Key Policy & Legislative Updates

A. Federal Moratorium on British Columbia Crude Oil Tanker Traffic

On November 13, 2015, Prime Minister Trudeau instructed the Minister of Transport, the Honourable Marc Garneau to "formalize a moratorium on crude oil tanker traffic on British Columbia's North Coast, working in collaboration with the Minister of Fisheries, Oceans and the Canadian Coast Guard, the Minister of Natural Resources and the Minister of Environment and Climate Change to develop an approach." This mandate accords with promises made by Prime Minister Trudeau during the Liberal election campaign.

Whether a federal moratorium on tanker traffic exists in British Columbia has long been a subject of debate. To date, there has been no legislation or other written instrument formally establishing such a ban. Despite this, various secondary sources have continued to refer to the existence of a moratorium and the federal government maintained this policy for a number of years. However, there is the Tanker Exclusion Zone, a voluntary truck routing measure that applies to loaded crude oil tankers servicing the Trans-Alaska Pipeline System between Valdez, Alaska and Puget Sound, Washington. Tankers carrying no cargo may transit within the Tanker Exclusion Zone.

In 2010, the House of Commons passed a non-binding opposition motion calling for a ban on crude oil tanker traffic off British Columbia's north coast. This was followed by a private member's bill sponsored by Vancouver Quadra Liberal MP Joyce Murray in 2010 (Bill C-606), which had the support of the minority Parliament. It was ultimately dropped from the Order Paper when the 2011 federal election was called. Under the leadership of the Conservative Party, the position of the federal government was that there was no legally binding moratorium on the west coast. This allowed oil and gas projects involving the use of crude oil tankers to develop in British Columbia.

The terms and extent of a formal federal moratorium on crude oil tanker traffic and the manner in which it will be established remain unclear. However, it is anticipated that any such ban will have a significant impact on oil and gas development projects in northern British Columbia given the necessity of tanker transport to these projects. For example, it is anticipated that the Enbridge Northern Gateway pipeline project will require 225 tankers carrying condensate and crude oil to travel the Douglas Channel each year. It is notable that the mandate letter does not appear to prohibit exports of refined crude oil, so some oil and gas projects may not be affected.

B. Bill C-22 — The Energy Safety and Security Act (the "ESSA")

The ESSA, which relates to Canada's offshore regime for oil and gas exploration and operations in the North and Atlantic regions, received Royal Assent in early 2015. The majority of the provisions affecting the off-shore oil and gas industry will come into force on or before February 26, 2016. The ESSA includes the following legislative changes:

  • Amendments to the Canada Oil and Gas Operations Act, RSC 1985, c O-7 and the Canada Petroleum Resources Act, RSC 1985, c 36 (2nd Supp) to provide the National Energy Board with new tools to regulate oil and gas activities in the North;
  • Amendments to the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, SC 1988, c 28 and the Canada-Newfoundland Atlantic Accord Implementation Act, SC 1987, c 3; and
  • The Nuclear Liability Act, RSC 1985, c N-28 is replaced by the new Nuclear Liability and Compensation Act, SC 2015, c 4, s 120 to implement the International Convention on Supplementary Compensation for Nuclear Damage and increase the absolute liability limit of operators in the nuclear context from $75 million to $1 billion.

Specifically, the amendments revise the civil liability regime for the oil and gas industry by incorporating the "polluter pay" principle, increasing the limits of liability in the Atlantic offshore and Arctic areas to $1 billion, and requiring proof of financial resources to cover claims when applying for permits to drill, develop or produce offshore oil or gas. The amendments will identify Offshore Boards as "responsible authorities" under the Canadian Environmental Assessment Act, 2012, SC 2012, c 19, s 52, and grant them the authority to levy administrative and monetary penalties for contraventions of the regulations.

To improve spill response, regulators will have "direct and unfettered access" to $100 million in funds per project to help compensate affected parties and can authorize the use of chemical dispersants or other spill-treating agents as part of a spill response strategy. The ESSA also establishes a basis for governments to seek environmental damages to compensate for damage to species, coastlines or other public resources.

The ESSA will not apply on Canada's west coast due to the federal moratorium on oil and gas activity on offshore British Columbia. An unofficial ban on offshore oil and gas exploration in this region dates back to 1972, when the Government of Canada issued Orders in Council suspending the rights under existing permits for offshore oil and gas exploration and made a policy decision to decline to renegotiate the exploration permits as required by subsequent legislative developments.

C. Amendments to Schedule 1 to the Marine Liability Act

The Regulations Amending Schedule 1 to the Marine Liability Act, SOR/2015-98 came into force on June 8, 2015. The amendments increase the general limits of liability for shipowners' claims under Schedule 1 of the Marine Liability Act, SC 2001, c 6 (the "MLA") by approximately 50%. The limits are determined by size of vessel and vary depending on the specific range of size or tranches. Limits of liability for small vessels under the 300 ton gross tonnage threshold remain unchanged.

These amendments reflect Canada's obligations to the IMO's Convention of Limitation of Liability for Maritime Claims, 1976 (the "LLMC Convention"), as amended by the Protocol of 1996 (the "LLMC Protocol"), which provides the right for shipowners and their insurers to limit their liability on a range of different maritime claims. At its 99th session in April 2012, the IMO Legal Committee decided on the 50% increase based on the experience reported by the International Group of Protection and Indemnity Clubs, which underwrite the liability insurance for 90% of the world's vessels. The increase is intended to account for significant inflation since 1996 that has eroded the value of the maximum level of liability by over 50% in real dollar terms. This may have significant impact on a claimant's recovery of losses incurred.

Article 6 of the LLMC Convention, which is incorporated as Schedule 1 to the MLA, limits shipowners' liability for: (1) claims for loss of life and personal injury, and (2) claims for damage to property, such as other terminals, cargo and ships. Damages that are subject to other international instruments, such as pollution related to oil spills from oil tankers, are excluded. This limitation applies if the fault for the loss was due to the action or omission of the master or crew with no involvement of the shipowner or his executives or managerial staff.

The increase in LLMC limits will impact other elements of the MLA's framework, particularly:

  • The Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974, as amended by the Protocol of 1990 which sets the rules governing liability to passengers;
  • The International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001, which sets out the rules governing liability for pollution damage from bunker oil spills from non-tankers; and
  • The International Convention for the Unification of Certain Rules of Law relating to Bills of Lading, 1924, as amended by the Protocols of 1968 and 1979, which sets out the rules governing the shipowner's liability for loss or damage to cargo.

In its Regulatory Impact Analysis (Canada Gazette, Vol 149, No 10), the Government of Canada indicated that, while difficult to estimate, it is likely that the amend- ments may result in a net benefit to Canada given that the claimants will be mainly Canadians, whereas the respondents will include both domestic and international shipowners. Foreign registered ships, predominantly owned by non-Canadians, are generally much larger than Canadian ships and are more likely to be involved in major marine casualties where the current LLMC limits are exceeded. The Government of Canada also indicated the increase in LLMC limits could also have a positive impact on Canada's Ship-source Oil Pollution Fund (“SOPF”). For instance, in situations where a known ship (other than a tanker) is involved in a spill, the higher limits could allow the SOPF to recover a larger proportion of remedial costs in the rare cases when such incidents exceed the current LLMC limits.

