INTHISISSUEPAGE1COMPULSORYINSURANCEFORPASSENGERVESSELS

PAGE2FIRMANDINDUSTRYNEWS

PAGE5C.A.REINFORCESARBITRATIONCLAUSES

PAGE7SAFEFOODFORCANADIANSACT

PAGE10UNDECLAREDDECKCARGOPAGE14POSSESSORYLIENSVS.RECEIVER

PAGE20REEMPLOYMENTREFUSALANDMITIGATION

PAGE21CONTEST

FERNANDES HEARN LLP NEWSLETTER JANUARY 2017

On December 24, 2016 the Federal Department of Transportintroduced dra= regula?onsto implement compulsory insuranceforshipscarryingpassengers.

Interested persons may make representa?ons to the Minister ofTransport concerning the proposedRegula?onswithin 60 days a=erthedate ofpublica?onofthisno?ce.All suchrepresenta?ons mustbein wri?ng and cite the Canada Gaze)e, Part I, and the date ofpublica?on of this no?ce, and be sent to Doug O’Keefe, Chief,Interna?onal MarinePolicy,MarinePolicyDirectorate,DepartmentofTransport,PlacedeVille,TowerC,330Sparks Street,OOawa,OntarioK1A 0N5 (tel. : 613-608-8904; fax: 613-998-1845; email:doug.okeefe@tc.gc.ca).

Below is an execu?ve summary provided by the Department ofTransport:

Background

Part4oftheMarineLiabilityAct(theAct)introducedacomprehensiveliabilityregimeforpassengers carriedoncommercial orpublicpurposeships. The liability regime is based on the Interna?onal Mari?meOrganiza?on’s Athens Conven<on rela<ng to the Carriage ofPassengers and their Luggage by Sea, 1974 as amended by theProtocolof1990(1990AthensConven?on).

The 1990 Athens Conven?on presumes the carrier to be liable forinjuries resul?ng fromshipwreck, collisions, stranding, explosion, fireand any defect of the ship. As a trade-off, carriers can limit theirliability to each passenger to 175 000 Special Drawing Rights (SDR).[Special Drawing Rights are a special unit of account of theInterna?onal Monetary Fund which fluctuates and was equivalentto$1.80(1.80*175000=$315,000)onJune13,2016.].For this trade-off towork, carriers must have thefinancial resources to cover thisliability. The 1990 Athens Conven?on does not require carriers toinsurethisliability; however, sec?on39 oftheActprovidesauthoritytomakeregula?onsrequiringcarriers tomaintain insurancetocover

CompulsoryInsuranceforPassengerVessels

THENAVIGATOR

FERNANDES HEARN LLP NEWSLETTER JANUARY 2017 PAGE 2

FIRMANDINDUSTRYNEWS

• FernandesHearnLLPhas beenawardedthe2017CorporateIntl.GlobalAwardin thecategoryTransportLaw-LawFirmoftheYearinCanada.

• KimStoll celebratedher 10th year as partner withRui FernandesandGordon HearnonJanuary21,2017.

• MarSnAbadihas beeninvitedtoreturnas aguestlecturerattheUniversityof OOawa Faculty of Law in the Mari?me Law (Droit Mari?me) course in February/March. Mar?n will lecture on admiralty and commercial law and regulatoryaspectsinmari?melaw.

• Rui Fernandes andKim Stollwill be aOending the CanadianDefence Lawyers seminarinTorontoonFebruary22nd,2017onDefendingProductsClaims.

their liability to passengersuptothemaximumlimitofliability.

On June 16, 2000, the tour boat True NorthIIsankin 15mofwaterinGeorgianBayresul?ngin the drowning of two children. The inquestfoundthattheowner-operatorwasnotinsuredand recommended compulsory insurance forcommercialships carryingpassengers.Followingthis incident, theMinister of Transportmadeacommitment in2001totheHouseofCommonsStanding CommiOee on Transport andGovernment Opera?ons to enact regula?onsrequiring compulsory insurance for shipscarryingpassengers.

The Min is ter publ i c ly announced theGovernment’s plans to proceed with theseRegula?ons in 2003. The Department ofTransport (the Department) undertook acomprehensiveimplementa?onstudy (MariportReport)in2002andextensiveconsulta?ons withmarine stakeholders and marine insurersin2003–2004.

However, the Department was unable toproceed with the Regula?ons because theadventure tourism industry (e.g. white waterra=ing) could not acquire insurance without“waivers ofliability”thatareinvalidunderPart4of the Act. The Act was amended in 2009 toe x c l ude adven tu re tou r i sm ac?v i?es(subsec?on37.1(1)ofPart4oftheAct).Liabilityforthese ac?vi?es nowfalls underPart3oftheAct.

Issues

While the Act contains a liability regime forpassengers carried on board commercial orpublicpurposeships,carriers arenotrequiredtomaintainliabilityinsurancetowards theirliabilitytopassengers.

Objec<ves

Theobjec?veis toensure thefinancial securityof compensa?on due to passengers or theirdependents in theevent of a marine accidentinvolving personal injury or loss of life by

requir ing marine carr iers to maintainappropriateinsurance.

Descrip<on

The proposedRegula?ons would require shipscarrying passengers to maintain liabilityinsurance for death or personal injury. Morespecifically,theywould

-apply tocommercial andpublicpurposeshipsengagedinthedomes?ccarriageofpassengers;

-requireanycarrierwhoperforms any part ofthe carriage tomaintain liability insurance fordeathorpersonalinjury inanamount not lessthan $250,000 mul?plied by the passengercapacityoftheship;

-includeaprovisionforfleetpolicies wheretheamount of insurancewouldbedeterminedbythepassenger capacity of eachship.However,shouldanincidentoccurinvolvingtwoormoreships inthe fleet, eachshipwouldbedeemedseparatelyinsured;

- require carriers to carry proof of liabilityinsuranceonboardtheshipwherefeasible,ortoproduceitwithin24hours a=era designatedofficerhasboardedtheship;and

-includea provisionwhere failuretoprovideaproof of appropriate liability insurance couldresult in either the deten?onof theship or afine not exceeding $100,000 upon summaryconvic?on.

TheproposedRegula?onswouldnotapplyto

-anadventuretourismac?vity thatmeets thef o l l o w i n g c o n d i ? o n s s p e c i fi e d i nsubsec?on37.1(1)oftheAct:

(a) it exposespar?cipants to an aqua?cenvironment,(b) itnormally requires safetyequipmentand procedures beyond those normallyusedinthecarriageofpassengers,(c) par?cipants are exposed to greaterrisks than passengers are normallyexposedtointhecarriageofpassengers,

FERNANDES HEARN LLP NEWSLETTER JANUARY 2017 PAGE 3

(d) its risks havebeenpresentedto thepar?cipants and they have accepted inwri?ngtobeexposedtothem,and(e) any condi?on prescribed underparagraph 39(c) of the Act [ Underparagraph39(d)oftheAct,theGovernorin Counci l can make regula?onsprescribing classes of persons for thepurposeofsubsec?on37.1(2).Currently,theonly classesofpersons intheActaretheonesmen?onedinsubsec?on37.1(2)oftheActasdefinedabove];

-thecarriage ofa sail trainee orapersonwhoisa member of a class of persons prescribed inparagraph39(d)oftheAct;- a carriage by pleasure cra= as defined insec?on2oftheCanadaShippingAct,2001;-aninterna?onal carriage (e.g.ferries opera?ngbetween a port in Canada and a port in theUnitedStates;-a carriageoperatedby thefederal,provincialor territorial governments, or by an en?tyen?tled to indemnifica?on by government forliabilityunderPart4oftheAct;and-a carriage undertaking for searchand rescueopera?ons thatarecarriedoutbythe CanadianCoastGuardAuxiliary.

