THE NAVIGATOR - fernandeshearn.com · FERNANDES HEARN LLP NEWSLETTER OCTOBER 2017 PAGE 3 Fernandes...

INTHISISSUEPAGE1DOINGBUSINESSINCANADA-PART1

PAGE2FIRMANDINDUSTRYNEWS

PAGE3FERNANDESHEARNLLPANNUALSEMINAR

PAGE4MESA2018

PAGE9BLOCKCHAIN101-PART2

PAGE12CRIMINALINTERESTRATEPAGE14ANTI-BRIBERYLAWS

PAGE17RANDOMALCOHOLANDDRUGTESTINGUPDATE

PAGE18PINCODESAND“DELIVERYOFGOODS”

PAGE21CANADIANMARITIMELAW-SUPPLYOFGOODS

PAGE23SAFETYPLANSANDDUEDILIGENCEFORCARRIERS

PAGE26CONTEST

FERNANDES HEARN LLP NEWSLETTER OCTOBER 2017

Canada is a federal state witha cons1tu1on.Canada has anelectedparliamentary system of government. In addi1on to the federalgovernment it has ten provincial governments, three territorialgovernments. Atthefederal level Canadianselect the prime ministerandat theprovincial levels, the premier. TheCons%tu%on Act, 1867sets out the powers assigned to the federal government and thepowersassignedtotheprovincialandterritorial governments.Englishcommonlawis appliedinnineprovinces andthreeterritories.FrenchcivillawisappliedintheprovinceofQuebec.

Federal jurisdic1onwas designedtoencompass decisionsthataffectallCanadiansacross thevast country – maDers ofna1onal significance.The federal government has powers that include na1onal defence,foreignaffairs,employmentinsurance,banking,federal taxes,thepostoffice,federaltaxes,fisheries,shipping,railways,telephone,pipelines,indigenous landsandrights andcriminallaw.Provincial andterritorialjurisdic1on includes direct taxes, hospitals, prisons, educa1on,marriage, property and civil rights. Agriculture and immigra1on isshared.Certainaspects ofprovincial powers aredelegatedtomunicipalgovernments,whichenacttheirownbylaws.Legisla1vejurisdic1onissubject to limits provided by the Canadian Charter of Rights andFreedoms,whichformspartoftheConsitu%onAct,1982.

Depending on the business, it may be subject to either federal orprovincial regula1on.Forexample,anairline maybesubjecttofederallaw, suchas thefederal labour code, for maDers dealingwithlabourandemployment but bealsosubject toprovincial laws dealingwithrealproperty.

Thedivisionof powers is further complicatedby the“op1ng”out byprovincesfromfederalprograms.Forexample,Quebecadministersitsownprovincial pensionplan. It operatesseparately fromtheCanadaPensionPlan.

Inaddi1on,uniquearrangements havebeendevelopedforAboriginalpeoplesindifferentregionsofCanada....(page7)

DOINGBUSINESSINCANADAPart1(*1)–TheCanadianLegalSystem

THENAVIGATOR

FERNANDES HEARN LLP NEWSLETTER OCTOBER 2017 PAGE 2

FIRMANDINDUSTRYNEWS• RuiFernandesandKimStollhavebeenincludedintheWho’s WhoLegal2018inShippingandMari1meLaw.

• Rui Fernandes andGordon Hearn havebeen included intheChambers Guide2018 as recommended lawyers in the fields of Shipping Law and Road and RailTransporta1onLaw.

• RuiFernandes,CaroleMcAfeeWallaceandJaclyneReivewill be doinga“LegalUpdates Seminar” tocarriers and shippers in the Leamington areaonNovember 3rd,2017.

• Canadian Passenger Vessel Associa\on Annual Conference, November 8-10,2017,Niagara Falls,Ontario.RuiFernandeswill bespeakingon“DealingwithMarijuanaintheWorkplace.”JaclyneReivewillalsobeaDendingrepresen1ngthefirm.

• Ontario Trucking Associa\on (OTA) Conven\on & Execu\ve Conference,November8-9,2017,Toronto,Ontario.LouisAmato-GauciandCaroleMcAfeeWallacewillbeaDendingrepresen1ngthefirm.

• 50th Transporta\on Law Ins\tute November 10, 2017 in Norfolk, VA.GordonHearn,KimStollandLouisAmato-GauciwillbeaDendingrepresen1ngthefirm.

• CanadianBoardofMarineUnderwritersFall Conference,November28th,2017,TorontoOntario.

• Women’s Interna\onal Shipping & Trade Associa\on Annual General Mee1ngMontreal November30,2017.KimStollis theVicePresidentCentralRegionandwillbeinaDendance.

• GruntClub Annual Dinner,December1st,2017,Montreal Quebec.KimStollandRuiFernandeswillbeaDendingrepresen1ngthefirm.

• Toronto Transporta\on Club Annual Dinner, December 7th, 2017, TorontoOntario.


FernandesHearnLLP18thAnnualSeminar,January17th,2017,TorontoOntario,byinvita\on.Tenta1veProgram:

Date:WednesdayJanuary17th,2018Loca\on:TheAdvocates’SocietyEduca\onCentre

250YongeStreet,Suite2700TorontoCost:$65.00-Includeslightlunchandmaterials(bydownload)Registra\on:SharifaGreen,FernandesHearnLLP416-203-9500

Sendchequesto:FernandesHearnLLP,155UniversityAve.Suite700,ONM5H3B7

Limitedto120aDendees6.0RIBOCredits(TechnicalCategory)

TopicsandSpeakers:8:00-8:25 Registra\on&Coffee

8:25-8:30 Welcome

8:30-9:30 NAFTAUpdateandEffectsonTransporta1on

9:30-10:30 AutonomousVehicles,VesselsandAircral

10:30-10:45 Coffee

10:45-11:45 InsuranceOnline-RisksforBrokers,InsurersandCustomers

11:45-12:45 Blockchain,SmartContracts,andAccountability

12:45-1:30 Lunch

1:30-2:30 Hurricanes,Fires,ClimateChange,RiskAnalysisandLegal/InsuranceIssues

2:30-3:00 SocialMedia:SourceofInforma1onandUseinLegalMaDers

3:00-4:00 MedicalandRecrea1onalMarijuanaUseDuringEmployment


INVITATIONTOMESA2018CONFERENCE

FernandesHearnLLPis one ofthesponsors for theMarine&EnergySymposiumoftheAmericas2018(“MESA2018”)conferenceinTorontoApril 18-20,2018 inToronto.Thefollowingistheprogramfortheconference.

Where?OmniKingEdwardHotel,TorontoCanadaWhen?18-20April2018

Registra.on:hDp://www.mesa2018.com

Wednesday,April18,2018

6:00-8:00pmRegistra1on-Mezzanine,OmniKingEdwardHotel6:30-8:00pmOpeningRecep1on-PalmCourt,OmniKingEdwardHotel8:00pmDinneronyourown-orjoinusatapre-arrangedrestaurantThursday,April19,2018

8:00amtonoonRegistra1on-Mezzanine, Omni King Edward Hotel

Time JointSession-VanityFairBallroom

9:00to10:00am Arc1cExplora1onandShipping/ThePolarCodeModerator:RuiFernandes,PartnerFernandesHearnLLPPeterPamel–PartnerBordenLadnerGervais,AldoChircop–ProfessorofLaw;CanadaResearchChair(Tier1)inMari1meLawandPolicyDalhousieUniversity

10:00to11:00am SeabedMiningModerator:JamesManson–Associate,FernandesHearnLLPWylieSpicer–Counsel–McInnesCooper

11:00to11:15 CoffeeBreak

11:15amto12:15pm AlermathandImplica1onsofRecentCatastrophicHurricanesModerator:KimStoll-Partner,FernandesHearnLLPMarkNewcomb–CounselandVPClaims&Insurance,ZimIntegratedShippingServicesLtd.

12:15pmto1:15pmLunch-KeynoteAddress-TBA

http://www.marineenergysymposium.com

http://www.marineenergysymposium.com


MESA2018CONFERENCE

ConcurrentSessionTime

SessionA-VanityFair SessionB–Kensington

1:15to2:15pm Applica1onofJurisdic1onClausesinDifferentCountriesShelleyChapelski–PartnerNortonRoseFulbrightRobertReeb–ShareholderMarwedel,Minichello&Reeb

LNGContractsandTransporta1onVanessaRochester–CounselNortonRoseFulbright

2:20to3:20pm ArrestofVesselsinVariousJurisdic1ons&Alterna1ves

UpdateonHNSConven1on

3:25to4:25pm IssuesArisingfromProjectCargo PortSecurityandLiabilityBruceHennis,ManagingPartner,HennesCommunica1ons(USA)

6:00PMMESA2018CocktailRecep1onandDinner–Hotel


Friday,April20,2018

ConcurrentSession SessionA-VanityFair SessionB-Kensington

9:00to9:55am Limita1onofLiabilitybyStatute-Conven1onsandinContractsGeorgeArghyrakis-E.G.Arghyrakis&Co.