As a result of Canada being a signatory to the LLMC Protocol, these limits may be increased again in the future. To implement such a proposal, the validity of a proposal to increase liability limits must be examined by the IMO's Legal Committee and two-thirds of the state parties must be in support.

D. Amendments to Regulations under the Canada Shipping Act, 2001

Vessel Pollution and Dangerous Chemicals Regulations

The Vessel Pollution and Dangerous Chemicals Regulations, SOR/2012-69 were amended on January 2, 2015 to control and regulate airborne emissions from ships and to implement Canada's international obligations under Annex VI of MARPOL.

The amendments lowered the permitted limit for sulphur content in marine fuel by 90% (from 1.000% to 0.10%) for almost all types of vessels, including drilling, production and storage vessels in the North American Emission Control Area ("NA-ECA") or operating in waters south of 60º N. The new restrictions will apply to Canadian-flagged vessels in any area of the world, as well as foreign-flagged vessels that are operating in Canadian waters or within the Canadian portion of the NA-ECA under MARPOL. However, offshore drilling, storage and offloading platforms ("FPSOs"), fishing vessels, pleasure crafts, and production or storage vessels will be exempt.

Transport Canada has warned that it will be increasing penalties for non-compliance to accord with these stricter limits. Therefore, vessel and cargo owners may risk increased fines and delays for non-compliance, which will cause a corresponding increased risk of third party claims for insurers.

The amendments also lowered the sulphur content for vessels operating in waters outside of the NA-ECA north of 60º N from 3.50% to 0.50%, but this change will not be effective until January 1, 2019. The affected area includes Hudson's Bay, James Bay, and Ungava Bay.

Vessel Operation Restrictions Regulations

Amendments to the Vessel Operation Restrictions Regulations, SOR/2008-120 establishing restrictions on boating activities and navigation in Canadian waters came into force on May 29, 2015. The amendments are intended to respond to requests from local authorities for Transport Canada to impose or amend restrictions on navigation in order to enhance the safety of navigation, protect the environment, or protect the public interest.

Specifically, the amendments appoint inspectors in a municipality in Québec to ensure compliance with the Regulations in order to maintain and promote safe operation of vessels in the area, as well as correct existing restrictions on 87 bodies of water in Ontario and 59 bodies of water in Québec to accurately reflect geographical place, names, and coordinates.

Vessel Registration and Tonnage Regulations and Vessels Registry Fees Tariff

The Vessel Registration and Tonnage Regulations, SOR/2007-126 (the "VRTR") and Vessels Registry Fees Tariff, SOR/2002-172 were amended on May 1, 2015 and establish requirements with respect to vessels in the Canadian Register of Vessels under Part 2 of the Canada Shipping Act, 2001, SC 2001, c 26 (the "CSA, 2001"). These amendments alleviate much of the administrative burden relating to registration and aim to reduce the regulatory burden on non-profit organizations, charitable organizations, and small business owners.

Prior to 2011, all vessels other than pleasure craft were required to be registered, including human-powered pleasure craft such as canoes, kayaks, row boats, and small sailing vessels. This requirement placed an unnecessary administrative burden on small vessel owners that far outweighed any safety benefit.

The amendments to the VRTR exempt from registration vessels under an aggregate power of 7.5 kW, sailboats that are 8.5 m or less in length, human-powered vessels other than commercial river rafts, and certain vessels operated by recreational boating schools for training purposes.

E. World-Class Tanker Safety System

In April 2015, the Tanker Safety Expert Panel (the "Panel") released Phase II of their report, "A Review of Canada's Ship-source Spill Preparedness and Response: Setting the Course for the Future, Phase II — Requirements for the Arctic and for Hazardous and Noxious Substances Nationally" (the "Report"). The Report is divided into three parts: (1) Arctic Ship- Source Spills, (2) Hazardous and Noxious Substances (“HNS”), and (3) Marine Casualty Management.

Arctic Ship-Source Spills

The Report found that the Arctic requires an improved and tailored prevention and response regime given its unique characteristics. The Panel indicated that Ice Navigators (i.e. persons who act as an advisor to a ship's master on the ice regimes being navigated and are required to be on board vessels that meet criteria specified in the Arctic Shipping Pollution Prevention Regulations, CRC, c 353 (the "ASPPR")), play an important role in preventing ship-source spills. The Panel's review indicated that while the ASPPR set out the qualifications for Ice Navigators, there is no formalized training program or certification process required by Regulation. To remedy this, the Panel recommended that Transport Canada formally certify the Ice Navigators to ensure that they have the necessary experience.

The Panel also indicated that Canada's current ice navigation systems are dated or inadequate and recommended that Canada's navigational infrastructure, including its charts and its ice navigation systems, be upgraded.

The Report advocated for the development of systems that address the Arctic's unique challenges. To this end, the Panel suggested: (1) the classification of all oil handlings facilities according to risk, (2) the development of Arctic-specific standards of responses that all prescribed vessels and facilities are required to possess, and (3) the creation by Transport Canada of an oversight program to ensure compliance of these new standards and procedural requirements.

Finally, the Panel noted that preventing and limiting ship-sourced spills will require important improvements that should be implemented incrementally and regularly reviewed over the long run in response to the Arctic's evolving situation. The Report recommended constant consultation with all stakeholders and continued research into improved methods for preventing spills.

Hazardous and Noxious Substances

Canada is a signatory to the IMO's International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (the "HNS Convention"). The HNS Convention introduces strict liability for shipowners and requires insurance and insurance certificates. The HNS Convention is not yet in force, but the Safe-guarding Canada's Seas and Skies Act, which received Royal Assent in December 2014, incorporates many of its provisions into Canadian law by amending the MLA.

Although the need for a HNS preparedness and response regime has long been recognized, a framework has yet to be established in Canada. The Report recommended establishing a comprehensive regime that draws on linkages between the marine industry, chemical producers, and the land-based hazardous-response community.

The Report called for all ships carrying HNS and facilities handling HNS to have a comprehensive HNS response plan outlining in detail all facets of how to properly respond in the event of a spill. The Panel recommended that Transport Canada should develop an appropriate oversight program to ensure compliance with these new standards.

The Report also called for the Coast Guard, in collaboration with governmental, community, and industry stakeholders, to lead the development of national and regional contingency plans for ship-based HNS releases. These response plans should be routinely practiced to ensure readiness, and the Coast Guard must ensure it has the resources and competency to respond to a spill.

Finally, the Report recommended continued research into the behaviour and effect of HNS substances and called for government and industry to constantly track and share data concerning HNS movement in Canada. Using such data and research, and in collaboration with all stakeholders, Canada's preparedness and response regime should be continually refined to ensure maximum effectiveness.

Marine Casualties

The Report recommended that Canada create a centralized marine casualty decision making authority similar to those in place in the United Kingdom and Australia.

F. Area Response Planning ("ARP")

On July 7, 2015, the former Minister of Transport announced the launch of the ARP pilot project. The ARP is one of the Government of Canada's measures under the World-Class Tanker Safety System and was developed in response to the Panel's Phase I report.

The ARP is intended to establish planning partnerships that will tailor ship-source spill preparedness and response to the level and types of risk in a particular geographic area. These plans will consider the geography, environmental sensitivities and oil tanker traffic volumes present in the designated areas and are intended to help ensure that procedures are in place and equipment is readily available to plan for any scenario. The ARP is intended to be a collaborative planning project, with participation and input from local communities, Aboriginal groups, industry and all levels of government.

