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Newsletter > July 2013

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In this issue: 1. Firm and Industry News 2. Freight Forwarder found to be “Holder” and “Merchant” under Bill of Lading 3. TSB Releases its Investigation Report into the Aldershot VIA Train Derailment 4. Kruger v. First Choice Update 5. Pierringer Debate Sanctifies Settlement Privilege 6. Limitation Periods for Dummies 7. Recent U.S. Customs and Border Protection Position Paper on C-TPAT 8. Lac-Mégantic Rail Disaster Update

The three masted schooner Empire Sandy at the Harbour Front in Toronto for the January 2017 newsletter.

1. Firm and Industry News

  • Fernandes Hearn LLP is pleased to announce that the Firm has been listed for inclusion in Chambers and Partners Global 2013 as one of the best “Shipping” Law Firms in Canada.
  • CBMU Golf Day – August 28th – Richmond Hill Ontario Canada.
  • Gordon Hearn will be speaking at a joint meeting of the Canadian Trucking Alliance, Ontario Trucking Association and Verisk Crime Analytics Canada – CargoNet on September 5th. The meeting is the Official Launch of “Project Momentum” to address cargo crime along the Highway 401 Corridor.
  • International Union of Marine Insurers (IUMI) annual meeting – London England – 15th to 18th of September. Rui Fernandes will be representing the firm at the meeting.
  • Kim Stoll will be speaking at the 2013 Canadian Transport Lawyers Association Annual Conference – Quebec City, Canada- 19th to 21st of September, 2013 on “Trucking Modal Update 2013”.
  • International Marine Claims Conference – Dublin Ireland – 25 to 27 September. Gordon Hearn will be representing the firm at the conference.
  • CMI Symposium – Dublin Ireland – 27 September to 4 October.
  • Women’s International Shipping and Trading Association (Wista) 1 to 4 October – Montreal, Quebec, Canada. Kim Stoll will be representing the firm at the conference.
  • Canadian Board of Marine Underwriters Network Night – October 3 Montreal, Quebec, Canada. Kim Stoll and Martin Abadi will be representing the firm.
  • Rui Fernandes will be presenting a paper on general average in Montreal at the meeting of The Association Mondiale de Dispacheurs / International Association of Average Adjusters on October 8th.
  • 2013 Surface Transportation Summit 16 October Mississauga, Ontario Canada. Kim Stoll and Martin Abadi will be representing the firm at the summit.
  • Fort Lauderdale Mariners Club Seminar – October 29-30, Fort Lauderdale. Kim Stoll will be representing the firm at the seminar.

2. Freight Forwarder found to be “Holder” and “Merchant” under Bill of Lading

On May 23, 2013, the Federal Court’s decision in DHL Global Forwarding (Canada) Inc. v. CMA-CGM S.A. 2013 CF 534 was released (*1). This decision highlights freight forwarders’ potential exposure when exercising a freight forwarder’s lien; that is, if asserting control over goods that are the subject of a Bill of Lading, such freight forwarder may be bound to the terms of that Bill of Lading and, in particular as in this case, the jurisdiction clause. The appeal will be heard on November 6, 2013.


HSB International (“HSB”) hired DHL Global Forwarding (Canada) Inc. (“DHL”) as a freight forwarder who in turn retained CMA-CGM S.A., through its Canadian agent, CMA CGM Canada, (“CMA CGM”) as carrier to transport 68 containers (the “cargo”) by sea from Halifax, Nova Scotia, to the Port of Ho Chi Minh City, Vietnam. A series of bookings were made by DHL and booking confirmations were provided to DHL by CMA CGM, as its client. Upon instructions by DHL, HSB was later identified as the shipper, Tan Mai as the consignee and DHL as the forwarding agent in the Bills of Lading.

Upon arrival, the consignee, Tan Mai Group Joint Stock Company (“Tan Mai”) was unable to take final delivery as DHL had asserted a freight forwarder’s lien and had refused to release the original Bills of Lading to HSB without payment. Apparently, due to a dispute between HSB and Tan Mai, HSB had not paid DHL for some or all of the freight already paid by DHL to CMA CGM. CMA CGM was now left with the demurrage and accumulating storage charges regarding the unreleased cargo. As of August 15, 2012, these charges totaled $681,655.55 US (the “charges”).

CMA CGM then commenced proceedings in France as against HSB, DHL and Tan Mai, jointly and severally, regarding payment of such charges as per the jurisdictional clause in the Bill of Lading that stated:



All actions against Carrier under the contract of Carriage evidenced by this Bill of Lading shall be brought before the “Tribunal de Commerce de MARSEILLE” and no other Court shall have jurisdiction with regards to any such action. Actions against the Merchant under the contract of Carriage evidenced by this Bill of Lading may be brought before the “Tribunal de Commerce de MARSEILLE” or, in Carrier’s sole discretion, in another court of competent jurisdiction. [Emphasis in the original]

DHL, within a few days of the commencement of the French proceedings, then initiated an action in Canada (the “Declaratory Action”) seeking a declaratory order that (1) it was not liable for payment of the charges arising from the performance of the contracts of ocean carriage by CMA CGM pursuant to CMA CGM’s Bills of Lading or any consequential services such as demurrage and port storage charges; and (2) it was not bound by any terms and conditions in the said Bills of Lading.

Prothonotary Morneau then heard a motion brought by CMA CGM under the Federal Courts Act seeking a stay of the Declaratory Action in favour of the French proceedings. CMA CGM was successful and a stay was granted.

The Decision

The Prothonotary, in his decision, found that CMA CGM S.A. is an international carrier of goods by containers acting, in Canada, through the intermediary of its agents, CMA CGM Canada. DHL was also acting as a freight forwarder with respect to its relations with CMA CGM Canada in this dispute. The two entities had a long-standing business relationship.

The issue, on the motion for a stay of the Declaratory Action, was whether DHL was a party to the CMA CGM Bills of Lading and therefore bound by the terms of that contract (i.e. the jurisdiction clause noted above).

The Court in its analysis acknowledged that a freight forwarder can act as a principal if it creates Bills of Lading or holds the cargo or the interests in the cargo. The Court also found that, in this matter, DHL acted as an agent or an intermediary of its client, the shipper, HSB. The Court further confirmed that the booking and booking confirmation can be viewed as preliminary contracts to the contract of transportation.

DHL had argued that it accomplished all its obligations under such preliminary contracts, but that the costs of demurrage and storage (which continued to accumulate) resulted from a “second” contract, the contract of transportation itself.

The Court, however, found that the clauses found in the booking confirmations (reproduced below) referring to the terms and conditions of the Bills of Lading rendered the “splitting up” of the contracts merely a theoretical exercise.