ImpactofClimateChangeonShippingandEnergyProjects

10:00to10:45am AutonomousShipsandEquipment

CyberterrorisminTransporta1onandEnergyProjects

10:45to11:00am Coffee Coffee

11:00to11:45am OffshoreExplora1onandExploita1on:LiabilityandCompensa1onIssuesLawrenceMallizzi–SeniorManager–O’Brien&Gere

PipelineTechnologies,DevelopmentIssuesandLi1ga1onJoshuaJantzi,Partner,DentonsCanadaLLPKoriPatrick,TechnicalManager,Research&Development,Enbridge,EdmontonAlberta

11:55amto12:45pm EmergingIssuesinInsuranceinMarineandEnergySimonSwallow–ChiefExecu1veShipowner’sClubBrianMurphy–VicePresident,BerkleyOffshore

WindTurbineLi1ga1onSarahPowell–Partner–DaviesWardPhillips&VinebergLLP

12:45pmto2:00pmLunch–Presenta1ononArbitra1oninCanada

Aboriginal groupsmayhave arangeofrights andpowersover certainlands undertheIndianActandpursuanttohistoricandtreatyrights.

The federal and provincial and territorialgovernments are all responsiblefor thejudicialsystem in Canada. (*2) Canada’s judiciary iscompletelyindependentfromotherbranches ofgovernmentandall governmentac1onis subjectto judicial scru1ny. Canadian judges areappointedfor life.Canadianjudgesarefair andwell-respected.

Only the federal government can appoint andpayjudgesofthesuperior,orupper-level,courtsintheprovinces.Parliamentcanalsoestablishageneral court ofappealandothercourts. It has

created the Supreme Court of Canada,the Federal Court and the Federal Court ofAppeal,aswellastheTaxCourt.

Parliamentalsohasexclusive authorityovertheprocedure in courts that try criminal cases.Federal authorityforcriminal lawandprocedureensuresfairandconsistenttreatmentofcriminalbehaviouracrossthecountry.

The provinces administer jus1ce in theirjurisdic1ons. This includes organizing andmaintaining the civil and criminal provincialcourtsandcivilprocedureinthosecourts.

ThegraphicbelowisanoutlineofCanada’sCourtSystem(*3).


SUPREMECOURTOFCANADA

COURTMARTIALAPPEALCOURT

FEDERALCOURTOFAPPEAL

PROVINCIAL/TERRITORIALCOURTOFAPPEAL

PROVINCIAL/TERRITORIALSUPERIORCOURTS

FEDERALCOURT

TAXCOURTOFCANADA

PROVINCIAL/TERRITORIALADMINISTRATIVE

TRIBUNALS

MILITARYCOURTS

PROVINCIAL/TERRITORIALCOURTS

FEDERALADMINISTRATIVE

TRIBUNALS

TheSupremeCourt ofCanadaisCanada’s finalcourt of appeal. Its nine judges represent thefourmajorregions ofthecountry.Threeofthemmust be from Quebec toadequately representthecivillawsystem.

The Federal Court specializes in areas such asintellectual property,mari1melaw,immigra1onlaw, federal-provincial disputes and civil casesrelatedtoterrorism.

The Provincial and Territorial level courts areroughly thesameacrossCanada.Eachprovincehas three levels: lower courts, superior courtsandappeal courts.Nunavut is theexcep1on. Ithasasingle-leveltrialcourt.

Administra1ve boards and tribunals deal withcertaintypesofdisputes overtheinterpreta1onand applica1on of laws and regula1ons.Examples are human rights, en1tlement toemployment insuranceordisabilitybenefitsandrefugee claims. Decisions of administra1vetribunalsmay bereviewedbya courttoensurefairnessandproperlegalprocess.

Canadian courts may look to foreign judicialdecisionsforguidance,andboththe federal andprovincial legislatures frequently adopt foreignlegisla1ve models: for example, the PersonalProperty Security Act in force in Ontario isessen1ally the same as Ar1cle 9 of the U.S.UniformCommercialCode.

Arbitra1onclausesin agreements are generallyenforcedby courtsandarbitra1onisextensivelyused. Canadian courts will generally recognizearbitra1ondecisions,includingforeignawards.

Canada alsohosts anumber ofmedia1ons withmanyformerjudges andseniorlawyersavailabletomediatecomplexcommercialdisputes.

Canada providesanaDrac1veclimateforforeignbusinesses. It hasstable poli1cal andeconomicsystems. It has abundant natural and humanresources.

RuiM.Fernandes

Fo l l ow Ru i M . Fe rnandes on Tw iHer@RuiMFernandesandonLinkedin. SeealsohisblogathDp://transportlaw.blogspot.ca

Endnotes(*1) This ar1cleis part1of17parts dedicatedto a review of doing business in Canada.Subsequent ar1cles will include: ForeignInvestment, Business Structures, Securi1esRegula1on, CanadianImmigra1on, EmploymentLaws,Directors andOfficers,Interna1onalTrade,Compe11on, Sale of Goods, IntellectualProperty,Privacy,RealProperty, EnvironmentalLaws,Taxa1on,Insolvency,Li1ga1onandADR.(*2) see hDp://www.jus1ce.gc.ca/eng/csj-sjc/just/07.html(*3)Ibid

INVESTOR NEWSLETTER ISSUE N°3 FALL 2008FERNANDES HEARN LLP NEWSLETTER OCTOBER 2017 PAGE 8

http://transportlaw.blogspot.ca


http://www.justice.gc.ca/eng/csj-sjc/just/07.html




2. Blockchain101–Part2

This Part 2 of the ar1cle on blockchain (*1),“Blockchain 101”, and dealswith thepoten1alfor useof blockchainplatorms in the logis1csandsupply chainarea. Theblockchainprotocolfora decentralizeddigitalledgermayworkverywell in logis1cs and supply chainmanagement(including insurance). Thespeedof verifica1onoftransac1ons andthe security for transac1onsinvo lv ing mul1p le par1es in mul1p lejurisdic1onslendsitselftotheuseofblockchain.

Thebest-known pilot project in logis1cs is theMaerskprogramwithIBM,Microsol andotherpartners. The blockchain platorm is built onMicrosol’s Azureglobalcloudtechnologyandisslatedtobeimplementedin2018.Theplatormwill connect clients, brokers, insurers, carriersandthirdpar1es todistributedcommonledgersthat capture data about iden11es, risk andexposure and integrate the informa1on withinsurancecontracts.(*2)

The project was described in Fortune asfollows(*3):

Maersk, the Danish shipping giant, recentlycompleted a 20-week blockchain proof ofconcepttrialformarineinsurancethisyear,thecompany told Fortune. Thecompany partneredwith EY, Microsol, Willis Towers Watson, andseveral insurance companies to try securelysharingshippingdataonablockchain.Maersk used KSI, a blockchain developed byGuard1me, a startup whose technologyunderpinsthetech-savvyna1onEstonia, forthetest. The platorm was designed to makeaudi1ng aspects of a shipping supply chaineasier, to improve the tamper-resistance andsharingofdatainreal1me,andtoenablemanydifferent par1es to seDle upon the terms ofpremiumsinamore1melyfashion.

Accoun1nggiantEYexplainedwhytheprojectinthe shipping and insurance industry wasappropriatefortheblockchainplatorm(*4):

EYexplainedthat its decision tosecuremarineinsurance data with blockchain was due to a"completeinefficiency"inthesector.

"Thereasonwe chosemarine(insurance)as thestar1ngpoint for this sort of market is mainlybecause of its complete inefficiency," ShaunCrawford, global insurance leader at EY, toldCNBC via phoneearlier thisweekaheadoftheannouncement.

Crawfordsaid theindustry was "over capacity"andthattherewas"alotofcosttoit."

He added: "It's facing high administra1veburdensofmanagingandwri1ng claimswithalot of paperwork. All contracts are signedmul1ple1mes.Theygofromshiptoship,porttoport,throughquiteajourney."

Another project for container security is beingdeveloped by T-Mining. T-Mining is currentlydeveloping and tes1ng blockchain-basedapplica1ons for container logis1cs with theobjec1ve of giving secure clearance forpersonnel, suchastruckdrivers, topickuptheloads. It is a response to the rela1vely recenttrend in logis1cs of fic11ous pickups. Theseoccur whencon ar1sts showup at ashipper’sdock,providefabricateddocumentsandpickuptheshipment.Presumablyifall thepar1es inthetransac1onareonthe blockchainplatorm, thedriverwouldrequireasecureprivate key topickupthegoods.(*5)

Other blockchain projects in the logis1cs areahave been described by Forbes writer SteveBankerasfollows(*6):

On organiza1on called Kouvala Innova1on hasan even more audacious vision. Pallets withRFIDtags wouldcommunicate theirneedtogetfrompointAtopointBbya certaindate.Carrier“mining” applica1onswouldbidfor therighttomovethat load. The RFIDtagwouldawardthebusiness to the carrier that bests meets ashipper’s price and service needs. Then as themoveprogresses,theblockchainwouldcon1nuetotracktheshipment.


