July 2018 copy - fernandeshearn.com · FERNANDES HEARN LLP NEWSLETTER JULY 2018 PAGE 2 FIRM AND...

INTHISISSUEPAGE1TENPOINTACTIONPLANOFCANADIANTRUCKINGALLIANCE-TRUCKSAFETY

PAGE2FIRMANDINDUSTRYNEWS

PAGE4INDEPENDENTCONTRACTORSDUTYTOMITIGATEUPONTERMINATION

PAGE7ENFORCEMENTOFCONTRACTUALMODIFICATIONSANDFORBEARANCEAGREEMENTS

PAGE10DOINGBUSINESSINCANADA(PART10)-SALEOFGOODS&CONSUMERPROTECTIONPAGE13STANDARDOFREVIEW&INTERPRETATIONOF“CARBLOCKS”INRAILINTERSWITCHINGREGULATIONS

PAGE15CONTEST

FERNANDES HEARN LLP NEWSLETTER JULY 2018

TheCanadianTruckingAlliance (*1)believes thatthefacts surroundingtheeventsofApril 6,2018Humboldttragedy(*2)shouldbeusedasacatalyst to finally deal with asmallsegment of thetrucking industrythatchoosesnottoadheretosafetyregulations.

On July 10, 2018, the CTA released its Ten Point Action Plan thathighlights how government and industry can work together onimprovingcomplianceissues likehours of service, distracteddriving,sobriety, carrier evaluation programs along with training andtechnology recommendations. It recommends implementing thefollowingactionplan:

1. Introduce regulations this summer to mandate the use ofelectronic loggingdevices (ELDs)forallcarriers requiredtomaintainalogbookbySeptember-December2019.

2. Consult with the Federal Government, commercial vehiclemanufacturing and trucking industry to explore the feasibility ofdeveloping regulations requiring the installation of forward-facingcameras in all new and existing federally-regulated commercialvehicles.

3. Partner with governments, manufacturers and the truckingindustrytoassess theavailabilityandfeasibilityofincreasingtheuseofadditional in-cab technologies that monitor distracted drivingbehaviourofcommercialdrivers.

4. Beginworkingwith the governments, manufacturing and thetrucking industry toassess themarket readiness of advanceddriverassistsystems (ADAS), includingspeedlimiters tomandateset speedson heavy trucks, and determine the role governments can play inincreasing the penetration rate of driver assist technology in themarketplace.

5. Encourage all provinces to introduce mandatory entry leveltraining (MELT) for commercial truck drivers based on the nationaloccupationalstandard(NOS).

6. Workwithgovernments, truckingandthetraining industry todevelopadistracteddrivingawareness moduleforcommercial vehicle

TenPointActionPlanofCanadianTruckingAlliance

THENAVIGATOR

FERNANDES HEARN LLP NEWSLETTER JULY 2018 PAGE 2

FIRMANDINDUSTRYNEWS• FernandesHearnLLPhasbeenselectedasTransportLaw-LawFirmoftheYearinCanadaintheGlobalLawExpertsAnnualAwardsintheClientChoiceCategory. • TheCanadianBoard ofMarineUnderwritersAnnual GolfDaywill takeplace onAugust21st,2018attheRichmondHillGolfClub.

• PortCreditinWaterBoatShow,August24-26,PortCreditOntario.

• HoustonMarineInsuranceSeminar,September16-18,2018,Houston.

• OntarioTruckingAssociationAnnual Fall GolfClassic,September18th,2018,GlenAbbeyGolfClub,Oakville.

• Marine& InsuranceClaimsAssociation Annual Dinner,October5th, 2018, NewYork.

• McGillUniversity/PEOPILInternationalAviationLaw:Liability,Insurance&FinanceConference,October19-20,2018,Ireland.

drivers to be incorporated into all provincialMELTprogramsandothertrainingprograms.

7. Explore with the provinces and thefederal governmentways toexpandtheuse ofon-road safety prescreening technology (pre-clearance/pre-screening) to assist provincialenforcement officials in identifying commercialvehicleoperators thatrequirefurther attentionandintervention.

8. Work with federal and provincial governments to better focus on-roadenforcement related to known human factorsthatcontributetocollisions.

9. Work with federal and provincial governments to develop a better proactivesystem to identify trucking companies anddrivers thatposea risktopublicsafety includingsuchmeasures as mandatory drug andalcoholtesting, new entrant education and evaluationprogramsandanti-avoidancemechanisms.

