HomeOur Blog › Blog Input

Walking a Fine Line - Bill of Lading Stomps Liability for Cargo Theft

 Apr 30, 2019 5:00 PM
by Tim Gillibrand

The Federal Court recently released the decision of Black & White Merchandising Co. Ltd. v. Deltrans International Shipping Corporation. The case involved the transportation and theft of over 8000 pairs of children's shoes. While the decision is silent as to the brand of the shoes, we can only assume the perpetrator was disappointed with his luck on the black market. The cargo loss resulted in a lawsuit brought by the consignee, with some interesting findings regarding liability and jurisdiction of the Federal Court. 


Black & White Merchandising Co. Ltd ("B&W") purchase the shoes from a Chinese manufacturer and hired Delmar International Inc. to transport the shoes from China to Montreal.  Behind the scenes, Delmar hired Deltrans International Shipping Corporation  as well as a logistics company, which in part arranged for storage. 

Delmar dealt directly with B&W as to the various details of the shipping. Deltrans issued a through Bill of Lading on January 12, 2017, which indicated that the cargo was to be delivered to Montreal and the type of move was "CY/CY" ("container yard to container yard"). 

The goods made their way from China to Quebec, where they were then stored at Canchi's warehouse. Next, the cargo was to be "de-stuffed", repackaged, and transported to the B&W warehouse which was also in Quebec. The cargo, however, was stolen from the Canchi warehouse.

B&W asserted that Deltrans was responsible under the BoL and that it was reckless in hiring the storage facility. Deltrans denied liability as it no longer had possession of the cargo at the time of loss and had no role in arranging for the warehousing. It further argued that its contract of carriage ended upon delivering the goods to the CN yard, prior to being taken to Canchi.

B&W argued that the BoL, on its face, did not fully capture the entire delivery. It was standard practice in its dealings with Delmar that deliveries would go to the B&W warehouse. Deltrans argued that, if there was some agreement between Delmar and B&W for further delivery beyond the Canchi warehouse, that was beyond the scope of its contract of carriage.

Deltrans brought a motion to strike the Statement of Claim. It argued that the contract of carriage had ended and thus the Federal Court did not have jurisdiction over the claim. Secondly, Deltrans brought a motion for summary judgment on the basis that it had discharged its obligations under the BoL. Deltrans also relied upon a clause in the BoL that relieved it of liability for events beyond its control.  The two motions were intertwined as they depended on a finding as to when Deltrans' contract of carriage ended. 

B&W argued that the Federal Court had jurisdiction over the matter in accordance with Section 22(2)(f) of the Federal Courts Act, which provides jurisdiction over the following:

"any claim arising out of an agreement relating to the carriage of goods on a ship under a through bill of lading, or in respect of which a through bill of lading is intended to be issued, for loss or damage to goods occurring at any time or place during transit". 

In responding to the motions, B&W argued that Delmar and Deltrans were effectively "one in the same". Deltrans put forth evidence that the two were at least distinct corporate entities. B&W did not specifically argue what the legal effect would be of the two entities operating together; however, the thrust of its position was that Deltrans' BoL should be extended to cover the entire delivery up to the point it would be delivered to the B&W warehouse, which would mean that the through BoL was still in effect at the time of loss.

Issues and Findings

Strickland, J. found in favour of Deltrans, concluding that the Federal Court did not have jurisdiction over the matter.  Although it was moot, given the decision on jurisdiction, the court also granted summary judgment.

The court found that the contract of carriage ended when Deltrans delivered the cargo to the Canchi warehouse. It was important that the BoL specifically stated the delivery was to be from one container yard to another and did not state that delivery would be to the B&W warehouse. The court was not convinced by B&W's argument that Delmar and Deltrans were "one in the same" and seemed satisfied that B&W's initial dealings were with Delmar.  Therefore, any dispute as to what "ought to have been" in the BoL was a dispute between B&W and Delmar - who was not a party. 

The court surmised that, even if Delmar usually arranged for transport to the B&W warehouse, this did not necessarily mean that such deliveries were part of the through BoL. They may very well have been part of some other arrangement.

It is notable that the BoL had a specific clause granting the Federal Court jurisdiction over any disputes. Here the court reiterated the status of the common law: parties cannot confer jurisdiction upon the court which it does not otherwise have.