It is also thought this technology could beeffec1veinenhancingfoodanddrugtraceabilityandforreducingcosts associatedwithfactoring.Provenance, a U.K. solware startup, looks touse blockchain technology to establish theauthen1city of food. Provenance is tes1ng thetechnology to authen1cate tuna caught inIndonesia delivered to Japanese restaurants.Provenance takes informa1on from sensors orRFID tags and records it on the blockchain totrack the fish from“hook to fork.” IBM is alsointerested in food traceability, and hasannounced a consor1um with several majorfoodproducersandretailers.

Forbes argues that all these projects soundpromisingbutmay beslowtotake beyondthebeta tes1ng stage due to a number of factors(*7):

1. The technological talent is scarce andexpensive;muchof ithas beenscoopedupbyfintechstartupfirms.2. There are network effects associated withderivingvalue from blockchain in logis1cs. Themoreen11es thatpar1cipate,themorevaluablethe solu1on is. But this network effect makesthingsdifficultatthestart.3.Itis likelythattogetto scale,largecompanieswill needtorequiretheir supply chainpartnerstopar1cipate.Butthis couldhinderthedrivetocreate the necessary standards. Further, whileseveral organiza1ons are seeking to play thenecessary roleofstandards body; none has yetachievedthenecessaryscale.4. “Miners” areused to validate that thedataaddedtoa blockchainis valid.WithBitcoin,thisprocess can take several minutes. There aresupplychainprocesseswhereless latencywouldbeverydesirable.

The insurance industry can certainly useblockchain in the future. Insurance providersneed an efficient way toprocess claims, verifythat an insurable event (such as an accident)actually occurred, and provide customerswithfair and 1mely payouts. With automatedinsuranceclaimprocessing,policycondi1onsarewriDen into a smart contract stored on the

blockchain and connected to publicly availabledata via the Internet. Whenever an insurableeventoccursandis reportedbya trustedsource,the insurance policy is automa1cally triggered,theclaimis processedaccordingtothe terms ofthe policy specified in the smart contract, andthecustomerispaid.(*8)

Industries using complex systems such as theaircral industry may beable tobenefit fromablockchain platorm. When something goeswrongwitha complex“systemofsystems,”suchas an aircral, it is important to know theprovenance or origin, through supply chainmanagement,ofeachcomponent,downtothemanufacturer,produc1ondate,batch,andeventhemanufacturingmachine program.Blockchainholds complete provenance details of eachcomponent pa r t , a c ces s i b l e by eachmanufacturer in the produc1on process, theaircral owners, maintainers, and governmentregulators.

Benefitsinthiscategoryinclude(*9):

a) Increasedtrustbecausenosingleauthority“owns”theb) Increasedefficienciesleadtoreduc1ons in1me taken to diagnose and remedy a faultimprovingsystemu1liza1onc) Specific recalls rather than cross fleet/generic

Without doubt, the implementa1on can beexpensive and1me intensive. Will the benefitsexceedthereturnvalue?

Part 3 of this ar1cle will deal with the legalconsequencesarising from theimplementa1onofblockchainplatorms.

RuiM.Fernandes

Fo l l ow Ru i M . Fe rnandes on Tw iHer@RuiMFernandesandonLinkedin. SeealsohisblogathDp://transportlaw.blogspot.ca




Endnotes(*1) seeSeptember 2017 FHLLP newsleDer forPart1.(*2)see“MaerskpartnerswithMicrosol,EYonmari1meinsuranceblockchain”September8,2017,CanadianShipper.com(*3) see hDp://fortune.com/2017/09/05/maersk-blockchain-insurance/(*4)seehDps://www.cnbc.com/2017/09/05/ey-microsol-maersk-blockchain-for-marine-insurance.html

(*5)seehDp://www.t-mining.be(*6) see hDps://www.forbes.com/sites/stevebanker/2017/09/01/blockchain-in-the-supply-chain-too-much-hype/#c96fcbc198c8(*7)Ibid(*8) Gupta, Manav “Blockchain for Dummies -IBMEdi1on”,2017JohnWiley&Sons,Inc.,page27.(*9)Ibid,atpage28


http://fortune.com/2017/09/05/maersk-blockchain-insurance/




https://www.cnbc.com/2017/09/05/ey-microsoft-maersk-blockchain-for-marine-insurance.html






http://www.t-mining.be

http://www.t-mining.be

https://www.forbes.com/sites/stevebanker/2017/09/01/blockchain-in-the-supply-chain-too-much-hype/#c96fcbc198c8






3. AVeryInterest-ingCase:PlatypusMarine,Inc.v.Tatu(Ship)

In Canada, sec1on 347 of the Criminal Codeforbids anyone fromcharginganannual interestrateofover60%.Apparently,however,charging59.9%isjustfine…

Recently, inPlatypusMarine, Inc. v. Tatu (Ship),2017 FCA 184, the Federal Court of Appealconsidereda case where oneparty had orallyagreed to pay the other USD$100,000 ininterest,inconnec1onwithcertaindebtsowing.Theissue was whether this amount cons1tuteda criminalinterest rate of over 60%. Thelowercourt judge ruled that it did, andsubs1tuted alower amount. On appeal, however, the Courtoverturnedandorderedthedebtor to pay thefull USD$100,000.Onits calcula1ons,andusingthedatesofeachinvoice (plus a two-day graceperiod)as thestar1ng point for calcula1ngtheinterest (as opposed to the date of the oralagreement),theCourt foundthata60%rateofinterest would generate an amount of USD$100,529.78 – meaning that the agreed-uponamount of $100,000 was very, very slightlyunder60%.

Theobvious lesson?Becareful what youagreeto!

TheFacts

Theappellant,PlatypusMarineInc.(“Platypus”),is a shiprepairer based inPort Angeles in theStateofWashington. Platypus provided repairsand maintenance work to the ship “Tatu”,owned by the respondent, Pla1num PremierCorpora1onLimited(“Pla1num”).Theworktookplace over several months in 2014; in duecourse, Platypus sent Pla1num ten invoicestotaling $285,508.92. Eachinvoicewasmarked“INVOICE DUE UPON RECEIPT”, and made nomen1onofinterest.

Thefinal invoicewasdatedSeptember19,2014.At that point, Pla1num had not paid any ofPlatypus’s previous invoices. Shortly alersendingthelast invoice,thepar1es cametoan

oralagreement,madeatPla1num’s sugges1on,where Pla1num agreed to pay Platypus USD$100,000 ininterest ontheamountsowing. Inexchange, Pla1num would not have to effectpaymentbeforetheendofJanuary2015.

Pla1num then failed to seDle the outstandingamountsbythe endofJanuary2015,soPlatypusarrested the “Tatu”. On October 29, 2015,Platypus commencedanac1onin FederalCourtagainstPla1num.

Ul1mately, Platypusobtaineda judgment fromthe Federal Court in respect of the principalamount owing only. Pla1num eventually paidthisamount,includingcostsandinterest.

What remained was the issue of whetherPla1num owed Platypus USD$100,000 ininterest, as agreed. Pla1numbrought amo1onfor summary judgment on this issue, arguingthat theamount cons1tuteda criminal rateofinterest,contrarytosec1on347ofthe CriminalCode, which prohibits charging annual interestratesover60%.

The mo1ons judge agreed with Pla1num thatthe agreed-upon interest charge cons1tuted acriminal interest rate. He set aside the oralagreement reached between Platypus andPla1num andordered Pla1num instead to payPlatypus $35,000 in interest. This was theamount that the mo1onsjudge concludedthatthepar1es hadagreedto,inthe eventthattheUSD$100,000 amount wasset aside, being the5% interest rate provided by sec1on 3 of thefederal Interest Act. The mo1onsjudgeappliedthis rate to the amount of the judgment,roundedtoanevenfigure.

TheAppeal

On appeal to the Federal Court of Appeal,Platypus argued that the sum of USD$100,000didnotviolatethecriminal interestprovisionsoftheCriminalCode. Platypusreferredtoachartdetailingits calcula1ons,whereinitscalcula1onof the interest began three days following thedateofeachpar1cularinvoice(i.e.toallowfora


three-daygraceperiodfordeliveryandreceiptofthe invoice). Platypus showed that using a 60%interestrate,a three-daygraceperiodresultedina total interest amount of USD$100,082.21 –thus,onthis calcula1on,theamountchargedwas(veryslightly)underthecriminalrate.