The ARP pilot project will include the following geographic areas:

  • the southern portion of British Columbia, including Vancouver Harbour;
  • Saint John and the Bay of Fundy, New Brunswick;
  • Port Hawkesbury and the Strait of Canso, Nova Scotia; and
  • St. Lawrence River (Montréal to Anticosti Island), Québec.

G. International Code for Ships Operating In Polar Waters (The "Polar Code")

The IMO's Marine Environment Protection Committee (the "MEPC") adopted the environmental requirements of the Polar Code in May 2015. The MEPC also adopted amendments to the International Convention for the Prevention of Pollution from Ships ("MARPOL"), to which Canada is a party, which make the environment-related provisions of the Polar Code mandatory.

The IMO Maritime Safety Committee had previously adopted the safety provisions of the Polar Code in November 2014.

The Polar Code is intended to supplement existing IMO instruments by increasing the safety of ships' operation and mitigating the impact on people and the environment in polar waters. It acknowledges that coastal communities could be, and that polar ecosystems are, vulnerable to ship operation and that increased safety measures will benefit the environment by reducing the probability of an accident.

The Polar Code will restrict waste disposal by ships in the waters around the North Pole and offshore Antarctica by banning discharges of oil or oily mixtures, "noxious liquid substances" or mixtures containing such substances, and animal carcasses. Discharge of food waste will only be permitted when the ship is as far as practicable from areas of ice concentration exceeding 1/10 and not less than 12 nautical miles from the nearest land, ice-shelf or fast ice (i.e. sea ice which forms and remains "fastened" along the coast, where it is attached to the shore, an ice wall, an ice front, or between shoals or grounded icebergs). Food waste will have to be ground before it is discharged and cannot be contaminated with other types of waste. Limitations will also be placed on the discharge of cargo residues, cleaning agents or additives.

Further, the Polar Code requires ships to consider the presence of marine mammals and their seasonal migration areas in planning their route and to minimize unnecessary disturbances to marine mammals and areas of cultural heritage and significance if these are encountered.

The Polar Code is expected to come into force on January 1, 2017. Canada is a signatory to MARPOL and most aspects of MARPOL have been adopted under the CSA, 2001, while the sewage discharge provisions of the Arctic Waters Pollution Prevention Act apply to Canadian Arctic Waters because these were stricter than the MARPOL requirements. Canada was actively involved in the development of the Polar Code, though how and when it may be implemented in Canada is unclear at the present time.

H. Nairobi International Convention on the Removal of Wrecks

In June 2015, Transport Canada released a discussion paper (the "2015 Discussion Paper") regarding the possible development of a regulatory regime to comprehensively address the hazards associated with shipwrecks, including the potential Canadian adoption of the Nairobi International Convention on the Removal of Wrecks, 2007 (the "Nairobi Convention") and the development of further rules to augment the Nairobi Convention in the Canadian context.

The Nairobi Convention, to which Canada is not a party, was adopted by the IMO in May 2007 and came into force for State Parties on April 14, 2015. Transport Canada had previously released a discussion paper in April 2010 requesting input on whether Canada should ratify the Nairobi Convention and apply its provisions to Canada's internal waters and territorial sea. The responses to that discussion paper were generally favourable, so the 2015 Discussion Paper posits that any proposed regime would be based on the Nairobi Convention.

In Canada, the "hazards" that can arise from a shipwreck are governed by at least eight federal laws. For instance, the Navigation Protection Act, RSC 1985, c N-22 requires that the owner of an obstruction, including a wreck take certain reporting and removal actions and they can be ordered to secure, remove or destroy the obstruction by the Minister of Transport. Under the CSA, 2001, if the Minister of Fisheries and Oceans has reasonable grounds to believe that a vessel, including a wreck, is discharging or is likely to discharge a pollutant, he or she may take mitigation measures to repair, remedy, minimize or prevent pollution damage, as well as order any person or vessel to take such measures. Further, the MLA provides strict liability and compensation regimes for all pollution damages from any oil spills and for costs and expenses incurred by the Minister of Fisheries and Oceans or of any person in Canada. The MLA does not create a specific liability regime for shipwrecks and there is no requirement for shipowners to have marine insurance related to shipwrecks.

The 2015 Discussion Paper notes that in order to comprehensively address the hazards associated with shipwrecks, the proposed regime would have to extend the application of the Nairobi Convention to more vessels (e.g. non-seagoing vessels such as the Great Lakes fleet), extend certain provisions beyond what exists in the Nairobi Convention (e.g., compulsory insurance), and consider unique provisions for other circumstances not covered by the Nairobi Convention (e.g. liability for removal of towed objects).

The proposed regime outlined in the 2015 Discussion Paper would impose strict liability on shipowners by requiring that they remove or remediate, at their own expense, any commercial vessels and pleasure craft that become hazardous wrecks. To ensure that shipowners have the necessary financial resources to meet this obligation, the proposed regime would require all Canadian ships and all foreign ships that call at Canadian ports that are 300 gross tons and above to maintain insurance or financial security for wreck removal or remediation in accordance with Article 12 of the Nairobi Convention. The Discussion Paper also proposes that the insurance policies would need to allow for a direct action against the insurer for claims related to wreck removal and remediation, though insurers' liability would be limited to the amount of liability under the LLMC. This would prohibit or render ineffective standard "pay to be paid" clauses that usually require the shipowner to pay any claim before being indemnified by the insurer.

In the event that the owners fail to take appropriate action or where the situation requires immediate action, the proposed regime would allow Canadian authorities to facilitate the removal or remediation of a hazardous wreck. The Nairobi Convention provides a broad definition of "hazard," which includes conditions or threats to navigation, the marine environment, or "damage to the coastline or related interests" of one or more State Parties. Among other things, these "related interests" extend to the health of coastal populations and the "wellbeing of the area concerned, including conservation of marine living resources and of wildlife."

The 2015 Discussion Paper also proposes that a number of violations and offenses be created and be subject to either administrative monetary penalties or fines upon summary conviction depending on their severity. Under the proposed regime, a vessel and its owners, operator and/or master could be charged and liable for the penalty and vessels could be detained at a Canadian port or subject to other restrictions.

The proposed regime would apply to vessels whether or not they are registered, listed, or licensed under the CSA, 2001, but would not apply retroactively to wrecks in existence prior to its coming into force.

Maritime Law — Recent Key Judgments — 2015

2015 has seen the usual variety of important Canadian decisions which bear on maritime law and various admiralty practice areas.

A. Fingad Shipping Ltd. v Ningbo Arts & Crafts Imp & Exp. Co. Ltd., 2015 FC 851

The plaintiffs in this case had entered into a contract with the corporate defendants for the construction of the defendant vessel, the "Chemical Aquarius." There was a dispute between the parties and the plaintiffs cancelled the contract in 2010. In June 2012, the Chemical Aquarius was sold by the corporate defendants to a third party, Huarong Huiyin Limited ("HH"), and the purported sale was registered. Subsequent arbitral proceedings resulted in arbitral awards against the corporate defendants in 2013, substantial portions of which remained owing to the plaintiffs.

In April 2015, the plaintiffs commenced a proceeding in France to enforce the arbitral awards and arrest the Chemical Aquarius. The defendant vessel was seized in France and HH sought to have the seizure lifted on the basis that they, as the registered owner of the ship, were not one of the debtors of the arbitral awards. On May 7, 2015, the Tribunal de Commerce de Terre et de Mer du Havre (the "French Tribunal") lifted the seizure of the Chemical Aquarius.

