Source: https://www.fernandeshearn.com/newsletter-2015-april-fernandes-hearn-toronto-law-firm/
Timestamp: 2019-04-21 18:57:55+00:00

Document:
Gordon Hearn and James Manson will be representing the firm at the United States Maritime Law Association Dinner in New York City on May 1st.
Rui Fernandes will be representing the firm at the Shiparrested Conference being held in Dubai between May 2nd and 5th. He will also be giving private seminars to clients in Dubai.
Rui Fernandes will be doing a presentation on the legal implications of sleep apnea in the trucking industry at the Northbridge Seminar on Sleep Apnea on May 13th in Toronto.
Rui Fernandes, Gordon Hearn, Kim Stoll and Louis Amato-Gauci will be representing the firm at the Transportation Lawyers’ Association / Canadian Transport Lawyers Association annual and semi-annual meetings in Scottsdale Arizona between May 13th to 17th. Gordon Hearn will be moderating a panel on “Food For Thought: Safety and Security Issues in the Transportation of Goods.” Rui Fernandes will be a speaker on the Multi Modal Panel.
Kim Stoll and James Manson will be representing the firm at the Canadian Board of Marine Underwriters Spring Conference being held May 20-22 in St. John’s, Newfoundland.
Obstructive sleep apnea (“OSA”) is caused by the obstruction of the upper airway due to a collapse of the soft tissue at the back of the throat during sleep. It is characterized by repetitive pauses in breathing during sleep, despite the effort to breathe, and is usually associated with a reduction in blood oxygen saturation. These pauses during breathing, called “apneas” (literally, “without breath”), typically last 20 to 40 seconds. The most serious consequence of untreated OSA is to the heart. Sleep apnea sufferers have a 30% higher risk of heart attack or death than those unaffected. They have a four times greater risk of stroke. It is a disorder that can cause excessive daytime sleepiness. Falling asleep during the operation of rail locomotives, vessels, aircraft and trucks poses a serious risk to individuals and to the public. The Canadian and American legislators are looking at this emerging issue with a view to increasing the regulatory framework to address the problem.
For a comprehensive review of sleep apnea in the transportation industry from a legal perspective see the Fernandes Hearn LLP newsletters of November 2013, December 2013 and January 2014.
In October 2013 U.S. legislators passed a bill that requires the Federal Motor Carrier Safety Administration (“FMCSA”) to use its formal rule-making process to deal with any regulation concerning sleep apnea for the trucking industry. The 2013 legislation requiring that any new OSA requirements be subject to formal rule-making was strongly supported by the trucking industry. It came in response to FMCSA’s stated intention at the time to publish new formal guidance to medical examiners on how to handle suspected OSA cases. The main point of contention: FMCSA’s anticipated recommendation that commercial drivers be screened for OSA if they have a Body Mass Index (BMI) greater than 35. This was estimated to be as much as a third of the commercial driver population with costs for screening and treatment reaching as much as $1 billion a year by one estimate. Industry groups said a change of this magnitude required a formal rule-making proceeding with full opportunity of public review and comment and cost analysis.
The FMCSA has indicated that it is in the process of drafting a formal rule. At this time, it has not issued a formal rule.
However, in January 2015 the FMCSA issued a guidance bulletin to certified medical examiners and medical trainers on the issue of OSA. FMCSA’s guidance on sleep apnea dates back to 2000. The agency states that the recent bulletin serves as a “reminder” to medical examiners. The bulletin urges medical examiners to use their best judgment in deciding whether a trucker should be tested for OSA as a matter of highway safety. In the U.S., The National Registry of Certified Medical Examiners went live in May 2014. Its implementation came from a final rule that requires all commercial drivers to obtain their physicals and driver medical cards from an FMCSA-certified examiner.
The January 2015 guidance bulletin came amidst ongoing concerns by many in the industry that some medical examiners were overzealous in referring drivers for OSA testing and treatment. There have also been complaints that certified examiner instruction courses used since May 2014 for certifying examiners go beyond FMCSA’s regulations and guidance in advising examiners on how to respond when OSA is suspected.
The bulletin does not carry the legal weight of a regulation or even a formal advisory or interpretation. Nonetheless, missives of this sort must be treated seriously by medical practitioners, if for no other reason than they may be used as evidence of a de facto standard in negligence suits.
While the FMCSA regulations state that a person is physically qualified to drive a commercial motor vehicle if that person “has no established medical history or clinical diagnosis of respiratory dysfunction likely to interfere with his/her ability to control and drive a commercial motor vehicle safely,” trucking organizations in the U.S.A. have recently begun to see an increase in medical examiners refusing to issue certification if a driver exhibits only a few of the indicators of OSA. One of the more commonly used medical exams requires OSA screening if the driver gives an affirmative answer to just three of eight questions. The final three questions being: (1) Is the patient 50 years or older? (2) Is the patient’s neck circumference more than 15.7 inches? and (3) Is the patient a male?
Trucking companies in the U.S.A. are also finding that some examiners are issuing provisional certifications and requiring drivers to undergo costly sleep studies if they have certain “risk factors” for OSA, which has further increased costs for trucking companies.
What is obvious is that the issues involved are not simple. Is there a significant causal connection between sleep apnea and trucking accidents? While there is medical evidence about the health effects of sleep apnea, increased risk of heart attacks and stroke, there are few studies about its affect on trucking accidents. What type of accidents? Are only long haul drivers affected? Are the statistics for sleep apnea in the U.S.A. the same in Canada? More studies are needed.
