Facebook Icon. Twitter Icon. LinkedIn Icon. 

A Premier

Toronto Law Firm

serving all of Canada and International clients since 1996.

Fernandes Hearn LLP law firm logo with stylized F and H letters.

Telephone: 416-203-9500

Newsletter > May 2013

 View/Download this newsletter in PDF

In this issue:

1. Firm and Industry News 2. Five Recent Updates – Commentary

a) Aboriginal Groups Must Follow Statutory Procedures b) Certain Provisions Of Railway Safety Act in Force May 1, 2013 c) Court Challenge to Proposed Wind Generation Project Dismissed d) Ontario Courts Cannot Validate Foreign Service of Claims Where the Hague Convention Applies e) Court Holds Sunlight is a Contaminant!

3. The Marine Liability Act Governs Contracts for the Carriage of Goods by Water – But Not Contracts for the Charter of a Ship 4. Ontario Court of Appeal Enforces Insurance Policy 1 Year Contractual Limitation Period 5. The Duty of Care Owed by Public Carriers of Passengers

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.
  • Rui Fernandes will be presenting on a panel on “Law & Order: Police and Criminal Investigation in the Boating and Small Vessel Sector” at the annual seminar of the Canadian Maritime Law Association on June 7th, 2013 in Toronto.
  • Kim Stoll will be representing the firm at The Toronto Transportation Club’s Women in Transportation Conference and Luncheon on June 11 2013.
  • Gordon Hearn will be representing the Firm at the Conference of Freight Counsel meetings to be held in Washington, D.C. on June 16 and 17.
  • Rui Fernandes will be presenting a paper on “Constitutional Jurisprudence in Transportation Law – Perspectives on Canadian Federalism and the Division of Powers” at the Commons Institute Seminar on Supreme Court and Constitutional Litigation in Toronto on June 27th, 2013.
  • Gordon Hearn will be speaking at the 2013 T2 meeting of the Transported Asset Protection Association (Americas) at Redmond, WA on July 11th on “Managing Risks in Intermodal Contracts of Carriage”.

2 (a). Aboriginal Groups Must Follow Statutory Procedures

In May the Supreme Court of Canada released its decision in Behn v. Moulton Contracting Ltd., 2013 SCC 26. The Court affirmed that Aboriginal groups seeking to challenge the validity of permits or authorizations granted to resource developers must follow the legislatively mandated process to do so. An Aboriginal group that chooses to forgo legal remedies will not be permitted to (a) employ “self-help” remedies to challenge the permitted undertaking; or (b) defend against the enforcement of those permits in civil proceedings by challenging the validity of validly issued authorizations based on a breach of the duty to consult and of treaty rights. The Supreme Court concluded that allowing these actions would bring the administration of justice into disrepute and amount to a repudiation of the duty of mutual good faith underlying the Crown’s constitutional duty to consult First Nations.

The decision is significant to proponents of industrial projects that trigger environmental assessments and Aboriginal consultation obligations. It provides strong authority that Aboriginal groups and other parties must advance their grievances in the appropriate legal forum. When permits are issued and not formally challenged through a legislatively mandated process, proponents that take steps to act on those permits will be afforded a high degree of protection against self-help remedies, such as blockades, or collateral attacks on the validity of validly issued permits.

2(b). Certain Provisions Of Railway Safety Act in Force May 1, 2013

On May 1, 2013, all provisions of An Act to amend the Railway Safety Act and to make consequential amendments to the Canada Transportation Act (the Act), other than sections 10, 12, 43 and 44, subsections 7(2), 11(2) and 14(2) to (5) of the Act and paragraphs 41(2)(g) and 46(g) of the Railway Safety Act [as enacted by subsection 32(2) and section 35 of the Act], came into force.


Intended to improve rail safety in Canada, the legislative changes are designed to encourage rail companies to maintain a culture of safety and will penalize rule breakers. Further, a new regulation-making authority will increase the importance of environmental management in the Railway Safety Act by requiring the railway industry to operate in an environmentally responsible manner.


The Act received Royal Assent on May 17, 2012. The sections coming into force make several changes to Canada’s federal rail safety regime, including:

a) strengthening the Department’s enforcement powers by introducing an administrative monetary penalty scheme, and increasing existing judicial penalties;

b) reflecting the central importance of safety management systems, and including provisions for an “accountable executive” for safety, and, in the case of a railway company, an internal non-punitive reporting system by railway employees;

c) clarifying the authority and responsibilities of the Minister of Transport, Infrastructure and Communities in respect of railway matters, including the responsibility for the development and regulation of matters to which the RSA applies, the authority to enter into coordination agreements with the Canadian Transportation Agency and the authority to order a company to provide information and documentation for the purposes of ensuring compliance;

d) expanding regulation-making authorities generally, and including such areas as environmental protection, fire prevention and control, fees and charges and administrative monetary penalties; and

e) allowing for clarification of the rule-making process by introducing the authority to make regulations setting out the process for the formulation, revision and amendment of rules and by permitting third parties to develop and submit rules on behalf of a company.