To facilitate compliance, the proposedRegula?onsprovide for implementa?on in twostages.

Exis<nginsurancepolicies

Carrierswhoholdaninsurancepolicyforliabilityto passengers when the proposed Regula?onscome into force would need to comply withthem upon the renewal, modifica?on orcancella?onofthepolicy.

Newinsurancepolicies

Carrierswhoholdnoinsurancepolicyforliabilityto passengers when the proposed Regula?onscome into forcewould be required to complywiththem60daysa=ertheycomeintoforce.

Some stakeholders were concerned with thedetermina?on of passenger capacity. For

example, somestakeholders noted that fishingvessels would not have a passenger capacity,while others noted that a ship may have acapacity of nine passengers but never carrymorethanfourpassengers.

TheproposedRegula?onsarenotprescrip?veastohowanoperator must determine the ship’spassengercapacity.All operators ofvessels usedto carry passengers, including fishing vessels,need to comply withthe Canada Shipping Act,2001 regula?onsonthecarriage ofpassengers.Indoingso,theyneedtodetermine thenumberofpassengers that thevessel has beenouviOedto carry (e.g. number of life jackets). Thisdetermina?on should inform their insurancepolicyrequirements.

FernandesHearnLLP will keep you advisedofany changes to the dra= regula?ons a=erstakeholders provide comments to thegovernment.

RuiM.Fernandes

FollowRuiM.FernandesonTwi)er@RuiMFernandesandonLinkedin.SeealsohisblogathOp://transportlaw.blogspot.ca

INVESTOR NEWSLETTER ISSUE N°3 FALL 2008FERNANDES HEARN LLP NEWSLETTER JANUARY 2017 PAGE 4

2.OntarioCourtofAppealReinforcesArbitraSonClauses

In October 2016, theOntario Court of Appealreleasedaunanimousdecisionthatoverturnedadecision of first instance and stayed a courtac?onpendinga determina?onofjurisdic?onbyan arbitrator pursuant to the competence-competence doctrine (*1). This doctrineprovidesthatanarbitratoristheproper refereeatfirstinstancetoruleuponhis ownjurisdic?onunderanarbitra?onclause.

The context of the case was a shareholdersagreement between partners in an Italianrestaurant.Therestaurantfailedandone ofthepartners,Mr.Haas,broughtanac?onagainsthisformer investment partners. The shareholdersagreement indisputably containedamandatoryarbitra?on clause in the event of a disputeamongstthebusinesspartners.

SuperiorCourt

Mr.Haas originally issueda StatementofClaim,which alleged both torts on the parts of theothershareholdersprior tothesignatureoftheagreement, and breaches of contract thatrelated to the shareholders agreement. Uponreceiving no?ce of the defendants’ impendingmo?on to stay the ac?on on the basis of thearbitra?on clause, Mr. Haas amended hisStatementofClaimtoremovethereferences tobreachofcontract,amovewhichcanbe seenasanacquiescencethatcontractual disputes wouldbe subject to the arbitra?on provision in theshareholdersagreement.

Themo?onsjudge,AkhtarJ.,hadrefusedtostaythe plain?ff’s ac?on. At the outset, the judgeheldthat the mo?onshouldbedeterminedonthe basis of the AmendedStatement of Claimandnottheoriginal StatementofClaim.Hethenproceededtoconsider the“pithandsubstance”of the ac?on (*2). His Honour concluded thatb o t h t h e p l a i n ? ff ’ s a l l e g a ? o n s o fmisrepresenta?ons inducing him to sign theshareholders agreement,andtheallega?onthatthebusiness partnersbreachedfiduciary du?es

by openingacompe?ng restaurant within onekilometre fell outside of the content of theagreement, which contract was subject tomandatoryarbitra?on.

Onthe otherhand,thejudgediddeterminethatthe allega?ons of oppression pertained to thecontent of the shareholders’ agreement, andthat,atfirstblush, theseissuesshouldproperlybereferredtothearbitrator.However,AkhtarJ.refused on policy grounds to separate theproceedings betweenthe courts andarbitra?onwhenacommonsetoffactswouldunderpinthetwoparallelproceedings.

CourtofAppeal

Lauwers J.A. for theCourt of Appeal reversedthe decision of the mo?ons judge. Lauwersstressedthedirec?veandunequivocal nature ofs.7oftheArbitra?onAct(*3),contras?ngthis tothe former wording of the provision (*4). Thejudge also stressed the importance of thecompetence-competencedoctrine, whereby, asnotedabove,anarbitratoris the proper refereeatfirstinstancetoruleuponhis ownjurisdic?onunder an arbitra?on clause. The principle isentrenchedboth in theOntario legisla?onandtheSupremeCourtcaselaw(*5).

Theappealcourtthenendorsedtheapproachofthe lower court in looking to the pith andsubstance of the plain?ff’s claim; howeverLauwers J.A. refuted the determina?on ofAkhtar J. that the pith and substance of theclaims was beyondthecontractual framework.Save fortheallegedmisrepresenta?onas totheperformance of other restaurants at thesamel o c a ? o n , t h e o t h e r a l l e g a ? o n s o fmisrepresenta?on as advanced by the plain?ffrelated to thepost-contractual conduct of thepartners, such as the opening hours of therestaurant,the shorvallincapitaliza?onandthedecision to prematurely close down therestaurant. Accordingly, theappealscourt heldthatthepithandsubstanceoftheseclaims wasn o t p r e - c o n t r a c t u a l f r a u d u l e n tmisrepresenta?ons inducing the plain?ff toinvestinthebusiness.

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Theappeals courtwentontoconsiderwhetherthefact that the plain?ffpleadedin tort ratherthan contract excluded the applica?on of thearbitra?onprovisioncontained in the contract.LauwerJ.A.dismissedtheargumentandwarnedagainst thedanger of vi?a?ng the purposes ofanarbitra?onclauseifthis couldbebypassedbya tort-based characteriza?on of a plain?ff’sclaims.Inthesamevein,the courtrefutedthatthearbitra?on clauseshouldbe impairedby apleading of fraud, which could be used as astrategytoobviateamandatedarbitra?on.

The mo?ons judge had resisted applying thearbitra?onclause for theminor por?onof theclaim which he had determined should havebeenarbitrated. However, this was basedona“faultypremise” as thedecisionwasprematuregiven that there had not been a properdetermina?on by an arbitrator of his/her ownjurisdic?on.

The Court of Appeal finally had to decide onresidual arguments, which had not beenconsidereda firstinstancegiventhatthe plain?ffhadprevailedonotherbases.

Firstly, the court denied that the arbitra?onclause was per se invalid. Although thearbitra?on clause called upon each party tonameanarbitrator andclearly was dra=edforthepurposesofabilateral contract as opposedto a mul?-party shareholder agreement, this

shouldnotbefatal butrather the clause shouldbe given a func?onal interpreta?on to respecttheintentofproceedingtoarbitra?on.

Finally,althoughoneshareholderhadnotsignedtheagreementandwas notresis?ngthemaOerproceeding in Superior Court, the risk ofmul?plicity of proceedings did not jus?fyignoring the policy support for enforcing thearbitra?onclause.Moreover, it was notreadilyapparent that this partner would refuse topar?cipateinthearbitra?onprocess.

This case is demonstra?ve that the OntarioCourtofAppeal isheedingthepolicydirec?onofthe legislator and the Supreme Court; andpar?es whoincludeanarbitra?onclause intheircontracts must expect to be held to thoseprovisionsbythecourtsoftheprovince.

