Newsletter > June 2008
In this issue: 1. Firm News 2. River Rafting Regulations 3. Bodily Injury Exclusion for Headlock 4. Air Carrier Ordered to Provide Space for Service Animals 5. Punitive Damages Update 6. Due Diligence Defences
1. Firm News
- Matt Mulholland has rejoined the firm as an Associate after articling with us in 2007/08. We congratulate Matt on his call to the Bar of Ontario in June.
- Our Personal Injury Seminar originally scheduled for June 19th had to be postponed until a later date due to scheduling conflicts. It will be rescheduled for the fall. Tentatively the upcoming programs are: – November 6th, 2008 – Insurance and Commercial Litigation Strategies – January 16th, 2009 – Maritime and Transportation Conference
2. River Rafting Regulations
The Special-Purpose Vessels Regulations (the “Regulations”), made under the Canada Shipping Act,2001, came into effect on April 17th 2008 (SOR/2008-121). The Regulations set out the requirements for the safe operation of commercial river rafting in Canada.
The Regulations establish minimum standards for commercial river rafting and apply them to all waters in Canada. The Regulations incorporate industry “best practices” and address such matters as:
- vessel and safety equipment requirements (e.g. helmets, lifejackets and their equivalents, and the circumstances in which they must be worn);
- operational requirements (e.g. first aid training, familiarization trips and safety briefings); and
- the keeping of records for three years after an excursion, including the name(s) of the guide(s), the date of the excursion, the number of passengers on the excursion, a geographical description of the waters on which the excursion took place, the contents of the safety briefing and a copy of the rescue plan.
There are approximately 230 commercial river rafting operations in Canada, with the largest concentration in Alberta, Ontario and British Columbia. The majority of these enterprises operate within well-organized associations such as the Canadian Rivers Council (CRC), the Professional River Outfitters Association of Alberta (PROAOA) and Jasper’s Professional River Outfitters. These associations have established guidelines that are mirrored in the Regulations.
Compliance with the Regulations will be achieved through the Small Vessel Inspection Program conducted by Transport Canada marine safety inspectors. Local enforcement agencies may also request Transport Canada to designate local enforcement officers with an interest in public safety issues (such as police and conservation officers) with the authority to respond to compliance and safety issues while engaged on their regular duties.
3. Bodily Injury Exclusion for Headlock
Ontario courts continue to do gymnastics with insurance policy interpretation. In the recent decision of Mitsios v. Aviva Insurance Co. of Canada (2008) 89 O.R. (3d) 556 Justice Allen had occasion to hear an application for a declaration that a commercial liability policy of insurance required the insurer to defend an insured for a claim for bodily injury.
The insured was sued by a fellow employee who alleged that he sprayed the insured with water while cleaning up, that the insured reacted by placing him in a headlock, and that he lost his balance and suffered injuries as a result.
In response to the application for a declaration for coverage, the insurer Aviva relied upon an exclusion in the policy for bodily injury “caused intentionally by or at the direction of the insured.”
Justice Allen held that the insured’s acts were not excluded under the policy. Relying on the decision of the Supreme Court of Canada in Nichols v. American Home Assurance Co. 1 S.C.R. 801 where that court held that provisions granting coverage are to be construed broadly, while exclusion clauses are to be construed narrowly, Justice Allen stated “Even if it could be said that the headlock was intentional, there is no plea of an intent to injure.”
4. Air Carrier Ordered to Provide Space for Service Animals
The Canadian Transportation Agency issued its decision [Decision No. 327-AT-A-2008] on June 20th, 2008 ordering Air Canada and Air Canada Jazz to ensure sufficient floor space is provided for certified service animals at the person with a disability’s seat.
The Agency ruled that failure to provide sufficient space would constitute an “undue obstacle” in transportation. The decision is designed to ensure equal access to the federal transportation network for persons with disabilities, regardless of the nature of the disability. The Agency found that travelling in a very constrained position has negative implications for a service animal which may impact on its ability to function and which may negatively impact a person’s well-being and increase the risk of injury, and therefore has safety implications for both the individual and the service animal.
The Decision applies only to the travel of certified service animals within Canada on Air Canada and Air Canada Jazz aircrafts with 30 or more seats. A service animal is any guide dog, assistance dog, or other animal professionally trained and certified to provide assistance to an individual with a disability.
In accordance with section 149 of the Air Transportation Regulations, a carrier must accept a service animal for carriage at no additional cost to accompany a person on board an aircraft and permit the animal to remain on the floor at the person’s passenger seat.
While Air Canada and Air Canada Jazz have provided sufficient space for service animals in many instances, the carriers only confirm sufficient space accommodation without additional cost just prior to departure and is subject to space availability, thereby creating undue obstacles.