10. Work with federal and provincial governments todevelopa ‘bestpractices’guidetoassistpurchasersoftransportationservices inidentifyingunsafeoperators.

“The vast majority of trucking companies andtruckdrivers embracea cultureofcompliancebyf a r e x c e e d i n g m i n i m a l s a f e t yrequirements,” says CTA president StephenLaskowski. “However, the events surroundingtheHumboldt tragedy have reminded all ofusthat weneed to have a national conversationabout raising the bar in dealing with those

operators who do not make the properinvestments in truck safety and lack thecommitment to make improvements. Byworking with all levels of government toimplement thisplanonanational basiswecanmake roads safer by focusing enforcementattention on carriers and drivers who need itmost.”

AndreaFernandes

Endnotes(*1) The Canadian Trucking Alliance is afederationofprovincial truckingassociations. Itrepresents a broadcross-sectionofthe truckingindustry—some4,500carriers, owner-operatorsand industry suppliers. With its head office inToronto, an operating office in Ottawa andprovincial association offices in Vancouver,Calgary, Regina, Winnipeg, Montreal andMoncton, the CTA represents the industry’sviewpoint onnational and international policy,regulatory and legislative issues that affecttrucking(*2)OnApril6,2018,sixteenpeoplewerekilledandthirteeninjuredwhenawestboundsemi-trailertruckstruckanorthboundcoachbusnearArmley,Saskatchewan,Canada.Thesemi-trailerhadfailedtoyieldataflashingstopsignattheintersectionofHighways35and335.Thebuswastravellingataspeedofapproximately100km/h.MostofthedeadandinjuredwereteenagersfromtheHumboldtBroncos,ajunioricehockeyteamthatplaysintheSaskatchewanJuniorHockeyLeague.


2. DoIndependentContractorsHaveaDutytoMitigateWhenaFixedTermContractHasBeenTerminated?

The answer: No (or, more accurately, “Maybenot”). In the recent decision of the Court ofAppealfor Ontario inMohamed v. InformationSystems Architects Inc. (*1) involving thetermination of an independent contractorworkingunder afixedtermcontract, the courtaffirmed the key finding of the summaryjudgment decision below that a terminatedconsultant was entitled to damages based ontheamount remainingpayable for thebalanceof theunexpiredterm ofhis contract, withnodutytomitigate.

Thefacts

The facts of this case were reasonablystraightforward. The plaintiff was an ITconsultantwhohadleftfull timeemploymenttopursuecontract workwiththedefendant. Thecontractatissuewasfora termof6months andincluded a provision that thedefendant couldterminate thecontract,interalia,immediatelyifit“determinesthatitis inISA’s bestinterests tor e p l a c e t h e C o n s u l t a n t f o r a n yreason” (emphasis added). The defendantrequiredall of its consultants working for it tosubmit to athird-party backgroundcheck. Thisbackground checkwould take2 to 4 weekstocomplete, and inthemeantimethe consultantbeganprovidingservices tothe defendant.Theconsultant had already completed a shorterfixed term contract assignment with thedefendant andhad just begun anew 6-monthcontract before the background check wascompleted.Approximately2weeks intothis newcontract, the background check came back,disclosingaprior criminalconvictionforassaultwith a weapon. The report was provided toCanadianTire, the party forwhich theplaintiffwasprovidingthedefendant’s services underhisfixed term contract. When Canadian Tirereceivedtheresults of thebackgroundcheck, itimmediately requested that the plaintiff beremoved from the project. The defendantproceededtoterminatetheplaintiff’s fixed-term

contract,relyingontheclause that permitteditto terminate for any reason acting in its bestinterests. At the time of termination, theplaintiff was only twoweeks into his 6-monthcontract.Uponterminating theagreement, thedefendantpaidthecontractoronly for thetwoweeksofworkperformed.

Thedecisiononthemotion

Theplaintiffcontractorthensuedthedefendantfor damagesfor the remainder of the term ofthe contract, notwithstanding the contract’sbroadterminationprovision.Onthecontractor’smotionfor summary judgment, the court sidedwiththecontractor.Themotions judgereliedontheearlierCourtofAppeal decisions inHowardv. Benson Group Inc. (The Benson Group Inc.)(*2)andBowesv.GossPowerProductsLtd.(*3)in concluding that, because there was noenforceable termination provision, damageswere to be basedon thedefined term of thecontract,whichwas6-months.

