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> October 2011
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In this issue:
1. Firm and Industry News
2. Notice of Claims - Receipt from Third Party
3. HNS Convention - A Reality?
4. Voyage Data Recorder Regulations
5. Use of Summary Judgment on Issue of Timebar
6. And Finally,
1. Firm and Industry News
- November 4th Arlington Virginia: Transportation
Law Institute
- November 29th Toronto: Canadian Board of
Marine Underwriters Annual Dinner
- December 2nd, Montreal: Grunt Club Annual
Dinner
- December 3-7, Hawaii: Joint Meeting U.S.
Maritime Law Association, Canadian Maritime Law Association, Maritime
Law Association of Australia and New Zealand
- January 13th, 2012, Toronto: Fernandes Hearn
LLP Annual Maritime and Transportation Conference
- January 14-15, 2012, New Orleans: Conference
of Freight Counsel
- January 20th, 2012, Chicago: Transportation
Lawyers Association Chicago Regional Seminar
- January 20th, 2012, Toronto: Marine Club
Annual Dinner
Gordon Hearn was the moderator for a Transportation
Lawyers Association webinar presentation on October 21, 2011
entitled "The Carrier Must Get Paid: Fact or Fiction?"
Gordon Hearn, Kim Stoll and Kimberley Newton
will be representing the firm at the Transportation Law Institute
to be held on November 4, 2011 in Arlington, Virginia.
Chris Afonso recently appeared before the Ontario Court
of Appeal on behalf of a freight forwarder who sought to collect
unpaid storage and demurrage charges. A three-judge panel unanimously
upheld the applicability of the Canadian International Freight
Forwarders Association (CIFFA) Standard Trading Conditions.
Rui Fernandes and Martin Abadi will be in the
Federal Court of Appeal on December 13th, 2011 responding to
the appeal and pursuing the cross appeal of the decision of
Justice Heneghan in Buhlman v. Buckley, 2011 FC 73. [The
decision is reported in our July 2011 newsletter]
The Fernandes Hearn LLP 12th Annual Maritime & Transportation
Conference 2012 "Winning Cases with Experts" will
take place as per below:
Date: Thursday January 13th, 2012
Location: Royal & Sun Alliance Lecture Theatre (Courtesy
RSA)
10 Wellington St. East, Toronto ON
Cost: $50.00 - Includes light lunch and materials on
CD ROM
Registration: Shannon Manna, Fernandes Hearn LLP 416-203-9500
BY INVITATION ONLY
Send cheques to: Fernandes Hearn LLP,
155 University Ave. Suite 700, ON M5H 3B7
Limited to 100 attendees RIBO Credits (Technical)
TOPICS
| 8:00-8:30 |
Registration & Coffee |
| 8:30-8:45 |
Welcome |
| 8:45-9:15 |
Use of Experts at Trial |
| 9:15-9:45 |
Insurance Issues: Reservation of Rights,
Non-Waiver Agreements, Additional Insureds, Coverage Gaps
and Overlaps, Subrogation |
| 9:45-10:15 |
Frozen & Refrigerated Foods |
| 10:15-10:45 |
Determining Cause in Engine Failures |
| 10:45-11:00 |
Coffee Break - Sponsored by Zurich Canada |
| 11:00-11:30 |
Energy Update |
| 11:30-12:00 |
Tug & Tow Failures |
| 12:00-12:30 |
Accident Reconstructions |
| 12:30-1:30 |
LUNCH |
| 1:30 - 2:30 |
Modal Updates
Aviation
Marine
Trucking
Rail & Forwarders
Insurance |
| 2:30-330 |
Expert Panel: TBA |
2. A Liability
Insurer May Receive "Notice of a Claim" from Someone Other
than it's Insured
The recent decision of the Ontario Court of Appeal
in the case of Marie Walker and Albert Walker v. Sun Shelters
Industries Inc. (*1) provides a cautionary tale for liability
insurers: care should be taken when adopting an "off cover"
position simply because an insured did not give timely notice of
a claim, if the insurer has independently received details of the
claim. This case illustrates how a "notice of claim" requirement
might be satisfied by a party adverse in interest to the
insured having given details of the claim to the insurer.
This decision also provides a helpful review and analysis
of the "direct right of action" whereby third parties
might claim against liability insurers found in Ontario's Insurance
Act. (*2) The reasons of the Court of Appeal also provide analysis
of the "relief from forfeiture" provision found in the
same statute. (*3)
The Facts
On January 30, 1999 the Walkers went to a movie at
the Power Centre in Burlington, Ontario. On the way back to their
car after the movie was over, Marie Walker slipped on some ice in
the parking lot and fell, sustaining a serious head injury.
The Walkers sued the owner of the Power Centre, Emshih
Developments Inc. ("Emshih"), and the maintenance company
retained to keep the property clear of ice and snow, Sun Shelters
Industries Inc. ("Sun Shelters"). Emshih cross-claimed
against Sun Shelters for "contribution and indemnity".
As Sun Shelters had declared bankruptcy, it did not defend the action.
Emshih, however, discovered that Sun Shelters was insured by the
Sovereign General Insurance Company ("Sovereign General")
and, accordingly, counsel for Emshih notified Sovereign General
of the Walkers' claim and forwarded copies of the court pleadings
to it. Sovereign General ultimately declined to participate in the
action.
The Walker plaintiffs settled with the Emshih defendant.
