Newsletter > February 2012
In this issue: 1. Firm and Industry News 2. Discussion Paper – Compulsory Insurance for Ships 3. 2011 – A Safe Year in Aviation History 4. Liability Exclusion Clauses in Marine 5. Smith v. Inco Limited 6. Halsbury’s Laws of Canada – Transportation
1. Firm and Industry News
- April 19 – 22, 2012, London U.K.: McGill University / PEOPIL Conference on Aviation Law and Insurance
- April 25 – 29, 2012, New Delhi, India: Workshop & International Conference on Law & Regulation of Air Transport & Law of Space Applications
- May 8 – 9, 2012, Toronto: Supply Chain & Logistics Association of Canada Annual Conference
- May 23 & 24, 2012, Banff Springs: Semi-Annual Meeting Canadian Board of Marine Underwriters
Gordon Hearn participated in a panel presentation at the February 9th meeting of the Canadian International Freight Forwarders Association. The panel addressed issues and best industry practices in preventing “Identify Theft” of cargo.
Chris Afonso presented a seminar to the Supply Chain & Logistics Association of Canada on February 21st on “Understanding Limits of Liability”.
Halsbury’s Laws of Canada has just published its Transportation – Carriage of Goods and its Transportation – Railways titles in one text. Rui Fernandes is the author for both of these works. See the summary of the works below in item 7.
Gordon Hearn will be presenting a paper on the “Canadian Import and Export Regulatory Regime” at the April 23rd annual meeting of the Transportation & Logistics Council in Orlando, Florida.
Gordon Hearn will be presenting a paper on “Legal Considerations in Managing Export Trade Risks” at an industry conference on April 26th in Mississauga, Ontario.
2. Discussion Paper on the Proposed Regulations Respecting Compulsory Insurance for Ships Carrying Passengers
On March 1st, 2012 the Canadian Federal Government introduced its discussion paper on the proposed regulations respecting compulsory insurance for ships carrying passengers. The objective of the regulations is described as:
[T]o ensure that marine carriers engaged in domestic carriage of passengers in Canada maintain insurance to cover their liability to those passengers. Such regulations, governing various forms of compulsory insurance, are the norm in other modes of transport (air, rail, and road) and marine passengers should expect to find the same safeguards in the marine mode.
The initiative has its origins in an accident which occurred on June 16, 2000. The tour boat “True North II? sank in 15 metres of water in Georgian Bay resulting in the drowning of two teenage children. The inquest found that the owner-operator was not insured and recommended compulsory insurance for commercial vessels carrying passengers. Following the incident, the Minister of Transport made a commitment in 2001 to the House of Commons Standing Committee on Transport and Government Operations to enact regulations requiring compulsory insurance for ships carrying passengers.
The following is a summary of the key provisions of the discussion paper.
The proposed regulations will have exactly the same scope of application as the underlying liability regime itself has in Part 4 of the Marine Liability Act (in that they will apply to all ships operated for commercial or public purpose for the domestic carriage (*1) of fare-paying passengers and, in some cases, also those passengers who did not have to pay for their passage).
The latter category may include: 1) A shuttle ferry providing service, free of charge, as an integral part of a highway, or to/from a free public concert held by a municipality on a nearby island; or 2) A water taxi operated by public or commercial entities, free of charge to users, as part of a municipal commuter system; or 3) A fishing vessel free of charge to users, carrying clients to/from fishing camps; or 4) A vessel normally used for private pleasure purposes free of charge to users, carrying prospective clients viewing real estate properties from the water-side; or 5) A vessel normally used for private pleasure purposes or a fishing vessel free of charge to users, that would carry workers to a construction site; or 6) A tug boat that does not usually carry passengers but once a year would have a contract to carry Transport Canada’s inspectors.
The proposed regulations will place the responsibility to maintain insurance solely on “a person who performs the whole or part of a carriage by ship”. The regulations are drafted so that a “carrier” who merely sells the ticket for a passenger voyage (e.g., travel agents) is not required to maintain insurance.