Inthe earlierCourtofAppeal decisioninBenson,which involved an employment contract, themotionsjudgefoundthattheterminationclauselimiting damages to the minimums availableunder theEmployment StandardsAct was voidfor vagueness, thus leaving the parties with afixed term employment contract with theemployer having noability toterminateexceptforcause.Insuchcontracts,theCourtofAppealheld, inbothBenson and its earlier decision inBowes,thatanagreementfora fixedtermcouldbe treated as “fixing liquidated damages or acontractual amount”(*4),withnoresultingdutyon the part of the dismissed employee tomitigate. In the earlier decision inBowes, thecontract expressly specified the amount ofliquidated damages, which the court thusawarded. In Benson, the court broadened thisprincipletoapplytoanycontractofafixedtermlacking a termination provision, in whichliquidateddamages,intheabsenceofaspecificprovision,beingsettledas theamountowedfortheunexpiredterm. InMohamed, themotionsjudge similarly held that this would applywhether ornotanindividual was anemployee,

INVESTOR NEWSLETTER ISSUE N°3 FALL 2008FERNANDES HEARN LLP NEWSLETTER JULY 2018 PAGE 4

dependentorindependentcontractor.Toreachthis result, however, the broad terminationprovisions of the consulting agreement inMohamedwouldhave tobeheldunenforceable.ThemotionsjudgeinMohamedhadinfactruledthat, like inBenson, theterminationprovisionsofthe consultant’s contractwere unenforceableforvagueness.

Thedecisiononappeal

Independent contractor agreements differfundamentally fromemploymentagreements inthat termination provisions are not ordinarilysubject to the many restrictions regardingreasonablenotice imposed by theEmploymentStandardsAct. Intheory,this allowsfor greaterflexibility in crafting termination provisions,permittingtheinclusionofverybroadprovisionssuch as found in Mohamed, whereby thecompany could terminate the contractorimmediately “for any reason” where itdeterminedit wasin itsbest interest todoso.Themotionjudge’sfindingthat the clause wasunenforceable for vagueness was thus anecessary ruling in awarding Mr. Mohameddamages in the amount of the unpaidbalancedue for the rest of the term, with no duty to

mitigate. Otherwise, the defendant companycould haveterminated the contractor on shortnoticewithoutanyseriousconsequences.

Onappeal,however,the appellantcompanywassuccessful in challenging the motion judge’sfinding that the termination clause was toovaguetobeenforceable. In theend, however,the defendant’s appeal was unsuccessful. ForMohamedtosucceed,hestill neededafindingthat the firm that retainedhimhadterminatedtheagreementwrongfully.Ultimately,theCourtof Appeal agreed with the motion judge’salternativefindingthattheagreementhadbeenterminated inbad faith relianceon the clausepermitting termination “for any reason.” Itreasoned that, because the contractor haddisclosed his criminal record to the companyprior to the background check, and prior todoingany workat all, terminating his contractbecauseofhis priorcriminal recordwas foundtobenotingoodfaith.

Employeesandindependentcontractors

In its ruling, the Court of Appeal directlyconsideredwhethertheprinciplefromBenson–thatwhereafixed-termcontractprovides either


expressly or implicitly for a penalty for earlytermination,thatpenaltyis payablewithnodutytomitigate – shouldberestrictedtothesphereof employment contracts, or alternatively beexpanded to includeindividuals working underindependent contractor agreements (*5).Unhelpfully, the Court of Appeal expresslyrefused to decide this issue. Instead, it simplynotedthat itwas appropriateinthis casetodoso, citing the two “rationales” from its earlierdecisions in Bowes and Benson for why thepenaltyforbreakingafixedtermcontractshouldbe damages based on the unexpired term,being: 1) that it was “analogous” to agenuineliquidateddamages clause, and2)becausethisremedy wasameans of“ensuring fairness andcertaintyforworkers”(*6).

Conclusion

Whilethereis still a fair amountofuncertaintyregarding whenOntario courts may choose toextendtheBensonprinciples tothe independentcontractor context in thewake of theruling inMohamed, it is atleastclearthat thecourts areleaningtowardsshapingthe commonlawtogivemoregenerousremediesto“workers”who,notbeing employees, cannot therefore rely onthe

statutory protect ions afforded by theEmployment Standards Act. There is littlequestion, then, that the decision inMohamedgives thecourts broader license todojust this.Thechief lessontobedrawnat present is thatcommercial actors that wish to retainindependent contractors for the sake offlexibilitywill nowhavetoexercise greatercare,both inhow they draft terminationprovisions,andwhenthey invoke them, wherefixed-termcontracts are concerned. It may now also bemore prudent to consider including expressliquidated damage clauses in fixed termcontracts to displace the presumption thatdamages for terminationaretobe fixed intheamount payable for the balance of theunexpiredterm.

