THE NAVIGATOR - Fernandes Hearn LLP · which a franchisee could be said to bear sufficient risks so as to assume the business risk of his or her enterprise and thus be considered

INTHISISSUEPAGE1S.C.C.ADOPTS“BUSINESSRISK”TEST

PAGE2FIRMANDINDUSTRYNEWS

PAGE6CANADA’SDIGITALCHARTER

PAGE7SHORTLINERAILWAYDEMURRAGECLAIMDISMISSED

PAGE10REVISEDCANNABISLICENSINGPROCESS

PAGE11FORUMSELECTIONCLAUSES:MAKESURETHEYSTICK

PAGE13THENEW“CARBONTAX”ANDROADCARRIAGECONTRACTS

PAGE15NEWDRONEREGULATIONS

PAGE17DISCIPLINARYHEARINGS

PAGE19E-SCOOTERS

PAGE20CIFFA9MONTHLIMITATIONPERIODUPHELD

PAGE26OFFICER/DIRECTORLIABILITY

PAGE29CONTEST

FERNANDES HEARN LLP NEWSLETTER JUNE 2019

Ina recent decisionof theSupreme Court ofCanada, theanalysis ofwhether an individual is considered an employee or independentcontractoris givenathoroughreviewanda“businessrisk”testis usedtodistinguishemployees fromindependent contractors.Thetestmayfindits wayintothetransportationindustryandmaybe the final nailinthe“DriverInc.”modeloftruckingservices.

Modern Cleaning Concept Inc. v. Comité paritaire de l’entretiend’édificespublicsdelarégiondeQuébec,2019SCC28involvedaclaimfor $9,219.32 in unpaid wages and other benefits in relationt o c l e an i n g s e r v i c e s p e r f o rmed b y F r an c i s B ou rque(“Bourque”). Modern Cleaning Concept Inc. (“Modern”)provided cleaning and maintenance services in the Québec regionthrough a network of franchises. It negotiated master cleaningcontracts withclients, andassignedthemfor specific locations toitsfranchisees, who performed the cleaning and maintenance work.Bourque became a franchisee in January 2014, agreeing toperform cleaning services exclusively through the franchiserelationship. The franchisees were not involved in negotiating thecontractswithModern’sclients.

Francis Bourque had previously owned and operatedhis own part-time cleaning business, Nettoyage Francis Bourque. His spouse,Jocelyne Fortin, helpedhim operate the business. Mr. BourquefirstcontactedModern in2013,whenhelearnedthat itwaslookingfor areplacementcleaneratanSAQbranch.Heinitiallytookonthisworkasa subcontractor.Several months later,Mr.Bourquedecidedtobecomea franchisee. He signed the franchise agreement with Modern onJanuary1,2014.

Mr.Bourquewas initially assignedcleaningcontracts for oneNationalBanklocationandone branchoftheSAQ.Overthenextfewmonths,Mr. Bourque was assigned cleaning contracts for three additionalNational Bank locations. Hehad limited interaction with the clientswhosepremises he cleaned. OnMay 31, 2014, after approximatelyfive months of working within the Modern network, Mr. Bourque,

S.C.C.Adopts“BusinessRisk”TestforDistinguishingIndependentContractorsfromEmployees

THENAVIGATOR

FERNANDES HEARN LLP NEWSLETTER JUNE 2019 PAGE 2

FIRMANDINDUSTRYNEWS• Rui Fernandes has recently received the Qualified Arbitrator (Q. Arb.)designation.

• OpentextEnterpriseWorldtechnologyconference:Toronto,July9-11,2019.

• GordonHearnwill be participatingina StaffordWebinarspanel presentationon“Shipper-Broker-CarrierContracts”onAugust14,2019.

• Women’s Trucking Federation of Canada’s 2019 Bridging the BarriersConference inMississauga,OntarioonSeptember6, 2019.KimStoll andAlanCofmanwillbespeakingonapanelonDriversInc.

• CIFFA 2019 Central Region Gulf Tournament: Caledon Woods Golf Club,September12,2019.

• IUMI2019(InternationalUnionofMarineInsurance)willbeholdingitsannualmeetinginTorontoonSeptember15to18,2019.

• Canadian Transport Lawyers Association 2019 Annual General Meeting andConference in Winnipeg, Manitoba on September 19-21, 2019. Kim Stoll is on theEducational Programme Committee and will be moderating the Ethics Panel onConscientiousLawyeringandCaroleMcAfeeWallacewillbespeakingonDriver’sInc.

increasingly frustratedbyhis lackofprofits andinability todevelophis businessas he wished,terminated his franchise agreement andr e c ommen c ed t h e o p e r a t i o n o f h i sowncleaningbusiness.

The Comité paritaire de l’entretien d’édificespublicsde la régiondeQuébec(“Committee”)isresponsible for overseeing compliance withQuebec law, the Decree respecting buildingserviceemployees in the Québec region, CQLR,c. D-2, r. 16 and it can therefore take anynecessary action arising from the Decree onbehalf of employees. In 2014, the CommitteecommencedproceedingsagainstModern.The trial judge considered the relationshipbetweenModernandMr.Bourquetodeterminewhether Mr. Bourque was an employee orindependent contractor. He found that thefollowingfactorssuggestedMr.Bourquewas anindependent contractor: he owned hisown cleaning business; he acted as asubcontractor forModern prior tobecoming afranchisee; andMr. Bourquehoped to enlargehis business. The factors the trial judge saidsupported Mr. Bourque being an employeeincludedhisinability tonegotiate the terms ofthe franchise agreement; Modern’s ongoingsupervision of his work; and the fact that Mr.Bourque’s clients paid Modern who then paidMr.Bourque.

Inordertodetermine whetherMr.Bourquewasactually an employee or an independentcontractor,however,thetrial judgeemphasizedMr.Bourque’s intention.HeconcludedthatMr.Bourque clearly entered into the franchiserelationship with the aim of expanding hisowncleaningbusiness.Thattheventuredidnotgo as planned — due to Mr. Bourque’sdissatisfactionwithModern’s roleas franchisor—didnot,inthe trialjudge’sview,detractfromMr. Bourque’s actual purpose: to expand hisownbusiness.

Relying on the language of the franchiseagreement, thetrial judgeconcludedthattherewas a common intention that Mr. Bourque

would be an independent contractor, not anemployee. Accordingly, as an independentcontractor, he was not entitled to the fullamountclaimedbytheComitéonhis behalf.Hewas, however, entitled to $2,877.28, anamount Modern conceded it still owed himpursuanttothefranchiseagreement.

KasirerJ.A.,writingforamajorityintheQuebecCourt of Appeal, allowed the appeal. He heldthat the trial judge had misapprehended thenature of thetripartite contractual relationshipbetweenModern, its clients anditsfranchisee,Mr.Bourque.Specifically,KasirerJ.A.wasoftheview that thetrial judgehadmadea palpableand overriding error in failing to consider then a t u r e o f t h e a s s i g n m e n t s o fthe cleaning contracts from Modern to Mr.B o u r q u e . B y f a i l i n g t o r e c o g n i z ethatModernremainedcontractuallyliable toitsclients, the trial judge erred in his analysis ofwhether Mr. Bourquewasanemployee or anindependent contractor. Various elements ofthis tripartite model ledtheCourt ofAppeal toconclude that Mr. Bourque was an employeeno t an i ndependen t con t r a c to r andordered Modern to pay the Comité the$9,219.32 it claimedonbehalf ofMr.BourqueandMs.Fortin.

TheSupremeCourt ofCanadaagreedwiththeQuebec Court of Appeal, introducing the“business risk” test. The critical factordistinguishing employees from independentcontractors was held to be the respectivedegreeofriskandtheattendantabilitytomakea profit. The independent contractor, inattempting to generate profit, accepts thebusiness risk.Employees,onthe otherhand,donot.

The Court held that the relevant riskisbusinessrisk,notsimplyany riskacceptedbythe worker in relation to his or her workingconditions. Employees, by virtue of theirindependence, will always have a degree ofautonomy and will likely accept some risk instructuring their work. Even in circumstanceswhere the worker owns his or her own


equipment and is characterized as anindependent contractor by tax law, a workermay, nonetheless be an “employee”. Theworking relationshiphas tobeexamined in itsentirety to determinewho bears the businessrisk.Ifitis theworker,thenhe orsheis properlycharacterized as an independent contractor. Ifnot,theworkeris anemployee.TheCourtnotedatparagraph36:

“Thecase lawdistinguishingindependentcontractors from artisans [employees]thus demands a highly contextual andfact-specific inquiry into the nature ofthe relationship in order to determinewhichparty bearsthebusiness risk.Thequestion is not one of comparativerisk;rather, itis whichpartyactually assumestheriskofthebusiness.”

TheCourtalsonotedthatBourque’sstatus as afranchisee was not determinative. Instead, theinquiry must assess the actual nature of therelationshipbetween the parties, regardlessofthe terms of and labels used in the franchiseagreement.

The Court noted that the cleaning servicescontractandthefranchise agreementhadtobeconsidered to understand Modern’s businessmodel.Modern’scleaningservicescontractwiththeBank and its franchiseagreementwithMr.Bourquewereinextricable.Mr. Bourque’s non-performance of the cleaning contract wouldpermit Modern to terminate the franchiseagreement. Similarly, the renewal of thefranchise agreement between Mr. Bourqueand Modern was contingent onMr. Bourque’scompliancewiththe obligations totheBankassetoutinthecleaningservicescontract.

In agreeing with the Court of Appeal, theSupremeCourt noted that the trial judgeonlyexaminedwhetherMr.Bourqueassumedsomerisks,notwhetherhe assumedthe business risk.It noted that employees will always have adegree of autonomy. But the fact that anemployee has a degree of autonomy andassumes somedegreeofriskdoes notmeanthat

heorshebearsthebusiness risk,inthesenseofbeing able to organize his or her businessventureinorder tomakeaprofit. By failingtoconsider the tripartite relationship, the trialjudgedidnotconsider the business as awhole,and, asa result, improperly concludedthatMr.Bourqueborethebusinessrisk.

Through the operation of the franchiseagreement,Mr.Bourqueacceptedcertainrisks,includinganindemnificationclause totheeffectthatModern couldrecover againsthim for anyfa i lure to comply wi th the terms ofthe cleaning contracts. Mr. Bourque alsoassumedsomerisks relatingtoanyimproperuseof time, equipment and product. There is,however,a fundamental distinctionbetweentherisks assumed by workers relating to workingconditions,andthebusinessrisk.

