Newsletter > August 2019View/Download this newsletter in PDF
In this issue: 1. News & Upcoming Events 2. Insurance Policy Covered Fraudulent Order for Goods 3. The Motor Carrier’s Limitation of Liability 4. The Unpaid Seller in the International Sale of Goods 5. Customs Tariff for Sailboat from USA 6. Entry into force of LRMA and Preclearance Act, 2016 7. Lawyer liable for Negligent Referral 8. Are you in an “exclusive” relationship? 9. Truck Driver’s Human Rights Complaint Dismissed 10. And Finally,
- “Best Lawyers™ in Canada 2020” has recognized Rui Fernandes and Gordon Hearn in the areas of Transportation Law and Maritime Law, Kim Stoll in area of Maritime Law and Carol McAfee Wallace in the area of Transportation Law.
- Women’s Trucking Federation of Canada’s 2019 Bridging the Barriers Conference in Mississauga, Ontario on September 6, 2019. Kim Stoll and Alan Cofman will be speaking on a panel on “Drivers Inc.”
- Association of Canadian Port Authorities Annual Conference will be held in Saguenay, Quebec, September 9-12, 2019.
- CIFFA 2019 Central Region Gulf Tournament: Caledon Woods Golf Club, September 12, 2019.
- 6th International Cargo Recovery Conference will be held in New York City on September 17, 2019. Rui Fernandes will be speaking on “Canadian Inland Losses.”
- IUMI 2019 (International Union of Marine Insurance) will be holding its annual meeting in Toronto on September 15 to 18, 2019.
- Houston Marine & Energy Conference, September 15-17, 2019, Houston.
- Canadian Transport Lawyers Association 2019 Annual General Meeting and Conference in Winnipeg, Manitoba September 19-21, 2019. Kim Stoll is on the Educational Programme Committee and will be moderating the Ethics Panel on Conscientious Lawyering and Carole McAfee Wallace will be speaking on Drivers Inc. and Alan Cofman will be speaking on Cabotage.
- Third Annual Conference on Enforcement of Arbitration Awards, September 26th, 2019, Boston.
- CMI 2019 Colloquium, September 30 to October 2nd, 2019, Mexico City.
(j) property on loan or on rental or sold by the Insured under conditional sale, instalment payment or other deferred payment plan, from the time of leaving the Insured’s custody.Heart Zap countered that the clear and obvious intention of the exclusion was to limit exposure in circumstances where the property was out of the insured’s possession but where they still have title. The Court found that, while the term “conditional sale” was not defined in the Policy, one must read the exclusion using the common law understanding of a conditional sale. (*2)
A conditional sale is a form of sales contract in which seller reserves title until the buyer pays for the goods, at which time, the condition having been fulfilled, title passes to the buyer. The items listed in the Policy exclusion convey that the exclusion is concerned with the retention of risk in the property. But the fraudulent sale was not a conditional sale. It was a typical cash delivery contract and there is no evidence of any agreement or intent to withhold title. If the mere inclusion of “Payment Net 30 days” were to create a conditional sale, the law of conditional sale would be substantially altered. I am not persuaded that the inclusion of a payment term of 30 days in the Invoice or Purchase order means the fraudulent transaction was a conditional sale.Rui Fernandes Endnotes (*1) 2019 ONSC 3667. (*2) See paragraphs 31-33. 3. The Motor Carrier’s Limitation of Liability In most Canadian provinces (*1) motor carriers may benefit from a $2 per pound limitation of liability unless there has been a declaration of the value of the cargo by the shipper. For contracts governed by the laws of Ontario there must be a declaration made on the “face of the contract of carriage”. As concerns the other provinces giving effect to this limitation of liability the shipper must declare a value on the “face of the bill of lading”. Whether there is a practical difference between the two regimes has not yet been settled by case law and is beyond the scope of this article. The legislative intent is clear that the parties to a carriage contract need to be in agreement on matters of risk and recovery: if the shipper declares a value, the carrier may face increased cargo loss or damage exposure if the goods are valued at more than $2 per pound. Depending on the prevailing practices and circumstances, where there is a declaration of value the carrier might either elect to: i) reject the carriage mandate ii) assess a declared valuation “surcharge” or iii) simply accepting cargo for carriage against the same base “freight rate” as if there was no declaration of value. Given that the $2 per pound limitation of liability is essentially a random (albeit policy based) legislated benefit to a carrier (exonerating it from full value liability) a carrier has to properly “set up” or qualify its defence of limited liability. The recently published decision of the Nova Scotia Small Claims Court in Shaw v. Sameday Worldwide, Division of Day & Ross Inc. (*2) highlights the importance of clarity in the contractual structure for a carrier to be able to limit liability. The facts of the case are quite simple, illustrating a common “disconnect” where more than one bill of lading form is used for a shipment: 1. The claimant bought certain “running boards” from a Quebec vendor. 2. The claimant contacted Sameday to pick up the running boards from the Quebec vendor’s pick up location, and to deliver them to the claimant at his Nova Scotia address. 3. Sameday sub-contracted the pick up and carriage to a third party carrier, Transit Nord Plus. 4. Sameday generated a form of its bill of lading in connection with the shipment. This bill of lading properly identified the vendor as the shipper, Sameday as the carrier and the claimant as the consignee receiver. 5. At the point of pick up, however, the Transit Nord Plus driver issued his company’s own form of bill of lading to the shipper. It listed Transit Nord Plus as the consignee receiver for the freight. Neither the claimant’s name nor his address was listed. The Transit Nord Plus bill of lading was signed by both the shipper and the driver. The shipper did not declare a value on this bill of lading. 6. The Sameday form of bill of lading was not signed by anyone. As it was not signed, it did not contain a declared valuation. Sameday relied on the $2 per pound defence. The cargo weighed only 69 pounds. It relied on the fact that there was no declaration of value on its form of bill of lading. The Court ruled that Sameday could not limit its liability to $2 per pound. Noting that, where the bill of lading is intended to be the contract of carriage (*3), it is critical that the same be properly executed and treated accordingly – that is, it should bear the required signatures of the shipper and trucking company as required in the governing legislation. The Court regarded the absence of signatures as reducing the Sameday bill of lading to effectively being an empty piece of paper, not forming a contract. As concerns the Transit Nord Plus bill of lading, the Court ruled that, as it did not refer to the claimant as the consignee, the contract reflected therein – including the $2 per pound limitation of liability – was then not binding on the claimant (*4). The paperwork, thus being considered by the Court to be confusing, along with other factors, also worked against the carrier’s limitation argument:
1. Sameday initially took the position that it had no record of accepting the carriage mandate in the first place – evidently on account of its bill of lading (likely having the effect of an internal or an accounting control document) not being issued.