The Toronto Rehab Foundation (the “Foundation”) is preparing to do a study on sleep apnea in the trucking industry in the coming two years. The Foundation is presently in the process of raising funds for conducting the study. A number of organizations and insurers have already stepped up to the plate with generous donations. Included among the contributors are Northbridge Insurance, Intact Insurance, Old Republic Insurance, and the Canadian Trucking Alliance. The study will be conducted on an estimated 1000 drivers. Participants will be advised of the results of the study, but the information gathered will not be supplied to their employers, insurers or the government authorities. Participants will be advised if they have sleep apnea for which they should seek medical help. The study will track the participant’s driving history (for accidents) before the testing, after the testing and treatment. The study will attempt to demonstrate the extent of the problem in Canada and the correlation to accidents. A formal rule is a likely to result from the FMCSA in the U.S. and such a rule will impact Canadian drivers going into the U.S. Canadian legislation will surely follow. Trucking companies should take steps today to meet this challenge. The results of the study will assist everyone in the dialogue to come and will be influential in assisting regulators in how much regulation is actually needed. For more information on the study or to make a donation, please contact Rui Fernandes, who is assisting the Foundation with the study.
This article will address some of the emerging issues in the private and commercial operation of Unmanned Air Vehicles (UAVs) or Unmanned Aircraft Systems (UAS’s) – often referred to as “drones” – for a variety of private and commercial uses.
“Drones” refers to a number of different UAVs and UASs that vary in size, shape, form, speed, and a whole host of other attributes. There are drones that are jet powered all the way to drones that are solar powered, which are very large but extremely light and can fly for months and years at a time at extremely high altitudes. There are drones that can literally fit into the trunk of a car or into a backpack or even the palm of a hand. Some of these drones can weigh 10 pounds, 5 pounds, less than 1 pound, or even a few ounces. There are also drones that are basically like balloons that sit up in the sky in one place and can observe enormous swaths of territory for long periods of time.
Drones have become increasingly powerful with the ability to provide sharper video images at greater distances and with infrared and thermal imaging and listening capability. The combination of drone technology and facial recognition programs means that drones could be used to continuously track individuals when “in public” and when “in private”.
1. Sense and Avoid Capability: What requirements should be imposed to ensure that the system can sense and avoid other aircraft?
2. Interruption in Connection: Minimum performance requirements must be set to ensure communication and control with the system.
3. Visual Flight Rules: Should the system be restricted to VFR airspace?
4. Certification: What certification should be required for the operator?
5. Airworthiness: Should systems require airworthiness standards?
6. Interaction with Air Traffic Control?
8. Insurance: Should operators be required to carry liability insurance? Companies and individuals use of drones may not be adequately insured for liabilities arising out of their use. Many policies contain “aircraft” exclusions and other language that can impair coverage.
The Regulations state that no person shall operate an unmanned air vehicle in flight except in accordance with a Special Flight Operation Certificate (“SFOC”). If you are using a UAV recreationally however, and the UAV weighs less than 35 kilograms, no SFOC is needed. However, compliance with the federal and provincial legislation including the Criminal Code and other laws including municipal by-laws is required.
There are two SFOC application processes available for commercial use of a UAV: one is the full SFOC application and the other is a simplified version. The simplified application is available to those who wish to fly UAVs that are remote-controlled with a maximum takeoff weight that is under 35 Kg and operated within visual range below 400 ft. above ground.
Initially, the SFOC is required for each flight of a UAV. Once an applicant has demonstrated that the operations can be conducted in a safe manner, Transport Canada may grant long-term approvals. In addition, Transport Canada may expedite SFOC applications after the initial application has been successful, especially if the missions are essentially the same. For example, if the UAV system and the pilot or operator are the same, Transport Canada will assess only the suitability of the area used for the operation.
SFOC applicants must provide details regarding the type and purpose of the operation, description of the aircraft, dates and times of the proposed flight, security plans and emergency contingency plans, and a detailed plan describing how the operation will be carried out including the altitude and routes, the location of any obstacles, and the exact boundaries of the area for the operation.
The primary concern of Transport Canada is safety, so the applicant should strive to provide a comprehensive application appropriate to the scope of the operation and the complexity of the UAV system. Generally, Transport Canada requires that UAVs operating in Canada meet levels of safety that are equivalent to manned aircraft.
An application must be received by the appropriate Transport Canada regional office at least 20 working days prior to the date of the proposed operation or by a date mutually agreed upon by the applicant and Transport Canada.
Once a SFOC is issued, the certificate holder must, among other things, carry adequate liability insurance, report any incidents involving injuries or violations and continue to comply with the Canadian Aviation Regulations.
Recently, the Honourable Lisa Raitt, Minister of Transport, launched the Government of Canada’s safety awareness campaign for UAVs. The goal of the campaign is to help ensure that recreational and commercial users of UAVs understand their responsibilities and how to comply with Canada’s safety laws. On November 5, 2014 Transport Canada introduced two exemptions to simplify small UAV operations. The new exemptions permit the use of UAVs without a Special Flight Operation Certificate (“SFOC”) if the UAV is under 2 kilograms and certain operations involving UAVs under 25 kilograms. These exemptions apply to both commercial and recreational UAV use.