OlegM.Roslak

Endnotes(*1)2018ONCA428[Mohamed].(*2)2016ONCA256[Benson].(*3)2012ONCA425[Bowes].(*4)Bensonatpara.33.(*5)Mohamedatpara.25.(*6)Mohamedatpara.26.


3. C o n t r a c t u a l M o d i f i c a t i o n s &Forbearance Agreements May Be EnforceableEvenifNothingofValueisExchanged

Thethreeclassicelements ofa validcontractatcommon law are (i) offer, (ii) acceptance, and(iii)“consideration”. Thefirsttwoelements areintuitive: someonemustproposeanagreementandasecondpersonmustaccepttheoffer. Thethirdelement, thatof“consideration”, requiresthatsomethingofvaluebegivenby eachparty.You havetogivesomething toget something,otherwisetheagreementis gratuitousanditwillnotgenerallybeenforceable.

Despitetheneedforconsideration, orvalue,tobeexchanged, courts will not usually look intothemerits ofabargain. In otherwords,courtsare loath to correct bad deals. Thus,considerationcanbenominal.InoldEnglishlawreports, the cases speak of the exchangeof ametaphorical peppercorn as being sufficientconsiderationtosupport theenforceabilityofacontract. In one tongue-and-cheek commentfrom an English jurist, it was once said that“peppercorn[s] do not cease to be goodconsideration[even] ifit is establishedthatthe[recipient] does not likepepper andwill throwawaythecorn.(*1)

Traditionally,this requirementfor considerationhas extendedtocontractamendments. Inorderto change the terms of a contract, a newpeppercornought to begiven. However, thiswasturned onits head ina recent decisionoftheBritishColumbia CourtofAppeal,whichheldthat a borrower’s repeatedpromiseto repay aloan“nextyear”was aneffective modificationtothe original agreement, even though no freshconsiderationwasgiven.

InRosas v. Toca, theBritishColumbia Court ofAppeal was faced with a seemingly unjustsituation.(*2)Theplaintiffhadloaned$600,000,interest-free, to her friend so that the friendcould buy a house. The new home-owningfriendneverrepaidtheloan,buthadpromised,“Iwill payyounextyear”. Thesepromiseswenton for several years, after which the plaintiff

finallycommencedanactionforrecovery oftheprincipal. Theclaim was issued six years andseven months after the money was originallyrepayable. The defendant argued that theaction was time-barred, as the former BCLimitation Act applied, and it contained a six-year limitation period. In other words, theplaintiffwas sevenmonths toolate. (Underthecurrent Act, the limitation is just two years.)Thus, thelitigationwouldturn,inlarge part,ontheapplicationofalimitationbar.

Up until now, forbearance agreements havealways required consideration. In effect, thepromise to defer enforcement has notconstitutedconsiderationfor theextensionofarepaymentobligation. Thus, it is goodpracticetoincludeaspecific tolling provisiontodefer alimitation period in any formal forbearanceagreement,at leastinjurisdictions wherethatispermitted.

In the Rosas case, thePlaintiff was in a toughspot, as she had deferredenforcement onthegratuitous promise of later payment, but shehadnoagreementinplacetotollthelimitationperiod. She framed her action in “unjustenrichment”,or,alternatively,a declarationthatshe had an equitable interest in the house.However, those claims were vulnerable to thelimitationsdefence.

Given the foregoing, the Honourable ChiefJustice ofBritishColumbia,Mr.JusticeBauman,held that “[t]he time has cometo reform thedoctrine of consideration” so that “[w]henparties toa contractagree tovary its terms,thevariation should be enforceable without freshconsideration,absent duress,unconscionability,or other public policy concerns.” (*3) Inotherwords, he held that “a lack of freshc o n s i d e r a t i o n w i l l n o l o n g e r b edeterminative.”(*4)Theothertwojustices ofathree-memberpanelagreed.

His Lordship considered several Englishdecisions, including Williams v. Roffey Bros.,where a general contractor has promised asubcontractorbonus moneyforfinishingontime


so that they would avoid certainpenalties forlate complet ion. (*5) A l though thesubcontractor’s obligation had already existed,the English Court of Appeal found that thegeneral contractorobtained“practical benefits”from the bonus-payment agreement and so itwasenforceable.