Modern’songoingliabilitytoitsclients byvirtueof the imperfect assignments was inexorablylinkedtothecontrols itplacedonMr.Bourquethrough the franchise agreements. Modern, atall times, remained liable to its clients. Thecontrols itplacedonMr.Bourqueaimedtolimitthis liability.Modern’sstrategytostrictlycontrolits franchisees, like Mr. Bourque, was thecontext for examiningModern’s assumptionofrisk. Thesecontrols werecritical because fromtheBank’s perspectiveit wasModern, notMr.Bourque,whoboretheriskofcontractual non-performance.

The Court stated that determining who bearsthe business risk is a fact-specific, contextualinquiry. “Theremay be other circumstances inwhich a franchisee could be said to bearsufficientrisks soastoassumethebusiness riskofhis or herenterpriseandthusbeconsideredanindependentcontractor”[atpara57].

In the Fernandes Hearn LLP November 2018newsletter the “Driver Inc.” model of truckingservices wasanalyzed.The“DriverInc.”model isan employment model used by commercialvehicle operators who do not own/lease oroperate their own vehicles. It is increasing inuse. In essence an employee truck driver will

INVESTOR NEWSLETTER ISSUE N°3 FALL 2008FERNANDES HEARN LLP NEWSLETTER JUNE 2019 PAGE 4

incorporate and receive payment from theircarrierwithnosourcedeductions. The practiceopens thedoor tothepossibility oftaxevasionby those engaged in it. It is believed that thepracticeis becominga preferredway toattractcontractdriverstofleets.

In71122OntarioLtd.v.SagazIndustriesCanadaInc.,[2001]2 S.C.R.983the SupremeCourtofCanada outlined some of the conditions todetermine if a worker is an employee or anindependent contractor. In the decision, theSupremeCourt of Canadamakesthe followingpoint that one must search for the totalrelationshipoftheparties:

“It is exceedingly doubtful whether thesearchfor a formula inthenature of asingle test for identifying a contract ofservice any longer serves a usefulpurpose…The mostthatcanprofitablybedone is to examine all the possiblefactors which have been referred to inthesecases as bearingonthe nature ofthe relationship between the partiesconcerned.Clearlynotall ofthese factorswill berelevant inall cases, orhave thesameweight inallcases. Equally clearlynomagicformula canbepropoundedfordeterminingwhichfactors should, in any

givencase,be treatedasthedeterminingones.”

TheSupremeCourt ofCanadahas alsomadeitclear that courts and tribunals must take intoaccount the particular policy objectives of astatute whendecidingifa personhasemployeestatus. (See Pointe-Claire (City) v. Quebec(Labour Court), [1997] 1 S.C.R. 1015) Forexample, for federally regulated trucking, thepolicyobjectives oftheCanadaLabourCodeareimportant. These are set to ensure minimumemploymentstandards andtopreventaccidentsandinjuriestohealtharisingoutofthe courseofemployment.

The decision inModern is the latest SupremeCourtofCanadadirective onthetesttobeusedin determining whether an individual is anemployeeor independent contractor. Basedonthis latest test, the“Driver Inc.”modelwill notstandupandanindividual usingthe“DriverInc.”modelwill neverbefoundtobeoperatingas anindependent contractor. Trucking companiesshould be aware that they are dealing withemployees. For companieswhose trucks crossprovincial borders theCanada Labour Codewillapply.

RuiFernandes


2. Canada’sDigitalCharter

On May 21, 2019, the federal governmentlaunched Canada’s new Digital Charter. TheChartersets outtenprinciplestogoverntheuseofdata in thedigitalworld.Theseprinciples“arethe foundation for a made in Canada digitalapproachthatwill guideourpolicy thinkingandactions and will help to build an innovative,people-centred and inclusive digital and dataeconomy.This balancedapproachstrives tosetoutthe buildingblocks fora foundationoftrustfor this digital age that unlocks Canada'sinnovationpotential.”

The10principlescomprisingtheDigitalCharterareasfollows:

1. UniversalAccess:allCanadianswillhaveequalopportunitytoparticipateinthedigitalworldandwillbegiventhenecessarytoolstodoso.

2. SafetyandSecurity:Canadianswillbeabletorelyontheintegrity,authenticityandsecurityoftheservicestheyuseinordertofeelsafeonline.

3. ControlandConsent:Canadianswillhavecontroloverwhatdatatheyaresharingandwillbeabletounderstandwhoisusingtheirpersonaldata.

4. Transparency,PortabilityandInteroperability:Canadianswillhaveaccesstotheirpersonaldataandwillbeabletotransferdatawithoutundueburden.

5. OpenandModernDigitalGovernment:CanadianswillbeabletoaccessmoderndigitalservicesfromtheGovernment.

6. ALevelPlayingField:TheGovernmentwillensurefaircompetitionintheonlinemarketplacetofacilitategrowthinCanadianbusinessandprotectCanadianconsumersfrommarketabuses.

7. DataandDigitalforGood:TheGovernmentiscommittedtotheethicaluseofdatatocreatevalue,promoteopennesstoimprovethelivesofpeopleglobally.

8. StrongDemocracy:TheGovernmentwilldefendfreedomofexpressionandprotectagainstonlinethreatsdesignedtoundermineCanada'sdemocraticinstitutions.

9. FreefromHateandViolentExtremism:Canadianscanexpectthatdigitalplatformswillnotpromoteviolentextremismorcriminalcontent.

10. StrongEnforcementandRealAccountability:meaningfulpenaltieswillbeimplementedfortheviolationoflawsandregulationsthatsupporttheDigitalCharter.

The principles “will help guide the federalgovernment'swork, serving asa digital charterfor Canadians to help address challenges andleverage Canada's uniquetalentsand strengthsinordertoharness the powerofdigital anddatatransformation.Theseprinciplesreflectwhatweheard from Canadians and are the buildingblocks of a foundation of trust for this digitalage.Theprinciplesmaystill evolveovertimeasit isimportant tomakesure thatthis continuestobetherightapproach.”

Within days ofthe announcementoftheDigitalCharter critics were already predicting that itwouldbea bustbeforeitevengets going.InanopinionpieceinThe Globe andMail publishedMay 24th, 2019, Kean Birch, an associateprofessor at York University outlined fivereasonstheCharterwillbe derailed.Heoutlinedthefivereasonsasfollows:

1. First, the Digital Charter is framed byfears about losingout in theemerging “digitaleconomy,” an economy that depends on ourpersonal dataas a resource. Suchdata is onlyvaluableifitcanbeturnedintoa privateasset.Evenata mundanelevel,free-to-playgameapps(such as Angry Birds) collect an enormousamountofpotentiallyvaluabledata. Introducinga charterseems unlikely togetourprivacy backor stop the indiscriminate collection of ourpersonaldata.


2. The Charter does not address theunderlying drive toward monopoly in thecollectionofpersonaldata.

3. The Charter lacks any teeth to compelmajor international companies to act in theinterestofCanada.

4. Canada is very comfortable withmonopoly andlacks thedrivetopursuestrongcompetition or data-privacy agendas – incontrast totheEuropeanUnion. So, the notionthat a DigitalCharter will upendadecades-oldpro-monopolypositionseemsunlikely.

5. Whenit comestotheDigital Charter isreally justwords,notmuchelse –noregulation,no legislation, no new rights. How well-intentioned thesewords are is meaningless atpresent, andwillremainsointhefutureiftheyarenotbackedupbya detailedandspecificsetof policies, regulations, standards and codesdesignedexplicitlytoshapeandprotecthowourpersonal data are used and how they can beusedinthefuture.

RuiM.Fernandes

3. ShortLineRailwayDemurrageClaimDismissed

In the recent decision of G.E.X.R. v. ShantzStation and Parrish & Heimbecker, 2019 ONSC1914,JusticeBraidoftheOntarioSuperiorCourtof Justicedismissed the demurrage claim of ashort line railway. Justice Braid started herdecisionasfollows:

“Time is money”, the old adage goes.This is certainly so in the transportsector, which has developed the legalconcept of “demurrage”. In short,demurrage is a charge levied when ittakeslonger thananticipated to loadorunloadgoodsintransit.

The railway, Goderich-Exeter Railway CompanyLimited(“GEXR”)operates ashortlinetrackthatcrosses through the Region of Waterloo. This

track, called the Guelph Line, is owned byCanadianNational Railway (“CN”)andconnectsto lines that are operated by CN. Parrish andHeimbecker (“P&H”) is a Canadian graincompany thatships grainfromWesternCanadatoOntario.

GEXR asserted it had the right to chargedemurrage to P&H in accordance with itspublished tariff for the delayed unloading ofrailcars at the Shantz Station Terminal. P&Hrefusedtopay thecharges onthebasisthat, intheabsenceofacontractbetweenthem,GEXRhad neither the contractual right nor thelegislative authority to exact demurrage. P&Hwas always prepared to pay demurrage atShantz Station, but subject to the invoicescomingfromCNandnotGEXR.

Indescribingtheconceptofdemurrage,JusticeBraidstated:

Theavailabilityofrailcars tomovegoodsis a crucial element of the economicoperations of a railway. Nevertheless,railway companies allow shippers areasonable period of “free time” forloading or unloading railcars whenequipment is placed at the shipper’sdisposal.The railcars areprovidedforthepurposeoftransportandnotforstorage.Whena shipperexceeds the time periodto unload the freight and therebywithholds the railcars from transportservice,theshippermay beliable topaydemurrage.

GEXR issued a tariff, which included termsregarding demurrage. Under the tariff’sdemurrage terms, there was a provision for afreeday for anempty car going in for loadingand two free days for a railcar going in forunloading. After this “free time”, demurragecharges begantoaccrue.Thetariffwasintendedto be an incentive to shippers to bring extracrewtounloadandpromptlyrelease anyrailcarssothat they couldbe usedbyothercustomers;andtooffsetcar hire costs forwhichGEXRwas


liable. It alsoprovidedadisincentivetouse thecarsforstorage.

P&H had all along dealt with CN and the twopart ies negotiated a Memorandum ofUnderstanding. P & H were concerned aboutlocating the grain terminal (the Shantz StationTerminal) on a short line anddid not want tohave difficulties if the short line had financialdifficulties. In the negotiateddealwithCN, CNassuredP&HthatonlyCNwouldinvoiceP&Hfordemurrage and that CN standard demurragepractices would be applied. CN drafted aMemorandumofUnderstanding,whichwastheagreementbetweenCNandP&H.BasedontheMemorandum,P&Hagreed tobuild aterminalontheGuelphLine.