Importantly, the court found that there was no genuine issue for trial because the through BoL had been completed and did not include transport to the B&W warehouse. The court did not comment on whether it would have had jurisdiction had Delmar been named as a defendant.

This case highlights the importance of ensuring bills of lading accurately reflect the intended delivery destination. It further highlights the need to investigate the roles of each party involved in a shipment to best frame a cause of action.

See Black & White Merchandising Co. Ltd. v. Deltrans International Shipping Corporation, 2019 FC 379 (CanLII)

Tim Gillibrand has been practicing insurance litigation since 2012. He has dealt extensively with property-related claims, including subrogation and coverage matters. Read more ...


No Void Ab Initio for Auto

 Apr 25, 2019 3:00 PM
by Dan Strigberger

Can an Ontario insurer treat an automobile policy as being void ab initio and deny a claim in its entirety as a result? The Court of Appeal for Ontario says “no”.

Merino v. Intact involved a pedestrian who was catastrophically injured when she was struck by a car insured with Intact. Intact’s insureds (husband and wife) applied for automobile insurance coverage over three months before the accident and Intact had issued a one-year policy to them. However, because of misrepresentations in the application regarding the wife’s driving record, Intact purported to rescind the policy shortly after issuing it, a couple of months before the accident.

Of note, Intact did not terminate the contract pursuant to the Statutory Conditions. It did not give 15 days notice of termination. There was no return of premiums (because no premiums had been paid).

After receiving judgment against Intact’s insureds, the pedestrian and her family brought an action against Intact under section 258(1) of the Insurance Act. On summary judgment, the motion judge was required to determine whether the insurer was entitled to rescind the insurance contract with the tortfeasors, and if so, whether the purported rescission had the effect of precluding the injured pedestrian, as an innocent third party, from making a claim against Intact under s. 258(1) of the Insurance Act.

The motion judge dismissed the pedestrian’s action on summary judgment. He found that the respondent insurer was entitled to rescind the insurance contract based on material misrepresentation, making it void ab initio; that it had done so effectively; and that, as a result, section 258(1) was not available to the appellants, as there was no contract with Intact that provided indemnity to the at-fault driver or owner at the time of the accident.

The Court of Appeal disagreed with the motions judge on all issues.

The most interesting issue (in an insurance coverage sort of way) was the motion judge’s finding that an automobile insurer could treat a policy as void ab initio. The Court of Appeal held that the highly regulated auto insurance scheme in Ontario prevents an insurer from treating a policy as void ab initio. The Court found that the purpose of these requirements under the Insurance Act and Compulsory Automobile Insurance Act is:

to ensure that a person who drives a car always knows whether they are insured, so that they can take steps to bridge any gap in their coverage, both for their own benefit and for the benefit of other drivers. If they are not able to secure alternate coverage, they must not drive the vehicle or allow it to be driven.

With respect to section 233 of the Insurance Act (Misrepresentation or violation of conditions renders claim invalid), the Court cautioned that the section does not render a contract void:

While a number of cases still express the effect of s. 233 as rendering the contract “void” as between the insurer and the insured, it is clear that that language is intended to do no more than reflect the express consequences of s. 233, which makes claims by the insured for personal loss or indemnity invalid and unrecoverable.

In short, the Court of Appeal has confirmed that the statutory scheme mandating auto insurance in Ontario has supplanted an insurer’s common law rights to treat a policy as void ab initio.

This means that if an insurer wants to get off risk because of a misrepresentation or other approved ground, it must terminate the contract in accordance with Statutory Condition 11. It cannot treat the contract as being void ab initio. It will still be (limitedly) liable for a loss that occurs during the policy period, pursuant to section 258 of the Insurance Act and the SABS, subject to any available exclusions under section 31 of the SABS.

See Merino v. ING Insurance Company of Canada, 2019 ONCA 326

The son of a plaintiff lawyer, Daniel decided in law school that he wanted to work for the insurance industry. Read more...


How much Risk does a Builder's Risk Risk?

 Apr 10, 2019 8:45 PM
by Dan Strigberger

When a builder negligently repairs a school’s gymnasium roof, which causes rain to spill into the gym and damage the wooden floor below, does the builder’s All Risk Builder’s policy cover the damage to the floor? 