Similarly, His Lordship considered variousCanadian cases, including the New BrunswickCourt of Appeal’s decisions in Robichaud v.Caisse populaire de Pokemouche (*6) andGreater Fredericton Airport Authority v. NAVCanada. (*7) In the former, a credit unionagreedtoacceptpartpaymentofadebtinordertodischargea judgment registeredagainst thedebtor’s house. The Court found that theagreement was enforceable, as the financialinstitutionhadobtaineda “practicalbenefit”. Inthe latter case, NAV Canada agreed to installequipmentfora newrunway onconditionthattheairportauthoritypay thecost, eventhoughNAVCanadaalreadyhadanobligationtoservicethefacility. IntheNAVCanada case, theNewBrunswickCourt ofAppealexplicitly decidedto“build upon” the English Court of Appeal’sjudgment inWilliams v. Roffey Bros., holdingthat a contract could be varied without freshconsideration so long as it was not procuredunder duress. However, onthefacts, it found

that NAV Canada had secured the agreementunderduress.

After also reviewing foreign law and academiccommentary,Bauman, C.J.,commentedthathewas“persuadedthatthelegitimate expectationsof theparties inthecaseofa modificationtoagoingtransactionshouldbe protected”andthat,in any event, there were “practical benefits”flowingtotheplaintiff,whogained“thebenefitof maintaining her relationshipwith her friendMs. Toca”, whichhadbeen themotivationforgrantingtheloanin thefirstplace. (*8)Finally,his lordshipalsofoundthattheenforcementofmodification agreements would permit partiesto adapt to changing circumstances. (*9) Hecommented that it made commercial sense inthemodernage.

In the result, the plaintiff was successful andjudgment was granted upon the outstandingdebt.

Ms. Rosas’ success should translate to otherBritish Columbia plaintiffs in the face offorbearance agreements and an expiredl im i ta t ion per iod . A l though no f resh“consideration” may have been granted, thecourt will enforce the intentionof the partiesthattheloanshouldremainenforceable.


It isnotyetclear ifother jurisdictions will followBritish Columbia’s lead, or how the Rosasdecisionwill be treatedoutside of thedebtor-creditorcontext.However,the decisionmightbeseen as a part of a trend by which Canadiancourts have become particularly interested inprotecting fairness and the reasonableexpectations of the parties. Following SattvaCapitalCorp.v.CrestonMolyCorp.(*10)–wheretheSupremeCourtofCanada famouslycraftedanew duty of good faith in contractualperformance– courts have beenmoreready toassess the circumstances of contractualperformance, even if those factors ought not“overwhelm”thewordsonapage.

This Rosascaseisa goodexampleofthistrend.After all, the British Columbia Court of Appealcould have simply held that an agreement todefer enforcement can indeed constitute

considerationforatermextension. Thefactthatthe Court was willing to attack the underlyingdoctrineofconsiderationissignificant.

AlanS.Cofman

Endnotes

(*1)Chappell&Co.Ltd.v.NestleCo.Ltd.,[1960]A.C.87(H.L.),perSomervellL.J.(*2)2018BCCA191.(*3)Ibid.atpara.4.Alsoseepara.183.(*4)Ibid.(*5)[1990],1AllE.R.512(C.A.).(*6)(1990)69D.L.R.(4th)589(N.B.C.A.).(*7)2008NBCA28.(*8)Supranote2atparas.176-77.(*9)Ibid.atpara.180.(*10)2014SCC53.


4. DoingBusinessinCanada–Part10(*1)–SaleofGoods&ConsumerProtection

Part1–SaleofGoods

DomesticRules

Theprimarylegislationapplicabletosaleofgoodscontracts in Canada are the various provincialSaleofGoodsActs.These havebeenenactedoradoptedinall provinces andterritories,exceptinQuébec, where the regulation of the sale ofgoodsisgovernedbyitsCivilCode.

AlthoughthelawinQuébecis operativelysimilarto the rest of Canada (in a practical sense),significant structural andprocedural differencesexist.Thediscussionbelowfocuses onCanadiancommonlawjurisdictions.

InadditiontotheSaleofGoods Acts,thereareanumber ofotherpieces of legislationthat relateto the sale of goods, notably the provincialPersonal Property Security Acts, which regulatesecurity and security interests against propertyother than real estate andConsumer ProtectionActs, which may apply to certain transactions(requiring the disclosure of certain information,or implying terms and conditions into sale ofgoodscontracts).