MarkGlynn

Endnotes(*1)Haasv.Gunasekaram2016ONCA744reversing2015ONSC5083(*2)ThisapproachwaslaidoutbytheOntarioCourtofAppealinMatrixIntegratedSolu<onsLtd.v.Naccarato2009ONCA593(*3)Arbitra<onAct1991S.O.1991,c.17(*4)S.7readlessprescrip?velyundertheArbitra<onsActR.S.O.11990c.A.24(*5)Sees.17ofArbitra<onAct(supra)andDellComputerCorp.v.Uniondesconsommateurs2007SCC34

INVESTOR NEWSLETTER ISSUE N°3 FALL 2008FERNANDES HEARN LLP NEWSLETTER JANUARY 2017 PAGE 6

3.ProposedRegulaSonsundertheSafeFoodForCanadiansAct

OnJanuary21,2017,theGovernmentofCanadalaunched a public consulta?on with respect toproposed regula?ons under the Safe Food ForCanadiansAct (“SFCA”)aimedat strengtheningfood safety. The SFCA is meant to harmonizeCanada’s food safety regime with that of ourtrading partners, par?cularly, theUnitedStatesandthe EuropeanUnion.Atthis ?me, the dra=regula?ons affect the following food industrybusinesses: preparers offoodfor interprovincialtrade or export, food importers/exporters,Interprovincial traders of food, fresh fruit andvegetable primary producers and the organicfoodindustry.Theproposedregula?ons appeartobeinline withthe standardsoftheAmericanFood SafetyModerniza<on Actand its Rule forPreventa<ve Controls for Human Food. Itremains tobeseenwhether regula?ons similarto the Rules on Sanitary Transporta<on ofHuman and Animal Food will be enacted.Further informa?on specific to carriers can befoundinthe“highlights”sec?on.

The dra= regula?ons are meant to put “agreateremphasis onpreven?ngfoodsafetyrisksforall foods importedintoCanadaorsoldacrossprovinces.”(*1) They also apply to foodsprepared for export. The 90-day consulta<onperiodendsonApril21,2017.

Goals of the Proposed Regula<ons under theSFCA

TheSFCAwaspassedin2012as anaOempt tomodernizeCanada’s foodsafetysystem,butwillnotbebrought intoforce un?l theseregula?onscontainingmanyoftheprescribedrequirementsunder the SFCA are finalized. (*2) Theregula?ons aremeant tobestrong,butflexible,thereby allowing businesses to “uphold theirreputa?on, keep customers healthy and loyal,andavoidcostlyrecalls.”(*3)

The preventa?ve systems that the regula?onsaim to put in place, such as traceability and

hazardanalysiscri?calcontrol point (“HACCP”)plans,are meant to“boost thecompe??venessof Canadian foodbusinesses across the supplychain…at home and on the world stage”according to the Canadian Government. (*4)Froma trade perspec?ve, the regula?onsalongwith the SFCA would align the Canadian foodsafety regimewith thoseof our major tradingpartners, such as the United States, theEuropean Union, Australia and New Zealand.(*5)This will bebeneficial toCanadaas well willbe opera?ng under interna?onally recognizedstandards.

In preparing these regula?ons, the CanadianGovernment has iden?fied food products thatfall intothe non-federallyregisteredsector,suchas fresh fruit and vegetables as well as otherprepared foods, as being “high risk” becausethey donot fall under the current commodity-basedregula?ons(e.g.meat,fish,ordairy).(*6)Accordingly, such foods are specificallyaddressedintheregula?onsandcompaniesthatmanufacture/grow/harvest, process, treat,preserve, grade, package, label or store suchfoods should pay par?cular aOen?on to theregula?ons.

HighlightsoftheProposedRegula<ons

Theregula?onsmainlyfocus onthe sanitaryandsafe manufacturing, growing, harves?ng,processing, trea?ng, preserva?on, grading,packaging, labelling and storing of foodproducts. Sec?on 19(1) specifically states thatthe SFCA and regula?ons do not apply to apersonwhoconveysa foodcommodity iftheirsole concerninrespectofthefoodcommodityisi t s c o n v e y a n c e . A c c o r d i n g l y , w h i l ewarehousemanmay be subject totheSFCA, itappearsthatcarriersandfreightforwarders willnotbe subjecttotheSFCAat this ?me. (*7)Asnotedabove,the regula?ons donot incorporatesimilar provisions as the US Rule on SanitaryTransporta<onofHumanandAnimalFood.

However,there is anexcep?ontothis carve-outwith respect to certain provisions of theregula?ons forthosedealingwithconveyancing/

INVESTOR NEWSLETTER ISSUE N°3 FALL 2008FERNANDES HEARN LLP NEWSLETTER JANUARY 2017 PAGE 7

carriage. Sec?on26(1)prohibits aperson fromsending or conveying from one province toanotherorimpor?ng/expor?nganyfreshfruitorvegetable unless(a)theyare amember ingoodstanding of the Fruit and Vegetable DisputeResolu?on Corpora?on (a not for profitcorpora?onthat80%ofbuyers andsellers andfruit andvegetables arealready members); (b)theyonlysell freshfruitorvegetablesdirectlytoconsumersandarepaid lessthan$100,000 forwhat they soldwithintheprevious 12months;(c)they only dealwithless thanonemetric ton(2205lb) of fresh fruit and vegetablesper day;(d)theyonly sell freshfruitandvegetablesthatthey havegrownthemselves; or(e)they areanorganiza?onthat is a registeredcharity,societyorassocia?on.(*8)

There are also rules regarding the design andmaintenance of equipment used to transportfood to and from anestablishment andthat isloaded and unloaded at an establishment (seesec?on 70); however, since carriers areexempted from this part, it appears that theresponsibilityforensuringcompliancewouldfallon other par?es such as the manufacturer.Similar requirements exist with respect to theactual unloadingandloadingprocedures as wellas storage.While thecurrent provisions donotapply to carriers, we note that manufacturersand related par?es may see it as moreadvantageous to use carriers that have HACCPPlans in place and are complying with otherrequirements of the SFCA (such as thosedescribed inthisparagraph) inorder tobolsterand assist in the manufacturer’s owncompliance.(*9)

Licences: The proposed regula?ons aim toincrease accountability for foodsafety andwillrequire the following to be licensed: foodimporters,persons preparingfoodforexportorinterprovincial trade, and for personsslaughteringanimals fromwhichmeatproductsfor export or interprovincial trade may bederived.Thelicencewouldbevalidfora periodof two years and cost $250.00. It would besubject to suspension or cancella?on for non-

compliance with the SFCA or the regula?ons.(*10)

There are some excep?ons to the licensingrequirement, including: alcoholic beverages,food addi?ves, and some unprocessed foodsthatwillbefurtherprepared(*11)

Preventa?veControl Plans (“PCP”):HACCPPlanswere discussedin theOctober 2015 FernandesHearn LLP NewsleOer. Although referred to byvarious names suchasPCPs, theseplansaimtoiden?fy hazards associatedwitha specific foodcommodity and put mechanisms in place toprevent and control those hazards in order toavoidfoodcontamina?on. Keyareas andissuesthat theseplans must address pursuant totheregula?ons include: sanita?on,pestcontrol andnon-food agents, conveyance and equipment,condi?ons respec?ng the establishment (i.e.proper ven?la?on, ligh?ng and temperature),unloading, loading and storing, competency ofstaff, hygiene, communicable diseases andlesions, inves?ga?on and no?fica?on ofcomplaints,andrecall.(*12)

APCPmustbe inwri?ngforthefollowingunlessanexcep?onapplies: every licenceholderwhoimports foodor prepares food to be conveyedfromoneprovincetoanother,everypersonwhogrows orharvests freshfruitorvegetables tobeexported or conveyed from one province toanother, every licence holder preparing fish ormeat products for expert and every person(includinga licenceholder)expor?ngfoodwhorequests an export cer?ficate. Companies thatgenerate$30,000 or less in gross annual foodsales are not required to have their PCP inwri?ng.(*13)

