Facebook Icon. Twitter Icon. LinkedIn Icon. 

A Premier

Toronto Law Firm

serving all of Canada and International clients since 1996.

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

Telephone: 416-203-9500

1. News & Upcoming Events

  • The Transportation Intermediaries Association and Canadian International Freight Forwarders Association have jointly published a paper by Gordon Hearn entitled “Freight Broker Framework – Doing Business in Canada”.
  • Carole McAfee Wallace and Janice Pereira will be representing the Firm at Trucking HR’s “Virtual Women with Drive Leadership Summit 2021” on March 10th, 2021.
  • The Fernandes Hearn LLP Annual Seminar will be held on February 11th, 2021 virtually on the Zoom platform.

Return to Table of Contents

2. Fernandes Hearn LLP Annual Seminar – February 11, 2021

Theme: Back to Basics

8:30am – 8:45am     Signing In
8:45am – 9:00am     Welcome Remarks
                                      Rui Fernandes
9:00am -10:45am     Current Employment Issues and Recent Decisions
                                     Carole M. Wallace,
                                     Janice Pereira
9:45am – 10:30am    Contractual Indemnities
                                      Gordon Hearn
10:30am – 11:00am   Marine Insurance Coverage
                                        James Manson
11:00am – 11:15am   Coffee Break
11:15am – 12:00pm   Current Issues Faced by Freight Forwarders
                                      Rui Fernandes
12:00pm – 12:45pm   Update on Rail/Air/Trucking/Marine Cases
                                       Andrea Fernandes – Rail / Air
                                       Alan Cofman – Trucking /Marine
12:45pm – 1:15 pm    Lunch Break
1:45pm – 2:15pm      Motor Truck Cargo Insurance Coverage Issues
                                     Kim Stoll
2:15pm – 2:45pm      Warehouse Storage Issues
                                    Oleg Roslak
2:45pm – 3:45pm     Court System Mediation and Arbitration, Panel
                                     Rui Fernandes
                                     Alan Cofman
Registration:
When: Feb 11, 2021 08:30 Eastern Time (US and Canada)

Register in advance for this meeting:
https://us02web.zoom.us/meeting/register/tZUvdOuhpjgrH9FqfC4wWp263tjnTcTn0hkf

After registering, you will receive a confirmation email containing information about joining the meeting.

Return to Table of Contents

3.  Application of Athens Convention to Personal Injury Boat Claim (*1)

The plaintiff, Francesca Knight, was injured when the boat on which she was travelling collided with a sandbar on the Lillooet River near Pemberton, British Columbia.

The parties did not dispute that Ms. Knight sustained personal injuries as the result of the accident. The sole question to be decided on the application was whether the defendants’ liability for those injuries was limited by Part 4 of the Marine Liability Act, S.C. 2001, c. 6 [“the Act”], which incorporates the limitation of liability in the Athens Convention relating to the Carriage of Passengers and the Luggage by Sea [the “Athens Convention”].

In the time leading up to the accident, Mainroad Howe Sound Contracting Ltd. (“Mainroad”) was under contract with Her Majesty the Queen in the Right of the Province of British Columbia, represented by the Minister of Transportation and Infrastructure (“MoT”) to provide highway maintenance services for designated provincial roadways. One of those roadways is the Pemberton Meadows Road (the “Roadway”), which lies adjacent to the bank of the Lillooet River (the “River”) in several areas north of Pemberton.

At the material time, Bob Devaney was Mainroad’s Operations Manager for the region. Jesse Morwood was MoT’s Area Manager.

In 2011, Mainroad and MoT became concerned about the stability of the Roadway, due to erosion of the River’s bank in several areas, if stabilization works were not conducted.

The plaintiff, Francesca Knight was a habitat biologist for the Department of Fisheries and Oceans (“DFO”). In July 2011, she expressed concerns over the approach taken by Mainroad and the MoT to protect the Roadway from bank erosion. The parties agreed to conduct reconnaissance to identify the riverbank erosion sites that would require emergency works for the DFO’s review.

Mr. Morwood tasked Mainroad with securing a boat charter to conduct the reconnaissance. Mr. Devaney, in turn, instructed Dave Brodowski, Mainroad’s Pemberton Yards supervisor to approach the defendant, Stephen Black, to determine whether he would transport Mainroad and MoT representatives on the River in his boat.

After some back and forth, Mr. Black agreed to transport individuals on the River in his boat for the purposes of the reconnaissance trip for payment of $200 per hour.