The collection of personal information by a UAV operator in the course of commercial activity is likely to be regulated under the Personal Information Protection and Electronic Documents Act (PIPEDA). In this context, “the organization may collect, use or disclose personal information only for purposes that a reasonable person would consider are appropriate in the circumstances.” [s. 5(3) Personal Information Protection and Electronic Documents Act (S.C. 2000, c. 5)] The use of model aircraft for recreational purposes does not require a special flight operation certificate. In terms of privacy issues, violations of privacy between individuals are likely to be addressed in Ontario on an ad hoc basis by the courts, perhaps under the new tort of intrusion on seclusion. There is no statutory tort of invasion of privacy in Ontario, however, although a common law tort of intrusion upon seclusion has been recognized as a cause of action by the Ontario Court of Appeal. See Jones v. Tsige, 2012 ONCA 32.
The Federal Aviation Administration (FAA) regulates the use of UAVs as a result of the National Transportation Safety Board’s (NTSB) decision in Huerta v. Pirker. In 2013, a $10,000 civil penalty was assessed on the unlicensed operator of a small drone used to take photographs of the University of Virginia. The drone was used for compensation for the operator. The FAA fined the pilot for operating “an aircraft in a careless or reckless manner so as to endanger the life or property of another” under 14 C.F.R. § 91.13. The NTSB noted that the FAA had specifically excluded some aircraft – such as balloons, kites, rockets, and moored balloons – but not UAVs from § 91.13. Therefore the drone was an “aircraft” for the purposes of the regulating legislation.
The Federal Aviation Administration Modernization and Reform Act of 2012 (“Reform Act”) was the U.S.A.’s reaction to the anticipated proliferation of unmanned aircraft. The goal of the Reform Act was to develop a comprehensive regulatory scheme to integrate commercial unmanned aircraft systems into the National Airspace System. The FAA was tasked with designing a system for granting Special Airworthiness Certification. The approval process was contain provisions that would require applicants to use certain UAV designs and safety equipment, demonstrate training and qualifications for UAV pilots, and comply with standards for commercial operation of UAVs.
Even without the regulatory scheme in place, the FAA has initiated enforcement proceedings for unauthorized use of UAVs. It has issued cease and desist letters to unauthorized UAV operators. The FAA generally permits recreational use (with certain limitations) while forbidding commercial use. So a hobbyist might be permitted to fly a UAV over his property for the fun of; however, the use of the same UAV over the same property to make a commercial video would be prohibited.
Recently, the FAA has implemented an interim policy that allows commercial operators to apply for an exemption pursuant to Section 333 of the Reform Act. In making this determination, the FAA must assess whether the UAV will endanger the public or threaten national security. This requires the FAA to evaluate (1) the UAV’s size, weight, speed, and operational capability; (2) whether the UAV will be operated in close proximity to airports and populated areas; and (3) whether the UAV will be operated within visual line of sight of the operator. See Section 333(a)(1). If it concludes that the UAV poses no hazard, the FAA can issue an exemption permitting specified commercial use without an airworthiness certificate.
The FAA granted the first exemptions in September 2014 to six aerial photo and video production companies associated with the Motion Picture Association of America. The companies promised that the UAV operators would hold private pilot certificates, keep the UAV within line of sight, and restrict flights to the “sterile area” on the film production set. The FAA additionally required the applicants to inspect the UAV before each flight and prohibited night operations.
The process under a section 333 application can take months. It requires a detailed petition where the petitioner must describe the nature of exemption sought, explain why granting the exemption would be in the public interest, and supply a summary that the FAA will publish in the Federal Register. The FAA then allows public comment on the petition.
Use of private UAV must also comply with all applicable state laws and regulations. For example, in 2013, Texas enacted a law setting parameters on the use of UAV for the purpose of taking pictures of persons or property. The statute makes use of UAV for purposes of capturing images permissible for a number of applications including taking pictures of public property and persons on such property and use by a number of specified industries including electric and gas utilities, licensed realtors, pipeline operators and port authorities.
The regime in Canada is much more liberal in the use of drones. Many companies are becoming aware of this and coming to Canada to test their systems.
Unruly passengers are a very small minority, but unacceptable behavior on an aircraft can have serious consequences for the safety of all on board. Such passengers inconvenience other passengers and their behaviour can lead to significant operational disruption and cost for airlines. However, due to loopholes in existing laws, there are many cases where those who commit serious offenses are not punished.
Ms Cho is the daughter of Korean Air’s chief executive and was, herself, a senior executive and the head of the airline’s in-flight services. In December, shortly after boarding a flight from New York, Ms Cho flew into a rage after she was served some macadamia nuts in a bag rather than on a plate.
Whilst the plane was on the runway, she ordered the flight crew to return to the terminal to eject the head of the cabin crew. Ms Cho has since been found guilty of violating aviation laws by a South Korean court and sentenced to a year in prison. The court ruled that Ms Cho was guilty of forcing the plane to change its route, obstructing the flight’s captain in the performance of his duties, forcing a senior crew member off the plane and assaulting another crew member who had served her the nuts. Ms Cho has appealed the court ruling.
In April the International Civil Aviation Organization (ICAO) officially adopted a Protocol to amend the Tokyo Convention regarding offenses committed on aircraft.(*2) The Montreal Protocol 2014 makes key changes to improve airlines’ ability to deal with unruly passenger incidents and enhance aviation security. The Protocol, which will come into force once 22 states ratify it.