2. When the claimant first booked the carriage with Sameday, he was advised by its representative that it would “look after everything”; there being no discussion on matters of transit insurance or the declaration of values. (*5)As mentioned, two different forms of bill of lading were used in the equation. This tends to happen in the marketplace, in facts such as these (i.e. a delegated carrier using its own form over that of the carrier with whom the shipper contracts) or where a shipper signs its own shipping order or bill of lading form rather than signing the carrier’s form of bill of lading tendered by a driver for signature. We also see potential confusion in cases where one form of bill of lading is used at origin to confirm the receipt of cargo, but yet another form is used at destination as a “POD” (proof of delivery). The take away is simple, in “consumer” based carriage mandates such as in this case: where a shipper and a carrier have not signed an overarching carriage agreement; that is, where the carrier seeks the benefit of the automatic or deemed limitation of liability pursuant to governing regulation it must ensure that the contractual paperwork is clear, issued and signed “by the book”. For that matter, where a carrier wishes to rely on certain website-based terms and conditions (or those contained elsewhere that are not reproduced in a bill of lading form) through “incorporation by reference” on a bill of lading form, it too must be careful as to which bill of lading form is in fact used in connection with a shipment. Gordon Hearn Endnotes (*1) i.e. Ontario, Quebec, British Columbia, Alberta, Saskatchewan, Manitoba, Nova Scotia and New Brunswick. (*2) 2019 Carswell NS 499 (*3) The issue did not present itself given the facts of this case as to the interplay or relationship between the terms of a signed master Shipper-Carrier contract on the one hand and those contained in a bill of lading (or as may be deemed by applicable law to be in a bill of lading) on the other. There was no master contract in this case. The parties only ever intended for an issued bill of lading to comprise the contract. (*4) It appears that the argument was not advanced by the carrier that the vendor shipper was acting as the agent for and on behalf of the claimant so as to make the Transit Nord Plus bill of lading binding on him, but at any rate this is beside the point for our immediate discussion purposes. (*5) While the Court does not appear to be suggesting that carriers have any duty to raise such matters with shippers, there was confusion on what the contract was intended to be and this clearly made the Court more sensitive to the shipper’s interests in not being “surprised” by the carrier’s limitation of liability defence. 4. The Unpaid Seller in the International Sale of Goods Introduction In the July 2019 issue of The Navigator, we reported on the United Nations Convention on Contracts for the International Sale of Goods (known as the “CISG”). Ontario has adopted the CISG as Schedule 1 to the International Sales Conventions Act, R.S.O. 1990, c.I.10. As canvassed, the CISG might catch a seller or a buyer to an international sales contract by surprise given that, if applicable, it automatically stipulates certain contractual terms and conditions. Another point raised concerns how certain CISG terms and conditions might be at odds with how a seller or buyer may have come to understand their rights and obligations as a matter of their “local” or domestic law. Another challenge, presented by the case study being the subject of this article, concerns how there has been only limited judicial consideration of the CISG: exactly what does it impose on the contracting parties? Due diligence in “mapping out” sales contracts is critical. The recently published decision of the Ontario Court of Appeal in Solea International BVBA v. Bassett & Walker International Inc. (*1) illustrates an example of a sales contract ‘showdown’ concerning how parties to a sale of goods dispute had different interpretations of the CISG. This case concerned the question whether an unpaid seller is required to try to resell goods to a new buyer rather than suing the defaulting buyer for the purchase price. The Facts Solea International BVBA (“Solea”) is a broker of seafood products. It sold two containers of frozen shrimp to Bassett & Walker International Inc. (“BWI”), a Toronto-based company. Solea originally purchased the shrimp from an Ecuadorian supplier, Castromar S.A. Under the terms of its sales contract with BWI, Solea was to deliver the shrimp on CIF (Cost, Insurance and Freight) terms (*2) at the Mexican port of Manzanillo. The shrimp arrived at the port and was discharged from the ocean vessel on June 13, 2014. By mid-August, BWI still had not been able to pass the goods through Mexican customs. Although first assuring Solea that it would pay the invoice, ultimately BWI refused to pay Solea’s invoice for the contract price of the shrimp. The shrimp was returned to Ecuador. Solea commenced an action in the Ontario Superior Court of Justice for payment of the purchase price of U.S. $228,604.50 plus interest at a contractually stipulated rate of 8%. The Court eventually granted judgment to Solea for the full amount of the purchase price, together with pre-judgment interest. The Appeal to the Court of Appeal BWI appealed this decision to the Ontario Court of Appeal on the basis that Solea failed to satisfy a requirement to “mitigate” its claims that is contained in the CISG. The litigants had conceded that the CISG applied to the subject contract. BWI argued that Article 77 of the CISG required Solea to first try to resell the product to collect the purchase monies from a new buyer before it could start a legal action– that Solea had a duty to “mitigate” its losses and, in failing to do so, it could not sue for the unpaid purchase price. Article 77 appears in Chapter V of the CISG which deals with “Provisions common to the obligations of the seller and of the buyer”. Section II of that Chapter concerns “Damages”. Art. 77 states:
A party who relies on a breach of contract must take such measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting from the breach. If he fails to take such measures, the party in breach may claim a reduction in the damages in the amount by which the loss should have been mitigated.In our domestic common law, the “duty of mitigate” calls for a plaintiff to take reasonable steps within its control to reduce if not prevent a loss. If a plaintiff takes steps in mitigation it is able to recover expenses reasonably incurred from a responsible defendant. However, if it fails to take such steps that may affect the amount ultimately recovered by court action. The judge ruled that “[t]he duty to mitigate is not relevant to Solea’s claim for payment of the purchase price of the shrimp”, accepting Solea’s argument that the CISG mitigation provisions apply only to claims for damages (for example, compromised product in terms of quality or description, or damages for late delivery) but not to an action for judgment in the amount of the purchase price. The judge noted Chapter III of the CISG. That chapter deals with specific obligations of the buyer. Section III in that Chapter addresses “Remedies for breach of contract by the buyer”. Articles 61(1) and (2) in Section III state:
(1) If the buyer fails to perform any of his obligations under the contract or this Convention, the seller may:
(a) exercise the rights provided in articles 62 to 65;
(b) claim damages as provided in articles 74 to 77.
(2) The seller is not deprived of any right he may have to claim damages by exercising his right to other remedies.CISG Article 62 states that the “seller may require the buyer to pay the price, take delivery or perform his other obligations, unless the seller has resorted to a remedy which is inconsistent with this requirement.” The “UN Convention on Contracts for the International Sale of Goods (CISG), A Commentary” (*3) (the “ CISG Commentary”) takes the position that that the duty to mitigate contained in Article 77 does not apply to an action for the purchase price by a seller under Art. 62. The judge regarded Solea’s action for the purchase price as a requirement by it as the seller that the buyer pay the purchase price within the meaning of Article 62. Accordingly, the judge in first instance ruled in favour of Solea. At the Court of Appeal: It’s Analysis, Charting Complex Waters and the Vexing Article 28 The Court of Appeal found that the judge’s position on the mitigation issue was supported in the CISG Commentary which also addresses Article 62. The CISG Commentary states on point at p. 858:
Art. 62 grants the seller the right to demand the specific performance of any obligation owed to him by the buyer, including the payment of the price … Art. 62 adopts, at least in principle, the position of the civil law tradition – specific performance is available as of right for any breach of any obligation of the buyer, including the obligation to pay the price.The Court of Appeal noted that while Article 61(b) applies Article 77’s duty to mitigate to a claim for “damages” and not to an action by a seller pursuant to Art. 62 to “require the buyer to pay the price,” drawing from a commentary by the United Nations Commission on International Trade Law (UNCITRAL) (*4) on Article 62 (the UNCITRAL Commentary”). The UNCITRAL Commentary recognizes that this principle cuts against the grain of common law remedial principles stating, at p. 287:
Article 62 entitles the seller to require the buyer to perform its obligations. This remedy is generally recognized in civil law systems, whereas common law systems generally allow for the remedy (often under the designation “specific performance”) only in limited circumstances.The Court noted the CISG Commentary, which explores this tension between Art. 62 and common law jurisdiction remedies in a discussion on “The right to demand payment”. The CISG Commentary states, at p. 859:
The right to demand the specific performance of the obligation to pay the price is probably the most controversial part of this (Article 62) provision. During the negotiations of the Convention the delegation of the USA proposed that the buyer may require payment unless “in the circumstances the seller should reasonably mitigate the loss resulting from the breach by reselling the goods”. This would have made the CISG similar to the law in most common law jurisdictions. This was in fact also effectively the solution adopted by the ULIS, the predecessor of the CISG.