On October 18, 2011, Mr. Black operated the boat for the reconnaissance trip with five passengers: Mr. Devaney, Mr. Morwood, Ms. Knight, Jeff McMurtur of Mainroad and Mark Gollner, an environmental consultant.

On the way back from the reconnaissance trip, the boat struck a sandbar or some other object in the River. Ms. Knight alleges she sustained significant injuries as a result the impact.

On November 30, 2011, Mr. Black invoiced Mainroad $600 for his services in operating the boat for the boat trip. Mainroad paid that amount to Mr. Black on December 6, 2011 and subsequently charged that same amount to the MoT.

The Court reviewed the legislative background of the Athens Convention.

The issue to be determined on the application was whether the defendants’ liability was limited by the provisions of Part 4 of the Act and, by extension, the limitation provisions of the Athens Convention.

That analysis was informed by the interpretation of certain provisions of both the Act and the Athens Convention. In particular, the Court had to determine:

a) was Ms. Knight on the boat pursuant to a “contract of carriage”, as contemplated by section 37(2)(a) of the Act; and

b) if not, did any of the exclusions contemplated by section 37(2)(b) of the Act apply to negate the application of the Athens Convention?

The Court noted that as the starting point of this analysis, Article 1 of the Athens Convention defines a “contract of carriage” to mean a “contract made by or on behalf of a carrier for the carriage by sea of a passenger”.

As the Court also noted, section 36 of the Act directs that the phrase “carriage by sea” in this definition be read as “carriage by water”. “Carriage” is not defined in the Act or in the Athens Convention. Justice Ahmad noted that Black’s Law Dictionary defines “carriage” as “[t]ransportation of goods, freight or passengers”: Henry Campbell Black, Black’s Law Dictionary, 6th ed (St. Paul, MN: West, 1990).

Relying on that definition of “carriage”, the defendants argued that, as Mr. Black’s contract with Mainroad was made for the specific purpose of the transportation of individuals by boat on the River, the contract came within the definition of “carriage of contract”.

Ms. Knight argued that the analysis is not that simple. She argued that the defendants’ analysis ignores the nuances of marine contracts and agreements for the use of vessels. More specifically, she made a distinction between a “contract of carriage” and a “charterparty”. She submitted that the contract in this case was not a “contract of carriage”, but rather was a “charterparty”. As such, she argued that the limiting provisions of the Athens Convention do not apply.

Justice Ahmad noted that the Athens Convention provides that a “contract of carriage” is a “contract made by or on behalf of a carrier for the carriage by [water] of a passenger”. “To start, nothing in the definition excludes an agreement that has the characteristics of what the secondary sources refer to as a “charterparty”.” (*2) The Court held that the agreement to transport Ms. Knight and her colleagues by boat was a “contract of carriage”. 

The Court also found that on the evidence, there was a contract between Mainroad and Mr. Black to transport the individuals by boat in exchange for payment of $200 per hour. The Court also found that Mr. Black, as the owner and operator of the boat who performed the carriage, was the “performing carrier” as defined in the Athens Convention.

Lastly the Court dealt with the argument by Ms. Knight that the contract of carriage was not made with her, the passenger. The Court held that this was not a requirement, stating:

That section [37(2) of the Act] provides that the Athens Convention applies in respect of “the carriage by water, under a contract of carriage, of passengers”. The use of commas in that section delineates “contract of carriage” from “passengers”. If it was intended that the contract of carriage be made directly with the individual “passengers”, the legislature would not have made that delineation.  Rather, section 37(2)(a) could have provided that the Athens Convention applies to “the carriage by water under a contract of carriage with passengers”. The legislature chose not to use that language.The Court found that the Athens Convention applied and the limitation sections therein applied.

The Court found that the Athens Convention applied and the limitation sections therein applied.

Left to be determined was whether the exclusions in s. 37(2)(b) applied. The section provides:

(b)  the carriage by water, otherwise than under a contract of carriage, of persons or of persons and their luggage, excluding

(i) the master of a ship, a member of the ship’s crew or any other person employed or engaged in any capacity on board a ship on the business
of the ship
,

Justice Ahmad concluded that, the business of the ship was singular and limited: to transport Ms. Knight and her colleagues on the River. As Ms. Knight was not employed or engaged in that “business” of transportation, section 37(2)(b)(i) was not invoked so as to relieve Ms. Knight from the limitation provisions of the Athens Convention. The Court also concluded that on the day of the accident, the ship was operated for a commercial purpose.

