SUPREME COURT: COMPLIANCE WITH A STATUTE IS NOT
The Supreme Court of Canada set aside a "special
rule" that exculpated railway companies from liability, except
in exceptional circumstances if they complied with all of applicable
statutory standards. The court ruled that compliance with a statute
did not, as a matter of law, abrogate their requirement to comply
with the common law standard of care.
The case involved an action brought by a motor cyclist
injured when a tire of the motorcycle was caught in a gap beside
a railway track. The width of the gap was within the discretionary
range allowed to be utilized by the railway. However, the Supreme
Court of Canada found that the defendant railway had failed to take
reasonable precautions within the allowable range so as to meet
its independent common law duty to protect against foreseeable injury
to person's crossing the railway track The court found that there
was a sufficiently close relationship between the parties that it
was in the reasonable contemplation of the railway that carelessness
on its part might cause damage to a person crossing the railway.
The court found that there were reasonable measures available at
the time that the railway could have taken to eliminate or at least
limit the possibility of the type of accident that occurred from
actually happening. There were at the time of construction of the
railway crossing "flange-fillers" which could be inserted
into the flange way to create an even surface for road traffic but
which compressed under the weight of the train wheels.
Although in many cases compliance with a statute has
been held to meet the standard of reasonable conduct the court ruled
that it is possible that compliance with the statutory standard
may be found insufficient to meet the common law duty. The statutory
and common law standards are concurrent and each carries its own
penalty for breach. If the common law standard is not met by compliance
with the statutory requirements the railway can be held liable for
failing to meet the common law standards. The court indicated that
the statutory standard will have more relevance in cases where the
conduct is clearly within the intended scope of the statute and
the legislative standard is specific as opposed to general. When
there is an allowance for discretion within the statutory standard
the party must take precautions within the range of the authority
granted to minimize the risks that may result from their actions.
The trial judge and the court of appeal pointed out
that there are practical differences between a railway line which
cuts across traffic at a right angle and one, such as the one in
this case, that runs down the center of the street. The fact that
this was an unusual case and that the railway had not developed
any particular standards applicable to this type of track but simply
treated it as a crossing suggested a failure on their part to exercise
the statutory discretion reasonably. The railway should have taken
particular steps to minimize the risks to two wheeled vehicles by
building the flange ways at the minimum allowable width or by installing
flange fillers. The Supreme Court held that the failure to do so
was negligent and that the trial court's decision should be upheld.
Ryan v. City of Victoria et al (1999), 168 D.L.R.
(4th), 513 (S.C.C.)
MISREPRESENTATION VOIDS POLICY!
The issue of misrepresentation on an insurance application
was recently revisited by the Alberta Queen's Bench in 35445 Alberta
Ltd. v. Transamerica Life Insurance Co. of Canada. There, the applicant
indicated that he had not flown in the past two years, and did not
intend to fly, other than as a passenger, in the future. The defendant
insurer issued a life policy. The insured had actually piloted an
ultra-light plane in the last two years, and had in fact crashed
once. The insured's doctor issued a medical report to the insurer
prior to the issuance of the policy, and this report made reference
to the earlier crash.
The underwriter had noted this point, but had decided
it did not warrant further inquiry. Further, the application had
been completed in the insured's office, where there was a clearly
evident picture of the insured standing beside an ultra-light plane.
When the insured was killed in a crash where he was
the pilot of an ultra-light plane, the insurer denied coverage.
The Court agreed. It held that the information provided in the application
was clearly false, and the misrepresentation was not inadvertent.
The Court held that the insured had deliberately given false answers.
The evidence further indicated that the insurer would not have issued
the policy had it known the truth. Further, the attending physician
had been the insured's family doctor, and was not an agent of the
insurer, therefore his knowledge of the prior accident could not
be attributed to the insurer. The doctor's report should have raised
an issue to the underwriter, but it was not necessary for the underwriter
to make inquiries beyond checking the information as set out on
the application form. The photo in the insured's office did also
not clearly depict the insured as the pilot of the plane without
close inspection. Taken together, the insured's action met the criteria
for fraud. It was not necessary for the insurer to prove an intention
to deceive, just that there was an intention to induce reliance.