Justice Braid relied on the Supreme Court ofCanada decision in Sattva Capital Corp. v.Creston Moly Corp. 2014 SCC 53 to allowevidenceof the surrounding circumstances fortheinterpretationoftheMemorandum,stating(at p. 33) “ The evidence of the surroundingcircumstances, including the genesis andbusiness purposeofanagreement, isadmissiblewhen conducting contractual interpretation.This shouldconsistonlyofobjective evidence ofthe background facts at the time of theexecutionofthecontract andincludes anythingthatwouldhaveaffectedthe way inwhichthelanguage of the document would have beenunderstoodbyareasonableperson.”

Justice Braid went on to find that theMemorandumwascontrary toCN’sagreementwithGEXRasit relatedtoGEXR’sability tobillaccessorial charges. This agreement, the“Guelph Line Operating, Marketing andInterchange Agreement” provided that GEXRwastheexclusive operator of the GuelphLine.P&H werenot a party to this agreement. Theagreement stated that CN would continue tomarket the services on the Guelph Line. CNwouldcontinue tobe thecarriershowninrates,routes anddivisions, andtoquotefreightrates,publish tariffs, enter into contracts, andcollectfor its own account all related revenues andapplicable freight subsidies for traffic to and

from stations on the Guelph Line which willtravelover CN lines. Itwas further agreedthatGEXR would have the exclusive right andresponsibility to publish tariffs and enter intocontracts governing the handling of intra-linetrafficaswell as collectforits ownaccountonlyall related revenues, including any applicablesubsidies The agreementfurther statedthatCNwouldpayGEXRahaulagefee.GEXRwouldberesponsibleforpayingforall carhirechargesonindividual freight cars in its possession, andCNwould pay a reclaim of the car hire inaccordance with the agreement. Notably, theagreement statedthatGEXR“isresponsible forinvoicingcustomersfordemurrage.”

TherewasasignificantdifferenceintheCNandthe GEXR tariffs. The CN tariff was morebeneficial to P&H. In an arbitration involvingonly CN and GEXR, the arbitrator determinedthat in theMemorandum P&H andCN agreedthatonlyCNwouldbillP&Hfor demurrage. Healso found that CN had breached i tsMemorandumandits promise thatCNwouldbetheonlycarrierthatwouldchargedemurrage inconnection with the traffic to the terminalduringthe termoftheMemorandum.OnAugust9,2018,thearbitratorawardeddamagestoP&HagainstCNforthe breachofCN’spromisethatitwould be the only carrier that would chargedemurrageinconnectionwiththe terminal.Thequantificationof damageshasbeen adjourneduntil after the completion of the trial beforeJusticeBraid.

As a result of the arbitration ruling, and inaneffort todischarge its obligationsas set out inthat award, CN sent an invoice to P&H datedJune13,2018,fordemurragecharges.

JusticeBraidfoundthefollowing:1. GEXRwasnotasubcontractorofCN.2. Common law principles now apply torailwaycompanies(sincederegulation).3. A railway’srelationshipwitha customerisacontractualone.4. Section 113 of the CTA (“CanadaTransportation Act”) imposescertain“commoncarrier obligations” on railway companies,


requiringthemtotake, carry, anddeliver trafficon “payment of the lawfully payable rate.” Arailway sets the rate for themovement of thetraffic; once a customer has agreed topay therates, the railway must deliver the cars to thedestinationspecifiedinthecontract5. Section 118 of the CTA states that arailway company shall, at the request of ashipper,issueatariffinrespectofthe movementof traffic on its railway. Section119 of theCTAdirectsthat a railway company that proposes toincrease arateinatariffshall publisha notice ofthe increase and shall charge the rates in thattariff.6. Section87oftheCTAdefines“tariff”as “ascheduleofrates, charges, terms andconditionsapplicable to the movement of traffic andincidental services.”“Demurrage”is notadefinedtermundertheCTA.7. The CTA and the Certificate of Fitnessissued toGEXRdonot containexplicit languagestatingpreciselywhoisliable fordemurrage.Thelegislation is silent regarding on to whom a

railway may impose tariffs such as demurrage.The CTA does not go so far as to empower arailroad to unilaterally impose penalties onparties with whom it has no contractualrelationship.8. A contract of carriage that incorporatestariffterms is necessarybetweentwopartiesforthe railway to levy demurrage charges. Therailway may not charge demurrage to a partywithwhomithasnocontract.9. The mere provision of services, evenunderthe structure oftheCTA,doesnotcreateacontract.10. There was no implied contract to payGERX demurrage. “There cannot be an impliedcontractwherethereis aclear,express intentiontothecontrary”(p.116).11. P&H were not unjustly enriched. P&Hwere willing topay charges for demurragethatCN rendered i n a c co rdance w i th theMemorandum.

RuiM.Fernandes


4. RevisedCannabisLicensingProcess

HealthCanadapublishedastatementlastmonth(May8th,2019)concerninga majorchangeintheapplication process for granting licences tocultivateor processcannabis,or tosell cannabisfor medical purposes. Applicants for licences tocultivate cannabis, process cannabis, or sellcannabisformedical purposes are nowrequiredto have a fully-built site that meets all of therequirements oftheCannabisRegulationsatthetime they submit their application. Applicantsmust now also submit an “evidence package”demonstrating that their proposed facility (forcultivation, processing and/or sale) meets thelicensingcriteria.

For applications already submitted, HealthCanada will make a general review of theseapplications.Theapplications consideredas beingcompletewill receive an update letter that willindicatetheresult.Onceafully constructedandcompliant site is available to applicants, thenHealth Canada will review the application indetail in prioritybasedontheoriginal applicationdate.

These changes are being made in an effort toreduceinstances whereapplicants just submit a

paperapplication,whichwouldbe reviewed,withtheapplicantbeingallowedtoswiftlyproceedtobuilda facility.HealthCanada isconcernedthatasignificantamount of resources is beingusedtoreviewapplicationsfromapplicants thatarenotready to begin operations. Consequently, onlyonce a site isready,will existingapplications thenreceive priority review and be placed in thequeuebased on their original application date,and not when the complete application wassubmitted.

Health Canada suggests that this change isconsistent with the need to align the cannabislicensing framework with other regulatedindustries, including the pharmaceutical sector.This critical change should thus bring increasedefficiency to the licensing process andhopefullynot only benefit the already well-capitalizedapplicants, as applicants must now front-loadtheir largest capital investment before evensubmitting their application, and also risk thattheirapplicationmay notbeapprovedbyHealthCanada…

RobertCarillo


5. ForumSelectionClauses:MakingSureTheyStick

Ithaslongbeenroutine foragreements betweenparties acting internationally to containat leastone of a “choice of law” clause and a forumselection clause, and frequently the two arecombined. The need for these is quiteobvious.Parties acting across borders are resident indifferentjurisdictions.Whenevera disputearisesinvolving a cross-border agreement it is rarelystraightforwardinwhichcountry litigationshouldbe pursued, and it is common principle acrossbothcommonlawandcivil law jurisdictionsthatany legaldisputeshouldonlybepermittedtobelitigatedinonejurisdictiontothe exclusionofallothers. Furthermore, even in cases where theproper country for the hearing of a disputeappearsobvious, local courts canstill decide thecase onthebasis ofa “foreign” rather thanlocallaw if that is what the parties havespecificallyagreed.

Choice of law and forum selection clauses canprovide commercial parties with valuablecertainty, if not about the outcome of thedispute,at leastaboutwherethedecisionwill bemade and according to what law. A recentdecisionof theCourt of Appeal for Ontario hasshown, however, that these clauses are notalwaysas certainastheyappear.Inits decisioninForbes Energy Group Inc. v. Parsian Energy RadGas (*1) the court showed that these clausesneedtobecarefullydraftedinordertohavetheintendedeffectofprovidingcertainty.

Thefacts

Forbes Energy Group, the plaintiff in thisproceeding, brought an action in Ontariounderits agreementwiththedefendants todeterminecertainissues relatedtoanagreement involvingupstreamoil andgas rights inIran.Forbes EnergyGroupwas incorporated inAlberta witha headofficelocatedinCalgaryanda registeredoffice inToronto.Itwas alsoa whollyownedsubsidiaryofForbes & Manhattan Inc., an Ontario companywith a head office in Toronto. The defendantsvariously incorporated in Iran, the United Arab

Emirates, andtheBritish Virgin Islands,andhadofficeslocatedinIran,Dubai,London,Edinburgh,Durban,andBermuda.

Theagreementthatwasthe subjectofthe actioncontainedthefollowingterm:

This termsheetshallbegovernedby andconstruedinaccordancewiththelawsofEnglandandtheParties agreetoattorntothecourtsofEngland(*2).

Relying on this clause, two of the defendantsbroughta motiontohaveForbes’actionstayedinfavour of the English courts. Themotion judgehad found that Ontario courts had jurisdictionover the matter but, considering the relevantfactors, also foundthat theplaintiff hadshown“strongcause”whythecourts inEnglandshouldbepreferred,andthereforestayedtheaction.

The Court of Appeal reversed this decision. Itnotedthatthe “strongcause”testonlyapplies toexclusivejurisdictionclauses.One ofthe issues ontheappeal was infactwhetherthe motionjudgehadmadearulingonwhethertheclause,quotedabove,was infactanexclusivejurisdictionclause.The Court of Appeal concluded that no findinghadbeenmade,andthattheclauseinquestionclearly hadnot grantedexclusive jurisdiction tothe English courts; that is, it stated that theparties “attorn to the courts of England,” butcrucially did not say that no other courts mayexercisejurisdictionoverthecontract.

Intheabsence ofanexclusivejurisdictionclause,the courts will then consider the jurisdictionclause onlyas onefactoramongmanyrelevanttodeterminingwhat isthemost appropriate placeto hear a dispute. Thus, the Court of Appealproceeded to weigh the relative merits of ahearingin Ontarioversus oneinLondon,England,asfollows:

(i) therewas no evidence that the TermSheet was signed in either England orOntario;


(ii) there did not appear to be a strongconnectionbetweenthesubjectmatterofthe Term Sheet and England, and, sincethewitnesses werescatteredaroundtheworld, there was no one location thatwouldbemoreconvenient for allof thewitnesses;

(iii) although the Term Sheet providedthat the law of England is the governinglaw, it is common for Ontario courts toapplyforeignlaw;

(iv)therewas nosuggestionofthe loss ofa legitimate juridical advantage if theactionproceededinOntario;and

(v)therewas nothing tosuggest thattherespondents contemplate bringing anaction concerning the Term Sheet inEngland, thereby triggering Forbes’obligationunder the Clause toattorn tothejurisdictionoftheEnglishcourts.(*3)

Placingall ofthese factors inthe scales,theCourtof Appeal ruled that there was on balance noreason why the action should not be tried inOntario rather than in England, and thereforereversedthestaygrantedinthelowercourt.