In the end, however, the US proposal and the approach adopted by the ULIS were rejected and there is, therefore, no need for the seller to mitigate his loss – he is entitled to ask for the payment of the price without having to try to sell the goods to a third party. The CISG adopts a pure civil law formulation of the rule. In practice, however, it is very likely that in the vast majority of cases where the seller has possession of the goods and there is a market for these goods, the seller will opt to cut his losses, attempt to avoid the contract as soon as possible (Art. 64) and resell the goods (maybe even using Arts 85 and 88) rather than seek an order for specific performance of the obligation to pay that would have to be enforced in the buyer’s country. In practice, therefore, the theoretical differences between the civil law and the common law may not be as important as they may seem. In addition, Art. 28 will often mean that sellers will have to mitigate their loss by reselling the goods. There will however be instances where the seller will prefer to seek the specific performance of the obligation to pay. [footnotes omitted, emphasis added] The Court of Appeal Addresses the Vexing Article 28The reference to Article 28 in the last portion of the above extract from the CISG Commentary was found to be significant. Article 28 states:
If, in accordance with the provisions of this Convention, one party is entitled to require performance of any obligation by the other party, a court is not bound to enter a judgment for specific performance unless the court would do so under its own law in respect of similar contracts of sale not governed by this Convention.(emphasis added) As explained in the CISG Commentary:
Art. 28 is a compromise position between the common law’s preference for money damages in the event of a breach of contract and the civil law’s preference for performance … To the extent that [Art. 28] applies, it restricts the ability of the parties to demand performance. (at pp. 370 and 375).The CISG Commentary observes the following on Article 62:
In practice, however, the general availability of specific performance under the CISG will be limited, particularly in common law jurisdictions by Art. 28 (at pp. 858-859).In its statement of claim, Solea did not expressly seek specific performance of the sales contract. It simply claimed “$228,604.50 U.S. dollars or the Canadian equivalent at the date of judgment.” The Court of Appeal regarded Solea’s action as one requiring BWI “to pay the price” within the meaning of Article 62 but that any ultimate characterization of Solea’s claim for the purpose of determining whether an Article 77 duty to mitigate applied would need to take into account the availability of an Article 62-based specific performance remedy in a common law jurisdiction such as Ontario in view of the limitation placed by Article 28. The parties did not address what effect, if any, Article 28 may have on any duty for Solea to mitigate in its Ontario action for the purchase price. As a result, the judge had not expressed any view on the matter. The Court of Appeal had to wrestle with the notion that Article 28 might pose a possible impediment to Solea’s argument: if the action were subject to Ontario law would an Ontario court impose BWI’s position that there was the duty on Solea to mitigate by reselling the shrimp? The Court of Appeal addressed this vexing question by considering BWI’s case at its highest, assuming (without deciding) that Solea was in fact subject to a duty to mitigate. Upon undertaking such an analysis, it found that, in any event, Solea had in fact satisfied a duty to mitigate. Solea had, in Fact, Mitigated its Losses, If Required Under the CISG BWI had argued that Solea failed to establish that it took reasonable measures to mitigate its loss. Having returned the shrimp to Solea, BWI contended that Solea either resold, could have resold, or should have resold the shrimp. As a result, BWI submitted that Solea’s damages were “zero”. The Court of Appeal revisited the trial judge’s findings that BWI breached the contract by failing to pay the purchase price. Her Honour’s reasons disclosed that she found that title had passed to BWI upon delivery of the goods at the Mexican port and BWI’s subsequent problems in clearing the goods had not altered the fact that title had passed to it. The judge had reviewed the evidence about the discussions between the parties in mid to late August, 2014 following BWI’s disclosure that it had encountered import problems. She had found that:
- Solea did not make any representation, promise or agreement that it would not require BWI to pay the purchase price if the product was returned to Ecuador;
- The arrangement to return the goods to Ecuador was not a new transaction in which title to the shrimp was reconveyed to Solea; and
- The bill of lading for the shipment to Ecuador named Castromar, the original supplier, as consignee, which led the trial judge to find that there was no evidence that title to the shrimp had passed from BWI to Solea.
3.Casual goods that are acquired in the United States
(a) are deemed to originate in the United States and are entitled to the benefit of the United States Tariff if
(i) the marking of the goods is in accordance with the marking laws of the United States and indicates that the goods are the product of the United States or Canada, or
(ii) the goods do not bear a mark and there is no evidence to indicate that the goods are not the product of the United States or CanadaThe parties agreed that (i) the good in issue was purchased by Mr. McElligott in the United States just prior to importation into Canada; (ii) the hull was imported from Taiwan into North America (seemingly into Canada) in or around 1986 (and then at some point sold and exported to the United States); (iii) the HIN indicates that the hull was manufactured in Taiwan; (iv) spars, sails, rigging, and various other components were added to the hull in the United States; and that (v) the good in issue does not itself bear a mark indicative of its origin; to be sure, various components that make up the good in issue, including the hull, have origin markings, but the good in issue does not have an overall mark of its own. The Tribunal noted that according to paragraph 3(a) of the Regulations, when a casual good, such as the good in issue, is acquired in the United States it is deemed to be of U.S. origin in certain circumstances. The Tribunal analyzed the application of the Regulation as follows:
16.The first circumstance is set out in subparagraph 3(a)(i) of the Regulations: that the marking of the goods be in accordance with the marking laws of the United States and indicates that the goods are the product of the United States or Canada. That circumstance is not applicable to the facts of this case because the good in issue does not itself bear a mark indicative of its origin (see (v) in paragraph 14 above). As such, the Tribunal finds that subparagraph 3(a)(i) of the Regulations does not apply.