The Court inferred that the insured knew the insurer would rely
on the answers in the application to determine whether or not to
insure him. The judge was of the opinion that the insured had made
an intentional lie. The policy was therefore void.
35445 Alberta Ltd. v. Transamerica Life Insurance
Co. of Canada (1996), 5 C.C.L.I. (3d) 160 (Alta. Q.B.); aff'd 
10 W.W.R. 704 (C.A.).
PUNITIVE DAMAGES AWARD FOR INSURER'S BAD FAITH DENIAL OF CLAIM
REDUCED BY ONTARIO COURT OF APPEAL
The Ontario Court of Appeal has reduced a punitive
damage claim awarded by an Ontario jury against Pilot Insurance
Company from $1,000,000.00 to $100,000.00 on the grounds that the
million dollar award was simply too high.
The plaintiff insureds had lost their home and all
their belongings in a fire. The fire chief and the firefighters
investigating the accident determined the fire to be accidental.
The insurer hired various independent adjusters and engineers to
investigate the fire, all of whom came to the initial conclusion
that the fire was accidental.
The insureds had co-operated fully with the insurer
throughout and had offered to take a polygraph test. The jury awarded
the plaintiffs their full claim for the structure, its contents
and for their living expenses following the fire. The insured also
recovered interest and costs on a solicitor and client basis. The
jury went on to award punitive damages of $1,000,000.00.
On appeal Laskin J. in dissent concluded that there
was an independent actionable wrong in the insurer's conduct that
allowed a punitive damage claim to be made. He also concluded that
the conduct of the insurer was sufficiently reprehensible to justify
a punitive damage award. With respect to the quantum of punitive
damages awarded, Laskin J. was of the opinion that although it was
high it was not irrational or unreasonable and served the intended
purpose of such awards to punish the insurer and to act as a deterrent
to future similar conduct.
The majority decision of Justice Katsman and Finlayson
agreed with Laskin J. that this was an appropriate case for punitive
damages. However, they were of the opinion that the punitive damage
award was simply too high. Traditional bad faith awards against
insurers were in the range of $7,500.00 to $15,000.00. There was
no evidence to suggest a corporate strategy on the part of the insurer
to deny claims or to discourage making of claims. The insurer did
not profit from the denial and the evidence suggested that it was
the insurer's counsel that was primarily responsible for the insurer
taking the denial position.
Finlayson J. and Katsman J. indicated that an appellate
court had more discretion on appeal with respect to altering an
award for punitive damages than it did with respect to damage awards
in general and that in the circumstances the purposes of a punitive
damage award could be met with a lower award of $100,000.00.
Whiten v. Pilot Insurance Co. et. al. (1999), 170
D.L.R. (4th), 280 (Ont. C.A.)
LICENSED AIRCRAFT MAINTENANCE ENGINEERS HELD LIABLE
In Janzen v. Kovachik Aircraft Services Ltd., an aircraft
gliding club hired a survey company to inspect a plane that it owned.
Seven months after the report which indicated that the plane was
in good condition was issued, it crashed, killing one man. The Transportation
Safety Board investigation revealed that the cause of the accident
was a broken elevator cable, due to contact between the cable and
a battery lead. The wife of the deceased sued the club and the survey
At trial, the judge held the surveyors 60% liable,
based on the finding that an "automotive" battery lead
had been installed, rather than an "aircraft" lead. The
error was made prior to inspection, and the judge held that the
surveyor was therefore negligent. The deceased was held to be contributorily
negligent for not having noticed the problem during his routine
inspections of the plane. On appeal, the Court affirmed the ruling
against the surveyors, and overturned the finding of contributory
negligence. It was held that the husband did not have a duty to
inspect the lead and was entitled to rely upon the expertise of
the licensed aircraft maintenance engineers who performed the inspection.
The Ontario Court of Appeal also affirmed the trial judge's ruling
that the flying club was not vicariously liable for the negligence
of the inspectors it hired. The full liability for the loss was
therefore on the inspection company.