In addition to parties exempted from the liability regime in Part 4 of the Marine Liability Act (e.g., adventure tourism activities, sail trainees, etc.) and therefore exempted from the proposed regulations, the following are also exempted from the proposed regulations:
– carriage performed by vessels that are undertaking search and rescue operations as part of the Coast Guard Auxiliary Vessels Program; and – carriage performed by the Government of Canada or a province, or by an entity that is entitled to indemnification by such Government for the liability under Part 4 of the Marine Liability Act.
It is therefore proposed that the amount of liability insurance for death or personal injury to passengers be fixed at an amount of not less than $250,000 multiplied by the passenger capacity of the ship.
It should be noted that the proposed regulations also indicate that the contract of insurance must provide that the coverage is available exclusively to indemnify damages for death or personal injury. In other words, the required amount is “reserved” for only these two kinds of claims. It follows, therefore, that carriers would be well advised to consult fully with their insurance experts to determine any additional insurance needs to cover their other exposures to various liabilities other than for death or personal injury of passengers.
A proof of insurance in the form of a Certificate of Insurance will have to be carried on board the ship to be produced on demand by an enforcement officer. The proposed regulations include a standard form of this certificate to be issued by insurers. It should be noted that the wording of the certificate resolves the concerns raised earlier by insurers about the absence of any expression or reference that would make it clear that the certificate is “subject to the terms and conditions of the policy”. This provision has therefore been included in the certificate.
In addition, the certificate would also stipulate that in case of a fleet policy, each ship would be deemed separately insured.
The proposed regulations provide for a two-stage introduction.
Shipowners who hold an insurance policy for liability to passengers at the time that the new regulations come into force would be required to comply with the regulations on the date of the next renewal of the policy, unless they modify or cancel their policy in the meantime.
Thus, if the regulations are published in Part II of the Canada Gazette on September 1, 2012 and come into force in 30 days, i.e. on October 1, 2012, and the shipowner already holds an annual liability insurance policy that was issued or last renewed on April 1, 2012, that shipowner would be expected to comply with the regulations at the next renewal of the policy on April 1, 2013.
Shipowners who do not have any insurance policy for liability to passengers would be expected to comply with the regulations sixty (60) days after they come into force.
Thus, if the regulations are published in Part II of the Canada Gazette on September 1, 2012 and come into force in 30 days, i.e. on October 1, 2012, the shipowners would have to obtain the required insurance to comply with the regulations by November 30, 2012. Effectively, the shipowners would have 90 days to comply with the new regulations.
*1 Part 4 of the Marine Liability Act sets out that domestic carriage includes all carriages where the initial point of departure and final point of arrival are in Canada, even if there is an in-transit call at a place outside Canada
3. 2011 – A Safe Year in Aviation History: Lessons Learned and Things Anticipated
What happened in 2011?
The beginning of each year is the time when many of us make resolutions to follow in the New Year based on our experience in previous years. These resolutions usually mirror our intentions to improve. With respect to the aviation industry, however, making ambitious resolutions for 2012 could be considered to be a bold initiative since the previous year was probably the safest year in the aviation history.
According to an analysis completed by Flight Global (http://www.flightglobal.com) – a leading online portal dedicated to the aviation industry – last year saw 32 fatal aircraft accidents which is more than the number of accidents in 2010 (26 accidents) and above the annual average for the last decade (31 accidents). Nevertheless, the fatality total in 2011, which was 514 deaths, was the second lowest after comparing 2011 with the results from 2004. The annual average of fatalities for the previous decade was 751 fatalities.
Of all jet aircraft involved in the total of nine fatal jet accidents, 2 were freighters, 2 regional jets and 5 big passenger jets. According to Ascend (http://www.ascendworldwide.com) – data and consultancy division of Flight Global – the worst of those jet accidents involved a 36-year old Boeing 727-200 and a 46-year-old Boeing 727-100. The other three jet aircrafts were Boeing 737-200, Tupolev Tu-154 and Yakovlev Yak-42.
