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> November 2010
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In this issue:
1. Firm and Industry News
2. Warehouses Beware! B.C. Court Disallows Standard Terms and Conditions
3. Don't Take Forum Selections Clauses Lightly
4. Personal Injury Claims Assessment: Case comment on Rollin
v. Baker et al, Ontario Court of Appeal, 2020 ONCA 569
1. Firm and Industry News
- November 30th, 2010 Toronto:
CBMU Annual Conference and Dinner
- December 3rd, 2010 Montreal: Grunt Club Annual
Dinner
- January 20th, 2011 Toronto: Fernandes Hearn Annual
Seminar
- January 21st 2011 Toronto: CMLA Meeting
- January 21st 2011 Toronto: Marine Club Annual Dinner
- January 21st, 2011 Chicago: Transportation Lawyers
Assoc. Seminar
- February 2-3, 2011 Quebec City: Marine Oil Pollution
Seminar
- May 11-14 Las Vegas: Transportation Lawyers Assoc.
Annual Meeting
- May 25-26 2011 Collingwood: CBMU Semi-Annual Dinner
- June 3rd 2011 Quebec City: CMLA Annual Meeting
Gordon Hearn presented a paper on "Limitations
of Liability in the Modern Carriage World" at the Annual Conference
of the Canadian Board of Marine Underwriters at Toronto on November
30th, 2010. Gordon will be speaking at the upcoming Transportation
Lawyers Association annual Chicago Regional Seminar on January 21,
2011
Rui Fernandes will be speaking at the Institut
maritime du Quebec's conference on Marine Oil Pollution Prevention
and Combating: Where do we stand? being held February 2-3, 2011
in Quebec City.
2. Warehouses
Beware! B.C. Court Disallows Standard Terms and Conditions
In the recent decision of Kruger Products Limited
v. First Choice Logistics Inc., 2010 BCSC 1242 Justice Burnyeat
had to deal with responsibility for a fire at a warehouse involving
multiple parties. Kruger Products Limited was the owner of paper
products stored at a warehouse operated by First Choice Logistics
Inc. The origin of the fire was a fork lift operated by Terrance
Bodnar. The fork lift was manufactured by Toyota and leased to the
warehouse by Mason Forklift Ltd.
Prior to the trial and subsequent to settlement agreement
the claimant Kruger Products discontinued its actions against Toyota
and Mason. The fire destroyed a number of large paper rolls stored
at the warehouse. The forklift was powered by propane. An original
propane forklift used at the warehouse was noticed to overheat due
to paper debris being sucked up into the body of the vehicle by
the operation of the radiator cooling fan. Operators also noticed
that they could smell paper smouldering within the machine. They
were forced to stop the forklift and allow it to cool before cleaning
it and putting it back into service. First Choice sought the assistance
of Mason regarding these problems. As a result of discussions, an
air compressor was obtained to "blow out" the forklift
at various intervals and to have the exhaust pipe wrapped with fiberglass
insulation in order to shield paper and debris from the hot surface
of the exhaust pipe. The number of "problems" was reduced.
In mid July 2001, the original forklift was damaged
and taken in for repair. Mason was asked to find a replacement unit
during the repair period. Mason did not install venting and did
not wrap the exhaust pipes of the forklift with fiberglass prior
to delivering the forklift to First Choice. First Choice did not
request the modifications and Scott was not consulted regarding
the use of the forklift without the modifications.
Mr. Bodnar was aware that the replacement forklift
was not wrapped with fiberglass tape. His supervisor advised him
to proceed to use the forklift but to adhere to the procedure of
blowing down the machine with compressed air as required. Justice
Burnyeat held that the forklift was blown down with compressed air
approximately 10 to 15 minutes prior to the fire. While passing
an electric forklift at the warehouse Mr. Bodnar did not see any
large pieces of paper in the aisle ahead of him. The electric forklift
operator noticed a piece of paper about 2 to 3 feed long in the
vicinity of the exhaust grill of Mr. Bodnar's forklift. The paper
was on fire and drifted away from the back of the forklift landing
at the base of a stack of rolls. The fire spread within the warehouse
causing a total destruction of the building and its entire contents.
Kruger Products claimed against the warehouse under
a partly written and partly oral contract. It claimed that First
Choice breached its contract to take reasonable care of the warehouse,
failure to train employees etc. In addition it claimed that First
Choice breached their duties at common law and as a warehouser under
the Warehouse Receipts Act of B.C. The losses amounted to
$16,000,000.