Pla1num argued that theUSD$100,000 interestamount was a criminal interest rate. Itmaintained before the Federal Court of Appeal(asin thelower court)thatthe appropriatedatetobegincalcula1nginterest, for thepurposesofarrivingattheeffec1ve rate,was thedate oftheoral agreement (i.e. September 19, 2014).Therefore, according to Pla1num, the interestratewasactually95%.

Platypus disagreedand argued that the correctdatefor calcula1onof the interest ratewas thedateofeachinvoice, andnotonSeptember 19,2014.

TheCourt’sAnalysis

Wri1ngforthe Court,Jus1ceNadonheldthatthedetermina1on of the maDer turned on thecommencement date for calcula1on of interest.HethusconsideredPla1num’s argumentthattheopera1ve date was September 19, 2014. IfPla1num was correct in its submission, thenthere couldbenodoubt that theUSD$100,000amount didcons1tuteaninterest ratewellover60%.Ontheotherhand,Jus1ce Nadonobservedthat ifPlatypuswascorrect inits view, thentheinterestchargedwasslightlyunder60%.

Jus1ce Nadon concluded, first, that the lowercourt had erred in its finding that the USD$100,000 amount cons1tuteda criminal rateofinterest. In the first place, the judge had notmade any calcula1ons inhis reasons tosupportthis conclusion, but rather restedhis finding onthe conclusion that both par1es’ calcula1onsresultedincriminalrates.Second, Jus1ce Nadonfoundthatthecalcula1onsadvancedbyPlatypus(showingthat theamountwas slightly less than60%)werecorrect.

Turningtotheproper start datefor theinterestcalcula1on, Jus1ce Nadon had no difficulty inconcluding that it was an implicit term of thepar1es’agreement thattheUSD$100,000wastosubsume the interest to which Platypus wasalready en1tled at the1methe oralagreementwasmade.The“interest”referredtointhiscasewould have been pre-judgment interest, whichJus1ce Nadon noted is always payable inadmiralty maDers, rather than contractualinterest.Henoted,“theoralagreementmustbecharacterizedandunderstood in thelight of thefact that interestwas indeed owed by Pla%numontheamountscoveredbytheteninvoices”.

Thus, in the Court’s view, interest shouldtherefore be calculated using thedate of eachinvoice. The Court also held that it wasreasonable to include a two-day grace period,given that the evidence established that theinvoices were not always deliveredon thedateshown.

Ul1mately, the Court set out a series ofcalcula1ons demonstra1ng that with respect toeachinvoice, if interest begantoaccrueonthesecond day following the date of the invoice,then,at60%perannum,thetotal amountowingwould be USD$100,529.78. Thus, the USD$100,000 amount asagreed by the par1eswasslightlylowerandthereforenotover60%.

TheCourtnotedthatevenwithathree-daygraceperiod, the amount calculated was s1ll (very)slightlyoverUSD$100,000,andthuss1ll notover60%.

Jus1ce Nadondeclinedtocommentontheotherissuesraisedontheappeal,namely whetherthelowercourt judgeerredinawarding5%interest;andwhether his calcula1ons in respect of thatawardwerecorrect.

JamesManson


4. IsYourBusinessatRiskofBreachingAn\-BriberyLaws?

Does yourcompanyhaveanan1-briberypolicy inplace?Is yourcompanycomplyingwithCanadianan1-bribery laws regardingdomes1candforeignofficials? Is paying for an expedited permit orl icence issued by a government officialconsideredbribery for the purposes ofCanadianlaw? Here are the basics that your companyneedstoknow.

IsYourBusinessatRisk ofBreachingAn%-BriberyLaws?

You or your company are at higher risk ofpoten1ally breachingCanadianan1-bribery lawsif you are bidding on or are engaged ingovernment contracts in Canada or in foreigncountries.Addi1onally,youare alsoathigherriskif, in order to operate, you require a permit,licence,orvisathatis issuedbyapublicbody(forexample, this could include safety fitnesscer1ficates, CVORs, opera1ng authori1es, liquorlicences, food and drug licences from HealthCanada or aforeignequivalent, importorexportcer1ficates or licences, environmental permits,buildingpermits,etc…).

Themore olenyouarerequiredtointeractwithpublic officials here in Canada or abroad, themore exposed you are to poten1ally breachingCanada’san1-briberylaws.

Canada has three sets of legisla1onthat governbribery: the Corrup%onofForeignPublicOfficialsAct (“CFPOA”) (*1), the Criminal Code (the“Code”) (*2), and the Extrac%ve SectorTransparency Measure Act (*3). The laDergoverns payments madeby companies involvedinmining, oil and gas to foreign and domes1cgovernments and will not be discussed in thisar1cle.

BriberyofForeignOfficials

A foreignpublic official is apersonwhoholds alegisla1ve,administra1veor judicial posi1onofaforeign state, who performs public du1es or

func1ons for a foreignstate(includinga personemployedbya board,commission,corpora1onorother body performing func1onsonbehalf of aforeignstates),oranofficialor agentofa publicinterna1onalorganiza1onformedbytwoormorestatesorgovernments.(*4)

Under theCFPOA, an individualor companyhascommiDedtheoffenceofbriberyif:

(i) they havegiven, offered, or agreedtogiveoroffer,directlyor indirectly,aloan,reward, advantageorbenefitofany kind(“Foreign Bribe”) to a foreign publicofficial, or toanyonefor thebenefitof aforeignpublicofficial;and(ii)theForeignBribewasofferedtoobtainanadvanceinthecourseofbusiness;and(iii) it was offered as payment for theofficial toact or not toact inconnec1onwith the performance of their du1es orfunc1ons;or(iv)itwas offeredtoinducetheofficialtouse their posi1on to influence acts ordecisionsofaforeignstate.(*5)

The descrip1on of a Foreign Bribe for thepurposes of the CFPOA is quite broad andaccordingly, could expand to rela1vely minoroffers as long as some form of benefit oradvantage is provided. Addi1onally, the offencehas beencommiDedeveniftheForeignBribehasnot actually changed hands, as the legisla1oncovers bothgivingandagreeingtogivea ForeignBribe.

TheCFPOAis alsobroadenoughtocoverindirectForeignBribes whereathirdparty hasprovidedtheForeignBribetoa foreignofficialonbehalfofacompanyorindividual.

Currently, a “Facilita1on Payment” made toexpedite orsecuretheperformanceby a foreignofficial ofanyactofarou1nenaturethatis partof their du1es or func1ons, such as issuing apermit, licenceorqualifica1ontodobusiness inanothercountry, as well as certainother rou1neacts,arenotconsideredForeignBribes.However,under Bill S-14 which amended the CFPOA, the


elimina1on of Facilita1on Payments wasintroducedbutthiselimina1onis notyetinforce.(*6)

There are also certain excep1ons for when aForeign Bribe is not an offence, for example,whereitis permiDedor requiredunder thelawsoftheforeignstate.(*7)

Theoffencedoesnot need to becommiDed inCanada fortheCFPOAtoapply.The reachoftheCFPOA extends to acts or omissions commiDedoutsideof Canada if theperson commi~ng theact is a Canadian ci1zen, a permanent residentwhoispresentinCanadaalerhavingcommiDedthe act or omission, or is a public body,corpora1on, society, company, firm orpartnership that is incorporated, formed orotherwiseorganizedunderthelaws ofCanadaoraprovince.(*8)

BriberyofDomes%cOfficials

Under the Code, it is an offence for anyoneto,directly or indirectly, give, offeror agreetogiveor offer, any money, valuable considera1on,office, place, employment, pay acommissionorreward,orconferanadvantageorbenefitofanykind(“Bribe”):

(i) on an official as payment for theircoopera1on, assistance, exercise ofinfluence or for an act or omission inconnec1on with any maDer of businessrela1ngtothegovernment;or (ii) to an employee or official of thegovernment with which that personhasdealings.(*9)

Similarly totheCFPOA,thedescrip1onofa Bribeis broad enough to expand to rela1vely minoroffers as long as some form of benefit oradvantage is provided. An offence has beencommiDed even if the Bribe has not actuallychanged hands as the legisla1on covers bothgivingandagreeing to givea Bribe.Theoffenceunderthe CodealsocoversindirectBribes wherea thirdpartyhas providedtheBribe toanofficialonbehalfofacompanyorindividual.

Unlike the CFPOA, there is no excep1on forFaci l i ta1on Payments under the Code.Accordingly, small payments made to low-levelofficials to expedite rou1ne services areconsideredBribesundertheCode.

HowtoProtectYourBusiness

The best method of protec1ng your businessfrom breaching Canada’s an1-bribery laws is byhavingarobustan1-briberypolicy inplacethatiscirculated to employees and contractors, and ismonitoredandenforced.