Janzen v. Kovachik Aircraft Services Ltd. (1999),
86 A.C.W.S. (3d) 248 (Ont. C.A.).
ORDEN V. GRAIL: S.C.C. CLARIFIES CANADIAN MARTIME
This case concerns four separate actions commenced
in the Ontario Court General Division. The actions involved two
boating accidents which resulted in fatalities and in serious personal
injury. The actions gave rise to similar legal issues. The issues
1. Do the superior courts of the provinces, such as
the Ontario Court General Division, have jurisdiction over maritime
fatal accident claims or are such claims within the exclusive jurisdiction
of the Federal Court?;
2. When can provincial statutes of general application
apply to maritime negligence claims? Specifically:
a) Do the provisions of the Ontario Family Law Act
allowing claims for loss of care, guidance and companionship by
dependents (including common law spouses and siblings) apply to
b) Do the provisions of the Ontario Trustee Act allowing
the estate of a deceased person to bring an action for damages apply
to vessel accidents?
c) Do the provisions of the Ontario Negligence Act
apply to vessel accidents? Is contributory negligence a complete
bar to a plaintiff's claim? Does the principle of joint and several
liability exist in marine law?
3. Is the limitation period for fatal boating accidents
one or two years?
The Supreme Court of Canada held as follows:
1. Provincial superior courts have an inherent general
jurisdiction over maritime matters that can only be taken away by
clear and explicit statutory language. The provisions of the Canada
Shipping Act granting jurisdiction over fatal accident claims to
the "Admiralty Court" (which is defined as the Federal
Court) do not expressly exclude provincial superior court jurisdiction.
Therefore the Ontario Court General Division has concurrent jurisdiction
with the Federal Court over maritime fatality claims.
2. A provincial statute can be applicable to a maritime
negligence action where through a four part test that court is satisfied
that the provided the provincial laws do not go to the core of the
federal jurisdiction. If they do, they will be read down. The four
part test is:
a) First, it must be determined whether the matter
at issue is within the exclusive federal legislative competence
over navigation and shipping, i.e. is the subject matter under consideration
so integrally connected to maritime matters so as to be legitimate
Canadian Maritime Law;
b) If the answer to the above is yes, the second step
is to determine whether Canadian Maritime Law provides a counterpart
to the statutory provision. If it does, Canadian Maritime Law applies;
c) If there is no counterpart provided by Canadian
Maritime Law, the third step is to consider whether the non-statutory
Canadian Maritime Law should be altered in accordance with the principles
of judicial reform established by the court, i.e. to reflect the
changing social, moral and economic fabric of the country. Such
changes should only be incremental. Changes with complex or uncertain
ramifications should be left for the legislature. Additionally,
in making changes to Canadian Maritime Law the courts should consider
the fabric of the broader international community of maritime states
and the desirability of maintaining uniformity in maritime law;
d) Finally, and only if the matter cannot be resolved
through the application of steps 1 through 3, the court must determine
whether the provincial statute is constitutionally applicable to
a maritime claim. The Supreme Court noted that matters within exclusive
federal jurisdiction are subject to provincial statutes of general
application provided the provincial laws do not go to the core of
the federal jurisdiction. If they do, they will be read down.
The Supreme Court of Canada held that:
a) It was unnecessary to determine if the provincial
Ontario Negligence Act applied to the actions since the issue was
decided by the Court in Bow Valley Husky where the Court changed
the old common law rule of contributory negligence being a complete
bar to a claim. Maritime common law was reformed to allow for the
apportionment of liability and for joint and several liability and
a right of contribution between defendants.
b) With respect specifically to the application of
the Ontario Family Law Act to boating accidents, the Supreme Court
chose to reform maritime common law to allow claims by dependents
for loss of guidance, care and companionship in respect of both
personal injury accidents and fatal accidents. The Court held that
"dependents" should include common law spouses but not
siblings. Siblings were excluded because they are not included as
a class of dependents in the fatality provisions of the Canada Shipping
c) With respect to the application of the Ontario
Trustee Act, the chose to reform maritime common law to allow a
claim by an executor of a deceased.
3. The final issue considered in the case was whether
a fatal accident claim is subject to a one or two year limitation
period. Section 649 of the Canada Shipping Act provides that the
limitation period for a fatal accident is one year. Section 572(1),
which deals with collisions, provides for a two year limitation
period. The Court held that the plaintiff's claims prima facie came
within section 572(1) and any ambiguity created by the two sections
must be resolved in favour of allowing the plaintiff to rely on
the longer period.
Ordon v. Grail (1998), 166 D.L.R. (4th) 193 (S.C.C.)
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