First Choice and Mr. Bodnar defended on the basis
of an agreement set out in a February 1, 2000 Warehouse Management
Agreement accepted by Kruger Products through its conduct (as opposed
to a proposal as alleged by Kruger Products). The Warehouse Management
Agreement included a provision requiring Kruger Products to obtain
insurance on the inventory in the warehouse and naming First Choice
as an additional insured. Kruger Products was therefore barred and
estopped from claiming against First Choice to the extend of the
indemnity which would have been provided by such insurance. First
Choice also relied on an appendix to the Agreement which excluded
or limited the liability of First Choice. The appendix was developed
by the International Warehouse Logistics Association and its "Canadian
Standard Contract Terms and Conditions for Merchandise Warehouse."
First Choice also pleaded that Kruger Products was
negligent by ordering the warehouse to stack the rolls higher than
normal (creating a fire hazard) and failing to wrap the rolls in
order to avoid paper sloughing off the rolls creating a housekeeping
issue and fire hazard.
The judge found that the paper debris coming into
contact with the unwrapped exhaust system of the forklift caused
the fire. Other possible causes of the fire were rejected.
The judge reviewed the discussions and correspondence
between the parties regarding the Warehouse Management Agreement.
The Kruger Products representative died shortly after the fire and
his recollections of the discussion were not available for trial.
The judge heard the evidence of the First Choice representative
who stated that he explained the agreement and left the agreement
with the Kruger Products representative and the "it was his
expectation that [the Kruger representative] would eventually get
back to him with affirmation that the proposed terms were acceptable
or, alternatively, would raise any concerns so that the parties
could then negotiate further.
The judge then reviewed the formation of the Agreement
and the appendix which had an effective date of February 1 2000.
During the spring of 2000 the warehouse was being operated by First
Choice and Kruger Products continued to forward product to the warehouse.
First Choice followed up with the Kruger Products representative
on numerous occasions to obtain the agreement. A number of excuses
were provided as to why no comments were being forwarded. No agreement
was signed. The judge found that the Agreement had many deficiencies.
"Some of the drafting is incomprehensible." However, the
judge was satisfied that the Agreement and the appendix accurately
reflected the contract which existed between the two parties.
Justice Burnyeat then proceeded to go through the
Agreement and appendix in detail. He found that:
a) First Choice did not "maintain the warehouse
in food grade condition and cleanliness at all times" in accordance
with the contract requirement. It failed to maintain the warehouse
in a condition that met or exceeded professional warehousing management
practices - housekeeping was poor;
b) First Choice breached its contract to "properly
and safely maintain, and keep in sanitary, neat and orderly condition,
all goods and products by failing to wrap the exhaust of the forklift.
c) First Choice owed Kruger Products a duty of care
under the common law and pursuant to the provisions of the Warehouse
Receipts Act. First Choice failed to meet the standard of care
and the breaches caused the fire and the damages. The court found
that the duty was as described in the Warehouse Receipts Act
- as a "careful and vigilant owner." The court also found
that section 2(4)(a) of the Act provides that any attempt by contract
between the parties to reduce the care and diligence cannot prevail.
The onus is a reverse onus - on the warehouse to show that it did
not breach the duty of care, not on the owner of the goods to show
that the warehouse breached such a duty. The court found that First
Choice failed to take adequate preparations regarding dealing with
fires, including a duty not to allow paper debris to build up.
"A careful and vigilant warehouseman
in the position of First would have taken steps to sweep up the
paper debris not only in the aisles but also at the base of the
stacked parent rolls on a regular basis and not just after each
shift. I find that these failures amount to a breach of the duties
owed by First to [Kruger] [p. 116]… I also find that the
failure to wrap the exhaust system of the Forklift was a breach
of the duty owed by First to [Kruger][p.117]
d) The Toyota defendants and the Mason defendant were
not liable for the damages.
e) Kruger Products was not contributorily negligent
for the fire. The "unwrapped" rolls were not inherently
dangerous. Stacking at a height over the recommended height was
not contributory negligence.
f) A warehouser may limit its liability but not if
it lowers the statutory duty of care. The paragraph dealing with
any loss of profit or special, indirect or consequential damages
was so poorly drafted that the judge refused to rectify the paragraph
as "I cannot conclude that there would have been an agreement
between the parties [on this issue]."
g) Paragraphs in the Agreement stating that goods
were stored at the owner's risk of loss damage or delay caused by
certain events were found contrary to other paragraphs in the Agreement
and contrary to the duty to properly and safely maintain the goods.
h) There was a conflict in the warehouse receipt being
used and in the Agreement (including the clause relating to indemnification).
