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Newsletter > January 2015

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In this issue: 1. News & Upcoming Events 2. Insurer Entitled To Deny Coverage To Carrier Based on Misrepresentation of Existing Contract 3. “Right On Track”: Federal Court of Appeal Upholds CTA’s Inter-switching Order 4. Transport Canada: Did You Know? 5. Differing Standards of Driving for Rural and City Drivers: An Invitation to Traffic Chaos

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

1. News & Upcoming Events

  • Kim Stoll will be representing the firm at the Defence Research Institute “Product Liability Conference” being held in Las Vegas, Nevada from February 4-6, 2015

  • Rui Fernandes will be speaking at The Commons Institute program “240 Minutes on Cross-Border Litigation Strategies” taking place February 19th, 2015 in Toronto. He will be speaking on “Common Conflicts of Laws Issues in Cross Border Litigation.”

  • Rui Fernandes will be speaking at The Commons Institute program “Transportation Law” taking place on February 23rd, 2015 in Toronto. He will be speaking on “Federal-Provincial Transportation Jurisdiction Issues.”

  • Aviation Law and Policy in the European Union and Asia-Pacific: Liberalization, Competition and Consumer Protection, 23 – 25 February 2015, Seoul

  • The Transportation & Logistics Council 41st Annual Conference will take place in Orlando Florida on March 23-25, 2015.

  • The Ontario Transportation Expo Conference and Trade Show, April 12-15, 2015, Toronto.

  • 8th Annual McGill Conference on International Aviation Liability and Insurance, April 17-18, 2015, Montreal.


2. Insurer Entitled To Deny Coverage To Carrier Based on Misrepresentation of Existing Contract

In this newly released decision (*1) C.H. Robinson Worldwide Inc. (“Robinson”), sought to recover from Northbridge Commercial Insurance Corporation (“Northbridge”) the payment of monies under the terms of a judgment obtained by Robinson as against Northbridge’s insured, KLM Express Ltd. (“KLM”), a trucking company. Robinson also sought a declaration that Northbridge was required to indemnify Robinson for the amount of the judgment subject to the limits of liability contained in KLM’s policy.

Robinson is a freight forwarder. Amongst other things, it contracts with motor carriers to transport property for its customers. Northbridge, is a commercial insurance company. At all material times, it was the insurer of KLM, a motor carrier that provided services for Robinson.

Robinson retained KLM to transport a shipment of food products from Ajax, Ontario to Calgary, Alberta. On or about June 22, 2012, they entered into a written Agreement for Motor Contract Carrier Services (the “Contract”) under which KLM would transport the goods in question. Under the terms of the Contract, KLM undertook to procure and maintain insurance coverage and to provide Robinson with written evidence of the insurance coverage.

KLM had an existing insurance policy with Northbridge, but the coverage period was set to expire on August 12, 2012. Accordingly, KLM took out another policy. The new policy that KLM obtained (Policy 2021043) ran from August 12, 2012 to August 12, 2013.

On July 18, 2012, KLM provided proof of the existing policy to Robinson by way of a Certificate of Liability Insurance. Following Robinson’s receipt of that Certificate, it sent an email to KLM dated July 24, 2012 stating, “Your insurance certificate has been accepted. You may continue conducting your business with C.H. Robinson.” Shortly thereafter, KLM sent a further Certificate of Liability Insurance covering the renewed policy.

In breach of the terms of the Contract, KLM failed to transport and deliver the food products. The truck carrying the shipment was involved in an accident and the food was destroyed. In response to the breach, Robinson corresponded with KLM and Northbridge, the latter to advise of the loss and claim. Robinson sent a letter to both KLM and Northbridge dated April 8, 2013 and a second letter, dated May 21, 2013. Robinson also provided Northbridge with a copy of the Contract. Northbridge maintained that this was the first time it had seen the Contract between KLM and Robinson. This Contract was critical in that it made KLM responsible for the full amount of the loss and did not entitle KLM to limit its liability to the standard $4.41 per kilogram limitation under a standard bill of lading or under the relevant Ontario legislation.

KLM failed to honour Robinson’s request for payment. Accordingly, Robinson commenced an action against KLM for damages in the Ontario Superior Court of Justice. Northbridge was served with a copy of the issued Statement of Claim but did not participate in that action. Northbridge had taken the position with KLM that it had misrepresented the facts (the existence of the Contract) relevant to the insurance and the policy of insurance was void.

KLM did not defend and was noted in default on October 24, 2013. Robinson obtained judgment in the amount of $223,701.85 plus costs of $1,106.07, together with post-judgment interest at the rate of 3% per annum.