Ascend states, “[i]t was a good year from the point of view of both safety and insurance. Fatal accident and passenger fatality rates for the year were the lowest ever and, with no major catastrophe, the estimated cost of incurred hull and liability losses in 2011 is not much more than half that recorded in 2010.”
Fatal accident rates also improved in 2011, according to Ascend and the International Air Transportation Association (IATA). In 2010 the accident rate was one accident to 1.3 million flights. (*1) This rate improved to one accident per 1.52 million flights. Hence, according to accident rate indicators, 2011 was the a very safe year in aviation history.
The region-by-region analysis of IATA also shows that all regions have had improvements in their safety performance, but for one region – the Commonwealth of Independent States (CIS). When calculated on a per-one-million-flights basis, Europe had no loss of hull of Western-built aircraft; Southern Africa had 3.9 compared to 8.26 in 2010; Latin America and the Caribbean had 1.43 compared to 2.0 in 2010; Middle East and North Africa had 0.76 against 0.8; Asia Pacific 0.2 against 0.9; North Asia zero compared with 0.38, and North America the same safety performance as in 2010 at 0.11. (Source: Flight Global)
The worst performer, the CIS, had the rate of 1.39 and plus there were 5 jet hull loss accidents involving Eastern-built aircrafts. The IATA analysis of total accident rates for all types put the CIS at 11.7 hull losses per million flights in 2011. In contrast, in 2010 the CIS had no loss of Western-built aircrafts, and, including the accidents to Eastern-built aircraft, there were 7.15 losses of hull. (Source: Flight Global and IATA)
Things to Watch for in 2012: Lithium Batteries
With the variety of different electronic gadgets coming into the consumer market, the need for and use of lithium batteries has increased significantly. Lithium batteries are problematic when the cargo consisting of such batteries has not been properly declared in the associated shipping documents. Apparently, lithium batteries can ignite and easily catch fire. Therefore, it has become a priority for air carriers to have the cargo declared accordingly to avoid possible fire accidents onboard.
In 2011, Asiana Airlines’ Boeing 747-400F was the largest aircraft involved in a fatal accident. While investigation of this accident still continues, it has been concluded that the aircraft crashed because of a fire in the main cargo hold. It has yet to be confirmed; however, the experts believe that the cause of fire was the cargo of 400 kg of lithium batteries. This accident is the second fatal accident involving a 747-400F; the first one involved a UPS aircraft that crashed near Dubai in September of 2010.
Problems and dangers associated with lithium batteries have been known to the aviation industry for some time and has attracted much publicity due to the fire incident at the FedEx facilities in August 2009 involving cargo belonging to Massachusetts Institute of Technology (“MIT”) packed with lithium batteries. MIT was found liable for negligent packaging of the cargo and not informing the carrier that the cargo contained hazardous material – lithium batteries. As a result, the US Federal Aviation Administration imposed a $175,000 USD fine on MIT. (Source: The Tech – Online Journal: <http://tech.mit.edu/V131/N35/faapenalty.html>)
If the investigation of the Asiana freighter crash reveals a certain causation between the lithium batteries it was carrying and the onboard fire, this should further alert the industry participants to take more precautionary measures when dealing with lithium batteries. Every participant in the airline industry, be it the shipper, the freight-forwarder, the insurer or the carrier, should take to mitigate the damages that could result from similar accidents.
However, paradoxically, the legislators are hesitant to allow the aviation industry participants to take tighter control over the transport of lithium batteries. For instance, in February of 2012, the US President Barack Obama signed a new bill, The FAA Modernization And Reform Act of 2012 (H.R. 658). This new Bill, amongst other things, “prevents the FAA from mandating tighter controls on lithium batteries beyond International Civil Aviation Organization (ICAO) Technical Instructions unless U.S. or foreign air-accident investigators produce ‘a credible report’ that lithium batteries ‘substantially contributed’ to an aircraft fire.” (*2)
Such an approach of the US legislators towards hazardous cargo has ignited negative reaction amongst the industry participants. For example, the Coalition of Airline Pilots Associations has criticized the Congress for failing to recognize the dangers of lithium batteries and allow for more regulation despite the FAA’s findings and predictions about the danger these batteries pose to the aviation safety (*3). Hence, one can only hope that other countries will deal with lithium batteries more seriously.