InternationalRules

The UN Convention on Contracts for theInternational Sale of Goods 1980 (“CCISG”) wasimplementedinCanadaby theInternationalSaleof Goods Contracts Convention Act 1992. TheCCISG has subsequently been incorporated intoprovincial legislation by all Canadian provincesand territories. TheCCISG governscontracts forinternationalsalesofgoodsbetweenbusinesses,andexcludes sales toconsumers,sales ofservicesandsalesofcertainothergoods.

Saleof goodscontracts subject totheCCISG inCanada often exclude the applicability of theCCISG. It is excluded most commonly becauseparties areunfamiliarwithits application.Partiesgenerally prefer to choose Canadian law or

equivalentcontractlawofanotherjurisdiction.Ininternational sale of goods transactions, partiesgenerally tend to prefer to apply one or theother's domestic laws rather than applyingprovisionsbasedontheCCISG.

Incoterms

The International Chamber of Commerceinternationalcommercial terms(Incoterms)2010are commonly used for drafting sale of goodscontracts inCanada.Inaddition, Canadianbanksinvolved in international sale of goodstransactionstypicallyadopttheUniformCustomsand Practice for Documentary Credits and theUniform Rules for Demand Guarantees, whereapplicable.CommonLaw

InCanada,thesubstantiveelementsrequiredtocreateanenforceablecontractaregovernedbycommonlaw.Foracontracttobeenforceableundercommonlaw,fiveelementsmustbepresent:a) Intentiontocreatelegalrelations.b) Offerandacceptance.c) Consideration.d) Capacitytocontract.e) Lawfulpurpose.

Part2ConsumerProtection

UndertheCanadianConstitution,the federal andprovincial governments share responsibility forconsumer protection. Federal consumerprotectionlaws govern thesale, advertisingandlabelling of consumer goods sold in Canada.Provincial governments are responsible forcontractual matters relatedtothesaleofgoods,such as conditions of sale, warranties andlicensing.

TheCanada Consumer Product Safety Act cameinto force in2011. This legislationprohibits themanufacture, importation or sale of consumerproducts thatposea“danger tohumanhealthorsafety.”Italsoexpandsthefederalgovernment’spowers to regulate, inspect, test and recall


consumer products and createsa widearray ofrelated offences and penalties. Manufacturers,importers and retailers need to comply withstringent requirements to maintain requiredrecords concerning their products and reportincidents. Any safety incidents involving theproduct must be reported. Manufacturers,importers and retailers are also required toreport recalls or similar measures involving theproductanywhereinthe world.The governmentalso receives reports directly from consumers.Such reports can lead to inspect ions ,requirements for product testing or productrecalls. The government may also conduct aninspectionintheabsenceofareport.

Inaddition,federal statutes suchas theFoodandDrugs Act, the Hazardous Products Act, theConsumer Packaging and Labelling Act and theTextileLabellingAct(andregulationsmadeunderthem), as well as a range of provincialregulations, can directly affect businessoperations in Canada, since goods that fail tocomply with the statutory and regulatoryrequirementsmaynotlawfullybesold.

TheFoodandDrugsActregulatestheadvertising,saleand importation of foods, drugs, cosmeticsandmedical devices,by prescribingstandardsofpurity and quality, as well as labelling andadvertisingstandards.

The Hazardous Products Act regulates theadvertising,saleandimportationofhazardousorcontrolled products and substances, whichinclude compressed gas, flammable andcombustible material, oxidizing material,poisonous and infectious material, corrosivematerial,anddangerouslyreactivematerial.

The Consumer Packaging and Labelling Act,regulates the packaging and labelling ofconsumergoods. Thegoal ofthis legislationis toprotect consumers frommisrepresentationsandto help consumers differentiate betweenproducts

Provincial statutes such as Ontario’s ConsumerProtection Act, 2002arealsoaimedatproviding

protectionforconsumers.These statutes provideconsumerswhohavebeenharmedbydeceptiveor unconscionable business practices with avarietyofstatutory remedies,includingdamages,punitivedamages and rescissionofagreements.Specific, consumer-friendly contract terms maybe mandated. Other contract terms, such aswaivers ofimpliedstatutory warrantiesor termsrequiringanydisputestobesubmittedtobindingarbitrationorpurportingtobana consumerfrominitiatingorparticipatingina class action,maybeunenforceableagainstconsumers.

Part3–ProductsLiability

Product liability law inCanadais basedonboththe law of contract and the law of negligence.Statutory law also applies in some cases,providing, amongother things, statutory and/orimpliedwarranties.

Anybusinessinvolvedinthedesign,manufacture,distribution or sale of products is a potentialdefendantinaproductliabilityclaim.