They then obtained a judgment against Sun Shelters for $100,000
in general damages and related relief. The trial judge found that
the "parking lot was completely treacherous and unfit for
use by pedestrians … that day", that "Ms.
Walker's fall was horrific", and that "no amount
of care by Ms. Walker could likely have prevented her fall".
The Walkers brought an action against Sovereign General,
which was the subject of this decision. They claimed damages under
Section 132 of the Insurance Act, which allows a third party
to recover against a liability insurer where an insured named in
a liability policy has failed to satisfy a judgment for damages.
Section 132 of the Insurance Act provides as
follows:
Where a person incurs a liability for injury or
damage to the person or property of another, and is insured against
such liability, and fails to satisfy a judgment awarding damages
against the person in respect of the persons liability, and an
execution against the person in respect thereof is returned unsatisfied,
the person entitled to the damages may recover by action against
the insurer the amount of the judgment up to the face value of
the policy, but subject to the same equities as the insurer would
have if the judgment had been satisfied.
Accordingly, persons such as the Walkers seeking recovery
under s. 132 stand in no better position then the insured. The insurer
can still raise policy defences (e.g. issues on coverage) but cannot
reopen issues such as the finding of liability or the quantification
of damages from the underlying trial. The analysis accordingly then
proceeded to the question as to whether Sovereign General owed a
duty to indemnify Sun Shelters in order for the Walkers to be in
a position to recover damages under the policy.
Sovereign General asserted that Sun Shelters breached
the statutory conditions of the policy (being a commercial insurance
policy containing comprehensive general liability coverage) requiring
it to give notice and to co-operate in the defence. As Sun Shelters
was at the time bankrupt, it had not defended the action and had
not provided notice of the claim to Sovereign General. Sovereign
General asserted that, because Sun Shelters did not give timely
notice of the claim, it was not required to defend the action brought
by the Walkers or to indemnify Sun Shelters for any finding of liability.
Accordingly, the argument followed that Sovereign General was not
required to satisfy the Walkers' claim brought under s. 132 of the
Insurance Act.
The Action by the Walkers Against Sovereign General
The Walkers moved for summary judgment on their claim
against Sovereign General, which, in turn, brought a cross-motion
to dismiss the action. The issue on the motion was whether Sovereign
General had received notice of the claim against Sun Shelters in
accordance with the conditions of the insurance policy.
The judge hearing the motion ("the motion judge")
held that although Sun Shelters itself had not given Sovereign General
notice of the claim, that Sovereign General had in fact received
notice from Emshih, which notice complied with the policy conditions.
In granting summary judgment to the Walkers, the motion judge held
that because Emshih had cross-claimed against Sun Shelters in the
underlying action, it may have been entitled to part of the insurance
proceeds and therefore it had standing to give notice of the claim.
The motion judge held that, under either of the notice provisions
in the policy (there being both statutory provisions and stand alone
policy provisions on point), Emshih's notice was effective notice
to Sovereign General. Alternatively, the motion judge held that,
even if there was something wrong in this manner of notice, the
Walkers were entitled to "relief from forfeiture" under
s. 129 of the Insurance Act. Section 129 provides:
Where there has been imperfect compliance with a
statutory condition as to the proof of loss to be given by the
insured or other matter or thing required to be done or omitted
by the insured with respect to the loss and a consequent forfeiture
or avoidance of the insurance in whole or in part and the court
considers it inequitable that the insurance should be forfeited
or avoided on that ground, the court may relieve against the forfeiture
or avoidance on such terms as it considers just.
Accordingly, while finding that sufficient notice
was given to the insurer for the purposes of the policy in question,
the motion judge ruled that, even if there was imperfect compliance,
the same should in effect be "waived" so as to provide
the insured Sun Shelters (and, by extension, the Walkers) the benefit
of the insurance coverage. Accordingly, the Walkers were successful
on their motion to enforce their claim against the Sovereign General
insurance policy.
Sovereign General Appeals to the Court of Appeal
Sovereign General appealed to the Ontario Court of
Appeal on three grounds:
1. The motions judge was in error in holding that
the notice provision in the statutory conditions of the
insurance policy applied to the Walkers claim.
2. The motion judge was in error in finding that
the notice given by the Emshih was effective notice under the
policy conditions for liability coverage (the policy in
question having contained both the "statutory conditions"
legislated by the Insurance Act as well as specific policy
conditions forming a part of the policy itself).
3. The motion judge made an error in granting "relief
from forfeiture" because such relief is available only for
imperfect compliance with a policy condition, whereas in this
case, the total lack of notice of the claim amounted to "total
non-compliance".
The Court of Appeal reviewed the entirety of the
insurance policy. As mentioned above, Sun Shelters was insured
under a commercial insurance policy, which provided various coverages
such as fire and extended coverage, comprehensive general liability
and insurance over other perils.
Section 8 of the Statutory Conditions contained
in the policy dealt with who may give notice of a loss:
Notice of loss may be given, and proof of loss may
be made by the agent of the insured named in the contract in case
of absence or inability of the insured to give the notice or make
the proof, and absence or inability being satisfactory accounted
for, or in the like case, or if the insurer refuses to do so,
by a person to whom a part of the insurance money is payable.