Human Error: Not eradicated, but rather strengthened
With the development of the latest aircraft technologies, one would expect that potential contribution of human error to aircraft accidents would be reduced. It would also be expected that the combined knowledge of pilots and onboard technology would leave no space for any kind of error.
Although 2011 has not witnessed loss-of-control or lack-of-control accidents, the number of such accidents caused by human error has increased in the last decade. As noted by Flight Global, quoting the findings of the UK Royal Aeronautical Society conference, the system of training pilots today is producing pilots incapable of dealing with the unexpected. Automation of procedures in aircraft exploitation has created an increasing dependence of pilots upon onboard technologies:
“The intellectual and physical skills once required of the pilot have largely been replaced by an emphasis on ‘soft skills’ and automation management. The pilot who once cynically challenged sources of information now readily accepts information from a variety of sources, many computer-generated, without question.” (Source: Flight Global)
This increase of automation of flight procedures and potential shortcomings in pilot training can possibly cause more human error-related accidents. Hopefully, 2012 will be a start in addressing these concerns. However, with increasing shortage of pilots around the world, it is highly unlikely that pilot training centers will adopt old school approaches regarding training as the airlines demand fast and inexpensive production of trained pilots for their ever increasing number of aircrafts.
What will 2012 bring?
For the aviation industry, 2012 will be yet another challenging year. The clearest and most significant of those challenges will probably be the fluctuation of fuel prices and the instability of oil-producing countries in the Middle East.
In addition, based on previous year’s experience with old aircraft, we can expect definite movement towards aggressive fleet updating. Certain movements in that respect can be seen in Russia where President Dmitriy Medvedev and Prime Minister Vladimir Putin have criticized the safety records of aircraft flying in that part of the world. The Russian President has called for rapid modernization of his country’s aviation industry. Previous tax barriers regarding the import of Western-built aircraft in effect in Russia in 2010 were lifted in 2011 and more Western-built aircraft are expected to to fly in Russian skies. (*4)
So far, the year 2012 has already witnessed incidents regarding aircraft safety. Recently, Singapore Airlines and Qantas have found cracks, though said to be non-critical, in the wings of some of their Airbus A380s. (*5) Thus, the issue of airworthiness of aircraft, both old and new, will be something to watch in 2012.
With respect to the challenge posed by transporting lithium batteries, in the absence of legislative intervention, air carriers and their insurers are expected to become more demanding and careful with respect to such hazardous cargo.
Rakhmadjon Sobirov Student-at-Law
*1 See in general, Airline Safety Review: *2 AvStop.com – Aviation Online Magazine: President Obama Signs The FAA Modernization And Reform Act Of 2012 (H.R. 658): <http://avstop.com/news_february_2012/president_obama_signs _the_faa_modernization_and_reform_act_of_2012_hr_658.htm>. *3 The Coalition of Airline Pilots Associations, CAPA Response to FAA Bill passes through to Obama: <http://www.capapilots.org/capa-response-to-faa-bill-passes-through-to-to-obama>. *4 Russian Aviation News Portal, The government of Russian Federation has started the development of measures for funding the leasing of foreign aircraft:<http://www.ruaviation.com/news/2011/9/13/532/>. *5 Flight Global, Qantas grounds A380 after finding 36 cracks on wings: <http://www.flightglobal.com/news/articles/qantas-grounds-a380-after-finding-36-cracks-on-wings-367923/>.
4. The Extent of a Liability Exclusion Clause in Marine Law: What if There Is Negligence?
It is common practice in marine law to have exclusion clauses with regard to the carrier’s liability on the bill of lading under which the cargo is carried. In November of 2011, the Court of Appeal of Quebec, in Mediterranean Shipping Company, S.A. v. Courtiers Breen Ltée, (*1) had the opportunity to review the extent of two of the most commonly used exclusion clauses in Marine Law, i.e. the exclusion of liability in the event of a breakdown of machinery and the exclusion of liability with regard to damages to fruit, vegetables and other perishables.