Pre-Eng v. Intact involved a coverage battle between the builder’s All Risk Builder’s policy with Northbridge and CGL policy with Intact. The Builder’s Risk policy provided the following coverage:

3. Insured Property

This Form insures the following items for the amount of insurance specified on the Coverage Schedule of Part I and II;

A. At the “project site”, provided that the value of the described property, whether owned by you or by others, is included in the amount of insurance:

(a) property in course of construction, installation, renovation, reconstruction or repair other than property described in 3.A(b),all to enter into and form part of the completed project including expendable materials and supplies, not otherwise excluded, necessary to complete the project;

The parties agreed that the Project Site included the entire school, disagreed over whether the gym floor was “property in course of construction, installation, renovation, reconstruction or repair…”

Meanwhile, the builder also held a CGL policy, which was intended to exclude coverage for what was covered under the Builder’s Risk policy. The exclusion clause reads as follows:

“Property damage” to:

5. That particular part of real property on which the Named Insured or any contractor or subcontractor working directly or indirectly on the Named Insured's behalf are performing operations, if the property damage arises out of those operations; or

6. That particular part of any property that must be restored, repaired or replaced because the Named Insured's work was incorrectly performed on it.

Northbridge argued that the Builder’s Risk policy explicitly covered “property under construction” and the gym floors were not under construction. They were damaged as a result of construction, but they were not under construction and were therefore not covered by the Builder’s Risk policy.

Intact argued, among other things, that there was ambiguity in the Builder’s Risk policy because, in this case, the builder was hired to do a variety of tasks at the school, which could inevitably lead to property damage to other areas in the school.

Both insurers sought summary judgment in a coverage action that the builder brought against them.

Conflicting Case Law

The motions judge noted that there was a conflict in Canadian case law involving the scope of Builder’s Risk insurance. On the one hand, a 2007 case from Alberta (Medicine Hat College) held that the Builder’s Risk policy covered damage caused to a building’s penthouse after the builder had negligently moved a gas pipeline and an explosion ensued. The contractor had not been hired to do any work on the penthouse of the building but that happened to be the site of the damage caused by his negligence. The Alberta Queen's Bench judge concluded that the penthouse mechanical room was included in the phrase “property in the course of construction” and was covered under the Builder's Risk policy.

On the other hand, a 2015 case from Ontario (Osler Health) held that the Builder’s Risk policy did not cover flooding damage to several parts of the hospital, caused by a plumber’s negligent installation of pipes during a kitchen renovation at the hospital. Justice Firestone concluded that the Builder's Risk insurance held by the contractor only covered damages to the kitchen itself, not to the other areas of the hospital which had been flooded.

More recently, the Supreme Court of Newfoundland and Labrador reviewed the same issue in a case called Dominion v. Viking Fire (Team Mechanical Construction). In that case, a renovator negligently installed a water treatment system in a large health sciences complex, which lead to leakage and extensive damages to many areas of the complex. The renovator had obtained a Builder’s Risk insurance policy which was substantially the same as the policies used in Medicine Hat Collegeand Osler Health. The motion judge expressly disagreed with the ruling in Osler Healthand instead followed the reasoning in Medicine Hat College (Builder’s Risk policy covered losses to other property).

However, on March 6, 2019, the Court of Appeal of Newfoundland and Labrador released its decision in Dominion v. Viking Fire, overturning the motion judge’s decision and adopting Justice Firestone’s reasoning in Osler Health.

So what does the Builder’s Risk policy cover?

The motions judge followed Justice Firestone’s decision and held that the Builder’s Risk policy with Northbridge did not cover the damage to the gym floors:

If Intact’s argument were correct, it would lead to the conclusion that the Builder’s Risk insurance was intended to cover the entire Project Site. That interpretation cannot be reconciled with the Northbridge policy which specifically limits coverage to property in the course of construction which is located at the Project Site. If the intention of the parties was to extend coverage to the entire site, there would have been no need to include section 3 in the agreement which defines the “insured property” as property located at the Project Site.

The judge concluded that the words “property in course of construction, installation, renovation, reconstruction or repair” are sufficiently clear to exclude the gym floor from coverage under the Builder’s Risk policy. The gym floor was not being installed, renovated, or reconstructed and there was no evidence to suggest that it was.