The Tokyo Convention (the “Convention”), which came into effect in 1969, allows the captain to take reasonable measures against an unruly passenger, including restraint, to (1) protect the safety of the aircraft, passengers, and crew, (2) maintain good order and discipline on board, and (3) enable the captain to deliver the passenger to law enforcement. Article 10 of the Convention provides immunity from liability in any proceedings for actions taken in accordance with its provisions.
The 2014 Protocol makes three key improvements to the Tokyo Convention, including the clarification of the definition of “unruly behavior,” the extension of jurisdiction over in-flight incidents, and the recovery of costs stemming from unruly passenger behavior.
Article VIII of the new Protocol eliminates the need for a captain to have reasonable grounds to believe that an unruly passenger is committing “a serious offence according to the penal law of the State of registration of the aircraft” in order to justify delivery to law enforcement under Article 9. All that is required under the Protocol is reasonable grounds to believe a “serious offence” has been committed.
Protocol Article IV also extends the jurisdiction over the unruly passenger’s offence to the destination country of the flight, in addition to the country of aircraft registration. This provision will likely close a loophole in the Tokyo Convention that allowed many serious offenses to escape legal action.
(*2) Protocol to Amend the Convention on Offences and Certain Other Acts Committed on Board Aircraft, done at Montréal on 4 April 2014 (Doc 10034).
In Francois Proulx v Canadian Cove Inc., Terry Smith, 2042098 Ontario Ltd o/a Jim Earle Marine Group and Jim Earle, 2014 ONSC 3493, the Ontario Superior Court of Justice ordered that the principal of a corporation was personally liable for damages for breach of contract and was also ordered to pay $25,000 in respect of punitive damages.
The plaintiff brought an action against the defendants for failure to close a contract for purchase of a 2002 56 Sunseeker Predator which was to be sold by the defendant by Jim Earle or Jim Earle Marine Group (“the Earle defendants”) in August of 2010. The damages sought were made up of the difference between the purchase price of the Sunseeker and the cost of purchasing a replacement as well as punitive and exemplary damages. The co-defendants, Terry Smith and Canadian Cove Inc. were released from the action.
The case is interesting because poor drafting of contracts is not uncommon when used in seemingly straightforward matters. The danger and associated lesson of not “dotting the “i”s and crossing the “t”s was well learnt by the individual defendant in this matter. It is also interesting to note that the Court did not actually consider whether the “corporate entity” was actually incorporated.
The plaintiff was an avid boater and had previously owned six powerboats. He had been interested in purchasing a Sunseeker, which was a European made luxury boat as featured in four James Bond films. The plaintiff had attended various boat shows to specifically see Sunseekers and even had an alert on the YachtWorld website to advise him of Sunseekers between 50 to 60 feet in length that became available for purchase. On July 27, 2010, the plaintiff received a YachtWorld alert regarding a 56-foot Sunseeker Predator for sale. He contacted the associated broker, Terry Smith of Canadian Cove Inc. The plaintiff also wanted to trade his 42 foot Cruisers 4270 yacht (the trade-in vessel). A deal was reached between the plaintiff and Mr. Smith for $300,000 cash plus the trade-in vessel valued at $199,000. Mr. Smith forwarded an Offer to Purchase was forwarded to the plaintiff with conditions and including a guarantee from the vendor that the Sunseeker was “free and clear of all liens and encumbrances”. An inspection by the plaintiff was required by August 4, 2010 and he was to provide an acknowledgement of acceptance, as appropriate. The trade-in vessel was subject to the same inspection requirements. The Offer to Purchase was signed on July 29, 2010 and the closing date was identified as August 16, 2010.
SUBJECT TO THE BUYER BEING SATISFIED WITH INSPECTION, SEA TRIAL, SURVEY HULL AND MECHANICAL AND THE VENDOR HAS THE SAME RIGHTS WITH THE TRADE VESSEL AND PROVIDING A SIGNED ACCEPTANCE OF VESSEL TO BE COMPLETED FOR EACH VESSEL ON OR BEFORE AUG. 16, 2010.
THE INSPECTION AND SEA TRIAL OF THE SUNSEEKER WILL BE AUGUST 4, 2010, IF SATISFACTORY THE CRUISERS WILL BE INSPECTED BEFORE AUG 9, 2010″.
The plaintiff completed his inspection of the Sunseeker on August 4, 2010 and provided the acknowledgment of acceptance along with the required deposit.
The defendant, Mr. Earle, however, did not conduct a vendor’s inspection or provide an acknowledgment of acceptance as per the Offer to Purchase. On August 6, 2010, the plaintiff received an email from Mr. Smith indicating that Mr. Earle did not wish to pursue with the sale of the Sunseeker as he was unable to obtain financing. The plaintiff, however, was ready, willing and able to close the deal and had commenced his journey with the trade-in vessel from Trois Rivieres, Quebec to Kingston, Ontario to close the deal. However, Mr. Earle sold the Sunseeker to another purchaser for a better price on August 6, 2010 prior to advising the plaintiff that the deal would not close.
The plaintiff alleged that the defendants had breached the contract by failing to conduct inspection and failing to close the purchase as agreed, due to financing difficulties. The plaintiff sought damages arising from the sale of the Sunseeker to a third party purchaser. The plaintiff also alleged that all contracts involved were signed by “Jim Earle” and not by “Jim Earle Marine Group” and that Mr. Earle was personally liable for damages or, in the alternative, that the corporate veil should be “pierced”, or disregarded, so that he, Jim Earle, would be personally liable for the failure to complete the transaction.