Relying on section 132(1) of the Insurance Act (*2), Robinson sought payment from Northbridge of the monies ordered to be paid under the judgment. Northbridge refused, maintaining that Policy 2021043 was void for misrepresentation and, in the alternative, if Northbridge did have liability to Robinson, that liability must be limited to $65,953.29 as the maximum allowed under that policy (equivalent to the $4.41 per kilogram limitation amount under the standard bill of lading and legislation).

The Court noted that KLM had a common law obligation to fully and accurately disclose all matters within its knowledge that were relevant to the nature and extent of the risk to be assumed by Northbridge. The policy of insurance also contained a provision that “The entire policy shall be void if, whether before or after a loss, you have concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of any Insured therein, or in case of any fraud or false swearing by you relating thereto.”

The misrepresentation concerned Northbridge’s Small Business Fleet Transportation Insurance Survey (the “Survey”), which was signed by Lekha Sivananthan on behalf of KLM on August 2, 2012. The Survey formed part of the application that KLM completed in order to secure insurance coverage from Northbridge. On page 8 of the Survey, the following question was posed:

Does [KLM] have any contracts with shippers that stipulate limits of liability that are required to supercede [KLM’s] standard Bill of Lading? (If yes, please provide copies.)

KLM placed an “X” in the No box. The Contract that KLM signed with Robinson six weeks earlier on June 22, 2012 expanded the limits of liability beyond the standard bill of lading terms and conditions.

The Court noted at paragraph 19:

It is pertinent that section 191.0.1(1) of the Highway Traffic Act, R.S.O. 1990, c. H.8 deems every contract of carriage by commercial motor vehicle for compensation to include the terms and conditions set out in the regulations. Clause 9 of Schedule 1 (“Uniform Conditions of Carriage”) of Ontario Regulation 643/05 (the Carriage of Goods Regulation) under the Highway Traffic Act limits the liability of carriers such as KLM to the lesser of (1) the value of the goods at the place and time of shipment and (2) $4.41 per kilogram computed on the total weight of the shipment. Clause 10 of the Uniform Conditions of Carriage provides a declared value exception. If a contract of carriage declares the value of the goods on its face, the amount of any loss or damage shall not exceed that value. Unless a higher value is declared, liability is limited by the Carriage of Goods Regulation to $4.41 per kilogram.

The difference between limited liability ($4.41 per kilogram) and the declared value, in this case, is the difference between $65,953.29 and $223,701.85.

The Court found that KLM’s answer to the question on page 8 of the Survey to have been a misrepresentation. The next issue that the Judge had to determine was whether the misrepresentation was material to the risk. She accepted the evidence of the Northbridge representative that the existence of contracts that expand the insured’s or applicant’s liability beyond the standard $4.41 per kilogram limitation amount on a bill of lading are material to its underwriting process. Had this information been disclosed, it would have affected the amount of the premium charged to KLM. Although Northbridge did not calculate the exact amount, the Northbridge witness confirmed that the premium would have increased if the liability were in excess of $4.41 per kilogram. In response to Robinson’s argument that there was no evidence of what that increase would be, the Judge held that it was the fact that there would be an increase, rather than the quantum of that increase, that was relevant to materiality in this case.

Robinson’s claims against Northbridge were dismissed. Rui Fernandes and Kim Newton represented Northbridge in this matter.

Rui M. Fernandes

Endnotes (*1) 2015 ONSC 232 (*2) Section 132. (1) of the Insurance Act provides:  Where a person incurs a liability for injury or damage to the person or property of another, and is insured against such liability, and fails to satisfy a judgment awarding damages against the person in respect of the person’s liability, and an execution against the person in respect thereof is returned unsatisfied, the person entitled to the damages may recover by action against the insurer the amount of the judgment up to the face value of the policy, but subject to the same equities as the insurer would have if the judgment had been satisfied.


3. “Right On Track”: Federal Court of Appeal Upholds CTA’s Inter-switching Order

In Canadian Pacific Railway Co. v. Canada (Canadian Transportation Agency), 2015 FCA 1, the Federal Court of Appeal recently upheld a decision of the Canadian Transportation Agency (the “Agency”) to grant an “inter-switching order” to the applicant, Parrish & Heimbecker, Ltd. (“P&H”). The order requires the Canadian Pacific Railway Co. (“CP”) to haul P&H’s grain cars from a rail terminal at Milk River, Alberta to CP’s Coutts Yard (a railway yard located in Coutts, Alberta at the Canada/United States border) at a distance of some 20 km, in accordance with the federal “inter-switching” regulations enacted pursuant to the Canada Transportation Act, S.C. 1996 c.10 (the “Act”). Ultimately, as a result of the order, CP is required to haul the cars at a significantly lower rate than its regular commercial rate.