On July 3, 2015, the plaintiffs commenced a proceeding in the Federal Court for the outstanding amounts and seeking the judicial sale of the Chemical Aquarius. The plaintiffs also obtained a warrant for the arrest of the Chemical Aquarius and commenced a separate ex parte application before the Federal Court for the recognition and enforcement of the arbitral awards. In this motion, HH was seeking an order to strike out the Statement of Claim or, alternatively, to set aside the arrest.

Under the Federal Courts Rules, SOR/98-106, a party seeking to strike out a pleading must establish that it is "plain and obvious" that the pleading has no merit on one of the enumerated grounds, and the court should only exercise its discretion to strike only in the clearest of cases. HH argued that arrest had to be set aside since the plaintiffs do not have an in rem right against the vessel because they had no right in personam against its owners (HH). HH further argued that the Federal Court proceeding had to be struck out on the basis of issue estoppel — the French Tribunal had already addressed the enforcement of the arbitral awards through the arrest of the Chemical Aquarius, as well as the issue of the genuineness of the sale to HH.

Justice Locke noted that there are three pre-conditions to the exercise of the court's discretion to apply issue estoppel: (1) the same question has been decided, (2) the judicial decision creates estoppel, and (3) the parties (or their privies) are the same in the judicial decision and the present proceeding (citing Danyluk v Ainsworth Technologies, [2001] 2 SCR 460). In the present case, only the first condition was at issue. Locke J. held that the central issue before the French Tribunal was the same as the central issue in the present motion since the French Tribunal had fully considered whether the ownership of the Chemical Aquarius had changed and its decision on this issue was final. The plaintiffs argued that they had cited new evidence that had not been considered by the French Tribunal, but Locke J. rejected this argument because to allow new evidence would allow parties to "gut issue estoppel of any substantial meaning by simply raising new evidence in a subsequent proceeding."

Locke J. refused to exercise his discretion to refuse to apply estoppel and struck the allegations regarding the genuineness of the sale to HH and the reference to the action being in rem, removed the defendant vessel from the style of cause, and released the defendant vessel. HH was awarded the costs of the motion in the amount of $7,500.

Peter G. Pamel and Jean-Marie Fontaine of BLG's Montréal office represented the moving party, Huarong Huiyin Limited, in this motion.

B. Chevron Corp. v Yaiguaje, 2015 SCC 42

The underlying dispute in this case was alleged environmental pollution in the Lago Agrio region of Ecuador, an oil-rich area that has a long history of oil exploration and extraction. For over 20 years, a group of indigenous Ecuadorian villagers (the "Plaintiffs") have been seeking legal accountability and financial and environmental reparation for harms allegedly caused by the former operations of Texaco, Inc. (which later merged with Chevron Corp.) in the area. In 2011, an Ecuadorian trial court ruled in favour of the Plaintiffs and this decision was affirmed by an Ecuadorian appellate court. Finally, in 2013, Ecuador's highest court upheld the appellate decision, with the exception of the punitive damages award, and held that Chevron was liable to pay the Plaintiffs US$9.51 billion.

Chevron refused to acknowledge or pay the award ordered by the trial court and fought the Plaintiffs in the United States courts. Since Chevron did not hold any Ecuadorian assets, the Plaintiffs had to select another forum to get satisfaction on the debt. In 2012, the Plaintiffs commenced an action in the Ontario Superior Court of Justice for the recognition and enforcement of the Ecuadorian judgment against Chevron (a U.S. corporation), Chevron Canada (a Canadian corporation that is a seventh-level indirect subsidiary of Chevron), and Chevron Canada Finance Limited.

The Supreme Court of Canada confirmed that Canadian courts should take a generous and liberal approach to the recognition and enforcement of foreign judgments. Although this type of process was once technical and challenging, the last twenty years has seen significant streamlining of and openness towards the process of enforcing foreign judgments in Canada. Yaiguaje continues this trend, and offers great assistance to parties who wish to seek to enforce a foreign judgment in Canada, whether or not:

  • the judgment debtor/defendant is located in Canada;
  • the judgment debtor/defendant has assets in Canada; or
  • the original underlying dispute that led to the foreign judgment has any connection to Canada.

There is no need for the applicant to prove a real and substantial connection between the Canadian province where the foreign judgment is sought to be registered and the original underlying dispute that led to the foreign judgment, or between the Canadian province and the judgment debtor/defendant. So long as a real and substantial connection exists between the foreign court and the original action, and so long as the defendants were properly served with the original claim, the enforcing Canadian court has jurisdiction to recognize and enforce the judgment.

The decision further reiterates Canadian courts' commitment to the principles of comity to and respect of foreign legal systems, and upholds the principles outlined in previous authorities, including Club Resorts Ltd. v Van Breda, 2012 SCC 17 and Beals v Saldanha, 2003 SCC 72. By taking a strong position with respect to the rights of the plaintiffs, the Court confirmed that there are few circumstances in which a Canadian court will not have jurisdiction to recognize and enforce a foreign judgment.

C. Aquavita International S.A. v Pantelis (The), 2015 FC 180

In this decision, the Federal Court interpreted its jurisdiction over maritime law to include redelivery of a vessel with excessive bunkers. The plaintiff Aquavita International S.A. ("Aquavita"), the sub-sub-time charterer of the defendant vessel, the M/V "Pantelis," alleged that it owned bunkers that remained on board when the vessel was redelivered to its disponent owners and that the bunkers were misappropriated by the defendants. The plaintiffs brought an action for unjust enrichment and conversion, framed both in rem and in personam, and arrested the Pantelis.

The defendants brought a motion to strike the action pursuant to Rule 221 of the Federal Courts Rules on the basis that the Federal Court lacked jurisdiction to adjudicate the matter. The defendants submitted that the plaintiff was not entitled to rely on paragraph 22(2)(m) of the Federal Courts Act, RSC 1985, c F-7, which grants jurisdiction to the Federal Court over "any claim in respect of goods, materials or services wherever supplied to a ship for the operation or maintenance of the ship, including, without restricting the generality of the foregoing, claims in respect of stevedoring and lighterage." The defendants argued that the plaintiff was not a bunker supplier, so its claim was based on a contractual obligation.

On the question of jurisdiction, Justice Harrington did not determine whether or not the plaintiff's claim fell under paragraph 22(2)(m), instead relying on subsection 22(1) of the Federal Courts Act to ground the Court's jurisdiction. Justice Harrington cited the Supreme Court of Canada's decision in ITO-International Terminal Operators Ltd v Miida Electronics Inc., [1986] 1 SCR 752 ("ITO"), wherein the Court had "specifically held that the claim did not fall within subsection 22(2), but rather fell within subsection 22(1) which for this purpose is more or less coextensive with Parliament's jurisdiction over "navigation and shipping" under subsection 91(10) of the Constitution Act, 1867." Justice Harrington held that what was at issue in the present case was "fuel on board the ship, which fuel was allegedly used to propel her over the ocean blue" and that "[n]othing could be more maritime."

Accordingly, Justice Harrington dismissed the motion to strike, noting that while he had "no hesitation in holding that [the Federal Court] had jurisdiction to decide this action on its merits," this decision was only a determination that it was not "plain and obvious" that the plaintiff does not have a cause of action.