Conclusion

The Court of Appeal wrote a short decision inForbes with an important lesson; namely, becareful whatyouaskfor,andbecareful howyouask for it. Specifically, it illustrates a keydifference between exclusive andnon-exclusivejurisdiction clauses. A non-exclusive jurisdictionclause mightbepreferredby theparties whodonotwishtocommit toaparticular jurisdictioninwhich to adjudicate their disputes, butnevertheless want the limited certainty that adispute may be heard in one jurisdiction inparticular. However, where the parties wantcertaintyas tothe placeofcourtproceedings,anexclusive jurisdiction clause is a necessity. Evenwith the latter there is no guarantee that adispute connected with an agreement will notultimatelybeheardelsewhere,butthelikelihoodis far greater that the parties’ choice will berespected where an exclusive clause has beenused.

OlegM.Roslak

Endnotes(*1)2019ONCA372[Forbes].(*2)Forbesatpara.2.(*3)Forbesatpara.8.


6. TheNew“CarbonTax”andRoadCarriageContracts

Thefederal“carbontax”beganinOntario, NewBrunswick,Saskatchewan,andManitoba onApril1,2019.Theotherprovinces werenotaffectedbythis recent government initiative as they hadearlier implemented carbon pricing regimes inthenatureofthecarbontax.

Introduction-WhatistheCarbonTax?

TheCarbontax putsa directpriceonemissions.“Greenhouse gas” emitters—usually fuelproducers and distributors—pay a designatedamountpereachtonneofcarbondioxide emittedfromburningcarbon-basedfuels.As a motivationfor emitters to decrease emissions, the priceusually goes up slowly over time such thathouseholds and industries will have time toadjustandadoptlesscarbon-heavypractices.

The carbon tax differs from what is known as“cap-and-trade” in industry. Cap-and-trade isindirect carbon pricing. The government sets alimit(the cap)oncarbonemissionsbycompanies,who are then given emissions permits. If acompany’s emissions fall below their permits,theyareallowedtosell excess permits (thetrade)toacompanythathasexceededtheirs.

TheCarbonTaxandtheCanadianConsumer

Consumers donot pay thecarbontaxdirectly asdo corporations andbusinesses – however theywill facehigherprices forgoodsandservices fromindustriesthatemithighergreenhousegases.Forexample, as reported by the CanadianDepartment of Finance gas prices saw a priceincrease of4.4cents per litre inApril2019,beingprojected to go up to 11 cents a litre by April2022 as the carbon tax gradually increases. Afederal carbon tax “backstop” policy will helpcounterthis costwitha general annual rebatetoCanadian households based on the averageexpensesofa province anddividedevenly acrosstheboard. It is reportedthat theaveragerural

householdinSaskatchewan,whodrivemorethanurbancounterparts,forexample,wouldreceiveaprojected$598rebate–regardless ofhowmuchthey spendoremit (althoughit shouldbenotedthat gas and diesel for farming are eligible forexemption from carbon tax fuel charges). Bycomparison, the average household inOntariowouldreceive$300.

The Carbon Tax and the Negotiation of RoadCarriageContracts?

The Freight Carriers Association of Canada (the“FCA”)(*1)has providedaveryhelpfulreviewofhowtheCarbonTaxmay affectcarriagecontactnegotiations: the decision to charge a “CarbonTax Surcharge” – just as a conventional “fuelsurcharge” is ofcoursean independent decisionbyeachindividual carrier. Inthe resultthere areseveral differing scenarios at play in themarketplaceas aresultoftherecentintroductionofthecarbontax.

TheFCA produces a weekly “Diesel Cost ChangeImpactIndex”thatwas originallydevelopedasanindustry “fuel surcharge guideline” back in theday before the revised Competition Actel iminated any remnants of “collectiveratemaking” by otherwise competing carriers,using the services of membership based “ratebureaus”or“tariffbureaus”. TheFCAweekly diesel cost index is basedon aformula of thecost of highway diesel fuel as apercentageofcarriers’overall operatingcosts asdetermined by an extensive financial analysisconducted prior to the elimination of collectiveratemaking under the revised Competition Act.Most major trucking companies that wereoperating in Ontario and Quebec at that timeactively participated in that financial studythroughwhicha widely accepted‘baseline’ wasproducedestablishingameaningful industry-widerelationship between fuel costs and totaloperatingcosts for thetruckingindustry.Thenbycomparing the “current” cost of diesel fuelagainst the baseline cost for fuel (the price ineffect at the time the industry study was


conducted–whichwas $0.39perlitre,excludingGST/HST)–a costimpactcouldbeimputed.Theresulting percentage impact then became the“fuel surcharge”requiredtooffsettheimpactofthechangein diesel fuelcost. The surchargeofcourse wouldgoupordown,basedontheactualchangeindiesel fuel purchasedbycarriers in thatoriginalstudymarketarea(OntarioandQuebec). TheFCAweekly diesel cost index remains, by alarge margin, the most widely acceptedmethodology for calculating the industry impactof fluctuating diesel fuel cost. Most Canadiancarriers rely on the FCA weekly bulletin as thebasis for theirownfuel surchargeregimen,or atleast a major data input for their independentfuelsurchargecalculation.(*2)Accordingly,theinitialimpressionsand“takeaways”thatcanbegleanedontheeffectofthecarbontaxareasfollows:

• to the extent that the carbon tax isincorporatedintothe ‘pumpprice’for fuelpurchased in Ontario, the impact of thecarbon tax is captured in the FCA weeklyimpactformula.

• certain carriers have determined thatthey required a separate “Carbon TaxSurcharge”– inadditiontotheirotherwiseapplicable fuelsurchargeregimen–inordertooffset the full impactof thenewcarbon

taxfortheiroperations. This iswithintheirindependentprerogative.

• it is understood that there has beenconsiderable resistance by major shippersagainst carriers who have introduced aseparate CarbonTax SurchargeinadditiontotheirexistingFuelTaxprogram.Resultingmarket pressure from large shippers mayforce them to waive any application of aseparate CarbonTax Surcharge. This mayexposesmaller shippers with less leverageorlessandleavethem“onthehook”.

• on a contract-by-contract basis thingstherefore come down to how well eachindividual contract addresses carriercompensation, fees andsurcharges.Again,the larger, better informed and moresophisticated shippers usually have thebetter crafted contracts to insulate themfromanynewfees.

GordonHearn

Endnotes(*1)https://fcafuel.org(*2)TheFCAcurrentlyhasroughly425motorcarriers,couriers,brokersandintermediariesthatsubscribetoitsweeklybulletin.Additionally,thereareover275major“shippers”thatalsosubscribetotheweeklyFCAfuelbulletin.


https://fcafuel.org

https://fcafuel.org

7. TheNewRegulationofSmallHobbyandCommercialUseDrones:“It’sNotJustaToy”

Wearebeingusheredintoanera ofsmall droneregulation. We hear in the news reports ofairport air space being comprised of “nearmisses”. Wenowreadofprisonairspacebeinginvaded by contraband delivering drones, ofinvasionofprivacy andharassment concerns. Anewregulatory regime is atplay tokeepaviationlanes clear,tooptimizepublicsafetyandtoallowtheauthorities toidentify droneoperators: whoisbehindthecontrols?

OnJanuary 9, 2019 Transport Canadapublishednew rulesfor flyingdrones, officially referredtoin the legislation as “Remotely Piloted AircraftSystems” (RPAS) inCanada. The rules introducetwocategories ofdrone operations,being“basic”and“advanced”.Thecategories arebasedontheoperating distance from bystanders and onairspacerules.

Effective June 1, 2019, drone “pilots” must beregistered to fly their drones weighing over 250gramsbutunder25kilograms.

The new rules will be enforced by TransportCanada andthe Royal CanadianMountedPolice.There are serious penalties, for those not incompliance. Individuals and corporations canfacefinesorjailtimefor:

-puttingaircraftandpeopleatrisk-flyingwithouta“dronepilotcertificate”-flyingunmarkedorunregistereddrones

Pilot certificates, knowledge tests and flightreviews

All pilots of drones that weigh between 250gramsand25 kilograms must get adronepilotcertificate. Pilots conducting basic operationsneed a “Pilot Certificate – Basic Operations”.Pilots conducting advanced operations need a“Pilot Certificate – Advanced Operations”. ToobtainanAdvancedOperations certificatea pilotmust pass a “Small AdvancedExam” and an in-

person interview. The flight reviewwill assessthepilot’sabilitytooperatedronessafely.

Registration

All drones thatweighbetween250gramsand25kilogramsmustnowberegisteredwithTransportCanada.Pilots mustmarktheirdrones withtheirregistration number before they fly. Dronesunder 250 grams donot need to be registered.Drones over 25 kilograms do not need to beregisteredbutrequire a “special flightoperationscertificate”. If youfly anunregistereddroneyoumay be fined $1000 if you are a person and$5000 if a corporation is behind theoperation.Registration can be done through the “DroneManagementPortal”.

RPASSafetyAssurance

Drones are provided with a “safety assurancedeclaration”thatis providedtoTransportCanadaby the manufacturer. This information advisesusers of the safety limits of thedrone that theyare operating. Pilots are required to operatetheir dronewithin the prescribed safety limits.Drones must be specifically approved foradvancedoperations.Thedronesafetyassurancedeclaration will prescribe what advancedoperations a drone will be approved for. Thedrone pilot must first register with TransportCanada. Transport Canadawill then send theregistereddronepilot anemail explainingwhichadvancedoperationsthedroneis approvedfor.Until this email is obtained,thepilotmayonly flythedroneforbasicoperations.