The dispute in this case centred around the issue of whether CP’s railway line and the Coutts Yard connected at the border with a railway line owned by the Burlington Northern and Santa Fe Railway (“BNSF”) in such a manner that would engage the “inter-switching” regulations.

Ultimately, the Court agreed with the Agency and found that BNSF had a property interest in the Coutts Yard, which arose pursuant to a longstanding agreement between CN and BNSF. Through this property interest in the Coutts Yard, afforded by the agreement, it was found that BNSF in effect had a railway line in Canada that connected with CP’s railway line, thereby engaging the “inter-switching” regulations.

This decision is important in that it underscores the Agency’s (and the Court’s) departure from an earlier requirement that a railway company demonstrate an “ownership” interest in a railway in order for the “inter-switching” regime to apply. It would appear from this case that as long as a railway can demonstrate a sufficient property interest in the railway in question, this will be sufficient to engage the regime. A true “ownership” interest does not appear to be required.

The Facts

P&H operates a grain terminal at Milk River, Alberta, from which it exports grain to the United States. The terminal is served by a rail siding that connects to the CP rail line. This line ultimately connects with BNSF’s track at the United States border.

Each railway company maintains a set of storage tracks on its side of the border. CP operates three storage tracks, known as the “Coutts Yard”, about 350 yards from the border.

CP and BNSF have exchanged rail traffic at the Coutts Yard for many years. Southbound traffic destined for the United States is commonly parked at the Coutts Yard for pickup by BNSF locomotives. BNSF then enters into Canada, picks up the southbound rail cars and brings them into the United States.

This arrangement between CP and BNSF has been governed by an agreement since 1928. Known as the “Interchange Agreement”, the contract essentially gives BNSF the right to use the CP tracks and to “place and pull Interchange Cars… at CPR’s Coutts Yard”. Thus, rail traffic is “inter-switched” at the Coutts Yard between the two railway companies.

This practice has existed in Canada since the early 1900s, and was introduced in order to limit the proliferation of railway lines in urban centres that served the manufacturing industry, where each railway company would build a line to its customer’s door. The customer would then be a captive of that railway, and thus subject to potentially monopolistic service and rate situations.

Parliament reacted by introducing a number of measures to deal with this issue, including the concept of “inter-switching”, which is defined in section 111 of the Act as “to transfer traffic from the lines of one railway company to the lines of another railway company in accordance with regulations made under section 128.”

Section 128 of the Act authorizes the Agency to make regulations with respect to inter-switching. Amongst other things, the regulations prescribe the amounts that one railway company can charge another for providing inter-switching services from its line to a competitor’s line.

Section 127 of the Act also provides that the Agency can make an “inter-switching order” in appropriate circumstances, thereby forcing a railway company to provide inter-switching services to another railway company in accordance with the regulations. The circumstances are:

a) a railway line of one company must connect with a railway line of another company before a company or other party can apply for an inter-switching order;

b) where an order is made, the Agency may order the railway companies to provide facilities for the inter-switching to take place at an “interchange” between the two companies’ railway lines; and

c) if a point of origin or destination of the rail carriage is within 30 km of an interchange, then a railway may only transfer the rail traffic in accordance with the inter-switching regulations (i.e. at certain prescribed rates).

An “interchange” is defined in the Act in section 111 as “a place where the line of one railway connects with the line of another railway company and where loaded or empty cars may be stored until delivered or received by the other railway company”.

In this particular case, the Milk River grain terminal was only some 20 km from the Coutts Yard, thus potentially engaging the above inter-switching regulations. P&H wanted to move its grain from Milk River to the United States, but needed CP to haul the grain to the Coutts Yard, at which point BNSF would presumably take over.

Ultimately, P&H and CP could not agree on a rate for the transportation of P&H’s grain cars from the terminal to the Coutts Yard. Accordingly, P&H applied to the Agency for an inter-switching order. The Agency considered the matter and granted the order, which meant that CP was required to transport the grain cars to Coutts Yard and inter-switch them at the rate of $315 per car, rather than at its commercial rate of $1,373 per car.

The Agency’s Decision

The Agency’s rationale for making the order was as follows. First, it turned to the matter of whether BNSF had a railway line at Coutts in the first place. The Agency decided that it did, for two reasons.

First, citing an intervener’s materials, the Agency noted that the actual connection point of rail lines occurred in a two – to four – metre space on the border. Accordingly, it concluded that:

…the physical connection of the lines of railway of BNSF and CP is wider than, and extends beyond, the international boundary into Canada at Coutts. Therefore, the BNSF has a line of railway which extends beyond the international boundary into Canada. The Agency therefore finds that BNSF has a line of railway for the purpose of the inter-switching provision of the [Act].