The PCP is based on HACCP principles andshouldincludethefollowing(whereapplicable):

(1)adescrip?onofthebiological, chemical andphysical hazards that could contaminate thefood; measures used to prevent or eliminatethosehazards andevidence that themeasuresareeffec?ve;

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

(2)a descrip?onofthe points atwhicha controlcan be applied that is essen?al to prevent oreliminate the hazard as well as evidence thattheyareeffec?ve;(3)adescrip?onof the“cri?cal limit”or limit atwhich the hazard is acceptable withoutcompromisingthesafetyofthefood;(4)a descrip?onofthemethodsusedtomonitorthecontrolpoint;(5) a descrip?on of the correc?ve ac?onproceduresforeachcri?calcontrolpoint;(6)a descrip?onoftheproceduresusedtoverifythat the PCP meets the requirements of theSFCA;and(7)documentaryevidencethatthe PCPhasbeenimplemented.(*14)

The Canadian Food Inspec?on Agency (“CFIA”)has published examples of PCP templates fordomes?cfoodbusinessesandexporters, as wellas guides for importers, exporters and foodbusinesses toassistinpreparingtheirownplans.(*15)

Traceability: Anyone impor?ng, expor?ng andinterprovincially trading food as well as thoseholding a licence issued under the SFCA orgrowing/harves?ngfreshfruit orvegetablesthatare to be exported or traded interprovinciallymust comply with the traceability requirementsunder the regula?ons. They will be required tokeep records that can be used to track foodforward to their immediate customer andbackwardstotheimmediate supplier; however,retailers would not be required to trace theirsales forwardtoconsumers.Theserecords mustbekept foraperiodof2years fromthe daythatthefoodwasprovidedtoanotherpersonorsoldat retail. If a food safety risk is iden?fied, theMinistry may require that the records beproduced.(*16)

Other Provisions: The regula?ons containprovisions specific to certain foodcommodi?es,such as meat, egg and dairy. They also allowanyonetorequestanexportcer?ficatetocomplywith fore ign government or customerrequirements. There are provisions related tolabeling and packaging as well as grade

requirements and container sizes and standardweights.

JaclyneReive

Twi)er:@jaclyne_reiveBlog:h)ps://jaclynereive.wordpress.com

Endnotes(*1)“GovernmentofCanadaproposesnewrulestostrengthenfoodsafety”GovernmentofCanada,online:<hOp://news.gc.ca/web/ar?cle-en.do?nid=1181099>

(*2)“Backgrounder:ProposedSafeFoodforCanadiansRegula?ons”GovernmentofCanada,online:hOp://www.inspec?on.gc.ca/about-the-cfia/acts-and-regula?ons/regulatory-ini?a?ves/sfca/consulta?on/learn/backgrounder/eng/

1484935542023/1484935542619(*3)Ibid.(*4)Ibid.(*5)Ibid.(*6)“SafeFoodForCanadianRegula?ons”

CanadaGazeOe,Vol.151,No.3–January21,2017,online:hOp://www.gazeOe.gc.ca/rp-pr/p1/2017/2017-01-21/html/reg1-eng.php#reg(*7)Ibid.(*8)Ibid.

(*9)Ibid.(*10)Ibid.(*11)Ibid.(*12)Ibid.(*13)Ibid.

(*14)Ibid.(*15)PCPTemplatesandGuides:<hOp://www.inspec?on.gc.ca/about-the-cfia/acts-and-regula?ons/regulatory-ini?a?ves/sfca/consulta?on/learn/eng/1427299500843/

1427299800380>(*16)Supranote6.

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4. Hague-VisbyRulesandLimitaSonsapplytoUnauthorizedandUndeclaredOn-DeckCargo

Loss

De Wolf Mari<me Safety B.V. v. Traffic-TechInterna<onalInc.2017FC23(January11,2017)

OnJanuary11,2017,theFederal CourtofCanadawastaskedwiththe preliminarydetermina?onoftwoques?onsoflawinDeWolfMari<meSafetyB.V. v. Traffic-Tech Interna<onal Inc. Firstly, didtheHague-Visby Rules (*1)liability regimeapplyto the loss inques?ongiventheundeclared ondeckcarriageoftheshipmentand,ifso,were theHague-Visbypackagelimita?ons available tothecarrierinthecircumstances?

Whereondeck carriage ofcargo is declared onthebill ofladingandthat cargois infactcarriedon deck, the Hague-Visby Rules’ defini?on of“goods” will exclude that cargo andtheHague-Visby Rules and its limita?ons will not apply tothe associated carriage. In this case, thecargo,while carried on deck, was not declared as ondeck cargo on thebill of lading and, therefore,theissuewaswhetherthe Hague-VisbyRulesandassociatedlimita?onswouldapply.

FactsTheplain?ff, DeWolfMari?meSafety B.V. (“DeWolf”) was the owner and consignee of ashipment described as “One piece zodiac andSpare Parts” (the “Shipment”), carried in acontainer loaded on board the vessel “CapJackson” in Vancouver, Canada. The Shipmentwas scheduled for delivery in RoOerdam,Netherlands. Thecontainer wascarriedunder abill of lading issuedby Traffic-TechInterna?onalInc. (“Traffic-Tech”).There wasnodeclara?ononthebill ofladingthatthesaidcontainerwas tobecarried“ondeck”;however,thecontainerwas,infact, carried on deck. There also had been nodeclara?ononthe bill of ladingorotherwisebythe shipper as to the nature or value of theShipment.

Unfortunately, thecontainerwaslostduringthevoyage andfailedtobe delivered inRoOerdam.De Wolf’s loss totalled €71,706.00, being$98,896.92CADpluscostsandinterest.

DeWolf claimed that Traffic-Techhad failed tocarry theShipment under deck, insteadcarryingthe Shipment on deck without declara?on orauthority. By failing to declare the on deckcarriage on the bill of lading, DeWolf claimedthat theHague-Visby Rules didnot apply. Theresul?nglosswas allegedtohavebeencausedbyTraffic-Tech’s failure to safely carry, care for,discharge, store and deliver its cargo in goodorder and condi?on. Further, De Wolf allegedthat Traffic-Tech had breached its contract andobliga?ons, was grossly negligent, and was,therefore, not en?tled to invoke any oflimita?ons of liabilityprovidedfor inthe Hague-Visby Rules, being Schedule 3 of the MarineLiabilityAct,SC2001,c6(“MLA”).

Traffic-Techdefendedarguingthat theShipmentwas “goods” as defined under the Hague-VisbyRules in Ar?cle I(c). “Goods” excludes “cargowhich by the contract of carriage is stated asbeing carried on deck and is so carried.”Therefore, whiletheShipmenthadbeencarriedondeck,ithadnotbeendeclaredasbeingcarriedondeckonthebill of lading. Asa result,Traffic-TecharguedthattheShipmentwas notexcludedfrom the defini?on of “goods” and was,therefore, subject totheHague-Visby Rules andits limita?ons of liabilitywereavailable. Further,Traffic-Techargues thatAr?cleIV(5)(a)statesthatneither the carrier nor the ship shall “in anyevent”becomeliable for any amount abovethelimita?onprovidedforintheconven?onandthatthe limits shall apply in any ac?on against thecarrier,andwhetherintortorcontract.

The limita?on claimed by Traffic-Tech was anamount not exceeding 666.67 units of accountper package or unit or 2 units of account perkilogrammeofgrossweight ofthegoods lost ordamaged,whicheverwasthehigher.