In conclusion the Court  found that, any liability found against the defendants was limited to 175,000 “units of account” pursuant to Part 4 of the Act and Articles 1to 22 the Athens Convention.

Rui M. Fernandes
Endnotes
(*1) Knight2021. BCSC 19
(*2) at para. 72.

Return to Table of Contents

4.  Leave to Appeal Denied by Supreme Court of Canada in Waksdale v. Swegon

The July 2020 edition of The Navigator covered the  Ontario Court of Appeal’s decision in Waksdale v. Swegon North America Inc.  (“Waksdale”)(*1). In this game-changing decision, the Court held that termination clauses must be reviewed in their entirety. Therefore, despite the fact that the employee’s termination was without cause, and the without cause termination provision in the employee’s contract was found to be valid on its own, the Court opined that the termination “for cause” provision was void as it breached the Employment Standards Act, 2000 (“ESA”)(*2), therefore rendering the entire termination section in the employment contract unenforceable. As a result, the employee was entitled to common law reasonable notice of termination, which is generally a much longer period of notice than the minimums provided by the ESA.

It is important to note that the employment contract in Waksdale had a severability clause (a provision stating that the terms of the contract are independent of one another so that the rest of the contract will remain enforceable should a court declare one or more of its terms unenforceable or void). Nevertheless, the Court refused to apply the severability clause, as the invalid “for cause” termination clause tainted, by association, the remaining and otherwise enforceable termination “without-cause” clause in the contract.

The Court explained that even if an employer does not rely on an unenforceable “for cause” clause in dismissing an employee, the employer nevertheless gains the benefit of the illegal clause. For example, an employee who is not familiar with their rights under the ESA and who signs a contract that includes an unenforceable termination for cause provision, may incorrectly believe that they must behave in accordance with the unenforceable provision in order to avoid termination for cause.

On January 14, 2021, the Supreme Court of Canada dismissed the application for leave to appeal the Court of Appeal’s decision in Waksdale, thus confirming that employment agreements, and specifically, termination provisions, are to be read as a whole and not on a piecemeal basis.

While termination clauses can be useful tools for employers in order to protect their interests, such clauses are only as useful if they are legally compliant. Employers are urged to seek legal advice in order to ascertain whether their employment contracts remain legally binding in light of Waksdale, and if not, to bring their contracts into compliance with the ESA. On the other side of the coin, employees who are terminated would be wise to have their lawyers review their employment contracts in order to determine whether the employee is receiving a termination package that appropriately reflects their legal entitlements in the wake of Waksdale.

If you are interested in further employment law updates, be sure to attend the Fernandes Hearn LLP Annual Seminar which will be held by Zoom on February 11, 2021. Please see details above.

Janice C. Pereira
Endnotes
(*1) 2020 ONCA 392 [“Waksdale”].
(*2) S.O. 2000, c. 41 [“ESA”].

Return to Table of Contents

5.  Employee or Independent Contractor: Round 64,982

A recent complaint under the Canada Labour Code (the “Code”) (*1) regarding an alleged unjust dismissal of a driver engaged by a transportation and logistics company was argued all the way up to the Federal Court of Appeal on the perennial issue of whether the driver was an employee or independent contractor. In its very recent decision in 6586856 Canada Inc. cob TFI Transport 22 L.P. (operating as Loomis Express) v. Warren Fick (*2), the Federal Court of Appeal overturned a judicial review brought in the Federal Court from the adjudication of the complaint under the Code, thus restoring the adjudicator’s original decision that the complainant driver was not an employee of Loomis Express, but rather an independent contractor.

This case is important for two reasons. For one, it reminds parties yet again that whether someone works as an employee or an independent contractor will ultimately depend on the basic facts regarding their relationship, and not on the description set out in any formal agreement. Secondly, the case shows how it is most important to be successful at the initial complaint stage, since, on an appeal to any court, to successfully resist the appeal the original decision need only be shown to be reasonable, and therefore will not be altered even if a court believes that a decision arrived at reasonably was ultimately the wrong one.

The Facts

The driver who launched the complaint in this case, Warren Fick, had been delivering Freight for Loomis Express in Slave Lake, Alberta, for a period of 17 years. He had been hired initially under Loomis’ owner-operator classification as a unionized employee. In 2005, however, Fick terminated this relationship and later re-joined Loomis in 2006, working for them under this new relationship continuously until 2016. In 2016,  Loomis terminated its relationship with Fick after he suffered a heart attack and was unable to work, alleging as the reason for termination that he had failed to ensure a replacement driver provided services while he was recuperating. This termination by Loomis prompted the driver’s complaint of unjust dismissal brought under section 240 of Part III of the Code.