The Agency has ordered both carriers to take the following corrective measures within 90 days in order to remove undue obstacles to persons travelling with a service animal:
1. Develop policies and procedures for domestic flights to ensure that, at the time of reservation and upon receipt of a request at least 48 hours in advance, seating with sufficient floor space will be provided for the person travelling with their service animal, at no additional cost.
2. Make a reasonable effort to provide the service when less than 48 hours advance notice is provided.
3. Enter into dialogue with the person travelling with a service animal to determine floor space requirements of the service animal and how best to accommodate these requirements.
5. Punitive Damages Update
The Supreme Court of Canada and the U.S. Supreme Court this month both had occasion to consider punitive damage awards and the basis for these type of awards.
In Canada, in Honda Canada Inc. v. Keays,  SCC 39 and employee, Mr. Keays had worked 11 years for Honda, first on an assembly line and later in data entry, when, in 1997, he was diagnosed with chronic fatigue syndrome. He ceased work and received disability benefits until 1998, when his Honda’s insurer discontinued his benefits. Mr. Keays returned to work and was placed in a disability program that allows employees to take absences from work if they provide doctor’s notes confirming that their absences are related to their disability. Honda became concerned about the frequency of his absences. Moreover, the notes Mr. Keays offered to explain his absences changed in tone, leaving Honda to believe that the doctor did not independently evaluate whether he missed work due to disability. As such, Honda asked Mr. Keays to meet an occupational medical specialist, in order to determine how Mr. Keays disability could be accommodated. On the advice of his counsel, Mr. Keays refused to meet the doctor without explanation of the purpose, methodology and parameters of the consultation. In March 28, 2000, Honda gave Mr. Keays a letter stating that it supported Mr. Keays full return to work but that Mr. Keays employment would be terminated if he refused to meet the doctor. When Mr. Keays remained unwilling to meet the physician, Honda terminated his employment.
The trial judge found that Mr. Keays were wrongfully terminated and awarded Mr. Keays a notice period of 15 months. In addition the trial judge increased the notice period to 24 months to award additional damages for the manner of dismissal and awarded $500,000 in punitive damages. The Ontario Court of Appeal reduced the punitive damages to $100,000.
The Supreme Court of Canada held that Mr. Keays was wrongfully dismissed and the award of damages reflecting the need for 15 months’ notice should be maintained. However it held that neither the aggravated damages (the extra notice period) nor the punitive damages should have been awarded. The trial judge had ordered the punitive damages on the basis of discriminatory conduct by Honda.
The Supreme Court of Canada made it clear that breaches of the Human Rights Code cannot be compensated by way of court-awarded punitive damages. The Court held that the Code provides a comprehensive scheme for the treatment of claims of discrimination and that a breach of the Code cannot constitute an actionable wrong (which is a necessary requirement for an award of punitive damages). The Court stated (at p. 62):
Damages for conduct in the manner of dismissal are compensatory; punitive damages are restricted to advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own. This distinction must guide judges in their analysis.
The Court also stated (at p. 69):
…it is worth mentioning that even if the facts had justified an award of punitive damages, the lower courts should have been alert to the fact that compensatory damages were already awarded, and that under the old test, they carried an element of deterrence. This stems from the important principle that courts, when allocating punitive damages, must focus on the defendant’s misconduct, not on the plaintiff’s loss… In this case, the same conduct underlays the awards of damages for conduct in dismissal and punitive damages. The lower courts erred by not questioning whether the allocation of punitive damages was necessary for the purposes of denunciation, deterrence and retribution, once the damages for conduct in dismissal were awarded. Be that as it may, we now have a clearer foundation to distinguish between damages for conduct in dismissal and punitive damages.
On 25 June 2008, the United States Supreme Court issued its opinion in Exxon Shipping Co. v. Baker (No. 07-219) 472 F. 3d 600 and 490 F. 3d 1066. The decision concerned the limits of punitive damages which may be assessed under federal maritime law. The Court held that under federal general maritime law governing maritime cases, an award of punitive damages may not be greater than a 1:1 ratio as compared with compensatory damages. The Supreme Court reduced the prior $2.5 billion punitive damages award to $500 million.
In 1989 the “Exxon Valdez,” ran aground, spilling some 11 million gallons of crude oil into Prince William Sound. The accident occurred after the tanker’s captain, Joseph Hazelwood-who had a history of alcohol abuse and whose blood still had a high alcohol level 11 hours after the spill-inexplicably exited the bridge, leaving a tricky course correction to unlicensed subordinates. Exxon spent some $2.1 billion in cleanup efforts, pleaded guilty to criminal violations occasioning fines, settled a civil action by the United States and Alaska for at least $900 million, and paid another $303 million in voluntary payments to private parties. Other civil cases were consolidated into this one, brought against Exxon, Hazelwood, and others to recover economic losses suffered by those who depended on Prince William Sound for their livelihoods. The Court converted the case into a class action, with approximately 32,000 claimants. The jury awarded approximately $507.5 million in “relevant compensatory damages.” The jury then initially awarded $5 billion in punitive damages against Exxon. After several appeals to the Ninth Circuit, the award was reduced to $2.5 billion.