It appears that any conflict in Canadian case law over the scope of coverage under the Builder’s Risk policy is close to being wrapped up (if it isn't already). To date, two Ontario Superior Court Judges and the NLCA have limited its scope to cover only property that is being in the course of “construction, installation, renovation, reconstruction or repair”. Any other property losses not covered by the Builder’s Risk policy would likely be covered under the builder’s CGL policy, subject to any other terms or exclusions.

It will be interesting to see whether Intact appeals to give the Ontario Court of Appeal a chance to review this issue. Stay tuned…

See Pre-Eng v. Intact, 2019 ONSC 1700 (CanLII)

Coverage, Risk  

No Skirting of Responsibility

 Apr 10, 2019 12:00 PM
by Shalini Thomas

While at the Bramalea City Centre Mall with her mom and siblings, the plaintiff (a minor) fell backwards on an upward moving escalator. Unfortunately, her left hand got stuck in the step-to-skirt gap of the escalator resulting in a severing of her left index finger.

The plaintiff and her mother commenced a lawsuit against the owners of the mall, the Schindler Elevator Corporation and the Technical Standards and Safety Authority (the “TSSA”). Schindler was hired to inspect and maintain the escalators at the mall. In their regulatory capacity, the TSSA also periodically inspected the escalators. The escalators were subject to the inspection and maintenance requirements adopted by the TSSA.

The TSSA brought a partial motion for summary judgment which was ultimately dismissed. 

The plaintiffs produced an expert report which concluded that the subject step/skirt gap exceeded the upper standard and that the step/skirt performance index (“SPPI”) also exceeded the standard. The report opined that Schindler failed to take corrective measures to reduce the SPPI when it was discovered just a few months prior to the plaintiff’s injury. The report also opined that if the TSSA carried out inspections at the one-year frequency recommended by industry standards, they more likely than not would have discovered the SPPI issue, which in turn should have resulted in an issuance of a compliance order and a shutdown of the escalator.

While the TSSA were able to produce detailed logs of their inspections and reports/orders, it likely did not assist that TSSA provided conflicting evidence on how often the escalator was periodically inspected.  Furthermore, TSSA’s own evidence supported that the escalator had recurring issues with the anti-friction skirt, which the plaintiff’s expert opined increased the risk for step/skirt entrapment.

The Court held that a trier of fact would benefit from hearing evidence of all witnesses in order to determine the issues and assess the strength of the evidence, as well as provide a fair and just determination on the merits. The Court determined that TSSA’s actions / responsibilities were not clearly severable from the balance of the case against the remaining defendants, which would remain even if the motion was granted. 

This decision highlights that actions with multiple defendants who may be jointly and severally liable under the Occupiers' Liability Act are unlikely to be successful candidates for a partial summary judgment motion.

See Gallo v. Bramalea City Centre Equities Inc., 2019 ONSC 1443

Shalini defends insurance claims covering all aspects of general insurance liability including motor vehicle accidents, occupiers’ liability, slip and falls, as well as accident benefits litigation and arbitration and priority and loss transfer disputes.

Occupiers' Liability, Tort  

Too Good to be True? May be your Wilful Blindness

 Apr 9, 2019 6:45 PM
by Kathleen O'Hara

The Facts

This sordid tale begins with an employee going rogue with a company credit card. The Defendant Fung began purchasing iPhones and iPads from the Defendant Minetto in November 2011. The first transaction was seemingly innocent. The two met in the parking lot at Yorkdale Mall. Fung purchased one iPad from Minetto and paid in cash.

Over the course of the next 2.5 years, Minetto sold Fung over 4,900 iPhones and 5,300 iPads in increments of 10 to 20 pieces at a time. Initially, Fung and Minetto met in parking lots to exchange cash for the Apple Products. Eventually, they set up a virtual office where Minetto had Apple Inc. ship the Apple Products directly to Fung.

As it turns out, Minetto was using her employer Wescom’s corporate credit card to purchase the Apple Products and then selling the Apple Products for her own personal gain. Minetto’s actions went undiscovered for so long because she was the employee responsible for paying the corporate credit card invoices. In the end, Minetto defrauded her employer out of $6.8 million over 5 years. Some of her expenditures were for other unrelated personal items. Over $6.2 million was spent on Apple Products which Minetto later sold. Wescom ultimately discovered the fraud and terminated Minetto immediately.