The adjudicator under the Code accepted Loomis’ evidence and found the driver to have been an independent contractor during the critical period between 2006 and 2016. The driver’s evidence had been that he and Loomis had a written agreement of employment executed in 2006, and that his copy had been lost when his house was destroyed in fires at Slave Lake in 2011. While Loomis had no evidence to contradict this, the adjudicator relied on both parties’ evidence to conclude that the post-2006 relationship between the driver and Loomis was an independent contractor relationship.

The driver and Loomis both gave evidence that he received a fixed daily payment of $500, on top of which he submitted invoices to Loomis under a trade name, WB Enterprises, from which no source deductions were taken. It was also both parties’ evidence that the driver’s compensation under this arrangement was significantly higher than he had received previously as an owner-operator employed by Loomis.

Employee or Independent Contractor

The adjudicator applied the established test for determining whether Fick was an employee as set out in the Supreme Court of Canada decision in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. (*3) (“Sagaz”). According to Sagaz, a court is to examine several key factors to determine whether, on balance, a relationship is one of employer/employee or independent contractor. In this particular case, the facts relevant to these factors were found to be as follows:

1. Ownership of tools and equipment: Except for a company-owned scanner provided to
the driver, Fick owned all of the equipment he used to work for Loomis, including his vehicle.

2. Right to hire helpers or others to perform work: Loomis did not prohibit Fick from hiring
others to perform his work, and in fact encouraged him to do so.

3. Extent of investment in business: Fick invested in his own vehicle and categorized it as
business investment for tax purposes.

4. Chance of profit/risk of loss: Although Fick had to charge a fixed rate for Loomis deliveries, he did not have to work for Loomis exclusively and was free to provide delivery services to others.

All of these factors pointed towards finding the driver to be an independent contractor rather than an employee. What further pushed the adjudicator towards a finding of an independent contractor relationship was the overall finding that this was not a case where the transportation company in question used its economic leverage to structure the relationship to its benefit. On the contrary, as noted above, it was the driver that had made the “conscious decision” to adopt greater risk for the greater reward he could obtain as an independent contractor.

The Appeals

Somewhat surprisingly, the Federal Court, upon the driver’s application for judicial review, overturned the adjudicator’s decision, finding it to have been “unreasonable.” One main reason for this finding by the Court was a problem with Loomis’ evidence, in that it failed to state where it was based only on information and belief. For example, although Loomis’ witness was not with the company when Fick entered the alleged new employment contract in 2006, the adjudicator nevertheless accepted its evidence that the relationship of Loomis with the driver was an independent contractor relationship, even though Loomis’ witness could have no direct knowledge of this and did not provide any basis for his belief. The Federal Court therefore reversed the adjudicator’s decision that it had no jurisdiction, concluding that the adjudicator’s reasons, because of errors in assessing the evidence, lacked the “requirements of justification, transparency and intelligibility” (*4).

On appeal by Loomis to the Federal Court of Appeal, the adjudicator’s finding against Fick was restored. One of the main lessons from this decision is the importance of succeeding at the initial hearing in the case of unjust dismissal adjudications under the Code. In disagreeing with the court below and finding the adjudicator’s decision to have been a reasonable one, the Federal Court of Appeal rejected the driver’s submission that his evidence about the 2006 contract had to be preferred because his was the only first-hand evidence. In fact, the Federal Court of Appeal found it not only  reasonable to accept Loomis’ version of events, but in fact quite reasonable for the adjudicator to have drawn conclusions on the nature of the post-2006 relationship by relying only on that evidence where both Loomis and the driver were in agreement on the relevant facts. This reminds us that you need to show more than simply that an adjudicator might have been wrong on certain factual decisions. The Federal Court of Appeal’s decision highlights the fact that, even if an adjudicator’s conclusion on a particular fact might be wrong, so long as the process for reaching that conclusion was a reasonable one, an appellate court will not interfere with the original decision.

Conclusion

The title of this article was intended to suggest, somewhat humorously, that disputes about whether someone is working as an independent contractor or employee are unlikely to disappear. The reason for this is that there will always be on the one hand companies seeking to maximize their own benefit by structuring a relationship in a way that most benefits them, while, on the other, there will be no shortage of workers prepared to take on the risk of a relationship that offers little protection if things go wrong in order to reap the greater economic reward from operating as an independent contractor. From the legal side, this case also shows why, in the end, getting a case decided in your favour on the first go around is critically important, not only because appeals are lengthy and costly, but because they also set a higher bar for reversing initial findings of fact.