(Emphasis added)
The motion judge relied upon this section to find
that Sovereign General had been given effective notice of the Walkers'
claim. This was by virtue of the fact that Emshih had cross-claimed
against its co-defendant in the initial action, Sun Shelters, thereby
it was a "person to whom a part of the insurance money is payable".
The policy conditions in turn formed a part
of the "Comprehensive General Liability Coverage Rider",
which had a different notice provision from that in the Statutory
Conditions. The policy conditions also imposed a duty of co-operation.
The relevant wording was as follows:
3. Insured's Duties in the event of Accident, Occurrence,
Claim or Suit:
a) In the event of an accident or occurrence, written
notice containing particulars sufficient to identify the insured
and also reasonably obtainable information with respect to the
time, place and circumstances thereof, and the names and addresses
of the injured and of available witnesses, shall be given promptly
by or for the Insured to the Insurer or any of its authorized
agents.
Section 4 of the Policy Conditions stated that
compliance with the terms of the policy was a condition precedent
to any action against Sovereign General:
No action shall lie against the Insurer under any
Insuring Agreement of this policy including the Insuring Agreement
relating to "Defence-Settlement-Supplementary Payments"
unless, as condition precedent thereto, there shall have been
full compliance with all of the terms of this policy…
Sovereign General maintained that Sections 3 and 4
of the Policy Conditions applied to the Walkers' claim, and
that notice was not given in accordance with Section 3 (a). Without
any analysis, the motion judge had held that effective notice had
been given not only under Section 8 of the Statutory Conditions
reproduced above but also under Section 3(a) of the Policy
Conditions.
Issue No.1: Did the motion judge err in holding
at Section 8 of the Statutory Conditions applied to the Walkers
claim?
The Court of Appeal reviewed the policy in its entirety
and determined that the Statutory Conditions applied to "first
party property" losses such as fire and theft but not apply
to liability or losses to third parties. The first party or property
coverages were seen to be stand-alone from the third party or liability
coverage. On a proper construction of the policy as a whole the
Statutory Conditions were accordingly seen to apply only
to the property coverages where as the Policy Conditions
applied to any third party liability claims.
Accordingly, the Court of Appeal ruled that Section
8 of the Statutory Conditions was inapplicable to the Walkers'
claims and, in this regard, came to a different finding than that
of the motion judge.
Issue No.2: Did the motion judge err in finding
that the notice given by Emshih was effective notice under Section
3(a) of the Policy Conditions for liability coverage?
Sovereign General argued on the appeal that only Sun
Shelters was able to give notice under Section 3(a) and that Sun
Shelters had breached its duty to co-operate under Section 3(c).
The Court of Appeal disagreed with both of these submissions. The
court held that notice under Section 3(a) could be given "by
or for the Insured". Accordingly, such notice could be given
by a person other than the Insured and the court noted that the
policy did not define the class of persons capable of giving notice
on behalf of the insured. The court also noted that it is necessary
to interpret Section 3(a) in light of its purpose; that is, to make
Sovereign General aware of circumstances so that it has a timely
opportunity to deal with the claim. The delivery and content of
the notice is important because it triggers Sovereign General's
duty to defend and obligation to act in good faith to its Insured.
Given this purpose as stated by the court, "if the notice
is to be given for an Insured instead of by the Insured itself,
the person giving it should have sufficient proximity to the claim
to have knowledge of the information required by Section 3(a)".
The court found that Emshih was such an entity as the owner of the
property where the accident occurred. In giving notice to Sovereign
General, Emshih was in fact then acting for Sun Shelters in that
regard.
The Court of Appeal noted also that, at the very least,
the policy was ambiguous as to who could give notice "for"
the Insured. In accordance with well accepted principles in the
interpretation of contracts, any ambiguities are to be construed
against the party who provided the wording, in this case being Sovereign
General: Consolidated - Bathurst v. Mutual Boiler [1980]
S.C.R. 888. (*4)
Accordingly, the Court of Appeal agreed with the motion
judge that Emshih's notice was effective notice to Sovereign General.
On the second argument, that Sun Shelters had failed to co-operate
in the defence of the original action, the Court of Appeal cited
with approval the motion judge's reasoning that this argument had
no merit on the basis that Sovereign General had made no effort
to contact its Insured or to seek its assistance in defending the
action. Instead, Sovereign General had taken the position that it
would not participate in the action at all. The court reasoned that
Sovereign General could not now complain that Sun Shelters breached
its duty to co-operate.
Issue No.3: Did the motion judge err in granting
relief from forfeiture?
The Court of Appeal noted that its disposition of
the second issue above would be sufficient to decide the appeal:
effective notice was in fact given of the claim to Sovereign General
such that its policy indemnification obligations would be triggered
(with the Walkers being able to recover their damages). It accordingly
was not necessary to determine whether or not the Insured, Sun Shelters,
or, by extension, the Walkers, should be given "relief"
from any imperfect compliance with a policy condition. However,
the Court of Appeal noted that, even if Emshih was unable to give
notice under policy condition 3(a), it agreed with the motion judge
that the Walkers would be entitled to "relief from forfeiture"
under Section 129 (reproduced above). The Court of Appeal noted
that the relief from forfeiture provisions of Section 129 apply
to both the statutory and policy conditions. The court
cited case law precedent that the failure to give timely notice
of a claim is imperfect compliance rather than "total
non-compliance" of the policy or statutory condition. On this
basis, the Court of Appeal then proceeded to the next question as
to whether the forfeiture of the insurance proceeds would be inequitable.