The defendants, however, stated that the plaintiff’s trade-in vessel was actually valued at $115,885.00, being much less than the $199,000.00 stated in the Offer to Purchase. Further the Earle defendants suggested that there was an issue with the number of hours logged on the trade-in vessel’s engine. The Earle defendants maintained that Jim Earle decided not to complete the sale without conducting an on site inspection and rejected the trade-in vessel. Earle, it was argued, exercised his rights pursuant to the Offer to Purchase and he communicated this to Terry Smith on August 6, 2010. The Earle defendants also took the position that there was no binding enforceable contract, that the defendants were entitled to reject the Offer thereby ending the contract. Therefore, there was no reason to pierce the corporate veil or to hold Jim Earle personally liable in any event.
At trial, the Court found that the Sunseeker was represented in the Offer to Purchase to be located in “fresh water Great Lakes”, a representation that the plaintiff had relied upon. In fact, the Sunseeker had spent its whole life in salt water, which fact was never provided to the plaintiff. The plaintiff had accepted and signed the Offer to Purchase and returned it to Mr. Smith. An inspection of the Sunseeker took place with both Jim Earle and Terry Smith in attendance. The sea trial was conducted with Mr. Smith and Mr. Earle and there were discussion about both vessels. The trade-in vessel was accepted as being in “impeccable condition” but the Sunseeker required certain repairs. Mr. Smith prepared an Acknowledgment of Acceptance of the Sunseeker adding, in his own handwriting, all of the repairs to be done, that vendor had accepted the repair requirements and that such repairs would be completed prior to the sale.
The Sunseeker was to be delivered to Kingston on August 10, 2014, a week earlier than the original date of August 16, 2014. Mr. Earle also advised that he had made arrangements to fly in on August 6, 2010 to do a quick inspection of the trade-in vessel. The Court accepted the plaintiff’s evidence that there was no discussion regarding financing. On August 6, 2010, Mr. Smith emailed the plaintiff at 9:59 a.m. advising that there was a plane ready for noon, but that Mr. Earle’s financer had advised that he would not accept the trade-in vessel at a value of $199,000.00 for the trade-in vessel. Instead, only a value of $115,885 was acceptable with the balance of the deal in cash. The plaintiff understood this explanation to mean that Mr. Earle could not arrange the credit and there had indeed been financing of the boat, even though the Offer to Purchase indicated that the vessel was “free and clear of all liens and encumbrances”.
The plaintiff offered another $10,000.00 on August 7 to assist Mr. Earle with secondary financing. On August 8, 2010, the plaintiff emailed Terry Smith indicating that he would be in Brockville, Ontario for the inspection of the trade-in vessel on August 9 and sent a further email confirming his attendance in Kingston on August 10, 2010 at 5:00 p.m. to provide with the final payment and to take possession of the Sunseeker. He also asked for banking co‑ordinates and the Sunseeker’s serial number for insurance purposes. Mr. Earle did not attend in Kingston on August 10, 2010; however, the plaintiff was ready, willing and able to close the deal. Unbeknownst to the plaintiff, however, Mr. Earle had sold the Sunseeker on August 6th to another purchaser for $460,000.00 plus GST in an all cash deal. The plaintiff thereafter did receive a “rejection of trade-in vessel” from Mr. Earle on August 10, 2010, which had been signed on August 8 after the sale of the Sunseeker to a third party. The deposit cheque was also returned. It was also noted that Mr. Smith emailed the plaintiff on August 6, 2010 that Mr. Earle was working on a solution, which was in direct contradiction to earlier emails and even though the Sunseeker was sold that same day.
The plaintiff was also unaware that the Sunseeker was apparently owned in the name of Jim Earle’s company and not Jim Earle personally. Mr. Earle had signed the Offer to Purchase without indicating that he was signing on behalf of a corporate entity.
The Court was not impressed with the failure of Mr. Earle to earlier divulge the sale on August 6 to a third party, his misrepresentation of the Sunseeker’s history in salt water and the fact of that the Sunseeker had been subject to financing.
The Court accepted evidence that the trade-in value of the trade-in vessel was $199,000.00, which was supported by the fact that the plaintiff was able to sell the trade-in vessel eventually for $200,000.00. The plaintiff also attempted to find comparable Sunseekers to mitigate his loss, but found only one that was far more expensive than he could afford. The subject Sunseeker eventually was put up for sale for $679,000.00, but the plaintiff was no longer interested as the owner was apparently linked to mafia and the Sunseeker had become a symbol of “corruption and excess”.
The Earle defendants took the position that the Offer to Purchase was not a contract, but, rather, an “intent to purchase”. Jim Earle testified that the Offer to Purchase should have included a clause to permit the acceptance or rejection of the sale and a provision that allowed for the recission of the agreement if the trade-in equipment was found to be improperly appraised or defective or, conversely, in an acceptable condition. However, as the Court pointed out, this provision was not contained in the Offer to Purchase or the Acknowledgement of Acceptance nor was it an issue between Mr. Earle and Mr. Smith, who had been responsible for drafting the document and was no longer a party to the action. The Offer to Purchase agreement included only the conditions in paragraph 4, as above.
With regard to the actual Offer to Purchase, the plaintiff was only ever aware that the vendor was “J.E.” According to Mr. Smith, the vendor in such transactions is never declared until the contract is signed.