1. The Facts
In this case, the appellant, Mediterranean Shipping Company S.A. (“Mediterranean”) a marine carrier, was hired by Les Courtiers Breen Ltée (“Breen”), a Montreal-based fruit importer, for the carriage of a cargo of clementines. Upon receipt of the cargo by Breen in the port of Montreal, it was noticed that the cargo was severely damaged, as many of the fruits were moldy and rotten. Breen sued Mediterranean for damages in the Court of Quebec. At first instance (*2), Mediterranean claimed that it was not liable for the alleged damages claimed by Breen as there were exclusion clauses on the back of the bill of lading under which the cargo was carried excluding Mediterranean’s liability as follows:
“14. (b) REEFER CHILLED OR HEATED CARGO. Refrigerated or heated carriage and carriage at controlled temperatures shall not be furnished unless specifically stipulated in Box 13 (Particulars Furnished by the Merchant), reverse side and extra freight paid per tariff. If a carrying temperature is specified in Box 13, it is agreed that the Merchant shall ship the goods at the temperature, plus or minus 2o C, and the Carrier shall carry the goods at the temperature plus or minus 2o C, since it is understood that reefer machinery is not designed to freeze the goods or to lower their temperature and that exact temperatures cannot be maintained by the reefer machinery at all times. The carrier shall not be liable for breakdown of such machinery, unless caused by the carrier’s negligence. The carrier has no responsibility whatsoever for the functioning of reefer containers or trailers which are not owned or leased by the carrier.
(d) The Carrier shall not be responsible for loss or damage to fruit or vegetables due to deterioration, decay, rot heat or frost, discoloration, change of skin texture, and not for marked, cut or stained bags or boxes or other packages of freight. Fruits, vegetables and other perishable Goods are carried expressly at the sole risk of the Merchant.”
The first instance judge held that the damage to the cargo had been caused by Mediterranean’s negligence. Afterwards, the Honourable Justice had to decide whether the above-mentioned exclusion clauses could be sufficiently broadly construed to exclude Mediterranean’s liability even in the event of its own negligence. To do so, he referred to the three-prong analysis of the decision Canada Steamship Lines Ltd. v. The King, (*3) that goes as follows:
“Their Lordships think that the duty of a court approaching the consideration of such clause may be summarized as follows:
(i) If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called “the proferens”) from the consequence of the negligence of his own servants, effect must be given to that provision. Any doubts which existed as to whether this was the law in the Province of Quebec were removed by the decision of the Supreme Court of Canada in Glensoil S.S. Co. v. Pilkington. (ii) If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens. If a doubt arises at this point, it must be resolved against the proferens in accordance with art. 1019 of the Civil Code of Lower Canada: “In cases of doubt, the contract is interpreted against him who stipulated and in favour of him who was has contracted the obligation.” (iii) If the words used are wide enough for the above purpose, the court must then consider whether “the head of damage may be based on some ground other than that of negligence” to quote again Lord Greene, M.R., in the Alderslade case. The “other ground” must not be so fanciful or remote that the proferens cannot be supposed to have desired protection against it, but, subject to this qualification, which is, no doubt, to be implied from Lord Greene’s words, the existence of a possible head of damage other than of negligence is fatal to the proferens even if the words used are, prima facie, wide enough to cover negligence on the part of his servant.
Based on this analysis, the Honourable Judge at first instance held that Mediterranean could not rely on clause 14-B as the clause specifically excluded its application in the event of negligence. In regards to the application of clause 14-D, it was held that interpreting 14-D as wide enough to cover negligence on the part of Mediterranean’s servant would deprive clause 14-B of any application since it specifically excludes application in the event of negligence. Judgment was granted in favour of Breen and Mediterranean appealed.
2. The Legal Issue
The Court of Appeal had to answer the following question: did the judge at first instance err in finding that clause 14-D was not applicable in the event of negligence?