To determine whether DHL was subject to the terms of the Bills of Lading and the within exclusive jurisdiction clause, the Court looked at the associated documentation for the subject shipment including the booking instructions, booking reservations and also the Bills of Lading, which included the definitions of “Merchant” and “Holder”.

DHL attempted to assert that it did not know of the existence of CMA CGM S.A. as it had only dealt with CMA CGM Canada and was not aware of its role as intermediary for CMA CGM S.A. (the party responsible for the provision of Bills of Lading and for the transportation by sea of the containers). The Court did not accept this argument citing that the invoices created in respect of the shipment showed the involvement of CMA CGM S.A.

Further, in the booking confirmations provided to DHL and pursuant to which CMA CGM issued Bills of Lading, clauses 6 and 7 incorporated the CMA CGM terms and conditions as follows:

6. Bill of Lading-All moves referenced in this Booking Confirmation are subject to the terms and conditions of the carrier issued long form bill of lading. The customernamed on this Booking Confirmation hereby acknowledges and agrees to all the terms and conditions of the carrier issued long form bill of lading.

7. Booking subject to CMA CGM terms and conditions available on web site www.cma-cgm.com …or in any CMA CGM agency.

(emphasis added)

Further, the booking confirmations stipulated on page 2 therein:

Shipping shall be subject to CMA CGM Bill of Lading terms and conditions available in any CMA CGM agencies or on CMA CGM web site: www.cma-cgm.com

It is reminded that if this shipment has been booked on a “freight collect” basis you guarantee and will be responsible for the payment of all freight and charges payable by the receiver and that you shall proceed with the full payment of all outstanding freight and charges should they remain unpaid for more than three consecutive days after discharge.

While identified as the forwarder in the booking confirmation and not referred to specifically as the “customer”, DHL was the only party expressed referred to. At that stage, DHL was the only party identified and was therefore the “customer”. As the customer, DHL knew and recognized the terms and conditions of the Bills of Lading. The Court further found that, even if DHL was not the “customer”, clause 7 in the booking confirmation, noted above, stipulated that all reservations were subject to the terms and conditions of the Bills of Lading.

There was no attempt by DHL to exempt itself or clarify the effect or extent of clauses 6 and 7 of the booking confirmations which referenced the terms and conditions of the Bills of Lading. The Court found that DHL was bound by the content therein, despite not having provided express consent (which had not been established by the evidence as a normal and required measure in the maritime industry for such agreements).

The terms and conditions of the Bills of Lading contained definitions of the following terms “Merchant” and “Holder” to whom these terms and conditions would apply:

Merchant includes the ShipperHolder, Consignee, Receiver of the Goods, any Person owning or entitled to the possession of the Goods or of this Bill of Lading and anyone on behalf of any such Person.

Holder means any Person for the time being in possession of this Bill of Lading by reason of the consignment of the Goods or the endorsement of this Bill of Lading or otherwise.

(emphasis in the judgment)

DHL argued that it was in simple physical possession of the Bills of Lading and held same in the name of HSB; however, the Court stated that such possession of the Bills of Lading permitted DHL to refuse their release and to brandish them or to use them to require the payment of the charges for the cargo, which had already been paid to CMA-CGM Canada. DHL further recognized that it had control over the Bills of Lading to the extent that it can keep them or potentially sell them.

Given the above, the Court found that DHL met the definition of “Holder” as any person “otherwise” in possession of the Bill of Lading. Essentially, once DHL exercized its lien on the Bills of Lading, it became a holder and subject to the definition of “Merchant”. Even if HSB, the shipper, was the “Holder” and DHL acted as agent only, the Court found that DHL, as forwarder, was covered by the definition of “Merchant” in the circumstances in any event. (*2)

As the Merchant and/or Holder, DHL, through its actions and exercise of the freight forwarder’s lien, was held to be subject to the terms and conditions of the Bills of Lading, including the exclusive jurisdiction clause, as noted above, citing the appropriate jurisdiction as France. The Court granted the request of CMA CGM and stayed the Declaratory Action in favour of the French proceedings.

The appeal will be heard November 6, 2013.

Kim E. Stoll


(*1) Many thanks to Ajit Singh, articling student, and our associate, Mark Glynn, for assisting in the unofficial translation from the original French language decision so necessary at time of writing. The Unrevised English Certified Translation is now available on the Federal Court website.

(*2) DHL would be included in the definition of “Merchant” as “any Person…entitled to the possession of this Bill of Lading and anyone acting on behalf of any such Person”. 


3. The Transportation Safety Board of Canada Releases its Investigation Report into the February 26th, 2012 Aldershot, Ontario VIA Train Derailment

The Transportation Safety Board (“TSB”) has released its Investigation Report R12T0038 concerning the Aldershot VIA train derailment. The Report features a detailed analysis of the events leading up to the incident and provides three safety recommendations aimed at preventing future derailments:

1) that major Canadian passenger and freight railways implement fail-safe controls, beginning with Canada’s high-speed rail corridors; 2) that all controlling locomotives in main line operation be equipped with in-cab video cameras; and 3) that crashworthiness standards for new locomotives also apply to rebuilt passenger and freight locomotives.


On February 26, 2012, VIA Rail train no. 92 (“VIA 92”) was proceeding eastward from Niagara Falls to Toronto, Ontario on track 2 of the Canadian National rail line located near Burlington, Ontario. VIA 92 was operated by two experienced locomotive engineers who were accompanied by a locomotive engineer trainee. VIA 92 was carrying 70 passengers and a VIA service manager. The train departed the Aldershot station on track 2. Down the line, the track switches were lined to route VIA 92 from track 2 to track 3 through a certain ‘crossover’ (“Crossover”), which had a maximum speed of 15 miles per hour. VIA 92 entered the crossover travelling at a speed of 67 miles per hour. Subsequently, the locomotive and all 5 coaches derailed. The locomotive rolled onto its side and struck the foundation of a building adjacent to the track. The operating crew and trainee were fatally injured. 45 passengers and the VIA service manager sustained various injuries. The locomotive fuel tank was punctured and released approximately 4300 litres of diesel fuel.

The TSB Investigation

Tragically, the two engineers and the engineer trainee located in the locomotive did not survive the accident. There was no ‘black box’ device to provide objective information as to what happened. The TSB had to investigate what went wrong with no ‘real time’ account from the locomotive.

Through the course of its investigation, the investigators were able to eliminate the following as factors in the derailment:

  • there were no pre-accident defects noted to the locomotive or the railcars;
  • there were no defects noted to the tracks in the area in question;
  • there were no defects noted to the signals throughout the area (although, as noted below, the question of signal perception by the operating crew would be ‘front and centre’ in the investigation);
  • the weather conditions were fair, with no restricted visibility;
  • the two engineers were well experienced in respect of the equipment and the territory in question;
  • the two engineers were found to have been qualified for their positions, had met ‘rest’ standards, with no relevant post-accident toxicology findings;
  • the two engineers had worked together as a crew on a regular basis over the previous 16 months;
  • an accident re-enactment confirmed that the “wayside” rail signals were clearly visible from the locomotive cab throughout the journey; and
  • it was unlikely that the sun had interfered with the crew’s ability to identify the wayside rail signals.

