give Grand Financial business from other clients. The Court also noted that Grand Financial’s principal told Arnold Brothers in an angry message that “someone was going to pay the money” owed to Grand Financial, and he “didn’t care who” – supporting the trial judge’s finding that Grand Financial would take any steps within its power, whether lawful or unlawful, to get the money it thought was owed. principal also threatened to pursue Arnold Brother’s customers, causing it to sever its business its relationship with Solemio. Finally, the trial judge had correctly found that Grand Financial’s principal was “well aware of and intended the natural consequences which he knew would flow from his deliberate actions in executing on security pursuant to an agreement which he knew was terminated.”

ii) as to the requirement that the “interference” having been caused by Illegal or Unlawful means

Grand Financial’s main argument on the cross-appeal was that the trial judge erred in his application of the “unlawful means” criterion for the establishment of the tort. The Court of Appeal reiterated and further explained this element of the tort, ruling that:

The unlawful means tort creates a type of “parasitic” liability in a three-party situation: it allows a plaintiff to sue a defendant for economic loss resulting from the defendant’s unlawful act against a third party. Liability to the plaintiff is based on (or parasitic upon) the defendant’s unlawful act against the third party. While the elements of the tort have been described in a number of ways, its core captures the intentional infliction of economic injury on C (the plaintiff) by A (the defendant)’s use of unlawful means against B (the third party).
The Court of Appeal accordingly held that the trial judge correctly found that this part of the test had been established on the evidence.

iii) as to the requirement that the plaintiff  must have suffered an economic loss

The Court found that the trial judge correctly found that Solemio had satisfied the third element of the tort of intentional interference with economic relations. The sum of $35,000 was improperly taken from its RBC bank account and in addition a significant business relationship with Arnold Bros. had been destroyed.

iv) Should the trial judge’s award of “damages at large” awarded in favour of Solemio be increased (as asserted by Solemio) or be set aside (as asserted by Grand Financial)?

The trial judge concluded on the evidence that even though Solemio had “failed to prove the quantum of its pecuniary losses there [did] appear to be a reasonable basis to make an award of general damages for intentional interference with economic relations”. He rested this decision on three footings: first, that the actions of Grand Financial had resulted in significant, but not readily assessable, liquidity problems for Solemio; second, that those actions had contributed to a loss of reputation for Solemio; and third, that they constituted a serious abuse of the legal process, a reference to the unlawful resort to the PPSA Security.

Solemio submitted on the appeal that the trial judge’s award of $175,000 for damages at large was insufficient and was apparently based on his misconception that Solemio had “significant liquidity problems unrelated to the actions of Grand Financial” when there was no such evidence to support that conclusion. Grand Financial in turn argued that the trial judge erred in granting damages at large at all, or in any amount more than the $35,000 seized from the RBC account.

The Court of Appeal ruled that trial judge’s findings were not unreasonable and should not be disturbed. The Court agreed that Solemio’s claims for damages were not supported by any reliable documentary, accounting, or expert evidence – but that should not mean that it should go without being indemnified for damages.

The Court of Appeal noted that damages at large may be awarded in cases of intentional torts, and to corporations in such circumstances where there has been injury to the corporation’s reputation and associated economic loss (*4) and that unlike pecuniary damages, such damages are not capable of being precisely measured and are more a matter of impression (*5):

[D]amages at large are a matter of impression; they must include the consideration of a host of circumstances involving both the particular plaintiff and the particular defendant, and they are likely to be unique in each case.

The Court provided an accurate summary of the law with respect to the assessment of damages at large as follows:

1. Damages other than for pecuniary loss are "damages at large" and generally include compensation for loss of reputation, injured feelings, bad or good conduct by either party, or punishment.
2. Damages at large are compensatory for loss that can be foreseen but cannot be readily quantified.
3. Damages at large are a matter of discretion for the trial judge and are more a "matter of impression and not addition."
4. Where damages at large are imposed for intentional torts, the assessment of damages provides an opportunity to condemn flagrant abuses of the legal process.

The Court of Appeal ruled that the circumstances were appropriate for the award of “at large” damages based on the above factors. Noting that while it was not “readily apparent how the trial judge arrived at the awarded amount of $175,000” the Court noted that damages at large are a “matter of impression” and are not something that can be precisely measured and that accordingly it is difficult for it as an appellate court to say that the trial judge’s assessment was plainly erroneous.  Accordingly the Court of Appeal did not interfere with the damage total awarded Solemio by the trial judge.

v) Should the trial judge have awarded Solemio punitive damages based on the conduct of Grand Financial?

The Court of Appeal noted that although the trial judge found that Solemio had made out the tort of intentional interference with economic relations, the trial judge declined to grant Solemio’s request for punitive damages in the amount of $250,000.  The Court of Appeal found no error in this determination, finding that the trial judge properly summarized the law relating to punitive damages in his reasons:

Punitive damages are only awarded in extraordinary situations. In general, punitive damages are considered in situations where the defendant’s misconduct is so malicious, oppressive, and high- handed that it would offend the court’s sense of decency. Punitive damages do not bear any relation to what the plaintiff should receive by way of compensation. Their aim is not to compensate a party, but rather to punish someone. It is the means by which a court expresses its outrage at what it considers egregious conduct of a party. As noted by the Supreme Court of Canada (*6) punitive damages are very much the exception rather than the rule.

The Court of Appeal ruled that even though Grand Financial had acted in an unlawful manner, its conduct did not rise to a level warranting an award of punitive damages. The Court also noted that one component of the award of damages at large for Solemio was a reflection of the court’s disapproval of Grand Financial’s abuse of the legal process. Accordingly, the punitive damages concept of expressing society’s disapproval of the defendant’s behavior had accordingly already been taken into account.

Conclusion

Solemio was awarded the ‘at large’ damages amount of $175,000 for Grand Financial’s tortious interference with its economic relations with the other claims all being dismissed.

This case serves as an excellent example of how parties should not recklessly take grievances into their own hands.  The courts may eventually be called upon to review the conduct in question, and where unjustified actions cause economic loss to another, damages may be awarded even if the scope or amount of same cannot be precisely determined by a court.