Secondly, the Agency also found that the Interchange Agreement between CP and BNSF authorized BNSF to use CP’s infrastructure for the specific purpose of interchange activities between the two companies. As a result, BNSF was found under the Interchange Agreement to have sufficient rights in connection with CP’s tracks for it to be said that BNSF had a railway line within the meaning of the Act in relation to those tracks.

Next, having found that BNSF had a railway line that connected in Canada with CP’s line, the Agency turned to consider whether the Coutts Yard was an “interchange” within the meaning of the Act. The Agency found that it was, as the evidence showed that cars could be parked at the Coutts Yard could be placed until picked up by BNSF.

Finally, the Agency found that the Milk River terminal, as point of origin of P&H’s southbound traffic, was within the statutory radius for imposing inter-switching activities at statutory rates, since it was only 20 km from the Coutts Yard.

In the result, the Agency granted the inter-switching order to P&H. CP appealed the Agency’s decision to the Federal Court of Appeal.

On Appeal to the Federal Court of Appeal

On appeal, CP argued two main points in support of its contention that the Agency’s decision was unreasonable and should be overturned. Firstly, it took issue with the Agency’s conclusion that BNSF’s railway line necessarily extended into Canada at the point of connection. Secondly, CP argued that BNSF’s contractual rights with respect to the use of CP’s tracks at Coutts Yard did not give BNSF a sufficient interest in the Coutts Yard to allow it to treat the Coutts Yard as part of its own railway line.

Ultimately, the Court dismissed CP’s appeal and upheld the Agency’s finding. Writing for a unanimous Court, Justice Pelletier sidestepped the first issue and based his decision largely on the Court’s finding that the Agency’s conclusion with respect to the second issue was reasonable.

CP’s argument with respect to the second issue, and the Court’s ultimate disposition of this case, turned on the extent to which a railway company must be seen to have an “ownership” interest in a railway line, as opposed to some other interest, sufficient to conclude that the company has a railway line that connects with another railway line, thereby engaging s. 127(a) of the Act and inter-switching regime.

CP essentially argued that BNSF’s contractual interest in the railway line at the Coutts Yard was not sufficient to ground an “ownership” interest that would allow BNSF to treat the Coutts Yard as part of its own railway.

CP’s argument proceeded as follows, buttressed by a few prior Agency decisions. Firstly, CP argued that in one prior decision,(*1) the Agency had decided that mere running rights of one company’s trains on another company’s railway line were not a sufficient basis for the first company to treat the second company’s tracks and facilities as part of its line of railway.

Secondly, CP argued that the requirement that a railway own a line of railway was confirmed in a second decision of the Agency, (*2) where CN Rail and CP Rail were found to each have an “ownership” interest in a newly-consolidated rail line being operated in partnership. This disposed of the question (in the affirmative) regarding whether various pre-existing interchanges on the now-jointly-run line continued to be interchanges as defined under the Act.

Thirdly, CP argued that in light of the “ownership” requirement illustrated in the above cases, the Agency erred by misinterpreting a prior decision of the Federal Court of Appeal (*3) (known as the “Fort Rouge” case) as having established a new test for determining when a railway company has a line of railway for the purposes of the definition of an “interchange.”

In the Fort Rouge case, CN Rail and BNSF had reached an agreement whereby two tracks were built at CN’s “F” Yard in Winnipeg: one for delivery of BNSF traffic to CN and another for delivery of CN traffic to BNSF. A complex agreement provided essentially that CN and BNSF would share the associated costs of the arrangement. The agreement also provided that CN could change the location of the rail yard or the transfer tracks provided it did so at its expense and that the new facilities were equally convenient for BNSF.

In 2003, CN relocated the joint facilities to its Fort Rouge Yard. The relevant issue was whether there was now any inter-switching taking place at the Fort Rouge Yard since all of the tracks were owned by CN.

In Fort Rouge, the Agency examined the agreement between BNSF and CN, and concluded that “BNSF ha[d] a sufficient ownership interest in the transfer track at the Fort Rouge yard to have a railway line for the purpose of the inter-switching provisions of the Act.“ The Federal Court of Appeal upheld the Agency’s decision.

Ultimately, in this case CP argued that the Fort Rouge decision supported previous case law. CP argued that BNSF was required to demonstrate an “ownership” interest in the Coutts Yard, in line with prior Agency decisions (including Fort Rouge), in order to engage the inter-switching regime.