The investigators thus focused on the events – in particular, the crew’s perception of the rail signals – leading up to the derailment.

The Crossover from Track 2 to Track 3

A Canadian National (“CN”) work crew had been dispatched earlier that day to effect repairs to a signal on track 2 east of the Aldershot station. The work crew required exclusive occupancy over track 2. Arrangements were made with the CN Rail Traffic Coordinator for that crew to occupy track 2. The CN Rail Traffic Coordinator, accordingly, routed VIA 92 around the work being done on track 2 by lining the track switches to route the train from track 2 to track 3 through the Crossover. While the normal routing for eastbound VIA trains was straight through the area on track 2, the Rail Traffic Coordinator did not communicate the route change to the VIA 92 crew. There was no requirement for him to do so as there existed a well established and strict regime of wayside track signals, providing VIA 92’s crew (and all others) with routing, speed, and “stop and go” information.

The Control of Train Movements Through Signals

The rail line had a standard Centralized Traffic Control System. This system controls train movements employing interconnected track circuits and field (or wayside) track signals. The design of the system is such that trains are given a series of progressive track-side signal indications that require train crews to take action based on the signal displayed. In Canada, this system does not provide any form of automatic enforcement to slow or stop a train if it were, for example, to pass a stop signal or other point of restriction. The displayed signal indications convey information to train crews of the speeds at which they may operate and how far they are permitted to travel.

“Situational Awareness” on the Part of the VIA 92 Rail Crew

The TSB focused on the apparent fact that there was a critical ‘disconnect’ between the speed signals that were displayed for the upcoming crossover from Track 2 to 3 and the train operation. To the experienced conductor, the series of signals approaching the crossover – if registered – would translate to an instruction that, at the point of the Crossover, the train was to proceed at “slow speed”, being a maximum of 15 miles per hour. How then was it that the train proceeded through the area at 67 miles per hour?

The TSB report delves into aspect of ‘human factors’ and the crew’s ability to perceive, comprehend and project events. Quite simply, and as evidently borne out by the facts, the progression of key signals to ‘slow down’ was missed by the crew. We will never know for certain what went wrong in terms of the signal “disconnect”, given that there were no in cab-video and voice recording devices. There is presently no requirement that locomotives be equipped with forward-facing video recorders. At the time of the accident, 32 of VIA Rail’s 41 locomotives had, however, been equipped with a video recorder. Accordingly, it was not possible to recreate the events in terms of signaling, related crew perception issues or otherwise leading up to the accident.

The investigation reveals that the locomotive’s braking system was not implemented. In its analysis, the TSB cites the fact that, with respect to train operations, the railways and Transport Canada have based their safety philosophy on a cornerstone of strict rules compliance:

“While regulatory compliance is necessary for accident prevention in transportation, regulatory compliance alone is not sufficient to maintain safety in a complex transportation system … organizations that place excessive reliance on strict regulatory compliance tend to believe that the safety rules they have developed are invulnerable to human error. A rule-book culture can produce an attitude that assumes all accidents are the result of individual failures to follow the rules. Unfortunately, in a complex system such as transportation, even the most rigorous set of rules will not cover every contingency and interpretation by individuals will be required to cover unanticipated situations. Even the most motivated and experienced employees are subject to the normal slips, lapses and mistakes that characterize human behavior….

For many years, the railway industry in Canada has relied on crew compliance with wayside track signals that provide train crews with a series of signal indications requiring crew actions relative to the signals displayed. … the level of safety afforded by wayside signal systems has not advanced significantly beyond their original design, which dates back over 100 years. However, high-speed passenger trains now share track with freight trains and the overall pace of rail transportation has increased since wayside signals were first introduced.”

In this context, TSB cited its finding from an earlier incident (*1) that backup safety devices for signal indications were inadequate, then recommending that:

The Department of Transport and the railway industry implement additional backup safety defences to help ensure that signal indications are consistently recognized and followed.

To date, there has been no formal strategy developed to adapt either emerging technology or existing on-board computer systems to provide fail-safe physical train control defences. The TSB considered fail-safe safety regimes in use in Europe and which are being phased into the U.S. rail industry. One such example concerns “Positive Train Control”.

“Positive Train Control”

Internationally, the rail industry has developed technology to address the risk of crew misinterpretation of or failure to follow signal indications. The various technologies include Positive Train Control (“PTC”), which is an emerging train control technology designed to prevent train to train collisions, overspeed derailments or incursions into work zone limits and movement of a train through a switch left in the wrong position: if the crew does not initiate an adequate response, the PTC system would automatically slow or stop the train.

In Canada, there are currently no PTC systems in use by freight or passenger railways. The recent July 6, 2013 rail explosion tragedy at Lac-Megantic, Quebec will certainly motivate the discussion for the need for back up safety systems such as Positive Train Control.

The Locomotive Construction Issue

In light of the crew fatalities, the TSB investigation also focused on the design and crashworthiness of the locomotive and rail cars. The locomotive had sustained significant concentrated damage. While its body had retained overall structural integrity, it was noted to have been missing ‘cab corner posts’ being structural reinforcements that would have provided extra protection in the area where the locomotive was damaged. The conclusion was also formed that the locomotive might have had better rollover protection had then been a more “robust side and roof structure”.

The TSB’s Key Findings

Considering that the operating crew was very experienced, the TSB had to focus on the question as to how such a crew could have misperceived or misinterpreted a visible signal indication. Without in-cab recordings, it was impossible to identify this cause with any certainty.

This said, the TSB was able to make the following key findings and observations:

1. VIA 92 was travelling in the derailment zone at 67 mph instead of the prescribed 15 mph. This excessive speed caused the derailment;

2. This conclusion was consistent with the crew misperceiving or misunderstanding certain key wayside signals;

3. The crew’s misperception or misunderstanding may, in part, have been a function of the “lull” in the routine of taking track 2 directly through the area and/or the crew having been distracted upon discovering the signal working crew up ahead in the distance on track 2;

4. “Administrative defences” (i.e. regulations, operating procedures, supervision and training) are not enough – rather, “physical defences” are required – being alarms or warnings in the locomotive, or a physical means of stopping the train. As stated by the TSB:

The reality of low probability, high-consequence accidents argues for adding defences in depth to the rail system to prevent accidents where crew members do not respond to the signals displayed. To date there has been no formal strategy developed to adapt either emerging technology or existing on-board computer systems to provide fail-safe physical train control defences. Additional defences such as Positive Train Control, or systems such as Automatic Train Control or Advance Civil Speed Enforcement Systems would have prevented this accident. (*2)

Accordingly, the TSB recommends that the Department of Transport require major Canadian passenger and freight railways to implement fail-safe train controls, beginning with Canada’s high-speed rail corridors”;

5. That the Department of Transport require that all controlling locomotives in main line operation be equipped with in-cab video cameras; and

6. That the Department of Transport require that crashworthiness standards for new locomotives also apply to rebuilt passenger and freight locomotives.