Gordon Hearn

Endnotes
(*1) 2016 ONCA 175 (CanLII)
(*2) Bulut v. Carter, 2014 ONCA 424 (CanLII) at para. 12
(*3) See Alleslev-Krofchak v. Valcom Ltd., 2010 ONCA 557 (CanLII) and cases cited therein, leave to appeal refused, [2010] S.C.C.A. No. 403.
(*4) See 2009 ONCA 499 (CanLII), 266 O.A.C. 17, at para. 37; PSC Industrial Canada Inc. v. Ontario (Ministry of the Environment)
(*5) Uni-Jet Industrial Pipe Ltd. v. Canada (A.G.) (2001) 198 D.L.R. (4th) 577 (Man. C.A.), at paras. 66-72
(*6) in Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595,

 

 

5. Air Passenger Compensation Rights in Canada and the European Union

Many passengers travelling by air have likely been subject to cancelled or delayed flights at some point in their travels. What most passengers do not realize is that, in some cases, they may have a right to monetary compensation for the cancellation of their flight, over and above the typical re-routing on an alternate flight and the arrangement of hotel accommodations and meal vouchers.

The European Union has legislation that addresses this issue specifically and sets outs the rights of air passengers, irrespective of which airline is involved. Canada does not have any legislation that sets out specific compensation rights; each passenger being subject to the tariff allowances of the airline in question.

Air Passengers Rights in the European Union

Passengers departing from an airport located in the European Union have a right to a fixed amount of monetary compensation depending on the distance of travel when their flights are cancelled, pursuant to Regulation (EC) No. 261/2004 of the European Parliament and of the Council (the “Regulation”).  In the case of flights that depart from an airport outside of the European Union and arrive within the EU, the Regulation applies only if the airline is an EU carrier and the passenger has not received compensation in the non-EU country. (*1)

The obligations set out in the Regulation apply to the operating air carrier that performs (or intends to perform) the flight, whether with owned aircraft or under dry/wet lease, or on any other basis. (*2) Furthermore, the Regulation explicitly states that these obligations cannot be limited or waived by a clause in the contract of carriage. (*3)

Where a flight is cancelled, passengers are entitled to the following, above and beyond the usual assistance offered by airlines (such as re-routing, hotel and meal accommodations, etc.):

  1. EUR 250 for all flights of 1500 km or less;
  2. EUR 400 for all flights of more than 1500 km within the EU, and for all other flights between 1500 and 3500 km;
  3. EUR 600 for all flights not falling under (a) or (b). (*4)

Passengers are entitled to the above unless the airline informs them of the cancellation at least two weeks before the scheduled time of departure or between two weeks and 7 days (where the re-routed flight departs no more than two hours before the originally schedule time and arrives less than four hours after the original arrival time). If less than 7 days notice is provided, then in order for the airline to be exempt from the above requirements, the re-routed flight must depart no less than one hour before the original time of departure and reach the final destination less than two hours after the original time of arrival. (*5)

However, the airline may limit its liability to 50% of the set amount where the airline offers re-routing on an alternative flight if the arrival time does not exceed the scheduled arrival time of the original flight by two hours, three hours, and four hours, with respect to (a), (b), and (c), respectively, even where notice was not properly provided (*6)

Additionally, an airline can escape liability if it can prove that the cancellation was due to “extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.” (*7) The Regulation states that “extraordinary circumstances” may include cases of political instability, meteorological conditions incompatible with the operation of the flight concerned, security risks, unexpected flight safety shortcoming, strikes, and decisions of air traffic management. (*8)

The Court of Justice of the European Union recently discussed whether technical defects or mechanical issues with the aircraft are considered “extraordinary circumstances” for the purposes of the Regulation. (*9) In KLM, the Court held that technical problems that come to light during maintenance of an aircraft or on account of failure to carry out maintenance cannot constitute “extraordinary circumstances” since the functioning of an aircraft inevitably gives rise to unexpected technical problems, which air carriers are confronted with as a matter of course in their operations. (*10)

The Court went on to say that where technical problems or hidden defects affecting flight safety are revealed by the manufacturer or a competent authority and concern the fleet, or where damage to the aircraft is caused solely by acts of sabotage or terrorism – then the technical problem may constitute extraordinary circumstances. (*11)

Furthermore, the breakdowns or premature malfunctions of certain components of an aircraft, although an unexpected event, are not beyond the actual control of the carrier since it is required to ensure the maintenance and proper functioning of the aircraft. (*12)

Passengers have a variety of options in terms of methods of obtaining compensation from the airline for a cancelled flight. A complaint can be made directly with the airline, to the national enforcement body in the EU country where the incident took place, or a court action can be commenced against the airline in the country where the incident took pace.

Air Passengers Rights in Canada

Unlike the EU, Canada does not have legislation that specifically deals with fixed amounts of compensation for air passengers when their flights are cancelled. However, the Canada Transportation Act (“CTA”) and associated regulations state that air carriers must display a copy of their tariff, which must include certain prescribed terms and conditions of carriage, in a prominent place at their business offices and publish a copy on their website. (*13)

The regulations under the CTA state that the terms and conditions of carriage must clearly state the air carrier’s policy with respect to certain matters, including compensation for denial of boarding as a result of overbooking, passenger re-routing, failure to operate the service or operate the service on schedule, refunds, cancellations, and limits of liability respecting passengers and goods. (*14) Note that neither the CTA nor the regulations specifically address amounts of compensation for cancellation or whether compensation must actually be provided. The main goals of these sections of the CTA and its regulations are to ensure that air carriers have some form of policy in place which addresses these issues and make them available to the public so that passengers are aware of their rights.

If a passenger believes that the terms and conditions of a tariff are unreasonable or unduly discriminatory, then the passenger may make a complaint to the Canada Transportation Agency (the “Agency”) which offers a court-like complaint process. (*15)

As a comparison to the EU compensation provisions, Air Canada’s international tariff states that in the case of a schedule irregularity including flight cancellation, there are various options which it may take: carry the passenger on another of its aircraft without additional charge, reroute the passenger and refund part of the ticket if the fare of the rerouted flight is lower than the original fare, or upon request, for cancellations within Air Canada’s control, return the passenger to the point of origin and refund the passenger as if no portion of the trip had been made, or offer a travel voucher. (*16) Similar rules are applied in Air Canada’s domestic tariff.