The Court ultimately disagreed with CP. It held that CP had mischaracterized the Court’s decision in the Fort Rouge case. It held that in Fort Rouge, what had been found on BNSF’s part was a property interest, but not an “ownership” interest. As Pelletier J.A. commented:

This court recognized that while the factors referred to by the Agency [in the Fort Rouge case] fell short of creating an ownership interest, they were nonetheless capable of supporting the Agency’s conclusion that BNSF had a sufficient interest in the Fort Rouge Yard to justify the Agency in treating those Yards as part of BNSF’s line of railway.

Similarly, in this case, the Court found that the Interchange Agreement gave BNSF the right to “perform all necessary operations in order to interchange traffic”. These rights allowed the Agency to conclude that BNSF had a sufficient interest in the Coutts Yard for it to be treated as part of BNSF’s railway.

The Court agreed that the Agency has apparently refined its view of when a railway company “has” a line of railway, moving away from a strict “ownership” position to a more nuanced position based on functional integration. As Justice Pelletier observed:

This refinement is in keeping with Canada’s national transportation policy which favours competition and market forces, and discourages rates and conditions which are an undue obstacle to the movement of traffic. It is entirely within the Agency’s mandate to refine its approach to the issue of what constitutes an interchange.

In the result, the Court found that the Agency’s decision was reasonable, and the appeal was dismissed.

James Manson


(*1) CTA Decision No. 439-R-1989 (1989). (*2) CTA Decision No. 798-R-1993 (1993). (*3) Canadian National Railway Company v. Transportation Agency, 2010 FCA 166 [Fort Rouge].


4. Transport Canada Update: Did You Know? 

Air Transport: Did You Know? (*1)

Canada and Israel Improve Air Transportation Links

Did you know that the Honourable Lisa Raitt, Canada’s Minister of Transport, was in Israel on January 21, 2015 to sign an Air Transport Agreement, a Declaration of Intent on Aviation Security, and a Memorandum of Understanding on transportation with Mr. Yisrael Katz, Israel’s Minister of Transport and Road Safety?

Minister Raitt stated, “This visit is a good opportunity to share innovative ideas and demonstrate Canada’s many successes in the transportation sector. The signing of these three important transportation documents enhances our cooperation and supports economic growth, prosperity, security and safety in both our countries.”

The three important Transportation documents are the new Air Transport Agreement, the Declaration of Intent on Aviation Security and the Memorandum of Understanding on

Cooperation in the Field of Transportation.

The Air Transport Agreement is intended to expand Canada’s air transport relationship with Israel by providing substantial operating flexibility for airlines in both countries to offer greater service options for travellers and shippers; specifically, the agreement will allow Canadian and Israeli airlines to offer air services to any city in Canada and Israel. It will also increase the number of permitted flights for passenger and cargo services, and it will provide airlines the ability to introduce new prices more quickly.

The Declaration of Intent on Aviation Security formalizes Transport Canada’s cooperation with Israel on aviation security issues. It provides the basis for an ongoing exchange of information with Israel and is said to be a key component of the Strategic Partnership Memorandum of Understanding signed during Prime Minister Stephen Harper’s visit to Israel in January 2014.

The Memorandum of Understanding on Cooperation in the Field of Transportation provides a framework for sharing best practices and lessons between both departments, and is intended to help identify opportunities for Canadian and Israeli commercial interests.

Quick Facts (as provided by Transport Canada)

• In 2013, Canada’s total merchandise trade with Israel was approximately $1.4 billion • The Canada-Israel Free Trade Agreement (CIFTA), in force since 1997, has led to a doubling in the value of trade between the two countries • Two carriers, Air Canada and El Al Israel Airlines, operate direct scheduled air services between Toronto and Tel Aviv.

Air Transport: Did you know?

The Federal government has banned shipments of lithium metal batteries on passenger flights as part of the update to the Transportation of Dangerous Goods Regulations

Did you know that on December 30, 2014, the Canadian Government announced significant amendments to the Transportation of Dangerous Goods Regulations (the “TDGR”)? Updates include a ban on transporting lithium metal batteries as cargo on passenger flights in Canada, as well as new labeling requirements and Emergency Response Assistance Plan (the “ERAP”) requirements for certain dangerous goods.

The changes are in keeping with the ban in 2014 by the International Civil Aviation Organization (the “ICAO”) of the shipment of lithium metal batteries as cargo aboard passenger aircraft. The main concern is that, if ignited, lithium batteries can cause any nearby batteries to overheat and catch fire. Most passenger airlines in Canada have banned lithium metal batteries as cargo on their own accord.