The motions judge had ruled that such forfeiture would be inequitable,
there being no bad faith by Sun Shelters, the Walkers or Emshih.
Accordingly, Sovereign General's policy obligations
were seen to be triggered and, by virtue of s. 132, the Walkers
were entitled to recover against the policy for the judgment assessed
against Sun Shelters.
Conclusion
The "direct right of action" element of
Section 132 of the Insurance Act is always something to be
reckoned with by insurers who consider taking an "off cover"
position on a liability policy. If the insurer chooses not to participate;
that is, it decides not to provide a defence, the possibility remains
that an unsatisfied judgment creditor may "come knocking"
later on in time. If the liability insurer catches wind of a claim
against an insured, the insurer would be well served to carefully
consider the notice requirements contained in the policy to determine
whether any constructive or indirect notice (provided by someone
other than the insured itself) might suffice to trigger policy obligations.
Perhaps the insurer should deal with the matter rather than "turning
its back" on same. For its part, a claimant might wish to provide
details of a claim to a defendant's insurance company.
Gordon Hearn
Endnotes
*1 2011 ONCA 597 (CanLII)
*2 s.132, Insurance Act R.S.O. 1990 c.I.8
*3 s. 129
*4 [1980] S.C.R. 888
3. HNS Convention - A Reality?
On October 25, 2011, Canada took part in a ceremony
to sign a protocol that will establish a global liability regime
and further protect the environment from the risks of marine transport.
The Protocol of 2010 to the International Convention on Liability
and Compensation for Damage in Connection with the Carriage of Hazardous
and Noxious Substances by Sea, 1996 ("2010 Protocol) was
signed at the International Maritime Organization (IMO) in London,
United Kingdom. Canada was one of the states that led the development
of this important protocol at the IMO.
The International Maritime Organization is the leader
is setting conventions and codes that define Hazardous and Noxious
Substances (HNS).
In the 1990s, several incidents involving waterborne
spills of HNS highlighted a gap in the marine liability system and
prompted the international community to take action. Through the
International Maritime Organization (IMO), a liability regime was
devised to compensate claimants in the event of spills involving
chemicals and other hazardous substances. This effort culminated
in the International Convention on Liability and Compensation
for Damage in Connection with the Carriage of Hazardous and Noxious
Substances by Sea (HNS), 1996 (the HNS Convention), which was
adopted under the auspices of the IMO in 1996.
When it enters into force, the HNS Convention will
provide compensation from damage resulting from the maritime transport
of HNS. In 1997, the Canadian government signed the Convention.
Ratification was to follow, but has been slow.
Under this Convention, HNS include:
- oils,
- other liquid substances defined as noxious or dangerous,
- liquefied gases,
- liquid substances with a flashpoint not exceeding
60° C,
- dangerous, hazardous and harmful materials and
substances carried in packaged form, and,
- solid bulk materials defined as possessing chemical
hazards.
The Convention also covers residues left by the previous
carriage of HNS when carried as bulk cargo.
In 2005, Canada released the Maritime Law Reform
Discussion Paper recommending the ratification and implementation
of the HNS Convention. This sent a signal to stakeholders and the
international community that Canada intended to give favourable
consideration to the Convention's ratification and to the legislation
required to implement the regime in national law. The Maritime
Law Reform Discussion Paper also allowed for initial consultations
with stakeholders. Following the release of the paper, Canada was
part of discussions among states at the international level, which
focused on finding solutions to issues raised within the existing
1996 HNS Convention. However, in 2007, it was agreed that a Protocol
was needed to deal with obstacles to the implementation of the Convention
by states.
The Protocol is intended to address the underlying
causes that have inhibited the entry into force of the HNS Convention,
i.e.:
1) Contributions to the Liquefied Natural Gas (LNG)
Account and the fact that titleholders to LNG cargoes in non-state
parties would not contribute to cover compensation from LNG incidents.
This would of lead to situations where those with certain types
of LNG supply contracts would not have contributed to the HNS Fund
if they were located outside of the jurisdiction of an HNS Convention
state party;
2) The concept of 'receiver' and the difficulties
of effectively implementing a reporting and contributions system
for packaged HNS. The complex logistics chain for packaged HNS and
uncertainty over who would be considered the actual "receiver"
meant that states would need to implement very burdensome reporting
and tracking requirements for packaged HNS; and
3) Non-submission of contributing cargo reports by
states, on ratification of the Convention and annually thereafter.
The 1996 HNS Convention did not impose any sanctions against states
that did not report the HNS received in their territory and this
presented an unfair sharing of the burden among states when assessing
contributions to the HNS Fund.
In Canada, over the last nine years (2001-2010), there
have been at least 98 chemical spills from vessels in Canadian waters.
Although most of these were small spills, the high volume of HNS
carried by sea-going vessels, particularly in international trade,
highlights the potential for a major chemical spill occurring in
Canadian waters.
As it currently stands, the original HNS Convention
of 1996 was signed, subject to ratification, by eight states and
was ratified by 14 states but never came into force internationally
as one of the entry into force provisions was never met. The particular
entry into force provision that was never met by those states that
ratified the Convention was the requirement to submit reports on
its contributing cargo to the future HNS Fund (i.e. how much HNS
received in that state over the thresholds established in the Convention).