17.The second circumstance is set out in subparagraph 3(a)(ii) of the Regulations and is determinative of the Tribunal’s finding that the good in issue is of U.S. origin. This circumstance is applicable if two conditions are met: (1) that the goods not bear a mark and (2) there be no evidence to indicate that the goods are not the product of the United States or Canada. For the reasons that follow, the Tribunal finds that both conditions are met.The Tribunal further found that that the origin of the good in issue cannot be reduced to the origin of its hull component. This is because even though the hull has a HIN, that mark which is found on a component of the good in issue cannot be assimilated to a mark for the good in issue itself. The Tribunal also found that, in regards to the second condition of subparagraph 3(a)(ii), which requires that there be no evidence to indicate that the goods are not the product of the United States or Canada, that there was in fact no such evidence before it in this matter. The Tribunal added:
The evidence also shows that the hull and other components were manufactured or assembled into the good in issue in the United States: the original agreement of purchase, which indicates that only the hull, less spars and rigging was being procured; the letter from Mr. Peterson; and the information relating to the commissioning of the vessel in the United States. Fundamentally, the good in issue is an assembly of parts that came into being in the United States; it was manufactured or assembled there.The Tribunal found that the good in issue was deemed to be of U.S. origin and granted the appeal of Mr. McElligott. Rui Fernandes Endnotes (*1) AP-2018-045, 2019-07-15 (*2) S.O.R./93-593 (*3) Under tariff item No. 8903.91.00. 6. Entry into Force of LRMA and Preclearance Act, 2016 In March 2015, Canada and the United States signed a new treaty entitled the Agreement on Land, Rail, Marine and Air Transport Preclearance between the Government of Canada and the Government of the United States (LRMA), which was a commitment of the 2011 Beyond the Border Action Plan. The LRMA provides for preclearance operations to be conducted in all modes of transport (i.e. land, rail and marine as well as air) as well as for cargo operations. Like the previous air agreement, the LRMA permits either country to establish preclearance operations in the territory of the other country (i.e. Canada in the U.S. or the U.S. in Canada). Canada’s treaty obligations under the air agreement were implemented in Canadian law through the Preclearance Act of 1999. Similarly, Canada’s treaty obligations under the LRMA have been implemented in Canada through the modernized Preclearance Act, 2016. The LRMA and Preclearance Act, 2016 entered into force on August 15, 2019. Public Safety Canada has issued the following notice:
The Agreement on Land, Rail, Marine, and Air Transport Preclearance between the Government of Canada and the Government of the United States of America entered into force today, August 15, 2019. The entry into force of the Agreement coincides with the coming into force of the Preclearance Act, 2016, the consequential amendments to other Acts contained therein, and its associated Regulations.The U.S. is currently conducting preclearance operations at the following airports in Canada: • Calgary International Airport • Edmonton International Airport • Stanfield International Airport (Halifax) • Trudeau International Airport (Montréal) • Macdonald-Cartier International Airport (Ottawa) • Pearson International Airport (Toronto) • Vancouver International Airport • Winnipeg James Armstrong Richardson International Airport Rui Fernandes 7. Lawyer liable for negligent referral In the course of a retainer, lawyers are occasionally called upon to refer clients to other professional advisors, and even to other lawyers, particularly where matters are transnational, involving multiple jurisdictions. Referring or recommending a client to another professional advisor does not typically put the lawyer at risk of being liable to his or her client for the mistakes or wrongdoing of the referred professional. In other words, a lawyer’s referral of a client to another professional is not to be taken as a guarantee of a particular outcome. This appears to accord with common sense. The reason lawyers sometimes need to recommend other professionals to clients is precisely because another professional may have a particular skill or specialization not possessed by the referring lawyer. The referring lawyer therefore should not be expected to be an insurer of the other professional’s services. The very recent decision of the Supreme Court of Canada in Salomon v. Matte-Thompson (*1) reminds us, however, that despite this general rule that professional advisors are each responsible for their own conduct, lawyers still have a minimal duty to take some care when making specific recommendations of other advisors. Facts In Salomon, the appellant lawyer in question had for many years been the trusted professional advisor to a married couple and their successful restaurant business. When the respondent’s husband passed away, the respondent client in this case became the trustee of certain trusts created through his will. One of these trusts was for the preservation of the capital of his estate for the benefit of their children. Her lawyer recommended that she retain particular financial advisors in respect of this trust’s assets. The recommended financial advisors managed investment funds based in the Cayman Islands and the Bahamas, and the respondent in all invested $7.5 million in the funds recommended by her financial advisors. The funds in which the respondent invested turned out to be Ponzi schemes, however, and before she could withdraw her investment her financial advisors disappeared together with most of the money. Only about $900,000 from the money invested in these offshore funds was ultimately recovered by the client. The client then sued both her financial advisors and her lawyers. Although the trial judge had found the lawyer had breached a professional standard of care in initially recommending the financial advisors, she nevertheless held there was no causal link between that recommendation and the loss ultimately suffered. The Quebec Court of Appeal reversed this ruling, finding instead that the lawyer’s fault was not limited to the initial recommendation, but extended for a period of years during which he reassured the client regarding her investment, and that the negligence was in respect of advice given not only to the individual, but to both her and her company, the owner of the trust’s assets. The Court of Appeal also reversed the trial judge’s finding that the lawyer was not in a conflict of interest as between his client and the financial advisors. The Supreme Court of Canada dismissed the appeal, thus upholding the Court of Appeal’s ruling. The lawyer’s obligation in making a referral In upholding the Court of Appeal’s ruling, the majority in the Supreme Court of Canada restated the already well-established rule regarding a lawyer’s duty in making referrals. As expressed in the reasons of the majority, that duty is that:
Lawyers who refer clients to other professionals or advisors have an obligation of means, not one of result. Although lawyers do not guarantee the services rendered by professionals or advisors to whom they refer their clients, they must nevertheless act competently, prudently and diligently in making such referrals, which must be based on reasonable knowledge of the professionals or advisors in question. Referring lawyers must be convinced that the professionals or advisors to whom they refer clients are sufficiently competent to fulfill the contemplated mandates (*2)While the majority on the Supreme Court agreed that the standard was correctly stated in Harris, they distinguished the appeal in Salomon on the facts. In particular, they said the lawyer had breached his obligation to his client in this case by repeatedly recommending a particular investment product managed by the financial advisors to his client, which was advice that he was not competent to give. One key breach of duty of the lawyer identified by the majority of the Supreme Court was his failure to note that the financial advisors themselves were not registered as securities advisors or dealers under Quebec securities law. While this decision of the Supreme Court of Canada does not on its face signal any new standard to be met by lawyers when referring their clients to other professionals, the dissenting reasons in this case expressed some concern that this might be an example of a “hard case making bad law”. The lone dissenting voice on the Court noted that the decision might be imposing too great a burden on lawyers, perhaps even requiring systematic enquiry into the backgrounds of advisors they recommend (*4). Recommending other professionals to existing clients, where appropriate, is routine in the legal profession and generally of great benefit to a lawyer’s clients. The concern expressed in the dissenting reasons was that a duty of verifying the status of a professional advisor with whom a lawyer is familiar and has no reason to suspect would give poor advice might cause lawyers to avoid making recommendations altogether, out of fear they had not checked the backgrounds of their referrals sufficiently. Conclusion The decision in Salomon has lessons for both lawyers and their clients. For lawyers, while the law has not changed, in that a referral to another professional will not generally expose a lawyer to liability for a bad result, we are reminded that lawyers still have an obligation to be cautious, ensuring that they have a reasonable familiarity and comfort with the standards of advisors they recommend. On the other hand, while clients can take some comfort in the fact that a reckless recommendation may give them a remedy against the lawyer who made the referral, they should nevertheless recall that a recommendation by one trusted advisor of another is, as the courts have repeatedly stated, no “guarantee.” The lawyer still has no duty to ensure that a referred professional is giving good advice. In short, there is still no substitute for a client independently looking into the background and reputation of his or her professional advisors, regardless of how much one trusts the professional making the recommendation. Oleg M. Roslak Endnotes (*1) 2019 SCC 14 [Salomon]. (*2) Salomon at para. 45. (*3) Harris (Succession), Re, 2016 QCCA 50 [Harris]. (*4) Salomon at para. 146 (dissenting reasons). 8. Are you in an “exclusive” relationship? In 2009 the Ontario Court of Appeal confirmed that when it comes to classifying workers, there is an intermediate category between employee and independent contractor. In McKee v. Reid’s Heritage Homes Ltd. (*1) the court confirmed that a “dependent contractor” relationship exists where a worker can show a certain minimum economic dependency which may be demonstrated by complete or near-complete exclusivity. If a worker is determined to be a dependent contractor, he or she is entitled to notice of termination, or pay in lieu thereof, equal to that of an employee. In 2016, the Court of Appeal, in Keenan v. Canac Kitchens Ltd. (*2), stated that a “high level of dependency and exclusivity” is needed to establish the dependent contractor relationship. The Court stated that exclusivity cannot be determined on a snapshot approach to the relationship and the full history of the relationship must be considered. There have been few reported decisions since then which have offered helpful guidance to a business trying to apply the legal test to the particular facts of a work relationship, in order to assess whether the worker is a dependent contractor. Until now. On July 31, 2019 the Ontario Court of Appeal released its decision in Thurston. v. Ontario (Children’s Lawyer) (*3) and provided greater particularity with respect to the concepts of “exclusivity” and “dependency” in the definition of dependent contractor. Barbara Thurston is was a sole practitioner lawyer who provided legal services to the Ontario Children’s Lawyer (“OCL”) for a period of 13 years between 2002 and 2015. Ms. Thurston was a member of the OCL panel of 380 lawyers and provided services to the OCL through a series of fixed term contracts each of which required reappointment by OCL as there was no automatic right of renewal. The contracts did not restrict her ability to work for others, and some of the contracts expressly required that she state that her practice included work for others. The contracts also did not guarantee a minimum volume of work. There was continuous service, through a series of renewals since 2002; however, OCL did not renew Ms. Thurston’s contract in 2015, and she sued OCL claiming she was a dependent contractor and was entitled to 20 months’ termination notice. Ms. Thurston conceded that she was not an employee and brought a motion for summary judgment seeking a determination that she was a dependent contractor, which motion OCL resisted, arguing that she was an independent contractor. Key evidence on the motion was a chart setting out Ms. Thurston’s billings from 2002 to 2015, showing her gross billings and the portion of those gross billings