The prohibition on lithium battery transport came into effect on January 1, 2015, in compliance with the ICAO ban. The ban applies to all cargo shipments of lithium metal batteries on passenger planes within Canada and the United States has already banned such shipments on passenger flights. It does not apply to batteries already contained in or packed with equipment. It only applies to those lithium batteries packaged and shipped separately. The ban fortunately will not affect the lithium ion batteries in travellers’ personal devices including laptops and “smartphones” or any medical devices.

Other amendments to the TDGR include:

(1) Incorporation of Protective Direction (PD) 33 into the TGDR. Protective Direction (PD) 33 was introduced in April 2014 and required all shippers by rail of ethanol, petroleum crude oil, gasoline, and other petroleum products to have an approved Emergency Response Assistance Plan (the “ERAP”) in place; (2) Adding ERAP requirements for petroleum sour crude oil and Alcohols N.O.S. (used to classify ethanol in the US), which were not previously included under PD33; and (3) New United Nations (UN) product numbers for petroleum sour crude oil and biomedical waste.

Air Transport: Did you know?

Trusted Travellers Improvements

Did you know that on December 17, 2014, that the Canadian Government introduced new initiatives whereby NEXUS members and other low-risk “Trusted Travellers” who have undergone extensive background checks will have even more convenient benefits. Trusted Travellers are eligible to use security screening lines and include members of the NEXUS (a bi-national programme administered in cooperation and collaboration with the United States) and Global Entry programmes as well as the Canadian and US military, and aircrew in uniform with valid ID. There are more than 1.1 million Nexus programme members as of December 2014.

During Canadian Air Transport Security Authority (CATSA) security screening, “Trusted Travellers” are now able to access dedicated lines at four of Canada’s busiest airports: Vancouver, Calgary, Toronto (Pearson Terminals 1 and 3), and Montreal. Trusted Travellers have access to faster security screening and do not have to take off their shoes, belts, hats, light jackets; and may keep permitted liquids, aerosols and gels in carry-on bags though they must still comply with screening rules for prohibited items. There is also “front of queue” service at the CATSA checkpoints.

Further, upgraded Trusted Traveller kiosks, described as faster and more efficient and highly secure, have been installed in all airports in Canada where NEXUS is available to expedite customs clearance and immigration. The number of kiosks has been increased given the programme’s popularity.

There was also an introduction of a new portal at Canada.ca/HolidayTravel to enable faster and more convenient holiday travel. This site provides links to user-friendly tools like the “Current Border Wait Times” table and the “Travel Smart” app for consular information and assistance abroad.

Rail Transport: Did you know?

Transportation Information Regulations: Increased data collection to help prevent or reduce accidents and improve railway safety across Canada

On December 17, 2014, Transport Canada confirmed that the Government of Canada is introducing amendments to the Transportation Information Regulations intended to “better identify and address safety risks proactively”.

Railway data reporting in Canada is collected after an accident happens as “lagging indicators”, which help Transport Canada to target inspections and monitor compliance with the Railway Safety Act and its regulations, rules, and standards.

Under the changes, rail carriers will be required to report “leading indicator data” to Transport Canada which data are measurable factors that can be used to identify and address safety risks proactively before accidents occur. It is hoped that this new requirement will improve rail safety in planning and performance measurement, more focused audits and inspections, and targeted programs that address specific safety issues.

The Information Collection, Analysis and Dissemination (ICAD) Working Group was created in 2008 to consider recommendations from the Railway Safety Act Review. The ICAD Working Group comprised representatives from government, industry, and labour identified 15 leading indicators to be gathered under the proposed regulations.

The leading indicators in three categories—operations, equipment, and engineering—and may include data on:

(1) railway staffing and training activities (e.g. employee proficiency tests and results); (2) condition and maintenance of locomotives and rolling stock (e.g. number of broken or cracked wheels found on a train in a yard); and (3) railway infrastructure repairs (e.g. number of bridges with temporary speed restrictions).

The Honourable Lisa Raitt, Minister of Transport, on December 17, 2014 also announced new Grade Crossings Regulations to establish new safety standards for federally-regulated grade crossings to take full effect over the next 7 years.

A grade crossing, also known as a road or level crossing, is where a railway line crosses a road at the same level. Railway companies and road authorities (provinces, municipalities, band councils, and private crossing owners) are all responsible for managing railway crossing safety in Canada.

Under the authority of the Railway Safety Act, the new Grade Crossing Regulations are intended to improve safety by helping to reduce the frequency and severity of accidents, preventing derailments and injuries and saving lives.

The new Grade Crossing Regulations are intended to improve safety by:

(1) Providing consistent grade crossing safety standards across Canada but with options for bringing that level of safety to the rail crossings; (2) Clarifying the roles and responsibilities of railway companies and road authorities; and (3) Improving safety features and promoting collaboration between all parties.