De Wolf, on the other hand, argued that theundeclared on-deck carriage of the shipment

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under thebill ofladingpreventedthe defendantfromrelyingonthecarrier’s limita?ons ofliabilityprovided for in theHague-Visby Rules. Simplyput, De Wolf had not been no?fied that theShipmentwouldbestowedonthe deckandonlyfoundouta=ertheloss andthere wasno“libertyclause” inthe bill of ladingthatputDeWolf onno?ce that the Shipment might be carried ondeck. (A liberty clause in a carriage contractprovidesthata carrierwill beatlibertytostowatits op?oncargoabovedeck or below deck). DeWolf argued that there are special risksassociated with on-deck cargo and there areaddi?onal measures that must be taken toprotectandinsure suchgoodswhentheyaresoshipped.DeWolfsubmiOedthat,wherethere isnoplaceofstowagenotedonthebill oflading,itis generally understood that the goods will becarried under deck. To carry them on deckwithoutpriordeclara?onwouldbe improper,perAr?cle III(2)oftheHague-Visby.Bypermi�ngthelimita?ontoapply,De Wolfargued,“wouldbe torewardthe carrier for failing toits obliga?ontodeclareon-deck stowage, inbreach of contract,andcontrary tothegoodfaithrequirementreadintoAr?cle1(c) of theHague-Visby Rules” (*2).This is also in keeping with the good faithobliga?onnowreadintoCanadiancommon lawcontract(*3).Asthelimita?ondidnotapply,fulldamageswererecoverable.

Analysis

Thetwoques?onsoflawbeforetheCourtwere:

(1)Doestheundeclaredon-deckcarriageoftheShipmentundertheTraffic-Techbillof lading prevent the defendant fromrelyingontheHague-VisbyRules;and(2) If the Hague-Visby Rules do apply,what limita?ons are applicable to thecontract of carriage pursuant to theHague-VisbyRules?

WithregardtoQues?on1,the CourtagreedwithTraffic-Tech that the fact that the on-deckcarriagewasundeclareddidnotpreventrelianceontheHague-VisbyRules.

Referring to both legisla?on and case law, theCourtheldthatthe containerizedShipmentofDeWolfcons?tuted“goods”withinthemeaningoftheHague-VisbyRulesas,evenifitwas carriedondeck,itwas notstatedasbeingsocarriedonthecontractofcarriage.

[35] …in order for cargo not to beregardedas“goods”, itmust not only becarriedondeck, butalsobestatedin thecontract of carriageas being so carried.Thelate professorWilliamTetleyconfirmsthat “neither the carrier nor the shippermay benefit from or be subject to theRules, provided that: a) thebill of ladingon its face states that the goods arecarriedondeck,andb)thecargoisinfactcarriedondeck”(Tetleyat1569).

[36] Therefore, the Hague-VisbyRuleswill apply to cargo carried under deckwhile the bill of lading states that thecargo is carried on deck, and vice versa(JulianCookeet al,Voyage Charters, 4thed. (London:Lloyd’s ShippingLawLibrary,2014)at1018).

[37]Inthiscase,itisundisputedthatthebill of ladingdidnotmen?onon-deckcarriage,andthat thegoods werecarriedondeck. Asoneof thetwo condi?onsisnot met, the cargo cannot be excludedfrom the defini?on of “goods”, and it isthussubjecttotheHague-VisbyRules.

TheCourt thenwent ontoconsiderQues?on2,(if the Hague-Visby Rules did apply), whatlimita?ons are applicable to the contract ofcarriagepursuant tothe Hague-Visby Rules?TheCourt found that the limita?on of liabilityprovidedforinAr?cle IV(5)(a)ofthe Hague-VisbyRules applied being an amount not exceeding666.67 units ofaccountperpackageor unitor2unitsofaccountper kilogrammeofgross weightofthe goodslostordamaged,whicheverwas thehigher.

TheCourt notedthatAr?cle IV(2)of theHague-VisbyRulesprovidescompleteexonera?ontothe

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carrierandtheshipfor loss ordamagearisingorresul?ng from the circumstances listed therein,suchas acts ofwar orofpublic enemies, amongothers.Ar?cleIV(5)(a)thenprovidesalimita?onof liability to the carrier and the ship “in anyevent.”Ar?cle IV(5)(e)providesthat neither thecarriernorthe shipshall be en?tledtothebenefitof this limita?on of liability if “the damageresulted from an act or omission of thecarrierdonewithintent tocausedamage,or recklesslyandwithknowledgethatdamagewouldprobablyresult”.

Ar?cleIV(5)(a)states:

Unlessthenature andvalue of[the]goodshavebeendeclaredbytheshipperbeforeshipmentandinsertedinthebill oflading,neitherthe carriernortheshipshall inanyeventbeor becomeliable forany loss ordamage to or in connec?on with thegoods in an amount exceeding 666.67unitsof accountper packageorunit or2unitsofaccount perkilogrammeofgrossweight of the goods lost or damaged,whicheveristhehigher(emphasisadded).

TheCourtwent onto consider various case lawfromCanada,theUnitedKingdomandtheUnitedStates,butul?matelystated:

[53] Ifwes?ckto“theordinarymeaningtobegiventothetermsofthetreaty in their context andinthelightofi t s object and purpose” (ViennaConven<onontheLawofTrea<es,CanTS1980No37,art31(1); seealsoJ.D.IrvingLtdvSiemensCanadaLtd,2016FC287atpara32), hereby construc?ng the wordsas theEnglandandWalesCourtofAppealdid,itappears clearthatthewords“inanyevent” used in Ar?cle IV(5)(a) mean “inevery case” and encompass the case atbar. This can also be inferred from theF r e n c h wo r d i n g “ e n a u c un c a sresponsable”, which canbetranslatedas“in no way responsible”. Neither thewordingofAr?cleIV(5)(a)northecontextof the ar?clesuggest that “inany event”

refers to the events listed under Ar?cleIV(2). Hence, theonly excep?on to thelimita?onrulesetoutinAr?cleIV(5)(a)isthe one provided by Ar?cle IV(5)(e),discussedfurtherbelow.

[54] DeWolfsubmits thatbadfaithshouldbar a carrier from thebenefits oftheHague-Visby Rules.However, thereisnoevidencebeforetheCourtthatTraffic-Tech actually acted in bad faith as noevidence is to be tendered in theseproceedings.Hence,itis notforthis Courtto assess whether Traffic-Tech acted inbadfaithornot.

Thenatparagraphs56and57(*4)

[56] De Wolfargues thatTraffic-Tech cannot invoke the benefit of thelimita?ons of liability contained inAr?cleIV(5)(a), hereby relyingonAr?cleIV(5)(e)of the Hague-Visby Rules. Traffic-Techsubmits that this excep?onis not at playas,whileDe Wolfallegesthatthedamagewas caused by Traffic-Tech’s negligence,“theproceedings containnoallega?onorproofof thedamage havingbeencausedwiththeintentorknowledgeonthepartofthe Defendantthatthedamages wouldoccur”(Defendant’sMemorandumofFactandLawatpara23).

[57] TheCourtsideswithTraffic-Techas,onceagain, itis notfortheCourttodecide ifAr?cleIV(5)(e)applies intheseproceedings as this would require anassessmentofthefacts.

Summary

TheCourtheldthatTraffic-Techcouldinvokethelimita?onof liability providedforatAr?cle IV(5)(a) of the Hague-Visby Rules, despite theunauthorizedandundeclaredondeckcarriageonthebillof lading.As a result, the Court orderedthat the limita?onapplicable to the contract ofcarriage pursuant to the Hague-Visby Rulesappliedandshould not exceed“666.67 units of

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accountperpackageorunitor2units ofaccountperkilogramofgross weightofthe goods lostordamaged, whichever is the higher” pursuant toAr?cle IV(5)(a). TheCourtalsoawardedcoststoTraffic-Tech.