The Court found that the plaintiff had agreed to pay $499,000.00 for the Sunseeker and that the Earle defendants had agreed to accept $300,000.00 cash plus the trade-in vessel at an assigned value of $199,000.00. With taxes, the total amount was $538,000. The broker, Mr. Smith, sent the Offer to Purchase to the plaintiff, which he signed and returned to the broker. It was accepted by the “vendor”, who signed it the same day. The Agreement of Purchase and Sale was subject to the buyer (the plaintiff) being satisfied with “inspection, sea trial, survey haul and mechanical of vessel to be completed for each vessel on or before August 15, 2010. The inspection and sea trial of the Sunseeker will be August 4, 2010, if satisfactory, the Cruisers will be inspected before August 9, 2010”, following which each party would provide a written Acknowledgement of Acceptance of the vessel. The plaintiff’s inspection and sea trial revealed minor deficiencies, which were to be corrected on the Sunseeker. The Plaintiff signed the Acknowledgement of Acceptance on August 4, 2010. That Acceptance was made subject to conditions including repairs and a number of deficiencies in the Sunseeker and reiterated the contractual provision for the approval of the trade-in the vessel. The plaintiff provided the deposit cheque after the inspection of the Sunseeker.
Therefore, there was an offer, acceptance and consideration as required for any valid contract and, therefore, it was a binding contract.
The Court rejected the Earle defendants’ argument that, if the conditions regarding (1) inspection of the trade‑in vessel and (2) the signing of the Acknowledgment of Acceptance by August 9th were not completed, then the conditions were not satisfied and the contract was at an end. The Court found that the failure to conduct the inspection had nothing to do with the actual inspection of the trade-in vessel but rather was due to financing issues. It was only after learning that the trade-in would not be accepted, that the defendants did not proceed to satisfy the contractual conditions of inspection but terminated the contract and sold the Sunseeker to a third party.
The contract also did not contain a condition that the purchase and sale was subject to the vendor’s financing requirements, which would have, when financing failed, allowed Mr. Earle to terminate the contract. The Court further confirmed that provisions from another “standard” contract typically used by one party could not be verbally imported into this contract.
The Earle defendants also argued that the contract was not valid due to uncertainty regarding the vendor’s identity that such uncertainty rendered the contract unenforceable. However, the broker, Mr. Smith, had testified that all brokered marine contracts of Purchase and Sale are completed in that fashion and, if the defendants’ argument was accepted, then all such brokered marine contracts were void for uncertainty, which was not an acceptable conclusion.
(3) Where there is an available market for the goods in question, the measure of damages is, in the absence of evidence to the contrary, to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or, if no time was fixed then at the time of their refusal to deliver….
The Court further found that the plaintiff had taken reasonable steps to mitigate his damages by attempting to locate a comparable Sunseeker on the market and had also sold his trade-in vessel in order to ensure that he could enter into an all cash deal.
With regard to punitive damages, the plaintiff sought an amount of $50,000.00 claiming that the Earle defendants had acted in a high‑handed manner in terminating the contract for Mr. Earle’s own economic advantage and then selling the Sunseeker to another party for an all cash deal, before the plaintiff had been advised that the contract had been terminated.
The Court revisited Whiten v. Pilot Insurance  1 S.C.R. 595. Punitive damages are awarded against a defendant only in exceptional circumstances “for malicious, oppressive and high‑handed” misconduct that “offends the court’s sense of decency”. Punitive damages are also recoverable in a breach of contract case where the defendant’s conduct gives rise to an independent “actionable wrong”, which may be found in a breach of a distinct and separate contractual provision or other duties such as a fiduciary obligation. Given the (1) false representations regarding the vessel being free from liens and encumbrances; (2) false representations in the advertisement that the Sunseeker had been “located” in fresh water intimating that it had been used in fresh water (which it had not); and (3) defendants’ conduct in putting an end to the contract and then reselling to a third party before even advising the plaintiff, the Court found that such conduct was sufficiently malicious, oppressive and high‑handed and would offend the court’s sense of decency. The Court awarded $25,000.00 in punitive damages.
The plaintiff also submitted that Jim Earle should be made personally responsible for the breach of contract or, in the alternative, if the corporation was found to be liable, then the corporate veil should be lifted to make Jim Earle and the corporation both responsible for the breach of contract and the damages flowing therefrom. The Court found that the contractual documentation was signed by Jim Earle personally using “J.E.”, his initials, with no indication that he was signing on behalf of a corporation. There was no evidence that any documents indicating the “Jim Earle Marine Group” rather than Jim Earle personally were ever given to the plaintiff (*2). Further, the plaintiff was never apprised that the owner of the Sunseeker was Jim Earle Marine Group.
The Court found that there was insufficient or no evidence that the company was incorporated for “illegal, fraudulent or improper purpose” or that Jim Earle expressly directed that a “wrongful thing be done”. There was also no evidence to conclude that the corporate structure was a sham from the outset or an afterthought to a bad deal.
However, the Court found that Jim Earle did not distinguish between the corporate identity and his own personal identity and always signed for the corporation using his personal initials and without indicating that he was signing for the “Jim Earle Marine Group”. Jim Earle simply ignored a separate legal corporate structure and treated both the corporation and himself as one. The Court found that, by signing in his personal capacity, Jim Earle made himself personally liable.