Passengers have some compensation right for flights departing from the EU and Switzerland, as Air Canada’s international tariff states that it will apply the provisions of the Regulation. (*17)

Notwithstanding the lack of specific compensation provisions in Canada, passengers may still have the option of starting a claim against an air carrier for compensation for pain and suffering and other damages through litigation. However, the air carrier’s liability may be limited through its tariff or the application of international treaties, such as the Montreal Convention.

Jaclyne Reive

Twitter: @jaclyne_reive
Blog: https://jaclynereive.wordpress.com

Endnotes
(*1) Regulation (EC) No. 261/2004 of the European Parliament and of the Council at (6) and Article 3.1(b).
(*2) Ibid at (7).
(*3) Ibid at Article 15.1.
(*4) Ibid at Article 7.1 (a)-(c).
(*5) Ibid at Article 5.1 (c).
(*6) Ibid at Article 7.2 (a)-(c).
(*7) Ibid at Article 5.3.
(*8) Ibid at (14) and (15).
(*9) van der Lans v KLM, Case C-257, Court of Justice of the European Union (Ninth Chamber), decided 17 September 2015 [hereinafter referred to as KLM].
(*10) Ibid.
(*11) Ibid.
(*12) Ibid.
(*13) SC 1996, c.10, ss. 67(1)-(2); Air Transportation Regulations, SOR/88-58, ss. 110(1), 116(1) and 116.1.
(*14) Air Transportation Regulations, ss. 105, 107(1)(n) and 122.
(*15) CTA, s 67.2; “Air Passenger Rights” Government of Canada, online: <http://travel.gc.ca/air/air-passenger-rights>
(*16) Air Canada – International Passenger Rules and Fares Tarriff, online: <http://www.aircanada.com/en/travelinfo/before/documents/int_rule_80-85.pdf>
(*17) Ibid.

 

 

6. Privity of Contract and Parent, Subsidiary and Affiliated Companies

The doctrine of “privity of contract” provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it.

However, sometimes it is not clear which entities are parties to a particular contract as many commercial contracts include a term that attempts to define the stated parties to a contract as also including those parties’ corporate affiliates, parent corporations, and subsidiaries.

This can be useful to a company engaged in a contractual relationship with a commercial entity that has breached their contractual obligations but is judgment proof. The non-breaching party can look to the breaching party’s affiliated, parent or subsidiary corporations for relief.

How reliable are these contractual definitions? Can a party not actually listed in the contract be liable for the breaches of its affiliated, parent or subsidiary corporation?

Well, that depends on the intent of the parties at the time the contract was formed. However, determining the intent of parties at the time of contract formation is a fact-based analysis. Companies that enter agreements with a commercial entity and wish for that commercial entity’s affiliated, parent or subsidiary corporations to be bound by the contract’s terms ought to specifically list the commercial entities that the parties intend to be bound to the contract and have them as signatories, or risk leaving it to a court to undertake the complicated and largely unpredictable exercise of determining whether the parties intended to have the unnamed corporation as party to the contract. 

The Supreme Court of Nova Scotia, in its decision of C&C Technologies v. McGregor Geoscience Limited and Superport Marine Services Limited, 2016 NSSC 55 (“the Decision”), provides a cautionary tale of the danger of not clearly identifying all parties that are intended to be party to a particular contract (*1).

The Facts

McGregor Geoscience Limited (“McGregor”) is a company based in Halifax, Nova Scotia that provides marine geophysical surveys. In the fall of 2013, McGregor acquired a sizable contract with a client for a survey of a deep-water pipeline route off the coast of British Columbia (“the Head Contract”).

Superport Marine Services Limited (“Superport”), a corporation based in Port Hawkesbury, Nova Scotia, owned and operated a fleet of vessels available for charter. McGregor entered into a time charter of a research vessel from Superport.

McGregor and Superport are sister companies. They have common ownership and actively promote the benefit of their common ownership to contractors in their marketing efforts, with McGregor touting its geoscience expertise coupled with its direct access to vehicles from Superport.

C&C Technologies Inc. (“C&C”), based in Louisiana, is also a surveying and mapping company.

In order to fulfill the Head Contract, McGregor entered into a sub-contract with C&C to perform aspects of the deepwater survey work (“the sub-Contract”).

The terms of the sub-Contract were negotiated between C&C and McGregor, with C&C first delivering a proposal, followed by a corresponding letter of intent and purchase order from McGregor, and finally a formal contract drafted by C&C’s corporate legal counsel.

The formal contract named only McGregor and C&C as parties and signatories. However, common to most commercial contracts, the contract contained a term defining C&C and McGregor as including their respective “parent, subsidiary and affiliated companies”.

The projects were successfully completed in early 2014 and McGregor was ultimately paid by its client under the Head Contract. Its invoices included the work billed by C&C as subcontractor and the cost of the vessel charter from Superport.

Ultimately, McGregor paid all of the Superport charter invoices in full, but paid just under half of the C&C invoices, leaving an outstanding balance of $2,484,568 USD.

The Lawsuit

C&C sued McGregor and Superport for the outstanding balance. However, on the opening day of trial, McGregor filed for bankruptcy. This created an automatic stay of proceeding against them. In response, C&C took the position that both McGregor and Superport were parties to the contract (as affiliated companies) and as such, Superport was liable for McGregor’s debt to C&C under the law of contract.

The Court’s Decision

The Court was forced to determine whether Superport was liable for the outstanding debt of McGregor as an affiliate of McGregor within the meaning and intent of the contract.

The Court found that based on the evidence, it was clear that McGregor and Superport were affiliated companies, as the two companies were under common ownership and control.

However, despite the fact that the Court determined that McGregor and Superport were affiliated companies, this was not the end of the analysis. The Court needed to answer the question of whether the parties negotiating the sub-Contract intended that Superport be bound by the sub-Contract.

In undertaking this analysis, the Court relied on the reasoning of the Supreme Court of Canada in the decision of Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 5, in which the Supreme Court of Canada adopted the modern approach to contractual interpretation. This involved taking a practical, common sense approach not dominated by technical rules of construction where the overriding concern is to determine the intent of the parties consistent with the surrounding circumstances known to the parties at the time of formation of the contract.