Wescom obtained a Judgment on consent against Minetto for the full $6.8 million, plus interest. In a separate decision, Wescom was granted leave to sell Minetto’s home after a Judge found that Minetto committed multiple material breaches of their settlement agreement.

Superior Court Decision

An action was brought by Wescom based on Fung’s alleged unjust enrichment at the expense of Wescom. On consent, the Trial proceeded on the issues of: (1) Whether Fung knew or was wilfully blind to the fact that he was purchasing stolen goods or goods fraudulently obtained by Minetto; and, if yes (2) Did this apply to all transactions or just transactions after a certain date?

Fung admitted that he did not initially ask Minetto where or how she obtained the Apple Products. Later, he asked her if they were stolen and Minetto told him they were “legit”. Fung could detect no sign that the Apple Products were stolen. He was not concerned about the cash transactions or lack of documentation for the purchase or resale of the Apple Products.

What Fung knew or ought to have known was analyzed over three distinct stages:

Stage 1: November 2011 to early 2012 – Yorkdale Mall parking lot transactions

During the initial timeframe, Fung purchased 30 iPhones and 400 iPads from Minetto. The Judge held that there was no basis to find that Fung knew, or that the circumstances were sufficiently strong to arouse his suspicions, that the Apple Products had been stolen or obtained through fraud.

Stage 2: Early 2012 to April 2013 – Ikea parking lot transactions

The Judge found it important that Fung again questioned Minetto during Stage 2 whether the Apple Products were legitimate. He had already asked. If he believed her, and there had been no reason to suspect otherwise, why ask again? He found that Fung made a conscious choice not to seek verification or further information about the source of the Apple Products. Fung chose to remain deliberately ignorant. The Judge held that Fung was wilfully blind to the fact that the Apple Products were stolen or fraudulently obtained during Stage 2.

Stage 3: April 2013 to July 2014 – where Minetto shipped products directly to Fung’s virtual office

By this time, the business relationship had evolved. Products were being shipped directly from Apple to Fung’s virtual office. Fung ordered products from Minetto by email. Minetto would send him a shipping notification provided by Apple. Fung could track the shipment. Shipping was being paid by Wescom. The Judge held that this level of sophistication removed the probability that Fung was wilfully blind to the nature of how Minetto was procuring products. He held that Fung had actual knowledge of the source and nature of the Apple Products he was purchasing from Minetto.

Judgment was granted in the amount of $5 million against Fung. Fung’s crossclaim against Minetto for contribution and indemnity was granted in the same amount. Fung appealed.

Court of Appeal

Fung submitted that the Trial Judge erred by applying an objective standard to the wilful blindness analysis (rather than a subjective standard). The Court of Appeal agreed with Fung’s submission that the Trial Judge erred in law in his articulation of the concept of wilful blindness when he engaged in an objective analysis. The Trial Judge was not asked to consider whether Fung as a ‘reasonable person’ would have been alerted to a potential breach of trust.

A finding of wilful blindness, which is the same standard in criminal and civil proceedings, involves a subjective focus on the workings of a defendant’s mind.

Notwithstanding the mischaracterization, the Court held that the Trial Judge was correct in his application of the wilful blindness analysis when he found that Fung was wilfully blind. It was clear the Trial Judge made findings of fact establishing that Fung was wilfully blind from a subjective standard. Fung knew that the Apple Products were probably stolen or obtained by fraud, but made a deliberate choice not to investigate.

Fung’s appeal was dismissed by the Court.

This case highlights that, in the civil context, wilful blindness in is to be assessed on a balance of probabilities. The test is a subjective one. The Court held that Fung’s conduct met the definition of wilful blindness articulated in R. v. Sansregret (SCC), which “arises when a person who has become aware of the need for some inquiry declines to make the inquiry because he does not wish to know the truth. He would prefer to remain ignorant.” Once suspicions about certain facts are aroused, a duty to inquire is raised. A party cannot simply bury his head in the sand or look the other way. Failure to make those inquiries can turn what may seem like ‘harmless’ parking lot transactions into a successful claim for unjust enrichment.

See: Wescom Solutions Inc. v. Minetto, 2019 ONCA 251.

Kathleen was called to the bar in 2009. Over the years, she has developed an insurance defence practice with a particular focus on fraud. Read more ...



Top of page