In order to create or revamp your an1-briberypolicy, each company should start with a riskassessmentiden1fyingareas whereyourbusinessinteracts with government officials, includingthroughthirdpartyintermediaries.Next,withtheassistance ofcounsel,youshouldsetuporreviseanexis1ngan1-briberypolicy that is targetedtospecific risk factorsof your business. This policyshouldbecirculatedtoall employeesas wellasthird party contractors, who should confirm inwri1ng that they have received the policy.Consider implemen1ng training for staff andcontractors.Finally,engagecounsel toassistwithintermiDent self-audits toensurethatthepolicyisbeingpropertyenforced.

JaclyneReive

TwiHer:@jaclyne_reiveBlog:hHps://jaclynereive.wordpress.com

Endnotes(*1)S.C.1998,c.34.(*2)R.S.C.1985,cC-46.(*3)S.C.2014,c.39,S.376.(*4)CFPOAs.2.(*5)Ibid.,s.3(1).(*6)Ibid.,s.3(4).(*7)Ibid.,s.3(3).(*8)Ibid.,s.5(1).(*9)Codes.121.


https://jaclynereive.wordpress.com

https://jaclynereive.wordpress.com

5. Update on Random Alcohol and DrugTes\ng

In 2013 in Communica%ons, Energy and PaperWorkersUnionofCanada,Local30vIrvingPulp&Paper, Ltd (“Irving”), the Supreme Court ofCanada confirmed a company may conductrandom alcohol tes1ng for a safety-sensi1veposi1on where the company can establish itoperates adangerous workplaceand there is ageneral problem with alcohol abuse in theworkplace. This test is a very high obstacle toovercome.

InIrving,theSupreme Courtsetoutthreespecificinstances, even in safety-sensi1ve industrieswheretes1ngmayoccur:

(i) there is reasonable cause tobelieve thattheemployeeisimpairedwhileonduty,(ii) theemployeehasbeendirectlyinvolvedinaworkplaceaccidentorsignificantincident,or( i i i ) t h e e m p l o y e e i s r e t u r n i n g t oworkalertreatmentforsubstanceabuse.

This year theOntarioSuperior Court gavesomeinsight intotheanalysis a court may undertakew h e n a s s e s s i n g r a n d o m t e s 1 n g .See Amalgamated Transit Union, Local 113 v.Toronto Transit Commission, 2017 ONSC2078discussedinourApril2017newsleDer.

A recent decision of the Court of Appeal ofAlbertainSuncorEnergyInc.v.UniforLocal707A(*1)providesaddi1onalguidanceonalcohol anddrugtes1ng.

In2012, Suncor implemented randomdrug andalcohol tes1ng for workers in safety-sensi1veposi1ons at some of its sites in the FortMcMurray area. Unifor grieved the allegedinfringementofunionizedworkers’privacyrights.The majority of the arbitra1on panel ruled infavour ofUnifor. The majority ofthepanel heldthat the employer had not demonstratedsufficient safety concerns within the bargainingunit to jus1fy random tes1ng. The dissentconcludedthatthere was overwhelmingevidenceof safety issueswithin theworkplace, including

substanceabuseissues, andwouldhaveupheldtheemployer’srandomtes1ngscheme.

SuncorpappealedtoCourtofQueen’sBenchforjudicial review. The arbitra1on decision wasquashed by the reviewing jus1ce, who orderedthat the maDerbesent back for afreshhearingby a new panel. The judge found that themajority’s decisiontobeunreasonablefor threemain reasons. First, he held that the tribunal’smajority misapplied the balancing exerciseoutlined in Irving by imposing more stringentrequirements than those contemplated by theSupremeCourtofCanada.Second,heconcludedthat themajority erredby only considering theevidence that demonstrated substance abuseproblemswithinthebargainingunit,andignoringtheevidenceofsubstance abuseproblemswithinthe broader workplace. [At the site therewereboth unionized and non-union personnel.]Finally,heconcludedthatthemajorityhadfailedtoconsideralloftherelevantevidence.

TheUnion appealed to theCourt of Appeal forAlberta.TheCourtofAppealconsideredonlyoneground of the appeal: the arbitra1on panelmajority’s sugges1onthatitshouldonly considerevidence demonstra1ng a drug or alcoholproblemwithinthebargainingunit.

TheCourtofAppeal notedthatinIrving,Abella Jexplained how a dangerous worksite is not, initself, enough to jus1fy management imposingrandomdrugor alcohol tes1ngon its unionizedemployees. She defined the test in terms ofwhether there are special safety risks, and inpar1cular, whether there was evidence of ageneral problem of substance abuse withinaworkplace(atpara31,emphasisadded):

[T]he dangerousness of a workplace —whether described as dangerous,inherently dangerous, or highly safetysensi1ve — is, while clearly and highlyrelevant, only the beginning of theinquiry. Ithas never beenfoundtobeanautoma1c jus1fica1on for the unilateralimposi1on of unfeDered random tes1ngwithdisciplinary consequences.What has


beenaddi1onally requiredis evidenceofenhancedsafetyrisks,suchas evidenceofa generalproblemwithsubstanceabuseintheworkplace.

TheCourtalsonotedthatinanaDempttosa1sfythis test from Irving, Suncor led extensiveevidence about employee substance abuseproblemsatits FortMcMurray opera1ons.Someof thisevidencedirectly implicateditsunionizedemployees. Suncor introduced evidence aboutposi1ve drug and alcohol tests that took placealersafetyincidents or“nearmisses,”withtheserecords indica1ng that over 95%of theposi1vetests had involved unionized employees.However, muchof Suncor’s evidencerelated totheworkplaceas a whole,anddidnotdis1nguishbetween unionized employees, non-unionizedemployees, and contractors’ employees. Suncorintroducedevidenceofover2,200“incidents” atits FortMcMurrayopera1ons thatinvolveddrugsor alcohol, but didnot provide abreakdownofhowmany of theseincidents involvedunionizedemployees versus non-unionized employees orcontactoremployees.

TheCourtofAppealheldthatitwasunreasonableforthetribunalmajoritytoinsistupon“par1cularized”evidencespecifictoSuncor’sunionizedemployees.Atparagraphs46and47itheldthat:

This sets the eviden1ary bar toohigh. Irvingdefinedthe balancingprocessin terms of workplace safety andworkplace substance abuse problems –notbargainingunit safety andbargainingu n i t s u b s t a n c e a b u s eproblems. Irving calls for a more holis1cinquiry into drug and alcohol problemswithintheworkplacegenerally, insteadofdemanding evidence unique to theworkers whowill be directly affectedbythe arbitra1on decision. A broader,workplace-focused analysis appearsconsistent with how both the SupremeCour t and the a rb i t ra1on pane lin Irving approached the balancingprocess. Inthe Irvingarbitra1ondecision,

thearbitratormen1onedhowsomeoftheevidencedidnotdis1nguishbetweenthe“groups of employees” involved inalcohol-related incidents, but alsospecifically considered evidence aboutalcohol tes1ng within the overallworkplace, including plant employeesoutsidethebargainingunit

Theappealwasdismissed.

Thetakeaway for employers: employers mustbecau1ous when implemen1ng a random alcoholanddrug tes1ngpolicy. Only a generalproblemwith substance abuse (in a safety sensi1veindustry)needs tobedemonstrated, ratherthana “significant problem” (and a reasonablelikelihood of risk to heal and safety due tosubstance abuse) being required in order tojus1fytes1ng.

RuiM.Fernandes

Fo l l ow R u i M . F e r nande s o n Tw iHe r@RuiMFernandes and on Linkedin. See alsohisblogathDp://transportlaw.blogspot.ca

Endnotes(*1)2017ABCA313




6. Pin Codes Not Proper “Delivery” ofGoodsUnderBillofLading

Rapidlychangingtechnologyis impac1ngthewaytheworldworks ineveryway.Standardopera1ngprocedures are amendedinresponseandtotakeadvantageofanybenefits.Changes really startedwh e n i n s t r u c 1 o n s b y ema i l b e c amecommonplace and then moved to electronicversions of contracts of carriage. The law isalways two (or more) steps behind and is onlynow star1ng to deal with the effect that suchmodernprac1ces have onthe legal rela1onshipsbetween par1es to a contract. As with any“newfangledthing”,li1ga1onwill help makeclearwhatmustbedonenext.

Theuseofpincodesis familiar toall of usasasecuritymeasure.Pincodesareusedbyshippinglines as partoftheirprocedures forthereleaseofcargo.Terms havebeeninsertedintocertainbillsof lading toprotect theshipping lines regardingtheuseofsuchtechnologyand,un1lnow,thosecarriers havemaintainedthattheprovisionofpincodes to effect thereleaseof cargocons1tuteseffec1vedeliveryofthatcargo.