D. Save Halkett Bay Marine Park Society v Canada (Environment), 2015 FC 302

This case involved an application for judicial review of an Environment Canada decision authorizing the sinking of the decommissioned HMCS Annapolis (the "Annapolis") brought by the Save Halkett Bay Marine Park Society (the "Society").

The respondent, the Artificial Reef Society of British Columbia (the "ARSBC"), purchased the Annapolis in 2008 and intended to turn it into an artificial reef in Halkett Bay Marine Park, which is off the coast of Vancouver. The artificial reef was intended to be used for recreational diving and to provide marine habitat. Before the ARSBC could sink the Annapolis, it was required to obtain various regulatory approvals, including a Disposal at Sea Permit (the "Permit") from Environment Canada. In 2012, the Annapolis was found to contain levels of polychlorinated biphenyls ("PCBs") that could pose a risk if accidentally released in the environment. In June 2013, Environment Canada informed ARSBC that the Permit would not be issued until the PCBs were removed, so the ARSBC withdrew its application and undertook the required remediation work.

In July 2014, the Annapolis was inspected and certified to be free from PCBs in solid form, with concentrations not exceeding the regulatory threshold. Accordingly, the Minister of Environment issued the Permit to ARSBC in October 2014. The Society filed a Notice of Objection in respect of the Permit pursuant to subsection 332(2) of the Canadian Environmental Protection Act, SC 1999, c 33 (the "CEPA"). In response to a subsequent announcement that the ARSBC planned to proceed with the sinking of the Annapolis in Halkett Bay, the Society filed an application for judicial review of the Permit.

Chief Justice Crampton of the Federal Court ultimately dismissed the application on the basis that it had not been commenced within 30 days of the Minister's decision to issue the Permit, as required by subsection 18.1(2) of the Federal Courts Act. Crampton C.J. did not exercise his discretion to extend the limitation period because the ARSBC had suffered substantial prejudice as a result of the Society's failure to comply with the time period and the delay had not been explained.

Crampton C.J. also noted that, regardless of the application's procedural failings, he would have also dismissed the Society's application on the merits. The Society had argued that dibutyltin dichloride and tributyltin chloride ("TBTs") are subject to a complete ban in Canada pursuant to the International Convention on the Control of Harmful Anti-fouling Systems on Ships, 2001, the Vessel Pollution and Dangerous Chemicals Regulations, SOR/2012-69 and/or the CEPA and that the Minister had erred by failing to consider the presence of TBTs in the hull of the Annapolis. Crampton C.J. held that there is no such complete ban on TBTs and that the Minister was entitled to issue the Permit.

Crampton C.J. rejected the Society's argument that the Minister's decision was unreasonable because its basis had not been explained, holding that the Minister was not obliged to issue separate detailed reasons and that the decision record and letter from the Minister was adequate. The Society had further argued that the Minister had failed to apply Environment Canada's Clean-Up Standard for Ocean Disposal of Vessels, Aircraft, Platforms & Other Structures with regard to the testing of anti-fouling paint. Crampton C.J. disagreed with this position. Finally, the Society argued that the Minister was obliged to refuse to issue the Permit if there were any TBTs whatsoever in the hull, but Crampton C.J. held that there was no clear and compelling evidence that the Annapolis did contain TBTs, so the Minister's decision was entitled to deference.

E. Ehler Marine & Industrial Service Co. v M/V Pacific Yellowfin (Ship), 2015 FC 324

In this case, the Federal Court gave guidance on the enforceability of service quotes, as well as the liability of a repairer when a vessel sustains damage during launch operations.

The plaintiff, Ehler Marine & Industrial Service Co. ("Ehler"), a ship repair company, provided a quote to repair the defendants' wooden vessel, the M/V Pacific Yellowfin (the "Yellowfin"). The defendants had issued a Request for Proposal (the "RFP") in respect of the Yellowfin that asked for a "reasonably accurate estimate" for the re-fastening and re-caulking of 15 seams below the waterline per side. Ehler provided an estimate based on the RFP, stipulating that certain items of work would be billed on the basis of the actual time spent and the actual materials used to perform the work. The defendants hired Ehler on the basis of this estimate, but it was later discovered that the RFP had incorrectly described the scope of work and additional seams needed to be re-fastened and re-caulked. The parties agreed that Ehler would do the additional work, but Ehler thought the work was being done on a time and materials basis, while the defendants were under the impression that the original contract price would be prorated.

Ehler completed the repairs, including the additional work, and the final costs exceeded the estimate. The defendants refused to pay, arguing that the estimate was an agreed upon price, and Ehler commenced an action to recover the invoiced amount.

Justice Simpson held that the proper test for determining whether Ehler was bound by its estimate is what a reasonable man in the situation of the parties would understand the contract to be. In these circumstances, an objective reasonable bystander would have concluded that the estimate was an agreed price, particularly since the estimate had not stipulated that the items of work being disputed would be billed on a time and materials basis.

There was also some damage caused to the Yellowfin while it was being launched after the repairs were completed. The defendants made a counterclaim, arguing that the Ehler's agent was responsible for the damage because it was an implied term of the contract that the launch would be safe. Simpson J. dismissed the counterclaim, finding that the defendants' evidence of the alleged damage was incomplete and contradictory.

F. Pêcheries Guy Laflamme Inc. v Capitaines propriétaires de la Gaspésie (A.C.P.G) Inc., 2015 FCA 78

Readers of previous editions are likely to be familiar with the facts in Pêcheries Guy Laflamme Inc. v Capitaines propriétaires de la Gaspésie (A.C.P.G) Inc., 2015 FCA 78. This case arose from an accident during the launch of a fishing boat where a mechanical problem had occurred with the portable crane. The owner of the vessel, Pêcheries Guy Laflamme Inc. ("Pêcheries"), demanded payment for the damage from the owner of the portable crane, Capitaines Propriétaires de la Gaspésie (A.C.P.G.) Inc. ("Capitaines"). Capitaines refused to pay and denied liability on the basis of an exclusion of liability clause in the boat handling contract, which provided that the owner "accepts liability for any risk resulting from the towage, docking, wintering and/or launching of this vessel" and released the owner and operator of the dry dock from "any civil liability resulting from these associated operations or handling." Capitaines, its employee and its insurance company commenced an action seeking a declaratory judgment that they were not liable to Pêcheries. Pêcheries brought a counterclaim against Capitaines and its insurance company claiming damages in excess of $408,000.

At first instance (reasons indexed at 2014 FC 456), Justice Harrington held that the plaintiffs had failed to rebut the presumption that the loss was not caused by a breach of their duty, as bailees, to take reasonable care and that the exclusion clause covered any negligence on the part of Capitaines, be it in contract or in tort. Relying on the Supreme Court of Canada's decision in Tercon Contractors Ltd. v British Columbia (Transportation and Highways), 2010 SCC 4, Harrington J. held that Canadian courts have increasingly distanced themselves from the presumption that exclusion clauses are unreasonable and noted that there are many practical reasons for exclusion clauses to be used by contracting parties. Further, Harrington J. dismissed the argument that Pêcheries had not been made aware of the exclusion clause, since he had signed multiple boat handling contracts in the past and frequently dealt with such documents.