Determining the intent of the parties is necessarily a fact driven analysis and the Court looked at many pieces of evidence to determine whether C&C and McGregor intended for Superport to be a party to the sub-Contract. The evidence included e-mails exchanged between the parties prior to the signing of the sub-Contract, the letter of intent and purchase order delivered by McGregor, which parties C&C performed a credit check on prior to entering into the sub-Contract, and the invoicing between the parties.

Based on its review of this evidence, the Court found that there was no intent or expectation on the part of anyone in the C&C camp that Superport be a party to its contract with McGregor for the project. The Court found that it was the intent and expectation of all parties that it was McGregor, and not Superport, who would be responsible for the payment obligations under the contract.

As a result, the Court held that C&C could not prove privity of contract with Superport. Despite the fact that Superport was an affiliated company of McGregor, and the sub-Contract defined McGregor as including all of its affiliated companies, the Court ruled Superport could not be liable to McGregor in contract as that possibility was not the intention of the parties to the sub-Contract at the time it was formed. This is a classic example of what is known in contract law as “substance over form” – meaning the true intent of the parties prevails over what is written in the actual contractual document.

Implication

As noted above, commercial contracts routinely include a term that the stated parties include their affiliates, subsidiaries or parent corporations. However, more often than not this is merely boilerplate language that may not be reflective of the parties’ true intentions.

Because of this, the decision serves as a stark reminder that where a contract does not clearly delineate which parties are meant to be bound by its terms and includes these parties as signatories, but rather relies on vague definitions of the parties to the contract (as seen in the sub-Contract), parties proceed at their own peril as to whether a Court will agree that the factual matrix surrounding the formation of the contract supports their position that an unnamed third party ought or ought not be bound by the terms of that contract.

At first glance, the Court’s ruling in the specific instance may seem unfair given that C&C was not paid for the work that was performed under the sub-Contract while Superport, McGregor’s sister company under the same ownership, was fully paid. However, as the Court pointed out, this situation could have been avoided if C&C, whose in-house counsel drafted the sub-Contract, had clearly identified that Superport was a party to the sub-Contract.

The Court also made the insightful comment that, given at the time of contract formation C&C was content to rely on its perceived lien rights and a credit check of Superport only, C&C undertook the risk of contracting with McGregor only.

It should also be pointed out that C&C also failed at convincing the Court that Superport was liable in contract via the principle of agency and also in tort through unjust enrichment.

In short, if you want someone to come to your party, you should make sure they are on the guestlist.

Charles Hammond

Endnotes
(*1) C&C Technologies v. McGregor Geoscience Limited and Superport Marine Services Limited, 2016 NSSC 55
(*2) Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 5

 

 

7. Cargo Claim Limitation Periods in the Common Law Provinces: An Overview

Introduction

A statute of limitations is a set of legislated rules that establishes deadlines after which a prospective plaintiff may no longer take steps to bring an action or commence a proceeding in order to seek a remedy from another, even though the prospective plaintiff may still have a legitimate cause of action against them. Such rules can no doubt seem draconian. They can (and often do) lead to a harsh result for prospective plaintiffs who might want to commence a proceeding but who, for whatever reason, do not do so in time.

Even though they may seem harsh, however, there are good policy reasons for having statutes of limitations. The Supreme Court of Canada has identified (*1) (and recently re-affirmed (*2)) three such underlying rationales.

The first rationale concerns finality. Statutes of limitations are meant to be “statutes of repose”. “There comes a time”, according to LaForest J. in the M.(K.). case, “when a potential defendant should be secure in his reasonable expectation that he will not be held to account for ancient obligations.”(*3)

The second rationale is evidentiary, and concerns the desire to shut out claims that could not be proven due to stale or disappeared evidence. “Once the limitation period has lapsed”, wrote LaForest J., “the potential defendant should no longer be concerned about the preservation of evidence relevant to the claim.”(*4)

Third, plaintiffs “are expected to act diligently and not ‘sleep on their rights’”. Thus, statutes of limitation are designed to encourage plaintiffs to bring their actions in a timely fashion.(*5)

In light of the particularly harsh consequences that follow when an applicable limitation deadline is missed, it is essential that prospective plaintiffs (and their counsel) are aware of the various limitation periods, and other related provisions and exceptions, that have been set up from province to province and in the territories.

Further, given that the transportation industry very frequently involves inter-provincial movement of goods and travel by truck, it is also critical for industry stakeholders to have a clear understanding of the applicable limitation periods and related provisions in place from coast to coast. This is particularly true in the case of trucking cargo claims, which can arise in any province or territory, and at any time. Of course, depending on the statute of limitations in place in a particular jurisdiction, there could be a big difference in terms of when an action must be commenced in respect of such a trucking cargo claim.

With the above in mind, this article briefly surveys the various limitation periods (and a few other related provisions and concepts) currently in place in Canada’s common law provincial jurisdictions,(*6) as well as the applicable federal limitation periods, with respect to trucking cargo claims. Along the way, the following concepts will be addressed:

  • “basic” limitation periods for trucking cargo claims
  • “ultimate” limitation periods
  • the “discoverability” principle
  • the interplay between limitation periods and the “notice” provisions found in the various carriage of goods regulations across the country

At the outset, the reader must of course understand that this article is no substitute for actual legal advice and should be taken as a general overview of the limitation period regime across Canada only. Anyone with a potential claim in a particular jurisdiction should seek advice from knowledgeable counsel.

The “Basic” Limitation Periods

The “New Regime” Provinces

Beginning in 2000, Canadian provinces have been gradually introducing new legislation designed to simplify their limitation of action regimes. In total, six provinces (British Columbia, (*7) Alberta, (*8) Saskatchewan, (*9) Ontario, (*10) New Brunswick (*11) and Nova Scotia (*12)) have now passed such legislation. The most recent addition to this list is Nova Scotia, whose new legislation came into effect on September 1, 2015.