Oleg M. Roslak

Endnotes
(*1) Canada Labour Code, R.S.C. 1985, c. L-2 [the “Code”].
(*2) 2021 FCA 2 [Fick].
(*3) [2001] 2 S.C.R. 983 [Sagaz].
(*4) Fick at para. 31.

Return to Table of Contents

More interesting 2021 January Articles!

6.  Motor Carrier Limitation of Liability:  Does $2 per Pound Apply if a Bill of Lading is Not Issued?

Introduction

Most provinces in Canada (*1) deem by way of regulation the application of various terms and conditions to contracts of carriage. One critical set of such terms concerns the ability of a trucking company to limit liability to $4.41 per kg (commonly expressed in terms of $2 per pound) for lost or damaged freight unless a shipper declares a value for the goods being shipped to a carrier prior to or at the point of the pick-up at origin. There are slight variations on this theme: for its part, in its Carriage of Goods Regulation (*2), Ontario provides that a carrier may limit liability subject to the contract of carriage featuring a declared valuation:

9.  Valuation
Subject to Article 10, the amount of any loss or damage for which the carrier is liable, whether or not the loss or damage results from negligence, shall be the lesser of,
i. the value of the goods at the place and time of shipment, including the freight and other charges if paid, and
ii. $4.41 per kilogram computed on the total weight of the shipment.
10.  Declared Value
If the consignor has declared a value of the goods on the face of the contract of carriage, the amount of any loss or damage for which the carrier is liable shall not exceed the declared value.

The other provinces that regulate deemed terms of carriage in turn address the bill of lading itself as the means by which a shipper may declare a value to a carrier. As an instructive example (the particular case being the subject of this article happening in Nova Scotia) it is helpful to look at the language in so called “Uniform Conditions of Carriage” in the Nova Scotia Carriage of Freight by Vehicle Regulation (*3)

(i) The amount of any loss or damage computed … must not exceed the greater of

(A) the value declared by the consignor, or

(B) $4.41 per kg computed on the total weight of the shipment…

Frequently, as a function of a relatively high value of freight relative to its weight, the “$2 per pound limitation of liability” defence emerges as a critical factor in cargo claim resolution.

Whether or not a shipper declared a value may not be the end of the discussion. The provinces regulating in the area in different degrees prescribe requirements of a “minimum content” contract of carriage (i.e. Ontario) or bill of lading (the other provinces in question). This makes good sense from a policy standpoint: shippers should be given a fair and notorious opportunity to either declare a value or not. The risk allocation exercise as between shipper and carrier should be consistently administered and transparent.

If a carrier does not issue a compliant bill of lading or include required terms in a contract of carriage as may be the case, can it still limit its liability where there a value is not declared by a shipper? There is a surprising dearth of case law on point. The suggestion has been that a carrier should abide by the regulatory rules so as to benefit by them – that there needs to be some means available to a shipper to clearly mark in its declaration of value in the event it chooses to do so (*4). Does this however mean that shippers and carriers might never “go off grid” and provide otherwise, whether deliberately by way of a contractual agreement or as a matter of convenience, laziness or inadvertence? Can a shipper and carrier agree on a specific transportation contract dealing with such matters (in which case a bill of lading might be considered and used by the parties just as a receipt by the carrier for the cargo) or must there always be “technical compliance” in the issuance of a bill of lading?(*5)

The language of the regulating provinces suggests that technical compliance may be required.

The Ontario Carriage of Goods regulation provides that, amongst other items, “A contract of carriage shall contain … “a space to show the declared valuation of the shipment, if any” and “a statement to indicate that the uniform conditions of carriage apply”. (*6)

In turn, Nova Scotia’s Carriage of Freight by Vehicle Regulation provides that the deemed provisions of carriage – such as the $2 per pound limitation of liability – “shall be contained or incorporated by reference in every bill of lading relating to the carriage of freight by a motor carrier”. (*7) Further, that Regulation calls for the issuance of a bill of lading which must show various information including “a space to show the declared value of the shipment” and “a statement to indicate that the Uniform Conditions of Carriage apply”. (*8)

This article by no means purports to address all the possible arguments to the extent that they may be informed by the specific law of the province of origin of the cargo. This article does however provide a specific case study in how the courts might address the matter. It is also worth highlighting that there exists in Canada a “freedom of contract” regime, where shippers and carriers may enter into a formal carriage framework agreement addressing questions of liability, including limitations of liability and how, if at all, the shipper may declare a value. The lesson to the wise is to be as compliant, deliberate and as proactive as possible.