Gordon Hearn


(*1) TSB Report R98V0148 issued February 2001, concerning the 1998 Train Collision involving 2 Canadian Pacific Railway trains near Notch Hill, British Columbia.

(*2) Automatic Train Control systems in the United States are integrated with existing cab signaling systems. The ATC comes from electronics in the locomotive that implement some form of speed control based on the inputs of the cab signaling system. If the train speed exceeds the maximum speed allowed for a portion of track, an over-speed alarm sounds in the cab. If the driver fails to reduce speed and/or make a brake application to reduce speed, a penalty brake application is made automatically.

Advanced Civil Speed Enforcement Systems provide railway trains with positive enforcement of “civil” speed restrictions (those based on the physical characteristics of the line). The on-board components keep track of a train’s position and continuously calculate a maximum safe braking curve for upcoming speed restrictions. If the train exceeds the safe braking curve, then the train brakes are automatically applied.


4. Kruger v. First Choice Update

In our newsletter of November 2010 this warehouse fire decision of the Supreme Court of British Columbia was reviewed. In our newsletter of January 2013 we reported on the British Columbia Court of Appeal’s decision reversing some of the trial judge’s findings. On June 13th the Supreme Court of Canada dismissed the application for leave to appeal this decision. (*1)

As we reported earlier, this may have serious implications for insurers of cargo and their subrogation efforts. The trial judge had to deal with a claim for a fire at a warehouse. Kruger Products Limited (“Kruger Products”) was the owner of paper products stored at a warehouse operated by First Choice Logistics Inc. (“First Choice”). First Choice was found to be responsible for the fire and fully liable for the large loss.

The trial judge rejected the position of First Choice that the warehouse agreement required Kruger Products to obtain insurance for the inventory and to name First Choice as an additional insured. The judge held that First Choice did not have an insurable interest in the goods. First Choice had a lien on the goods and that was the extent of its interest. The court also found that First Choice could not rely on a waiver of subrogation clause in the warehouse contract. The trial judge held that such a position would result in an impairment of the duty of care owed by First Choice to Kruger Products as a warehouseman.

The Court was advised that the claim was a subrogated claim – Kruger’s property insurer had paid the claim and now sought to recover the amounts it had paid to Kruger, from First Choice.

The importance of the appeal decision is the finding that the waiver of subrogation clause in the contract was valid and that the subrogated claim of Kruger was totally barred. Kruger’s insurer recovered nothing. The ruling has wide implications for any transportation or storage contract that contains a clause barring insurers of cargo from claiming against a party to a contract responsible for the loss.

The Court of Appeal also found that the warehouse had an insurable interest in the property that was destroyed by the fire. The warehouse was subject to the “possibility of liability” under the warehouse agreement.

The Supreme Court of Canada has chosen not to hear any appeal.

Rui M. Fernandes


(*1) Kruger Products Limited / Produits Kruger Limitée v. First Choice Logistics Inc., et al., 2013 CanLII 33938 (SCC).


5. Pierringer Debate Sanctifies Settlement Privilege

Pierringer Agreements (*1) are key to insurers and their counsel in the resolution of complex multiparty litigation, which has the potential to be astronomically expensive. The Supreme Court of Canada recently used a dispute over a Pierringer agreement to underline the fundamental value of settlement in contemporary litigation by indulging the crucial term of quantum in such agreements with “privilege” until the conclusion of trial, to the wrath of the non-settling defendants (*2).

Before considering the context of the Supreme Court decision, the recent trial in Rychman v. Pottinger will be used to exemplify the potential utility of Pierringer agreements to insurers and other defendants in multi-defendant litigation(*3).

Pierringer agreements are reached by plaintiff counsel when settling with one or more, but not all, tortfeasors in a multi-defendant tort action. The defendant with whom settlement is reached exits the lawsuit, and the existence of such an agreement must be disclosed to the co-defendants (*4). The terms of the settlement will protect the settling party by providing that recovery from non-settling parties will be limited to their relative liability, thereby insulating the settling defendant from any claims for contribution and indemnity to an eventual verdict against non-settling defendants.

In Rychman v. Pottinger, the plaintiff was injured as the result of two successive motor vehicle accidents, and a lawsuit was commenced against the drivers involved in both incidents. Liability was admitted by both defendants, however damages were to be at issue at trial, as well as the respective liabilities of the defendants.

The defendant from the first accident concluded a Pierringer agreement with the plaintiff, which was entered into court and sealed until the jury decision. The plaintiff prosecuted the claim against the remaining defendant and argued that 80% liability for her injuries lay with the remaining defendant, being the driver of the second vehicle. The jury verdict was returned finding that the first driver was 90% liable.

Given that the jury was also skeptical of the plaintiff’s alleged damages of $1m, and awarded a total of only $175,000, the plaintiff thus recovered at trial only a priori $17,500 given that the remaining defendant was only liable for 10% of the upheld damages. Without knowing the value of the settlement, it is impossible to quantify the result for the plaintiff and the settling defendant. It is however apparent that the plaintiff settled the case with the first driver with the expectation of a vastly different apportionment of liability as amongst the drivers. Given that the first driver escaped a finding of 90% liability and also avoided all trial costs, it is unlikely to have been a negative result from the insurer’s perspective unless settlement was premised on much greater anticipated damages than those accepted by the jury. This case highlights the double alee involved in such settlements of apportionment of liability and quantification of damages.

The upswing for a settling defendant in the Pierringer agreement necessarily includes the significant economies of not trying the case. For the plaintiff, the result is a greater gamble since trial costs will still be incurred, however the Pierringer agreement guarantees a floor level of damages even if trial is unsuccessful, and the advance payment may either be used to cover legal fees or ensure the liquidity of the plaintiff – who may be catastrophically injured – pending the outcome of the lengthy litigation process through the appeals stage.