The 2010 Protocol to the HNS Convention was developed
first by a Working Group set up by the International Oil Pollution
Compensation (IOPC) Fund's 1992 Fund Assembly and then by the IMO's
Legal Committee, with the aim of facilitating the entry into force
of the HNS Convention.
The 2010 Protocol, which addresses the practical problems,
outlined above, that have prevented many states from ratifying the
original Convention, was adopted by the IMO at a diplomatic conference
held on April 26-30, 2010. That conference also adopted four resolutions
relating to the setting up of the HNS Fund, the promotion of technical
co-operation and assistance, avoidance of a situation in which two
conflicting treaty regimes are operational, and the implementation
of the 2010 HNS Protocol. As indicated at the beginning of this
article, the ceremony to sign the protocol took place on October
25th, 2011 and Canada was present.
The 2010 HNS Protocol will be tabled in the Canadian
Parliament this fall, and subsequently amendments to the Marine
Liability Act will be introduced to implement the protocol by ensuring
that compensation is available for victims of marine pollution and
that polluters are held responsible. Following its ratification,
Canada will be able to implement the protocol.
Rui Fernandes
4. Voyage Data Recorder Regulations
On 21 March 2006, the passenger and vehicle ferry
Queen of the North departed Prince Rupert, British Columbia,
for Port Hardy, British Columbia. On board were 59 passengers and
42 crewmembers. After entering Wright Sound from Grenville Channel,
the vessel struck the northeast side of Gil Island at approximately
00:21 hours on March 22. The vessel sustained extensive damage to
its hull, lost its propulsion, and drifted for about 1 hour and
17 minutes before it sank in 430 m of water. Passengers and crew
abandoned the vessel before it sank. Two passengers were unaccounted
for after the abandonment and have since been declared dead.
The accident was investigated by the Transportation
Safety Board of Canada (TSB). In its report, the TSB noted that
the Queen of the North was not equipped with a voice data
recorder (VDR) and that it was not required to be equipped with
one. The TSB noted that the lack of a VDR can result in a more complex
and protracted investigation and that the information from a VDR
or a simplified voyage data recorder (S-VDR) can be invaluable to
investigators and operators seeking to understand the sequence of
events leading up to an accident.
As a result of the investigation the TSB recommended
in 2008 that the requirement for the carriage of voyage data recorders
or simplified voyage data recorders be extended to large passenger
vessels over 500 gross tonnage and all other commercial vessels
on an equivalent basis to those trading internationally.
On September 30th 2011 the federal government implemented
the Voyage Data Recorder Regulations (see SOR/2011-203). The regulatory
impact analysis statement for the regulations sets out the following
description of the regulation:
The primary purpose of a voyage data recorder (VDR)
or a simplified voyage data recorder (S-VDR) is to assist in casualty
investigations. The VDR or S-VDR records specific information
from a variety of data sources on board the vessel and stores
this information in a secure and retrievable form.
The Voyage Data Recorder Regulations (the
Regulations) require all new passenger vessels of 500 gross tonnage
or more and new cargo vessels of 3 000 gross tonnage or more that
are not engaged solely on inland voyages to be fitted with a VDR.
In addition, all existing passenger vessels of 500 gross tonnage
or more are required to be fitted with either a VDR or an S-VDR
by July 1, 2015. The Regulations do not apply to certain new and
existing passenger vessels that are seasonally operated, nor do
they apply to domestic cargo vessels constructed before January
1, 2012.
The Regulations also implement the VDR requirements
contained in the International Safety Convention for the Safety
of Life at Sea (SOLAS Convention), which affects Canadian
vessels engaged on international voyages. As certain portions
of these requirements were contained in the Navigation Safety
Regulations, these specific requirements have been repealed.
The SOLAS Convention requires all passenger vessels
of 150 gross tonnage or more and all cargo vessels over 3 000 gross
tonnage to be fitted with a VDR when engaged on an international
voyage (SOLAS Convention Regulation V/20). Cargo vessels constructed
before July 1, 2002, may be fitted with a VDR or an S-VDR. The requirement
has been phased in over the years, between July 1, 2002, and July
1, 2010.
The new VDR regulations implement domestic VDR requirements
that take into account existing international standards and requirements,
the recommendation of the TSB, the cost-benefit analysis conducted,
and results of consultations with stakeholders. The Regulations
do not apply to domestic cargo vessels constructed before January
1, 2012.
Rui Fernandes
5. Use of Summary Judgment on Issue of Timebar
Until the recent changes to the Rules of Civil Procedure,
summary judgment motions brought by defendants to bring a quick
end to actions where a plaintiff failed (or allegedly failed) to
issue within the proper limitation period (under the Limitations
Act) were typically dismissed and the issue reserved for trial.
Plaintiffs often would defend such motions on the basis that the
applicable limitation period should be extended on the basis of
"discoverability". (The discoverability principle pertains
to the party's knowledge of the material facts upon which the cause
of action is based and is often focused on the issue of the exercise
of due diligence by that party to ascertain such facts.) The test
on summary judgment was (and continues to be) whether there is a
"genuine issue" regarding a material fact that would require
a trial. Previously, judges hearing such timebar motions were inclined
to order that there was just such a genuine issue for trial given
that the plaintiff's evidence would be required and a determination
based on credibility made. Prior to the changes to Rule 20, such
an assessment could be done only at trial by the ultimate trier
of fact.