2(c). Court Challenge to Proposed Wind Generation Project Dismissed

In Wiggins v. WPD Canada Corporation 2013 ONSC 2350 the claimants brought a claim for damages and injunctive relief against the proponent of a wind turbine project. The claim for $16.6 million against a prospective wind project was dismissed on a summary application.

The Court found that the project had yet to receive its final renewal energy approval from the Ministry of the Environment as required by s. 47.3 of the Environmental Protection Act, R.S.O. 1990, c. E.19.

The Court stated that it would be inappropriate – and also impossible – to decide the claims advanced by the plaintiffs on a proposed project that could be subject to amendments in its design plan under the regulatory process, which had not yet been completed.

The plaintiffs had led evidence demonstrating that nearby residents had already suffered a diminution in property values and interference with the use and enjoyment of their properties. However, the Court found that the plaintiffs had failed to show that the diminution was caused by the defendants. Further, the Court concluded that the plaintiffs’ evidence relating to anticipated adverse health effects once the turbines commenced operation was too speculative to merit injunctive relief or a full trial before an renewal energy approval was issued.

2(d). Ontario Courts Cannot Validate Foreign Service of Claims Where the Hague Convention Applies

In the recent decision of Khan Resources Inc. v. Atomredmetzoloto JSC, 2013 ONCA 189 the Ontario Court of Appeal held that an Ontario court cannot dispense with or validate foreign service when a contracting state refuses to facilitate service under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters.

Khan Resources Inc. engaged in a joint venture to develop a uranium mining property in Mongolia with Atomredmetzoloto JSC. Khan Resources Inc. is an Ontario corporation and Atomredmetzoloto JSC is a Russian corporation in which the Russian State Atomic Energy Corporation has a controlling interest. In August 2010, an action was commenced in Ontario against Atomredmetzoloto JSC by Khan Resources Inc. seeking damages in the amount of $300 million.

Canada and Russia are contracting states to the Convention. As such the Convention governed service of Khan Resources Inc.’s statement of claim on Atomredmetzoloto JSC in Russia. In December 2010, the Russian Ministry of Justice informed Khan that pursuant to article 13 of the Convention, it was refusing to serve Khan’s statement of claim on the basis that effecting service would infringe its sovereignty or security.

The Court held that the Convention requires contracting states to designate a central authority to serve foreign proceedings and permits states to refuse to serve proceedings if they infringe on sovereignty or security. As an Ontario court will not grant final judgment against a defendant unless that defendant has been served, a foreign state can prevent the plaintiff from seeking the assistance of Ontario courts and require that plaintiff to start its action in the foreign court. This decision, which underscores the risks involved when litigating international business disputes, confirms that rule 17.05(3) of the Rules of Civil Procedure – which incorporates the Convention into Ontario law – is a complete code for service on foreign defendants in contracting states. In short, plaintiffs must comply with the Convention.

2(e). Court Holds Sunlight is a Contaminant!

The Environmental Protection Act, RSO 1990, c. E.19 prohibits the discharge of a contaminant into the natural environment if that discharge causes an adverse effect.

In a private prosecution brought by a nominal prosecutor, an employee of “Ecojustice”, an environmental advocacy group, two corporations were charged with a number of regulatory or public welfare offences related to the harming, injury or death of birds. The offences at issue are set out in two provincial statutes (the Ontario Society for the Prevention of Cruelty to Animals Act and the Environmental Protection Act) and the federal Species at Risk Act.

In Podolsky v. Cadillac Fairview Corp. 2013 ONCJ 65 (CanLII) the Court accepted the explanation of a scientific expert that sunlight reflected from the windows of a building owned by the defendants could be considered an “emission” of “radiation” and thus would fall within the statutory definition of a contaminant under the Environmental Protection Act. Therefore, the Court found that the defendants had discharged a contaminant – reflected light – that caused an adverse effect, namely the bird deaths.

The Court also accepted that the unintentional and inadvertent bird collisions at the building were sufficient to ground the defendants’ liability for “killing” or “harming” an endangered or threatened species, which is prohibited under section 32(1) of Species at Risk Act.