The warehouse receipt was also not signed. In addition the reverse
side of the receipt was not provided to Kruger Products. As a result,
the wording in the receipt allowing First Choice to limit liability
was of no effect.
Having found that First Choice could not limit its
liability under the Agreement, the judge had to decide what the
limitation would be should he be found incorrect in the decision.
The question to be determined was what made up a "package or
stored unit" for the purposes of limitation. First Choice took
the position that "unit" was a pallet or lift given how
the warehouse dealt with the product. Kruger Products took the position
that the "unit" measure was a case given how customers
ordered the product. The court found that the limitation amount
(if he was incorrect in his determination that there was no limitation)
was the lesser of the monetary amount of the damage incurred or
of twenty five times the monthly storage rate on any "case"
(not pallet or lift).
i) The court rejected the position of First Choice
that the Agreement required Kruger Products to obtain insurance
for the inventory and to name First Choice as an additional insured.
First Choice did not have an insurable interest in the goods. First
Choice had a lien on the goods and that was the extent of its interest.
The court also found that First Choice's position would result in
an impairment of the duty of care owed by First Choice to Kruger
Products and thus would be contrary to the Warehouse Receipts
Act.
In summary, First Choice was found solely and fully
liable to Kruger Products for the full loss.
The moral of the story is that, if you are a warehouser
and you want to limit your liability in any way you should have
a well drafted signed warehouse agreement that does not have any
conflicting language.
Rui Fernandes
3. Don't Take Forum Selections Clauses Lightly
Earlier this year, Justices O'Connor, Gillese and
Juriansz of the Ontario Court of Appeal confirmed that our courts
strongly favour the enforcement of forum selection clauses in commercial
contracts. A departure from enforcement will occur only in exceptional
circumstances.
In Expedition Helicopters Inc. v. Honeywell Inc.,
2010 ONCA 351, the Court of Appeal overturned the motions judge's
dismissal of Honeywell's motion to stay Expedition's action by virtue
of the forum selection clause contained in their agreement.
The dispute between Honeywell and Expedition arose
following the crash of an Expedition helicopter that was operating
with a Honeywell engine. The crash left the pilot and passenger
dead. The helicopter was a total loss and Expedition sued Honeywell
in Ontario.
Of note, Expedition is an Ontario company and Honeywell,
a Delaware company. The crash occurred in Saskatchewan, the subject
engine was manufactured in Pennsylvania and modified in a Honeywell
facility located in South Carolina but managed by a different division
in Arizona.
The agreement that was ultimately enforced between
Expedition and Honeywell contained a forum selection clause stating,
"this agreement shall be governed, controlled and interpreted
under the law of the State of Arizona". The agreement also
provided the Federal Court located in Phoenix, Arizona, with exclusive
jurisdiction over all proceedings "arising out of or in connection
with" the agreement.
The proper test for considering the enforcement of
a forum selection clause is the "strong cause" test and
not a forum non conveniens analysis. The strong cause test
requires courts to hold contracting parties to their agreements
absent an exceptional "strong cause" justifying departure.
The underlying presumption is that parties should
be held to their bargains.
Incidentally, the strong cause test was first expressed
in the British case, The "Eleftheria" [1969] 1
Lloyd Rep. 237 (ADM Div.) and subsequently affirmed in the Supreme
Court decision in Z.I. Pompey Industrie v. ECU-Line N.V.,
[2003] 1 S.C.R. 450, the leading authority in Canada.
Expedition Helicopters, supra, serves as an
important reminder to commercial parties that Canadian courts take
forum selection clauses seriously; they are common components of
international commercial transactions, repeatedly applied in both
industry and by courts and therefore, such clauses will be judicially
protected.
As Justice Bastarache observed at pp. 189-190 in Z.I.
Pompey, supra,:
The "strong cause" test reflects
the desirability that parties honour their contractual commitments
and is consistent with the principals of order and fairness at
the heart of private international law as well as those of certainty
and security of transaction at the heart of international commercial
transactions.
In Expedition Helicopters, supra, the distinction
between the strong cause test and the forum non conveniens
doctrine was the basis for Honeywell's successful appeal.