Instead of providing different limitation deadlines for various enumerated causes of action, the new legislation in these six provinces now provides that a court proceeding in respect of a “claim” must not be commenced more than two years after the day on which the “claim” was “discovered”.(*13) By way of example, the particular language used in Ontario is as follows:

Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.(*14)

In these provinces, a “claim” is intended to cover most causes of action for which one might contemplate commencing an action. In each of these jurisdictions, except Alberta, a “claim” is defined as

a claim to remedy an injury, loss or damage that occurred as a result of an act or omission.(*15)

In Alberta, a claim is defined somewhat differently as “a matter giving rise to a civil proceeding in which a claimant seeks a remedial order.”(*16) In turn, a “remedial order” is defined as “a judgment or an order made by a court in a civil proceeding requiring a defendant to comply with a duty or pay damages for the violation of a right.”(*17)

Either way, the definition of “claim” easily encompasses breach of contract situations that one would normally encounter in a carriage of goods dispute.

The “Old Regime” Provinces and Territories

In contrast, Newfoundland, Prince Edward Island, Manitoba and the Territories have not implemented more recent legislation dealing with limitation periods. Accordingly, these jurisdictions follow the older method of establishing different limitation periods for different causes of action.

In Newfoundland and Labrador, the limitation period is two years in respect of actions brought

for damages in respect of injury to a person or property, including economic loss arising from the injury whether based on contract, tort or statutory duty,(*18)

and also two years in respect of actions brought

for damages in respect of injury to a person or property including economic loss arising from negligent representation and professional negligence whether based on contract, tort or statutory duty.(*19)

This language is broad enough to encompass a cargo claim against a carrier.

In Prince Edward Island, an action for breach of contract is not specifically provided for in its statute.(*20) Accordingly, contract claims, including those in the carriage of goods context, fall under section 2(1)(g) of the statute, which provides a limitation period of six years for “any other action not in this Act or any other Act specifically provided for”.

In Manitoba, things are more complicated.

Manitoba’s Limitation of Actions Act (*21) provides, on the one hand, for a limitation period of two years in respect of actions “for trespass on injury to chattels, whether direct or indirect”. (*22) On the other hand, it also provides for a limitation period of six years for “actions for recovery of money… whether recoverable as a debt or damages or otherwise, … or on a simple contract, express or implied…” (*23)

So, the obvious question is: what is the applicable limitation period when one has a trucking cargo claim (based in contract) for damage to a shipment of goods? Is it two years or six?

It appears from the jurisprudence in Manitoba that even though a trucking cargo claim may be brought in contract, if the essence of the claim is for “injury to chattels” (i.e. damage to the shipment), then the claim will attract a two-year limitation period only.

Speciallaser Tech Inc. v. Specialloy Industries Inc. (*24) is instructive. In that case, the plaintiff had purchased a laser and hired the defendant to assist in unloading it upon delivery. During the unloading, the laser was damaged by the defendant. The plaintiff commenced a claim over two years after the date of loss, and the defendant argued that the action was statute-barred.

The Court agreed with the defendant and dismissed the claim. Justice Morse held that true legal basis for the plaintiff’s claim, whether framed in tort or in contract, was “injury to chattels” (i.e. damage to the laser) and so the plaintiff could not rely on the more general six-year limitation period for breach of contract.

Similarly, in Pembina Consumers Co-op (2000) Ltd. v. Ainsworth Inc.,(*25) the Court refused to allow a plaintiff to amend its Statement of Claim to include a contract claim, against the third party in the action, in respect of items and equipment damaged in a fire more than two years after the date of loss. The Court held that since that aspect of the proposed amendment related to “injury to chattels”, the two-year limitation period applied. This was so even though the proposed amendment was framed as a breach of contract.

Thus, it appears that in Manitoba, a prospective plaintiff (and its counsel) must be alert to the nature or essence of the cargo claim when deciding when to commence an action. If the claim involves damage or injury to the goods, however slight, then it is certainly possible that a court in Manitoba would apply a two-year limitation period. If, however, the cargo claim is for something other than “injury to chattels” – for example, if the goods were stolen or delayed – then it is arguable that a six-year limitation period would be applicable. Obviously, each case will turn on its own facts.

That said, it is almost certainly advisable, in all cases, to proceed on the assumption that a cargo claim in Manitoba will be found to have a two-year limitation period. Given the harsh outcome that results if a limitation deadline is missed, it is simply not worth taking a chance that a court would permit a six-year period.

In the Yukon Territory, the Northwest Territories and Nunavut, the limitation period is six years in respect of actions

for trespass or injury to real property or chattels, whether direct or indirect, and whether arising from an unlawful act or from negligence…(*26)

The limitation period is also six years in respect of

actions for the recovery of money, except in respect of a debt charged on land, whether recoverable as a debt or damages or otherwise, and whether on a recognizance, bond, covenant, or other specialty or on a simple contract, express or implied, and actions for an account or for not accounting.(*27)

Thus, whether a particular claim is properly characterized as an action in respect of “injury to chattels” or an action “for the recovery of money … as damages … on a simple contract”, the resulting limitation period is the same.

Interestingly, there is also a curious provision in each territory’s statute,(*28) providing that a limitation period in respect of most causes of action (including those listed above) does not begin to run if a person is “out of the territory” at the time the cause of action arises. Instead, the action may be commenced within two years of the person’s “return” to the territory, or within the normal limitation period otherwise applicable. There is no indication as to how long a person needs to be “out of the territory” in order for this provision to take effect, and also no indication as to what constitutes a “return of the person” to the territory in order to start the clock on the new two-year limitation. 

The Federal Limitation Period

The Federal Courts Act (*29) provides the following with respect to limitation periods for actions brought in the Federal Court:

39. (1) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions in force in a province between subject and subject apply to any proceedings in the Federal Court of Appeal or the Federal Court in respect of any cause of action arising in that province.

(2) A proceeding in the Federal Court of Appeal or the Federal Court in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose.

Although it is rarely (if ever) done, it is arguably possible to commence an action in connection with a trucking cargo claim in the Federal Court if the cargo claim is inter-provincial in nature. This is because inter-provincial trucking operations qualifies as a “federal transportation undertaking” and therefore falls under federal jurisdiction. (*30) The Federal Court would therefore likely have jurisdiction by virtue of s. 23(c) of the Federal Courts Act, which gives the Court concurrent original jurisdiction (along with the provincial superior courts) over cases where:

a claim for relief is made or a remedy is sought under an Act of Parliament (*31) or otherwise in relation to any matter coming with any of the following classes of subjects:

[…]

(c) works and undertakings connecting a province with any other province or extending beyond the limits of a province.