The Court then considered whether the defendants could prove that they exercised sufficient due diligence and reasonable care to establish a lack of fault. The Court accepted that the defendants had exercised sufficient due diligence by complying with municipal building and industry standards; implementing and maintaining a policy to respond to nocturnal light pollution; cooperating with environmental advocacy groups in bird-strike tagging programs; and conducting test installations of window treatments designed to deter bird strikes. The defendants were found not guilty of the charges.

Rui Fernandes


3. The Marine Liability Act Governs Contracts for the Carriage of Goods by Water – But Not Contracts for the Charter of a Ship

We reported on the interesting case of Mercury XII (Ship) v. MLT-3 in the June, 2012 edition of this Newsletter. That report concerned the trial level decision in the Federal Court of Canada. The case since went to the Federal Court of Appeal. The disposition of the case, reported in reasons recently released (*1) provides further insight into the application of the Marine Liability Act (*2) to the carriage of goods on a ship. The matter concerned more than a legalistic discussion – if the Marine Liability Act applied to the facts of this case, the plaintiff’s claim would be time barred on account of being commenced too late.


Wells Cargo Equipment Financing Company (“Wells Fargo”) owned a 2001 Freightliner truck equipped with a flatbed and fitted crane (the “Truck”). The Truck was leased to C & C Machine Movers and Warehousing Inc. (“C & C”). C & C was hired by a customer to use the Truck for the carriage of building materials to a site on Grambier Island near Vancouver. The building site was on an island. C & C had to arrange for the Truck with its cargo of construction materials to be conveyed by ship to the island.

Pursuant to a long-standing business arrangement, C & C engaged Mercury Launch and Tug Ltd. (“Mercury”) to provide a tug and barge for the movement of the Truck to the island. On December 4, 2007 the Truck was loaded onto a barge (the “MLT-3”) on the mainland for transfer to the island. As reported in our earlier article, fate intervened when the Truck was being loaded back onto the MLT-3 for return to the mainland at the end of the day: It was getting dark, with the tide lowering considerably. The mooring lines connecting the MLT-3 to the shore had been untied from the shore. As the Truck driver was backing the Truck onto the barge-loading ramp, he could see in his rearview mirror the tugboat captain directing him. When the rearmost axle of the Truck was just off the barge ramp and onto the MLT-3, the driver noted that the barge was starting to leave the shore. The Truck driver applied the airbrakes in the hope that this would lock the rear wheels to the deck of the MLT-3 and the front wheels to the shore ramp, preventing further movement of the MLT-3 from the shore. Unfortunately, this manoeuvre did not work. While applying the airbrakes, the Truck driver heard the front bumper hitting the shore rocks with the Truck then sinking with the cab filling with water. Efforts to save the truck were unsuccessful and it sank in 55 feet of water.

At the Federal Court of Canada – Trial Division

Wells Fargo and C & C commenced an action against the MLT-3 and the tug Mercury XII and their owners and the tug captain for damages for the loss of the Truck and the items contained thereon. At trial, the Court found that the plaintiffs’ were entitled to damages for 90% of their proven losses and associated expenses, but were found 10% contributorily negligent on the basis that the Truck driver ought not to have attempted to use the brakes to prevent the further movement of the MLT-3 from shore. The judge had found that the Mercury XII was negligent in its failure to secure its mooring lines on shore to the MLT-3. With a lowering tide, a prudent skipper would have taken steps to secure the barge. Despite this lack of security, the tug captain nonetheless signaled the truck driver to back the Truck onto the barge, which constituted negligent conduct.

At the trial, Mercury argued that the plaintiffs’ action was out of time. Section 43(1) of the Marine Liability Act provides:

43(1) the Hague-Visby Rules have force of law in Canada in respect of contracts for the carriage of goods by water between different states as described in Article X of those Rules.

(2) the Hague-Visby Rules also apply in respect of contracts for the carriage of goods by water from one place in Canada to another place in Canada, either directly or by way of a place outside of Canada, unless there is no bill of lading and the contract stipulates that those rules do not apply.

(emphasis added)

Article III, paragraph 6 from the Hague-Visby Rules provides that:

… the carrier and the ship shall in any event be discharged from all liability whatsoever in respect of the goods, unless a suit is brought within one year after their delivery or of the date when they should have been delivered. This period may, however, be extended if the parties so agree after the cause of action has arisen”.