The Supreme Court of the U.S.A. was split evenly on the issue whether punitive damages can be assessed against a ship-owner based on the independent acts of its managerial employees under federal maritime common law. The Ninth Circuit’s decision (answering the question in the affirmative), therefore stands, and the Supreme Court’s “split” creates no precedent. The Court rejected Exxon’s argument that penalties for spills under the Clean Water Act preempted an award of punitive damages. The Court then turned to the core of the case: whether the punitive damage award was excessive.
The Supreme Court surveyed the history of punitive damages in Anglo-American jurisprudence, and concluded that “the consensus today is that punitives are aimed not at compensation but principally at retribution and deterring harmful conduct.” The Court noted that the median punitive damage award in United States courts is in an approximately 1:1 ratio with compensatory damages. The Court held that the punitive damages award against Exxon was excessive as a matter of maritime common law. In the circumstances of this case, the award should be limited to an amount equal to compensatory damages.
The Supreme Court was troubled by outlying cases: “The real problem, it seems, is the stark unpredictability of punitive awards.” The Court reasoned that “a penalty should be reasonably predictable in its severity,” and similar conduct should result in similar punitive damage awards. The Court discussed three possible methods of increasing predictability: a multi-factored test (which require judges to weight various factors), a hard dollar cap on punitive damages and pegging punitive damages to compensatory damages.
The Court determined that the best way to eliminate outlying punitive damage cases was “by pegging punitive to compensatory damages using a ratio.” The Court then determined that a 1:1 ratio, which represents the median punitive damage award, is best suited for maritime cases such as Exxon – “a case of reckless action, profitless to the tortfeasor, resulting in substantial recovery for substantial injury.”
6. Due Diligence Defences
R v. Kanda (2008) 88 O.R. (3d) 732 [Ont. C.A.]
Narrowly speaking, this case concerns whether a person caught driving a car containing a child who is not wearing a seat belt can raise a defence of due diligence.
More broadly, the case is a helpful reminder and an illustration of the defences that are available to one charged with a regulatory or a ‘public’ offence.
Ashwani Kanda was driving two sons, aged 8 and 12 years, to school in April of 2004. He was stopped by a police officer and charged with an offence under s. 106 of the Ontario Highway Traffic Act, R.S.O. 1990, c.H.8 which provides:
“No person shall drive on a highway a motor vehicle in which there is a passenger who is under sixteen years of age and occupies a seating position for which a seat belt assembly has been provided unless that passenger is wearing the complete seat belt assembly and it is properly adjusted and securely fastened”.
Mr. Kanda testified at the trial of the charge that he ensured both boys were wearing their seat belts when he left the family home. The younger son had apparently unbeknownst to Mr. Kanda freed himself from his own seat belt during the drive.
The trial judge convicted Mr. Kanda of the offence on the basis that it was an ‘absolute liability’ offence. Mr. Kanda appealed this finding, which was overturned on appeal. The judge hearing the appeal ruled that the offence was a ‘strict liability’ offence.
What is the difference between ‘absolute’ and ‘strict’ liability? Under a ‘strict’ liability offence the accused may avoid a conviction by leading evidence of ‘due diligence’ to avoid the infraction from happening. Under ‘absolute liability’, an accused will be found liable simply upon proof being established of the offence itself – regardless of any explanations of steps taken to prevent an infraction.
The appeal judge remitted the question of ‘due diligence’ back to the original trial judge for evidence to be led, and considered on that point.
Her Majesty sought leave to appeal the successful ‘overturn’ of the conviction and the remanding of the matter back to the original judge for trial. Her Majesty wanted the conviction restored and to stand without further proceedings. On this particular appeal, the issue was whether the above offence was one of strict as opposed to absolute liability.
Enter then the general relevance of this case. There are many infractions and offences on the books, of municipal, provincial and federal legislation. Which is which and what defences exist, if a charge is laid?
The Court of Appeal in reviewing the matter had occasion to revisit the important case of R. v. Sault Ste. Marie (City)  2 S.C.R. 1299 which set forth the criteria by which various offences were to be categorized. In the Sault Ste. Marie case the Supreme Court of Canada classified ‘regulatory’ or ‘public welfare’ offences into three different categories:
– mens reas offences – strict liability offences and – absolute liability offences
The first type [means rea] offence consists of a positive state of mind such as intent, knowledge or recklessness, which state of mind must by proven by the prosecution as a matter of inference to be drawn from the act committed, or by separate evidence.