In terms of which limitation period would apply in the context of an inter-provincial trucking cargo claim brought in Federal Court, it would seem that the wisest course of action for a prospective plaintiff is, again, to assume that the applicable limitation period in Federal Court is the most restrictive of those found among the various provincial statutes of limitations: that is, two years.

That said, it might be possible to argue that the six-year limitation period set out in section 39(2) would apply. This would only be the case in circumstances where the facts underlying the particular cause of action were accepted by the court as taking place “otherwise than in a province”. For example, one could potentially argue that in the case of a breach of contract such as a trucking cargo claim, the actual breach of contract itself is not confined to one province, or indeed any particular province. Rather, it is an intangible occurrence with no particular location, and therefore occurs “otherwise than in a province”. There may be other arguments that would support such a finding; however, given the harsh consequences of missing the correct limitation deadline, one would certainly not recommend relying on s. 39(2) unless there was truly no other choice.

The “Discoverability” Principle

For the most part, the three underlying rationales discussed above continue to be main reasons why statutes of limitations have been enacted throughout Canada. However, those rationales sometimes yield to other considerations. 

One such consideration is the notion that it would be fundamentally unfair to apply a limitation deadline to deny a plaintiff his or her right to sue another when the plaintiff is not yet even aware that such a cause of action exists. This notion has led to the inception and development of what is known as the “discoverability” principle.

While it is beyond the scope of this article to give an exhaustive account of the “discoverability” principle and how it has developed from province to province and in the territories over the years, no article discussing limitation periods in Canada would be complete without at least a basic overview.

Essentially, the discoverability principle operates to alleviate against the strict application of a given basic limitation period in circumstances where a plaintiff is legitimately unaware that he or she in fact has a claim or a cause of action against another. In such circumstances, courts (and now several provincial legislatures) have agreed that it would be unfair to bar such a plaintiff from commencing a lawsuit, even though the basic limitation deadline may have already come and gone.

In 1986, the Supreme Court of Canada affirmed the general rule concerning the discoverability principle as follows:

…a cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence… (*32)

In 1997, in Peixeiro v. Haberman, (*33) the Court added:

Since this Court's decisions in Nielsen v. Kamloops (City), [1984] 2 S.C.R. 2 (S.C.C.), and Central & Eastern Trust Co. v. Rafuse, [1986] 2 S.C.R. 147 (S.C.C.), at p. 224, discoverability is a general rule applied to avoid the injustice of precluding an action before the person is able to raise it. See Sparham-Souter v. Town & Country Developments (Essex) Ltd., [1976] Q.B. 858 (Eng. C.A.), at p. 868 per Lord Denning. M.R., […] :

It appears to me to be unreasonable and unjustifiable in principle that a cause of action should he held to accrue before it is possible to discover any injury, and therefore before it is possible to raise any action. (*34)

The “Majority” Position

Since the above statements from the Supreme Court of Canada were handed down, almost all of the provinces have now codified the discoverability principle in some form or another.

In Ontario, for example, s. 5 of the Limitations Act, 2002, provides that: 

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,
(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 clause (a). 

The notion of when a claim is “discovered” thus ties into Ontario’s basic limitation provision, which, as noted above, only bars proceedings commenced more than two years after the claim is “discovered”.

British Columbia,(*35) Saskatchewan, (*36) Alberta, (*37) Nova Scotia (*38) and New Brunswick (*39) all have provisions that are very similar, if not identical to Ontario’s provision, above.

In Newfoundland, the relevant legislation similarly provides that in “an action for property damage… the limitation period fixed by this Act does not begin to run against a person until he or she knows or, considering all circumstances of the matter, ought to know that he or she has a cause of action”. (*40)

Manitoba’s discoverability regime is also codified; however, its regime is somewhat different than that in other provinces with a codified discoverability regime. In Manitoba, a prospective plaintiff seeking to rely on the discoverability principle may not simply file an action out of time as in other provinces; instead, the prospective plaintiff must act diligently and first apply to the court for an extension of time in order to bring or continue an action if a limitation period has expired or will soon expire. (*41) The application must be made no more than 12 months from the date the prospective plaintiff knew (or ought to have known) “all material facts of a decisive character upon which the action is based”. (*42) Interestingly, on such an application, the prospective plaintiff must actually lead evidence that would, in the absence of any evidence to the contrary, be sufficient to establish the cause of action. (*43)

Note also that in Manitoba, the operative provisions state that the court “may” grant leave to begin or continue an action under that section; accordingly, courts in Manitoba are given discretion over whether to grant the applicant relief. This is another feature particular to Manitoba.

For a helpful summary of the discoverability regime in Manitoba, see Cahill v. Mustapha Designs, Inc. (*44)

The “Minority” Position

In Prince Edward Island and the Territories, there is no discoverability provision in the applicable statute. This means that these jurisdictions continue to be governed by the common law discoverability principle established by the Supreme Court of Canada. (*45)

The “Ultimate” Limitation Periods

In addition to the “basic” limitation periods discussed above, many provinces’ limitations statutes also provide for what is known as an “ultimate” limitation period. This limitation period is the final date beyond which no action can be brought in respect of a claim of cause of action, whether the action was “discovered” by the claimant or plaintiff by then or not. As such, ultimate limitation periods are significantly longer than basic limitation periods.

In Nova Scotia,(*46) New Brunswick,(*47) Ontario, (*48) Saskatchewan (*49) and British Columbia, (*50) the ultimate limitation period is 15 years. In Alberta, it is 10 years.(*51)

Meanwhile, in Newfoundland (*52) and Manitoba, (*53) the ultimate limitation period is 30 years.

Prince Edward Island and the Territories have no ultimate limitation period.