The strong cause test requires that full weight be
given to a forum selection clause because the clause and its effect
on the other factors relevant to the determination of forum should
both be considered.
The motions judge mistakenly applied a forum non
conveniens analysis that did not give proper weight to the forum
selection clause by treating it as but one factor "and a subsidiary
one at that".
At para. 24 of its decision, the Court of Appeal,
confirmed that generally speaking, a forum selection clause in a
commercial contract should be enforced.
The factors that may justify departure are few:
(a) was the plaintiff induced to agree to the clause
by fraud or some other improper reason?
(b) is the contract otherwise unenforceable?
(c) does the court in the selected forum refuse to accept jurisdiction
or is it otherwise unable to deal with the claim?
(d) is the claim, or the circumstances that have arisen, outside
of what was reasonably contemplated by the parties when they agreed
to the clause?
(e) can the plaintiff no longer expect a fair trial in the selected
forum due to subsequent events that could not have been reasonably
anticipated? or
(f) will enforcing the clause in the particular case frustrate some
clear public policy?
A party hoping to avoid its bargain must show more
than the mere inconvenience of having to assert a claim in a foreign
jurisdiction. Litigation costs, such as the transportation of witnesses
and evidence, that are disproportionate to the amount of the claim
will not justify allowing a party to depart from its commercial
agreement.
Interestingly, Expedition initially responded to Honeywell's
motion by arguing that, among other things, its claim may be dismissed
in Arizona because, under Arizona law, the claim may not have been
filed in a timely fashion whereas such an issue would not arise
in Ontario.
While this ultimately proved to be of no concern,
the Court of Appeal noted, though perhaps in obiter, that
a party should not be able to take advantage of its own failure
to commence a timely suit in the proper jurisdiction by creating
a prejudice that would might justify departure from the forum selection
clause.
Leave to appeal this decision to the Supreme Court
of Canada was refused in late November.
If only one thing is taken from this commentary, it
should be that the law in Canada strongly favours the enforcement
of forum selection clauses.
Parties, and counsel, who fail to give such clauses
proper attention, do so at their own peril.
Sonny Ingram
4. Personal Injury Claims Assessment: Case comment
on Rollin v. Baker et al, Ontario Court of Appeal, 2020 ONCA
569
The following case is significant from a practical
point of view when considering the assessment of personal injury
damages. The Court of Appeal has reminded parties and their lawyers
that assessment of quantum must still be related back to cases previously
adjudicated upon. Inflated assessment proposals well outside inflationary
adjustments should be met with return requirements for citations.
The following case shows a refusal by the Court of Appeal to accept
general assessments of damage assessments by trial judges without
case law support in their reasons. This should have a trickle down
effect for any ongoing cases regarding assessment of general damages
during negotiation including mediation.
In the Rollin v Baker case, the plaintiff suffered
a severe broken wrist (Colles' fracture) of her left arm and attended
an emergency room at a local hospital. The emergency room doctor,
Dr. Baker, performed a procedure to reset the bone but failed to
take an x-ray after the cast was applied to ensure that no displacement
had occurred. He sent her home with instructions to obtain a follow
up x-ray in 7-10 days and to see her family doctor. He did not tell
her that there was a significant risk of slippage in the early stages
after surgery or that slippage was very serious and should be closely
monitored by having x-rays weekly for three weeks.
Unfortunately, the plaintiff could not visit her doctor
who was on vacation, but she did obtain an x-ray, which showed no
displacement or callus formation. She then visited her family doctor
three weeks post surgery though he did not order another x-ray.
A week later, the plaintiff discovered, after she jumped in a pool
and her cast disintegrated, that her wrist looked like a claw and
a big lump had formed on her wrist joint. The plaintiff then was
required to have surgery to put the joint back together, which included
surgery to install metal hardware. There were further complications
including the need for a further surgery about 10 months later where
the plate was removed and replaced and the long bone of her left
forearm shortened. A third surgery two years post accident removed
the hardware and she was then cleared to do normal tasks, though
she continued with on going pain and discomfort from the wrist and
her pelvis due to required bone graft. She also suffered interference
with her normal daily activities.