(emphasis added)

The trial judge found that the case was not time-barred on the basis that Mercury did not issue a bill of lading for the tow in question and that there was no expectation on the part of any of the parties that a bill of lading would be issued. The judge also based his decision on a ground that had not been argued by counsel at the trial that the contract respecting the carriage was oral and it appears that the judge determined that there was an agreement that the Hague Visby Rules were not to apply. Accordingly, both requirements of Section 43(2) being satisfied, the Hague-Visby Rules did not apply and the plaintiff’s case was therefore not out of time.

On Appeal

Counsel for both sides agreed that the trial judge was incorrect in suggesting that subsection 43(2) of the Marine Liability Act limited the application of the Hague-Visby Rules to written contracts. Counsel for Mercury argued that the judge erred in stating that the Hague-Visby Rules did not apply simply because no bill of lading had been issued. Counsel for Mercury submitted that, properly interpreted, subsection 43(2) provides that the Hague-Visby Rules applies to a contract for the carriage of goods by water within Canada, unless there is no bill of lading and the contract provides that the Hague-Visby Rules do not apply. In the present case, since no bill of lading had been issued, the first statutory condition was satisfied. However, the second condition was not, as the contract between Mercury and C&C did not expressly exclude the Hague-Visby Rules.

The Court of Appeal ruled that it was, however, unnecessary to address the issue concerning the oral nature of the contract and whether it in fact did or did not exclude the application of the Hague-Visby Rules insofar as the time bar issue could be concluded on another ground altogether, which is addressed below. (*3)

Counsel for the plaintiffs’ first argument on the appeal was that the Hague-Visby Rules do not apply given the prescribed scope of routing where the Truck was to be carried and eventually returned to the same point. (The Hague-Visby Rules apply “…for the carriage of goods by water from one place in Canada to another place in Canada, either directly or way of a place outside Canada”). In making this argument, counsel for the plaintiffs placed emphasis on the word “another” in that phrase. The court rejected this argument on the basis of being an overly formalistic interpretation of the statute. There would be no purpose served by excluding contracts for a “round trip” from the application of the Hague-Visby Rules. There was simply no utility in distinguishing what may have been a single contract for a round trip as opposed to there having been two separate contracts for one-way voyages, each way.

The Court, however, did agree with the second argument raised by counsel for the plaintiff – that Mercury had failed to establish that the Hague-Visby Rules apply in the first place to the contract in question. The Court accepted the plaintiff’s argument that this matter concerned a charter of a tug and barge as opposed to a contract for the carriage of goodsfor the purposes of subsection 43(2). On this basis the plaintiffs’ action was not subject to the Hague-Visby Rules, including the one-year limitation.

A Contract for the Carriage of Goods or a Charterparty Contract?

The Court noted that the starting point for the analysis of this issue is the decision of the Federal Court of Appeal in Canada Moon Shipping Co. Ltd. v. Companhia Siderurgica Paulista-Cosipa (*4). In that case Justice Gauthier held that the term “contract for the carriage of goods by water” in section 46 does not include a contract for the charter of a vessel.

Counsel for Mercury asserted in reply that the Canada Moon Shipping case concerned section 46 of the Marine Liability Act (as opposed to the present section 43), which permits a claimant in certain circumstances to institute proceedings in a court or arbitral tribunal in Canada despite a clause in the contract stipulating that the adjudication of claims arising under the contract shall be adjudicated in a place other than Canada. Counsel for Mercury argued that the purpose of section 46 was to curb the commercial power of carriers to dictate to shippers onerous arbitration clauses, which is a power not possessed by charterers when entering into a charter party. Accordingly, since this is not the mischief to which subsection 43(2) was aimed, it should not be interpreted like section 46 as excluding charter parties.

The Federal Court of Appeal disagreed. Citing the presumption that Parliament intends to use statutory language consistently, such that the same words in a statute should be intended to have the same meaning, the Court noted that the use of the phrase “contracts for carriage” in the close proximity of sections 43 and 46 to each other suggests that there should be harmony and consistency in how the phrase “contracts of carriage” should be interpreted. The court also cited Justice Gauthier’s reasons for judgment in the Canada Moon Shipping decision wherein she stated at paragraph 57:

It is important to note that none of the international regimes discussed above (including the Hague-Visby Rules) regulate the rights and obligations to a charter-party. They all specifically mention that the Rules will essentially only come into play when a distinct contract for the carriage of goods exist or “springs to life”, for example through the endorsement of a bill of lading between a carrier and a person who is not a party to a charter-party.