The second type of offence, being the ‘strict liability’ offence does not require the prosecution to prove ‘state of mind’ on the part of the accused. Rather, proof of the commission of the prohibited act will result in a conviction, unless the accused can avoid liability by proving that he took ‘all reasonable care’, or due diligence, to prevent the infraction. The Supreme Court noted that this involves a consideration of what a reasonable man would have done in the circumstances. The defence will be available if the accused reasonably believed in a mistaken set of facts which, if true, would render the act or omission innocent, or if he took all reasonable steps to avoid the particular event.
The third type of offence, being absolute liability, does not leave it open for the accused to try to show that he acted reasonably to avoid a conviction. The mere commission of the prohibited act will then result in a conviction.
How then to differentiate between these three types of offences?
The Supreme Court commented in Sault Ste. Marie:
“Offences which are criminal in the true sense fall in the first category [above]. Public welfare offences, at first blush, would be in the second category… An offence of the first category type [mens rea] would require the use of words in the relevant legislation such as “willfully”, “with intent”, “knowingly” or “intentionally”. On the other hand, the principle that punishment should in general not be inflicted on those without fault would apply. Offences of absolute liability would be those in respect of which the legislature made it clear that guilt would follow proof merely of the prohibited act. The overall regulatory pattern of the legislature, the subject matter of the legislation, the importance of the penalty, and the precision of language used will be primary considerations in determining whether the offence falls into the third category [of absolute liability].
It is therefore important to note the presumption, or general rule, that ‘public welfare’ offences are strict liability offences, as opposed to being absolute liability offences.
On this particular appeal the Court of Appeal reviewed the facts of this seat belt case. The police officer who laid the charge was stopped in an unmarked cruiser at a four way stop in Brampton, Ontario in the morning when he observed the vehicle driven by Mr. Kanda at the intersection. He observed the younger child, in the back seat, without a seat belt. Upon stopping the vehicle the officer confirmed this to be the case. A ticket was issued. As mentioned, at trial the original judge determined that this was an absolute liability offence. As such Mr. Kanda’s explanation that he was unaware of what had happened in the back seat of his car afforded no defence.
The Court of Appeal accordingly took the above underlined factors outlined by the Supreme Court of Canada into consideration in assessing the essence of s. 106 of the Highway Traffic Act. The court noted that of the many offences contained in the Highway Traffic Act, that there are clear illustrations of all three types of offences. Accordingly, an analysis of the ‘overall regulatory pattern’ of the Highway Traffic Act, being the first test sanctioned by the Supreme Court, is neutral and does not answer the question: that Act, as a whole, would not provide the answer of what type of offence this is.
The second factor concerns the ‘subject matter’ of the legislation. The purpose is obviously to minimize driver and passenger injury. The Court of Appeal regarded s. 106 as supporting a classification of ‘strict liability’ as striking an appropriate balance between encouraging vigilance in drivers to take care of minors and not punishing those who do expend reasonable efforts to ensure their safety.
Looking at the third factor of ‘penalty’, the only penalty that may be levied is a modest fine – a fine of not less than $60 and not more than $500 plus 2 demerit points. The Court notes that there is no stigma associated with a traffic ticket of this sort. Accordingly, the Court of Appeal reasoned that such minor penalties then support a classification of this offence of being one of ‘absolute liability’ – there being less concern for the harsher ‘fall out’ that comes with the categorization of ‘absolute liability’.
The fourth factor is that of “Precision of language’. The prosecution argued that the wording in the particular offence that “No person shall” points to the offence being an absolute liability offence. The Court disagreed, citing that while some cases have found that such wording leads to an ‘absolute’ liability offence that such cases concern situations where an offence has occurred through the action of the accused. Section 106 of the Highway Traffic Act necessarily concerns the action of a third party. The Court found logic in the argument that where a statute concerns itself with creating a duty of care in respect of another person, that it would be illogical that an accused could not raise a defence of due diligence or reasonable care. Further, the wording of s. 106, by itself, does not preclude the defence of due diligence as it does not use the specific words usually used to create an ‘absolute’ liability offence.
The Court ultimately dismissed the appeal by the prosecution, ruling that s. 106 is a ‘strict’ liability offence, citing the principle from R. v. Sault Ste. Marie that there is a presumption in favour of strict liability in an interpretive dispute between strict and absolute liability offences – as a matter of fairness to the accused individual. Factoring all the above, the Court ruled that the prosecution did not displace the presumption in favour of strict liability. Accordingly the appeal was dismissed and the matter was referred back to the original trial court to hear evidence and argument on the defence of due diligence.
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