3. The Ruling
The Court of Appeal held that the judge at first instance had erred in his interpretation of the three pronged test of Canada Steamship Line; more specifically, in his analysis of the second part of the test as to whether the language used was wide enough to cover negligence on the part of Mediterranean, while in fact, the language used in clause 14-D was broad enough to include negligence.
By answering “yes” to the second part of the test, the Court of Appeal had to analyze the third part of the test and to decide whether the “head of damage may be based on some ground other than of negligence.” To that question, the Court answered “No”. It held that the only cause other than negligence that could have triggered the exclusion clause 14-D would be a failure by Mediterranean to comply with its contractual obligations and that it was unlikely that the parties had contemplated this ground at the time the contract was entered into. However, even if clause 14-D was broad enough to include negligence, the Court concluded that it was certainly not broad enough to include a failure by Mediterranean to comply with its contractual obligations, which was, in this case, the carriage of a refrigerated cargo at the appropriate temperature.
The appeal was dismissed.
Endnotes* 1 Mediterranean Shipping Company, s.a. v. Courtiers Breen Ltée, 2011 QCCA 2173 (CanLII). * 2 Courtiers Breen Ltée v. Mediterranean Shipping Company, s.a., 2010 QCCQ 583 (CanLII). *3 Canada Steamship Lines Ltd. v. The King,  A.C. 192
5. Smith v. Inco Limited (*1) – Rylands v. Fletcher Revisited
The plaintiffs in this class action were successful at trial, obtaining a judgment of $36 million for its class members. This success, however, was reversed on appeal. An application for leave to appeal to the Supreme Court of Canada has been launched. If leave is granted, this will be the first treatment of the rule in Rylands v. Fletcher in many years and the case will be groundbreaking.
Inco opened a nickel refinery in Port Colborne in 1918. The refinery closed in 1984. During that time, Inco emitted waste products including nickel oxide into the air from the 500-foot smoke stack located on its property. The vast majority of the nickel emissions occurred before 1960. None occurred after the closure of the refinery in 1984. During the time of operation, Inco complied with the various environmental and other governmental regulatory schemes applicable to its refinery operation. There was no evidence presented that the emission levels from the refinery contravened any regulations.
Many of the properties as owned by the plaintiffs in this class action were located within several miles around the Inco refinery and were found to contain nickel deposits. Inco accepted that its refinery was the source of the vast majority of the nickel found in the soil.
The plaintiffs did not allege at trial that the presence of the nickel in the soil on their properties posed any immediate or long-term threat to human health. By the time of trial, allegations that the nickel deposits were carcinogenic or in any way harmful to the health of the residents had been abandoned and the action limited to a claim for loss of property value arising out of negative publicity regarding the Inco emissions. There were no allegations or findings that the plaintiffs’ use or enjoyment of land (amenity nuisance) had been interfered with.
The trial judge found that the soil on the properties of the class members contained nickel particles placed in the soil as a result of emissions generated by Inco’s nickel refinery in Port Colborne, Ontario over a 66-year period prior to 1985. The trial judge further held that, beginning in 2000, concerns about the levels of nickel in the soil caused widespread public concern and adversely affected the appreciation in the value of the properties after September 2000.
The trial judge held that Inco was liable in private nuisance and under strict liability imposed by the rule set down in Rylands v. Fletcher L.R. 1 Ex. 265, aff’d (1868), L.R. 3 H.L. 330 for that loss.
The trial judge ultimately found that comparable properties in Welland, Ontario had increased in value by 4.35% more than the Port Colborne properties during the ten-year period from 1999 to 2008. This difference yielded a loss of $4,514 per property, which when multiplied by the number of properties owned by the claimants resulted in the damage award of $36 million.
Inco appealed to the Ontario Court of Appeal, which allowed the appeal and dismissed the action finding that the plaintiffs had failed to establish liability under either nuisance or Rylands v Fletcher and, even if the plaintiffs did make out the claims, that the plaintiffs failed to establish any damages.