In Ms. Ryckman’s case, the situation went from bad to worse when, after the jury’s verdict, the second defendant moved for a ruling that the insurer was not responsible for payment of non-pecuniary damages as assessed in total by the jury as $35,000. On the basis that the second defendant’s liability for non-pecuniary damages was $3,500 – being 10% of the total award for this head of damage – the judge found that the plaintiff’s injuries sustained as a result of the second tortfeasor’s misconduct did not, per the jury, reach the standard requisite to meet the threshold test established by s. 267.5(5) of the Insurance Act, which provides that liability for non-pecuniary damages in the case of a motor vehicle accident will arise only if the injured party dies, or sustains permanent serious disfigurement, or permanent serious impairment of an important physical, mental or psychological function. Final recovery after trial from the second defendant was thus reduced to $14,000.

The issue arose in the Nova Scotia case of Sable Offshore Energy Inc. v. Ameron International Corp.(*2) as to whether non-settling defendant(s) have a right at law to know the quantum of settlement reached by the plaintiff and the exited defendant(s). The case, which continues today, involves high stake litigation with an initial claim by the plaintiff for damages of $443.9 million.

The plaintiff is the owner of the major Sable Offshore Energy Inc. (“Sable”) gas project, comprising three offshore structures and two onshore gas processing facilities. The lawsuit pertains to paint supplied to the plaintiff for corrosion protection for all of the structures, which is alleged to have been unsuitable and, therefore, failed prematurely.

Settlement was reached with 12 parties, but not with the paint manufacturer, Ameron International Corp. (“Ameron”), and Amercoat, an independent franchisee of Ameron products. These entities were not in a direct contractual relationship with the plaintiff.

Ameron and Amercoat were provided with the settlement agreement between the plaintiff and exiting defendants, to the sole exclusion of the quantum of settlement. Ameron and Amercoat thus moved for disclosure of this information.

This trial judge in Nova Scotia, Hood J., held that the quantum of settlement was relevant information, for which the threshold is low, and therefore was subject to disclosure (*5). Hood J., however, went on to use the Pierringer agreement to distinguish the case from precedent cited by Ameron and Amercoat, highlighting that over-recovery is barred in cases of Pierringer agreements and each non-settling defendants cannot be required to pay more than their respective liability, thus there is no risk from the settlement of increased exposure at trial for the non-settling defendant. Rather, the risk in Pierringer Agreements lies with the plaintiff who may under-recover damages.

Given that the remaining defendants are thus not subject to over-exposure by reason of the Pierringer agreement, Hood J. held that the quantum should be privileged, holding that it would be a disincentive for a defendant to make the first move to settle if the quantum would later be subject to disclosure to the other defendant(s). The tactical disadvantage for the remaining defendants of not knowing the quantum of settlement was outweighed by the benefit of encouraging settlement with the exited defendants.

The Nova Scotia Court of Appeal reversed this decision with Farrar J.A. reasoning for the bench (*6). The Court of Appeal decided the case on the rationale that it is a “fundamental tenet of our legal system that a party has a right to know the case it has to answer” (*7). Since the quantum of settlement with other parties speaks inherently to the case to be met, the amount was necessarily subject to disclosure to the parties, but not to the trial judge with the associated issue of admissibility at trial deferred to the trial judge.

The plaintiff appealed to the Supreme Court, which in June 2012 granted leave to hear the appeal. On June 21, 2013, Abella J. rendered reasons for a unanimous court reversing the decision of the Nova Scotia Court of Appeal and reverting to the position of the trial court per Hood J.

At the outset of a succinct decision, Abella J. expressed in her first paragraph that settlement was a key component to access to the justice system, which assists in combating “litigation’s stubbornly endemic delays, expense and stress”. Settlement privilege evolved, per Abella J., as a tool to promote settlement, which, borrowing from the reasons of L’Heureux-Dubé J. in previous Supreme Court jurisprudence, is “sound judicial policy…..(that) contributes to the effective administration of justice” (*7).

Abella J. proceeded to rely on English precedent from the House of Lords to highlight two key features of settlement privilege:

(i) Settlement privilege does not turn on the employment of the magic phrase “without prejudice” in communications; and

(ii) Settlement privilege extends to successful negotiations as it does to unsuccessful negotiations (*8).

The Court went on to dismiss Canadian precedent (*9 ) which did not extend such privilege to quantum. Abella J. did recognize that privilege is never an absolute concept, and is subject to exceptions where there is a competing and overarching public interest. Thus, the crux of the case was returned to the paradigm as articulated by the trial judge of whether the interest of disclosure to the non-settling defendants outweighed the interest of privilege to the plaintiff and the exiting defendants.

The Supreme Court stated that the privilege of quantum of settlement does not “materially affect the ability of the non-settling defendants to know and present their case”. Although the court acknowledged that future settlement may be hastened or facilitated with remaining defendants vested with the knowledge of quantum of settlement, this interest should not be preferred over the rights of the initial settlor(s). Reward should be extended to those who make the first move in resolving the complex litigation, and the ultimate public interest of settlement is, in the opinion of the court, better served by protecting the quantum of initial settlement(s), since the imposed disclosure of the agreed amount to remaining defendants would represent a barrier to reaching the initial settlement(s). Therefore, the absence of an outweighing public policy dictated that the prima facie privilege associated with settlement quantum should be preserved.

The decision is to be welcomed by insurers and the defence bar. Settlement is integral to avoiding the burden of litigation and associated expenses. Investing reluctant defendant(s), who resist to participate in initial settlement efforts with the knowledge of the details of settlement with exited defendants, would be to encourage freeriding in multiparty litigation that could ultimately derail settlement initiatives and encourage protracted litigation to the ultimate stage of trial.

Mark Glynn


(*1) The name derives from the Wisconsin case which first contemplated such as agreement, Pierringer v. Hoger 124 N.W. 2d 106

(*2) Sable Offshore Energy Inc. v. Ameron International Corp, 2013 SCC 37

(*3) Tracy Ryckman v. Lisa Jayne Pottinger, 2013 ONSC 2857

(*4) Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898, leave to Supreme Court of Canada refused.

(*5) 2010 NSSC 473

(*6) 2011 NSCA 121

(*7) Kelvin Energy Ltd. v. Lee, [1992] S.C.R. 235

(*8) Rush & Tompkins Ltd. v. Greater London Council, [1988] 3 All E.R. 737 (H.L.)

(*9) Amoco Canada Petroleum Co. v. Propak Systems Ltd., 2001 ABCA 110


6. Limitation Periods for Dummies: An Update Regarding The Limitation Period for Contractual Indemnity Claims

When it comes to statutory limitation periods, timing is everything; even if a claimant has a nearly perfect claim on the merits, a failure to commence an action (i.e. have the Superior Court of Justice issue a Statement of Claim) within or before the expiration of the applicable limitation period will cause the claim to be “thrown out at first base.” Once the limitation date passes, the claim is time barred and the claimant will have permanently lost their right to legal recourse in respect of that claim.