Justice Gauthier was also quoted from paragraph 72 of her reasons:

The ordinary (more accurately, the dictionary meaning) of “carriage of goods by water” could include charter – parties because all such contracts are ultimately entered in order to “convey goods” by water. That said, in the context of legislation dealing with the rights and obligations of common carriers and which implements international rules, I am satisfied that this expression would not and should not be understood to include charter-parties.

This legal conclusion is consistent with commercial reality. Charter-parties are contracts between commercial entities dealing directly with each other, whose execution and enforcement are the private concern of the contracting parties. There is no policy reason why such actors should not be held to their bargains.

To reiterate, considering the general purpose of part V and the mischief that section 46 was meant to cure (that is, boilerplate jurisdiction and arbitration clauses dictated by carriers to the detriment of Canadian importers or exporters could become parties to such contracts), and the different commercial reality that lead to the conclusion of charter-parties, the Judge’s conclusion that the charter-party under review was not covered by subsection 46(1) is correct.

On the basis of the foregoing the Federal Court of Appeal determined that as a matter of statutory interpretation that the contract for the carriage of goods in section 43 likewise does not include a charter-party.

The Result

The evidence on the Court record indicated that the parties essentially considered the arrangements to be that of a charter-party, that is, a contract for the hire of a Tug and the Barge rather than a contract for the carriage of goods. In this regard the Court noted that the contract called for the use of the tug and barge on an hourly basis. The use of the barge was to be paid for whether or not there was “cargo on the barge” according to the terms of the contract, and finally the invoice rendered for the use of the barge indicated an amount owing based on an hourly rate taken for the voyage, including the time for the offloading and standby. A final indication that the contract was not one for the carriage of goods, at least as far as the Truck was concerned, was the trial judge’s finding of fact that at all material times the Truck was in the possession and control of the Truck driver, as opposed to being in the control and possession of the tug and barge, as would be the situation under a contract for the carriage of goods where as a matter of law the carrier is considered an ‘insurer’ over the goods taken into its possession.

Mercury was accordingly unable to establish the application of the Marine Liability Act and the one year time bar defence on account of the fact that the contract in question being for a charter of a ship and not for the carriage of goods rather did not invoke Hague-Visby Rules. Accordingly the plaintiff was permitted to recover damages for its claim.

Gordon Hearn

Endnotes *1 2013 FCA 96 (CanLII) * S.C. 2001, c.6 *3 Interestingly, the Court of Appeal issued an admonishment that “when a judge is minded to take the unusual step of deciding a case on a basis that was not argued by counsel, the judge should normally advise the parties accordingly, and invite them to make submissions on the issue before rendering judgment” [at para. 21] *4 2012 FCA 284 (CanLII)


4. Ontario Court of Appeal Enforces Insurance Policy 1 Year Contractual Limitation Period

On May 8, 2013, the Ontario Court of Appeal in Boyce v. The Cooperators General Insurance Company 2013 ONCA 298 (“Boyce”) held that clearly worded clauses containing a one year limitation period as typically found in property or multi-peril policies will successfully trump the two year limitation period under the Limitations Act, 2002 in matters not concerning personal, household or family purposes.

This is the first time that a court has held that there is legislative intent to allow the shortening of statutory limitation periods via contract, specifically business agreements, thus clarifying when such provisions will be enforced. In this case, the contract was a first party multi peril insurance policy.

This matter was an appeal from a decision of Quigley, J. upon hearing of a summary judgment motion as brought by the defendant insurer. The insurer argued that the insured had brought his action outside of the one-year limitation period provided in both the allegedly applicable Statutory Conditions and the contractual provisions of the associated multi peril policy at issue.


The plaintiffs operated a clothing business called the Portside Boutique, which premises was discovered to have a foul odour. The stench caused the business to close down for some weeks, cleaning costs were incurred and much of the inventory could not be salvaged. The plaintiffs had a multi-peril policy (the “policy”) with the defendant insurers. The insurer concluded that a skunk had caused of the loss (a peril not covered by the policy) whereas the plaintiffs concluded that their property had been vandalized (a covered peril).

The policy contained the following provision, which essentially tracked the statutory wording in S. 148 of the Insurance Act, which outlined Statutory Conditions for fire policies under the Insurance Act (*1):

Conditions The Statutory Conditions apply to the peril of fire and as modified or supplemented by forms or endorsements attached apply as Policy Conditions to all other perils insured by this policy.

Statutory Conditions … 14. Action Every action or proceeding against the insurer for recovery of any claim under or by virtue of this contract is absolutely barred unless commenced within one year* next after the loss or damage occurs.

* Two years in province of Manitoba and Yukon Territory

(emphasis added)

The damage had occurred more than one year before the statement of claim was issued but less than two years.