To establish nuisance, a plaintiff must prove that a noxious substance was allowed to escape by the defendants onto land that was owned or occupied by the plaintiff. But escape was not enough. The Court of Appeal noted that, to establish nuisance, there is also a requirement for actual, substantial and physical damage to the land at issue that at least posed some risk to the health or well being of the residents of those properties or to some physical injury to the land. Evidence that the existence of the nickel particles in the soil generated “concerns” about “potential” health risks did not amount to evidence that the presence of the particles in the soil caused actual, substantial harm or damage to the property. There was no physical injury to the land otherwise alleged or proven.
Therefore, the plaintiffs failed to establish actual, substantial and physical damage to their properties as a result of the nickel particles becoming part of the soil. Concerns about potential health risks were insufficient. Without actual, substantial and physical harm, the claim as framed by the plaintiffs could not succeed in nuisance.
The plaintiffs also sought judgment based on liability under the rule contained in Rylands v. Fletcher. The Court of Appeal noted the four prerequisites to the operation of the rule as found in The Law of Nuisance in Canada by Gregory S. Pun and Margaret I. Hall, (Markham, Ontario: LexisNexis Canada, 2010) (page 113):
(1) the defendant made a “non-natural” or “special” use of his land; (2) the defendant brought on to his land something that was likely to do mischief if it escaped; (3) the substance in question in fact escaped; and (4) damage was caused to the plaintiff’s property as a result of the escape.
This test suggests a broad basis for the imposition of strict liability for any damages caused as a result of the escape from the defendant’s land of something brought on to that land by the defendant, for his or her own “special” purposes, that was likely to do damage if it escaped from the defendant’s property. The concept of “non-natural use” of property as a precondition to the imposition of strict liability was introduced. Later cases used words like “special”, “unusual” or “extraordinary” to describe the use of the property.
The Court of Appeal stated that a finding of strict liability under the rule was predicated on ‘non-natural’ use of Inco’s property. The Court confirmed that items not naturally found on property will not necessarily or automatically give rise to strict liability if they escape. Further, characterization of an activity as ‘ultra-hazardous’ did not automatically attract liability. The plaintiffs failed to show that Inco’s use, as a nickel refinery, of its land was ‘non-natural’, ‘exceptionally dangerous’ or ‘extraordinary or unusual’. The refinery was in an industrial area and had complied with all applicable regulations, and was merely an ordinary use of industrial land.
Putting the claimants’ case at its highest, they alleged that the nickel particles placed in the soil up to 1984, combined with public health concerns, (ultimately not validated), that arose in 2000 and beyond, caused a relatively small decrease in the appreciation of the value of the claimants’ properties over a 10-year period beginning in 2000. Even if this harm was causally related to the refinery operation and the nickel particle emissions, the Court of Appeal held that this could not justify describing the refinery operation or the emissions as so inherently dangerous as to merit the imposition of strict liability based exclusively on the hazardous nature of the operation and the abnormal risk presented to others by that operation.
Even if strict liability for “ultra hazardous” activities, either as a freestanding basis for liability or a modification of Rylands v. Fletcher, were part of the law in Ontario, the claimants, it was found, failed to prove that Inco’s refinery constituted such activity. As to the characterization of the use, the court found that it must have regard to the place where the use is made, the time when the use is made, and the manner of the use.
It is of note that the Court of Appeal did emphasize that, while compliance with environmental and zoning regulations is not a defence to a claim seeking to apply the rule in Rylands v. Fletcher, it is part of the consideration as to the determination of whether the use is “non- natural”.
In this case, the Court of Appeal found that the plaintiffs’ claim failed because the alleged damages were caused by the normal operations of a nickel refinery in a heavily industrialized part of the city and was not a “non- natural” use.
At page 50 of the decision, Doherty J.A. speaking for the Court said,
“It is one thing to impose strict liability for mishaps that occur in the course of the conduct of an unnatural or unusual activity. It is quite another to impose strict liability for the intended consequence of an activity that is carried out in a reasonable manner and in accordance with all applicable rules and regulations.”