The Sad Case of the Lobster – a Trap for the Unwary?

The recently released decision in the case of FFAF Air Cargo v. Connors Transfer Ltd. (*9) is of interest in this discussion. While a decision of the Nova Scotia Small Claims Court – and, as such, being only of “persuasive” value, not being “binding” on other courts – it packs a “big punch” in terms of its lucid analysis which may be of assistance to higher level courts in similar cases to come.

The Adjudicator in this case, Raffi A. Balmanoukian sets this stage beautifully: “With the arguable exception of the Great Moosehead Beer Heist of 2004 , a trucking story doesn’t get more Atlantic Canadian than this.”

Background

The Plaintiff, FFAF, ships or arranges for the shipment of live and fresh lobster all over the world. It engages transportation companies such as the Defendant (“Connors”) to get the product from processing plants, brokers, and other facilities to locations such as airports for its onward journey; most notably for our purposes Halifax, Toronto, and Montreal.

The evidence in the case revealed that, over the years, FFAF and Connors developed a “strong partnership” with Connors being FFAF’s “main, but not only” transport provider. They began doing business in 2014-2015. At that time, the only contractual stipulation was that Connors had to provide evidence to FFAF that the former was amply insured for carrier liability.

In late 2017, Connors sent FFAF a limitation of liability form, which purported to limit liability to an overall amount of “$2.00 per pound computed on the total weight of the shipment.”  FFAF agreed to this term. It signed this document in March of 2018.

In November 2019, FFAF engaged Connors to arrange for pick up and transport of a shipment of lobster. No bill of lading was issued. The lobsters were to be delivered from Nova Scotia to Quebec and Ontario for ultimate shipment to customers in France, Belgium, and South Korea. A portion of the cargo arrived, sadly, “dead on arrival” resulting in this claim. FFAF sued Connors for damages in the Nova Scotia Small Claims Court. The losses totalled some $21,703.86.

Connors relied upon its contractual and statutory $2 per pound limitation of liability. FFAF took the position that the statutory and contractual limitations did not apply.

The Adjudicator addressed the issue as to whether the lack of a bill of lading between FFAF and Connors removed any statutory or contractual limitation on liability.

As a starting point, Connors sought to rely on the above Nova Scotia statutory $2 per pound limitation of liability. FFAF had not declared a value for the lobster. Connors relied on the specific “deeming” language, here reproduced again:

7. Except as otherwise provided by or under these regulations, the following clauses are prescribed as uniform conditions of carriage of freight by a motor carrier and are deemed to be part of every contract for the carriage of freight by a motor carrier and shall be contained or incorporated by reference in every bill of lading relating to the carriage of freight by a motor carrier:

(emphasis added)

FFAF argued that, since there was no bill of lading, the statutory limitation of liability did not apply.

The Adjudicator agreed with FFAF as concerned the statutorily deemed limitation of liability. Noting the sophistication of the parties and their ongoing relationship, the Adjudicator ruled that the parties “relied on their own conduct rather than the regulatory regime. In doing so, they took themselves out of regulatory protections, insofar as the regulatory regime capped or limited liability for negligent errors or omissions”. Accordingly, in not having issued a bill of lading as required, Connors was precluded from setting up the limitation of liability. In short, the Adjudicator reasoned that a party may not rely on statutory limitations when that regulatory regime sets out a condition precedent for such reliance such as the issuance of a bill of lading.

The Contractual Limitation of Liability

The Adjudicator however considered whether Connors could rely on the negotiated contractual limitation of liability notwithstanding the lack of a bill of lading. It will be recalled that the contract between Connors and FFAF limited Connors’ liability to $2.00 per pound.

Connors was successful in limiting liability to $2 per pound. In this regard, the parties through “freedom of contract” could operate outside of the regulatory regime. The Adjudicator considered the limitation of liability clause in the context of governing case law holding that contractual exclusionary language should be enforced by a court unless it would be unconscionable to do so. The Adjudicator cited the Supreme Court of Canada case of Tercon Contractors Ltd. v. British Columbia (Minister of Transportation & Highways) (*10), which case held that a court has no discretion to refuse to enforce a valid and applicable contractual exclusion clause unless there was public policy sufficient to override the public interest of “freedom of contact”. The Tercon decision provided a three part test for the applicability and interpretation of a contract clause excluding or limiting liability. This three part test may be summarized as follows:

1. a determination as to whether the clause applies to the facts of the case;
2. a determination as to whether the clause itself is unconscionable (and thus invalid from the time the contract is made); and
3. if valid at the time the contract was entered into, whether the court should refrain from enforcing the clause because of some overriding public policy.