The Decision upon Summary Judgment Motion

Quigley J. found that the two-year limitation period found in s. 4 of the Limitations Act 2002 applied. His Honour found that the wording in the policy was misleading and was not specific enough.

The motions judge described four factors that were required in any agreement seeking to limit a statutory protection:

(1) specific reference to the statutory limitation period; (2) clear and unequivocal language that the parties were intending to vary the statutory protection; (3) a provision clearly alerting the insured that they were foregoing a statutory right to a longer limitation period; and (4) signature on the agreement by the person foregoing such right to statutory protection to ensure understanding of such agreement.

Quigley J. went on to hold that the policy was not a “business agreement” as required under the Limitations Act 2002, which states:

22. (1) A limitation period under this Act applies despite any agreement to vary or exclude it, subject only to the exceptions in subsections (2) to (6). ….

(5) The following exceptions apply only in respect of business agreements:

1. A limitation period under this Act, other than one established by section 15, may be varied or excluded by an agreement made on or after October 19, 2006.


(6) In this section,

“business agreement” means an agreement made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002; (“accord commercial”)

The Consumer Protection Act 2002, S.O. 2002, defines “consumer” as:

“Consumer” means an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.

The motions judge held that the policy was a “peace of mind” contract and because insurance contracts were not covered by the Consumer Protection Act, they could not be “business agreements” under S. 22(5) of the Limitations Act 2002. Only if the policy was a business agreement could the statutory limitation period be successfully overridden.

The Court found that the one-year limitation period to commence an action against the defendant insurer in this first party loss situation was unenforceable. The statutory two-year limitation period applied and the plaintiffs’ claim was therefore not time-barred.

The defendant insurers appealed.

The Ontario Court of Appeal Reverses

On appeal from the motion court judge’s ruling, the Ontario Court of Appeal reversed and provided commentary and guidance regarding attempts to contract out of statutory limitation periods.

The Court of Appeal found that the contractual provision in question provided “for a one year limitation on claims in clear and unambiguous language” (*2). The Court quoted Cronk J.A. in International Movie Conversions v. ITT Hartford Canada (2002) 57 O.R. 3d 652 (C.A.), “Indeed, in my view, it is difficult to conceive how it could have been made more explicit.” Such clear language was key.

Further, the Court found that there was no requirement in the Limitations Act 2002 that an agreement must fulfill the enumerated four factors (noted above) before such agreement would successfully override a statutory limitation period. In fact, the only requirement was that the subject contract be a “business agreement” pursuant to S. 22(5) and there was no language at all which imposed the requirements laid out by the motions judge.

Lastly, the policy was a “business agreement” despite being a “peace of mind” contract, which definition did not include agreements made by “consumers”. The only role that the Consumer Protection Act 2002 played was to supply the definition. Therefore, as consumers were those individuals acting “for personal, family or household purposes”, the policy in this case was a “business agreement” as the policy insured a business. Therefore, the limitation period could be altered from the statutory provision.

The Court of Appeal allowed the appeal and reversed the decision of the motions judge. The plaintiffs’ claim was time barred. (*3)


In its reasons, the Court of Appeal provided guidance in this area and stated (*4):

A court faced with a contractual term that purports to shorten a statutory limitation period must consider whether that provision in “clear language” describes a limitation period, identifies the scope of the application of that limitation period, and excludes the operation of other limitation periods. A term in a contract which meets those requirements will be sufficient for s. 22 purposes, assuming, of course, it meets any of the other requirements specifically identified in s. 22.

Therefore, policies containing such “clear language” ought to be able to require a shortened limitation period. As this case provides, however, such policies must also be considered “business agreements” to successfully do so. Insurers with policies containing shorter than statutory limitation periods and involving consumers acting for personal, family or household purposes should note that they may not be able to enforce such provisions.

Insurers, whose policies will be considered “business agreements” and who will be seeking to rely on a shorter than statutory limitation period clause, should review the clarity of their policy wording as it is the key to successful enforcement.(*5)

Kim E. Stoll

Endnotes (*1) Upon the summary judgment motion, the insurers had argued that Section 148 applied. The motions judge found that the multi-peril policy at issue could not be classified as a fire policy and the statutory conditions did not apply. On appeal, the insurer argued the contractual provision that mirrored the wording applied. This argument was ultimately successful. (*2) at para.12. (*3) The time to file a leave to appeal application had not yet expired at time of writing. (*4) at para 20. (*5) A liability policy may face different considerations regarding any attempts to shorten limitation periods. Such cases will likely focus on other aspects including when the limitation period actually commences.