The Court of Appeal also held that the risk addressed in Rylands v. Fletcher is a limited one, imposing strict liability for things that go wrong and produce unintended consequences that damage the property (or perhaps the person) of another. In other words, an accident or mishap that occurs from an “unnatural use of land” must occur. The circumstances of the case did not relate to the same risk. Further, the Court of Appeal overturned the trial judge’s decision as the evidence did not support a finding that there were damages connected to Inco’s activities and held essentially that physical “change” was different than physical damage to the land.
Even if the plaintiffs could succeed in nuisance or pursuant to the rule in Rylands v. Fletcher, the plaintiffs failed regarding damages. On a proper analysis of the data, the Court of Appeal concluded that there was no evidence that residential real estate prices had risen more slowly in Port Colborne than in Welland. Accordingly, the plaintiffs had suffered no loss and the action was dismissed.
It is of note that the plaintiffs at trial did not adduce other evidence that might also have proven physical damage or loss of enjoyment of land had occurred. This would have included evidence that the nickel deposits on the land materially interfered with the use and enjoyment of the land or evidence that the nickel present reduced the property values based on something other than just negative publicity.
If the Court of Appeal’s decision withstands scrutiny at the highest level, it may be that, in future cases, expected and known results of businesses operating within the law will not qualify as “non-natural uses” even if neighbouring properties are adversely affected.
The application for leave to appeal to the Supreme Court of Canada will be heard within the next few months.
Kim E. Stoll
*1 2011 ONCA 62
6. Halsbury’s Laws of Canada – Transportation Law
On March 1st, 2012 the Canadian Federal Government introduced its discussion paper on the proposed regulations respecting compulsory insurance for ships carrying passengers. The objective of the regulations is described as:
Transportation – Carriage of Goods Rui M. Fernandes, B.Sc., J.D., LL.M.With carriage of goods law often at the forefront of commercial transactions, Halsbury’s Transportation – Carriage of Goods title offers the ideal resource for lawyers who require a concise explanation of how this specialized area of law operates. Timely and accessible, and written by one of Canada’s leading transportation lawyers, this valuable reference delivers a clear narrative of the legislative framework and identifies the relevant case law that practitioners need to be aware of. It contains useful answers to questions on a wide range of topics, including:
- Federal and provincial powers and areas of responsibility
- Carriage of goods by road
- Federal legislation regulating extra-provincial trucking
- Provincial licensing of carriers
- Powers and procedures of transport authorities
- Equipment and personnel
- Duties and responsibilities of carriers
- Passenger and luggage liability issues
- Hazardous goods
- Carriage of goods by rail
- Contractual arrangements
- Loss, damage or delay
- Accommodation for goods
- Connecting carriers
- Carriage of goods by water
- Formation and interpretation of Charter parties
- Loading and discharge of goods
- Frustration of contracts
- Hague-Visby rules regarding bills of lading
- Responsibilities, liabilities, rights and immunities of carrier Arbitration clauses, letters of indemnity
Transportation – Railways Rui M. Fernandes, B.Sc., J.D., LL.M.Once at the very heart of commercial activity and the Canadian Dream, railways still play an important part in the transport of passengers and goods, and rail lines are omnipresent in virtually every populated region in Canada. Transportation – Railways provides a comprehensive and national treatment of the law governing the construction, operation, safety and oversight of federal and provincial railways, including matters such as:
- The legislative framework
- Role and powers of the Canadian Transportation Agency
- Orders, enforcement and appeals
- Mediation and arbitration
- Violations and offences under the legislation
- Regulation of railway construction
- Expropriation of land
- Location, re-location and approval procedures
- Construction and maintenance costs
- Safety standards and regulation
- Duty of care, rights of way and railway crossings
- Environmental protection
- Passenger car safety requirements
- Powers, responsibilities and management of railway companies
- Traffic operations and rules
- Carriage of passengers
- Service requirements, persons with disabilities and personnel training
- Baggage issues
- Tariffs, rates and freight
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Fernandes Hearn LLP
155 University Avenue, Suite 700, Toronto, Ontario, Canada M5H 3B7
Telephone: 416-203-9500 | Fax: 416-203-9444
A proud Canadian law firm specializing in Transportation, Insurance, Trade, Technology and Commercial Law.