Pêcheries appealed. The Federal Court of Appeal noted that contractual interpretation is a question of mixed fact and law and the trial judge will be given deference unless he made a palpable and overriding error. Pêcheries submitted that Harrington J. committed errors in law, including a failure to consider that the clause does not expressly exclude negligence and to apply the contra proferentem rule against Capitaines. The Court held that, where a party has no civil liability in the absence of negligence, the phrase "any civil liability" in the exclusion clause is synonymous with negligence. Therefore, there was no ambiguity that necessitated the application of the contra proferentem rule. Further, the Court upheld Harrington J.'s findings that Pêcheries was bound by the exclusion clause and that the exclusion clause was neither abusive nor draconian. Accordingly, the appeal was dismissed.

G. Snow Valley Marine Services Ltd. v Seaspan Commodore (Tug), 2015 FC 304

Causation can often be a contentious issue, particularly where multiple parties are involved in an incident causing loss. This decision stemmed from the sinking of an assist tug, the Warnoc, while it was providing assistance to the defendant vessel, the "Seaspan Survivor." The plaintiff Snow Valley Marine Services Ltd. ("Snow Valley"), was retained to assist in delivering logs to the Seaspan Survivor, which was owned by the defendant, Seaspan Marine Corporation ("Seaspan"). However, when the crew of the Seaspan Survivor retrieved the stern anchor after loading, the anchor was fouled. At the time, there were two experienced operators on the Warnoc and they assisted with the efforts to untangle the chain from the anchor. The mate of the Seaspan Survivor attended on board the Warnoc and attached a line from the Warnoc to either the anchor or the anchor chain. Unfortunately, when the anchor came free, it fell rapidly and the weight of the anchor and chain sunk the Warnoc.

Snow Valley alleged that Seaspan's employees had been negligent in failing to properly secure a safety line to the anchor and that this was the sole cause of the accident. In response, Seaspan argued that the accident was due to the failure of the Warnoc's crew to take reasonable steps to ensure the safety of the vessel, including their failure to use a release mechanism for the tow line. Seaspan further argued that the Warnoc's crew did not have the requisite qualifications under the Marine Personnel Regulations, SOR/2007-115.

Justice Manson accepted Seaspan's argument that the crew members were not technically qualified to operate, control, and ensure the safety of the Warnoc, but found that this was not fatal to the claim. He did, however, note that the crew's years of experience and the particular series of events in this case would be relevant to the question of whether their lack of technical qualifications contributed to the sinking.

While Manson J. did acknowledge that the crew of the Warnoc was responsible for ensuring that the tow line connection was safe, he held that the failure of a safety chain between the Seaspan Survivor and the anchor and chain, not the tow line connection, caused the sinking. This meant that Seaspan was solely responsible.

Manson J. awarded damages to Snow Valley based on the value of the Warnoc to Snow Valley as a going concern at the time and place of loss. The value of the lost tug was to be assessed by considering: (1) the market price of a comparable replacement tug, (2) the cost of refitting a tug to do her work, and (3) the compensation required to put Snow Valley in the same position it would have been in if the loss had not occurred (subject to the rules of law on remoteness of damages).

H. St. Paul Fire & Marine Insurance Company c Valley, 2015 QCCQ 1891

In Canadian maritime law, some provincial superior courts and the Federal Court have concurrent jurisdiction. This case is an example of how the courts may tackle the question of which court has jurisdiction over a particular dispute.

The owner of a yacht (the "insured") had engaged the services of the defendant to transport the yacht from Québec City, Québec to Willsboro Bay Marina, New York, by sailing the yacht to its destination. However, the yacht was grounded during the voyage and sustained damage. The plaintiff, St. Paul Fire & Marine Insurance Company (the "insurer"), had fully indemnified the insured and commenced subrogation proceedings against the defendant.

In the present application, the defendant asked the Court to dismiss the insurer's action on the basis that the Québec court lacked jurisdiction, as maritime law governs this type of dispute and excludes the application of the Code civil du Québec, RLRQ c C-1991 (the "QC Civil Code"). The Court disagreed, holding that neither section 22 of the Federal Courts Act nor the jurisprudence restricts jurisdiction over maritime law to the Federal Court, so the Québec superior courts have jurisdiction in admiralty. The Court went on to decide that the contract in question was not a contract of carriage within the meaning of Article 2030 of the QC Civil Code, but a service contract.

Therefore, the Court dismissed the defendant's argument that the claim ought to be dismissed because no notice of claim was provided within 60 days of delivery (as required by Article 2050 of the Code civil du Québec), because this requirement only applies for actions against carriers. The Court noted in obiter that the notice is not required where, as in the present case, the carrier is the one who notifies the property owner about the damage.

I.  LF Centennial Pte. Ltd. v TRLU7228664 et al (Containers), 2015 FC 214

The plaintiff, LF Centennial PTE Ltd. ("Centennial"), was a Singaporean company that had acted as the buying agent for Mexx Canada Company ("Mexx"). On December 3, 2014, Mexx filed a Notice of Intention to Make a Proposal ("NOI") with the Official Receiver and commenced insolvency proceedings before the Québec Superior Court (the "QCSC"). In so doing, a stay of proceedings pursuant to the Bankruptcy and Insolvency Act, RSC 1985, c B-3 was put in place. On December 23, 2014, Centennial commenced an in rem action in the Federal Court and arrested shipments of garments that had been purchased by Mexx on the basis of its interest in the cargo as an unpaid seller. Centennial did not seek leave from the QCSC before instituting the Federal Court proceedings.

The parties reached an agreement on bail for the arrested cargo that allowed Mexx to ship the garments to its stores and sell them, as long as it deposited the proceeds into an escrow account, less certain amounts, up to a maximum of $1,100,000.

However, Mexx and its receiver brought an application to quash the arrest and to strike the claim on the following bases: (1) the existence of the insolvency proceedings before the QCSC, (2) the Federal Court lacked jurisdiction, and (3) the claim was an abuse of process.

At first instance, Prothonotary Morneau determined that Centennial knew at the time it commenced the Federal Court proceedings that Mexx was the owner of the garments and held that Centennial had no right to bring this proceeding without first obtaining the permission of the QCSC, which it had not done.

The leading decision on in rem claims in the face of bankruptcy proceedings is the Supreme Court of Canada's decision in Holt Cargo Systems Inc. v ABC Containerline NV (Trustees of), 2001 SCC 90 ("Holt"). In Holt, Holt Cargo Systems Inc. started an in rem action against a Belgian vessel and its owners in the Federal Court, claiming a maritime lien for stevedoring services in the United States. The vessel was arrested, but its owner was subsequently adjudged bankrupt by a Belgian court and the trustees in bankruptcy obtained an order from the Québec Superior Court recognizing the Belgian court order. The trustees' application for an adjournment of the in rem proceedings was denied and judgment was awarded to Holt against the ship. The Federal Court ordered the judicial sale of the vessel and declined to give effect to various stay orders from the bankruptcy court or to stay its proceedings. The Federal Court of Appeal and Supreme Court of Canada upheld the trial decision.

Morneau P. distinguished Holt on the following bases: (1) the vessel in Holt had already been arrested and sold before the bankruptcy court intervened, and (2) in the present case, Centennial's right as a secured creditor had not yet crystallized at the time of the arrests. Morneau P. also found that Centennial and its counsel knew or ought to have known of the NOI and failed to disclose the existence of the restructuring proceedings pending before the Québec Superior Court when it applied for the arrest of the garments. Accordingly, Morneau P. ordered Centennial to respect the QCSC's orders with respect to the insolvency, ordered a stay of the Federal Court action, discharged the arrest, and dissolved the escrow agreement.