KimE.Stoll

Endnotes(*1)Atpara 33,The Interna<onalConven<on fortheUnifica<onofCertainRulesofLawrela<ngtoBillsofLading,beOer knownas theHagueRules,wasconcludedatBrussels onAugust25,1924. Itwasamendedin1968by the Protocolto AmendtheInterna<onalConven<onfortheUnifica<onofCertainRulesofLawRela<ng toBillsofLadingtobecometheHague-VisbyRules.TheHagueRules

were incorporated inCanadian law throughtheWater Carriage of Goods Act, SC 1936, c 49.A=erwards, the Hague-Visby Rules came intoforce first through sec?on 7 of theCarriage ofGoods by Water Act, SC 1993, c 21, and thenthrough sec?on 43 of theMarine Liability Act,beinginsertedinits schedule3.TheHagueRulesand the Hague-Visby Rules may hereincollec?velybereferredastheRules exceptwherereferencetoaspecificconven?onisrequired.(*2)atpara22(*3)BhasinvHrynew,2014CSS71).(*4)ItalsoappearsthattheCourtwaspersuadedinpartthattherisksassociatedwithondeckcarriagearenolongerassignificantastheyoncewere.

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5. PerhapsPossessionReallyis9/10’softheLaw:TheCourtAppointedReceiverVersusthePossessoryLienClaimantTherecently publishedOntarioSuperiorCourtofJus?ce caseofRoyalBank v.Delta Logis<cs(*1)provides interes?ng guidance as to whether acourt appointed Receiver or a possessory lienclaimantmaycontroltheassetsofadebtor.

Background

23377764OntarioInc.(“233”)performedcertaininspec?on and repair services to seven trucksowned by Delta Logis?cs Transporta?on Inc.(“Delta”). 233alsostoredthetrucks foraperiodof?me. 233invoicedDelta roughly $80,000forthese services for which it was not paid. 233therea=er retained possession of the trucks,asser?nga possessory lienpursuanttoOntario’sRepairandStorer’sLienAct(the“RSLA”)(*2).

Delta therea=er made an assignment inbankruptcy on September 26, 2013. The RoyalBankofCanada(“RBC”)was a creditor ofDelta.Pursuant to s. 243(1) of the Bankruptcy &Insolvency Act (the“BIA”) (*3), atRBC’srequestBDO Canada Limited (“BDO”) was appointedpursuanttoa CourtOrder as the Receiveroftheassets,undertakings andproperty ofDelta.BDOwas also appointed as Delta’s Trustee inBankruptcy.

BDOappliedtothe Court for anorder requiring233 to deliver the trucks to it. BDO took theposi?on that pursuant to the Court Orderappoin?ngitas the Receiverthatitwas requiredto carry out various tasks including takingpossession of Delta’s property to sell for thebenefit of Delta’s creditors. 233 refused. Itarguedthat theCourthadnojurisdic?ontogiveeffecttoBDO’s demandforpossession.233tookthe posi?on that any disputed claim forpossession had tobe referred to the Court forresolu?onpursuanttotheprovisions ofPartVofthe RSLA which provides a mechanism for adetermina?onofthe rights ofpar?es toanassetunderlien.

Who as between 233 and the Receiver wasen?tled to possession – and, with that, thecontrol over the disposi?on of the trucks? Thedispute was referred to the Ontario SuperiorCourtwhichreviewedtherelevantlaw.

The Relevant Statutory Provisions and OrderAppoin<ngBDOasReceiver

TheBIA

• Sec?on 69.3 of theBIA provides that on thebankruptcyofanydebtorthatnocreditorhas anyremedy against the debtor or the debtor’sproperty, or shall commence or con?nue anyac?on, execu?on or other proceedings, for therecoveryofaclaimprovableinbankruptcy.

• subjecttocertaininapplicableexcep?ons,as ageneral rule the aboveBIA provision, however,does notpreventa securedcreditorfromrealizingor otherwisedealingwithhis or her security inthesamemanneras he or shewouldhave beenen?tled to realize, unless the court otherwiseorders.

•Sec?on70oftheBIAprovidesthat:

Every bankruptcy order and everyassignment made under this Act takesprecedence over all judicial or othera)achments, garnishments, cer<ficateshavingtheeffect ofjudgments, judgments,cer<ficatesofjudgment, legalhypothecsofjudgment creditors, execu<ons or otherprocessagainst thepropertyofa bankrupt,except those that have been completelyexecutedbypayment to thecreditororthecreditor’s representa<ve, and except therightsofasecuredcreditor.

• Sec?on243(1) of theBIA inturnprovidesfortheappointmentofa Receiversuchas tookplaceinthiscase:

243(1) Subject to (certain inapplicableexcep<ons)a courtmay appoint a receiverto do any or all of the following if it

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considers it to be just or convenient to doso:

(a) take possess ion of a l l orsubstan<ally all of the inventory,accountsreceivableor other propertyof an insolvent person or bankruptthat was acquired for or used inrela<on to a business carried on bytheinsolventpersonorbankrupt;

(b)exerciseanycontrolthatthecourtconsidersadvisableoverthatpropertyand over the insolvent person’s orbankrupt’sbusiness;or

(c) take any other ac<on that thecourtconsidersadvisable.

TheCourtOrder thatappointedBDOas Receiverdidnotcontainanyrestric?onontheability foritto dealwith andrealizea sale of thetrucks asDeltaassets.

TheCourtOrderAppoin<ngBDOastheReceiver

Thisorderprovidedinpart:

2. This Court orders that pursuant tosec?on 243(1) of the BIA, BDO is herebyappointedReceiver,without security, ofalltheassets, undertakings andproper?esoftheDebtoracquiredfor,orusedinrela?onto a business carried on by the Debtor,including all proceeds thereof (the“Property”).

3. This Court orders that the Receiver isherebyempoweredandauthorized,butnotobligated, to act at oncein respect of theProperty and, without in any way limi?ngthegeneralityofthe foregoing,theReceiveris hereby expressly empowered andauthorizedtodoanyofthefollowingwherethe Receiver considers it necessary ordesirable:

(a)totakepossessionofandexercisecontroloverthePropertyandanyanda l l p r o c e e d s , r e c e i p t s a n ddisbursements arisingoutof or fromtheProperty…

4.This Courtorders that(i)theDebtor, (ii)all of its current and former directors,officers, employees, agents, accountants,legal counsel and shareholders, and allother personsac?ngonits instruc?ons orbehalf, and (iii) all other individuals, firms,corpora?ons, governmental bodies oragencies, orother en??eshavingno?ce ofthis Order(all ofthe foregoing,collec?vely,being“Persons”andeachbeinga“Person”)shall forthwith advise the Receiver of theexistenceofany Property insuchPerson’spossess ion or control , shal l grantimmediate and con?nued access to theProperty to theReceiver, andshall deliverall suchProperty tothe ReceiverupontheReceiver’srequest.…

13.This Courtordersthatall funds,monies,cheques, instruments, and other forms ofpayments received or collected by theReceiver fromanda=er themakingof thisOrder from any source whatsoever,includingwithout limita?on the sale of alloranyofthePropertyandthe collec?onofanyaccounts receivable inwholeorinpart,whether in existence on the date of thisOrder or herea=er coming into existence,shall bedeposited into one or more newaccounts tobe openedby theReceiver(the“Post Receivership Accounts”) and themonies standingtothecredit ofsuchPostReceivership Accounts from ?me to ?me,net of any disbursements provided forherein, shall beheldby theReceiver tobepaid in accordancewith the termsof thisOrderoranyfurtherOrderofthisCourt.