The cases below show the marked shift between the
way summary judgment motions were done and the way the will be done
going forward. (This article does not seek to examine the concept
of "discoverability" in any great detail or the correctness
of the associated judgments, but rather to review this new route
that is now more economical and potentially of much greater value
as a weapon in defence counsel's arsenal.)
In early 2010, Rule 20 of the Rules of Civil Procedure
was amended granting a Judge on the hearing of a summary judgment
the ability to undertake a more intensive analytical review in the
decision-making process, by providing expanded powers, to determine
if the test has been met. These greater powers outlined in Rule
20.04(2.1) included the ability to examine and weigh evidence, evaluate
the credibility of deponents and draw inferences from the evidence.
The motion for summary judgment in the Safai
case (a motion decided before the change of the Rules), below, was
initially dismissed by the motions judge but such order was overturned
by the Court of Appeal and sent back for a trial with the issue
of discoverability left for determination by the trial judge. The
Supreme Court of Canada recently dismissed (on May 5, 2011) the
application for leave to appeal as brought by the defendant.
This pre-emptive attack by counsel for the defendant
in Safai ultimately had no value and cost the defendant a
great deal of money to attempt. (Thereby, it is completely understandable
why such attempts were rare indeed). Conversely, with the new Rules,
the Liu case, below, was decided by the motions judge on
the evidence before him and the associated appeal to the Court of
Appeal was dismissed on October 29, 2010.
The Old Way
Safai v. Bruce N. Huntley Contracting Limited,
2010 ONCA 545
Application for leave to appeal dismissed May 5, 2011
Gity Safai slipped and fell in a patch of ice in a
parking lot in February 2000. Ms. Safai suffered a broken ankle
and she commenced an action as against the owner of the parking
lot in which she fell. A separate action was commenced in September
of 2006 as against the company responsible for winter maintenance
of the parking lot. The maintenance contractor and owner of the
property moved for summary judgment based on the expiry of the then
six-year limitation period. Ms. Safai argued that she was not aware
of the identities of each of the maintenance contractor and owner
and so her claim was only "discoverable" as of the date
she became aware of their identities. Therefore, she argued that
the limitation period with regard to the both entities was extended
on the basis of the discoverability principle.
The motions judge found that the discoverability principle
had no application and dismissed both actions against both the maintenance
contractor and the owner of the property. These orders were appealed
and the Ontario Court of Appeal confirmed the dismissal against
the owner but reversed the motions judge's order regarding the maintenance
contractor and sent the matter back for trial. Leave to appeal to
the Supreme Court of Canada from the Court of Appeal's order was
sought by the maintenance company, but such application was dismissed
on May 5, 2011.
Facts
On February 17, 2000, Ms. Safai attended her accountant's
office to discuss her financial issues. Her accountant was located
in a commercial building on Woodbine Avenue in Markham, Ontario.
While walking in the parking lot she slipped and fell on a patch
of ice and fractured her ankle. At the time of the fall, she had
no information concerning the ownership of the parking lot or who
was responsible for its maintenance. A month after her fall, she
met with a lawyer and retained him to act for her and her family
regarding her accident. A title search was done by her counsel and
a demand letter sent to the registered owner of the property. The
insurers of the property owner identified Markham Property Services
Ltd. as the maintenance contractor responsible for winter maintenance
of the parking lot in question. A statement of claim however was
not issued as against the maintenance contractor until February
23, 2006, which was several days after the expiry of the limitation
period (which at that time was six (6) years).
Motions and Appeal
Both the owner of the property and the maintenance
contractor moved by motion for summary judgment pursuant to rule
20 of the Rules of Civil Procedure on the basis that the
action was commenced after the expiry of the limitation period as
outlined in the Limitations Act.
At the motion, the maintenance contractor and owner
of the property submitted that there were genuine issues for trial
because Ms. Safai knew or ought to have known the identity of the
owner of the property where she was injured and the contractor who
had been employed to provide snow removal services for the parking
lot. Mr. Justice Mullins, the motions judge found that the discoverability
principle did not apply and dismissed both actions.
On appeal, the Ontario Court of Appeal considered
whether or not the name of the property owner and the maintenance
contractor were essential elements of the cause of action and whether
the limitation period did not run until the appellants knew these
names or, by the exercise of reasonable diligence, could ascertain
them.
Justice Armstrong, speaking for the court, stated
that the proposition made by the plaintiffs that the limitation
period did not start to run until the plaintiff knew the names of
the potential defendants either by actual knowledge or the exercise
of reasonable diligence was stating the rule in Aguonie,
cited below, too broadly. Otherwise, such proposition would mean
that every motor vehicle accident, where the ownership of the defendant's
vehicle was not immediately known, would have an extended limitation
period until such time as a routine search of the motor vehicle
register could be made. This suggestion would mean that the limitation
period would not commence on the date of the accident but rather
the date that the routine motor vehicle search revealed the owner's
name. This, in the words of Armstrong J., defied common sense.
Having said this, Armstrong J. went on to provide
the judgment of the Court of Appeal stating that on the date of
the accident Ms. Safai knew she had fallen and injured her ankle
and knew that she likely had a claim for her injuries against the
owner of the property. As of the date of the accident, she was in
a position to ascertain the name of the registered owner of the
property. In fact, this information was discovered using reasonable
diligence. Accordingly, there was no reasonable basis in those circumstances
to involve the discoverability rule to dispel the commencement of
the limitation period. The date of the accident started the time
running. Ms. Safai was out of time to sue the owner of the property.