Centennial appealed Morneau P.'s decision, arguing that he had erred in ordering the discharge of the arrest and the dissolution of the escrow agreement without applying the test for a motion to strike. Justice de Montigny, as he then was, wholly dismissed this argument since the motion seeking a stay of proceedings was distinct and alternative to the demand that Centennial's action be struck.

de Montigny J. held that section 188(2) of the Bankruptcy and Insolvency Act is prescriptive and mandatory and requires "all courts and officers of all courts to act in aid of the [bankruptcy court]." Therefore, Morneau P. had no discretion and was obligated to ensure that the stay of proceedings was respected. Further, the proceedings before the Federal Court were ineffective because Centennial had failed to obtain leave before commencing them and had not even disclosed the existence of the restructuring proceedings to the Federal Court. Centennial also argued that section 69 of the Bankruptcy and Insolvency Act did not apply to in rem proceedings, so the Federal Court maintained its admiralty jurisdiction and could hear the action. De Montigny J. held that Holt was distinguishable from the present case given that: (1) there were significant differences between Holt and this case with regard to the timing of the bankruptcy/insolvency proceedings, (2) the Court in Holt had not discussed sections 69 and 188(2) of the Bankruptcy and Insolvency Act, and (3) Holt dealt with bankruptcy proceedings (where the objective is to facilitate distribution of a debtor's property to its creditors), while this case involved insolvency proceedings (where the objective is to allow the debtor to restructure and refinance).

In obiter, de Montigny J. went on to consider whether the Federal Court had jurisdiction over the matter. Centennial contended that its cause of action for stoppage in transit of cargo pursuant to multimodal bills of lading fell under subsection 22(2)(i) of the Federal Courts Act. de Montigny J. dismissed this argument, finding instead that Centennial's claim flowed exclusively from contracts of sale with no maritime component and the mere fact that the garments had been carried on a ship did not establish a sufficient connection between the dispute and maritime transport. On this basis, de Montigny J. concluded that Centennial's claim did not relate to shipping and navigation and did not fall within the Federal Court's admiralty jurisdiction.

Peter G. Pamel and Daniel Grodinsky of BLG's Montréal office represented the plaintiff, LF Centennial Pte. Ltd., in this action.

J. West Kelowna (District) v Newcomb, 2015 BCCA 5

The plaintiff/appellant, the District of West Kelowna (the "District"), had established a bylaw permitting "temporary boat moorage accessory to the use of the immediately abutting upland parcel" in the "Recreational Water Use Zone" (the "Bylaw"). The District also held a Licence of Occupation (the "Licence") from the Province of British Columbia over the Crown foreshore of a portion of Okanagan Lake fronting on Gellatly Bay.

The defendant/respondent moored his houseboat in an area covered by the Bylaw until he was issued a notice to relocate pursuant to the Licence. He then moved his houseboat to other parts of Okanagan Lake but remained in the area covered by the Bylaw. The District, relying on the Bylaw and its Licence, commenced these proceedings to obtain declaratory relief against Mr. Newcomb and a permanent injunction restraining Mr. Newcomb and all other persons having notice of the order from mooring vessels in the areas covered by the Bylaw and Licence.

The trial judge held that both the Licence and Bylaw were constitutionally valid, since the pith and substance of these measures was to regulate land use, which falls within provincial jurisdiction under subsections 92(13) (property and civil rights) and 92(16) (matters of a local nature) of the Constitution Act, 1867, 30 & 31 Victoria, c 3 (UK). However, the trial judge applied the doctrine of interjurisdictional immunity and concluded that the Licence and Bylaw must be read down so as not to prohibit temporary moorage of vessels that falls within the protected "core" of shipping and navigation. The trial judge found that Mr. Newcomb was in breach of the Licence and Bylaw.

Both parties appealed the trial decision. The BCCA held that the trial judge was correct in holding that the purpose and the pith and substance of the Bylaw were to regulate land use and that the District was entitled to enact the Bylaw. The Court noted that in British Columbia (Attorney General) v Lafarge Canada Inc., 2007 SCC 23, the Supreme Court of Canada affirmed the double aspect of land use control in federal harbours. Therefore, a finding that temporary moorage, incidental to active navigational use, is at the protected core of navigation does not mean that the pith and substance may not remain within provincial jurisdiction. The Court held that the trial judge was correct to "address the ambit of moorage rights incidental to navigation as part of the interjurisdictional immunity analysis” and had correctly read down the Bylaw.

K. AllChem Industries Industrial v CMA CGM Florida (Vessel), 2015 FC 558

The plaintiffs were the owners and persons interested in cargo on board the vessel "CMA CGM Florida" (the "Florida"). The Florida was involved in a collision at sea and the plaintiffs commenced a proceeding against the freight forwarders and common carriers that had been used to book the transportation of the various cargoes on the Florida, as well as against the vessel owners. They were seeking to recover losses arising from the alleged damage to the cargo due to the collision and to be indemnified for any general average or salvage contributions that they were compelled to make.

In the present motion, one of the defendants, Topocean Consolidation Service Inc. ("Topocean"), had moved to contest service of the Statement of Claim. The plaintiffs had directed a process server to serve Topocean with the Statement of Claim at the premises of Manitoulin Global Forwarding ("Manitoulin"), a freight forwarding company. While Topocean admitted that it used Manitoulin as an "agent" for some of its Canadian shipments, it contested service on the basis that the Statement of Claim had not been served at its place of business and Manitoulin was not a “branch or agency” of Topocean, nor had it been used in connection with the transportation of the cargo in issue.

Prothonotary Tabib held that Manitoulin carried on some integral part of Topocean's business in Canada and the fact that it was not acting in this capacity for the shipment in question did not detract from this connection. Further, Tabib P. found it relevant that Manitoulin had considered it its duty as an agent to forward the Statement of Claim to Topocean and that Topocean had publicly promoted itself on its website as a group of "owned and agent offices" that carried on business as "a network" worldwide, including at a specific address in Canada through the agency of Manitoulin. Given a lack of evidence to the contrary, Tabib P. concluded that Manitoulin was Topocean's agent in Canada and, therefore, service was validly effected.

BLG represents a defendant in this action, China Shipping Container Lines (Hong Kong) Co. Ltd., but made no appearance in this motion because it only related to the defendant Topocean.

L. C.H. Robinson Worldwide v Northbridge Insurance, 2015 ONSC 232

This case involved a claim made by a judgment creditor against a carrier's insurer following the loss of a shipment. The applicant, C.H. Robinson Worldwide Inc. ("Robinson"), had contracted with a motor carrier, KLM, to transport a shipment of food products. Pursuant to the contract between the parties, KLM was to be liable for the value of any shipments tendered to it and had to maintain insurance coverage. To this end, KLM applied for and obtained coverage (the "Policy") from the respondent, Northbridge Insurance ("Northbridge") and provided proof of coverage to Robinson. Unfortunately, KLM's truck was involved in an accident while carrying the shipment and the goods were destroyed.