5. The Duty of Care Owed by Public Carriers of Passengers

Background Facts

William Falconer suffered injury to his ankle when he stepped off a city bus in Kamloops, British Columbia on January 29, 2008. Mr. Falconer had taken the bus and been dropped off at the location in question several times before. What was different in this case was the fact that the bus stopped one bus length further away from where it usually stopped. While there was a curb at the prescribed and usual stopping spot in the area of the rear exit door, there was no such curb where the bus came to stop on the day in question – there was simply a ‘driveway / grade level’ surface: a further distance to step down from the bus from the norm. It being winter, the area where Mr. Falconer disembarked was covered with snow and some ice. While attempting to exit through the rear doors of the bus, Mr. Falconer slipped and fell causing injury to his right ankle.

Mr. Falconer brought a claim for damages. The matter proceeded to a trial for determination as to whether the defendant B.C. Transit Corporation was negligent (having employed the operator of the bus) and if the plaintiff was contributorily negligent.

The decision of Falconer v. B.C. Transit Corporation (*1) in the British Columbia Supreme Court provides a concise summary of the nature and scope of liability of a public carrier of passengers.

The Evidence

On the day of the accident the weather conditions were described as “pretty wintery”. When the bus approached Mr. Falconer’s destination, he rang the bell to indicate his desire to get off the bus. As mentioned the bus driver stopped the bus approximately one bus length from the bus stop sign. The plaintiff admitted that he saw that there was snow and ice in the area that he was to disembark, and that the surface appeared “uneven”. The trial judge regarded the plaintiff as a credible and forthright witness, admitting that snow and ice on sidewalks and roads are not unexpected in Kamloops for the time of year in question, and that he saw “mostly snow… and it looked like ice was shining through in the area where he was to step off of the bus”. The plaintiff testified that however the road surface was four or five inches lower than the ‘customary’ exit location. The plaintiff still decided to disembark the bus through the rear door, because “it looked safe enough for me”.

After extensive review and consideration of the evidence at trial the judge made various findings of fact, notably that there were indeed winter conditions present to a certain extent obvious to Mr. Falconer before he left the bus, and that due to the “lack of curb”, Mr. Falconer had greater distance to step down from the bus then if the bus had been brought to a halt right at the bus stop. The judge also found that the bus driver did not issue any form of warning to the passengers before exiting the bus at this particular stop location and that Mr. Falconer’s injury occurred when his right ankle “snapped” shortly after he placed it on the icy surface directly outside the rear exit of the bus. A further finding of fact made by the judge, which, all things equal, could not have helped the transit company defendant, was the fact that the bus driver drove away from the bus stop without checking the right side of his bus to see if the area was clear: in effect, the bus driver had no idea that the accident had occurred and he did not check to see what was happening on the right hand side of the bus before departing. As submitted in argument by plaintiff’s counsel: “There could have been a child running alongside the bus looking for a stray ball and this would not have been noticed by the bus driver”. While not relevant for the purposes of the incident itself, one notes that things will not go well for the bus company when this type of observation is made by the judge in the course of issuing reasons for judgment…

The Applicable Legal Principles

The findings of fact being set forth above, the judge then had to determine whether the transit commission was negligent through the conduct of its driver or for that matter whether Mr. Falconer was “contributorily negligent”.

Citing case law (*2), the judge noted that:

The standard of care owed to a plaintiff passenger by a defendant bus driver is the conduct or behaviour that would be expected of a reasonably prudent bus driver in the circumstances. This is an objective test that takes into consideration both the experience of the average bus driver and anything the defendant driver knew or should have known.

It is well settled on the authorities that the standard of care imposed on a public carrier is a high one. However the principle to be derived from the authorities is that the standard to applied to the bus driver is not one of perfection nor is a defendant bus driver affectively to be an insurer for every fall or mishap that occurs on a bus.

Day v. Toronto Transportation Commission (*3) is the seminal case dealing with the liability of public carriers. The plaintiff, a passenger in a streetcar owned by the defendant, was standing and picking up a parcel in preparation to disembark, and was thrown to the floor and injured by a sudden application of the emergency brake. The articulation of the standard of care was indicated as follows:

Although the carrier of passengers is not an insurer, yet if an accident occurs and a passenger is injured, there is a heavy burden on the defendant carrier to establish that he had used all due, proper and reasonable care and skill to avoid or prevent injury to the passenger. The care required is a very high degree.