SafeandPermittedOperation

TransportCanada providesthe helpful following“Infographic” showing where one can fly theirdrone.Notethatthereare general “maintain line-of-sight” and ceiling of flight requirements.Operation is to be kept a prescribed distancefrom bystanders, airports, heliports, emergencysitesandadvertisedevents.Thereare exceptionsconcerning authorized “advanced operations”.(*1)


The National Research Council has created aninteractivemap. Themaphelps droneoperatorsunderstand airspace and findout where to fly.Prior toeachflight,dronepilots mustconduct asurveyoftheareaandalsoconsult:

- Notice to Airmen (NOTAMs) for the flightlocation:NAVCanadaNOTAMsportal-the“CanadaFlightSupplement”(*2)-theDesignatedAirspaceHandbook(*3)-appropriateaeronauticalcharts

NOTAMs tell pilots about events and obstaclesthat may affect them, indicating the time and

locationofthe event.AirTrafficControl approvalis requiredforoperationsincontrolledairspace.ForairspacecontrolledbyNAVCANADAanRPASFlightAuthorizationis required.(*4)Drone pilotswill need to maintain communicationswith theairtrafficcontrolauthoritywhileflying.

GordonHearn

Endnotes(*1)http://www.navcanada.ca(*2)see(*1)above(*3)see(*2)above


http://www.navcanada.ca

http://www.navcanada.ca

8. DisciplinaryHearings:AdifferentKindofLegalProceeding

Those who work in a regulated industry orprofessionmayat somepoint facea disciplinaryhearing. Retirement homes, motor vehicledealerships, and travel agencies are someexamples ofregulatedindustries,while opticians,physiotherapists, accountants and lawyers areamongthemanyregulatedprofessions.

It is important to understand how theseproceedings differ fromcourtproceedings. Thefirst step is to determine the authority of theregulating body, and the scope of its powers.This is usuallysetoutinthegoverningstatute. Itis also important to know the standards whichthe regulated business or professional mustmeet. This maybesetoutinthestatute butcanalsobe foundina CodeofConductor StandardsofPractice, setby theRegulator. InrespondingtothedisciplinaryactionoftheRegulator,specialRules of Procedure, whichgovernall aspects ofthe disciplinary hearing, from pre-hearingdisclosuretowhetherthehearingis inwritingorinperson,willapply.

Ontariobasedbusandtruckingcompaniesmayatsome point in the life of their business, face adisciplinary proceeding. In order for thesecompanies tooperate commercial vehicles theyrequire a Commercial Vehicle Operator’sRegistration(“CVOR”) issuedby theRegistrar ofMotor Vehicles (the “Registrar”). The CVORprogram is asafety-basedsystem, thedetails ofwhich are provided for under the OntarioHighway Traffic Act (“HTA”), includingwho canapply for a CVOR, the grounds uponwhich theRegistrar can refuse to issue a CVOR, and thecomponents of the safety record of the CVORholder, or operator, which is monitored by theRegistrar. In addit ion, the Ministry ofTransportationforOntario(“MTO”)publishes onits website the Commercial Vehicle Operator’sSafetyManual (“SafetyManual”)whichsets outawide range of information including how theNational Safety Code is applied in Ontario, thecomponents of a safety program and driverrecord keeping practices. A CVOR holder is

expected to comply with both the HTArequirements,andthe additional expectations setoutintheSafetyManual.

Underthe HTA,the Registrarhas broadpowerstosuspendorcancel aCVORor limitthenumberofthe operator’s vehicles, if the Registrar hasreasontobelieve ,basedonthe operator’s safetyrecord, or that of any person related to theoperator, that the operator will not operatecommercial motor vehicles safely or inaccordance with the HTA or laws related tohighway safety,orforanyothersufficient reasonnot setoutin thestatute. The HTArequirestheRegistrartonotify theoperatorbeforetakinganysuch action. In the notice of the proposedsanction(the“Notice”)the Registrarprovides theoperator with the opportunity to attend ameeting and “show cause” as towhy its CVORshouldnotbecancelled/suspended/limited. Thisis the first stageof thedisciplinary process, yetthere are no published guidelines or Rules ofProcedure whichgovern thismeeting. When astatutory decision-maker is making a decisionthat affectstheinterestsofa party,theconceptof procedural fairness is engaged. Proceduralfairness includes the right to know the caseagainst you, andtheright tomakesubmissions.For that reason, theRegistrar includes withtheNotice all of the documents and informationreviewed in support of the proposed sanction.Theoperatorshouldfollowupwiththe Registrarifthereareany concerns that thedocuments orinformationprovidedareincomplete. Therighttomakesubmissions inresponsetothe proposedsanction is provided for in the show causemeeting. Thisis the operator’s opportunity toaddress the Reg i s t ra r ’ s concerns anddemonstratethat a sanction is notnecessary inorder toprotect public safety. The showcausemeetingisa privatemeetingwiththeRegistrar,andis notopentothepublic. Thereis noswornevidencetaken,andnotranscriptofthemeetingis created,althoughtheRegistrarwill takenotes.Notwithstanding its appearance of being asomewhat informal proceeding, an operatorshould never lose sight of the fact that thismeetingis withthedecisionmakerwhohas the


powerundertheHTAtocancel,suspendor limititsCVOR.

The Registrar will consider the operator’ssubmissionsandanyadditional documentationorinformation provided and decide whether tomoveforwardwiththeproposedcancellationorsuspension or limitation of the CVOR and willrender a decision accordingly. If theRegistrardecides not to proceed with the proposedsanction, there is no public record of this firstphaseofthe disciplinaryprocess–nosanctionisimposed, and nothing will appear on theoperator’s CVORrecord. IftheRegistrardecidestocancel orsuspendtheCVOR,theoperator hastheright,undertheHTA,toappeal theRegistrar’sdecision to the Licence Appeal Tribunal(“Tribunal”). Filing the appeal will put thesanction on hold pending the hearing of theappeal.

TheLicenceAppealTribunalAct,1999establishestheTribunal andgives itauthority tomakerulesestablishingprocedures for hearingsheldby theTribunal. The Tribunal’s authority on a CVORrelatedappeal isfoundin theHTAwhichprovidesthat the Tribunal has the authority to confirm,modifyorsetaside the Registrar’s decision. TheTribunal is one of the constituent tribunals ofTribunals Ontario–Safety LicensingAppeals andStandardsDivision(formerly theSafety,LicensingAppeals and Standards Tribunals Ontario, orSLASTO),whichhas establishedCommonRulesofPractice&Procedure(the“RulesofProcedure”).The Rules of Procedure cover a wide range ofmatters including the scheduling of a caseconference,whether thehearingisinwritingororal,howtorequestanadjournmentandhowtosummons awitness toattend.ThehearingbytheTribunalis alsogovernedbytheStatutoryPowersProcedureAct,whichapplies toa proceedingbyatribunal in theexerciseof a statutory power ofdecisionconferredunder legislation(inthis casetheHTA)where thetribunal is required by thelegislationtogivetheparties theopportunity fora hearingbefore makinga decision. Itprovidesageneral framework for the conduct of hearingsbefore Ontario administrative bodies, includingtheTribunal. It is imperative that a party who

appears before the Tribunal has a clearunderstandingofthe Tribunal’s authoritytomakea decision,thetype ofdecisionit canmake,andtheRules ofProcedurethatwill be followed.Thisis in addition to understanding the laws andstandardsofsafety compliancethattheoperatorwillbemeasuredagainst.

The appeal before the Tribunal is a hearing denovo,andthe Tribunalowes nodeferencetotheRegistrar. The Tribunal member hearing theappeal, andmaking the decision, may not be alawyer.Eachpartypresentsits evidencethroughwitnesses who attend in person and providesworn evidence and are then subject to cross-examination. After theevidence ofeachpartyiscompleted, legal submissions are made. Thehearing is opentothe publicunless theTribunalorders otherwise. Within a reasonable periodfollowing the completion of the hearing, theTribunalwill render itsdecision inwriting. Thedecisionisavailable tothepublic. IftheTribunalconfirms the Registrar’s decision to cancel orsuspendtheCVOR, itwilldirect theRegistrar tocarry out the sanction, and that sanction willappear on theoperator’s CVOR recordand is amatterofpublicrecord.Anoperatormayappealthe Tribunal’s decision to the Divisional Court,within30days. Theappeal before the DivisionalCourt is not a hearing de novo. In order tosucceed, the appellant must show that theTribunal’s decision was not reasonable. TheTribunal’s decisionwill befoundtobereasonableif it is within the range of possible outcomesgiven the applicable facts and law. Filing anappeal does not stop the sanction from takingeffect;one mustapply totheDivisional Court foran order staying the sanction, which requiresdemonstratingthatthereis a serious issuetobetried (that the grounds of appeal have merit),that if the sanction is imposed pending thehearing of the appeal, the appellant will sufferirreparable harm, and where the balance ofconvenience lies, which involves a considerationoftheimpactofastayonpublicsafety.

It is clear thatwitheachstage ofthedisciplinaryprocess, the proceedings become morecomplicated.Itis imperative,nomatterwhatthe


stage, to have a clear understanding of thedecision maker’s authority, the scope of theirpower,the procedural rights andsafeguardsthatapply, and the laws (the HTA) and industrystandards (Safety Manual) that will be used toevaluate the conduct which has triggered thedisciplinaryprocess.CaroleMcAfeeWallace

9. E-Scooters – Disruptive Innovation orWelcomedRelieftoTorontoTraffic?

An e-scooter is an electric two-wheeled vehiclewithanopenframe.The riderstands ona narrowplatform while steering the e-scooter usinghandlebars. E-scooters are designed for singleoccupancyandtypicallytravel between20-30km/h.Onaverage, they cantravel 20kmper charge,and as suchthey are intended to replace shortcar rides or to connect people to more widereachingtransportation.(*1)

During the last two years, e-scooters haveemergedasa popularchoice inmanycities acrosstheglobe. They havesemi-famously “disrupted”the transportation industry in several US citiesincludingSanFrancisco,Chicago,andAustin.

The big players in the US – Lime, Bird, Spin,Uber’s Jump, Lyft, Bolt – have created rideprograms thatallowpeopletogainaccess toane-scooternear themthroughanapp.Typically,asmall initial payment is charged to the user,followed by a pay per minute of use. Othercompanies are targetingprivate ownership,withthepurchaseprice of ane-scooter ranging from$300-$1000+CAD.(*2)

Despitetheir drawbacks(limitedrange, docklessparkingposing asidewalkhazard,andseasonalrestrictions)e-scooters havemuchtooffertocitydwellers. They have the potential to reducecongestion, reduce emissions, and simply offerp e op l e a mo r e c o n v en i e n t mode o ftransportation.

SowhenaretheycomingtoToronto?