There are no Canadian cases yet on this issue;however,onMay24,2017the CourtofAppealofEnglandandWalesdecidedthe caseofGlencoreInterna%onalAG v MSC Mediterranean ShippingCo.SA (*1). The Courtdismissedthe appealandheldthatprovisionofpincodes bythecarriertotheagentoftheholderofthefill ofladingdidnotcons1tuteproper delivery ofcargo. The carrierwas liable to pay for losses resul1ng from thethelofthecargo.

This decisionwill havesignificantimpactonthoseu1lizing electronic release systems (“ERS”) andpincodesintheshipmentandreleaseofcargo.

Facts

GlencoreInterna1onal AG(“Glencore”)made69shipments ofdrumscontainingcobaltbriqueDes(the “cargo”) between January 2011 and June2012,whichshipments weresuccessfully carriedbyMediterraneanShippingCompanySA(“MSC”).

On the 70th shipment, aler discharge inAntwerp,Belgium,twoofthethree containers intheshipmentwerestolen.

Glencorewastheholder ofthe bill ofladingandtheownerofthecargo.Theterms of thebills oflading for the 69 previous shipments wereessen1allythesameasthatofthe problem70thshipment. TheMSC bills of lading (marked “toorder”) allowedoneoriginal bill of lading tobetendered to get a delivery order or the actualcargo.

Since 2011,thePortofAntwerpoperatedanERS,whichwas not mandatory andwas notadoptedby all users of theport.Under theERS, carriersprovided,againstbills oflading,pincodes,whichwere communicated by email to the relevantreceivers or their agents andtheport terminal.Theholders of bills of ladingwouldpresent theissued pin codes at the terminal to then takedeliveryofthecargo.Thepincodeswere usedinplace of tradi1onal paper copies of deliveryordersorreleasenotes.

In each of the 69 successful shipments,Glencore’s agent at the port hadusedtheMSCissued andemailedpincode to takedelivery ofthe associated cargo. With the problem 70thshipment,Glencore’sagent,alerpresenta1onofthebill ofladingandpaymentoffreight/charges,had received the MSC-issued pin code viaelectronicdocumentcalleda“Release Note”.TheagentaDemptedtoarrangefor pickup,but twoof the three containers had been stolen byunauthorized persons, which thieves had usedthesamepincodetogainaccess.

Glencore sued MSC for its losses and allegedbreach of contract, bailment and conversion onthebasisthat,as statedinthebill oflading,MSCwas required to deliver the cargo against thepresenta1onofa bill of ladingnot just against athepresenta1on of a pin code. MSC counteredthat there were clausesinthebill of ladingthatexpressly allowed MSC to use the pin codesystem. Further, MSC had used that same pincode systemsuccessfully inrespect oftheother69 shipmentsandGlencore hadbeen awareof


this usage andsohadimplicitly agreedtoits use.Thetrial judgeagreedwithGlencoreandissuedjudgmentagainstMSC.

IssuesonAppeal

(a)PinCodesas“Symbolic”Delivery

MSC argued that its provision of pin codes toGlencore’s agentattheportamounted,inlaw,tothedelivery ofpossessionof thecargo. Just likedeliveryupofakeytoa warehousewheregoodsare stored, the provision of the pin code (asubs1tutefor thecargo)was,therefore, deliveryofthecargo,byasymbolicact.

The Court dismissed this argument no1ng thatthosepresen1nga genuineoriginal billofladingdonot receivedeliverymerely onreceipt ofthebill or by a symbolic act but by presenta1onoftheactual bill. For “delivery”andthepassingofrisktoGlencoreandits agent,the Courtsaidthatitwouldhavebeennecessary forMSC“todivestitselfofall powers tocontrol anyphysical dealinginthe goods.”However,this wasnotthe case,asMSCwas s1ll abletorevokeorinvalidatethepincodes at all 1mes,evenif they didnothave thecontractual right to do so. Delivery was noteffected merely by provision of the pin codes.Further,therewas noexpressterminthe subjectbill of lading that specifically provided that theprovisionofpincodeswouldamounttodelivery.

(b) Electronic Release Note with Pin Code as“DeliveryOrder”orShip’sDeliveryOrder

MSCalsoarguedthatanelectronic“release note”with pin code was a “delivery order” for thepurposes ofthe bill oflading.Furtheritwasalsoa“ship’s delivery order” under sec1on1(4) oftheCarriage ofGoods by SeaAct 1992, whichMSCarguedrepresentedanundertakingtodeliver tothefirstpersontoprovidethepincode.

Regarding a “delivery order”, this term couldhave various meanings and was not a definedterm.Thepincodes weresimplyusedtoinstructtheterminal todeliver the cargotoanyonewhoentered the correct pin codes at the port. The

Court found that a “delivery order” was to beprovided by carriers as an alterna1ve to actualdeliveryofthecargoinexchange andsubs1tu1onfor the bill of lading. It was, therefore, implicitthat the par1es intended that a delivery orderalso included an undertaking by the carrier todeliverthegoods tothe personiden1fiedtherein.A pincodedidnot include such anundertakingandcouldnot be a“delivery order”.Use ofthepin code at the terminal, therefore, did notcons1tutedelivery andMSC’s obliga1ons in thatregardwerenotfulfilled.

Regarding whether the release note with pincode was a “ship’s delivery order”, the Courtdisagreed that such sec1on required MSC todeliver to the first person to enter the code,becausea delivery orderwithinthebill ofladingrequiredanundertakingtodelivertoGlencoreorits agent,whichwasnotthe same as deliveringtothefirstpersontoenterthepincode.

(c)Estoppel

MSCalsodeniedthatitwas in breachofcontractfor delivering the cargo upon presenta1onof apincode. MSC arguedthat, for the 69previoussuccessful shipments, it had used the ERS andprovidedpincodes by email toGlencore’s agent.Since Glencoregavethe “appearance”thatithadno issues withthis procedure, it could nownotarguethattheprocedurewasimproper.TheCourtdisagreed,sta1ngthatGlencore’s casewasnotthatdeliverywas madeagainstpincodesbut rather that delivery was not made toGlencoreorits agent.Infact,Glencoreand/oritsagents had never advised or somehow agreedthat delivery to anyonewho had the right pincode/ first presenter (and who was not them)would be acceptable. Successful use andpresenta1on of pin codes had not afforded anopportunity for Glencore to advise on theirposi1on had that use and presenta1on beenunsuccessful.Glencore alsowas alsoactuallynotawareofthefact that the ERSwasinplaceandbeingusedinAntwerp.


TheCourtofAppeal dismissedMSC’s appeal andMSC was liable for Glencore’s losses regardingtwoof three containers inthe70thshipmentofcobalt briqueDes. MSC has appealed to theSupremeCourt.

Finally

This case is a convincing example that use andimplementa1on of new or evolving technologymust also be accompanied by updated legaladvice to ensure protec1on of interests,contractual or otherwise, at all 1mes. Clientsusing ERS and pin codes in their prac1ces and

procedures shouldlooktoamendingtheirbills ofladingand/orotherdocumenta1ontoaccuratelyreflectwhether or not delivery is effecteduponusebythefirstpresenterofapincode.

KimE.StollFollowKimon LinkedInand at url: linkedin.com/in/kim-stoll-transporta%onlaw and on TwiHer@KimEStoll

Endnotes(*1)[2017]EWCACiv365


7. SupplyofGoodsandServicesforVessels

Whither Canadian Mari%me Law?: QuébecAppeals Court Confirms Supply of Goods andServices to a Vessel is Governed by CanadianMari%meLawandnotProvincialCivilLaw

The Court of Appeal for Québec has recentlyreleased a split 2-1 decision in the maDer ofWärtsiläCanadaInc.v.TransportDesgagnésInc.,whichtouchesdirectlyonthescopeof“Canadianmari1me law.”(*1)Itclarifiedthatprovincial lawscannotoustCanadianmari1melawinrespectofthesupplyofgoodsor services toa vessel. Themari1mebarcanbreatheasighofrelief.

The facts of the case were re la1velystraightorward. Transport Desgagnes, aCanadian shipping company, purchased a newbedplate and recondi1oned crankshal fromWärtsilä, a Dutch manufacturer, for use in itsvessel,the MVCamillaDesgagnés(the“Camilla”).Wärtsilä deliveredthe components totheCamillainHalifax in February of 2007. Twoandahalfyears later, the new crankshal suffered acatastrophic failuredueto insufficient torqueingofone oftheparts. Accordingly,theengineblewup.TransportDesgagnésandits insurers soughtdamagesofmorethan$5.6million.