Contrary to the Trial Judge's finding, the Court of
Appeal found that Dr. Baker was not liable for damages arising out
of the slippage since there was no evidence that the slippage occurred
during the application of the cast. Dr. Baker did admit that he
was negligent for failing to take an x-ray after the cast was applied;
however, the follow up x-ray obtained by the plaintiff showed no
signs of displacement. Further, as there was insufficient evidence
and conflicting experts' opinions regarding standard practice, the
Court of Appeal disagreed with the Trial Judge and determined that
no finding could be made on the standard of care expected of an
emergency room doctor regarding the level of follow up care that
should have been made available to the plaintiff (the "capable
hands" component).
The Court of Appeal, however, did confirm and fix
liability upon Dr. Baker for failing to provide key information
to the plaintiff that there was a significant risk of displacement
post surgery, that such displacement was very serious and time sensitive
and that an x-ray should be taken every 7-10 days post surgery for
several weeks to monitor for displacement so that a fresh displacement
could be corrected early. Dr. Baker was required to ensure that
his patient was sufficiently equipped to obtain her own aftercare.
Where a reasonable person could be expected to carry out the steps,
the doctor's responsibility diminishes. The plaintiff here though
did not receive the post-operative advice and directions and this
failure deprived her of the tools to take adequate care of herself.
In terms of damages, there was no evidence that the
plaintiff had suffered harm as a result of Dr. Baker not taking
a second x-ray, as there was no evidence that the misalignment took
place upon application of the cast. However, the Court of Appeal
agreed that had the plaintiff received proper instructions and if
she had obtained x-rays which would have discovered a fresh displacement,
then the procedures to treat the displacement would have been less
severe. As it was, she had endured two additional surgeries and
had been left with pain, disfigurement and limitations in the use
of her dominant hand.
The Court of Appeal went on to find that the Trial
Judge's assessment of damages included consideration of Dr. Baker's
failure to take an x-ray after the application of the cast, which
could not be maintained. The quantum of general damages awarded
by the Trial Judge was $90,000, but there was no explanation provided
for the basis for this assessment and, the majority of the Court
of Appeal found that the Trial Judge's reasons strongly suggested
that the assessment included a determination that Dr. Baker was
responsible for all of the damages that his patient suffered after
the fall. As a result, the usual deference applied to the Trial
Judge's assessment was not applied.
The Court of Appeal went on to state that $90,000
was several times the usual quantum awarded for non-pecuniary damages
for a severely broken wrist even with severe after-effects, even
in cases where there is full liability for same and so damages were
re-assessed.
It is to be noted that the basis for any assessment
of personal injury damages is based on the Supreme Court of Canada's
trilogy of cases which established a cap for general damages for
pain and suffering with the high end at $100,000 (Andrews v.
Grand & Toy Alberta Ltd., [1978] 2 S.C.R. 229, Thornton
v. School Dist. No. 57 (Prince George), [1978] 2 S.C.R. 267,
Arnold v. Teno, [1978] 2 S.C.R. 287). The upper limit of
the cap is applied to the most extreme cases (such as paraplegia)
and the quantum of same now sits at approximately $320,000 with
inflation. What is fair and reasonable for any injury must be determined
in relation to this cap and any assessment must be guided in part
by previous cases assessing such injuries.
The Court of Appeal outlined the law further to the
trilogy and went on to a review of cases involving broken wrists
with extended discomfort, which the Trial Judge had not done and
determined that the range was $10,000 to $25,000 but added that
Dr. Baker's liability did not include damages for the actual break
or for the slippage. Dr. Baker was only responsible with respect
to damages arising thereafter and resulted from the delayed detection
of the displacement. For these damages, the court awarded a more
modest $30,000 as being slightly above the range in their cited
cases.
Justice Jurianz's dissent indicates an acceptance
of the Trial Judge's assessment of damages as not unreasonable given
the severity of the treatment required by the plaintiff resulting
from the delay. His Honour disagreed with his fellow judges that
the starting point of any review of damages of broken wrists that
have been properly treated and maintained that medical malpractice
cases involve different consideration and there was little case
law to establish such a quantum. His Honour though did not disagree
that the starting point was a review of the cases, which is the
significant point here.
This case should be a wake up call that counsel and
parties must be cognizant that a review of previous cases are key
to support an assessment of damages in any personal injury case.
A trial judge's finding will not be disturbed if there is a proper
review of such cases when the case goes to trial. Almost more importantly,
such review should be considered in any negotiation and/or mediation
and is a reminder of the importance of the application of the cap
on general damages.
Kim E. Stoll
This newsletter is published to keep our clients and friends informed
of new and important legal developments. It is intended for information
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