In Ontario, vehicles are regulated through theHighway TrafficAct, (the“HTA”). Thislegislationdefines thedifferencebetweena vehicleand amotor vehicle,andhowthey are tobeoperatedon public roads. Motor vehiclesunder the HTAincludeautomobiles,motorcycles,motorassistedbicycles unless otherwise indicated in theHTA,and any other vehicle propelled or drivenotherwisethanbymuscularpower,butdoes notinclude a street car or other motor vehiclerunningonlyuponrails,a power-assistedbicycle,a motorized snow vehicle, a traction engine, afarm tractor, a self-propelled implement ofhusbandry or aroad-buildingmachine. (*3)Asavehicle propelled otherwise than by muscularpower,ane-scooterfalls intotheHTA’sdefinitionof motor vehicle. However, e-scooters do notcomplywiththerequirementsformotorvehiclesunder theHTA. For example, they do not havebrake lights, plates, or permitsand as sucharenotpermittedtodrive onanyhighway. (*4)As aresult,e-scootersareonlypermittedtobedrivenonprivatepropertyand, if allowedbymunicipalbylaws,onsidewalksandpathways.

Under Chapter 886 of Toronto bylaws –Footpaths, Pedestrian Ways, Bicycle Paths,Bicycle Lanes and Cycle Tracks – the term“bicycle”includes a bicycle,tricycle,unicycle,anda power-assistedbicyclewhichweighs lessthan40kilograms andrequirespedalingforpropulsion(“pedelec”),orothersimilarvehicle,butdoes notinclude any vehicle or bicycle capable of beingpropelled or driven solely by any power otherthan muscular power. (*5) Only vehicles whichfall intothisdefinitionofbicyclemaybeoperatedinToronto’s bicycle lanes andcycletracks.(*6)E-scooters do not fall into this Toronto bylaw’sdefinitionofbicycleastheycanbepropelledanddrivensolelybyelectricpower.

As for sidewalks, under Toronto bylaw 950-201only persons under 14 years of age may ride a“bicycle” on a sidewalk. (*7) A bicycle in thissectionhasthesamedefinitionas statedabove.E-scooters do not qualify as bicycles, and asvehicles, they areprohibited fromdriving uponsidewalks.(*8)


In the summer of 2018, mayor John Torycommented on the possibility of for-rent e-scooters in Toronto, but shared someconcernsregardinghowtoproperly regulate themandtheeffect that dockless parking may have onsidewalks.(*9)Achangeinthebylawshas yettocome.

A s new t e chno l og i e s deve l op i n t hetransportation industry, Ontario cities are leftplaying catch up. A regulative overhaul isnecessary in order to accommodate innovativetransportation technologies that give peopleexpanding mobility options, reduce inner citytraffic,andreduceemissions.

AndreaFernandes

Endnotes(*1)https://www.theglobeandmail.com/canada/toronto/article-the-e-scooter-invasion-is-coming-to-canada-what-will-our-cities-do/(*2)https://www.theglobeandmail.com/canada/toronto/article-the-e-scooter-invasion-is-coming-to-canada-what-will-our-cities-do/(*3)s.1(1)HTA.(*4)s.7(1)HTA.(*5)TorontoMunicipalCode,Chapter886,1-B.(*6) Toronto Municipal Code, Chapter 886, 10and15.(*7)TorontoMunicipalCode,Chapter950,201-C.(*8)TorontoMunicipalCode,Chapter950,200-D.(*9)http://www.iheartradio.ca/newstalk-1010/news/watch-are-for-rent-electric-scooters-coming-to-toronto-1.3985360

10. CIFFA9MonthLimitationPeriodUpheld

TheFederal Court of Canada has upheld the9-month limitationperiodcontainedtheCanadianInternational Freight Forwarders Association(“CIFFA”) Standard Trading Conditions inLabrador-IslandLink et alv.Panalpina Inc. etal.(“Labrador-Island Link”) (*1), released May 242019.

Parties performingcarriagemandatestypicallydoso under certain terms and conditions, which

likely include limitations of liability including aspecific timeperiod inwhicha legalactionmaybecommenced.Suchterms maybecontainedincarriage documentation or referred to thereinbut located on a website or in associatedcontractual agreements. Theparties involvedinanymovementofgoodsshouldensure thattheyareawareof theterms and conditions inplaceand, if needed, negotiate for the appropriateprotection.

InLabrador-IslandLink, theplaintiffs,collectivelyknownas“Nalcor”, suedtheir freight forwarder(Panalpina Inc.), carrier (Desgagnés TransarctikInc.) and stevedore, (Logistec Stevedoring Inc.)for alleged damage to two shipments ofaluminum conductor steel reinforced cableprovided on steel reels (the “Cargo”). Nalcorsought judgment for $3,711,451.94. Thedefendants broughtsummary judgmentmotionsonthebasisthattheactionwastimebarred.

Justice LaFrenièregrantedsummary judgment infavour of the defendants and dismissed theaction enforcing the nine (9) month limitationperiod. Alternatively, His Honour grantedsummary judgment on the basis that thelimitation period of one year under the SeaWaybillsapplied. Eitherway,Nalcorwasoutofluck and stuckwiththeineffectiveprovisions initscontract

Facts

Nalcor retained Panalpina to provide generalfreightforwardingservices toeffectcarriageofallcargo for the Lower Churchill electricaltransmission project between Labrador andNewfoundlandIsland. OnOctober 3, 2013, theparties executed a freight forwarding serviceagreement (the “Service Agreement”), whereinPanalpinaagreedtoactasa principal andnotasan agent for Nalcor and that it would be fullyresponsiblefortheassociatedservices containedinthetermsofthatServiceAgreement.

After Nalcor’s “request for quotation” process,Panalpina contracted with the other partiesdirectly anduponapproval fromNalcor toeffect


https://www.theglobeandmail.com/canada/toronto/article-the-e-scooter-invasion-is-coming-to-canada-what-will-our-cities-do/(*2)https://www.theglobeandmail.com/canada/toronto/article-the-e-scooter-invasion-is-coming-to-canada-what-will-our-cities-do/












http://www.iheartradio.ca/newstalk-1010/news/watch-are-for-rent-electric-scooters-coming-to-toronto-1.3985360






the carriage of the Cargo by sea from Trois-Rivières, Quebec to Argentia, Newfoundland.Upon the separate arrival of thetwo shipmentson June 1, 2015 and October 28, 2015, Nalcornoticed during discharge operations that theCargowas damaged.Nalcorprovidednotice ofitsintenttoclaimfordamagetoPanalpina regardingeachshipmentrespectivelyonSeptember9,2015and November 2, 2015. The legal action wascommencedonMay29,2017.

Thedefendants eachbroughtsummary judgmentmotionsfordismissal onthebasis that theclaimwas time barred. The action was commencedalmost2years postloss withtheplaintiffs relyinguponNewfoundlandandLabradorlawascitedinits contract with Panalpina. The defendantsreliedupon(1)the CIFFAStandardTradingTermsandConditions’nine(9)monthlimitationperiod,or(2)the SeaWaybills incorporatedbyreferencethe Hague Rules (*2) that carried a one yearlimitationofliability.

SummaryJudgmentasProcedure

Justice Lafrenièreconsideredwhetheruseofthesummary judgmentprocedureunder the FederalC ou r t R u l e s wa s a pp r op r i a t e i n t h ecircumstances. CitingGraymarEquipment (2008)Inc.vCosco PacificShipping Ltd (*3),His Honourdeterminedthathewas abletomakenecessaryfindings offactthatallowedhimtoapplythe lawto the facts and that the summary judgmentprocedure was anexpeditious,proportionate andlessexpensive waytoproceed.His Honourstatedatparagraph16,

Thesubstantial evidenceadducedby theparties provides a thorough paper trailconcerningtheiractivities andcontractualrelationships. Further, the affidavitsprovidedbytheparties andtranscripts ofcross-examinations allow the Court toascertain the parties’ intention whenconcludingtheunderlyingagreements.Nocredibility assessments of witness arerequired to deal with these matters.Further, allowing a time-barred claim toproceedto trial onfacts that are largely

undisputed would be a waste of theCourt’s resources and time. I thereforeconcludethatit is justandappropriatetodeterminewhetherNalcor’s claimis time-barredbywayofsummaryjudgment.

TheTrialDecision

TheCourt examinedthecontracts andbusinessbetween the parties and the circumstancesinvolved.

A.TheRelationships

TheServiceAgreement set forth the termsandconditionsthatappliedtomovementsofNalcor’scargo by Panalpina, including Panalpina's role,obligations, representationsandwarranties, thefurnishing of personnel and equipment,subcontracting, compensation and terms ofpayment, default and termination, liability andindemnificationandotherrelatedprovisions.

Nalcor, through its detailed Request forQuotation(“RFQ”)process requiredPanalpinatogo to the market and request quotes fromcarriers based on the specifics provided byNalcor. Thequotes would thenbe relayedbyPanalpina to Nalcor. After a detailed review ofpricing, scheduling and logistics, Nalcor selectedits preferredquote whichinformedPanalpinaandconfirmed the mode of transport, collectionpoint,delivery point, requireddelivery dateandinformation relevant to the collection andtransportationofthegoods.

From there Panalpina contacted the selectedcarrier and made al l of the necessarya r r a n g emen t s a n d b o o k i n g s f o r t h etransportation of the cargo, including issuingbookingnotestoNalcor.

As betweenNalcor andPanalpina,Article 1.9 oftheServiceAgreementstatedthatthe agreementwould“beconstruedinaccordance withthelawsof the Provinceof Newfoundland and Labradorand Canada” and that Panalpina “irrevocablyattorns tothe exclusive jurisdictionofthe courts


of the Provinceof Newfoundland and Labradorand Canada for the resolution of any disputearisinginrespectofthisAgreement.”

Article 2.2 of the FFSA explicitly stated thatPanalpina“is notanagentof[Nalcor]oranagentof any Affiliate of [Nalcor].” Further, Panalpinawasspecificallystatedtobe a principaland“fullyresponsible for the services in accordancewithandsubjecttotheprovisions oftheAgreement”.Other clauses included the requirement forapproval before subcontracting duties to otherparties and that Panalpina was responsible anyomissions or negligence of the subcontractors’work. There was also an “Entirety ofAgreement”clausewhichstatedthattheterms ofthe Service Agreement superseded all otheragreements, documents, writings, and verbalunderstandings between the parties and thatthere were no oral or written understandings,representations or commitments of any kind,expressor implied, unless expressly set out. Nomodificationofthe termswas permittedunlessinwritingandsigned.