However, the Court of Appeal took a different approach
with regard to the claim as against the maintenance contractor.
As of the date of the accident, it was reasonable for Ms. Safai
to assume that she would have a cause of action against the owner
of the property. However, the Court held that she did not know that
the owner of the property had contracted out the winter maintenance
for the property to a third party. This information may not have
been available until her lawyer was advised by the receipt of the
letter dated October 19, 2000 from the insurer for the owner of
the property. There is no simple procedure such as a search of a
public register to ascertain that the winter maintenance responsibilities
were contracted out to a third party. As a result, the trial judge
found there was indeed a genuine issue for trial concerning the
running of the limitation period and the application of the discoverability
rule that should be left to the trial judge. This was in keeping
with the decision in Aguonie v. Galion Solid Waste Material Inc.
(1998), 38 O.R. (3d) 161 (C.A.), in which the Court of Appeal stated
at paragraph 25 on page 10 of that decision:
"As the discoverability rule applies to this
case, the factual issue which the trier of fact will be required
to decide is "the time the cause of action arose" within
the meaning s. 61(4) of the FLA so that it can be determined whether
this action was commenced within the two-year limitation period.
That time, logically, will be a date between Lyman Aguonie's death
on October 4, 1993, and the availability of Mr. Miller's January
27, 1995, report, depending on the trial judge's finding about
the exercise of reasonable diligence by the plaintiffs in learning
the identity of the respondent tortfeasors and the necessary facts
relative to their alleged negligence."
(It is noted that the Safai decision clearly
states that the cause of action against the property owner will
be discoverable on the date of the accident and/or when the injury
has been incurred. However, the action against the maintenance contractor
will not be discoverable until such a time as the existence of a
maintenance contractor's involvement is revealed. While in Safai,
this was done by a letter from the property owner and took no effort
on the part of the plaintiff, in other circumstances further reasonable
steps would have had to have been taken by the plaintiff in order
to obtain such information and this information would be before
the court.)
The application for leave to appeal was dismissed
on May 5, 2011 by the Supreme Court of Canada.
The New Way
Liu et al v Silver et al, 2010 ONSC 2218
Appeal to Ontario Court of Appeal dismissed October 29, 2010
(2010 ONCA 731)
Facts
Ms. Liu, the plaintiff, underwent minor outpatient
surgery on August 16, 2004. This allegedly minor surgery for removal
of a polyp resulted in an eighteen-day hospital stay with many complications
including a perforation of Ms. Liu's uterus and abdominal bleeding.
She was released from hospital on September 4, 2004.
Some two years and four months later, Ms. Liu brought
an action against the defendant doctor for medical malpractice.
The defendant doctor brought a motion for summary judgment to have
the action dismissed on the basis that the action was not commenced
with the appropriate limitation period of two years under the Limitations
Act.
Motions and Appeal
The issue considered by the motions judge was in essence
whether the plaintiff could rely on the doctrine of discoverability
to extend the limitation period. The plaintiff argued that she did
not have the requisite knowledge of material facts of her case against
the defendant doctor until she obtained an independent medical expert
report. As opposed to the date of surgery being the date the cause
of action arose, she argued that her cause of action was not actually
"discoverable" until the report was prepared. Buoyed by
the newly extended powers under the new Rules, the defendants brought
a motion for summary judgment in this regard to dismiss the action
on the basis of timebar and to determine whether there was a genuine
issue requiring a trial.
After citing the expanded powers, Justice Allen examined
the evidence before the court with the proverbial fine-toothed comb
including both sworn affidavits and discovery transcripts and the
expert's report that was said to have been relied upon by Ms. Liu.
Allen J. detailed facts from the evidence before her which included
that Ms. Liu told hospital staff that she intended to seek legal
counsel, she knew that the defendant doctor had performed the surgery
and that she felt she was "fighting for her life" after
she woke up from the surgery. Justice Allen noted that Ms. Liu claimed
that she did not discover the defendant's doctor's negligence until
she obtained an independent medical expert's report, but Justice
Allen did not accept this.
Upon examining and weighing the evidence, evaluating
the credibility of the deponents of the affidavits and drawing inferences
from the evidence, Allen J. found that Ms. Liu had sufficient facts
by the time of her discharge from the hospital on September 3, 2004
to know she had sustained an injury or loss in which she could base
a claim in negligence against the defendant doctor. Allen J. reviewed
the plaintiff's actions and mental state (including her growing
anger toward the defendant doctor) before finding at page 8 of the
Reasons that there was "ample evidence that the plaintiff knew
litigation was an appropriate avenue to seek redress and that knowledge
was concretized (sic) after discharge and before the limitation
period expired when she sought advice from three law firms."
Her Honour found that the plaintiff failed to display
reasonable diligence in that neither she nor her counsel could provide
an explanation for periods of delay that occurred before she commenced
her claim including her failure to retain counsel. Her Honour found
that the plaintiff was an engineer and sophisticated as shown by
her request for her hospital records upon leaving the hospital and
her answers at discovery. Justice Allen found that there was no
genuine issue requiring a trial and the action was dismissed.