Contract lawprovidesaremedy for parties whoare injured when enforceable contractualpromises arebreached. Contracts for the saleofpersonal property are subject to provincialjurisdictionandareregulatedbyprovincialsaleofgoods legislation which generally implies intocontracts certain conditions and warranties offitness and quality of goods. Where goods arefound to be defective or in breach of eitherexpressorimpliedwarranties,sellers,distributorsandmanufacturers maybeheldliableforbreachofcontract.

Provincial statutes such as the Ontario Sale ofGoodsAct providethatwarranties of fitness forpurposeandofmerchantablequalityareimpliedincontracts betweenbuyersandsellersfor thesaleofgoods.

The law of negligence provides a remedy forparties whoare injuredwhen theconduct of aresponsible party (usually the party responsiblefor manufacturing or bringing a product tomarket)fallsbelowanacceptedstandard.


Tort liability fordamages or injuries causedby adefectiveor dangerous product is based ontheclaim ofnegligence. Therearethreemaintypesof negligence establishing tort liability fordamages orinjuries causedbydefectiveproducts:(i) negligent manufacture; (ii) negligent design;and(iii)failuretowarn.Toprovenegligence,theplaintiff must plead and establish the followingelements:

(a)theproductwasdefectiveinthatitposedanunreasonabledangerorriskofharmtopersonorpropertywhenforeseeablyused;(b)thedefendantowedadutyofcaretotheplaintiffwithrespecttotheproduct;(c)thedefendantwasnegligentinfailingtomeettheapplicablestandardofcare;(d)thedefendant’sbreachofthestandardofcarecausedorcontributedtothedefect;(e)thedefectcausedorcontributedtotheplaintiff’sdamages;and(f)theplaintiff’sdamageswerereasonablyforeseeable.

While general principles of Canadian negligencelaw will apply in any tort case, courts have

developeda distinct body of law relatingtotheanalysis and application of the elements inproductliabilityclaims.

Generally, a manufacturer’s duty is to takereasonablecaretoavoidcausingeitherpersonalinjury ordamagetoproperty.However,whereaproducthas notinfactcausedanyphysical injuryordamage toproperty,a personmaystill recoverdamages for economic losses (e.g., the cost ofrepairing a defectiveproduct) wherethefailureto takereasonablecare resulted indefects thatpose a real and substantial danger of actualphysicalinjuryorpropertydamage.

RuiM.FernandesFo l l ow R u i M . F e r nande s on Tw i t t e r@RuiMFernandes and on Linkedin. See alsohisblogathttp://transportlaw.blogspot.ca

Endnotes(*1)This articleis part10of17parts dedicatedtoa reviewofdoingbusiness inCanada.Subsequentarticles will include,Intellectual Property,Privacy,Real Property, Environmental Laws, Taxation,Insolvency,LitigationandADR.


http://transportlaw.blogspot.ca


5. Standard of Review & Interpretation of“CarBlocks”inRailRegulations

In the recent decision of the Federal Court ofAppealinCanadianNationalRailwayCompanyv.BNSFRailwayCompany2018FCA135,theCourtreaffirmedthe standard of reviewapplicable todecisionsoftheCanadianTransportationAgency(“CTA”) and affirmed its decision about theinterpretationof theterm ‘car block’ inrailwayinterswitchingregulations.

The two parties to the litigation were railwaycompanies that engage in “interswitching”between the two railways at the Emerson,Manitoba interchange. AccordingtotheRailwayInterswitching Regulations, S.O.R./88-41(“InterswitchingRegulations”), theappellant canchargemorefor interswitching groups of fewerthan60 cars thanitcanfor carblocks of60 carsor more. BNSR Railway Company (“BNSF”)shippeda groupofmorethan60cars thatwereinterswitched at the Emerson interchange andCanadianNationalRailway(“CN”)sentaninvoiceto BNSR at the higher rate. BNSR, taking thepositionthatthecarswerea carblockof60carsor more, paidthe invoiceat thelower rate. Anapplication was made to the CTA pursuant tosec t ions 127 and 128 o f the CanadaTransportationAct,S.C.1996,c.10(“Act”)askingit to interpret the term “car block”. The CTAissued its decision in CONF-6-2017, Case No.16-01380(“InterpretationDecision”).

TheCTAfound:thatthedefinitionofcarblockinsection2oftheInterswitchingRegulationsmustbereadas60 ormore cars that, as a block,couldbeinterswitchedwithareasonablenumber of hook-and-haulmovements atan interchange and are destined to, ororiginate from a single shipper at asiding (Interpretation Decision at para.78).