attributed to OCL work. Over the of the course of 13 years, Ms. Thurston’s work for OCL ranged between 14.8% to 62.6% of her overall billings (note that in the last 3 years of the relationship the percentage was 62.6%, 47.5% and 50.1%). The average over the 13-year relationship was 39.9% of Ms. Thurston’s overall billings. The motions judge focused on the continuous 13-year relationship, the fact that Ms. Thurston performed work that was integral to OCL’s services, and that OCL had a great deal of control over her work and working conditions. The motions judge acknowledged that, while significant, the percentage of Ms. Thurston’s work from OCL was consistently less than 50%. Notwithstanding, the motions judge found that the permanency of the relationship, and the fact that the work performed was integral to OCL, tipped the balance in favour of a finding of dependent contractor status. OCL appealed this decision. The Ontario Court of Appeal reviewed the McKee decision and confirmed that a dependent contractor status is a non-employment relationship in which a certain minimum economic dependency may be demonstrated by complete or near complete dependency, and that the determination of the status must be made in the context of the purpose of the concept: extending the common law entitlement to notice of termination from employees to dependent contractors. In McKee, exclusivity, and therefore income, was key to determining economic dependence. The Court went on to state that “near-complete” exclusivity cannot be reduced to a specific number that determines dependent contractor status and that additional factors may be relevant. Having said that, the Court went on to state that near-exclusivity requires substantially more than 50% of billings. Otherwise, exclusivity, the hallmark of dependent contractor status, would be rendered meaningless. In the case at bar, when the court examined the entire relationship, only 39.9% of Ms. Thurston’s earnings came from OCL and this could not be categorized as a “near-exclusive” relationship. In light of this recent decision, businesses should undertake an analysis of their independent contractor relationships in order to determine whether there is a risk of a dependent contractor determination. Businesses should ensure that their contractors are permitted to work for others, and do in fact work for others, and consider including express provisions in their contractor agreements in which the worker confirms that he or she performs work for others. It may also be advisable to build into those contracts where exclusivity and, therefore dependency, is a realistic risk, a termination provision that meets the employment standards minimums for termination, or provides a formula for calculating notice of termination which is no less than those minimums, so as to avoid a costly legal battle over the appropriate amount of notice of termination. Carole McAfee Wallace Endnotes (*1) 2009 ONCA 916 (*2) 2016 ONCA 79 (*3) 2019 ONCA 640 9. Federal Court Agrees with CHRC, Upholds Dismissal of Truck Driver’s Human Rights Complaint: Rosianu v. Western Logistics Inc., 2019 FC 1022 In a fairly straightforward decision (Rosianu v. Western Logistics Inc., 2019 FC 1022), Chief Justice Paul Crampton of the Federal Court recently considered and dismissed a judicial review application brought by Mr. Viorel Rosianu, a disgruntled truck driver who had been dismissed by his employer, Western Logistics Inc. (“Western Logistics”). While Mr. Rosianu had been cautioned and warned several times about speeding and safety concerns by Western Logistics, the straw that broke the camel’s back was when Mr. Rosianu was caught driving with two flat tires… in the middle of snowy and icy driving conditions. Mr. Rosianu, clearly unhappy about being fired, tried to challenge the employer’s decision. He ultimately filed a human rights complaint with the Canadian Human Rights Commission (the “CHRC”), alleging that he had been unfairly discriminated against by Western Logistics due to a disability: he alleged that he had had a hernia operation in 2011, that he could not perform heavy lifting, but that Western Logistics was not prepared to accommodate his disability. The CHRC investigated but dismissed Mr. Rosianu’s complaint, essentially finding that it had no merit. Mr. Rosianu then applied to the Federal Court seeking judicial review of the CHRC’s decision. As described below, the Court dismissed the application, agreeing with the CHRC that there was no merit to Mr. Rosianu’s discrimination claims. Facts Mr. Rosianu was a truck driver who used to work for Western Logistics. He was hired in January 2011. In October 2011, he had hernia surgery; following that surgery, Mr. Rosianu submitted a medical form to his employer, indicating that he could not do any heavy lifting for a period of time. During this period, he received short-term disability benefits. About two years later, Western Logistics learned about an incident in which Mr. Rosianu was alleged to have driven unsafely in snow and ice conditions. Apparently, Mr. Rosianu was driving in such conditions with two flat tires. Western Logistics proceeded to terminate Mr. Rosianu’s employment. In the letter of termination, Western Logistics stated that it had previously cautioned Mr. Rosianu on several occasions about safety concerns, excessive speeds and the need to adhere to its Operating and Safety Policies. The letter concluded by stating that Western Logistics could no longer tolerate such behaviour and that, “in the interests of public safety”, Western Logistics had to relieve him of his responsibilities with the company. In March 2014, an inspector with Employment and Social Development Canada concluded that Western Logistics had just cause to dismiss Mr. Rosianu under the Canada Labour Code. That decision was later confirmed by a Referee appointed by the Minister of Labour. Among other things, the Referee found that there was “sufficient evidence that the Appellant engaged in unsafe behaviour on November 20, 2013 that warranted immediate dismissal”. Mr. Rosianu then filed a human rights complaint, alleging discrimination on Western Logistics’ part. He alleged that he has been abused, harassed and discriminated against by his former supervisor at Western Logistics, in various ways, for a period of close to two years. In particular, Mr. Rosianu alleged that following his hernia surgery in October 2011, he advised his supervisor that he was not fit to unload trailers. He alleged that, despite this advice, his supervisor refused to accommodate his disability, continued to “force” him to do such work, and tried to force him to quit