The principal factual ques1on for trial waswhether the crankshal was defec1ve when itwas delivered or whether the 1ghtening issueresultedfromimpropermaintenance. However,Wärtsilä alsoreliedasix-monthlimita1onperiodin its warranty and a limita1on of liability to€50,000(approximately$79,000CDN).TransportDesgagnésarguedthatthecontractual limita1onof liability was invalid pursuant to the QuébecCivil Code. Thus, theCourthadtograpplewiththe ques1on whether the governing law wasCanadianmari1melawor Québec civillaw; and,depending on the applicable law, whetherWärtsilä wasen1tled to rely on a limita1on ofliability.

Theper1nentfactual findingwasthatthe productwastheresultofalatentdefectandnotimpropermaintenance.

Thetrial court thenheldthatthecontractwas asimplesales agreement and, therefore, was notintegrally connectedto the federalParliament’scons1tu1onal jurisdic1on over “naviga1on andshipping”. Thus, it applied the statutory law ofthe provincial Civil Code, which is within thepurviewofthe Québeclegislaturepursuanttoitscons1tu1onaljurisdic1onover“civil andpropertyrights”.

The Civil Code contains provisions requiringvendors towarrant that goods are freeoflatentdefects. TheCivil Codegoesfurthertocreateapresump1on against professional vendors thatthedefects existedat the1me of sale (inotherwords, it creates a reverse onus, such that avendor must leave posi1ve evidence in itsdefencerather thansimply pu~ngaplain1ff tothe burden of proof). In effect, the Codeex1nguishes any limita1on of liability clauseunless the vendor can rebut the presump1on.Good faith and ignorance are not defences.Effec1vely,defendants mustshowthatthebuyeror a third party caused the defect, or that thedefect only could have been discovered byscien1ficor technological discoveriesmade alerthe sale was completed. Wärtsilä argued thepoint at trial, but the judge found that thestatutory presump1ons had not been rebuDed.Thus,thePlain1ffs wereawardedthefull valueoftheirclaim.

The above-men1oned sale of goods provisionsareinstarkcontrasttothe rules underCanadianmari1me law. Under thoserules,alatentdefectmust affect an essen1al characteris1c of thegood,making it unfit for its intendeduse. Theonus is on the buyer to prove that the latentdefectwasknowntotheselleror thatthesellerwasrecklessindisregardingit.

In coming to her decision that provincial lawapplied,the trial judgewentsofaras tofindthatthere was no prac1cal necessity for a uniformfederal regime governing vendors’ obliga1ons.Rather,shefoundthatprovincial variances wouldnot adversely affect the uniformity of lawsrela1ngtonaviga1onandshipping.


Wri1ng the majority opinion for the Court ofAppeal, the Honourable Mr. Jus1ce Mainvillenoted sec1on 2 of the Federal Courts Act (*2),which outlines the bounds of “naviga1on andshipping”,andhecitedSupremeCourtofCanadaJurisprudenceonpoint.Forexample,HisHonourcitedITOv.MiidaElectronicsfortheproposi1onsthat Canadianmari1me law should be uniformacross the country and that it should beunfeDered in its governance over all maDersrela1ngtomarineandadmiraltymaDers.(*3)HisHonour also noted sec1on 22, which outlinespresump1vecases thatfall within“naviga1onandshipping”.In par1cularsec1ons 22(2)(m)and(n),which cover “goods, materials or services …suppliedtoa ship”and“anyclaimarisingoutofacontract rela1ng to the construc1on, repair orequippingofaship”.

His Honour usedharsh judicial languagefor thetrial judge’s relianceonIsenv.Simms(*4),whereit was held that the use of a bungee cord tosecurea boatonlandwas notwithinthescopeofCanadianmari1melaw. Hefoundthat thetrialjudge’s conclusions “not only runcounter totheclearlanguageofsec1on22oftheFederalCourtsAct,theyarealsoatodds withgeneral principlesof mari1me law as well as the unbrokenjurisprudence of the Supreme Court of CanadaandoftheFederal Courts”(*3).His Honourfoundthat it was “self-evident that the repair andsupply of engine parts to a ship is intrinsicallyrelated to its seaworthiness and thereforedirectly and integrally connected to naviga1onandshipping”(*5).

His Honour flatly rejected thearguments of thedissen1ngHonourableMr. Jus1ceVézina. First,he rejected any relianceon the FederalCourt’sdecision in Surplus JT v. Canada, where it hadbeen found that the contract for the sale of avessel was governed by provincial law. HisHonour dis1nguished that situa1on from thesupply ofgoods orservices toavessel insofarasthe former is not specifically enumerated insec1on22oftheFederalCourtsAct. His HonouralsonotedthattheSurplusJTcase was directlyatodds with the Supreme Court of Canada’s

decision in Antares Shipping v. The Ship‘Capricorn”et al.,whichheldthat1tleissuesdidfall withinCanadianmari1me law (*6). Finally,theHonourable Mr. Jus1ce Mainville rejectedhiscolleague’s reliance onthefact that the federalInterpreta%onActpurports togiveequal status tothe common and civil law with respect toproperty and civil rights “unless otherwiseprovided by law” (*7). He found that theapplica1on of the Civil Code was indeedotherwiseprovidedbylaw.

Accordingly, thetrial judgment wasoverturned.Damages wereawardedbasedupon the limitedvalue,as therewasnovalidreasonfor theCourttoinvalidateit.Inthatregard,theCourtfollowedthe Supreme Court of Canada’s jurisprudencefromTercon Contractorsv. Bri%shColumbia,(*8)where it was held that contractual limita1onsclausesshouldgenerallybeupheld.

The majority decision is straightorward, if notblunt: Canadian mari1me law applies to thesupply of goods andservices tovessels andit isuniformfromcoasttocoasttocoast. Themostsurprisingaspectofthiscaseis thatthedecisionwassplitandnotunanimous.

AlanS.Cofman

Endnotes (*1) 2017 QCCA 1471. We previously wroteabout the trial decision of the Superior Court,2015 QCCS5514, in theDecember 2015 edi1onofTheNavigator.(*2)R.S.C.1985,c.F-7.(*3)[1986],1S.C.R.752,citedinibid.atpara.87.(*4)2006SCC41,citedatpara.92insupranote1.(*5)Supranote1atpara.95etseq.(*6)2013FC832,citedinibidatparas.109-11.(*7)R.S.C.1985,c.I-21.(*8)2010SCC4.


8. SafetyPlansandDueDiligenceforMotorCarriers:WHENISENOUGH,ENOUGH?

Nogooddeedevergoesunpunished. Toomuchofagoodthingis,well,toomuch. Thesame canbetrueofduediligence.

Due diligence is the level of judgment, care,prudence, determina1on, and ac1vity that aperson would reasonably be expected to dounderpar1cularcircumstances. Inthe contextofthemotorcarrier industry,due diligencerequiresthecarrier totake allreasonable precau1ons andac1ons, andtodemonstrate all reasonablecareunder the par1cular circumstances, to operatecommercial motor vehicles safely, preventcollisions andhighway traffic infrac1ons, ensurecompliancewithapplicablelaws andregula1ons,and minimize the risk of property damage,personal injury and death. Motor carriers areexpected–andrequiredunder ourcommonlaw– to dowhatever is reasonably prac1cable andadvisable inthegiventhecircumstancestomeetthesegoals.

What is reasonable and advisable can bemeasured against the prevailing industrystandards and emerging trends within theindustry, and any guidelines published bygovernmental or regulatory agencies withauthority over the motor carrier. Publishedregulatory guidelines, in par1cular, must beconsidered absolute minimum requirements.Consider the following language from theCommercial Vehicle Operator’s Safety Manual,pub l i shed by the Ontar io Min i s t ry o fTransporta1on(*1):

In Ontario, there are no legalrequirements under the HighwayTrafficActtodevelopormaintainasafety program for your business.However, it is considered goodprac1cetodevelopaprogramthataddresses maDers rela1ng to thesa fe use and opera1on o fcommercialvehicles.

A safety program ensures thatmanagement has the informa1onavailabletomake properdecisionst o e s t a b l i s h s a f e wo r k i n gcondi1ons for all operators andoperator’s employees, coupledwith heightened awareness ofroad-safety compliance. A goodsafety program wi l l reduceproperty damage and, moreimportantly, prevent injuries anddeaths.Itis alsoa resource fortheem p l o y e e s , t o k n ow a n dunderstand their r ights andresponsibili1es

While the Ontario Ministry recommends theimplementa1on of an effec1ve safety programbecause it is “good prac1ce”, several otherprovinceshavegoneonestepfurthertomakeitamandatory legal requirement. This requirementis nowsoprevalentthatany carrier whofails tocomply with it before anincident occurs, wouldhavegreatdifficulty convincingMinistry officials,Crown prosecutors, theLicenceAppeal Tribunalora Courtthatithas mettheapplicable standardof due diligence in its efforts to prevent thatincidentfromoccurring.