By necessity, lawyers are intimately familiar and intensely concerned with limitation periods. One of the first questions a lawyer will always ask a client about a new file, regardless whether they act for a plaintiff or a defendant, will be about the relevant dates in order to determine whether there are any existing or imminent limitation issues.

Lawyers are not the only ones that should be concerned with limitation periods. We recommend to all of our clients, not only those that are routinely involved in litigation, that they obtain a general understanding of the limitations regime in Ontario. The reasoning is simple: if a client does not know when a claim is time barred, there is a risk that they may not contact their lawyer until it is too late.

Ordinarily, limitations issues are relatively straightforward; however, a recent decision of the Ontario Superior Court of Justice caused some confusion as to the applicable limitation period for contractual indemnity claims. Fortunately, the Court of Appeal cleared up the confusion in Canaccord Capital Corporation v. Roscoe, 2013 ONCA 378 (CanLII), which is discussed below following a general overview of the Ontario limitations regime.

i. General Limitation Periods

In Ontario, general limitation periods are governed by the Limitations Act, 2002, R.S.O. 2002, c. 24, Sched. B (the “Act”). In addition to the general limitation periods contained in the Act, certain other statutes impose limitation periods pertaining to specialized subject matter (for example, the Insurance Act contains various limitations periods by way of the statutory conditions thereunder). A full list of the various statutory exceptions are outlined in section 19 of the Act.

Under the Act, the basic limitation period in Ontario is two-years from the date on which the claim was discovered. The concept of “discoverability” is outlined in subsection 5(1) of the Act, which reads as follows:

(1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause

In summary, the “clock starts ticking” on either (a) the date of loss (i.e. the date that the contract was breached, the date that the negligent act occurred, etc.) or (b), where a claim is not discovered until a later date, the clock starts on the date on which a person acting reasonably ought to have been aware of the loss. In either scenario, a claimant has two years from the date that the clock starts ticking to commence their action.

ii. Limitation Period for Contribution and Indemnity Claims

When a party has been named a defendant in an action, it is not uncommon for that defendant to assert its own claim for contribution and indemnity against another party. Procedurally, this can be accomplished by way of a number of avenues including, but not limited to: by a Crossclaim against another defendant, by a Third Party Claim against a third party, or the claiming party could commence a separate and stand-alone action against a third party for contribution and indemnity in respect of any damages that may be awarded in the underlying action.

A claim for contribution is premised on the idea that the target party shares some degree of liability in the circumstances and, therefore, should contribute some amount in respect of any damages awarded against the claiming defendant in proportion to that party’s liability. A claim for indemnity is simply a claim for 100% of any damages awarded against the claiming defendant. Most commonly, indemnity claims are rooted in contractual indemnity clauses, which can also include indemnity obligations in respect of legal fees and the cost of investigating claims among other things on top of the principal damages. All things equal, the difference between contribution and indemnity “is a distinction without a difference. The difference […] is simply the extent of the recovery.” (*1)

Section 18 of the Act governs the limitation period that is applicable to claims for contribution and indemnity. It reads as follows:

Contribution and indemnity

18. (1) For the purposes of subsection 5 (2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer’s claim is based took place.


(2) Subsection (1) applies whether the right to contribution and indemnity arises in respect of a tort or otherwise.

In summary, a party has two years from the date that it was served with the claim in respect of which contribution and indemnity is sought to commence an action in respect of same.

As discussed above, the Court of Appeal recently clarified the scope of section 18 relative to contractual indemnity claims.

iii. Canaccord Capital Corporation v. Roscoe – Summary Judgment Motion

The factual underpinning of the decision involved a dispute between an investment advisor and his clients, which ultimately turned into a dispute between the investment advisor and his employer company.

Specifically, in August of 2008, an investment advisor, Roscoe, and his employer company, Canaccord Capital Corporation (“Canaccord”), were served with a Statement of Claim by two former clients (the “Clients”). The Clients alleged, among other things, that Roscoe and Canaccord had been negligent in their management of the Clients’ investments.

Initially, Canaccord funded a common defence. Then, in the Spring of 2009, it found itself at the table with the Clients having settlement discussions. At that time, Roscoe retained independent counsel who advised Canaccord that Roscoe denied any wrongdoing, would dispute any indemnity claim, and reserved his right to assert any available defences to any claim for indemnity. In July 2009, without Roscoe’s involvement, Canaccord settled that action with the Clients.

In January 2010, Canaccord wrote to Roscoe and formally requested indemnification pursuant to Roscoe’s employment agreement, which contained an indemnity clause for Canaccord’s benefit. Through a letter from Roscoe’s counsel in February 2010, he denied any liability and resisted Canaccord’s claim for indemnification.

In June 2011, almost three years after the delivery of the Clients’ Statement of Claim, Canaccord commenced an action against Roscoe for indemnity, claiming the amount of the settlement plus Canaccord’s legal fees. The claim was pleaded as a claim for damages for breach of contract based on Roscoe’s refusal to comply with the contractual indemnity provision.

Unsurprisingly, Roscoe brought a summary judgment motion before the Superior Court of Justice to have Canaccord’s claim dismissed on the basis that the indemnity claim was time barred because it was not issued before the two-year anniversary of the delivery of the Clients’ Statement of Claim, as required under section 18 of the Act.

Surprisingly, the Superior Court of Justice dismissed the motion on the basis that section 18 of the Act did not apply. Specifically, the Court found that: (*2)

[T]he provision did not apply to indemnity claims arising out of contract. She found that Canaccord’s actions did not assert a claim for “‘contribution and indemnity’ as between one wrongdoer and another”. In her view, Canaccord’s action was more properly categorized for limitations purposes as a claim for breach of Roscoe’s employment contract, and that it was therefore governed by the basic two-year limitation period that ran from the date Canaccord settled the [Clients] action. The motion judge held that a breach of contract claim for damages is fundamentally different from a claim for contribution and indemnity as between two wrongdoers and that s. 18 does not apply to claims for damages for breach of contract.

Further to the above, the Court treated the date that Canaccord settled the Clients’ claim as the date on which its contractual claim against Roscoe “crystallized”. In turn, because Canaccord had commenced its action against Roscoe within two years of the date of settlement, the Court found that Canaccord was not afoul of the general limitation period applicable to breach of contract claims. To the surprise of few, Roscoe appealed the decision.

iii. Canaccord Capital Corporation v. Roscoe – Court of Appeal

The Court of Appeal deftly and economically allowed Roscoe’s appeal, set aside the order of the motions Judge and, in its place, substituted an order dismissing Canaccord’s action on the basis that the claim is barred by operation of section 18 of the Act.

In reaching its decision that the motions Judge had erred in its interpretation of section 18, the Court reviewed the legislative history of the Act and applied the principles of statutory interpretation.