Panalpina had acted as freight forwarder forNalcor regarding hundreds of shipments. Foreachquotefromvarious carriersandstevedoresand provided to Nalcor, Panalpina made thefollowing reference in thedocument containingthe quote(s): “Rates are subject to latest CIFFATerms and Conditions (available upon request)”.Pursuant tosection 19 of the CIFFA Terms, anysuit against the freight forwarder must bebrought within 9 months from “the date ofdelivery of the goods for claims for damage togoods”,failingwhichthefreightforwarder“shall,unlessotherwiseexpresslyagreed,bedischargedfromallliability”.Nalcoradmittedreceivingeachone and accepting the quotes from Desgagnésand Logistec as carr ier and stevedorerespectively, andwhichhad providedtheir ownrates,termsandconditionstoPanalpina.

Panalpina then sent to Nalcor “back-to-back” booking notes with respect to eachshipment (Desgagnés issuing to Panalpina andPanalpina issuing to Nalcor) containing thefollowing statement under “Sea Waybill”: “All

othertermsandconditionsareasperDesgagnésTransarctik’s Sea Waybill”. The terms andconditions of the Sea Waybills included thefollowingclauses:

ConditionofCarriage

1. DEFINITIONS. "Carr ier" meansD E SGAGNÉ S T R AN SAR C T I K I N C .(hereinafterDTI)(…).

"Shipper" means not only the person orthecompany which deliver thegoodstotheShipat the loading port but alsotheownerofsaidgoods as well as anypersonor company acting on behalf of saidowner.

"Consignee"means anyoneentitledtothedelivery of the goods at the port ofdischarge including, as the casemay be,the owner of the goods or the persondesignatedasConsignee.

2. PARAMOUNT CLAUSE. The partiesacknowledgeandagreethat thecarriageperformed under this contract is notgovernedbyaBill ofLadingbutrather bythis Sea Waybill. However, they agreethat the terms, provisions andconditionsof Articles II to IX of the InternationalConventionfor the Unificationof CertainRules Relating toBills ofLadingsignedatBrussels onAugust 25, 1924 (TheHagueRules)are incorporatedbyagreementintothis contract. The Carrier's rights andimmunities including the $500.00limitationof liability per packageor unitaremore specifically hereinincorporated.Inthe eventsaidrules are incontradictionwith the other terms, provisions andconditions of this contract, said otherterms, provisions and conditions shallprevail.

Nalcor’s representative signedthebookingnotesissued by Panalpina on behalf of Nalcor andreturned them to Panalpina. Panalpina’srepresentativessignedDesgagnés’bookingnotes.


After each shipment departed, Panalpina issuedan invoice to Nalcor, which paid same. Eachinvoice containedthefollowingtextinthesectionentitled“TermsandConditions”:

1) All business will be accepted byPana l p i n a I n c . ( h e r e i na f t e r t he“Company”) from theOwner, Consigneeor Shipper (hereinafter the “Customer”)subject to the Standard TradingConditions of theCanadian InternationalFreight Forwarders Association, Inc.currently in effect which Conditionscontain provisions which exonerate theCompany from liability and limit theamount recoverable, and each Conditionshall bedeemedtobe incorporatedin andto be a Condition of any agreementbetween the “Company” and the“Customer”. In transacting suchbusinesswith the “Company”, the “Customer”acknowledgesthathe is familiarwithandaccepts such Conditions. A copy of theStandard Trading Conditions can beobtainedonrequestfromthe“Company”orfromtheCanadianInternational FreightForwarders Association, Inc., inthelattercase, by addressing suchrequest to: theCanadianInternational FreightForwardersAssociation (CIFFA), 170 Atwell Drive,Suite 480,Toronto,Ontario,M9W5Z5,orviawebhttp://www.ciffa.com/.

TheCourtdeterminedthatPanalpinacouldonlyhaveactedas:(a)freightforwarderandagentforNalcoror(b)carrieroragentofthe carrier.Eitherway,theCIFFATerms orthetermsandconditionsset forth intheSea Waybills must apply leavingonly a ninemonthor oneyear limitationperiodtoapply.

TheCourtreviewedthetraditional legal roleofafreightforwarder as anagentoftheshipperandhowtheshippermaynothaveaclaimagainstthefreight forwarder provided that it performeditsagencyduties withtheappropriateskill andcare.However,theCourtalsonotedthat,attimes,thefreight forwarder acts as principal contractor

arranging for thecarriage in its ownnameandassumes responsibilityforcarriageonthebasisofitsexpertiseinchoosingcompetentcarriers.

TheCourt foundthatthecontractual documentsandthe parties’dealings inrelationtothesubjectshipments wereconsistentwithPanalpina actingasNalcor'sprincipalandnotitsagent.

B.WhichTermsApply

NalcorarguedthatPanalpinaneveradviseditofthe CIFFA Terms’ application further to theexecutionof theService Agreement andfurtherthatthe CIFFATermswere indirectcontradictionwith theService Agreement’sterms. TheCourtdisagreed.

CitingNalcorasa sophisticatedshipper,theCourtnotedNalcorknewthat,givenits role as a freightforwarder,thatPanalpina was likelyamemberofCIFFAandfoundthatNalcorwas oroughttohavebeen aware that Panalpina was a member ofCIFFA fromthe startandasa matterofcommonknowledge. Knowing that such membershipwould not be enough to amount to theincorporation of CIFFA Termsintoa contractualagreementbetweenparties,the Courtconfirmedthat the evidence established that the CIFFAstandard terms and conditions werebrought toNalcor’s attention by Panalpina in its dealingswith Nalcor, and specifically in connectionwiththeMay andOctoberShipments. The CourtdidnotacceptNalcor’s submissionthatonlypricing,scheduling and logistics were reviewed inPanalpina documentation and the CIFFA termswere ignored, since the Service Agreementcovered such items. However, there was noevidencethatNalcortookissue withtheterms orsought clarification but rather approved thedocumentation. The Court stated at paragraph66,

“Ishouldnote thatevenifNalcorfailedtotakeactual noticeofthe referencetotheapplication of the CIFFA Terms, thiscannotserve as a basistorefuse toapplytheCIFFATerms.Any failure byNalcortotake proper notice of terms that were


http://www.ciffa.com

http://www.ciffa.com

clearly set forth in the documentsexchangedbetween theparties is simplynotanexcuseandcannotservetoalterorrender inapplicable such contractualterms.”

As for Nalcor’s reliance on the clauses thatprovidedthatthe ServiceAgreementwas thesoleagreement, the Court noted that the ServiceAg reemen t made no men t i on o f t hetransportationoftheCargooranyofthematerialterms relating to the carriage. TheCourt foundthatitwas clearlycontemplatedbythe parties tothe Service Agreement that the terms andconditions of each specific shipment would bedetermined in the future by way of distinctcontractualdocuments.(*4)

Nalcor further submitted that, if Panalpinawishedtorelyontheshorter limitationperiodintheCIFFAterms, itshouldhavesoughttoamendtheServiceAgreement inwritingas required, assuchtermwas directlycontrarytothe provisionsof the Service Agreement, which relied on thelawsofNewfoundlandandLabradorandCanada.The Court dismissed this argument stating thatthe laws of Newfoundland and Labrador andCanada were only meant to apply to theconstructionoftheServiceAgreementandtotheresolutionofanydispute arisinginrespectoftheServiceAgreement itself. The ServiceAgreementwassilent onthe issueof limitationperiod. TheCourtstated,

[72]Inthe absenceofany languageintheFFSA dealing with a specific limitationperiod to commence an action, it wasopen to Panalpina to put forward termswhen providing quotes to Nalcor whichplaceditinthesame positionasifitwereonly an agent and, therefore, had theadvantage of leaving the burden of anycontract so made on its customer,Nalcor: Schenker and Co (Aust) Pty Ltd vMaplas Equipment and Services PtyLtd,[1990]VicRp74;[1990]VR834.

[73] Nalcor submits that thecontractualallocation of risk between the parties

must be respected. It maintains thatconcluding that Nalcor contracted withand is boundby terms not found in theFFSAwouldsetasidethewell-establisheddoc t r i ne o f p r i v i t y o f con t rac t .However, Panalpina’s trading conditionsareinstandardformandareincorporatedinmanycontractsinregardtothecarriageofgoods.These aresubstantiallycontractsofadhesion.Nalcorcouldhave takenissueor rejected the CIFFA Terms uponreviewing the quotes received fromPanalpina,butfailedtodoso.…

[76] For theabovereasons, Iconcludethat Nalcor is boundby theCIFFA Termsand the action as against Panalpina istime-barred.

The Court went on to find that the action asagainst Desgagnés and Logistec, as contractorsengaged by the Panalpina toperform transportandrelatedservice inrelationtothe Cargo,wasalso time-barred as both relied upon theHimalaya clause (*5) in section 2 of the CIFFATerms toinvoketheshorternine(9)monthtime-bar. Bothparties knew that thirdparties wouldbeengagedandthatthis wasastandardpracticeintheindustry.TheCourtconcludedthatitwouldnotbeunreasonable toholdthatthecontractingpartywasactingas agentforthe thirdparties forthepurposesofthecontract.

TheCourtstated:

[80]Himalaya clauses arewell recognizedterms intransportcontracts,andtheyareenforceablebythecourtsnotwithstandinga thirdparty's completeignoranceoftheexistenceofa clausegrantingit abenefitatthe timeoftheperformanceofits owncontract:BoutiqueJacob Inc. v PantainerLtd, 2006 FC 217 (CanLII) at para38, overturned on appeal on othergrounds: Boutique Jacob Incv PantainerLtd,2008CAF85(CanLII).


[81]Theeffect of such clauses is simple.Every participant in the contract ofcarriage, whether they are explicitlynamed or simply an agent or sub-contractor, is entitled to rely upon andbenefitfromtheconditionsofcarriagesetforthinsaidcontract.