Notice Provisions in the Uniform Conditions of Carriage – “Condition 12”

In addition to the above limitation deadlines, prospective plaintiffs who are contemplating commencing an action in connection with a trucking cargo claim must also bear in mind a well-known series of regulations, generally referred to as the “Uniform Conditions of Carriage”, which are usually enacted pursuant to the provinces’ governing highway traffic legislation. As such, the Uniform Conditions of Carriage have the force of law almost everywhere in Canada, (*54) and are virtually identical from province to province.

For our purposes, “Condition 12” of the Uniform Conditions of Carriage is important. It sets up a statutory defence for a carrier that results in an outright dismissal of a plaintiff’s action in circumstances where the plaintiff fails to first provide the carrier with notice of the claim by certain strict deadlines. For example, Ontario’s version of Condition 12 provides:

12. Notice of Claim

i. No carrier is liable for loss, damage or delay to any goods carried under the contract of carriage unless notice of the loss, damage or delay setting out particulars of the origin, destination and date of shipment of the goods and the estimated amount claimed in respect of such loss, damage or delay is given in writing to the originating carrier or the delivering carrier within 60 days after delivery of the goods or, in the case of failure to make delivery, within nine months after the date of shipment.

ii. The final statement of the claim (*55) must be filed within nine months after the date of shipment, together with a copy of the paid freight bill.

The notice periods in Condition 12 are to be taken seriously. Claims are routinely dismissed by virtue of a plaintiff’s complete failure to provide the carrier with proper notice. For example, in Quality Circle Computers v. Royal Canadian Supply Chain Inc., (*56) a case where the plaintiffs claimed against a carrier in respect of certain industrial-sized printers that had been damaged while in transit. The Court found that the plaintiff had not given notice to the carrier with 60 days after delivery of the damaged good, as required. The claim was dismissed on that basis, among others.

Similarly, in R & S Transportation Inc. v. 1150726 Ontario Inc., (*57) in the context of an action by the carrier against its customer for unpaid invoices, the customer sought to establish a counterclaim against the carrier for losses suffered as a result of delayed deliveries by the carrier. The customer, however, admitted that it had not provided the carrier with notice of its claim against the carrier until two months after receiving the carrier’s Statement of Claim, and at least eight months after the expiry of the 60-day notice period.

Justice Hoy dismissed the customer’s counterclaim, noting:

There is considerable authority for the proposition that where written notice of a claim for delay is not given to a carrier within the contractually-stipulated time period for such written notice, then the claim is barred. (*58)

In Newfoundland, the same result was reached in the case of Port Enterprises Ltd. v. Parsons Trucking Ltd., (*59) where the plaintiff’s action against a carrier was dismissed for failure to provide notice of its claim according to the provisions of Newfoundland’s version of Condition 12. The plaintiff argued that since the defendant had failed to issue a bill of lading, it had not received notice of its requirement to provide such notice. However, the Court held that the plaintiff could not rely on that argument as the notice provisions formed part of the contract of carriage by operation of law; accordingly, the plaintiff was presumed to have knowledge of them.

That said, where a plaintiff does take steps to provide the required notice, courts have permitted claims to proceed, even where there may not have been perfect compliance. For example, in Jumbo Transport Solutions A/S v. Trendway Transportation Services Inc.,(*60) the plaintiff claimed against the defendant for damages sustained by a section of a chimney that it hired the defendant to ship. The loss occurred on December 9, 2008.

On December 11, 2008, the plaintiff advised the defendant that it intended to make a claim. On January 29, 2009, well within the 60-day notice period prescribed by Condition 12, the plaintiff provided the defendant with further particulars of the claim, including a time loss estimate with a detailed description of the hours and amounts claimed for the work necessary to repair the damaged chimney piece.

The defendant nevertheless argued that the plaintiff had failed to provide sufficient particulars of its claim within the time required by the notice provisions. This led to a motion by the plaintiff for a declaration that Condition 12 had been complied with in the circumstances, such that the action could proceed.

Ultimately, the Court agreed with the plaintiff and permitted the action to proceed. Justice Roberts held:

In my view, the notices provided by the plaintiffs satisfy the requirements of Condition 12: a description of the shipment, sufficient to identify it and its origin, and of the accident in question, where and [when] the loss took place, and detailed particulars of the specific amount claimed for the labour and costs expended to rectify he damages caused by the defendants carrier were provided within the prescribed deadlines. (*61)

In McColman v. Duckering’s International Freight Services Inc., (*62) the Alberta Provincial Court dealt with an action by a customer against a carrier on account of damages to a motor vehicle that he had hired the defendant to transport. The Court allowed the action to proceed in circumstances where within one month following the loss, the plaintiff had provided the defendant with an appraiser’s report outlining the damage to the vehicle and also a complete damage appraisal, and also where the parties were negotiating a possible settlement by then. The Court concluded that the defendant obviously had adequate notice of the plaintiff’s claim by then.

In Shooters Production Services Inc. v. Arnold Brothers Transport Ltd./Les Freres Arnold Transport Ltée, (*63) the Court held that while the plaintiff had failed to file a statement of its claim with the carrier within 9 months of the loss, the carrier nonetheless had already had adequate notice from the plaintiff of its intention to sue and the details of the claim. The Court held that in the circumstances, there had been substantial compliance with the required notice provisions. The Court also noted that in British Columbia (as in Ontario), the term “final statement of claim” as contained in British Columbia’s version of Condition 12 does not mean a formal Statement of Claim filed in court.
Conclusion

The reader who has struggled through to the end of this article will hopefully have realized three key points: 1) limitation statues and deadlines, and related concepts, are very technical and complex; 2) notice provisions in Condition 12 of the Uniform Conditions of Carriage are to be taken seriously; and 3) failure to comply with applicable limitation deadlines and notice provisions could have dire and irreparable consequences for prospective plaintiffs who wish to commence actions in connection with trucking cargo claims.
Ultimately, however, three additional points should help prospective plaintiffs stay on the right side of an applicable limitation deadline: 1) always assume that the shortest, most conservative limitation deadline is the one that will apply; 2) always commence actions in respect of trucking cargo claims as soon as possible, without waiting for the “assumed” deadline to approach; and 3) whether or not you are in doubt as to the applicable limitation deadline, always consult a lawyer before taking any action.