With regard to the legislative history of the Act, the Court cited the deliberate historical expansion of the limitation legislation to extend the availability of contribution and indemnity claims beyond the limited category of “tortfeasors” to the broader category of “wrongdoers”. The Court viewed this as a deliberate effort to have such claims include contractual claims for indemnity such as the subject claim. The Court found this to be consistent with evidence available as to the legislative purpose of the present limitations regime, being the creation of a “a clear, cohesive scheme for addressing limitation issues.” (*3)

Relying on the accepted principle of statutory interpretation, being that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament[,]” (*4) the Court focused on the deliberate inclusion of the conjunctive phrase “or otherwise” in subsection (2) of section 18, which states that section 18 “applies whether the right to contribution and indemnity arises in respect of a tort or otherwise.” In other words, had the legislature wished to limit the application of section 18 to tort claims only (and thereby exclude contractual indemnity claims), then it would not have selected the self-evident language as it exists in present form.


It is unlikely that many interested observers were surprised by the above-described decision of the Court of Appeal. The decision on appeal was not about making new law, rather it was a clarification of the status quo, which has been temporarily muddied by a curious decision of the Superior Court. In any event, this decision puts to rest any confusion that was created regarding the limitation period that applies to contractual claims for indemnity.

James Lea


(*1) Canaccord Capital Corporation v. Roscoe, 2013 ONCA 378 (CanLII) at para. 33.

(*2) Ibid, at para. 11.

(*3) Ibid, at para. 24.

(*4) Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27, at para. 21.


7. The Recent U.S. Customs and Border Protection Position Paper on C-TPAT: Some Comfort for Supply Chain Interests Carrying and Shipping Cargo into the United States

C-TPAT and PIP: U.S. and Canadian “Trusted Trader” Programs

The Customs-Trade Partnership Against Terrorism (C-TPAT) was established as a partnership program between stakeholders involved in international trade and the U.S. Customs and Border Protection agency following the events of 9/11. The goal was to eliminate organized crime and terrorism risks to the international supply chain. Through this program, the U.S. Customs and Border Protection has worked with the trade community to strengthen supply chains into the U.S. and to improve U.S. border security.

Partners in Protection (PIP) is the complementary Canada Border Services Agency (CBSA) programme likewise enlisting the cooperation of private industry stakeholders concerning the shipment of goods into Canada to enhance border and trade chain security.

C-TPAT and PIP are voluntary programmes whose importer and carrier members agree to implement and adhere to high security standards. For example, members must ensure the security and integrity of their cargo by adhering to well-defined targeted security measures, such as the sealing of trailers and containers and ensuring continuous seal integrity throughout the course of a containerized shipment. The U.S. Customs and Border Protection and the Canada Border Services Agency assess members’ security measures under both programmes, provide them with information sessions on security issues and offer other benefits. Member companies become known as “trusted traders”.

C-TPAT and PIP accordingly offer an element of ‘border protection’ respectively for the import of goods into the United States and Canada. The United States and Canada signed a Mutual Recognition Agreement in June 2008, recognizing the compatibility of the C-TPAT and PIP customs-trade partnership programs in light of the similarity of security standards and member site validations. Qualification for one is effectively qualification for the other.

The advantages of being “PIP Qualified” to the Canadian importer or carrier starts with the fact that this is an objective qualification that can be marketed to an existing or potential client base: it attests that the company has achieved certain processes and methodologies reducing import supply chain security risks. PIP ‘members’ receive the following benefits:

  • if they qualify for the CSA (“Customs Self Assessment”) programme, they are then eligible to apply to the “Free and Secure Trade” (FAST) programme to be able to use designated FAST lanes to cross the border into Canada. FAST provides expedited border clearances into Canada for pre-approved importers, carriers and drivers.
  • they can access CBSA expertise, critique and commentary on their security measures and in addressing supply chain vulnerabilities;
  • they can enhance their reputation by being a secure, low-risk company, and
  • they can contribute to the protection of Canadian Society (*1)

The Recent Position Paper on C-TPAT Regulation, Enforcement, and Due Process for Members

Over time concerns developed concerning the ability of the interested government agency to suspend or remove a member from C-TPAT or PIP. In particular, concerns had been registered from the national trucking associations on both sides of the U.S. – Canada border concerning the perceived lack of transparency and due process concerning the possible immediate suspension of members of C-TPAT. The concern was that a member might be suspended pending an investigation into a security incident – in essence, calling into question the time honoured tradition of ‘”innocent before proven guilty”. (*2) The concern related to the rights of many Canadian carriers and exporters of goods into the United States: what of the situation where carriers or importers with otherwise diligent security processes could be immediately suspended from C-TPAT for what might be regarded as a relatively minor or infrequent incident, such as the failure to properly seal a trailer – sometimes with little or no communication or the opportunity to implement corrective action, pending an investigation?

In response to the articulation of these concerns, the U.S. Department of Homeland Security (“DHS”) published a document on June 13, 2013 which clearly lays out the measures it will take to address security breaches involving motor carriers – the most important of which being that suspension or removal from the programme will not be immediate and without the newly published process described therein being carried out. (*3)

In the recently published position paper, DHS has set forth details on how the investigative process will work and has provided industry partners with detailed information on their legal rights and obligations following a security incident. DHS has made a strong commitment to “not arbitrarily suspend or remove a partner from the program [and] make every effort to work with the partner to achieve required levels of compliance”. Partners will not be immediately suspended if they identify a security breach and report it to DHS. The Agency has noted that such self-reporting “… demonstrates that the partner’s security procedures are functioning”. While DHS has reserved the right to impose an immediate suspension, “the program will not automatically suspend a partner if a breach occurs” and a review will be conducted to determine the cause of a security breach prior to any decision to suspend. In the event that a partner is suspended, ” the suspension letter will clearly articulate the reasons for the suspension and include requirements the partner must meet to be reinstated”.

It would appear that this is a step in the right direction, giving credence to the notion that C-TPAT, like PIP, is a voluntary membership intended to be a “win-win” proposition: the carrier and importer interests being able to market supply chain integrity and security, and each country enjoying enhanced security with both elements working in partnership.

Gordon Hearn


(*1) Extracted from the Canadian Border Services Agency web site located at http://cbsa-asfc.gc.ca/security-securite/pip-pep/

(*2) Canadian Trucking Alliance Press Release: Marco Beghetto: “Greater Transparency on C-TPAT Suspensions, Appeals a “Significant Step Forward”” June 13, 2013. Marco.Beghetto@Ontruck.org

(*3) Customs Trade Partnership Against Terrorism Suspension, Removal, Appeals and Reinstatement Processes, U.S. Customs and Border Protection, June 13, 2013


8. Lac-Mégantic Rail Disaster Update

On July 3rd, 2014 a unit train carrying crude oil operated by Montreal, Maine & Atlantic Railway derailed in Lac-Mégantic, Quebec. The subsequent inferno killed over forty people.