In such cases, a court will look to the surrounding circumstances of the contract to determine the intention of the parties. The fact that the agent’s principal is disclosed does not preclude a finding of personal liability. The Court concluded the Mr. Earle made himself personally liable in signing all documentation using his own initials without indicating that he was signing on behalf of the Jim Earle Marine Group. Jim Earle and the Jim Earle Marine Group were therefore jointly and severally liable.
Unfortunately for Jim Earle, he and Mr. Smith underestimated the importance of the paperwork. Contracts are not something to be sloppily put together. No doubt, such paperwork had been used without incident in many past dealings. The suggestion by the Earle defendants that their own deficient drafting rendered the terms and parties “uncertain” is particularly disconcerting. Therefore, we urge anyone entering into any type of contract and, in particular, yacht brokers, vendors and purchasers (given the industry standard of using initials in contractual documentation), to be sure to enter into properly drafted and vetted contracts to ensure that interests are adequately protected.
(*1) This is in keeping also with the recent Supreme Court of Canada case in Bhasin v Hrynew, 2014 SCC 71, which specifically discusses the general duty of honesty in the performance of a contract.
(*2) Again, there is no evidence that “Jim Earle Marine Group” (which had no “Inc.” or “Ltd.” in its name) was a corporate entity. The Court did not canvass this aspect at all in the judgment.
On June 8, 2015, the limits of liability of ship owners, operators and insurers, among others, for maritime incidents under the Convention on Limitation of Liability for Maritime Claims (“LLMC”)(*1) will increase by 51%.
Under the 1996 Protocol, the limit of liability for loss of life or personal injury claims on ships not exceeding 2,000 gross tonnage was 2 million Special Drawing Rights (“SDR”). SDRs are a monetary unit of measurement that must be converted into US dollars based on an exchange rate. For property claims, the limit of liability was 1 million SDR for ships not exceeding 2,000 gross tonnage. The limits were incrementally increased for larger ships. (*6) As of April 23, 2015, 1 SDR is equal to $1.38 USD as noted on the International Monetary Fund website.
The new limits of liability under the Amendment will automatically come into force in Canada on June 8, 2015 under the tacit acceptance regime. Under section 31 of the Maritime Liability Act, the government may also make a regulation in the future, which would explicitly implement the changes.
Ship owners and insurers should consider these increases when reviewing their policies or managing a maritime claim.
(*1) Convention on Limitation of Liability for Maritime Claims, 1976, 19 November 1976 (London).
(*3) Supra note 1, Article 2.
(*4) Supra note 1, Article 4.
(*5) Protocol of 1996 to amend the Convention on Limitation of Liability for Maritime Claims of 19 November 1976, 2 May 1996 (London), Article 21.
(*8) G. Main, “Increased liability limits for maritime claims adopted” (2012) Holman Fenwick Willan LLP: London.
(*9) Adoption of Amendments of the Limitation Amounts in the Protocol of 1996 to the Convention on Limitation of Liability for Maritime Claims, 1976, 19 April 2012 (Resolution LEG.5(99)).
Recently, in A&A Trading Ltd. v. Dil’s Trucking Inc., 2015 ONSC 1887 (S.C.J.) [“A&A”], Justice Bielby of the Ontario Superior Court of Justice held that the defendant carrier was liable for the full value of a shipment, and was not entitled to limit its liability, even though the value of the shipment was not declared on the particular bill of lading.
Rather, the plaintiff’s established practice was to attach the invoice for the shipment to the bill of lading and inscribe the invoice number on the bill of lading. The defendant was found to have accepted this method, and by doing so was taken to have knowledge of the value of the shipment. Judgment swiftly followed in the plaintiff’s favour, for over $263,000. It is unclear whether this decision is under appeal.
This decision may have important implications for the trucking industry in Ontario and, by extension, the rest of Canada. It suggests that the regulatory regime in Canada may not always be uniform when it comes to limiting a carrier’s liability for shipments lost or damaged while in transit. In most of the other provinces, the regime continues to be that, if a shipper desires to declare a value of a shipment, (thereby removing the regulatory limitation of liability for the carrier, usually to $4.41 per kilogram, that would apply in the absence of such a declaration), it must do so “on the face of the bill of lading”. However, in Ontario, since 2006, the operative regulation provides that the value must be declared “on the face of the contract of carriage”.
The obvious questions, which took centre stage in the A&A decision, are “what is a ‘contract of carriage’? Is it only the bill of lading, or can it be formed by other documents as well? Can it also include oral representations?” The Court in A&A has responded by stating that, at least in that case, an invoice attached to the bill of lading did form part of the contract of carriage, as did a certain oral representation made by the defendant to the plaintiff concerning the availability of insurance.
Arguably, Justice Bielby’s decision would not have been correct elsewhere, since the requisite declaration of value was admittedly not “on the face of the bill of lading”. However, the different wording of the regulation in Ontario appears to have given the Court the leeway it needed to rule for the plaintiff in this case.
Some might view this decision as reasonable, given the current state of the law in Ontario and also the practical reality that contracts for carriage are increasingly being arranged, confirmed and dealt with (including with respect to shipment value declarations) by electronic means. Accordingly, it may make sense to allow for increased flexibility.
Others, however, will lament what they see as a frustrating increase in uncertainty surrounding when, and how, a carrier can now successfully limit its liability. Some obvious next questions, of course, are “how far will this go? Exactly what document(s) can or will now form part of a contract of carriage? Do e-mails, text messages, or other shipping documents, etc., count? What about cases where a carrier is carrying goods to the United States and, as required, the driver is in possession of an invoice as part of a requisite package of documents for customs purposes? Do those documents form part of the contract of carriage?” Of course, these questions will have to be decided in their own time, on particular facts.