The Court noted that sec?on 247 of the BIAimposes on aReceiver theduty toact honestlyandingoodfaithandtodeal withthepropertyof

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the insolvent in a commercially reasonablemanner. The Court alsonotedcertain case lawfurther delinea?ng the func?on of andexpecta?onplacedona Receiver:AReceiveractsin a fiduciary capacity with respect to allinterested persons (see Ostrander v. NiagaraHelicopters Ltd.) (*4) Further, acourt appointedReceiver’s powerscomeen?rely fromthetermsof an issued Court Order: Royal Trust Co. v.MontexApparelIndustriesLtd.(*5)

TheRSLA

3.(1)Inthe absence ofawriOenagreementtothe contrary,a repairerhasa lienagainstanar?clethatthe repairerhasrepairedforanamount equal to oneof the following,and the repairermay retainpossession ofthear?cleun?ltheamountispaid:

1. The amount that thepersonwhorequestedtherepairagreedtopay.

2. Where no such amount has beenagreed upon, the fair value of therepair,determinedinaccordancewithanyapplicableregula?ons.

3. Where only part of a repair iscompleted, thefair valueof the partcompleted,determinedinaccordancewithanyapplicableregula?ons.

4.(1)Subjecttosubsec?on(2),astorerhasa lienagainst anar?clethat thestorerhasstored or stored and repaired for anamount equal toone ofthefollowing, andthe storer may retain possession of thear?cleun?ltheamountispaid:

1. The amount agreed upon for thestorage or storage andrepair of thear?cle.

2. Where no such amount has beenagreed upon, the fair value of thestorage or storage and repair,determined in accordance with anyapplicableregula?ons.

3. Where only part of a repair iscompleted, the fair value of thestorage and the part of the repaircompleted,determinedinaccordancewithanyapplicableregula?ons.…

5. A lienunder this Part is discharged andcannot be revived as an interest in thear?cle if possession of the ar?cle that issubject to the lien is surrendered to, orlawfully comes into the possessionof, theowner or any other personwhois en?tledtoreceiveano?ceundersubsec?on15(2).

6. A lienunder this Part has priority overthe interests of all other persons in thear?cle.

TheDisposi<onbytheCourt

Theonlydecisiondealingwitha conflictbetweenthe bankruptcy regime and the RSLA that thecourtcouldlocateconcernedthe caseofTotallineTransport Inc. v. Caron Belanger Ernst & YoungInc. (*6). In that case the defendant wasappointed as Trustee in Bankruptcy and asReceiver. An order had been issued by theSuperior Court ofQuebec allowing theReceiverto takecontrol of goods held by theplain?ff inthat case who was asser?ng a possessory lienunder the RSLA. That plain?ff asserted that itcould exercise its lien without regard to thebankruptcy proceedings and that no leave wasrequiredfromtheCourt inorder for it todoso.TheTrusteearguedthatgiventhe OrderfromtheSuperior Court of Quebec, possession of thegoods wastobeturnedovertotheReceiver.TheOntario Court agreed with the plain?ff, findingthat it hadtheright topossessthe security andrealizeits securityonthegoods underits lien. Insupport of its decision, the Court examined s.69.3 of the BIA (noted above) that a securedcreditor canrealizeand otherwisedeal with itssecurity in the samemanner as it would havebeen(otherwise havebeen)en?tledtorealizeordeal with, it being noted that apossessory lienclaimant is a“securedparty”as amaOerof law.

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The Ontario Court further determined that theplain?ff did not require leave of the Court toexercise its security pursuant to its possessorylienandfoundthatthegoods heldbythe plain?ffdidnotformpartofthebankrupt’s property thatcouldbeseizedbytheTrustee.

Inthepresentcasethe courtnotedthata helpful(and ul?mately disposi?ve) statement of therelevantprinciples is foundinthecaseofBankofNovaSco<av.MacCulloch&Co.(*7).The courtinthis case stated that “[o]nce a receiver isappointed, it is theReceiver’s duty to liquidatethe assets, pay all costs and expenses of theReceivership, and distribute the net proceedsamongthecreditors of thecompany inorderofpriority.AReceiverowes a dutytothecourtthatappointeditandtothe creditors generally”. Thisdecision quoted from a leading text, Kerr onReceivers(*8)no?ngthata Receiveris obliged“…totakepossessionoftheestate,ortheproperty,thesubjectmaOerofdisputeintheac?on,intheroomor placeoftheowner thereof; and,underthe sanc?on of the court, to do, as and whennecessary, all such actsof ownership… for thepar?es tobe ul?mately declared to been?tledthereto,as the ownerhimselfcoulddoifhewereinpossession…”.

The Court concluded in that case that theReceiverowes noduty toany individualcreditorand that “it may be improper for an individualcreditor to insinuate itself into the liquida?onprocess.Certainly,itis improperfora Receivertopermitit.”

Putanother way, andas arguedby theReceiverinthepresentcase:

“… a court-appointed Receiver … isauthorizedandempoweredtoliquidateallof the assets of the debtor under thesupervisionofthe court,totheexclusionofall others including secured creditors,whereas the stay in a bankruptcyspecifically preservestherightsof securedcreditors to exercise their remedies. Thewhole point of a court-appointedReceivership is that one person … is

appointedto dealwithall oftheassets ofaninsolventdebtor,realizeuponthem,andthen distribute the proceeds of thatrealiza?on to the creditors’ claims shouldbe priori?zed. As is clear from the broadwording of the Appointment Order, allcreditors, secured and unsecured, arestayedfromexercisingremedies againsttheinsolvent person’s assets in favour of asingle, court-supervised liquida?onprocessby the Receiver. Whether a securedcreditor’s rightsarise undertheMortgagesAct,thePersonal PropertySecurityAct,theConstruc?on Lien Act, the Repair andStorage Liens Act, at common law, orotherwise, that creditor is bound by theprovisionsoftheAppointmentOrder…:

TheCourtorderedthatthe Orderappoin?ngtheReceiver governed the outcome of the case.Given its broad terms, the Receiver was, andmustbeen?tledtotake possessionofthelienedar?cles, without prejudice to the claimant’spossessory lien claim which would have to bedeterminedatanother?me.

The Court held that this findingwas consistentwith thenecessity for the Receiver to maintaincontrolover the debtor’s assets toensuretheiradvantageous and orderly disposi?on for thebenefit of all creditorsand toavoid duplica?vecosts that would otherwise arise frommul?plesales.

The Court noted the dis?nc?on between thepowersofa Trustee andBankruptcyandthoseofa courtappointedReceiver.Shoulda compe??onemerge for possession between a Trustee inBankruptcy and a legi?mate possessory lienclaimant, the laOer woulds?ll enjoy the benefitof beingabletoexerciseits legal remedies suchas theenforcementofa lien– that is, however,un?la Receiverac?ngpursuanttoaCourtOrderentersthepicture.The termsofthe CourtOrderwouldthengovernthesitua?on.

Accordingly,inthiscasetheCourtrequired233todeliverthevehiclestotheReceiver,authorizingittosell thevehiclesbypublicauc?onandordering

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it to place the proceeds of the sale into aseparate trust account. The Court order that233’s claim would not be prejudiced by thedelivery of thevehiclestotheReceiver. Inotherwords, the lien claimantwould s?ll beaffordedthepriority statusas a possessory lienclaimant(vis-a-vis other non priority lien claimants andunsecured creditors) in any eventual realiza?onofanddivisionofDelta’sassets.