The Transportation Safety Board of Canada (the “TSB”) has provided updates of its continuing investigation. Its status report of July 19 2013 gives us some information about this disaster.

What we know Timeline At about 23:00 on 5 July 2013, the train stopped at Nantes, Quebec. At 23:50, the fire was reported to the rail traffic controller. At about midnight, the engine was shut down, and the fire was extinguished. An MMA employee arrived on site to assist the fire department. At approximately 00:56 on 6 July 2013, the train started to move, after the fire department and MMA had left. Runaway train The train rolled down the approximately 1.2% grade into the centre of Lac-Mégantic. The train derailed at approximately 01:14 on 6 July 2013. The locomotives detached from the rest of the train. There were no signals or track circuits, so the rail traffic controller would have no indication of a runaway train.

The TSB indicates that it is still working on some of the elements of the disaster:

  • The cause of the fire, and its role on the runaway train
  • A number of operational issues, including the operation of the train, and the requirements and company policies regarding securement of trains (e.g., locked doors, adequate brakes)
  • The packaging of dangerous goods, and their performance (e.g., class 111 tank cars in train accidents)
  • Additional interviews
  • Review of documented information, which we are waiting to receive
  • Support the coroner’s efforts
  • With other agencies, support the families, loved ones and survivors by keeping them informed
  • Select components for further analysis at the TSB Engineering Laboratory in Ottawa.
  • Start decoding the content of the locomotive event recorder as well as the sense and braking unit (commonly known as the black boxes).

The TSB provides a graphic illustration of the rail occurrences from 2003 to 2012.

The number of incidents has been decreasing.

The media and the public have been horrified by the event. Some Canadian politicians have attempted to use the incident for their own agenda. (*1) Andrew Coyne of the National Post has put some reality back into the discussion. He wrote:

To be fair, the NDP is hardly alone in this game. Commentators on the right have been equally quick to claim the disaster makes the case for transporting oil by pipe, rather than by rail. But here again, there is no evidence, the experts tell us, to say that one or the other is safer overall. Each has its advantages, and each its perils.

Certainly this one accident, as unprecedented as it is horrific, is not sufficient evidence in itself. Consider what a singular convergence of events was required to bring it about. A highly flammable cargo; an unattended train; parked on a hill; on the main track, not a siding; above a town; far enough from town to build up great speed; and, as a final piece, that fatal bend in the track as it entered town. If any one of those is not present, no disaster and no deaths. But even if all are, you still need two more: the failure (so it seems) of the air brakes; and the failure (so it is alleged) to lock the hand brakes.

So as you read each news story suggesting the accident was a result of some obvious regulatory failure, and not to a catastrophic mix of inclement circumstance and human negligence, ask yourself how any of them would have contributed to this particular tragedy; how, if they had not been present, it might have been avoided; or whether whatever remedy is now proposed would have occurred to anyone except in hindsight.

We are told, for example, that the townsfolk had earlier expressed concerns about the condition of the track. Great: how would even an immaculately maintained track have held a train going around a bend at better than 100 km per hour? We are told that the Montreal, Maine & Atlantic Railway used “only” one-man crews, as if it were unusual. But it’s not unusual, except in Canada: in most developed countries it’s the norm. Do runaway trains routinely plow into towns in Europe?

Similarly Mary-Jane Bennett of Vancouver has taken a similar approach of reality and the need to properly evaluate and learn from what happened.(*2)

Some are claiming that the Lac-Mégantic rail disaster means oil transportation should be confined to pipelines, but pipelines have their own set of risks and more pipeline capacity will not eradicate rail demand for oil transport. The facts show that, despite the increase in the amount of crude oil shipped by rail over the past five years, there has been no concurrent increase in the number of derailments. Rail accidents involving dangerous goods have decreased nearly by half in recent years.

Freight railways in the U.S. transport about 1.7 million carloads of dangerous goods each year. Canada’s railways transported 140,000 carloads of oil last year. With dangerous goods criss-crossing the country daily, it may be a hollow argument to now turn against transportation of oil by rail.

Rail disasters are not unique to Canada. On the other side of the Atlantic, the Spanish train derailment of July 24th killed at least eighty people and injured over a hundred and thirty. It appears the train was traveling at double the posted speed.

Use of positive train control technology (“PTC”) is being urged by many in the media. No one, however, seems to want to discuss the costs involved in that regard to shippers, rail carriers and taxpayers. Ms. Bennett concedes that PTC’s may be of limited relevance to situations like the Lac-Mégantic disaster (*3), stating:

Canada should give a fresh look at positive train control technology, mandated by the U.S. Congress in the Rail Safety Improvement Act of 2008. PTC technology monitors train speed and position, warns of speed or authority limits and brakes automatically if train crews fail to respond. PTC would prevent derailments, in cases of excessive speed, conflicting train movements or engineer failure to obey wayside signals, by automatically stopping trains where a collision or derailment is imminent.

Depending on the facts found by the TSB in the Lac-Mégantic disaster, PTC may be of limited relevance. Yet, given that most rail accidents originate with human error and track defect in equal measure, an examination of how technology can best ensure safe rail operations is needed. It can provide Canadians with the extra security they require in the transportation of goods.

The debate is only beginning. The TSB investigation will take some time. The litigation that will inevitably arise from the Lac-Mégantic disaster could last a decade or more.

We will keep you posted.

Rui Fernandes


(*1) See the National Post July 10, 2013 Andrew Coyne: Beware those using Lac-Mégantic disaster to further their own agendas “If the NDP leader did not explicitly blame the train derailment and explosion that leveled the town on Conservative spending cuts, he certainly left the impression they could have been responsible. “This tragic accident,” he told CTV News, “reminds us [that] we are seeing more and more petroleum products being transported by rail, and there are attendant dangers involved in that. And, at the same time, the Conservative government is cutting transport safety in Canada.”

(*2) July 18, 2013 The Montreal Gazette “Let’s Learn the Right Lessons from Lac-Mégantic”

(*3) PTC’s may have been relevant in the Spanish disaster.

This newsletter is published to keep our clients and friends informed of new and important legal developments. It is intended for information purposes only and does not constitute legal advice. You should not act or fail to act on anything based on any of the material contained herein without first consulting with a lawyer. The reading, sending or receiving of information from or via the newsletter does not create a lawyer-client relationship. Unless otherwise noted, all content on this newsletter (the “Content”) including images, illustrations, designs, icons, photographs, and written and other materials are copyrights, trade-marks and/or other intellectual properties owned, controlled or licensed by Fernandes Hearn LLP. The Content may not be otherwise used, reproduced, broadcast, published,or retransmitted without the prior written permission of Fernandes Hearn LLP.

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