TheCTAindicatedthat:[t]he reasonable number of hook-and-haul movements inevitably falls to bedeterminedona casebycase basis inlight

of the factual circumstances of eachcase(InterpretationDecisionatpara.78).

TheCTAfoundthattheinterswitchingin this casequalified for the lower car block rate.(InterpretationDecisionatpara.112).

TheCTAaddedthat: the necessity to break a car block forplacementinthe interchange tracks is not,inandofitself,a relevantconsiderationindetermining eligibility of the car blockrate”but“thatitis ratherthe mannerandextent of handling of the traffic at theinterchangethat determines whether thecar blockrateisavailable.Entitlement tothe car block rate is lost if there is arequirement to marshall and/or classifycars at the interchange (InterpretationDecisionatpara.109).

Inthis case, theCTAfoundthat the interchangedidnot requiremarshalling and/or classificationof cars and so the car block rate applies(InterpretationDecisionatpara.112).

CNappealedtotheFederalCourtofAppeal.

StandardofReview

Justice Near,oftheFederal CourtofAppeal,dealtwith the standard of review at paragraph82 ofthedecision:

The standard of review for decisionswheretheCTAinterprets its homestatuteis reasonableness (Canadian NationalRailwayCompanyv. EmersonMilling Inc.,2017 FCA 79 at paras. 59–61; CanadianN a t i o n a l R a i l w a y v . C a n a d i a nTransportation Agency, 2010 FCA 65 atparas. 27–29; Alberta (Information andPr ivacy Commiss ioner) v . AlbertaTeachers’ Association, 2011 SCC 61 atpara.30).This extendstothe delineationofits ownjurisdictioninapplyingits homestatute (Bell Canada v. Canada (AttorneyGeneral),2017FCA249atpara.9).Thisis


nota truequestionof jurisdictionandsodoes not attract correctness review. Asthe Supreme Court explained in WestFraser Mills Ltd. v. British Columbia(Workers’CompensationAppealTribunal),2018SCC22(WestFraserMills):

Wherethe statute confersabroadpower on a board to determinewhat regulations arenecessary oradvisable to accomplish thestatute’s goals, the question thecourt must answer is not oneof vires in the traditional sense,but whether the regulation atissue represents a reasonableexercise of the delegated power,havingregardtothosegoals…

West Fraser Mills at para. 23; seealso Canada (Canadian Human RightsCommission) v. Canada (AttorneyGeneral),2018SCC31.

A s l o n g a s t h e C TA ’ s d e c i s i o ndemonstrates “justification, transparencyand intelligibility within the decisionmakingprocess”and“falls withina rangeof possible, acceptable outcomes whicharedefensible inrespectof thefacts andlaw”, the Court will not intervene(Dunsmuir v. NewBrunswick, 2008 SCC 9atpara.47,[2008]1S.C.R.190.

The Federal Court of Appeal found that it wasreasonable for the CTA to find that it hadjurisdiction to interpret a term found inregulations madepursuanttoits enablingstatute.Italsofoundthatitwas reasonable forthe CTAtodeterminethat, becausesection127 of theActauthorized the CTA to make an interswitchingorder and section 111 defines interswitch inaccordance with the regulations made underparagraph128(1)(b) of theAct, the Agency hadjurisdictiontointerprettermsfoundwithinthoseregulations.

JusticeNearadded:

[21] The Interpretation Decision found,and I agree, that thetext of section2 is

silent as to whether an interswitchingoperation must occur in a singlemovement.Importantly,however,there isnothing in the text of section 2 thatprecludes aninterpretationthatallowsforinterswitching to occur in multiplemovements.Inthis case,then,thecontextandpurposewillbedeterminative.[22] TheCTA foundthat thecontext andpurposeoftheInterswitchingRegulations—namelytoprovideshippers withreliefinthecontextofa nearmonopoly—militatesagainst a definition of car block thatbestows all powertodeterminewhatratetochargeontheappellant.

TheCourt found that it was reasonable for theCTA tolooktothetext, context, andpurposeofthe Interswitching Regulations and, indoing so,theCTA’sinterpretationconsideredthe interestsof both railway companies involved in aninterswitchingoperation. It arrivedat theaboveinterpretationbasedonitsexpertiseinthisarea

Theappealwasdismissed.

RuiM.FernandesFo l l ow R u i M . F e r nande s on Tw i t t e r@RuiMFernandes and on Linkedin. See alsohisblogathttp://transportlaw.blogspot.ca





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