Inthealternative, the Court alsofoundthat theSea Waybills were the best evidence of thecontracts of carriage of theCargo. The CourtnotedthatPanalpinadidnot issueany shippingdocument for the carriage by sea of thecargo,whichwas consistentwithPanalpina actingas anagentofNalcor,notaprincipal.TheCourtstated,

[82]Inhis RFQforms,Mr.Capporicio(forNalcor), indicated under “Contract”: “…NoNVOC bill oflading”,whichcouldonlymean that theactual shippingdocumentevidencingthecontractofcarriage hadtocomefromtheactualcarrier by sea, notfroma freightforwarderactingas aNon-Vessel Operating Carrier. The bills oflading instructions naming Nalcor asshipper of each shipment actuallyoriginated from Nalcor itself and wererelayedtoDesgagnés byPanalpina. Inthecircumstances, Nalcorwasa party tothecontract of carriage with Desgagnés asevidenced by the Sea Waybill for eachshipmentandis thereforeboundbyall ofits terms and conditions, including theParamount Clause reproduced atparagraph44ofthesereasons.

[83] Inthe futher(sic)alternative,evenifNalcor were to succeed with theircontention that Desgagnés and Logistecacted strictly as subcontractors ofPanalpina, theclaimswouldstill betime-barred.

[84] I agree with the Defendants thata t tempts by ca rgo c l a imants tocircumvent the carriers’ limitations ofliabilityandotherterms,whetheritbebysuingintortorbyartificially raisingprivityof contract issues, are long passé now.

Sub-bailmentonterms andtheincreasedrecognition of Himalaya Clauses havebrought an end to these artificialattempts, especially in cases such asthepresentonewhereNalcorwas fullyawarethat Panalpina would not be the partyactually performing the stevedoring andcarriagebyseaoftheConductorReels.

[85] There is sub-bailment where acontractingcarriersubcontractsthewholeor part of thecarriage to subcontractingcarrier(s).Thereis sub-bailmentontermswherethe primary carrier (here assumedto be Panalpina for present purposes)either hadexpress, impliedor ostensibleauthority from the owners of the cargo(hereNalcor) to subcontract the portionof the carriage under the terms of thesub-carrier(hereDesgagnés)inwhichcasetheownerofthegoods is boundby theseterms, including terms excluding orlimiting the liability of that sub-carrier.These principles have been recognizedand consistently applied in Canadianshippingcases.

Finally

Thecurrenttrendis forshipperstodownloadasmuchresponsibilityas possibleontotheirfreightforwarders and/orcarriers(whether inmarineortrucking matters), but, where the drafting isimprecise,thecourtswilltakethe opportunitytoenforce long standing principles of Canadianshipping lawandcustomandtogiverecognitionto noted terms and conditions. Care must betaken in the drafting of agreements seekingcircumvent carriers’ limitations of liability andotherterms.TheService Agreement’s draftinginthis case as between the shipper and freightforwarderwasfoundtobe lackinginspecificityinmorethanonearea causingthefailure torecoveron this$3 milliondollar claim. It is alsotobenotedthatthefreightforwarderwassuccessfulinpartbecauseitconsistently referredtotheCIFFAterms andconditions initsdocumentation.This isa good reminder for those relying upon suchtermsorsimilartoalsobesuretodoso.


KimE.StollFollowKimon LinkedInand at url: linkedin.com/in/kim-stoll-transportationlaw

Endnotes(*1)2019FC740(*2) The formal name is the InternationalConventionfor theUnificationofCertainRulesoflawrelatingtoBillsofLading.(*3)2018FC974(CanLII),atpara.16(*4)atpara675) AHimalaya clauseis a contractual provision

that attemptstoextendthe benefits ofthecarrier’s contractual limitations to sub-carriers orotherthirdparties engagedbythecarrier to assist in the transportation ofgoods. Himalaya clauseshave are acceptedasformingapartofCanadianlaw.

11. Officer and Director Liability forRegulatoryOffences

Directors andofficers, and soleproprietors, aresubject to potentially large penalties, and evenjailtime, for corporate regulatoryoffences. TheOntario Court of Appeal’s decision earlier thisyearinR.v.NewMexCanadaInc.shouldserve asawarning.(*1)

Thefacts inthecaseweresomewhatextreme,asit involved aworkplace fatality. An employee,whowasknowntobeepileptic,suffereda seizureand fell off equipment while trying to retrieveinventory. He had no safety gear or safetytraining.

Thecompanyanditsdirectorstookownershipoftheir failings, including taking a leading role infuneral arrangements and assisting co-workerswith the tragedy, notwithstanding that theincidentwas damagingtothebusiness,whichhadtoshutdowntemporarilyandtodownsize.

Theincident ledtoaninvestigationandchargesunder Ontario’s Occupational Health and SafetyAct.(*2)Thecharges werelaidagainstbothNew

Mex Canada and also its two directors. Thecompany was charged with failing to provideinformation, instruction and supervision withrespect to fall protection and with failing tocomply with regulated workplace proceduresunder the Industrial Establishments Regulation.(*3) Theindividuals werechargedwithfailingtoensure compliance with the Act and theRegulation.

Notwithstanding that the directors onlycollectivelymadeabout$40,000ingross income,notwithstanding that the directors would bepaying the corporations fines out of their ownpockets, and notwithstanding that they had noprior convictions, the sentencing judge orderedthecompanytopay$250,000(morethandoublewhatthe Crownhadaskedfor); andsheorderedtheindividual directors toserve25-dayjail terms,followed by a year of probation. All threedefendants appealed, where an appellate judgevaried the sentences to $50,000 in fines to thecompany and $30,000 in fines against thedirectors,withoutany jailtime. TheCrownthenappealedtotheOntarioCourt of Appeal, whichupheld the varied sentences and dismissed theappeal.

In coming to his decision, the Honourable Mr.Justice Paciocco(writingforaunanimous panelofthreeappeals judges)gavelengthyguidancewithrespect to several factors that must beconsideredduringsentencing.

First, His Honour considered the principle of“moral blameworthiness”, which refers to anoffender’s level of culpability based upon hismental state. He rejected the argument thatregulatory offences ought tobe concernedwithpublic policy rather than blameworthiness,althoughheacceptedthatitwas a less importantfactor than inthe criminalcontext. His Honourexplained that moral blameworthiness was anecessary component of keeping sentencesproportional tothe offences.Eachsentence must“fit”theoffence.

Next, His Honour considered the principle of“restraint”for firstoffenders. Onthisscore,His


https://www.canlii.org/en/ca/fct/doc/2018/2018fc974/2018fc974.html

https://www.canlii.org/en/ca/fct/doc/2018/2018fc974/2018fc974.html

Honourrejectedthenotionthata fine is theonlyfit sentence for a first offender. In fact, hereasoned that theprinciple is less important intheregulatory context thanthecriminal context.In particular, he found that there was lessconcernthat incarcerationwouldpushsomeonetowards criminality because the sentences areshorterintheregulatorycontext;andHisHonouragreedwiththeOntarioCourt ofAppeal’s priorjurisprudence that “general deterrence” (i.e.sending a general message to the public) is amore important objective than “specificdeterrence” (i.e. sending a specific message totheoffender)intheregulatorycontext.(*4)

Third, His Honour consideredthe argumentthatfines are significantly more common thani n ca r ce ra t i on , i n c l ud i ng l ong s t and ingjurisprudencefromOntarioCourtofAppeal that“to a very large extent” the enforcement ofregulatory offences, such as those concerningoccupational health and safety, areachievedbyfines.(*5)However,His Honourrejectedthatthe“primacy” of fines should be a principle insentencing. Rather, hedeclared, “therarity ofincarceration for regulatory offences is adescriptive observation, not a prescriptiveone.”(*6)

Fourth, the appeals judge considered therelevance of corporate fines to the directors’abilitytopayinclosely-heldcorporations.He leftittoanotherdayfora defendanttoarguethataparticular corporate sentence would indirectlyimpoverishhiminthe sensethatitwoulddamagehis equity. However, that argument was notdirectlybefore thecourt. Theargumentathandwas simply that thedirectors wouldbemakingthe payment personally. On this ground, Mr.Justice Pacciocconotedthattheywerenotunderanyparticularlegalobligationtodoso.

Finally, His Honour considered the relevanceofpost-incident complianceandcooperationbythecompany. However, he alsorejected that as apossible mitigating factor in sentencing, evenwhere compliance was statutorily required.Following earlier jurisprudence, he found thatsuch a consideration could encourage lightercompliancebeforeanaccidentoccursinthefirstplace.(*7)

Inthe circumstances, His Honour foundthatthefines –although“light”inhisview–werenotsooutofline withthesentencingprinciples thatheoughttointerfereatthe appellate level. Healsofoundthatincarcerationwasnotnecessaryinthiscase.

Despitetheforgoing,thecaseshouldbeseenasopening the door to steeper penalties and,especially, to more incarcerations of directorsandofficersforseriousregulatoryviolations. HisHonour explicitly rejected that these individualsshould be spared jail time on grounds of“restraint”, “primacy of fines”, impoverishmentby virtue of corporate fines, or post-incidentcompliance.

Regulatory penalties at first instance are rarelyreported in official sources. However, somesecondary sources suggest that incarcerationsmight beon the rise. For example -- withoutspecifically referencing the New Mex Canadadecision– it hasbeenpublishedonlinethat thesole proprietor ofa small roofing firm, ina casecalledR. v.Bell,wassentencedtosevendays injailbecause oneofhis employeeswas foundtobeworkingover threemetreshighwithout anysafety gear. Thetechnical violationhadresultedinnoparticularinjuryordamageorproperty,butthe owner did have a history of three priorconvictions.(*8)

The likelihood of steeper penalties, includingmoreincarcerations,shouldconcernofficers anddirectors in every regulated sector. Now is thetime for officers and directors to ensure thatappropriatecompliancesystemsareputinplace.

AlanS.Cofman

Endnotes(*1)2019ONCA30.(*2)R.S.O1990,c.0.1.(*3)R.R.O.1990,Reg.851.(*4) Ontario (Labour) v. Flex-N-Gate CanadaCompany,2014ONCA53;R.v.Currie,2018ONCA218.(*5)R. v. Cotton Felts Ltd. (1982), 2 C.C.C. (3d)287(Ont.C.A.).(*6)paragraph85.(*7)Flex-N-Gate,supra,note4.


(*8)Unfortunately,sentencingreasonsarenotgenerallypublishedbytheOntarioCourtofJustice.However,R.v.BellisreportedbyCynthiaR.C.Sefton,“EmployerWithThreePriorConvictionsGivenJailSentence”,online:

<<http://www.mondaq.com/canada/x/808362/Health+Safety/Employer+With+Three+Prior+Convictions+Given+Jail+Sentence>>.


http://www.mondaq.com/canada/x/808362/Health+Safety/Employer+With+Three+Prior+Convictions+Given+Jail+Sentence









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