Every person who contracts for conveyance of others, is bound to use the utmost care and skill, and if, through any erroneous judgment on his part, any mischief is occasioned, he must answer for the consequences.

The principles articled in Day have been interpreted by the courts as endorsing the following analytical approach. Once a passenger and a public carrier has been injured in an accident a prima facie case of negligence is raised and it is for the public carrier to establish that the passenger’s injuries were occasioned without negligence on the part of the defendant or that it resulted from a cause for which the carrier was not responsible.

Essentially, the Court accepted for the purposes of the liability analysis that whether it is a case of a shifting burden of proof (as is the Day principle cited above) for a public carrier to show that it was not negligent, or whether it was simply a matter of strong inference to be drawn by the Court from the evidence towards a finding that the defendant was to blame, either way it remains for the defendant carrier to lead evidence suggesting that it was not negligent.

As explained by the trial judge, once the plaintiff establishes the circumstances of what happened, there is policy rationale for the shifting of the burden of proof for the defendant to show it exercised all due, proper and reasonable care and skill to prevent an accident or injury, or for the court to place itself in a position to draw inferences of negligence in favour of the plaintiff. First, passengers in a public carrier are entitled to expect that they will be carried to their destinations in safety and thus, the standard care for public carriers is high. Secondly, the driver of the conveyance is the person who knows whether the vehicle has been driven in a safe, proper and prudent manner. The passenger cannot be expected to know what happened. For example, in the Day case, the passenger was still proceeding down the aisle and could have no knowledge of why the bus, having left the stop, suddenly jerked to stop. Third, a shifting of the burden will encourage public carriers to adopt proper reporting procedures so that facts are ascertainable after an accident occurs. If the party with “knowledge” were not called on to answer, the incentive to keep proper records from which the truth can be ascertained disappears. Even worse, there might be an incentive not to keep records.

The court also noted that part of a public carrier’s duty is to provide passengers with a reasonably safe place to disembark(*4).

The Parties Positions and Disposition

The plaintiff argued at trial that he established a “prima facie” case of negligence against the defendant. He was dropped off at a driveway, not the curb, on the edge on an uneven surface. Essentially, he was “led to a trap”. The defendant transit company asserted in turn that no prima facie case of negligence had been established. Specifically, nothing done or not done by the defendant caused or contributed to the plaintiffs fall. As such, the defendant asserted that it had no obligation to explain what happened, and that this was simply an unfortunate accident and pointed to the wintery conditions in the area where the plaintiff was stepping off of the bus as the cause.

The judge found that a prima facie case of negligence had been established by the plaintiff. Although Mr. Falconer might not be able to say what caused him to fall, the court found that it was the lower level, icy surface upon which he stepped off of the bus due to where the bus driver chose to stop the bus.

The issue then turned as to whether the defendant had presented evidence negating the prima facie case of negligence had been established. The court found that the defendant had failed to do so, leading no evidence as to why the bus stopped where it did and in failing to lead evidence by which the court could conclude that the location where the rear doors opened was “reasonably safe to debark”. Further, the defendant led no evidence as to whether a warning to passengers was not required or unnecessary in the circumstances. Noting that the bus driver left the scene without noting or being aware of the incident having taken place (as mentioned, we knew that this would not ‘help’ the defendant) this indicated to the court a “general lack of care and inattention” on the part of the bus driver as far as his responsibilities to the passengers where concerned.

Finding the defendant negligent, the Court addressed whether the plaintiff was contributorily negligent. The court noted that by the plaintiff’s own evidence he did see some “ice shining through the snow” in the area where he was to leave the bus. In the Court’s view this should have “prompted him to debark using the utmost caution. In the alternative, he should have exited from the front of the bus if it was more appropriate to do so”. The court proceeded to find that the bus driver’s degree of fault was higher than that of the plaintiff, and accordingly fixed liability at 75% against the defendant transit company and 25% against the plaintiff.

Gordon Hearn

Endnotes *1 2013 BCSC 715 (CanLII) *2 Prempeh v. Boisvert 2012 BCSC 304 (CanLII) *3 [1940] S.C.R. 433 *4 Grand Trunk Pacific Coast Steamship Co. v. Simpson 63 S.C.R. 361

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.

Contact Us!

3 + 2 =

Banner for our Toronto law firm newsletter called the Navigator.

Subscribe to our newsletter "The Navigator"

13 + 1 =

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.

Copyright © Fernandes Hearn LLP. All Rights Reserved. | Copyright | Disclaimer | Privacy Policy | Designed By: Christopher Chong Productions Inc. | SEO By: Spider Choice Inc.