Marine Transport: Did you know?

Help Name the Ferry that serves the Saint John, N.B to Digby, Nova Scotia ferry route.

On January 21, 2015, the Canadian Government launched the process to choose a name for the replacement vessel for the MV Princess of Acadia, which serves the Saint John, New Brunswick to Digby, Nova Scotia ferry route.

The public is invited to participate in the naming process. The chosen name will be announced prior to the vessel’s service in 2015. There are eligibility criteria:

• The vessel name should promote Canadian culture, history, and geography by honouring people and places of importance to Canadians; • The name should have a regional significance; • The name should be brief and easily understood by radiotelephone and other means of communication; • Complicated or confusing spelling and pronunciation should be avoided; • Professional titles (Doctor), honorific (Right Honourable) and family abbreviations (Jr., III) and incomplete names should generally be avoided; • A vessel name will only be considered for persons posthumously; • No prize, award or recognition will be given; • Submissions are open only to Canadian residents; • You can enter as often as you wish; • Submissions will be accepted until February 20, 2015; and • No purchase is necessary to submit a suggested name.

If you are in the neighbourhood, forms are available on the current vessel, the MV Princess of Acadia, at both ferry terminals in Saint John and Digby.

Road Transport: Did you know?

More than a third of GM vehicles affected by ignition switch recalls are still on the road with the safety defect

Did you know that GM recalled 368,073 vehicles in Canada last winter due to a risk that the ignition switch may move out of the “run” position, resulting in a partial loss of electrical power and turning off the engine? In the event of a crash, air bags may not deploy if the ignition switch is not in the “run” position thereby increasing the risk of injury.

GM contacted owners of the affected vehicles, including sending re-notification letters. Despite such efforts and a Safety Advisory from Transport Canada in October 2014, there are still reportedly 140,782 vehicles on Canadian roads with this safety defect, as of December 8, 2014. This represents 38.2% of the affected vehicles in Canada.

According to Transport Canada, until the ignition switch recall repairs have been performed, it is very important that all items from the key ring be removed, as added weight increases the risk. The key fob, if any, is also required to be removed from the key ring.

Owners of potentially affected vehicles are strongly encouraged to visit GM’s website where they can enter their Vehicle Identification Number (VIN) to determine whether their vehicle has been recalled. (*2)

Kim E. Stoll

Endnotes (*1) All “Did You Know” entries are sourced from the Transport Canada website. (*2) For more information on Transport Canada’s Defect Investigations and Recalls Division, visit www.tc.gc.ca/recalls or call 1-800-333-0510.


5. Differing Standards of Driving for Rural and City Drivers: An Invitation to Traffic Chaos

At issue in this case was whether a municipality has a duty to keep its roads safe not only for ordinary drivers exercising reasonable care, but also for those who drive negligently. Fordham (Litigation guardian of) v Dutton-Dunwich (Municipality) (*1) involved a driver who ran a stop sign and crashed into a concrete bridge after losing control of his car when the road curved immediately after the sign. The trial judge found that the change in road alignment was a hidden hazard to rural drivers who had a habit of not always stopping at stop signs. As such, the trial judge held that more than an ordinary stop sign was required to warn ‘ordinary rural drivers’ of the this hazard. Liability was apportioned equally and the municipality appealed.


The 16 year-old plaintiff in this case had more experience operating a motor vehicle than an average person of his age since he had been racing cars at the Delaware Speedway for a year and a half prior to the accident. On the evening in question, under clear weather conditions, the plaintiff was travelling with a friend who was located in the passenger’s seat to another friend’s house down a gravel rural road that was unfamiliar to him. The road typically had little traffic. He had two beers during the trip but his blood alcohol readings were below the legal limit for fully licensed drivers.

When he came to an intersection with a stop sign, he saw no approaching cars and drove through the intersection at or near the speed of 80km per hour without stopping. The road curved to the right immediately after the intersection. While trying to navigate the curve, he lost control of the car and crashed into a concrete bridge. As a result, he suffered brain damage and had no memory of the crash. The plaintiff admitted at trial that he was negligent: if he had stopped at the intersection, the accident would not have happened.