Aneffec1vesafetyprogrammustbecustomizedtomeetalltheuniquesafety-relatedconcerns ofa given motor carrier, taking into account thetype ofequipmentbeingoperatedandthetypesof goods being hauled. It should outline thesafety prac1ces and expecta1ons for allemployees, reinforcethe requirement tocomplywithall applicable laws,andmapoutthecarrier’spolicies related to driver selec1on, orienta1on,training and refresher courses, ongoing driverevalua1on,themannerinwhichhours-of-serviceand other compliance issueswill bemonitored,andthe disciplinaryprogramthatwill apply intheevent of non-compliance. Safety programsshouldbe areferenceguide andtrainingtoolforall employees, they must be refreshed on anongoingbasistoensurethattheycon1nuetoberelevant anduptodate, andmustberigorouslyenforcedbythecarrier.


At a minimum, safety programs shouldaddressthefollowingmaDers:

- Speed limits, seat-belt use, drug and alcoholuse,defensive driving, fa1guemanagement, loadsecurity,andfuellingprocedures

- Proper records and recording of informa1on,including bills of lading, manifests, dangerous-goods documents, 1me records, drivers’ dailylogs,dailyinspec1onreportsandweighslips

- Policies indica1ng that drivers areexpectedtocomply with the law, as well as policy andprocedures re lated to dr iver t ra in ing,responsibili1es,conductanddiscipline

- Instruc1ons for the use of safety equipmentissued, includingtheuse of flagsandflares, fireex1nguishers,goggles,andhardhats

- Training for employees about safety laws andtheirapplica1on

-Anongoingprogramfor evalua1ngemployees’drivingskills

-Reten1onofcompleterecordsforeachdriver

- Policies for ensuring that drivers are properlyqualifiedforthetypeofvehiclethattheyoperate

Safety programscandomoreharmthangoodifthey are lel to gather dust on a shelf, if theyrefer to outdated regulatory provisions, if thecarrierhas noevidencethatits drivers andotheremployees have received complete, up-to-datecopiesoftheprogramandac1vely refer toit fortrainingpurposes,oriftheyfail toaddress issuesrelatedtonewroutesornewtypes ofequipmentthat thecarrier operates. Certainly ifacarrier’ssafety programmapsout asafety-relatedpolicythat is not ac1vely enforced, it couldbeusedasfurther evidence of the carrier’s negligence, forfailingtomeetaminimumstandardthatwas setbythecarrieritself.

CarrierProfiles

In the language of the OntarioHighway TrafficAct, a motor carrier is the operator of a

commercialmotor vehicle. Thattermis definedasfollows:

“operator” means the persondirectly or indirectly responsiblefor theopera1onofa commercialmotor vehicle including theconduct of thedriver of, and thecarriageofgoods or passengers, ifany, in,thevehicle orcombina1onofvehicles.

Everyoperatoris requiredtoholdasafetyfitnesscer1ficate,whichis thenusedby the Ministry togeneratea carrierprofile,se~ngouta recordoftheoperator’s convic1ons,inspec1ons,collisions,and the results of any facility audits. In verygeneral terms, each carrier is assigned a set ofthresholds basedonthe distance ittravelswithinOntario,andpoints are ascribedtoeachrecordedeventwhere thedriverorcarrierisfoundtobeatfault,orwhere thecarrier’s vehicles arefoundtobedefec1ve.

A safety ra1ng of “excellent”, “sa1sfactory”,“sa1sfactory-unaudited”, “condi1onal” or“unsa1sfactory” is assignedtothe carrier,basedon its overall performance as recorded on thecarrier profile, and this ra1ng is available forinspec1onby shippers, insurersandthegeneralpublic,atnocost.

As the carrier accumulates points, if it exceeds35%ofits assignedoverall threshold,the Ministrywill likely issue awarning leDer, and therealersanc1ons of increasing severity, from aninterview with company officers, to a “showcause” hearing where the carrier must showcause why its CVOR/safety fitness cer1ficateshouldnotbesuspendedor cancelled,andplateseizure.

When facedwith apending charge under mostprovisions of the Highway Traffic Act and itsregula1ons, and at each stage along theMinistry’s series of sanc1ons, carriersaregiventheopportunity toestablish the defenceof duediligence.Tothatend,theywill likelybe askedtopresent their safety programs, demonstrate that


their programs are up to date and properlytailoredtomeettherequirements ofthecarrier’sunique circumstances, while also mee1ng theminimum requirements mapped out in theMinistry’s published guidelines. Above all,carriers must beable to show that their safetyprograms areac1velyenforced,have beenmadeavailabletoall drivers andotheremployees,andare used as a reference tool and a trainingmanual.

UnintendedConsequences

As regulatory lawyers, we strongly encouragecarrier clients to develop and enforce robustsafety programs, and adopt “best prac1ces” intheir oversight of carrier safety andcompliancemaDers. Thiswouldincludeperiodic reviewofcarrier abstracts, safety mee1ngs and refreshertraining courses for drivers, mechanics anddispatchers.

Historically, carriers havebeen recep1ve to thedrive fora morehands-onapproachtosafetyandcompliance, recognizingthatwithout it, itwouldbe very difficult to present a due diligencedefence when the carrier is facing significantpenal1es, or worse, the loss of its safety fitnesscer1ficate.However,we arestar1ngtosee somepushback from carriers that rely exclusively, orextensively on independent contractors for theprovisionofdriverservices.

The concern is that the carrier runs the risk ofbeing perceived as the employer of itsindependent contractors, if it rigidly enforces itsownsafety program andpolicieson theowner-operators. This measure of control is a keyelementinthe commonlawrules thatourcourtsusetodeterminewhether anindividual is a trueindependentcontractor,oranemployee. Addtothis thefact thatmany carriers will providetheirowner-operators withsignificantservices,suchaslicensingand insurance,making them lookmorelikeemployeesthanwasoriginallyintended.

These concerns have grown in recent years,because of unhelpful decisions in employment-relatedcasesintheUnitedStates. The stakesarenow even higher here in Canada for all extra-

provincial carriers, that fall within the federaljurisdic1on. In the Supreme Court of Canadadecision inWilson v. Atomic Energy of CanadaLtd., an important and somewhat controversialdecision, the Court held that the “unjustdismissal”provisions oftheCanadaLabourCodethat apply tounionizedemployees alsoapply tonon-unionized employees, and asa result, non-unionized employees cannot be terminatedabsentjustcause,andadequate severancepayisnotasufficientsubs1tute.Employees whosejobsaregovernedby federallaw(suchas commercialdrivers who regularly operate across provincialboundaries or interna1onal borders) are noweffec1vely en1tledtojobsecurity for lifeunless:(i)theircontractscontaina fixedterm;or (ii)theemployer canmeeta very highthresholdtestof“justcause”fortheirdismissal.(*2)

So where does this leave the diligent carrier?Does the risk of having a court find that itsindependent contractorsare actually employeesthat cannot be terminated without causeoutweightheriskof not being abletoestablishthat it has been duly diligent on safety andcompliance maDers? Given the changinglandscapefor federally-regulatedemployers, thiswould be an excellent 1me for extra-provincialand cross-border carriers to consult with theiremployment lawyers and transport regulatoryadvisors, to ensure that their independentcontractoragreements andtheirsafetyprogramsprovidea suitableamount of protec1onagainstthelawofunintendedconsequences.

LouisAmato-Gauci

Endnotes(*1)MinistryofTransporta1on(Ontario):March2012,page7-4.Onlineatwww.mto.gov.on.ca(*2)Wilsonv.AtomicEnergyofCanadaLtd.,2016SCC29,[2016]1S.C.R.770.


http://www.mto.gov.on.ca

http://www.mto.gov.on.ca


DISCLAIMER & TERMS 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.

Editor: Rui Fernandes, Articles Copyright Fernandes Hearn LLP, 2017

Photos: Rui Fernandes, Copyright 2017,

To Unsubscribe email us at: [email protected]

FERNANDES HEARN LLP

155 University Ave. Suite 700

Toronto ON M5H 3B7

416.203.9500 (Tel.) 416.203.9444 (Fax)

CONTESTThismonthwearegivingawayacomplimentary1cketforaDendanceatourannualseminarday-Wed.January17th2018inToronto-forthefirstindividualtoemailusthenameofloca1ondepictedinphotographonpage11.Emailyouranswertoinfo@fernandeshearn.comwithasubjectline"NewsleDercontest".Firstresponsewiththecorrectanswerwins.

mailto:[email protected]




THE NAVIGATOR - fernandeshearn.com · FERNANDES HEARN LLP NEWSLETTER OCTOBER 2017 PAGE 3 Fernandes...

Documents

Transcript of THE NAVIGATOR - fernandeshearn.com · FERNANDES HEARN LLP NEWSLETTER OCTOBER 2017 PAGE 3 Fernandes...