KLM failed to pay Robinson for the loss, so Robinson obtained judgment against KLM in the Ontario Superior Court of Justice. Robinson then sought payment of the judgment from Northbridge pursuant to subsection 132(1) of the Insurance Act, RSO 1990, c I.8, which provides that where an insured person is liable for injury or damage to a person or property of another and has failed to satisfy a judgment awarding damages against them, a person entitled to damages may recover by an action against an insurer for the amount of the judgment up to the face value of the policy. This right of the claimant is "subject to the same equities as the insurer would have if the judgment had been satisfied."

Northbridge refused to pay Robinson, arguing that the Policy was void for misrepresentation and, in the alternative, that its liability to Robinson was limited to the maximum amount allowed under the Policy.

Brown C.J. noted that, as an applicant for insurance, KLM had a common law obligation to fully and accurately disclose all matters within its knowledge that were relevant to the nature and extent of the risk to be assumed by Northbridge. As it turned out, the insurance application had included a question regarding whether there were any contracts with shippers that stipulated limits of liability that superseded KLM's standard bill of lading. KLM had answered this question in the negative and did not give Northbridge a copy of its contract with Robinson. Under the Ontario Highway Traffic Act, RSO 1990, c H.8, any contract of carriage by a motor carrier is deemed to include the Uniform Conditions of Carriage that limit the carrier's liability to $4.41 per kilogram. Brown C.J held that KLM's contract with Robinson expanded its liability beyond this statutory limitation and, since this fact was directly relevant to the issue of insurability, KLM was obligated to disclose it. The Court found that the contract terms were material based on affidavit evidence stating that, if disclosed, this information would have affected the amount of the premium charged to KLM.

On the basis of the foregoing, Brown C.J. concluded that the Policy was void and Robinson's claims against Northbridge were dismissed.

M. ATL Trucking Ltd. v Vancouver Fraser Port Authority, 2015 FC 420 ("ATL") and Goodrich Transport Ltd. v Vancouver Fraser Port Authority, 2015 FC 520 ("Goodrich")

Goodrich, and the interlocutory decision in ATL, arose from a decision by the Vancouver Fraser Port Authority, also known as Port Metro Vancouver ("PMV"). PMV is a Canadian port authority established and governed by the provisions of the Canada Marine Act, SC 1998, c 10 and Letters Patent dated December 6, 2007. PMV operates and manages various port facilities in and around Vancouver, British Columbia, and is Canada's largest port. PMV had experienced a long history of labour disputes connected to the drayage sector and work stoppages in 1999, 2005, and 2014 were brought on by poor remuneration, increased operating costs, undercutting of wages, and operational inefficiencies. The work stoppages caused significant delays in container movement and significant economic losses.

The applicants were 28 businesses engaged in drayage, specifically the transportation of shipping containers by truck in and around the Lower Mainland of British Columbia. A great deal of their business involved moving shipping containers to and from certain container terminals managed by PMV. This commercial relationship was not without problems and a work stoppage by the truck drivers occurred in 2014. The Minister of Transport commenced an independent review that concluded, among other things, that there was an oversupply of trucks authorized to access the port under PMV's Truck Licensing System ("TLS"). Following this review, PMV publicly announced its intention to reform the TLS, including its intention to reduce the number of licensed trucks. Under this new scheme, PMV gave notice that all existing authorizations to enter the port were terminated and interim authorizations would expire on January 31, 2015. This had the effect of denying access to PMV facilities to any truckers who were unsuccessful in the new TLS process.

In early December 2014, PMV published a handbook providing instructions on how to submit an application under the new TLS, outlining the mandatory and discretionary criteria that would be used to assess the applications, and indicating that the anticipated number of applications would likely exceed the number of available licenses. The application process was to run from December 10, 2014 to January 16, 2015, and the applications were processed in batches. During this period, PMV issued several notices indicating that a certain number of applications had been approved and that the applications would continue to be processed until the end of January 2015 or when the target number of truck tags had been reached. Unbeknownst to the applicants, PMV was operating on a "rolling approvals" basis and a more onerous scoring benchmark was being used for the assessment of the later batches of applications.

The application process was concluded and the applicants each received a form letter from PMV denying their applications. This was the decision for which the applicants sought judicial review in the Federal Court.

In the Goodrich applications for judicial review, the applicants argued that the impugned decision was made without lawful authority because PMV fettered its discretion by adopting an inflexible evaluation model and that PMV's process was procedurally unfair. PMV accepted that duty of fairness applied, but argued that the content of the duty fell on the lower range of participation given the largely contractual nature of the parties' relationship (citing Mavi v Canada, 2011 SCC 30).

Meanwhile, PMV brought a motion arguing that the Federal Court lacked jurisdiction to hear the Goodrich judicial review applications because it was not acting as a "federal board, commission or tribunal" within the meaning of the Federal Courts Act and its decision was of a private and commercial nature. In the alternative, PMV submitted that if the Court did in fact have jurisdiction, the applications ought to be dismissed because the applicants had failed to commence the applications within the 30-day time period provided in the Federal Courts Act and had not sought an extension of the time.

PMV's motion was considered by Justice Zinn in the interlocutory ATL decision. He concluded that PMV's decisions regarding the applicants' licences, in effect, denied the applicants access to PMV facilities in order to carry on their commercial activities. He held that this activity was one of the main functions of the port and that, in making this decision, PMV was exercising its statutory authority pursuant to paragraph 28(2) (a) of the Canada Marine Act, SC 1998, c 10 to engage in port activities related to shipping, transportation of goods, handling of goods, and storage of goods. Zinn J. confirmed that there was a reviewable decision within the meaning of the Federal Courts Act, given that the applications had been assessed and PMV had reached a decision to deny the applicants' applications. Therefore, the case proceeded to a judicial review hearing before Justice Barnes (Goodrich).

In Goodrich, Barnes J. held that PMV had a duty of fairness to the applicants in relation to the evaluation of the licence applications. While there was no legislative limitation over PMV's procedure in considering the applications, Barnes J. noted that the decisions were of considerable economic importance to the applicants, PMV had promised a "consistent, fair and transparent process" and the applicants had no right to a reconsideration or appeal. In such circumstances, the applicants were entitled to a fair, impartial and open process that afforded them meaningful rights of participation. Citing Fisher v Canada, 2012 FC 720, Barnes J. held that effective notice is fundamental to procedural fairness and that, despite PMV's initial disclosure regarding the criteria, "fairness demanded the disclosure of the more onerous scoring system that applied to later applications." He concluded that PMV's decision to reach the benchmark was likely done on an ad hoc basis with little, if any, regard for fairness and that this process had unfair results.

Barnes J. went on to consider whether PMV had fettered its discretion. He concluded that, "in the absence of statutory confinement, a decision-maker does not act unreasonably or fetter its discretion by developing and applying firm rules to the evaluation of license applications" as long as it acts fairly and the rules it adopts are relevant to the exercise of its proper discretion. On this basis, he concluded that, while PMV's assessment scheme lacked nuance, it was not unreasonable or unlawful for PMV to adopt the criteria set out in the handbook or to assign scores solely on the basis of binary choices.

The decisions made by PMV in denying licences to the applicants were set aside. Further, PMV was ordered to reconsider the applications "on the merits and in accordance with the most favourable approval benchmark applied to any of the successful licensing applications" and to issue licences to "any qualified Applicant whose application meets that benchmark for approval."

Authors

Graham Walker 
GWalker@blg.com
604.640.4045

Dionysios Rossi 
DRossi@blg.com
604.640.4110

Expertise

Maritime Law
Insurance and Tort Liability