Legislation and Jurisprudence

The plaintiff commenced an action under section 4 of the Municipal Act, 2001 (*2) and pled that the Municipality breached its duty to keep its highways (including roads) and bridges in a reasonable state of repair by failing to post a checkerboard sign warning of the change in the road’s alignment.  Section 44 states the following:

44.  (1)  The municipality that has jurisdiction over a highway or bridge shall keep it in a state of repair that is reasonable in the circumstances, including the character and location of the highway or bridge. (2)  A municipality that defaults in complying with subsection (1) is, subject to the Negligence Act, liable for all damages any person sustains because of the default. (3)  Despite subsection (2), a municipality is not liable for failing to keep a highway or bridge in a reasonable state of repair if, (a) it did not know and could not reasonably have been expected to have known about the state of repair of the highway or bridge; (b) it took reasonable steps to prevent the default from arising; or (c) at the time the cause of action arose, minimum standards established under subsection (4) applied to the highway or bridge and to the alleged default and those standards have been met

The court relied upon the cases of Morsi v Femar Paving Ltd. (*3) and Deering v Scugog (Township) (*4),which establish a four-part test for determining whether a municipality has breached its duty to keep its roads in a reasonable state of repair:

“[26] … 1. Non-repair: The plaintiff must prove on a balance of probabilities that the municipality failed to keep the road in question in a reasonable state of repair. 2. Causation: The plaintiff must prove the “non-repair” caused the accident. 3. Statutory Defences: Proof of “non-repair” and causation establish a prima facie case of liability against a municipality. The municipality then has the onus of establishing that at least one of the three defences in s. 44(3) applies. 4. Contributory Negligence: A municipality that cannot establish any of the three defences in s. 44(3) will be found liable. The municipality can, however, show that the plaintiff’s driving caused or contributed to the plaintiff’s injuries.”

The court noted that “a municipality has a duty to prevent or remedy conditions on its roads that create an unreasonable risk of harm for ordinary drivers exercising reasonable care”. (*5) Further the court stated that ordinary drivers are not perfect, but rather include those who are of average intelligence, pay attention, use caution when needed, but sometimes make mistakes. (*6) This duty does not extend to negligent drivers. (*7) Municipalities are not required to make the roads safe for drivers who do not pay attention, drive at excessive speeds or too closely to the vehicle in front of them, and so on. (*8) Furthermore, warning signs are only required where an ordinary driver exercising reasonable care would be exposed to an unreasonable risk of harm without them. (*9)

Trial Judgment

The trial judge found that the municipality had breached its statutory duty because it failed to post a warning sign noting the change in the road’s alignment. Her Honour held that this change was a hidden hazard for ‘ordinary rural drivers’ who do not always stop at stop signs. As such, a warning was required to give rural motorists reasonable notice of a potentially catastrophic hazard. However, the trial judge also found that the plaintiff was negligent because he failed to stop at the stop sign and apportioned liability equally as a result.

The Reasonable Driver

The Court of Appeal held that the trial judge misapplied the standard of care. The offset did not pose any hazard or risk to the reasonable driver, that is, an ordinary driver exercising reasonable care. A driver who runs a stop sign at 80 km per hour, as the plaintiff was doing in this case, is driving negligently rather than reasonably. The court held that municipalities owe no duty to warn of hazards that present an unreasonable risk of harm only to negligent drivers. (*10)

The Court of Appeal noted that the trial judge effectively created a new category of driver, “the ordinary rural driver who does not always stop at stop signs”. It went on to say that this new category was not supported by the evidence at trial or by law. (*11) Furthermore, the court stated that even if the evidence did support the trial judge’s finding of a local practice of running stop signs in rural areas, it could not impose liability on the municipality for two reasons.

Firstly, this “local practice” still amounted to negligent driving and the Supreme Court of Canada has previously established that no amount of general community compliance will render negligent conduct ‘reasonable’. (*12)

Secondly, by recognizing ‘ordinary rural drivers’, the trial judge created two categories of drivers, which the Court of Appeal noted is not the law in Canada. (*13) There cannot be one standard of reasonable driving for rural drivers and another for city drivers. (*14)


In sum, the Court of Appeal established that municipalities only have a duty to keep their roads, whether rural or city roads, in a reasonable state of repair by making them safe for reasonable drivers. A municipality is not required to erect additional signs or take other precautions to prevent accidents that will occur only where a driver is negligent. This is due to the fact the Ontario Highway Traffic Act sets out uniform rules of the road, which apply to all drivers with no distinction between city and rural drivers.

Jaclyne Reive Student-at-Law

Endnotes: (*1) 2014 ONCA 891, [2014] OJ No 5938 (*2) S.O. 2001, c. 25 (*3) 2011 ONCA 577, 86 MPLR (4th) 30, leave to appeal refused (*4) 2010 ONSC 5502, 3 MVR (6th) 33, aff’d 2012 ONCA 386, leave to appeal refused (*5) Supra note 1 at p. 28. (*6) Ibid. (*7) Ibid., at p29. (*8) Ibid., at p. 30. (*9) Ibid., at p. 31. (*10) Ibid., at p. 36.

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