Ms. Liu appealed to the Ontario Court of Appeal. The
appeal was dismissed and the Appeal Book Record was endorsed as
follows:
"The motion judge found on (sic) a fact
that before the appellant was discharged from the hospital on
September 3, 2004, she knew that she had suffered an injury as
a result of a surgical procedure performed by the respondent to
which she had not consented. She knew from that point that litigation
was an appropriate avenue to seek redress and she immediately
sought legal advice with pursuing a claim against him.
[2] On these findings which were amply supported by the appellant's
own evidence, the motion judge did not err in concluding that
the two year limitation period began to run from September 3,
2004. As the action was not commenced within the two-year period,
the motion judge properly granted summary judgment dismissing
the action.
[3] Appeal dismissed."
Review
Cases like Safai and Aguonie essentially
held that issues such as the principle of discoverability were more
appropriately dealt with by the trial judge given the need to make
findings of fact and assessments of credibility. Under the new Rules
for summary judgment motions, however, the motions judge has greater
powers to examine and weigh evidence, evaluate the credibility of
the deponents of the affidavits and draw inferences from the evidence
before the court including discovery transcripts.
The result in the Liu case tells counsel and
clients alike that, under new Rule 20, such pre-emptive attacks
on preliminary issues can be successful and that plaintiffs' attempts
to argue that "discoverability" issues should be left
for trial will no longer be accepted. Further, the rules regarding
costs awards for unsuccessful summary judgment motions are now also
less severe. It is now apparent that there should be less hesitancy
by counsel and clients to attempt summary judgment on limitation
or timebar issues.
Kim E. Stoll
6. And Finally,
A. Speeding Tickets
GOOD: A motorist was mailed a picture of his car speeding
through an automated radar post in Edmonton AB. A $40 speeding ticket
was included. Being cute, he sent the police department a picture
of $40. The police responded with another mailed photo of handcuffs.
BETTER: A Saskatchewan policeman had a perfect spot to watch for
speeders, but wasn't getting many. Then he discovered the problem
- a 12-year-old boy was standing up the road with a hand painted
sign, which read "RADAR TRAP AHEAD". The officer then
found a young accomplice down the road with a sign reading "TIPS"
and a bucket full of money. (And we used to just sell lemonade!)
BEST: A young woman was pulled over for speeding. As the Saskatchewan
R.C.M.P. Officer walked to her car window, flipping open his ticket
book, she said, "I bet you are going to sell me a ticket to
the R.C.M.P. Ball.
"He replied, "Ma'am, Saskatchewan R.C.M.P. don't have
balls." There was a moment of silence while she smiled, and
he realized what he'd just said. He then closed his book, got back
in his patrol car and drove off. She was laughing too hard to start
her car.
B. A Louisiana State Trouper
A Louisiana State Trooper pulled a car over on US
165 about 2 miles south of the Louisiana/Arkansas State line. When
the Trooper asked the driver why he was speeding, the driver said
he was a Magician and Juggler and was on his way to Monroe to do
a show at the Shrine Circus. He didn't want to be late. The Trooper
told the driver he was fascinated by juggling and asked if he the
driver would do a little juggling for him then he wouldn't give
him a ticket. He told the Trooper he had sent his equipment ahead
and didn't have anything to juggle. The Trooper said he had some
flares in the trunk and asked if he could juggle them. The juggler
said he could, so the Trooper got 3 flares, lit them and handed
them to him. While the man was juggling, a car pulled in behind
the patrol car, a drunken good old boy, from Arkansas, got out,
watched the performance, then went over to the patrol car, opened
the rear door and got in. The Trooper observed him and went over
to the patrol car, opened the door asking the drunk what he thought
he was doing. The drunk replied, "You might as well take me
to jail, cause there's no way in hell I can pass that test."
C. No Pets Allowed!
So these two women were out for a Saturday stroll.
One had a Doberman pincher and the other had a Chihuahua. As they
sauntered down the street, the one with the Doberman said to her
friend, "Let's go over to that bar and get something to drink."
The one with the Chihuahua said, "We can't go in there. We've
got dogs with us." The one with the Doberman said, "Just
follow my lead." They walked over to the bar and the one with
the Doberman put on a pair of dark glasses and started to walk in.
The bouncer at the door said, "Sorry, Lady, no pets allowed."
The woman with the Doberman said, "You don't understand sir.
This is my Seeing-Eye dog." The bouncer said, "A Doberman
pincher?" The woman said, "Yes, they're using them now.
They're very good." The bouncer said, "OK, come on in."
The lady with the Chihuahua figured 'what the heck', so she put
on a pair of dark glasses and started to walk in. Once again the
bouncer said, "Sorry, lady, no pets allowed." The woman
with the Chihuahua said, "You don't understand. This is my
Seeing-Eye dog." The bouncer said, "A Chihuahua?"
The woman with the Chihuahua said, "A Chihuahua? They gave
me a f.....g Chihuahua???"
D. A Little Fun Each Day
I went to the store the other day, and I was in there
for only about 5 minutes. When I came out there was a motorcycle
cop writing a parking ticket. So I went up to him and said, "Come
on, buddy, how about giving a girl a break?" He ignored me
and continued writing the ticket. So I called him an inappropriate
name. He glared at me and started writing another ticket for worn
tires! So I called him another inappropriate name. He finished the
second ticket and put it on the windshield with the first. Then
he started writing a third ticket! This went on for about 20 minutes.
The more I abused him, the more tickets he wrote. I didn't care.
My car was parked around the corner. I try to have a little fun
each day. It's important.
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