The bottom line is that the trucking industry should take note of two important points highlighted by this decision. The first is that it should in no circumstances be assumed that a particular bill of lading represents the entire contract of carriage between a shipper and a carrier. Rather, the courts will likely look to the other documents in existence in a given case, and any oral representations, and determine whether they can reasonably be found to form part of the contract of carriage in the circumstances.
The second point is that, in Ontario, a carrier should never assume, simply because the value of a shipment is not declared on a bill of lading, that it will be automatically entitled to limit liability in the event of a loss, as it might in other provinces.
The plaintiff was in the import/export business. In April 2004, the plaintiff contacted the defendant corporation seeking a quote for the delivery of a consignment of goods from Toronto to Calgary. The plaintiff advised the defendant that the goods had a value of between $250,000 and $263,000, and asked if the defendant had sufficient insurance. The defendant confirmed that he did, and so the plaintiff hired the defendant to deliver the consignment.
On the day of the shipment, the plaintiff filled out a standard bill of lading for the shipment; however, he did not declare a value for the shipment on the face of the bill of lading itself. In fact, his practice was not to do so. Instead, he attached a copy of the invoice for the particular shipment (numbered “140407”), and a packing slip, to the bill of lading. The invoice showed the value of the shipment to be $263,520.
These documents were handed to the defendant’s employee who attended to pick up the shipment. This same employee then also completed another bill of lading, referencing Invoice #140407. Both the defendant’s employee and the plaintiff signed the defendant’s bill of lading, and a copy was given to the plaintiff.
A few days later, the shipment was stolen while in transit.
The plaintiff sued the defendant for the value of the goods lost. The defendant took the position that the plaintiff had failed to declare the value of the goods “on the face of the contract of carriage”, as required by the Carriage of Goods Regulations (O. Reg. 643/05, Sch. 1) enacted pursuant to the Highway Traffic Act, R.S.O., c. H.8. Accordingly, the defendant claimed that it could limit its liability for the loss to $4.41 per kilogram, or, in this case, about $100,00).
The matter proceeded to a motion for summary judgment before Justice Bielby in March 2015. The Court identified and considered two main issues: 1) what was the “contract of carriage” in this case; and 2) whether the plaintiff declared the value of the consignment on “the face of the contract of carriage”?
Bielby J.’s first task was to delineate the contract of carriage in this case, which involved two considerations. First, what documents made up the contract of carriage? Was it simply the bill of lading, or could other documents (such as Invoice #140407) also form part of the contract of carriage? Second, could oral representations form part of the contract?
The Court found that a plain reading of the relevant regulation does not define the term “contract of carriage” and does not expressly limit or equate a “contract of carriage” with a “bill of lading”. Next, the Court consulted earlier case law and concluded that oral representations could in fact be relied upon as part of a “contract of carriage” in appropriate circumstances.
Without that representation, the plaintiff would not have hired the defendant to transport the consignment. The plaintiff wanted to be assured that the defendant had sufficient insurance to cover the value of his consignment.
Was the Value of the Goods Declared?
The Court accepted the general proposition that the legislative intent behind the requirement of the shipper to declare the value of the shipment on the face of the contract of carriage is to provide notice to the carrier of the risk, and to provide the carrier with an opportunity to decide whether to assume that risk.
In this case, the plaintiff argued that the defendant had full knowledge of the value of the shipment, as result of oral communications and also the inclusion of Invoice #140407. The plaintiff argued therefore that the limitation of liability in the Carriage of Goods Regulations should not apply.
The defendant, meanwhile, argued that the plaintiff had failed to disclose the value of the shipment on the face of the contract for carriage, noting that it had not been disclosed on either bill of lading.
The Court proceeded to observe that, generally speaking, legal authority states that the failure of a consignor to declare a shipment’s value on the face of a bill of lading will mean that the consignor’s recovery will be limited to the limits. The Court referred to a few well-known earlier precedents in support of this proposition (*1).
Ultimately, the Court concluded that it was not bound by the earlier precedents, as they all required a value to be declared on the face of a bill of lading, as opposed to a contract of carriage. Accordingly, the fact that the value of the shipment was included on Invoice #140407 was enough to satisfy the Court that the value had been declared “on the face of the contract of carriage”.
I find that, by signing both bills of lading and specifically the defendant’s bill of lading, the plaintiff was adopting the contents of the contract of carriage and any declarations therein can be considered to be made by the plaintiff.
I find that, having already determined that invoice number 140407 is part of the contract of carriage, the value of the plaintiff’s property was set out on the face of the contract. On the face of the invoice is the value of the goods being the price the plaintiff paid for the goods.
My conclusion is further grounded in the fact that the driver for the defendant made written reference to the invoice on the face of the Bill of lading that the parties signed.
Thus, in the Court’s determination, the defendant had full knowledge of the value of the shipment. Summary judgment was accordingly granted to the plaintiff, for $263,520.00, plus costs and interest.
(*1) See, for example, Anticosti Shipping Co. v. St. Amand,  S.C.R. 372; Sept Iles Express Inc. v. Tremblay,  Ex. C.R. 213; Corcoran v. Ehrlick Transport Ltd. et al. (1984), 46 O.R. (2d) 225.

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