The Adjudicator had no difficulty concluding that the $2.00 per pound contract term applied to the facts of this case. He found that it was not unconscionable. As the Adjudicator put it, the parties “sat at the adult table.” They specifically turned their minds to the issue, over a period of months. The Adjudicator noted that “This is not a case of a consumer shipping Grandma’s furniture after the funeral and, upset, signing whatever is required.”. On the issue of “public policy” the Adjudicator considered whether FFAF might be relieved of the $2 limitation of liability on account of the lack of a bill of lading. In this regard the Adjudicator noted that he would have been sympathetic to excluding a limitation of liability in the absence of a bill of lading in the case of “one-off dealings” or in the case of a substantial inequality of bargaining power, or in other cases in which the policy considerations noted in Tercon would apply. It could, in many cases, be unconscionable for a carrier to omit a bill of lading and then, faced with a claim, to say “it doesn’t matter and the statutory requirement is without meaning.”

Turning however to this case, the Adjudicator noted that “In my view, when there is a course of dealing between the parties and everyone knows what the contract is, it is not contrary to public policy to enforce that contract”.

The Adjudicator buttressed this finding by noting the Anticosti Shipping Co. v. St-Amand (*11) decision from the Supreme Court of Canada. In that case, the Court upheld a limitation of liability on the grounds that, although there was no bill of lading, the shipper could have required it in what the Court termed an “ordinary transaction” where the parties in effect acted as though a bill of lading had been issued.

Conclusion

In his interesting analysis which may provide good “food for thought” in future cases, the Adjudicator essentially came up with two working “rules of thumb”:

1. A carrier cannot rely on a statutory benefit such as a limitation of liability unless it is in compliance with the terms of same, and
2. A carrier and a shipper may however through “freedom of contract” operate outside of the statutory regime, if the intention to do so is expressed in clear terms and there is no suggestion of the contract being “unconscionable”.

The Adjudicator’s reasoning certainly puts a premium on shippers and carriers considering the benefits of negotiating a transportation framework agreement or contract to order their affairs.

Gordon Hearn

Endnotes

(*1) The provinces that do regulate (that is, prescribe deemed carriage terms and conditions) in the area are: Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia)
(*2) O. Reg. 643.05, enacted pursuant to the Highway Traffic Act, RSO 1990, c H.8
(*3) N.S. Reg. 24/95, enacted pursuant to the Motor Vehicle Act, RSNS 1989, c. 293
(*4) This was the strong inference, but not an outright pronouncement, in the Ontario Court of Appeal decision in the decision of National Refrigerator & Air Conditioning Canada Corp. v. Celadon Group Inc. 2016 ONCA 339. In that case, ruling that the regulatorily deemed $2 per pound defence applied, the Court went on to note that “The bill of lading used for these shipments met the specification of s. 4 and included a space to show the declared value for these shipments.” (at para. 21).
(*5) There is debate as to whether the primary legislation in Ontario being the Highway Traffic Act R.S.O. 1990 c H.8 provides relief for the non-compliant carrier. Sub-section 191(1) provides that “Every contract of carriage for a person to carry the goods of another person by commercial motor vehicle for compensation shall contain the information required by the regulations and shall be deemed to include the terms and conditions set out in the regulations”. However subsection (2) goes on to say: “Where a person is hired for compensation to carry the goods of another person by commercial motor vehicle in circumstances where no contract of carriage has been entered into, then a contract of carriage shall be deemed to have been entered into, and the terms and conditions of the deemed contract of carriage shall be as set out in, and shall apply to such persons as are set out in, the regulations”.
(*6) at s. 4
(*7) at s. 7
(*8) at s. 8
(*9) 2020 NSSM 24
(*10) 2010 SCC 4
(*11) [1959] SCR 372

Return to Table of Contents

7.  Contract Termination Provisions and the Canada Labour Code

The enforceability of a termination provision in an employment contract is often the key issue in a wrongful dismissal action.  These provisions are aimed at limiting the amount of notice an employee is entitled to if terminated without cause.  If the provision is not enforceable an employee is entitled to common law notice, which can be significant, and will always be greater than what the applicable employment standards legislation requires.