James Manson

Endnotes
(*1) M.(K.) v. M.(H.), [1992] 3 SCR 6, 36 ACWS (3d) 466 (SCC) [M.(K.)].
(*2) Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60 at paragraph 57 (SCC).
(*3) M.(K.), supra note 1 at paragraph 22.
(*4) Ibid., at paragraph 23.
(*5) Ibid., at paragraph 24.
(*6) That is, all of the provinces and territories except for Quebec.
(*7) Limitation Act, SBC 2012, c. 13.
(*8) Limitations Act, RSA 2000, c. L-12.
(*9) The Limitations Act, SS 2004, c. L-16.1.
(*10) Limitations Act, 2002, SO 2002, c. 24, Sched. B.
(*11) Limitation of Actions Act, SNB 2009, c. L-8.5.
(*12) Limitation of Actions Act, SNS 2014, c. 35.
(*13) Respectively, supra note 1, s. 6; supra note 2, s. 3(1); supra note 3, s. 5; supra note 4, s. 4; supra note 5, s. 5(1); and supra note 6, s. 8(1).
(*14) Supra note 4, s. 4.
(*15) Ibid., s. 1.
(*16) Supra note 2, s. 1(a).
(*17) Ibid., s. 1(i).
(*18) Limitations Act, SN 1995, c. L-16.1, s. 5(a).
(*19) Ibid., s. 5(b).
(*20) Statute of Limitations, RSPEI 1988, c. S-7.
(*21) CCSM, c. L150.
(*22) Ibid., s. 2(g).
(*23) Ibid., s. 2(i).
(*24)(1998), 132 Man. R. (2d) 118, 83 ACWS (3d) 848 (MBQB).
(*25) 2013 MBQB 81, 227 ACWS (3d) 367 (Man. Master).
(*26) Limitation of Actions Act, RSY 2002, c. 139, s. 2(1)(e); Limitation of Actions Act, RSNWT 1988, c. L-8, s.2(1)(e); Limitation of Actions Act, RSNWT(Nu) 1988, c. L-8, s.2(1)(e).
(*27) Limitation of Actions Act, RSY 2002, c. 139, s. 2(1)(f); Limitation of Actions Act, RSNWT 1988, c. L-8, s. 2(1)(f); Limitation of Actions Act, RSNWT(Nu) 1988, c. L-8, s.2(1)(f).
(*28) This provision is found in s. 46 of the Northwest Territories’ and Nunavut’s statute, and s. 47 of the Yukon Territory’s statute.
(*29) RSC 1985, c. F-7.
(*30) See, e.g. Total Oilfield Rentals Limited Partnership v. Canada (Attorney General), 2014 ABCA 250, 242 ACWS (3d) 799 (ABCA).
(*31) Here, the relevant “Act of Parliament” could be the Motor Vehicle Transport Act, RSC 1985, c. 29 (3rd Supp.). However, it might not even be necessary to identify an Act of Parliament due to the words “or otherwise” found in s. 23.
(*32) Central & Eastern Trust Co. v. Rafuse, [1986] 2 SCR 147 at paragraph 89, 1 ACWS (3d) 294 (SCC).
(*33) [1997] 3 SCR 549, 74 ACWS (3d) 117 (SCC).
(*34) Ibid. at paragraph 36.
(*35) Supra note X, s. 8.
(*36) Supra note X, s. 6(1).
(*37) Supra note X, s. 3(1)(a).
(*38) Supra note X, s. 8(2).
(*39) Supra note X, s. 5(2).
(*40) Ibid., s. 14(1).
(*41) Supra note X, s. 14(1).
(*42) Ibid., s. 14(1)(a).
(*43) Ibid., s. 15(2).
(*44) 2014 MBQB 217, 248 at paras. 24-27, ACWS (3d) 193 (MBQB).
(*45) See, e.g., PEI Music & Amusement Operations Assn. Inc. v. Prince Edward Island, 2011 PECA 18, 13 CPC (7th) 156 (PEICA); Malik Estate v. Sidat Estate, 2009 YKSC 43, 177 ACWS (3d) 670 (YTSC); Spur Aviation Ltd. v. Northwest Territories, 2000 NWTSC 65, 2000. CarswellNWT 72 (NTSC); Lapierre Estate v. Fort Simpson Hospital, 2005 NWTSC 40, [2005] AWLD 1888 (NTSC).
(*46) Supra note X, s. 8(1)(b).
(*47) Supra note X, s. 5(1)(b),
(*48) Supra note X, ss. 15(1) and 15(2).
(*49) Supra note X, s. 7(1).
(*50) Supra note X, s. 21(1).
(*51) Supra note X, s. 3(1)(b).
(*52) Supra note X, s. 22.
(*53) Supra note X, s. 14(4).
(*54) Prince Edward Island, Newfoundland and the Territories have not enacted the Uniform Conditions of Carriage into law.
(*55) Note that the phrase “final statement of the claim must be filed” has been held in Ontario and British Columbia NOT to refer to a formal pleading or Statement of Claim that must be filed in court by the applicable deadline. Such a statement does NOT need to contain sufficient particulars to enable a carrier to draft a statement of defence. See Jumbo Transport Solutions, infra note 61 at paragraphs 10 and 13; see also Shooters Production Services, infra note 64 at paragraph 74.
(*56) 2011 CarswellOnt 16060 (Ont. Sm. Cl. Ct.).
(*57) (2002), 118 ACWS (3d) 147, 30 BLR (3d) 94 (SCJ).
(*58) Ibid. at paragraph 12. See also 2318-1654 Quebec Inc. v. Valley Propane (Ottawa) Ltd. (1993), 43 ACWS (3d) 54, 1993 CarswellOnt 2857 (Ont. Gen. Div.) where the defendant’s counterclaim was also dismissed for failure to provide adequate notice.
(*59) (1985), 30 ACWS (2d) 28, 153 APR 199 (NLSC).
(*60) 2010 ONSC 7100, 196 ACWS (3d) 807 (SCJ) [Jumbo Transport Solutions].
(*61) Ibid. at paragraph 17.
(*62) 2007 ABPC 17, 161 ACWS (3d) 163 (ABPC).
(*63) 2003 BCSC 92, 119 ACWS (2d) 342 (BCSC) [Shooters Productions Services].

 

 

 

 

 

 

 

 

 


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