his job. He further alleged that he advised several other persons in senior positions at Western Logistics regarding his disability. With respect to the incident that had triggered his termination, Mr. Rosianu explained that he had intended to fix the flat “tire” upon arriving at his destination. The Canadian Human Rights Commission Dismisses the Complaint The CHRC investigated the matter, as per its mandate. The CHRC decided to dismiss Mr. Rosianu’s complaint, as the investigator who investigated the complaint prepared a report recommending dismissal. The investigator’s report (the “Report”) began by noting that Mr. Rosianu’s allegations of “abuse and harassment” did not appear to be linked to his alleged disability. Accordingly, those allegations would not be investigated since those allegations are not within the CHRC’s jurisdiction. The Report continued that Mr. Rosianu had declined to be interviewed by the investigator and therefore could not be questioned about his allegations. It also noted that no evidence had been provided either to support the claim that Mr. Rosianu had been terminated due to his disability, or to indicate that he had any ongoing accommodation needs related to the effects of his surgery or any disability following his return to work in November 2011. Accordingly, the Report concluded that Mr. Rosianu had not been “treated in an adverse and differential manner on the basis of a disability” and had not been terminated on that ground. The Judicial Review Proceeding in the Federal Court Mr. Rosianu then sought to have the CHRC’s decision judicially reviewed in the Federal Court. As is often the case in judicial review proceedings (which are akin to appeals), Mr. Rosianu alleged, first, that his rights to procedural fairness had been violated by the CHRC in the course of its investigation of the complaint. Second, he alleged that the CHRC’s decision to dismiss his complaint should be overturned because it was “unreasonable”. Ultimately, the Court made short shrift of Mr. Rosianu’s arguments, and dismissed the application for judicial review. The Court Dismisses Mr. Rosianu’s “Procedural Fairness” Allegations First, the Court addressed Mr. Rosianu’s “procedural fairness” argument. Mr. Rosianu submitted that his rights to procedural fairness were violated in the CHRC’s investigation. Specifically, Mr. Rosianu argued that the CHRC: a) improperly admitted hearsay evidence b) failed to permit him to be interviewed in writing, as he had requested c) failed to provide him with an opportunity to identify witnesses to support his complaint d) only interviewed witnesses identified by Western Logistics; and e) failed to investigate certain evidence submitted by Western Logistics Chief Justice Crampton disagreed with all of Mr. Rosianu’s arguments on this issue. First, His Honour noted that the CHRC is an investigative and screening body, and accordingly has no adjudicative role. Thus, it is not subject to the same rules of evidence that apply in court. Second, the Court noted that, despite Mr. Rosianu’s contention that the CHRC did not grant his request for a written interview, the fact was that Mr. Rosianu actually did provide written submissions to the CHRC before it made its decision. Thus, he did have an opportunity to convey his written views to the CHRC before it made its decision. Third, the Court noted that Mr. Rosianu did in fact identify eight witnesses supportive of his complaint, and that two of these witnesses were actually interviewed by the CHRC. Fourth, the Court repeated that in fact, the CHRC had interviewed two of Mr. Rosianu’s witnesses, and that his procedural rights were not violated simply because all of the witnesses he had identified were not interviewed. The Court observed that two of the persons interviewed were “key” and “obvious” persons to interview because they were “directly involved with” Mr. Rosianu’s work and related experience. Finally, the Court found that Mr. Rosianu’s argument that the CHRC had failed to investigate certain evidence submitted by Western Logistics was simply a bald allegation with no explanation. The Court Dismisses Mr. Rosianu’s Substantive Allegations Mr. Rosianu’s main argument, however, was that the CHRC did not in fact deal with the substance of his complaint, was based primarily on irrelevant factors, and was arbitrary. In addition, Mr. Rosianu maintained that it was unreasonable for the investigator to have failed to interview any medical experts and to provide him an opportunity to provide a medical certificate to support his complaint. Again, Chief Justice Crampton disagreed. With respect to the “substance of his complaint”, the Court noted that in his complaint, Mr. Rosianu stated, “Despite my warnings, [the supervisor] continued to force me to unload trailers and not to try to accommodate my disability”. In addition, Mr. Rosianu alleged that the supervisor bullied him in an attempt to force him to quit and gave him fewer hours of work, in part because of his disability. The Court also noted that the investigator explicitly addressed these allegations in her Report. She began by noting that five Western Logistics employees had stated in writing that Mr. Rosianu was not required to load or unload trucks as part of his regular duties. Importantly, the investigator also noted that Mr. Rosianu had failed to provide any evidence to support the various allegations that he had made in connection with his disability. She also noted that he had only ever been asked to physically handle freight on three occasions during his three years of employment with Western Logistics; he had refused the request on each occasion and did not suffer any adverse employment consequences. The investigator also noted the various progressive disciplinary letters given to Mr. Rosianu with respect to speed and safety concerns, and that he had allegedly failed to follow dispatch instructions on several occasions. Finally, she noted the incident that had triggered Mr. Rosianu’s termination. Accordingly, the Court concluded that the investigator’s findings (that Mr. Rosianu had not been discriminated against or fired because of a disability but instead for safety concerns) were reasonable. The Court also concluded that it was not unreasonable for the investigator not to have interviewed medical experts. Chief Justice Crampton held that it was in fact Mr. Rosario’s burden to provide such evidence to the CHRC to support his complaint, but that he failed to do so. Conclusion For all of the above reasons, the Court dismissed Mr. Rosianu’s application for judicial review. James Manson
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