The wrongful dismissal cases, many of which have been commented upon in previous editions of the Navigator, focus on provincially regulated employers, and the applicable provincial employment standards legislation.  A recent Ontario Superior Court decision reviews the enforceability of a termination provision in a contract where the federally regulated employer is governed by the Canada Labour Code (“CLC”).

In Sager v. TFI International Inc. (*1), the plaintiff, Jean-Marc Sager, was hired as VP of Sales and Customer Care with Loomis Express, a subsidiary of TFI International Inc. (“TFI”) in November 2016 and his employment was terminated without cause less than 3 years later on July 31, 2019.  Mr. Sager’s employment contract provided that, if his employment was terminated without cause, the employer would pay the greater of 3 months of base salary, or one month of base salary per year of completed service up to a maximum of 12 months.  The contract also provided that the payment would be “inclusive of any and all requirements” owing to him under the CLC.  TFI paid Mr. Sager 3 months of base salary upon termination as required under the contract, and Mr. Sager then sued TFI for damages for wrongful dismissal.  [It is important to note that given Mr. Sager’s senior position, he was not eligible to assert an unjust dismissal complaint under the CLC, which is only available to non-managerial employees, with at least 12 months of service.]

Mr. Sager argued that the termination clause in his contract was unenforceable because it did not maintain all of the terms of his employment during the statutory notice period, as required under the CLC.  TFI’s position was that the termination provision was enforceable because it provided Mr. Sager with more than he was entitled to under the CLC.  Under the CLC Mr. Sager was entitled to 2 weeks’ notice plus 5 days of severance, based on his less than 3 years of service.

A termination provision in an employment contract must comply with the minimum requirements of the applicable employment standards; any attempt to contract out of these minimum standards renders the contract provision null and void.  In assessing the termination provision in Mr. Sager’s contract the court considered s. 231(a) of the CLC which provides that the employer cannot “reduce the wages or alter any other term or condition of employment” during the notice period.  Mr. Sager argued that the termination provision did not include a requirement that TFI continue making pension contributions, continue benefits, car allowance, vacation pay and bonus, during the statutory notice period, as required under the CLC.

The Court held that the termination provision limited TFI’s obligation to a single lump sum payment and expressly provided that this payment was inclusive of all requirements under the CLC. As a result, this lump sum payment excluded any payment for Mr. Sager’s pension, car allowance or bonus, which were all terms and conditions of his employment that were to be continued for the statutory notice period. It also excluded the continuation of benefits during the statutory notice period.  This was inconsistent with s. 231(a) of the CLC and therefore the termination clause was held to be void and Mr. Sager was entitled to reasonable notice at common law.  The Court then turned to an assessment of common law notice.

In assessing common law notice, the Court considered Mr. Sager’s age of 49 years, his 2 years and 9 months of employment and his senior executive role at TFI.  Mr. Sager argued that he had been induced by TFI to leave secure employment in France, and this should increase the common law notice period. TFI, however, claimed that Mr. Sager made the decision to move to Canada before he met anyone at TFI and that he initiated contact with a recruiter who had introduced him to TFI.  The Court found that the facts in the case fell somewhere between the positions of the two parties and so did not impact the notice period.  However, the court also found that TFI did make assurances of long-term, secure employment with opportunities for further advancement, and also agreed to waive the probation period, and that these assurances went beyond encouraging Mr. Sager to sign an employment contract.  This did have an impact on the notice period, with the result that Mr. Sager was entitled to 9 months of notice.

Summary

To summarize, under the CLC Mr. Sager was entitled to 3 weeks (2 weeks’ notice plus 5 days severance) plus all benefits and other payments, such as car allowance, for the 2-week statutory notice period.  Under his contract, Mr. Sager was entitled to 3 months of base salary.  Because his employment contract did not provide for all of his entitlements under the CLC he was awarded 9 months of notice at common law.  The analysis in this case is not surprising as it relies on the same principles found in the cases involving provincially regulated employers.  What is clear from all of these cases is that a termination provision in an employment contract must not provide for anything less than what the applicable employment standards legislation requires, and careful drafting is imperative to ensure that nothing is expressly or inadvertently left out of these termination provisions.  Failure to take this care will be costly.

Carole McAfee Wallace

Endnotes
(*1) 2020 ONSC 6608 (CanLII)

Return to Table of Contents

8. And Finally

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

Fernandes Hearn LLP
155 University Avenue, Suite 700, Toronto, Ontario, Canada  M5H 3B7
Telephone: 416-203-9500 | Fax: 416-203-9444
Email:

A proud Canadian law firm specializing in Transportation, Insurance, Trade, Technology and Commercial Law.

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