The“TakeAway”

Inthetransporta?onindustrywefrequently seesitua?ons where a shipper fails as a business.Tensionso=enemergebetweena carrierwishingtoasserta lienovera shipmentforthepaymentof unpaidfreight charges anda courtappointedReceiver. Careful study will be required indiscerning whether the Court Order precludesany lienenforcementby the unpaidcarrier. Thiscase appears toclarifythatthetermsoftheCourtOrderwill governintermsofexactlywhatofthecarrier’s legal remedies may be “stayed” andwhat the rights of the Receiver are: can thecarrierholdontotheshipmentun?lpayment(orevensell them,ifprovidedforbyspecificcarriagecontractprovisionsonpoint)orcantheReceiverdemand the delivery of the freight todes?na?on?.(*9)

Theexercise ofa lienovergoodsin transitsoldbya seller to a buyer presents an interes?ngsitua?onin any givencase. Inaddi?on to onehaving to carefully scru?nize the circumstancesand the specifics of the appointment of theReceiver in a given case, there will be theinteres?ngques?on as towhether thegoods inques?on do in fact form the property of thedebtoror bankrupt.Might the ?tletothe goodshavepassedtothebuyer/consignee?Whatwerethetermsoftheunderlyingcontractbetweenthesellerandbuyeronpoint?

Inthis regard, incontempla?ngwhereanunpaidcarriermight standconsidera?onwill have tobegiven to the language found in many CourtOrders appointment Receivers. Consider, forexample, the following “stay” provisionsusuallyseeninOrdersappoin?ngReceivers:

NO PROCEEDINGS AGAINST THE DEBTORORTHEPROPERTY

THIS COURT ORDERS that no Proceedingagainst or inrespect of the Debtor or theProperty shall be commencedor con?nuedexcept with the wriOen consent of theReceiverorwithleaveofthis Courtandanyand all Proceedings currently under wayagainst or inrespect of the Debtor or theProperty arehereby stayedandsuspendedpendingfurtherOrderofthisCourt.

Andasafurthercorollary:

NOEXERCISEOFRIGHTSORREMEDIES

THIS COURT ORDERS that all rights andremedies against theDebtor, the Receiver,oraffec?ngtheProperty,areherebystayedand suspended except with the wriOenconsent of the Receiver or leave of thisCourt,providedhowever that this stay andsuspensiondoesnotapplyinrespectofany"eligible financial contract"asdefinedintheBIA, and further provided that nothing inthis paragraph shall: (i) empower theReceiver or the Debtor to carry on anybusiness which theDebtor is not lawfullyen?tled to carry on; (ii) exempt theReceiver or the Debtor from compliancewith statutory or regulatory provisionsre l a?ng to hea l th , sa fe ty o r theenvironment; (iii) prevent thefiling of anyregistra?on to preserve or perfect asecurity interest; or (iv) prevent theregistra?onofaclaimforlien.

A more full discussion on the tensions at play,and a possible “work around” for the unpaidcarrier is something best le= for a futurear?cle(s). Sufficetosay forthemomentthatanyclaimantclaiminga lienovercargoorgoods mustpay very careful aOen?on to the specificcircumstances and the terms of any governingCourtOrder.

GordonHearn

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Endnotes(*1)2017ONSC368(CanLII)(*2)R.S.O.1990,c.R.25.(*3)R.S.C.1985,c.B-3(*4)1973CanLII467(ONSC)(*5)1972CanLII705(ONCA)(*6)(1998)8C.B.R.(4th)307(Gen.Div.)(*7)(1983)49C.B.R.(N.S.)251(N.S.T.D.)atpara.3(*8)17thEd.(London:Sweet&Maxwell,1978)atp.173(*9)The‘?pof the iceberg’ here, is raisedhereforillustra?on.Thedetermina?onofthecarrier’s

rights and a possible ‘work around’ with theReceiver will usually be more complex. Forexample, if the shipment in ques?onis oneof aseries of rou?nemoves by the carrier under ashipper-carrier contract, the carrier may berequiredtocon?nueservicelevels,butmightbeable to nego?ate secure payment terms for goforward services. These considera?ons arebeyondthescopeofthisar?cle. Theintentwiththis ar?cle is simplytohighlightthetensions thato=enemergeinthe caseofafailedshipper andthecarrier’shopeofenforcingitslegalremedies.

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6. Refusal to Accept Reemployment A^erTerminaSonNotaFailureofMiSgaSon

Itis a fundamental principleofCanadianlawthata plain?ffmustmi?gate itslosses,includinginthesphereofemploymentlaw. However,therearecaveats. In a decision of the Bri?sh ColumbiaSupreme Court last month, the HonourableMadam Jus?ceBurkehasremindedusthat theobliga?on to mi?gate must be assessed forreasonableness.

InBishop v. Rexel (*1),Her Ladyshipfoundthatan offer of reemployment did not requireacceptance from the departed employee in thecircumstances. In fact, the Court commentedthat this case was not oneof those “rare cases”where the employee should have accepted re-employment as a meansofmi?ga?on. Inotherwords, it suggested a poten?al new "default"wheretheemployerwouldhave anonustoprovethereasonablenessofanyre-employmentoffer.ThePlain?ff in this case, Mr. Bishop, wasa 61-year-old buyer for the defendant electricalproducts retaileranddistributor. Hehadworkedfor the defendant for 27 years, with a goodrecord.However,ononebaddaylastJanuary,hegotfedupathavingbeenassignedtasksthathedidnotwanttodo, inorder toassist a colleaguewhowasoverwhelmed. Accordingly, hesent ahastyresigna?onmessagetohis supervisorby e-mail to the effect that he would “not bereturning” if theaddi?onal tasksremainedwithhim. When confronted in person by hissupervisor, Mr. Bishop later doubled-down thatthetasks werenotwhat he was hiredtodoandthathewas “done”. He wasescortedoutofthebuilding later that a=ernoonwitha leOer sayingthat Rexel had accepted his wriOen resigna?on(althoughhis resigna?onhadnot beenmade inwri?ng).Oncelawyerswere involved,counselforMr.Bishopstatedthathis clienthadnot actuallyresigned. Rexel respondedpromptlyby offeringto reinstate him with full back pay, but Mr.Bishoprefused.Inthe circumstances,theCourt foundthatRexelfailed in its obliga?on to confirm Mr. Bishop’sinten?on toresigna=er acooling-off period. Itfoundfurther that the defendanthadanagenda

to lay off a number of employees, and hadopportunis?cally twisted the situa?on to itsfavour. TheCourt thenfoundthatMr. Bishop’sresigna?onwas not,infact,genuine;andthatthedefendanthadtakenadvantageofhis emo?onalstate. Thus,itconcludedthathewas en?tledto20months’no?ce. Thispartofthedecisionis inkeeping with longstanding law, requiringvoluntary resigna?ons to be "clear andunequivocal".

With respect to mi?ga?on, Mr. Bishop arguedthat it wouldbeunreasonabletoexpect himtocon?nuewithRexel,giventheanimosityandlackof trust that developed at the end of his longtenure. No?ng that the onus was on theemployer(notthe employee)toshowafailureofmi?ga?on,the HonourableMadamJus?ceBurkecitedthe SupremeCourt ofCanada’s decision inEvans v. Teamsters Local No. 31 (*2) for theproposi?on that an employee should not be“obligedtomi?gatebyworkingin anatmosphereofhos?lity,embarrassment,orhumilia?on”.Theforegoingwas complicatedbytes?monythatMr. Bishopfaceda significantlikelihoodofa lay-off within a year if reinstated; and the judge'sview that Rexel's acceptance of a resigna?onleOer–althoughnoneexisted–was a "decep?vemove".

Intheend,theCourtreasonedthat,atpara108,“Ul?mately, therewas clearly abreach of trustand some animosity between the par?es.Therefore,Iconclude this isnotoneofthoserarecaseswherethe employee shouldhaveacceptedre-employmentinordertomi?gatehislosses.”Itis notclear,certainlyinOntario,ifthe lawis soblack-and-white thatanemployee canrefusere-employmentfromanemployerthathadjustfiredhim, unlesstheemployer canprovethat it wasnot reasonable for theemployeetodeclinetheoffer. This caseshouldstandasacau?onarytaletobothemployersandemployees.

AlanS.Cofman

Endnotes(*1)2016BCSC2351.(*2)2008SCC20.

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